Annual and Transition Report (foreign Private Issuer) (20-f)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014.

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission File Number 1-15006

LOGO

(Exact name of Registrant as specified in its charter)

PetroChina Company Limited

(Translation of Registrant’s name into English)

The People’s Republic of China

(Jurisdiction of incorporation or organization)

9 Dongzhimen North Street

Dongcheng District, Beijing 100007

The People’s Republic of China,

(Address of principal executive offices)

Wu Enlai

Telephone number: 8610 59986270

Facsimile number: 8610 62099557

Email address: jh_dong@petrochina.com.cn

Address: 9 Dongzhimen North Street, Dongcheng District, Beijing 100007, The People’s Republic of China

(Name, telephone, e-mail and/or facsimile number and address of registrant’s contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of Each Class		Name of Each Exchange on Which Registered
American Depositary Shares, each representing 100 H Shares, par value RMB1.00 per share* H Shares, par value RMB1.00 per share		New York Stock Exchange, Inc. New York Stock Exchange, Inc.**

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:


A Shares, par value RMB1.00 per share***		161,922,077,818⁽¹⁾
H Shares, par value RMB1.00 per share		21,098,900,000****

(1)	Includes 158,033,693,528 A Shares held by CNPC and 3,888,384,290 A Shares held by the public shareholders.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

If this is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


¨ U.S. GAAP		x International Financial Reporting Standards as issued by the International Accounting Standards Board		¨ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨


*		PetroChina’s H Shares are listed and traded on The Stock Exchange of Hong Kong Limited.
**		Not for trading, but only in connection with the registration of American Depository Shares.
***		PetroChina’s A Shares became listed on the Shanghai Stock Exchange on November 5, 2007.
****		Includes 889,085,900 H Shares represented by American Depositary Shares.

Table of Contents


			Page
Certain Terms and Conventions				1
Forward-Looking Statements				5

		Part I

Item 1	—	Identity of Directors, Senior Management and Advisors		7
Item 2	—	Offer Statistics and Expected Timetable		7
Item 3	—	Key Information		7
		Exchange Rates		7
		Selected Financial Data		8
		Risk Factors		9
Item 4	—	Information on the Company		15
		Introduction		15
		Exploration and Production		19
		Refining and Chemicals		29
		Marketing		33
		Natural Gas and Pipeline		36
		Competition		38
		Environmental Matters		39
		Legal Proceedings		40
		Properties		41
		Intellectual Property		41
		Regulatory Matters		42
Item 4A	—	Unresolved Staff Comments		49
Item 5	—	Operating and Financial Review and Prospects		50
		General		50
		Operating Results		53
		Liquidity and Capital Resources		62
		Off-Balance Sheet Arrangements		67
		Long-Term Contractual Obligations and Other Commercial Commitments and Payment Obligations		67
		Research and Development		68
		Trend Information		69
		Other Information		69
Item 6	—	Directors, Senior Management and Employees		69
		Directors, Senior Management and Supervisors		69
		Compensation		79
		Board Practices		79
		Employees		81
		Share Ownership		82
Item 7	—	Major Shareholders and Related Party Transactions		82
		Major Shareholders		82
		Related Party Transactions		82
		Interests of Experts and Counsel		83
Item 8	—	Financial Information		83
		Financial Statements		83
		Dividend Policy		84
		Significant Changes		85
Item 9	—	The Offer and Listing		85
		Nature of the Trading Market and Market Price Information		85
Item 10	—	Additional Information		86
		Memorandum and Articles of Association		86
		Material Contracts		86
		Foreign Exchange Controls		86


			Page
		Taxation		87
		Documents on Display		92
Item 11	—	Quantitative and Qualitative Disclosures About Market Risk		93
Item 12	—	Description of Securities Other Than Equity Securities		97

		Part II

Item 13	—	Defaults, Dividends Arrearages and Delinquencies		97
Item 14	—	Material Modifications to the Rights to Security Holders and Use of Proceeds		98
Item 15	—	Controls and Procedures		98
Item 16A	—	Audit Committee Financial Expert		99
Item 16B	—	Code of Ethics		100
Item 16C	—	Principal Accountant Fees and Services		100
Item 16D	—	Exemptions from Listing Standards for Audit Committees		100
Item 16E	—	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		101
Item 16F	—	Change in Registrant’s Certifying Accountant		101
Item 16G	—	Corporate Governance		101
Item 16H	—	Mine Safety Disclosure		104

		Part III

Item 17	—	Financial Statements		104
Item 18	—	Financial Statements		104
Item 19	—	Exhibits		104
EX 4.15
EX 8.1
EX 12.1
EX 12.2
EX 13.1
EX 13.2
EX 15.1
EX 15.2
EX 15.3

CERTAIN TERMS AND CONVENTIONS

Conventions Which Apply to this Annual Report

Unless the context otherwise requires, references in this annual report to:

•

“CNPC” or “CNPC group” are to our parent, China National Petroleum Corporation and its affiliates and subsidiaries, excluding PetroChina, its subsidiaries and its interests in long-term investments, and where the context refers to any time prior to the establishment of CNPC, those entities and businesses which were contributed to CNPC upon its establishment.

•

“PetroChina”, “we”, “our”, “our company”, “the company” and “us” are to: PetroChina Company Limited, a joint stock company incorporated in the People’s Republic of China with limited liability and its subsidiaries and branch companies.

•

“PRC” or “China” are to the People’s Republic of China, but does not apply to Hong Kong, Macau or Taiwan for purposes of this annual report.

We publish our consolidated financial statements in Renminbi or RMB. In this annual report, IFRS refers to International Financial Reporting Standards as issued by the International Accounting Standards Board.

Conversion Table


1 barrel-of-oil equivalent	= 1 barrel of crude oil	= 6,000 cubic feet of natural gas

1 cubic meter	= 35.315 cubic feet

1 ton of crude oil	= 1 metric ton of crude oil	= 7.389 barrels of crude oil (assuming an API gravity of 34 degrees)

Certain Oil and Gas Terms

Unless the context indicates otherwise, the following terms have the meanings shown below:

“acreage”

The total area, expressed in acres, over which an entity has interests in exploration or production. Net acreage is the entity’s interest, expressed in acres, in the relevant exploration or production area.

“condensate”

Light hydrocarbon substances produced with natural gas that condense into liquid at normal temperatures and pressures associated with surface production equipment.

“crude oil”

Crude oil, including condensate and natural gas liquids.

“developed reserves”

Under the reserve rules of the Securities and Exchange Commission, or SEC, developed reserves are reserves of any category that can be expected to be recovered:

(i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

“development cost”

For a given period, costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas.

“finding cost”

For a given period, costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type test wells. Finding cost is also known as exploration cost.

“lifting cost”

For a given period, costs incurred to operate and maintain wells and related equipment and facilities, including applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. Lifting cost is also known as production cost.

“natural gas liquids”

Hydrocarbons that can be extracted in liquid form during natural gas production. Ethane and pentanes are the predominant components, with other heavier hydrocarbons also present in limited quantities.

“offshore”

Areas under water with a depth of five meters or greater.

“onshore”

Areas of land and areas under water with a depth of less than five meters.

“primary distillation capacity”

At a given point in time, the maximum volume of crude oil a refinery is able to process in its basic distilling units.

“proved reserves”

Under the SEC reserve rules, proved 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 regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes:

(A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as

seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

“reserve-to-production ratio”

For any given well, field or country, the ratio of proved reserves to annual production of crude oil or, with respect to natural gas, to wellhead production excluding flared gas.

“sales gas”

Marketable production of gas on an “as sold” basis, excluding flared gas, injected gas and gas consumed in operations.

“undeveloped reserves”

Under the SEC reserve rules, undeveloped reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.

“water cut”

For a given oil region, the percentage that water constitutes of all fluids extracted from all wells in that region.

References to:

•

BOE is to barrels-of-oil equivalent,

•

Mcf is to thousand cubic feet, and

•

Bcf is to billion cubic feet.

FORWARD-LOOKING STATEMENTS

This annual report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include, without limitation, statements relating to:

•

the amounts and nature of future exploration, development and other capital expenditures;

•

future prices and demand for crude oil, natural gas, refined products and chemical products;

•

development projects;

•

exploration prospects;

•

reserves potential;

•

production of oil and gas and refined and chemical products;

•

development and drilling potential;

•

expansion and other development trends of the oil and gas industry;

•

the planned development of our natural gas operations;

•

the planned expansion of our refined product marketing network;

•

the planned expansion of our natural gas infrastructure;

•

the anticipated benefit from the acquisition of certain overseas assets from CNPC, our parent company;

•

the plan to continue to pursue attractive business opportunities outside China;

•

our future overall business development and economic performance;

•

our anticipated financial and operating information regarding, and the future development and economic performance of, our business;

•

our anticipated market risk exposure arising from future changes in interest rates, foreign exchange rates and commodity prices; and

•

other prospects of our business and operations.

The words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “seek”, “will” and “would” and similar expressions, as they related to us, are intended to identify a number of these forward-looking statements.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future and are beyond our control. The forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in this annual report and the following:

•

fluctuations in crude oil and natural gas prices;

•

failure to achieve continued exploration success;

•

failures or delays in achieving production from development projects;

•

continued availability of capital and financing;

•

acquisitions and other business opportunities that we may pursue;

•

general economic, market and business conditions, including volatility in interest rates, changes in foreign exchange rates and volatility in commodity markets;

•

liability for remedial actions under environmental regulations;

•

the actions of competitors;

•

wars and acts of terrorism or sabotage;

•

changes in policies, laws or regulations of the PRC, including changes in applicable tax rates;

•

the other changes in global economic and political conditions affecting the production, supply and demand and pricing of crude oil, refined products, petrochemical products and natural gas; and

•

the other risk factors discussed in this annual report, and other factors beyond our control.

You should not place undue reliance on any forward-looking statements.

PART I

ITEM 1 — IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable. However, see “Item 6 — Directors, Senior Management and Employees — Directors, Senior Management and Supervisors” and “Item 16C — Principal Accountant Fees and Services”.

ITEM 2 — OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 — KEY INFORMATION

Exchange Rates

The following table sets forth the high and low noon buying rates between Renminbi and U.S. dollars for each month during the previous six months and the most recent practicable date:


	Noon Buying Rate⁽¹⁾
	High		Low
	(RMB per US$)
October 2014		6.1385		6.1107
November 2014		6.1429		6.1117
December 2014		6.2256		6.1490
January 2015		6.2535		6.1870
February 2015		6.2695		6.2399
March 2015		6.2741		6.1955
April 2015 (ending as of April 17)		6.2152		6.1930

(1)	The exchange rates reflect the noon buying rates as set forth in the H.10 statistical release of the Federal Reserve Board.

Average Noon Buying Rates⁽¹⁾

The following table sets forth the average noon buying rates between Renminbi and U.S. dollars for each of 2010, 2011, 2012, 2013 and 2014, calculated by averaging the noon buying rates on the last day of each month during the relevant year:


	Average Noon Buying Rate
	(RMB per US$)
2010		6.7603
2011		6.4475
2012		6.2990
2013		6.1412
2014		6.1701

(1)	The exchange rates reflect the noon buying rates as set forth in the H.10 statistical release of the Federal Reserve Board.

Selected Financial Data

Historical Financial Information

You should read the selected historical financial data set forth below in conjunction with the consolidated financial statements of PetroChina and their notes and “Item 5 — Operating and Financial Review and Prospects” included elsewhere in this annual report. The selected historical income statement (except ADS data) and cash flow data for the years ended December 31, 2012, 2013 and 2014 and the selected historical statement of financial position data as of December 31, 2013 and 2014 set forth below are derived from our audited consolidated financial statements included elsewhere in this annual report. The selected historical income statement data and cash flow data for the years ended December 31, 2010 and 2011 and the selected statement of financial position data as of December 31, 2010, 2011 and 2012 set forth below are derived from our audited financial statements not included in this annual report. Our consolidated financial statements were prepared in accordance with IFRS as issued by the International Accounting Standards Board. The financial information included in this section may not necessarily reflect our results of operations, financial position and cash flows in the future.


	As of or for the Year Ended December 31,⁽¹⁾
	2010			2011			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB
	(In millions, except for per share and per ADS data)
Turnover		1,465,415			2,003,843			2,195,296			2,258,124			2,282,962
Total operating expenses		(1,277,638	)		(1,821,382	)		(2,020,777	)		(2,069,482	)		(2,113,129	)
Profit from operations		187,777			182,461			174,519			188,642			169,833
Profit before income tax expense		189,305			184,215			166,811			178,063			156,759
Income tax expense		(38,513	)		(38,256	)		(36,191	)		(35,789	)		(37,731	)
Profit for the year		150,792			145,959			130,620			142,274			119,028
Profit for the year attributable to owners of the parent company		139,992			132,961			115,326			129,599			107,172
Non-controlling interest		10,800			12,998			15,294			12,675			11,856
Basic and diluted earnings per share for profit attributable to owners of the parent company⁽¹⁾		0.76			0.73			0.63			0.71			0.59
Basic and diluted net earnings per ADS⁽²⁾		76.49			72.65			63.01			70.81			58.56
Total current assets		264,196			361,590			392,805			430,953			391,308
Total non-current assets		1,392,291			1,555,996			1,776,091			1,911,157			2,014,165
Total assets		1,656,487			1,917,586			2,168,896			2,342,110			2,405,473
Total current liabilities		429,736			560,038			574,748			645,489			579,829
Total non-current liabilities		216,622			275,002			413,400			426,686			507,863
Total liabilities		646,358			835,040			988,148			1,072,175			1,087,692
Equity attributable to owners of the parent company		938,926			1,002,745			1,064,010			1,132,735			1,175,894
Non-controlling interests		71,203			79,801			116,738			137,200			141,887
Total equity		1,010,129			1,082,546			1,180,748			1,269,935			1,317,781
Other Financial Data
Dividend per share		0.34			0.33			0.28			0.32			0.26
Dividend per ADS		34.42			32.69			28.36			31.87			26.35
Capital expenditures		276,212			284,391			352,516			318,696			291,729
Net cash flows from operating activities		318,796			290,155			239,288			288,529			356,477
Net cash flows used for investing activities		(299,302	)		(283,638	)		(332,226	)		(266,510	)		(290,838	)
Net cash flows from/used for financing activities		(60,944	)		9,259			75,356			(12,239	)		(44,312	)
Return on net assets (%)⁽³⁾		14.9			13.3			10.8			11.4			9.1

(1)	As of December 31, 2010, 2011, 2012, 2013 and 2014, respectively, basic and diluted earnings per share were calculated by dividing the profit attributable to owners of the parent company by 183.021 billion, the total number of shares outstanding in each of these financial years.

(2)	Each ADS represents 100 H Shares. The basic and diluted earnings per ADS were calculated with the same method as that used for the calculation of the basic and diluted earnings per share.

(3)	Return on net assets is calculated as “Profit for the year attributable to owners of the parent company” divided by “Equity attributable to owners of the parent company”.

Risk Factors

Our business is primarily subject to various changing competitive, economic and social conditions. Such changing conditions entail certain risks, which are described below.

Risks Related to Macro Economic Conditions

Our operations may be adversely affected by international and domestic economic conditions. As the oil and gas industry is sensitive to macro-economic trends, oil and gas prices tend to fluctuate along with changes in macro-economic conditions. We may experience pricing pressure on our refined products in recessionary periods, which would have an adverse effect on our profitability. In 2014, a weak domestic economy continued to affect the demand for certain of our products. These factors may also lead to intensified competition for market share, with consequential potential adverse effects on volumes. There has been an uptrend in China’s overall inflation rate in recent years. Notwithstanding the measures taken by the PRC government to control inflation, China may continue to experience inflation in the near term and our operating costs may become higher than anticipated. The financial and economic situation may also have a negative impact on third parties with whom we do, or may do, business. Any of these factors may adversely affect our financial condition, results of operations and liquidity.

Risks Related to Competition

The oil, gas and petrochemicals industries are highly competitive. There is strong competition, both within the oil and gas industry and with other industries, in supplying the fuel needs of commercial, industrial and residential markets. In recent years, with further diversification of the market players in China’s petroleum and petrochemical industry, we have been facing increasingly intense competition from privately-owned companies and foreign-invested enterprises in chemical, sales and oil and gas service sectors. In addition, the rapid development of unconventional oil and gas resources, new energy sources and new products also poses competition with the conventional energy and petrochemical industries. Competition puts pressure on product prices, affects oil products marketing and requires continuous management focus on identifying new trends, reducing unit costs and improving efficiency. The implementation of our growth strategy requires continued technological advances and innovation, including advances in exploration, production, refining, petrochemicals manufacturing technology and advances in technology related to energy usage. Our performance could be impeded if competitors developed or acquired intellectual property rights to technology that we required or if our innovation lagged the industry.

The eastern and southern regions of China have a higher demand for refined products and chemical products than the western and northern regions. Although we have strived to increase our refinery capacity in the southern regions of China over recent years, most of our refineries and chemical plants are located in the northeastern and northwestern regions of China. We incur relatively higher transportation costs for delivery of our refined products and chemical products to certain areas of the eastern and southern regions from our refineries and chemical plants in western and northern China. We face strong competition from other domestic oil companies. As a result, we expect that we will continue to encounter difficulty in increasing our sales of refined products and chemical products in these regions.

Risks Related to Outbound Investments and Trading

We are subject to various political, legal and regulatory environments in foreign developing countries where we operate, some of which are known to be unstable and differ in certain significant respects from those prevailing in developed countries. Main factors affecting our outbound investments include unstable political situations, unstable tax policies and unstable regulatory regimes. CNPC, our controlling shareholder, and its affiliates and subsidiaries may choose to undertake, without our involvement, overseas investments, operations and trading in the oil and gas industry, including exploration and production of oil and gas, refining and transportation, import of crude oil and natural gas, operation of liquefied natural gas,

or LNG projects, or other business activities. CNPC’s overseas asset portfolio includes oil and gas development and pipeline projects in certain countries that are subject to U.S. sanctions, including Iran, Sudan, Cuba, Syria and Myanmar. Furthermore, CNPC has trading relationships with certain Russia entities which are subject to U.S. sanctions. Namely, CNPC has entered into long-term agreements with Rosneft to import crude oil from Russia to China and with Gasprom to import natural gas from Russia to China. Both of Rosneft and Gazprom are subject to limited U.S. sanctions, which largely prohibit those companies from accessing U.S. financial markets. Certain U.S.-based investors may not wish to invest and have proposed or adopted divestment or similar initiatives regarding investments in companies that do business with countries and entities that are subject to U.S. sanctions. These investors may not wish CNPC to make investments or conduct activities in the countries or with the entities that are the subject of U.S. sanctions and may divest their investment in us because of our relationship with CNPC and its investments and activities in those countries or with those entities that are the subject of U.S. sanctions. As a result, the trading prices of our ADSs may be adversely affected.

In July 2012, the U.S. Treasury Department’s Office of Foreign Assets Control, OFAC, added Bank of Kunlun Co., Ltd., or Kunlun Bank, an affiliate of our company due to common control by CNPC, to its “List of Foreign Financial Institutions Subject to Part 561” pursuant to the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. OFAC reported that Kunlun Bank provided financial services to at least six Iranian banks that were on OFAC’s sanctions list during 2012. These financial services included holding accounts, making transfers, and in particular, transfer of a total of US$0.1 billion for Bank Tejarat during early 2012, and paying letters of credit on behalf of the designated banks. Kunlun Bank has not informed us of the revenue and profit it generated from such activities in relation to Iran or whether it will discontinue such activities. Our company has no involvement in or control over such activities of Kunlun Bank or CNPC and CNPC subsidiaries and affiliates, and we have never received any revenue or profit derived from these activities.

Risks Related to Government Regulation

Our operations, like those of other PRC oil and gas companies, are subject to extensive regulations and control by the PRC government. These regulations and control affect many material aspects of our operations, such as exploration and production licensing, industry-specific and product-specific taxes and fees and environmental and safety standards. As a result, we may face significant constraints on our ability to implement our business strategies, to develop or expand our business operations or to maximize our profitability. Our business may also be affected by future changes in certain policies of the PRC government with respect to the oil and gas industry.

Currently, the PRC government must approve the construction and major renovation of significant refining and petrochemical facilities as well as the construction of significant crude oil, natural gas and refined product pipelines and storage facilities. We presently have several significant projects pending approval from the relevant government authorities and will need approvals from the relevant government authorities in connection with several other significant projects. We do not have control over the timing and outcome of the final project approvals.

Because PRC laws, regulations and legal requirements dealing with economic matters continue to evolve, and because of the limited volume of published judicial interpretations and the non-binding nature of prior court decisions, the interpretation and enforcement of these laws, regulations and legal requirements involve some uncertainty. Because the PRC Company Law is different in certain important aspects from company laws in the United States, Hong Kong and other common law jurisdictions, and because the PRC securities laws and regulations are still at an early stage of development, you may not enjoy the shareholders’ protections that you may be entitled to in other jurisdictions.

Risks Related to Controlling Shareholder

As of December 31, 2014, CNPC beneficially owned approximately 86.507% of our share capital. This ownership percentage enables CNPC to elect our entire board of directors without the concurrence of any of our other shareholders. Accordingly, CNPC is in a position to:

•

control our policies, management and affairs;

•

subject to applicable PRC laws and regulations and provisions of our articles of association, affect the timing and amount of dividend payments and adopt amendments to certain of the provisions of our articles of association; and

•

otherwise determine the outcome of most corporate actions and, subject to the regulatory requirements of the jurisdictions in which our shares are listed, cause our company to effect corporate transactions without the approval of minority shareholders.

CNPC’s interests may sometimes conflict with those of some or all of our minority shareholders. We cannot assure you that CNPC, as our controlling shareholder, will always vote its shares in a way that benefits our minority shareholders.

In addition to its relationship with us as our controlling shareholder, CNPC by itself or through its affiliates also provides us with certain services and products necessary for our business activities, such as construction and technical services, production services, materials supply services and financial services. The interests of CNPC and its affiliates as providers of these services and products to us may conflict with our interests.

Risks Related to Pricing and Exchange Rate

Our operations are affected by the volatility of prices for crude oil, refined products and natural gas. We set our crude oil median prices monthly based on the Singapore trading prices for crude oil.

Recently, international prices for crude oil have fluctuated widely in response to changes in global and regional economy, politics and supply and demand for crude oil. We do not have, and will not have, control over factors affecting international prices for crude oil. Fluctuations in crude oil prices have a significant impact in our results of operations. A decline in crude oil prices may reduce revenues from, and may result in a loss in, our exploration and production segment. Further, if crude oil prices remain at a low level for a prolonged period, our company has to determine and estimate whether our oil and gas assets may suffer impairment losses and, if so, the amount of the impairment losses. An increase in crude oil prices may, however, increase the production costs of refined products reduce demand for our products and affect our operating profits.

Since 2008, the PRC government has further improved its refined oil pricing mechanism. When there is a change in the average crude oil price in the international market during a given time period, the PRC government can adjust refined oil prices. When international crude oil price experiences sustained increases or becomes significantly volatile, the PRC government may increase its control over the refined oil prices. As a result, the regulation on refined product prices by the PRC government may reduce our profit and cause our refining assets to suffer impairment losses.

We negotiate the actual ex-factory price with natural gas users within the maximum price permitted by the PRC government. When the maximum price is lower than the international natural gas price, the cost of our imported natural gas will be higher than the selling price of our natural gas, which may reduce our revenues or cause our natural gas assets to suffer impairment losses.

We receive most of our revenues in Renminbi. A portion of our Renminbi revenues must be converted into other currencies to meet our foreign currency obligations. The existing foreign exchange limitations under the PRC laws and regulations could affect our ability to obtain foreign exchange through debt financing, or

to obtain foreign exchange for capital expenditures. The value of Renminbi against U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. On July 21, 2005, the PRC government introduced a floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of foreign currencies. Because most of our purchases of crude oil and our outbound investments are settled in foreign currencies, the exchange rates between RMB and U.S. dollars and any other relevant foreign currencies may have an effect on our crude oil purchase costs and investment costs.

Risks Related to Environmental Protection and Safety

Compliance with changes in laws, regulations and obligations relating to climate change or environmental protection could result in substantial capital expenditures and reduced profitability from increases in operating costs.

A number of provinces in which our oil and gas exploration and production activities are located have promulgated environment protection regulations, which set forth specific abandonment and disposal processes for oil and gas exploration and production activities. We have established standard abandonment procedures in response to the issuance of these provincial regulations. We have included under our asset retirement obligations the costs for these abandonment activities and this asset retirement obligation is based on our best estimate of future abandonment expenditures. In addition, PRC central government or other provincial governments may enact similar regulations or stricter environmental protection regulations. For example, the revised PRC Environmental Protection Law has been effective since January 1, 2015 and the revised PRC Safety Production Law has been effective since December 1, 2014. Any new or potential regulations could impose stricter requirements on us and thus increase our operation costs.

The process of gasoline and diesel fuel quality upgrade is gradually accelerating in China. The Circular of the State Council regarding the Printing and Issue of the Action Plan for Prevention and Treatment of Air Pollution issued in September 2013 set forth a definitive schedule for the upgrading of the quality of oil products. Pursuant to the schedule, the China IV standard for auto-use gasoline was implemented on January 1, 2014, the China IV standard for auto-use diesel, which requires that the sulfur content be reduced below 50ppm, was implemented on January 1, 2015, and the China V standard for auto-use diesel, which requires the sulfur content be reduced below 10ppm, will be adopted across the nation at a time determined by the PRC government authorities. Some local governments have earlier implemented local gasoline and diesel fuel standards equivalent to the Euro IV standard. New governmental requirements to improve oil quality impose challenges to our refining and chemicals segment and could increase our costs in oil refining.

Exploring for, producing and transporting crude oil and natural gas and producing and transporting refined products and chemical products involve many hazards. These hazards may result in:

•

fires;

•

explosions;

•

spills;

•

blow-outs; and

•

other unexpected or dangerous conditions causing personal injuries or death, property damage, environmental damage and interruption of operations.

Some of our oil and natural gas fields are surrounded by residential areas or located in areas where natural disasters, such as earthquakes, floods and sandstorms, tend to occur more frequently than in other areas. As with many other companies around the world that conduct similar businesses, we have experienced accidents that have caused property damage and personal injuries and death.

Significant operating hazards and natural disasters such as earthquake, tsunami and health epidemics may cause partial interruptions to our operations and property and environmental damage that could have an adverse impact on our financial condition.

Risks Related to Climate Change

In recent years, the oil industry has faced an increasingly severe challenge imposed by global climate change. Numerous international, domestic and regional treaties and agreements that restrict the emission of greenhouse gas have been executed and become effective. If China or any other country in which we operate business remains committed to the reduction of the emission of greenhouse gas, the legal and regulatory requirements for that purpose may lead to a substantial increase in our capital expenditures and tax expenses and in turn, an increase in our operating costs. As a result, our results of operations and our strategic investment may be adversely affected.

Risks Related to Insurance Coverage

Due to the fact that oil industry is susceptible to high and industry-specific risks in nature, the current ordinary commercial insurance cannot cover all the business areas in which we operate. We maintain insurance coverage against some, but not all, potential losses. We may suffer material losses resulting from uninsurable or uninsured risks or insufficient insurance coverage.

Risks Related to Oil and Gas Reserves

The crude oil and natural gas reserve data in this annual report are only estimates. The reliability of reserve estimates depends on a number of factors, assumptions and variables, such as the quality and quantity of our technical and economic data and the prevailing oil and gas prices applicable to our production, some of which are beyond our control and may prove to be incorrect over time. Results of drilling, testing and production after the date of estimates may require substantial upward or downward revisions in our reserve data. Our actual production, revenues and expenditures with respect to our reserves may differ materially from these estimates because of these revisions.

We are actively pursuing business opportunities outside China to improve our international operations. We cannot assure you, however, that we can successfully locate sufficient, if any, alternative sources of crude oil supply due to the complexity of the international political, economic and other conditions. If we fail to obtain sufficient alternative sources of crude oil supply, our results of operations and financial condition may be materially and adversely affected.

Risks Related to Liquidity

We have made best endeavors to ensure an appropriate level of liquidity and financing ability. However, as we are currently undergoing constructions in response to a peak in our oil and gas reserves, strengthening capacity building in key areas, constructing new, and expanding some existing, refinery and petrochemical facilities and constructing several natural gas and oil pipelines, we may have to make substantial capital expenditures and investments. We cannot assure you that the cash generated by our operations will be sufficient to fund these development plans or that our actual future capital expenditures and investments will not significantly exceed our current planned amounts. If either of these conditions arise, we may have to seek external financing to satisfy our capital needs. Our inability to obtain sufficient funding for our development plans could adversely affect our business, financial condition and results of operations.

Risks Related to Effectiveness of Internal Control over Financial Reporting

SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal control over

financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. Although our management concluded that our internal control over our financial reporting for the fiscal year ended December 31, 2014 was effective, we may discover other deficiencies in the course of our future evaluation of our internal control over our financial reporting and may be unable to remediate such deficiencies in a timely manner. If we fail to maintain the adequacy of our internal control over financial reporting, we may not be able to conclude that we have effective internal control over financial reporting on an ongoing basis, in accordance with the Sarbanes-Oxley Act. Moreover, effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud. As a result, our failure to maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading prices of our ADSs, H Shares or A Shares.

Risks Related to Audit Reports Prepared by an Auditor who is not Inspected by the Public Company Accounting Oversight Board

Auditors of companies that are registered with the SEC and publicly traded in the United States, including our independent registered public accounting firm, must be registered with the United States Public Company Accounting Oversight Board, or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Our independent registered public accounting firm currently relies on the Chinese member firm of the KPMG network for assistance in completing the audit work associated with our operation in China. The Chinese member firm of our independent registered public accounting firm is located in China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, and the Chinese member firm of our independent registered public accounting firm is not currently inspected by the PCAOB. As a result, investors do not have the benefits of PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in the PRC makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside the PRC that are subject to PCAOB inspections.

Risks Related to SEC Litigation Against the “Big Four” PRC-based Accounting Firms

On January 22, 2014, Judge Cameron Elliot, an SEC administrative law judge, issued an initial decision suspending the Chinese member firms of the “Big Four” accounting firms, including KPMG network, from, among other things, practicing before the SEC for six months. In February 2014, the initial decision was appealed. While under appeal and in February 2015, the Chinese member firms of “Big Four” accounting firms reached a settlement with the SEC. As part of the settlement, each of the Chinese member firms of “Big Four” accounting firms agreed to settlement terms that include a censure, undertakings to make a payment to the SEC, procedures and undertakings as to future requests for documents by the SEC and possible additional proceedings and remedies should those undertakings not be adhered to.

Our independent registered public accounting firm currently relies on the Chinese member firm of the KPMG network for assistance in completing the audit work associated with our operations in China. If the settlement terms are not adhered to, the Chinese member firms of “Big Four” accounting firms may be suspended from practicing before the SEC, which could in turn delay the timely filing of our annual report including our financial statements with the SEC. In addition, it could be difficult for us to timely identify and engage another qualified independent auditor to replace KPMG. A delinquency in our filing of the annual report with the SEC may result in the NYSE’s initiating delisting procedures, which could adversely harm our reputation and have other material adverse effects on our overall growth and prospect.

Risks Related to Employee Misconduct

We may not be able to detect or prevent employee misconduct, including misconduct by senior management, and such misconduct may damage our reputation and could adversely affect the trading price of our ordinary shares and ADSs.

Several former senior management members and directors of our company are being investigated by relevant PRC authorities. We have very limited knowledge of the status or scope of the ongoing investigations, and it is difficult for us to assess their ultimate outcome or their impact on our business.

We have re-examined our internal control and corporate governance policies and procedures in order to strengthen our ability to detect and prevent similar and other misconduct. We cannot assure you, however, that we will be able to detect or prevent such misconduct in a timely fashion, or at all. If we fail to prevent employee misconduct, our reputation may be harmed, and the trading price of our ordinary shares and ADSs could be adversely affected.

See also “Item 4 — Information on the Company — Regulatory Matters”, “Item 5 — Operating and Financial Review and Prospects”, “Item 8 — Financial Information” and “Item 11 — Quantitative and Qualitative Disclosures About Market Risk”.

ITEM 4 — INFORMATION ON THE COMPANY

Introduction

History and Development of Our Company

Our legal name is “ LOGO ” and its English translation is PetroChina Company Limited.

We are the largest oil and gas producer and seller occupying a leading position in the oil and gas industry in the PRC and one of the largest companies in the world. We are engaged in a broad range of petroleum and natural gas related activities, including the exploration, development, production and marketing of crude oil and natural gas; the refining of crude oil and petroleum products, as well as the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; the marketing of refined oil products and trading; and the transmission of natural gas, crude oil and refined oil products as well as the sale of natural gas.

Currently, substantially all of our crude oil and natural gas reserves and production-related assets are located in China. Our exploration, development and production activities commenced in the early 1950s. Over more than six decades, we have conducted crude oil and natural gas exploration activities in many regions of China.

We commenced limited refining activities in the mid-1950s. Our chemicals operations commenced in the early 1950s. In the early 1960s, we began producing ethylene. Our natural gas transmission and marketing activities commenced in Sichuan in southwestern China in the 1950s.

We have increased our efforts to pursue attractive business opportunities outside China as part of our business growth strategy to utilize both domestic and international resources to strengthen our competitiveness. Since 2005, we have acquired interests in various oil and natural gas assets in several countries, which significantly expanded our overseas operations and effectively increased our oil and gas reserves and production volumes. We are currently assessing the feasibility of making further investments in international oil and gas markets. At the same time, we have been maintaining and gradually increasing the proportion of imported crude oil in accordance with our needs. In 2014, we imported approximately 435.6 million barrels of crude oil, compared to 476.5 million barrels and 465.6 million barrels of crude oil in 2013 and 2012, respectively.

We were established as a joint stock company with limited liability under the Company Law of the PRC on November 5, 1999 as part of a restructuring in which CNPC transferred to us most of the assets and liabilities of CNPC relating to its exploration and production, refining and marketing, chemicals and natural gas businesses.

On April 7, 2000, we completed a global offering of H Shares and ADSs. In September 2005, we completed a follow-on offering of over 3 billion H Shares at the price of HK$6.00 per share. In October 2007, we issued 4 billion A Shares at an issue price of RMB16.7 per share. The A Shares were listed on the Shanghai Stock Exchange on November 5, 2007. As of December 31, 2014, CNPC beneficially owned 158,325,211,528 shares in PetroChina, which included 291,518,000 H Shares indirectly held by CNPC through Fairy King Investments Limited, an overseas wholly owned subsidiary of CNPC, representing approximately 86.507% of the share capital of PetroChina.

For a description of our principal subsidiaries, see Note 19 to our consolidated financial statements.

Our headquarters are located at 9 Dongzhimen North Street, Dongcheng District, Beijing, China, 100007, and our telephone number at this address is (86-10) 5998-6223. Our website address is www.petrochina.com.cn. The information on our website is not part of this annual report.

Our agent for service of process in the United States in connection with securities actions is CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011.

Our Corporate Organization Structure

The following chart illustrates our corporate organization structure as of December 31, 2014.

LOGO

(1)	Indicates approximate shareholding.

(2)	Indicates approximate shareholding, including the 291,518,000 H Shares indirectly held by CNPC as of December 31, 2014 through Fairy King Investments Limited, a wholly owned overseas subsidiary of CNPC.

(3)	Includes PetroChina Planning & Engineering Institute, PetroChina Exploration & Development Research Institute, IT Service Center, PetroChina Petrochemical Research Institute and several other companies.

Acquisitions and Divestment

We have launched a series of overseas acquisitions of assets or exploration rights in 2014, including among others:

In November 2013, we entered into an agreement with Petrobras to acquire all shares in Petrobras Energia Peru S.A. for a total consideration of US$2.6 billion. We completed this transaction in November 2014.

In December 2013, we acquired a 25% interest in the West Qurna-1 project in Iraq. In March 2014, we increased our interest in the West Qurna-1 project in Iraq from 25% to 32.7% for a consideration of US$442 million.

In August 2014, we exercised the option to purchase the remaining 40% interest in the Duvernay property in Alberta Canada for a consideration of 1.18 billion Canada dollars. After the transaction, we wholly owned the Duvernay property.

In November 2014, we entered into a product sharing agreement with the government of Chad in relation to the undeveloped area in the H block for an exploration term of up to eight years and a development term of up to 35 years. The government of Chad will have an interest of no more than 25% when the project reaches the development phase. This agreement is still subject to the approvals of the government authorities of China and Chad.

LOGO

Exploration and Production

We engage in crude oil and natural gas exploration, development and production. Substantially all of our total estimated proved crude oil and natural gas reserves are located in China, principally in northeastern, northern, southwestern and northwestern China. Meanwhile, we have enhanced our overseas cooperation and expanded our strategic presence in five major overseas oil and gas cooperation regions by conducting new project development. In the year ended December 31, 2014, the crude oil and natural gas produced by us at overseas regions accounted for 12.9% and 4.9% of our total production of crude oil and natural gas, respectively.

We currently hold exploration and exploitation licenses for oil and gas (including coal seam gas) covering a total area of approximately 380.4 million acres, including the exploration licenses covering a total area of approximately 353.2 million acres and the exploitation licenses covering a total area of approximately 27.2 million acres.

The following table sets forth the financial and operating data of our exploration and production segment for each of the years ended December 31, 2012, 2013 and 2014:


	Year Ended December 31,
	2012		2013		2014
Revenue (RMB in millions)		789,818		783,694		777,574
Income from operations (RMB in millions)		214,955		189,698		186,897
Proved developed and undeveloped reserves
Crude oil (million barrels)		11,018.0		10,820.3		10,593.4
Natural gas (Bcf)		67,581.2		69,322.6		71,097.5
Production
Crude oil (million barrels)		916.5		932.9		945.5
Natural gas for sale (Bcf)		2,558.8		2,801.9		3,028.8

Reserves

Our estimated proved reserves as of December 31, 2014 totaled approximately 10,593.4 million barrels of crude oil and approximately 71,097.5 Bcf of natural gas. As of December 31, 2014, proved developed reserves for crude oil and natural gas accounted for 68.5% and 50.4% of our total proved crude oil and natural gas reserves, respectively. Total proved hydrocarbon reserves, including our overseas crude oil reserves of 857.9 million BOE and overseas natural gas reserves of 1,262.0 Bcf, totaling 1,068.2 million BOE, increased by 0.3% from approximately 22,374.1 million BOE as of December 31, 2013 to approximately 22,443.0 million BOE as of December 31, 2014. Natural gas as a percentage of total proved hydrocarbon reserves increased from 51.6% as of December 31, 2013 to 52.8% as of December 31, 2014.

We prepared our reserve estimates as of December 31, 2012, 2013 and 2014 on the basis of reports prepared by independent engineering consultants, namely DeGolyer and MacNaughton, Ryder Scott Company, L.P., GLJ Petroleum Consultants, Gaffney, Cline & Associates (Consultants) Pte Ltd, Gaffney, Cline & Associates, Inc. and McDaniel & Associates Consultants Ltd. Our reserve estimates include only crude oil and natural gas which we believe can be reasonably produced within the current terms of our production licenses or within the terms of the licenses which we are reasonably certain can be renewed. See “Regulatory Matters — Exploration Licenses and Production Licenses” for a discussion of our production licenses. Also see “Item 3 — Key Information — Risk Factors” for a discussion of the uncertainty inherent in the estimation of proved reserves.

Our reserve data for 2012, 2013 and 2014 were prepared in accordance with the SEC’s final rules on “Modernization of Oil and Gas Reporting”.

Internal Controls Over Reserves Estimates

We have appointed a Reserve Assessment Directing Team, or the RAD Team. The leader of the RAD Team is our Vice President in charge of our upstream business.

In recent years, we have been implementing a practicing professional certification regime to supervise our employees engaged in oil and gas reserve evaluation and auditing functions. We have set up a team of reserve assessors and auditors covering our headquarter office and regional companies to perform reserve estimates and audits. Meanwhile, we have established a special reserve management department in our exploration and production segment. Each of the officers and employees of that department has over 20 years’ experience in oil industry and over 10 years’ experience in SEC-guided reserve evaluation. Many members of that department have national-level registered qualifications in reserve expertise. Each regional company has established a reserve management committee and a multi-disciplinary reserve research office. Mr. Zhang Junfeng, the Director of the Reserve Administration Department of the exploration and production segment, is in charge of the reserve estimation of the company. Mr. Zhang holds a doctorate degree in geology. He has over 15 years of work experience in oil and gas exploration and development. Since 2009, Mr. Zhang has been the expert primarily responsible for overseeing the preparation of the reserves estimates and oil and gas reserve estimation technology and management. The reserve research offices of the regional companies are responsible for estimating newly discovered reserves and updating the estimates of existing reserves. The results of our oil and gas reserve assessment are subject to a two-level review by both the regional companies and our exploration and production company, with final examination and approval by the RAD Team.

In addition, we commissioned independent assessment firms to independently reassess our annually assessed proved reserves in accordance with relevant SEC rules. We disclose the assessments of independent assessment firms in accordance with the SEC requirements.

Third-Party Reserve Report

DeGolyer and MacNaughton, an independent petroleum engineering consulting firm based in the United States, carried out an independent assessment of our reserves in China and certain other countries as of December 31, 2012, 2013 and 2014. Mr. Thomas C. Pence, the Senior Vice President of DeGolyer and MacNaughton, is primarily responsible for supervising the preparation of our reserve report. Mr. Pence is a Registered Professional Engineer, a member of the International Society of Petroleum Engineers, and has over 32 years of experience in oil and gas reservoir studies and reserve evaluations.

Ryder Scott Company, L.P. (“Ryder Scott”), an independent petroleum engineering consulting firm based in the United States, carried out an independent assessment of certain of our selected petroleum assets in Chad, West Qurna and Kazakhstan as of December 31, 2014. Mr. Daniel R. Olds, a director and a Senior Vice President of Ryder Scott, was primarily responsible for overseeing the estimate of the reserves, future production and income as stated in the reserve report. Mr. Olds is a licensed professional engineer in the State of Texas, a member of the Society of Petroleum Evaluation Engineers and a member of the Society of Petroleum Engineers. Mr. Olds has more than 33 years of practical experience in the estimation and evaluation of petroleum reserves.

GLJ Petroleum Consultants (“GLJ”), a petroleum consulting firm based in Canada, carried out an independent assessment of our reserves for certain gas and oil properties in Canada as of December 31, 2013 and 2014. Ms. Trisha MacDonald was the project manager for the evaluation. She is a senior engineer and has over 10 years of relevant experience. Mr. Jodi L. Anhorn, the Executive Vice President and Chief Operation Officer of GLJ, was the technical supervisor for the evaluation. He is an internationally recognized oil and gas resource evaluation expert and has over 20 years of working experience.

Gaffney, Cline & Associates (Consultants) Pte Ltd. (“GCA”), an engineering consulting firm based in Singapore, carried out an independent assessment of our reserves estimation and valuation in certain countries

such as Algeria and Chad as of December 31, 2012 and 2013. The reserve report of GCA has been compiled under the supervision of Mr. David S. Ahye, the firm’s director for the Asia Pacific region. He has over 30 years’ experience in the petroleum industry and holds a bachelor’s degree in chemical engineering.

Gaffney, Cline & Associates, Inc., an engineering consulting firm based in Texas, the United States, carried out an assessment of our reserves in the Halfaya oilfield in Iraq as of December 31, 2012 and 2013. Mr. Sakowski was the project manager for the reserves evaluation project of our Halfaya oilfield. He is a mechanical engineer and holds a master’s degree in project management. Mr. Sakowski is a member of the Society of Petroleum Engineers and Alberta APGG. He has 35 years of international experience in the oil and gas industry.

McDaniel &Associates Consultants Ltd., a petroleum consulting firm with its headquarters in Canada, carried out an independent assessment of our reserves held through PetroKazakhstan Inc. as of December 31, 2012 and 2013. Mr. Bryan Emslie, the Senior Vice President of McDaniel &Associates Consultants Ltd., was responsible for supervising the preparation of our reserve report. Mr. Bryan Emslie is a member of the Society of Petroleum Evaluation Engineers and the Society of Petroleum Engineers. He has over 30 years’ experience in oil and gas reservoir evaluation.

None of the above consulting firms or their partners, senior officers or employees has any direct or indirect financial interest in our company and the remunerations to the firms are not in any way contingent upon reported reserve estimates.

For detailed information about our net proved reserves estimates, please refer to the summary reports of reserves filed hereto as exhibits to this annual report on Form 20-F.

The following table sets forth our estimated proved reserves (including proved developed reserves and proved undeveloped reserves), proved developed reserves and proved undeveloped reserves of crude oil and natural gas as of December 31, 2012, 2013 and 2014.


	Crude Oil			Natural Gas⁽¹⁾			Combined
	(Millions of barrels)			(Bcf)			(BOE, in millions)
Proved developed and undeveloped reserves
Reserves as of December 31, 2012		11,018.0			67,581.2			22,281.5
Revisions of previous estimates		(124.1	)		(6,415.5	)		(1,193.2	)
Extensions and discoveries		774.8			10,958.7			2,601.3
Improved recovery		84.4						84.4
Production for the year		(932.9	)		(2,801.9	)		(1,400.0	)
Reserves as of December 31, 2013		10,820.3			69,322.6			22,374.1
Revisions of previous estimates		(16.1	)		(2,707.4	)		(467.2	)
Extensions and discoveries		645.6			7,511.1			1,897.4
Improved recovery		94.0			—			94.0
Sold		(4.9	)		—			(4.9	)
Production for the year		(945.5	)		(3,028.8	)		(1,450.4	)
Reserves as of December 31, 2014		10,593.4			71,097.5			22,443.0
Proved developed reserves
As of December 31, 2012		7,395.7			31,606.5			12,663.4
As of December 31, 2013		7,219.6			32,813.1			12,688.5
As of December 31, 2014		7,253.5			35,823.9			13,224.2
Proved undeveloped reserves
As of December 31, 2012		3,622.3			35,974.7			9,618.1
As of December 31, 2013		3,600.7			36,509.5			9,685.6
As of December 31, 2014		3,339.9			35,273.6			9,218.8

(1)	Represents natural gas remaining after field separation for condensate removal and reduction for flared gas.

Our proved undeveloped reserves were 9,218.8 million BOE in 2014. The main changes in our proved undeveloped reserves in 2014 include (i) the conversion of 2,089.2 million BOE of proved undeveloped reserves into proved developed reserves; and (ii) an increase of 1,622.4 million BOE in proved undeveloped reserves through extensions and discoveries as well as revisions of previous data as a result of improved discoveries. In 2014, we spent RMB130,912 million on developing proved undeveloped reserves. The overwhelming majority of our proved undeveloped reserves are situated around the oil fields that are currently producing. The majority of our proved undeveloped reserves are already scheduled for development within five years after initial booking.

Some of our natural gas proved undeveloped reserves are being developed more than five years after their initial disclosure primarily due to the effect of long-term natural gas supply contracts. The sale of natural gas produced from our reserves located in China is subject to our long-term contractual obligations to provide a stable supply of natural gas to customers. We sell all of the natural gas through our pipelines and under long-term supply arrangements with customers.

There are mainly two types of long-term supply arrangements. The first is multi-year supply contracts with terms ranging from 20 to 30 years that can be extended upon mutual agreement. The second type is renewable annual contracts. The majority of the natural gas produced from our gas fields in China is put into our nationwide, long-range pipeline system and sold to customers who have entered into multi-year supply contracts with us in the areas where the long-range pipeline system covers. A small portion of the natural gas produced by our company is put into local or internal pipeline systems and sold to customers in the areas adjacent to the company’s gas fields. These customers typically have formed de-facto long-term relationships with our company over the years and enter into supply contracts with us before the yearend to determine the amount of gas to be purchased for the next year, with such contracts being renewed every year. In general, our supply relationships with customers under the annual contracts have existed for more than ten years.

Mainly as a result of our contractual obligations to ensure a long-term, stable supply of natural gas to customers, we must maintain a relatively large amount of proved undeveloped natural gas reserves and develop them over an extended period of time (in some cases, longer than five years).

The following tables set forth our crude oil and natural gas proved reserves and proved developed reserves by region as of December 31, 2012, 2013 and 2014.


	As of December 31,
	2012				2013				2014
	Proved Developed and Undeveloped		Proved Developed		Proved Developed and Undeveloped		Proved Developed		Proved Developed and Undeveloped		Proved Developed
	(Millions of barrels)
Crude oil reserves
Daqing		2,697.1		2,078.1		2,484.9		1,895.2		2,267.1		1,710.8
Changqing		2,257.7		1,623.2		2,383.5		1,745.3		2,553.5		1,913.6
Xinjiang		1,512.5		1,050.2		1,548.6		1,024.7		1,535.1		1,028.9
Other regions⁽¹⁾		4,550.7		2,644.2		4,403.3		2,554.4		4,237.7		2,600.2

Total		11,018.0		7,395.7		10,820.3		7,219.6		10,593.4		7,253.5


	As of December 31,
	2012				2013				2014
	Proved Developed and Undeveloped		Proved Developed		Proved Developed and Undeveloped		Proved Developed		Proved Developed and Undeveloped		Proved Developed
	(bcf)
Natural gas reserves
Changqing		22,521.1		11,111.9		22,610.0		11,275.3		23,030.1		10,796.6
Tarim		20,250.4		7,939.3		20,770.7		8,967.2		22,434.2		12,495.5
Chuanyu		10,976.7		3,270.3		12,490.3		3,488.4		12,841.8		3,781.2
Other regions⁽²⁾		13,833.0		9,285.0		13,451.6		9,082.2		12,791.4		8,750.6

Total		67,581.2		31,606.5		69,322.6		32,813.1		71,097.5		35,823.9

(1)	Represents other oil regions in China and our overseas oil and gas fields.

(2)	Represents natural gas remaining after field separation for condensate removal and reduction for flared gas.

Exploration and Development

We are currently conducting exploration and development efforts in 12 provinces, two municipalities under the direct administration of the central government and three autonomous regions in China as well as in certain regions in other countries. We believe that we have more extensive experience in the exploration and development of crude oil and natural gas than any of our principal competitors in China.

The following table sets forth the number of wells we drilled, or in which we participated, and the results thereof, for the periods indicated.


Year		Daqing		Xinjiang		Changqing		Others⁽¹⁾		Total
2012
	Net exploratory wells drilled⁽²⁾		178		129		737		707		1,751
	Crude oil		163		84		434		313		994
	Natural gas		8		—		129		229		366
	Dry⁽³⁾		7		45		174		165		391
	Net development wells drilled⁽²⁾		4,498		2,018		9,289		4,127		19,932
	Crude oil		4,464		2,012		8,098		3,052		17,626
	Natural gas		10		6		1,050		1,030		2,096
	Dry⁽³⁾		24		—		141		45		210
2013
	Net exploratory wells drilled⁽²⁾		182		128		1,072		636		2,018
	Crude oil		164		89		638		298		1,189
	Natural gas		8		—		150		179		337
	Dry⁽³⁾		10		39		284		159		492
	Net development wells drilled⁽²⁾		4,909		1,716		5,981		4,181		16,787
	Crude oil		4,893		1,700		4,899		2,804		14,296
	Natural gas		9		16		994		1,336		2,355
	Dry⁽³⁾		7		—		88		41		136
2014
	Net exploratory wells drilled⁽²⁾		98		132		995		557		1,782
	Crude oil		76		68		615		309		1,068
	Natural gas		14		1		137		97		249
	Dry⁽³⁾		8		63		243		151		465
	Net development wells drilled⁽²⁾		5,134		1,559		5,611		3,832		16,136
	Crude oil		5,106		1,537		4,983		3,076		14,702
	Natural gas		16		22		525		731		1,294
	Dry⁽³⁾		12		0		103		25		140

(1)	Represents the Liaohe, Jilin, Huabei, Dagang, Sichuan, Tarim, Tuha, Qinghai, Jidong, Yumen, Zhejiang, southern and other oil regions.

(2)	“Net” wells refer to the wells after deducting interests of others. No third parties own any interests in any of our wells.

(3)	“Dry” wells are wells with insufficient reserves to sustain commercial production.

We had 340 wells in the process of being drilled and 17,918 wells with multiple completions as of December 31, 2014.

Oil-and-Gas Properties

The following table sets forth our interests in developed and undeveloped acreage by oil region and in productive crude oil and natural gas wells as of December 31, 2014.


					Acreage⁽¹⁾
	Productive Wells⁽¹⁾				Developed				Undeveloped
Oil Region	Crude Oil		Natural Gas		Crude Oil		Natural Gas		Crude Oil		Natural Gas
	(Thousands of acres)
Daqing		69,222		307		1,019.58		94.78		718.20		104.11
Changqing		53,231		9,679		1,047.17		4,746.46		565.80		2,444.00
Xinjiang		30,987		265		377.50		58.1		167.52		17.1
Other regions⁽²⁾		69,393		5,266		1,493.37		979.30		970.45		1,138.14

Total		222,833		15,517		3,937.62		5,878.64		2,421.97		3,703.35

(1)	Includes all wells and acreage in which we have an interest. No third parties own any interests in any of our wells or acreage.

(2)	Represents the Liaohe, Jilin, Huabei, Dagang, Southwestern, Tarim, Tuha, Qinghai, Jidong, Yumen, Zhejiang, southern and other oil regions.

Production

The following table sets forth our historical average net daily crude oil and natural gas production by region and our average sales price for the periods ended December 31, 2012, 2013 and 2014.


	For the Year Ended December 31,						% of 2014 Total
	2012		2013		2014		% of 2014 Total
Crude oil production⁽¹⁾
(thousands of barrels per day, except percentages or otherwise indicated)
Daqing		799.3		797.5		792.3		30.6
Changqing		456.4		492.0		506.8		19.6
Xinjiang		222.7		234.8		238.9		9.2
Other⁽²⁾		1,025.8		1,031.4		1,052.3		40.6

Total		2,504.2		2,555.8		2,590.3		100.0

Annual production (million barrels)		916.5		932.9		945.5
Average sales price (US$ per barrel)		103.65		100.42		94.83

Natural gas production⁽¹⁾⁽³⁾
(millions of cubic feet per day, except percentages or otherwise indicated)
Changqing		2,421.5		2.865.9		3,186.3		38.4
Tarim		1,739.2		1,995.3		2,099.4		25.3
Chuanyu		1,198.6		1,148.9		1,252.6		15.1
Other⁽⁴⁾		1,632.1		1,666.2		1,759.7		21.2

Total		6,991.4		7,676.3		8,298.0		100.0

Annual production (Bcf)		2,558.8		2,801.9		3,028.8
Average realized price (US$ per Mcf)⁽⁵⁾		5.04		5.61		6.30

(1)	Production volumes for each region include our share of the production from all of our cooperative projects with foreign companies in that region.

(2)	Represents production from the Liaohe, Jilin, Huabei, Dagang, Tarim, Tuha, Qinghai, Jidong, Yumen and other oil regions and our share of overseas production as a result of our acquisition of overseas assets.

(3)	Represents production of natural gas for sale.

(4)	Represents production from the Daqing, Qinghai, Tuha, Xinjiang, Liaohe, Huabei, Dagang, Jilin, Jidong, Yumen and other oil and gas regions and our share of overseas production as a result of our acquisition of overseas assets.

(5)	For natural gas citygate price, please refer to “Item 5 — Operating and Financial Review and Prospects — Overview”.

In 2014, we supplied a substantial majority of our total crude oil sales to our refineries. In addition, we entered into a crude oil mutual supply framework agreement with Sinopec in January 2015 for the supply of crude oil to each other’s refineries in 2015. Under this agreement, we agreed in principle to supply 4.74 million tons of crude oil to Sinopec in 2015. For the years ended December 31, 2012, 2013 and 2014, the average lifting costs of our crude oil and natural gas production were US$11.74 per BOE, US$13.23 per BOE and US$13.76 per BOE, respectively.

Principal Oil and Gas Regions

Daqing Oil Region

The Daqing oil region, our largest oil and gas producing property, is located in the Songliao basin and covers an area of approximately one million acres. In 2012, 2013 and 2014, our crude oil production volume in

the Daqing oil region was 799.3 thousand barrels per day, 797.5 thousand barrels per day and 792.3 thousand barrels per day, respectively. As of December 31, 2014, we produced crude oil from 39 fields in the Daqing oil region.

As of December 31, 2014, our proved crude oil reserves in the Daqing oil region were 2,267.1 million barrels, representing 21.4% of our total proved crude oil reserves. As of December 31, 2012 and 2013, the proved crude oil reserves in our Daqing oil region were 2,697.1 million barrels and 2,484.9 million barrels, respectively. In 2014, the crude oil reserve-to-production ratio of the Daqing oil region was 7.7 years.

Daqing’s crude oil has low sulfur and high paraffin content. As many refineries in China, particularly those in northeastern China, are configured to refine Daqing crude oil, we have a stable market for the crude oil we produce in the Daqing oil region.

Changqing Oil and Gas Region

The Changqing oil and gas region covers parts of Shaanxi Province, Gansu Province, Ningxia, Inner Mongolia and Shanxi Province. As of December 31, 2014, our proved crude oil reserves in the Changqing oil region were 2,553.5 million barrels, representing 24.1 % of our total proved crude oil reserves. In 2014, our crude oil production in the Changqing oil region averaged 506.8 thousand barrels per day, representing approximately 19.6% of our total daily crude oil production. In 2014, the crude oil reserve-to-production ratio at the Changqing oil region was 13.8 years.

In the early 1990s, we discovered the Changqing oil and gas region, which had total estimated proved natural gas reserves of 23,030.1 Bcf as of December 31, 2014, representing 32.4% of our total proved natural gas reserves. In January 2001, we discovered the Sulige gas field in the Changqing oil and gas region, which had total estimated proved natural gas reserves of 10,569.4 Bcf as of December 31, 2014. Sulige gas field is currently the largest gas field in China. In 2014, the Changqing oil and gas region produced 1,163.0 Bcf of natural gas for sale, representing an increase of 11.2% from 1,046.1 Bcf in 2013.

Xinjiang Oil Region

The Xinjiang oil region is one of our four largest crude oil producing properties and is located in the Junggar basin in northwestern China. We commenced our operations in the Xinjiang oil region in 1951. The Xinjiang oil region covers a total area of approximately 900,000 acres.

As of December 31, 2014, our proved crude oil reserves in the Xinjiang oil region were 1,535.1 million barrels, representing 14.5% of our total proved crude oil reserves. In 2014, our oil fields in the Xinjiang oil region produced an average of 238.9 thousand barrels of crude oil per day, representing approximately 9.2% of our total daily crude oil production. In 2014, the crude oil reserve-to-production ratio at the Xinjiang oil region was 17.6 years.

Tarim Oil and Gas Region

The Tarim oil and gas region is located in the Tarim basin in northwestern China with a total area of approximately 590,000 acres. In 1998, we discovered the Kela 2 natural gas field in the Tarim oil and gas region. As of December 31, 2014, the proved natural gas reserves in the Tarim oil and gas region reached 22,434.2 Bcf, representing 31.6% of our total proved natural gas reserves.

In 2014, we produced 766.3 Bcf of natural gas for sale in the Tarim oil and gas region. We have completed the construction of the pipelines to deliver natural gas in the Tarim oil and gas region to the central and eastern regions of China where there is strong demand for natural gas transmitted through our West-East Gas Pipelines. See “— Natural Gas and Pipeline — Natural Gas Transmission Infrastructure” for a discussion of our West-East Gas Pipeline.

Chuanyu Gas Region

We began natural gas exploration and production in the Chuanyu gas region in the 1950s. The Chuanyu gas region covers a total area of approximately 2.3 million acres. The natural gas reserve-to-production ratio in the Chuanyu gas region was approximately 28.1 years in 2014. As of December 31, 2014, we had 114 natural gas fields under development in the Chuanyu gas region. In 2013, our proved gas reserves increased by 6,621.6 Bcf cubic meters in the Anyue gas field located in the Chuanyu gas region. This is the largest ever monomer marine uncompartmentalized carbonate gas reservoir discovered in China and represents one of our major breakthroughs in the exploration of gas reserves.

As of December 31, 2014, our proved natural gas reserves in the Chuanyu gas region were 12,841.8 Bcf, representing 18.1% of our total proved natural gas reserves and an increase of 2.8% from 12,490.3 Bcf as of December 31, 2013. In 2014, our natural gas production for sale in the Chuanyu gas region reached 457.2 Bcf, representing 15.1% of our total natural gas production for sale.

LOGO

Refining and Chemicals

We now operate 28 enterprises located in eight provinces, four autonomous regions and three municipalities to engage in refining of crude oil and petroleum products, as well as the production and marketing of basic petrochemical products, derivative chemical products and other chemical products.

The following table sets forth the financial and operating data of our refining and chemicals segment for each of the years ended December 31, 2012, 2013 and 2014:


	Year Ended December 31,
	2012			2013			2014
Revenue (RMB in millions)		883,218			871,815			846,082
Loss from operations (RMB in millions)		(43,511	)		(24,392	)		(23,560	)
Crude oil processed (million barrels)		1,012.5			992.3			1,010.6
Crude oil primary distillation capacity (million barrels/year)		1,160.8			1,174.1			1,248.0
Production of refined oil products (thousand tons)		91,016			90,282			92,671

Refining

Refined Products

We produce a wide range of refined products at our refineries. Some of the refined products are for our internal consumption and used as raw materials in our petrochemical operation. The table below sets forth production volumes for our principal refined products for each of the years ended December 31, 2012, 2013 and 2014.


	Year Ended December 31,
Principal Product	2012		2013		2014
	(In thousands of tons)
Diesel		59,227		56,876		57,627
Gasoline		28,381		29,294		30,688
Kerosene		3,408		4,112		4,356
Lubricants		1,838		1,886		1,581
Fuel oil		3,874		3,802		3,423
Naphtha		9,876		9,056		9,966

Our Refineries

Most of our refineries are strategically located close to our crude oil production and storage bases along our crude oil and refined product transmission pipelines and railways, which provide our refineries with secure supplies of crude oil and facilitate our distribution of refined products to the domestic markets. In 2014, we further optimized our production processes and increased our refinery capacity. We also completed upgrade of diesel quality to ensure compliance with China IV standards. In addition, we have begun to further upgrade diesel quality to ensure compliance with China V standards in such key areas as the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Pearl River Delta. In 2014, Sichuan Petrochemical began production, and Guangxi Petrochemical put into operation its completed sulfur crude oil processing projects. The Yunnan refinery project, with a capacity over 10 million tons, is progressing as scheduled. In each of the years ended December 31, 2012, 2013, and 2014, our exploration and production operations supplied approximately 66.3% , 68.8%, and 68.7%, respectively, of the crude oil processed in our refineries.

The table below sets forth certain operating statistics regarding our refineries as of December 31, 2012, 2013 and 2014.


	As of December 31,
	2012		2013		2014
Primary distillation capacity⁽¹⁾ (thousand barrels per day)
Lanzhou Petrochemical		212.6		212.6		212.6
Dalian Petrochemical		415.0		415.0		415.0
Fushun Petrochemical		236.9		222.7		222.7
Dushanzi Petrochemical		202.4		202.4		202.4
Guangxi Petrochemical		202.4		202.4		202.4
Jilin Petrochemical		198.4		198.4		198.4
Sichuan Petrochemical		—		—		202.4
Other refineries		1,712.6		1,763.2		1,763.2

Total		3,180.3		3,216.7		3,419.2

Refining throughput (thousand barrels per day)
Lanzhou Petrochemical		202.3		212.6		185.4
Dalian Petrochemical		329.1		281.9		259.1
Fushun Petrochemical		152.2		167.8		170.5
Dushanzi Petrochemical		180.7		183.4		181.2
Guangxi Petrochemical		174.1		137.3		143.8
Jilin Petrochemical		168.5		173.5		168.7
Sichuan Petrochemical		—		—		125.4
Other refineries		1,559.6		1,562.0		1,534.6

Total		2,766.5		2,718.5		2,768.7

(1)	Represents the primary distillation capacity of crude oil and condensate.

In each of the years ended December 31, 2012, 2013 and 2014, the average utilization rate of the primary distillation capacity at our refineries was 90.1% , 87.3% and 86.1%, respectively, and the average yield for our four principal refined products (gasoline, kerosene, diesel and lubricants) at our refineries was 67.8%, 68.6% and 68.9% respectively. “Yield” represents the number of tons of a refined product expressed as a percentage of the number of tons of crude oil from which that product is processed. In each of the years ended December 31, 2012, 2013 and 2014, the yield for all refined products at our refineries was 93.8% , 93.4% and 93.8%, respectively.

Dalian Petrochemical, Lanzhou Petrochemical, Dushanzi Petrochemical, Guangxi Petrochemical, Sichuan Petrochemical, Fushun Petrochemical and Jilin Petrochemical were our leading refineries in terms of both primary distillation capacity and refining throughput in 2014.

To maintain effective operations of our facilities and lower production costs, we have endeavored to achieve the most cost-efficient proportions of various types of crude oil in our refining process. We purchase a portion of our crude oil requirements from third-party international suppliers located in different countries and regions. As a result, in 2014, we purchased a small amount of crude oil, through independent suppliers, from Sudan, which is on the U.S. sanction list. The crude oil so purchased was mingled with crude oil from other sources during the refining process. The revenue generated from our refinery from the crude oil purchased from Sudan accounted for 0.1% of our total revenue in 2014.

Chemicals

Most of our chemical plants are close to our refineries and are connected to the refineries by pipelines, providing additional production flexibility and opportunities for cost competitiveness. The raw materials required by our chemicals operations have been supplied by our own refineries.

Our Chemical Products

The table below sets forth the production volumes of our principal chemical products for each of the years ended December 31, 2012, 2013 and 2014.


	Year Ended December 31,
	2012		2013		2014
	(In thousand tons)
Basic petrochemicals
Propylene		4,074		4,257		4,600
Ethylene		3,690		3,982		4,976
Benzene		1,627		1,689		1,771
Derivative petrochemicals
Synthetic resin		6,089		6,537		7,951
Other synthetic fiber raw materials and polymer		1,595		1,218		1,293
Synthetic rubber		633		665		745
Other chemicals
Urea		4,408		3,771		2,663

We are one of the major producers of ethylene in China. We use the bulk of the ethylene we produce as a principal feedstock for the production of many chemical products, such as polyethylene. As of December 31, 2014, our annual ethylene production capacity was 5,910 thousand tons. We produce a number of synthetic resin products, including polyethylene, polypropylene and ABS. As of December 31, 2014, our production capacities for polyethylene, polypropylene and ABS were 5,062 thousand tons, 4,140 thousand tons and 705 thousand tons, respectively. In 2014, the 800 thousand tons-per-year ethylene project at Sichuan Petrochemical was completed and put into production.

Marketing of Chemicals

Our chemical products are distributed to a number of industries including the automotive, construction, electronics, medical manufacturing, printing, electrical appliances, household products, insulation, packaging, paper, textile, paint, footwear, agriculture and furniture industries.

The following table sets forth the sales volumes of our chemical products by principal product category for each of the years ended December 31, 2012, 2013 and 2014.


	Year Ended December 31,
Product	2012		2013		2014
	(In thousands tons)
Derivative petrochemicals
Synthetic resin		5,980.4		6,540.8		7,718.9
Synthetic fiber		107.4		101.8		86.4
Synthetic rubber		661.4		804.6		793.7
Intermediates		8,201.0		9,312.7		8,149.6
Other chemicals
Urea		4,303.6		3,943.7		2,681.8

In each of the years ended December 31, 2012, 2013 and 2014, our capital expenditures for our refining and chemicals segment were approximately RMB36,009 million, RMB26,671 million and RMB30,965 million, respectively. These capital expenditures were incurred primarily in connection with the expansion of our refining facilities, the upgrading of our product quality and the construction of large ethylene projects. In addition, we are also focusing on enhancing our processing technologies and methods. These efforts have enabled us to improve the quality of refined products at our refineries, particularly that of gasoline and diesel. We believe that our refined products are capable of meeting the product specification and environmental protection requirements as set by the PRC government.

LOGO

Marketing

We engage in the marketing of refined products through 37 regional sales companies including three distribution branch companies, one lubricants branch company and one fuel oil company. These operations include the transportation and storage of the refined products, and the wholesale, retail and export of gasoline, diesel, kerosene, lubricant, asphalt and other refined products. In addition, we have been actively developing international trade and have made some new achievements in Asia, Europe and America, the three oil and gas operating centers in the world, which further improved our international operations.

The following table sets forth the financial and operating data of our marketing segment for each of the years ended December 31, 2012, 2013 and 2014:


	Year Ended December 31,
	2012		2013		2014
Revenue (RMB in millions)		1,890,558		1,946,806		1,938,501
Income from operations (RMB in millions)		16,391		7,562		5,421
External sales volume of refined oil products (thousand tons)		153,277		159,133		160,878

We market a wide range of refined products, including gasoline, diesel, kerosene and lubricants, through an extensive network of sales personnel and independent distributors and a broad wholesale and retail distribution system across China. As of December 31, 2014, our marketing network consisted of:

•

Numerous nationwide wholesale distribution outlets. All of these outlets are located in high demand areas across China, particularly in the coastal areas, along major railways and along the Yangtze River; and

•

20,422 service stations, consisting of 19,806 service stations owned and operated by us and 616 franchised service stations owned and operated by third parties.

The PRC government and other institutional customers, including railway, transportation and fishery operators, are long-term purchasers of the gasoline and diesel that we produce. We sell gasoline and diesel to these customers at the supply prices for special customers published by the PRC government. See “— Regulatory Matters — Pricing — Refined Products” for a discussion of refined product pricing.

The following table sets forth our sales volumes of diesel, gasoline, kerosene and lubricants for each of the years ended December 31, 2012, 2013 and 2014.


	Year Ended December 31,
Product	2012		2013		2014
	(In thousands tons)
Diesel		94,515		93,301		87,041
Gasoline		47,407		52,350		59,821
Kerosene		11,355		13,482		14,016
Lubricants		2,104		1,740		1,498

Wholesale Marketing

We sell refined products both directly and through independent distributors into various wholesale markets, as well as to utility, commercial, petrochemical, aviation, agricultural, fishery and transportation companies in China. Our gasoline and diesel sales also include the amount we transferred to our retail operations.

Retail Marketing

The weighted average sales volume of gasoline and diesel per business day at our service station network was 11.1 tons per service station in 2012, 11.0 tons per service station in 2013 and 10.8 tons per service station in 2014.

Capital expenditures for the marketing segment for the years ended December 31, 2012, 2013 and 2014 amounted to RMB14,928 million, RMB7,101 million and RMB5,616 million, respectively, which were used mainly for the construction of sales network facilities including service stations and oil storage tanks.

LOGO

Natural Gas and Pipeline

We are China’s largest natural gas transporter and seller in terms of sales volume. We sell natural gas primarily to industrial companies, power plants, fertilizer and chemical companies, commercial users and municipal utilities owned by local governments. In addition, we also transmit crude oil and refined products in the natural gas and pipeline segment.

The following table sets forth the financial and operating data of our natural gas and pipeline segment for each of the years ended December 31, 2012, 2013 and 2014:


	As of December 31 or Year Ended December 31,
	2012			2013		2014
Revenue (RMB in millions)		202,196			232,751		284,262
Income (loss) from operations (RMB in millions)		(2,110	)		28,888		13,126
Total length of natural gas pipelines (km)		40,995			43,872		48,602
Total length of crude oil pipeline (km)		16,344			17,614		18,107
Total length of refined oil products pipeline (km)		9,437			9,534		10,086
Total volume of natural gas sold⁽¹⁾ (Bcf)		3,015.5			3,480.0		4,424.2

(1)	Represents the natural gas sold to third parties

Our Principal Markets for Natural Gas

In 2014, in addition to satisfying the demand of the northwestern, southern, central and northeastern regions of China, we sold our natural gas mainly to the northern, eastern and southeastern regions of the PRC.

Sichuan Province and Chongqing Municipality are two of our principal markets for natural gas in southwest China. We supply natural gas to Sichuan Province and Chongqing Municipality from our exploration and production operations in the Sichuan oil and gas region. Beijing Municipality, Tianjin Municipality, Hebei Province and Shandong Province in northern China have relatively high energy consumption levels. These areas are important markets for our natural gas transmission and marketing business. We supply natural gas to these areas primarily from the Changqing oil region through the Shaanxi to Beijing natural gas pipeline.

Shanghai Municipality, Jiangsu Province, Zhejiang Province and Anhui Province located in Yangtze River Delta of eastern China, and Henan Province and Hubei Province located in the central China have become our significant natural gas markets.

We have entered into contracts to provide approximately 3,356.0 Bcf of natural gas in 2015. However, the committed quantity of supply may be adjusted by the buyers and us in the course of the performance of the contracts in light of the actual situation.

Driven by environmental and efficiency concerns, the PRC government is increasingly encouraging industrial and residential use of natural gas to meet primary energy and environmental protection needs. The PRC government has adopted a number of laws and regulations to require municipal governments to increase the use of clean energy, such as natural gas and liquefied petroleum gas, to replace the use of raw coal. Several local governments, including that of Beijing, have adopted policies to facilitate an increase in natural gas consumption in order to reduce the air pollution level. The PRC government has also adopted a preferential value-added tax rate of 13% for natural gas production as compared to a 17% value-added tax rate for crude oil production.

We believe that these policies have had a positive effect on the development and consumption of natural gas in many municipalities that are our existing or potential markets for natural gas. We believe that these favorable policies will continue to benefit our natural gas business.

Natural Gas Transmission Infrastructure

As of December 31, 2014, we owned and operated approximately 48,602 kilometers of natural gas pipelines in China. Our natural gas pipelines represent the vast majority of China’s onshore natural gas pipelines. Our existing natural gas pipelines form a national trunk network for natural gas supply and the regional natural gas supply networks in northwestern, southwestern, northern and central China as well as the Yangtze River Delta.

The First West-East Gas Pipeline

The construction of the First West-East Gas Pipeline commenced officially in July 2002 and was completed and put into operation on October 1, 2004. The main line of our West-East Gas Pipeline links our natural gas fields in Xinjiang and Changqing with Henan Province, Anhui Province, Jiangsu Province, Shanghai Municipality and other areas in the Yangtze River Delta. It is designed to mainly transmit the natural gas produced at Tarim oil region to Henan, Anhui, Jiangsu, Zhejiang and Shanghai. The First West-East Gas Pipeline includes one main line, three main branch lines and numerous accessory branch lines, and two underground storage facilities, with a total length of 4,380 kilometers, of which the main line has a total length of 3,839 kilometers. The First West-East Gas Pipeline has a designed annual throughput capacity of 600.4 Bcf.

The Second West-East Gas Pipeline

In February 2008, we commenced the construction of the Second West-East Gas Pipeline. The west section of the Second West-East Gas Pipeline was put into operation in December 2009. In June 2011, the east section was put into operation. By the end of 2012, the main line and branch lines as well as the Hong Kong branch line of the Second West-East Gas Pipeline were all completed and put into operation. The Second West-East Gas Pipeline includes one main line, eight main branch lines and numerous accessory branch lines and three underground storage facilities, with a total length of 8,819 kilometers. The main line of the Second West-East Gas Pipeline has a length of 4,886 kilometers. The western section of the main line extends from Horgos to Zhongwei with a length of 2,325 kilometers and a designed annual throughput capacity of 1,059.5 Bcf. The eastern section of the main line extends from Zhongwei to Guangzhou with a length of 2,561 kilometers and a designed annual throughput capacity of 988.8 Bcf.

The Third West-East Gas Pipeline

The main line of the Third West-East Gas Pipeline extends from Horgos to Fuzhou via Zhongwei. It consists of five main branch lines, including the Yining-Horgos Line, and numerous accessory branch lines, with a total length of 6,840 kilometers and a designed annual throughput capacity of 1,059.4 Bcf. By the end of 2014, the western section of the Third West-East Gas Pipeline that extends from Horgos to Zhongwei was completed, with a length of 2,459 kilometers. The middle section that extends from Zhongwei to Ji’an is 2,030 kilometers long and is scheduled to be completed by 2017. The eastern section which extends from Ji’an to Fuzhou is 825 kilometers long and is scheduled to be completed and put into operation by 2015.

In addition, we also operate other natural gas pipelines, such as the Zhong County-to-Wuhan natural gas pipeline, the first, the second and the third Shaanxi-to-Beijing natural gas pipelines and Sebei-to-Lanzhou natural gas pipelines.

Crude Oil Transportation and Storage Infrastructure

We have an extensive network for the transportation, storage and distribution of crude oil, which covers many regions of China.

As of December 31, 2014, the crude oil transportation and storage infrastructure operated by us consisted of:

•

18,107 kilometers of crude oil pipelines; and

•

crude oil storage facilities with an aggregate storage capacity of approximately 30.4 million cubic meters.

Russia to China Crude Oil Pipeline

In May 2009, we commenced the construction of the Russia to China crude oil transmission pipeline (the Mohe-to-Daqing section) upon the approval of the National Development and Reform Commission, or NDRC. In September 2010, we completed construction of the entire line and put it into commercial production in January 2011. We were the builder and operator of the section crossing the Heilongjiang River and the section which lies in China. This pipeline extends from the Skovorodino off-take station of Russia’s Far East Pipeline through Galinda at the Russian border, Heilongjiang Province, and Inner Mongolia, to Daqing terminal station. This pipeline is 935 kilometers long and has a designed transmission capacity of 15 million tons.

In addition, we also operate other crude oil pipelines, including the western crude oil pipeline, the northeastern crude oil pipeline network and the Lancheng crude oil pipeline.

Refined Product Transportation and Storage Infrastructure

As of December 31, 2014, the refined product transportation and storage infrastructure operated by us consisted of:

•

10,086 kilometers of refined product pipelines; and

•

refined product storage facilities with a total storage capacity of approximately 35.5 million cubic meters.

The Lanzhou-to-Zhengzhou-to-Changsha Pipeline

We received approval from the NDRC for and commenced construction of the Lanzhou-to-Zhengzhou-to-Changsha refined oil pipeline in December 2007. The pipeline starts from Lanzhou of Gansu Province and terminates at Changsha of Hunan Province, with a total length of 3,133 kilometers, including the length of all the main lines and branch lines. We finished construction and commenced the operation of the section from Lanzhou to Zhengzhou in April 2009 and the section from Zhengzhou to Wuhan in August 2009. The construction of all the main line and branch lines was completed by October 2013.

In addition, we also operate other refined product pipelines, such as the refined product pipelines for western regions and Lanzhou-to-Chengdu-to-Chongqing refined product pipeline.

During the past three years, we have not experienced any delays in delivering natural gas, crude oil and refined products due to pipeline capacity constraints.

Competition

As an oil and gas company operating in a competitive industry, we compete in each of our business segments in both China and international markets for desirable business prospects and for customers. Our principal competitors in China are China Petroleum and Chemical Corporation, or Sinopec, and CNOOC.

Exploration and Production Operations

We are the largest onshore oil and gas company in China in terms of proved crude oil and natural gas reserves as well as crude oil and natural gas production and sales. However, we compete with other domestic oil and gas companies for the acquisition of desirable crude oil and natural gas prospects. Similarly, we face some competition in the development of offshore oil and gas resources. In addition, the gradual development of the low-cost shale gas and shale oil in the United States has had a material effect on our business. We believe that our experience in crude oil and natural gas exploration and production and our advanced exploration and development technologies that are suitable for diverse geological conditions in China will enable us to maintain our dominant position in discovering and developing crude oil and natural gas reserves in China.

Refining and Chemicals Operations and Marketing Operations

We compete with Sinopec in our refining and chemicals operations and marketing operations on the basis of price, quality and customer service. Most of our refineries and chemical plants are located in the northeastern and northwestern regions of China where we have the dominant market share for refined products and chemical products. We sell the remainder of our refined products and chemical products to the eastern, southern, southwestern and central-southern regions of China, where our products have a considerable market share. The eastern and southern regions of China, where refined products and chemical products are in higher demand, are important markets for our refined products and chemical products. Sinopec has a strong presence in the eastern and southern regions of China in competition with us, and most of Sinopec’s refineries, chemical plants and distribution networks are located in these regions in close proximity to these markets. Moreover, as the newly constructed facilities of CNOOC commenced operation in the same region, large quantity of chemical products have been marketed into that area. In addition, the further diversification of the market players in China’s domestic market and the continuous increase in production capacity of low-cost petrochemical products in the Middle East have a material effect on our business. As a result, the competition has further intensified. We expect that we will continue to face competition in our refined products and chemical products sales in these regions. See “Item 3 — Key Information — Risk Factors”.

We also face competition from imported refined products and chemical products on the basis of price and quality. In recent years, competition from foreign producers of refined products and chemical products has increased and the retail and wholesale markets in China for refined products and chemical products will be gradually opened to foreign competition as tariff and non-tariff barriers for imported refined products and chemical products are being lifted over time. For example, sales of chemical products imported from the Middle East have increased rapidly in China in recent years. We expect to face additional competitive challenges in the refined and chemical products market. In response, we have to reduce our production costs, improve the quality of our products and optimize our product mix. See “Item 3 — Key Information — Risk Factors”.

Natural Gas and Pipeline Operations

We are the largest natural gas supplier in the PRC in terms of sales volume. Currently, we face competition from Sinopec, CNOOC and coal-based natural gas producers in the supply of natural gas to Beijing Municipality, Tianjin Municipality, Hebei Province, Shanghai Municipality, Jiangsu Province, Anhui Province, Henan Province, Hubei Province, Hunan Province and the northwestern regions of China, our existing principal markets for natural gas. Currently, Sinopec has natural gas fields in Sichuan Province and Chongqing Municipality and sells natural gas to users in places such as Sichuan, Chongqing, Hunan, Jiangsu, Zhejiang and Shanghai. We have also expanded into the coastal regions in southeastern China where we may face competition from CNOOC and Sinopec. We believe that our dominant natural gas resources base, our relatively advanced technologies and our skills in managing long distance pipelines will enable us to continue to be a dominant player in the natural gas markets in China.

Environmental Matters

Like other companies in the industries in which we operate, we are subject to numerous national, regional and local environmental laws and regulations promulgated by the governments in those jurisdictions. These laws and regulations concern our oil and gas exploration and production operations, petroleum and petrochemical products and other activities. In particular, some of these laws and regulations:

•

require an environmental evaluation report to be submitted and approved prior to the commencement of exploration, production, refining and chemical projects;

•

restrict the type, quantities, and concentration of various substances that can be released into the environment in connection with drilling and production activities;

•

limit or prohibit drilling activities within protected areas and certain other areas; and

•

impose penalties for pollution resulting from oil, natural gas and petrochemical operations, including criminal and civil liabilities for serious pollution.

These laws and regulations may also restrict air emissions and discharges to surface and subsurface water resulting from the operation of natural gas processing plants, chemical plants, refineries, pipeline systems and other facilities that we own. In addition, our operations are subject to laws and regulations relating to the generation, handling, storage, transportation, disposal and treatment of solid waste materials.

We anticipate that the environmental laws and regulations to which we are subject will become increasingly strict and are therefore likely to have an increasing impact on our operations. It is difficult, however, to predict accurately the effect of future developments in such laws and regulations on our future earnings and operations. Some risk of environmental costs and liabilities is inherent in our operations and products, as it is with other companies engaged in similar businesses. We cannot assure you that material costs and liabilities will not be incurred. However, we do not currently expect any material adverse effect on our financial condition or results of operations as a result of compliance with such laws and regulations. We paid pollutant discharge fees of approximately RMB327 million, RMB378 million and RMB385 million, in 2012, 2013and 2014, respectively.

To meet future environmental obligations, we are engaged in a continuous program to develop effective environmental protection measures. This program includes research on:

•

building environment-friendly projects;

•

reducing sulfur levels in gasoline and diesel fuel;

•

reducing paraffin and benzene content in gasoline and continuously reducing the quantity of emissions and effluents from our refineries and petrochemical plants; and

•

developing and installing monitoring systems at our pollutant discharge openings and developing environmental impact assessments for construction projects.

Our capital expenditures on environmental programs in 2012, 2013 and 2014 were approximately RMB1.94 billion, RMB2.55 billion and RMB4.00 billion, respectively.

Because a number of our production facilities are located in populated areas, we have established a series of preventative measures to improve the safety of our employees and surrounding residents and minimize disruptions or other adverse effects on our business. These measures include:

•

providing each household in areas surrounding our production facilities with printed materials to explain and illustrate safety and protection knowledge and skills; and

•

enhancing the implementation of various effective safety production measures we have adopted previously.

We believe that these preventative measures have helped reduce the possibility of incidents that may result in serious casualties and environmental consequences. In addition, the adoption of these preventative measures has not required significant capital expenditures to date, and therefore, will not have a material adverse effect on our results of operations and financial condition.

Legal Proceedings

On September 3 and 6, 2013, two respective class action complaints were filed with the United States District Court for the Southern District of New York (the “Court”) against the Company and certain former and current directors and senior management of the Company for alleged violations of the securities laws of the

United States. These complaints were filed in light of PRC authorities’ investigation into certain former directors and senior management of the Company. The Company (through the designated legal documents delivery agent of the Company in the United States) has been served with notices of the complaints, with no details on the amounts claimed. The Company made announcements on September 6, 2013 and November 26, 2013, respectively, in relation to the actions.

On April 4, 2014, the Court entered an order to consolidate the related actions and appointed a lead plaintiff and lead counsel.

On June 6, 2014, the lead plaintiff submitted a revised complaint whereby the Company’s current directors and senior management were removed from the complaint and the individual defendants only include the former directors and senior management of the Company. The relevant charges set out in the complaint were basically the same as those in the previous complaint.

On August 5, 2014, in view of the revised complaint, the Company filed a motion to dismiss.

On November 24, 2014, upon approval by the court, the U.S. plaintiff further submitted a revised joinder complaint. In view of the complaint, the Company filed another motion to dismiss on February 13, 2015.

On April 10, 2015, the Court held a pre-motion conference to discuss the plaintiff’s request for submission of supplemental pleadings, and the Court dismissed the plaintiff’s request.

The normal course of business of the Company has not been affected by these complaints. The Company will proactively and vigorously contest the complaint with its best efforts to protect the legitimate rights and interests of the Company.

In addition to the foregoing, we are involved in several legal proceedings concerning matters arising in the ordinary course of our business. We believe, based on currently available information, that these proceedings, individually or in the aggregate, will not have a material adverse effect on our results of operations or financial condition.

Properties

We own substantially all of our properties, plants and equipment relating to our business activities. We hold exploration and production licenses covering all of our interests in developed and undeveloped acreage, oil and natural gas wells and relevant facilities.

Intellectual Property

Our company logo “ LOGO ” is jointly owned by us and CNPC and has been used since December 26, 2004. Together with CNPC, we have applied for trademark registrations of the logo with the State Trademark Bureau of the PRC. To date, several of our applications have been approved and others are either in the process of review or public announcement phase. In addition, together with CNPC, we have applied for international trademark registration for our logo in other jurisdictions. We have received 121 International Trademark Registration Certificates for our logo covering more than 50 jurisdictions.

As of December 31, 2014, we owned approximately 8,859 patents in China and other jurisdictions. We were granted 1,480 patents in China in 2014.

Regulatory Matters

Overview

China’s oil and gas industry is subject to extensive regulation by the PRC government with respect to a number of aspects of exploration, production, transmission and marketing of crude oil and natural gas as well as production, transportation and marketing of refined products and chemical products. The following central government authorities exercise control over various aspects of China’s oil and gas industry:

•

The Ministry of Land and Resources has the authority to grant, examine and approve oil and gas exploration and production licenses, and to oversee the registration and transfer of exploration and production licenses.

•

The Ministry of Commerce:

•

sets and grants import and export volume quotas for crude oil and refined products in accordance with the market supply and demand in China as well as WTO requirements for China;

•

issues import and export licenses for crude oil and refined products to oil and gas companies that have obtained import and export quotas; and

•

examines and approves production sharing contracts in relation to oil and coal seam gas and Sino-foreign equity and cooperative joint venture contracts.

•

The National Development and Reform Commission:

•

is responsible for industry administration, industry policy and policy coordination over China’s oil and gas industry;

•

determines mandatory minimum volumes and applicable prices of natural gas to be supplied to certain fertilizer producers;

•

publishes guidance prices for natural gas and maximum retail prices for certain refined products, including gasoline and diesel;

•

formulates the plan for aggregate import and export volume of crude oil and refined products in accordance with the market supply and demand in China;

•

approves significant petroleum, natural gas, oil refinery and chemical projects set forth under the Catalogs of Investment Projects Approved by the Central Government; and

•

approves Sino-foreign equity and cooperative projects exceeding certain capital amounts.

Exploration Licenses and Production Licenses

The Mineral Resources Law authorizes the Ministry of Land and Resources to exercise administrative authority over the exploration and production of mineral resources within the PRC. The Mineral Resources Law and its supplementary regulations provide the basic legal framework under which exploration licenses and production licenses are granted. The Ministry of Land and Resources has the authority to issue exploration licenses and production licenses. Applicants must be companies approved by the State Council to engage in oil and gas exploration and production activities.

Applicants for exploration licenses must first register with the Ministry of Land and Resources blocks in which they intend to engage in exploration activities. The holder of an exploration license is obligated to make a progressively increasing annual minimum exploration investment in each corresponding block. Investments range from RMB2,000 per square kilometer for the initial year to RMB5,000 per square kilometer for the second year, and to RMB10,000 per square kilometer for the third and subsequent years. Additionally, the holder has to

pay an annual exploration license fee that starts at RMB100 per square kilometer for each of the first three years and increases by an additional RMB100 per square kilometer per year for subsequent years up to a maximum of RMB500 per square kilometer. The maximum term of an oil and natural gas exploration license is seven years, subject to renewal upon expiration of the original term, with each renewal being up to two years. At the exploration stage, an applicant can also apply for a progressive exploration and production license that allows the holder to test and develop reserves not yet fully proven. Upon the detection and confirmation of the quantity of reserves in a certain block, the holder must apply for a production license based on economic evaluation, market conditions and development planning in order to shift into the production phase in a timely fashion. In addition, the holder needs to obtain the right to use that block of land. Generally, the holder of a full production license must obtain a land use rights certificate for industrial land use covering that block of land.

The Ministry of Land and Resources issues production licenses to applicants on the basis of the reserve reports approved by the relevant authorities. Production license holders are required to pay an annual production right usage fee of RMB1,000 per square kilometer. Administrative rules issued by the State Council provide that the maximum term of a production license is 30 years. In accordance with a special approval from the State Council, the Ministry of Land and Resources has issued production licenses with terms coextensive with the projected productive life of the assessed proven reserves as discussed above. Each of our production licenses is renewable upon our application 30 days prior to expiration. If oil and gas prices increase, the productive life of our crude oil and natural gas reservoirs may be extended beyond the current terms of the relevant production licenses.

Among the major PRC oil and gas companies, the exploration licenses and production licenses held by PetroChina, Sinopec and CNOOC account for the majority of mining rights in China. Among those companies, PetroChina and Sinopec primarily engage in onshore exploration and production, while CNOOC primarily engages in offshore exploration and production.

Pricing

Crude Oil

PetroChina and Sinopec set their crude oil median prices each month based on the average Singapore market FOB prices for crude oil of different grades in the previous month. In addition, PetroChina and Sinopec negotiate a premium or discount to reflect transportation costs, the differences in oil quality and market supply and demand. The National Development and Reform Commission will mediate if PetroChina and Sinopec cannot agree on the amount of premium or discount.

Refined Products

Since October 2001, PetroChina has set its retail prices within an 8% floating range of the published retail median guidance prices of gasoline and diesel published by the NDRC. After March 26, 2006, the price of diesel for fishing vessels has been set in line with the published retail base price, with no upward adjustment for the time being. These retail median guidance prices of gasoline and diesel vary in each provincial level distribution region. From October 2001 to early 2006, the NDRC published the retail median guidance prices of gasoline and diesel from time to time based on the weighted average FOB Singapore, Rotterdam and New York trading prices for diesel and gasoline plus transportation costs and taxes. Generally, adjustments were made only if the weighted average prices fluctuate beyond 8% of the previously published retail median guidance price. In 2006, the PRC government, under its macroeconomic controls, introduced a mechanism for determining the prices of refined products.

On December 18, 2008, the NDRC issued the Notice on Implementing Price and Tax Reform of Refined Oil (Guo Fa [2008] No. 37), which further improved the pricing mechanism for refined oil products. Under the improved mechanism, the domestic ex-factory prices of refined oil products are determined on the basis of the

relevant international crude oil prices, by taking into consideration the average domestic processing cost, tax and a pre-determined profit margin. The prices of diesel and gasoline continue to follow the government guiding prices. The highest retail price set for gasoline and diesel is calculated by using the relevant ex-factory price and a determined profit margin for retailing activities.

On March 26, 2013, the NDRC issued the Notice on Further Improvement of Refined Oil Pricing Mechanism (Fa Gai Jia Ge [2013] No. 624) and the amended and restated Measures for Oil Prices Management (on trial). The amended and restated Measures for Oil Prices Management (on trial) follow the provisions of the document under Fa Gai Jia Ge [2009] No. 1198. Under this new system, (i) the price adjustment period was shortened from 22 working days to 10 and the 4% limit on the price adjustment range was eliminated; (ii) the composition of the basket of crudes to which refined oil products prices are linked will be adjusted accordingly in light of the composition of the imported crudes and changes in crudes trading on the international market; and (iii) the refined oil products pricing mechanism will be further enhanced.

In order to promote the oil product quality upgrading, on September 16, 2013, the NDRC issued the Circular regarding Relevant Opinions on the Pricing Policy for Oil Product Quality Upgrading, pursuant to which the price increase standard for the auto-use gasoline and diesel upgraded to China IV Standard shall be set as RMB290 per ton and RMB370 per ton, respectively and the price increase standard for the auto-use gasoline and diesel upgraded from China IV to China V Standard shall be set at RMB170 per ton and RMB160 per ton, respectively.

Chemical Products

PetroChina determines the prices of all of its chemical products based on market conditions.

Natural Gas

The citygate price of natural gas has two components: ex-factory price and pipeline transportation tariff.

Prior to December 26, 2005, ex-factory prices varied depending on whether or not the natural gas sold was within the government-formulated natural gas supply plan. For natural gas sold within the government-formulated supply plan, the National Development and Reform Commission fixed ex-factory prices according to the nature of the customers. Most of these customers were fertilizer producers. For natural gas sold to customers not subject to the government-formulated supply plan, the National Development and Reform Commission published median guidance ex-factory prices, and allowed natural gas producers to adjust prices upward or downward by up to 10%.

On December 26, 2005, the NDRC reformed the mechanism for setting the ex-factory prices of domestic natural gas by changing the ex-factory prices to governmental guidance prices and categorizing domestic natural gas into two categories. On the basis of the ex-factory price set by the government, subject to the negotiations between the seller and the buyer, the actual ex-factory price of the first category may float upward or downward up to 10%; while the actual ex-factory price of the second category may float upward up to 10% and downward to any level. The price of the first category will be adjusted to the same level as the second category within three to five years. The National Development and Reform Commission does not allow PetroChina and Sinopec to charge different prices towards internal and external enterprises. On November 10, 2007, the National Development and Reform Commission increased the ex-factory price of the industrial use natural gas by RMB400/thousand cubic meters. On June 1, 2010, the NDRC raised the median ex-factory prices of the domestic onshore natural gas and as a result, the median ex-factory price of all the oil and gas fields in China increased by RMB0.23/cubic meter. At the same time, the National Development and Reform Commission combined the first category and the second category median ex-factory prices of the natural gas from Dagang Oil Field, Liaohe Oil Field and Zhongyuan Oil Field, thus ending the “dual-track natural gas pricing system” as described above. In addition, the National Development and Reform Commission expanded the floating range of the median ex-factory price by allowing the median ex-factory price to float upward to 10% and downward to any level.

PetroChina negotiates the actual ex-factory price with natural gas users within the benchmark price and the adjustment range set by the government.

On December 26, 2011, the NDRC implemented a natural gas price formation mechanism pilot reform in Guangdong Province and Guangxi Zhuang Autonomous Region. In general, the approaches under this reform consist of (i) modifying the natural gas pricing method from the current cost plus pricing to the netback pricing by choosing a pricing reference point and an alternative energy to establish a price linkage mechanism between the natural gas and the alternative energy; (ii) determining the gate station natural gas price in each province (region or municipality) based on the natural gas price of the pricing reference point and by taking into account the direction of the main flows of the natural gas market resources and the pipeline transportation cost of natural gas; (iii) implementing a dynamic adjustment mechanism for the gate station natural gas price under which the gate station natural gas price will be initially adjusted on an annual basis and subsequently on a semi-annual or quarterly basis in response to the change in the price of the alternative energy; and (iv) lifting the control over the ex-works prices of unconventional natural gas such as the shale gas, coal seam gas and coal gas to allow them to be formed through market competition.

In the fourth quarter of 2012, in order to secure a stable supply on the local natural gas market, Sichuan Province and Chongqing Municipality implemented a natural gas pricing mechanism reform and adjusted their local natural gas supply price by referring to the reform model in Guangdong Province and Guangxi Province. After such adjustment, the natural gas citygate price in Sichuan and Chongqing increased by RMB0.18/cubic meter on average.

On June 28, 2013, the NDRC announced a new program for the adjustment of the price of natural gas, which was put into effect nationwide on July 10, 2013. The new program is of great significance to the promotion of the healthy and sustainable development of China’s natural gas industry and market. The new program consists of (i) changing the mechanism administering the price of natural gas from ex-factory control to citygate control, and no longer differentiating the prices payable by the users in different provinces by considering the difference in gas sources and transportation routes; (ii) establishment of the mechanism linking the citygate price of natural gas to the price of alternative energy in order to establish the pricing mechanism for natural gas and alternative energy and finally achieve a completely market-driven pricing for natural gas; (iii) adopting differential pricing approaches towards the existing usage and the incremental usage so as to establish as soon as practicable a new pricing mechanism for natural gas while reducing the impact that the pricing reform will have on existing gas users, under this program, the adjustment to the price of the incremental usage will be implemented in one step while the adjustment to the price of the existing usage will be implemented in multiple steps and is targeted to be fully implemented by the end of the 12th Five-year Plan.

On August 10, 2014, based on the existing natural gas price reform roadmap, the NDRC issued price adjustment programs for non-resident natural gas, effective from September 1, 2014 in China. The main provisions are: (i) the natural gas citygate price for existing supplies to non-residential customers shall be increased by RMB400 per thousand cubic meters, if the natural gas price for new supplies were kept at current levels; (ii) no adjustment will be made to the citygate price for natural gas consumed by residential users; and (iii) further actions will be taken to implement the policy in connection with the liberalization of the sales price of imported liquefied natural gas (LNG) and the prices for shale gas, coal-seam gas and coal gas.

The NDRC sets the pipeline transportation tariff for the natural gas transported by pipelines constructed prior to 1991. For natural gas transported by pipelines constructed after 1991, PetroChina submits to the NDRC for examination and approval proposed pipeline transmission tariffs based on the capital investment made in the pipeline, the depreciation period for the pipeline, the ability of end users to pay and PetroChina’s profit margin.

On April 25, 2010, the NDRC adjusted the originally government-set flat pipeline transportation tariff for the natural gas transported by pipelines. As a result of such adjustment, our average pipeline transportation tariff for the natural gas transported by pipelines increased from RMB0.06 per cubic meter to RMB0.14 per cubic meter.

Production and Marketing

Crude Oil

Each year, the NDRC publishes the projected target for the production and process of crude oil in China based on the domestic consumption estimates submitted by domestic producers, including but not limited to PetroChina, Sinopec and CNOOC, the production of these companies as well as the forecast of international crude oil prices. The actual production levels are determined by the producers themselves and may vary from the submitted estimates. Since January 1, 2007, when the Measures on the Administration of the Refined Products Market promulgated by the Ministry of Commerce became effective, qualified domestic producers are permitted to engage in the sale and storage of crude oil. Foreign companies with the required qualifications are also allowed to establish and invest in enterprises to conduct crude oil business.

Refined Products

Previously, only PetroChina, Sinopec and joint ventures established by the two companies had the right to conduct gasoline and diesel wholesale business. Other companies, including foreign invested companies, were not allowed to engage in wholesale of gasoline and diesel in China’s domestic market. In general, only domestic companies, including Sino-foreign joint venture companies, were permitted to engage in retail of gasoline and diesel. Since December 11, 2004, wholly foreign-owned enterprises are permitted to conduct refined oil retail business. Since January 1, 2007, when the Measures on the Administration of the Refined Products Market became effective, all entities meeting certain requirements are allowed to submit applications to the Ministry of Commerce to conduct refined oil products wholesale, retail and storage businesses.

Natural Gas

The NDRC determines each year the annual national natural gas production target based on the natural gas production targets submitted by domestic natural gas producers including PetroChina. Domestic natural gas producers determine their annual natural gas production targets on the basis of consumption estimates. The actual production volume of each producer is determined by the producer itself, which may deviate from the production target submitted by it. The NDRC also formulates the annual natural gas guidance supply plan, which requires natural gas producers to distribute a specified amount of natural gas to designated key municipalities and key enterprises.

Foreign Investments

Cooperation in Exploration and Production with Foreign Companies

Currently, CNPC is one of the few Chinese companies that have the right to cooperate with foreign companies in onshore crude oil and natural gas exploration and production in China. CNOOC has the right to cooperate with foreign companies in offshore crude oil and natural gas exploration and production in China.

Sino-foreign cooperation projects and foreign parties in onshore oil and gas exploration and production in China are generally selected through open bids and bilateral negotiations. Those projects are generally conducted through production sharing contracts. The Ministry of Commerce must approve those contracts.

As authorized by the Regulations of the PRC on Exploration of Onshore Petroleum Resources in Cooperation with Foreign Enterprises, CNPC has the right to enter into joint cooperation arrangements with foreign oil and gas companies for onshore crude oil and natural gas exploration and production. PetroChina does not have the capacity to enter into production sharing contracts directly with foreign oil and gas companies under existing PRC law. Accordingly, CNPC will continue to enter into production sharing contracts. After signing a production sharing contract, CNPC will, subject to approval of the Ministry of Commerce, assign to PetroChina most of its commercial and operational rights and obligations under the production sharing contract as required by the Non-competition Agreement between CNPC and PetroChina.

Transportation and Refining

Since December 1, 2007, PRC regulations have encouraged foreign investment in the construction and operation of oil and gas pipelines and storage facilities. On March 10, 2015, PRC abandoned the restrictions on foreign investment in refineries with a production capacity of below 10 million tons per annum. Furthermore, when appropriate, projects must receive necessary approvals from relevant PRC government agencies. See “Item 3 — Key Information — Risk Factors”.

Import and Export

Since January 1, 2002, state-owned trading companies have been allowed to import crude oil under an automatic licensing system. Non-state-owned trading companies have been allowed to import crude oil and refine products subject to quotas. The export of crude oil and refined oil products by both state-owned trading companies and non-state-owned trading companies is subject to quota control. The Ministry of Commerce has granted PetroChina the right to conduct crude oil and refined product import and export business.

Capital Investment and Financing

Capital investments in exploration and production of crude oil and natural gas made by Chinese oil and gas companies are subject to approval by or filing with relevant government authorities. The following projects are subject to approval by the NDRC:

(1) overall development plans for oil and gas development projects in China to be conducted in cooperation with foreign parties;

(2) facilities for taking delivery of, storing or transporting imported liquefied natural gas and major, cross-province (region or municipality) oil transmission pipeline facilities;

(3) cross-province (region or municipality) trunk network for gas transmission;

(4) new refineries, first expansion of existing refineries, new ethylene projects, and transformation or expansion of existing ethylene projects which will result in an additional annual capacity of 200 thousand tons;

(5) coal-to-methanol-to-olefins project with a capacity of 0.5 million tons per annum or more and coal-to-methanol project with a capacity of 1 million tons per annum or more;

Taxes, Fees and Royalties

PetroChina is subject to a variety of taxes, fees and royalties. The table below sets forth the major taxes, fees and royalty fees payable by PetroChina or by Sino-foreign oil and gas exploration and development cooperative projects. PetroChina’s subsidiaries which have legal person status should report and pay enterprise income tax to the relevant tax authorities based on the applicable laws and regulations.


Tax Item	Tax Base	Tax Rate
Enterprise income tax	Taxable income	Effective from January 1, 2008, the statutory corporate tax rate is 25%, whereas a statutory corporate tax rate of 15% is applicable to operations in certain western regions in China qualified for certain tax incentives through the year 2020

Value-added tax	Turnover	13% for liquified natural gas, natural gas, liquified petroleum gas, agricultural film and fertilizers and 17% for other items. On November 16, 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Plan for Implementation of the Pilot Reform for Collection of Value-added Tax in Lieu of Business Tax which sets forth


Tax Item	Tax Base	Tax Rate

		the guidelines, principles and major contents of the pilot reform. Pursuant to the Plan, effective from January 1 and September 1, 2012, respectively, in pilot provinces and municipalities including Shanghai and Beijing, a pilot reform has been implemented on a step-by-step basis or completed to collect value-added tax in lieu of business tax on the revenue generated from transportation services and certain modern services, and effective from August 1, 2013, the pilot reform has been implemented across the nation. Certain pipeline transmission services and research and development technical services of our company have since then been subject to value-added-tax at the rates of 11% and 6%, respectively.

Business tax		Collected at rates prescribed by the state based on the actual contents of the services.

Consumption tax	Aggregate volume sold or self-consumed	Effective from November 29, 2014, the consumption tax on gasoline, naphtha, solvent naphtha and lubricant was increased from RMB1.0 per liter to RMB1.12 per liter, and the consumption tax on diesel oil, aviation kerosene and fuel oil was increased from RMB0.8 per liter to RMB0.94 per liter. Collection of taxes on aviation kerosene shall continue to be suspended. Effective from December 13, 2014, the consumption tax on gasoline, naphtha, solvent naphtha and lubricant was increased from RMB1.12 per liter to RMB1.4 per liter, and the consumption tax on diesel oil, aviation kerosene and fuel oil was increased to RMB1.1 per liter from RMB0.94 per liter. Collection of taxes on aviation kerosene shall continue to be suspended.

Resource tax	Value sold	Effective from December 1, 2014, the applicable rate of resource tax on oil and gas was increased from 5% to 6%. Certain oil fields, however, may enjoy certain preferential treatment with respect to the resource tax based on the quality of their actual resources, scale of exploration and production activities, and actual production cost.

Compensatory fee for mineral resources	Turnover	Effective from December 1, 2014, the compensatory fee for mineral resources with respect to oil and gas shall be reduced to zero.

Crude oil special gain levy	Sales amount above specific threshold	Effective from November 1, 2011, the threshold above which crude oil special gain levy levied on the domestic crude oil sold was raised from US$40 per barrel to US$55 per barrel, with the five-level progressive tax rates varying from 20% to 40% remaining. On December 26, 2014, the Ministry of Finance issued the Notice on the Increase of the Threshold of the Crude Oil Special Gain Levy, which stipulates that the threshold of the


Tax Item	Tax Base	Tax Rate

		crude oil special gain levy will be increased from US$55 per barrel to US$65 per barrel as of January 1, 2015. After the increase, the crude oil special gain levy continues to be collected at the five-level progressive tax rates.

Exploration license fee	Area	RMB100 to 500 per square kilometer per year

Production license fee	Area	RMB1,000 per square kilometer per year

Royalty fee⁽¹⁾	Production volume	Progressive rate of 0-12.5% for crude oil and 0-3% for natural gas

(1)

It shall be paid in cash and is only applicable to Sino-foreign oil and gas exploration and development cooperative projects in China. However, effective from December 1, 2010, the royalty fee payable by new Sino-foreign oil and gas exploration and development cooperative projects in western regions was replaced by the resource tax, while those cooperative projects under contracts signed before December 1, 2010 continue to be subject to the royalty fee until the contracts expire. Effective from November 1, 2011, the royalty fee payable by new Sino-foreign oil and gas exploration and development cooperative projects in the whole country was replaced by the resource tax, while those cooperative projects under contracts signed before November 1, 2011 continue to be subject to the royalty fee until the contracts expire.

Environmental Regulations

We are subject to various PRC national environmental laws and regulations and also environmental regulations promulgated by the local governments in whose jurisdictions we have operations. China has adopted extensive environmental laws and regulations that affect the operation of the oil and gas industry. There are national and local standards applicable to emissions control, discharges to surface and subsurface water and disposal, and the generation, handling, storage, transportation, treatment and disposal of solid waste materials.

The environmental regulations require a company, such as us, to register or file an environmental impact report with the relevant environmental authority for approval before it undertakes any construction of a new production facility or any major expansion or renovation of an existing production facility. The new facility or the expanded or renovated facility will not be permitted to operate unless the relevant environmental authority has inspected the environmental equipment installed at the facility and decides it satisfies the environmental protection requirements. A company that wishes to discharge pollutants, whether it is in the form of emission, water or materials, must submit a pollutant discharge declaration statement detailing the amount, type, location and method of treatment. After reviewing the pollutant discharge declaration, the relevant environmental authority will determine the amount of discharge allowable under the law and will issue a pollutant discharge license for that amount of discharge subject to the payment of discharge fees. If a company discharges more than is permitted in the pollutant discharge license, the relevant environmental authority can fine the company up to several times the discharge fees payable by the offending company for its allowable discharge, or require the offending company to close its operation to remedy the problem.

ITEM 4A — UNRESOLVED STAFF COMMENTS

We do not have any unresolved staff comment.

ITEM 5 — OPERATING AND FINANCIAL REVIEW AND PROSPECTS

General

You should read the following discussion together with our consolidated financial statements and their notes included elsewhere in this annual report. Our consolidated financial statements have been prepared in accordance with IFRS.

Overview

We are engaged in a broad range of petroleum and natural gas related activities, including:

•

the exploration, development, production and sale of crude oil and natural gas;

•

the refining of crude oil and petroleum products, and the production and marketing of basic petrochemical products, derivative chemical products and other chemical products;

•

marketing of refined oil products and trading; and

•

the transmission of natural gas, crude oil and refined oil products as well as the sale of natural gas.

We are China’s largest producer of crude oil and natural gas and are one of the largest companies in China in terms of revenue. In 2014, we produced approximately 945.5 million barrels of crude oil and approximately 3,028.8 Bcf of natural gas for sale. Our refineries also processed approximately 1,010.6 million barrels of crude oil in 2014. In 2014, we had turnover of RMB2,282,962 million and profit attributable to owners of our company of RMB107,172 million.

Factors Affecting Results of Operations

Our results of operations and the period-to-period comparability of our financial results are affected by a number of external factors, including changes in the prices, production and sales volume of our principal products and the regulatory environment.

Prices of Principal Products

The fluctuations in the prices of crude oil, refined products, chemical products and natural gas have a significant impact on our turnover. See “Item 4 — Information on the Company — Regulatory Matters — Pricing” for a more detailed discussion of current PRC pricing regulations and “Item 3 — Risk Factors — Risks Related to Pricing and Exchange Rate”.

The table below sets forth the average realized prices of our principal products in 2012, 2013 and 2014.


	2012		2013		2014
Crude oil (US$/barrel)		103.65		100.42		94.83
Natural gas (US$/thousand cubic feet) ⁽¹⁾		6.74		7.35		7.84
Gasoline (US$/barrel)		149.23		149.42		140.85
Kerosene (US$/barrel)		128.32		122.94		116.45
Diesel (US$/barrel)		148.84		146.61		139.72

(1)

Natural gas citygate price

Production and Sales Volume for Oil and Gas Products

Our results of operations are also affected by production and sales volumes. Our crude oil and natural gas production volumes depend primarily on the level of the proved developed reserves in the fields in which we have an interest, as well as other factors such as general economic environment and market supply and demand conditions.

Regulatory Environment

Our operating activities are subject to extensive regulations and controls by the PRC government, including the issuance of exploration and production licenses, the imposition of industry-specific taxes and levies and the implementation of environmental policies and safety standards. Our results of operations will be affected by any future changes of such regulatory environment.

Critical Accounting Policies

The preparation of our consolidated financial statements requires our management to select and apply significant accounting policies, the application of which may require management to make judgments and estimates that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of our financial statements, and the reported amounts of turnover and expenses during the reporting period. Notwithstanding the presentation of our principal accounting policies in Note 3 to our consolidated financial statements included elsewhere in this annual report, we have identified the accounting policies below as most critical to our business operations and the understanding of our financial condition and results of operations presented in accordance with IFRS. Although these estimates are based on our management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Accounting for Oil and Gas Exploration and Production Activities

We use the successful efforts method of accounting, with specialized accounting rules that are unique to the oil and gas industry, for oil and gas exploration and production activities. Under this method, geological and geophysical costs incurred are expensed when incurred. However, all costs for developmental wells, support equipment and facilities, and proved mineral interests in oil and gas properties are capitalized. Costs of exploratory wells are capitalized as construction in progress pending determination of whether the wells find proved reserves. For exploratory wells located in regions that do not require substantial capital expenditures before the commencement of production, the evaluation of the economic benefits of the reserves in such wells will be completed within one year following the completion of the exploration drilling. Where such evaluation indicates that no economic benefits can be obtained, the relevant costs of exploratory wells will be converted to dry hole exploration expenses. The relevant costs will be classified as oil and gas assets and go through impairment review if the evaluation indicates that economic benefits can be obtained. For wells with economically viable reserves in areas where a major capital expenditure would be required before production can begin, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise the well costs are expensed as dry holes. We have no material costs of unproved properties capitalized in oil and gas properties.

Oil and Gas Reserves

The estimation of the quantities of recoverable oil and gas reserves in oil and gas fields is integral to effective management of our exploration and production operations. Because of the subjective judgments involved in developing and assessing such information, engineering estimates of the quantities of recoverable oil and gas reserves in oil and gas fields are inherently imprecise and represent only approximate amounts.

Before estimated oil and gas reserves are designated as “proved”, certain engineering criteria must be met in accordance with industry standards and the regulations of the SEC. Proved oil and gas reserves are the estimated

quantities of crude oil and natural 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 the time at which 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. Therefore, these estimates do not include probable or possible reserves. Our proved reserve estimates are updated annually by independent, qualified and experienced oil and gas reserve engineering firms in the United States, Singapore and Canada. Our oil and gas reserve engineering department has policies and procedures in place to ensure that these estimates are consistent with these authoritative guidelines. Among other factors required by authoritative guidelines, this estimation takes into account recent information about each field, including production and seismic information, estimated recoverable reserves of each well, and oil and gas prices and operating costs as of the date the estimate is made. The price shall be the average price during the 12-month period before the ending date of the period covered by this report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The costs shall be that prevailing at the end of the period.

Despite the inherent imprecision in these engineering estimates, estimated proved oil and gas reserve quantity has a direct impact on certain amounts reported in the financial statements. In addition to the capitalization of costs related to oil and gas properties on the balance sheet discussed earlier, estimated proved reserves also impact the calculation of depreciation, depletion and amortization expenses of oil and gas properties. The cost of oil and gas properties is amortized at the field level on the unit of production method. Unit of production rates are based on the total oil and gas reserves estimated to be recoverable from existing facilities based on the current terms of our production licenses. Our reserve estimates include only crude oil and natural gas which management believes can be reasonably produced within the current terms of the production licenses that are granted by the Ministry of Land and Resources, ranging from 30 years to 55 years from the effective date of issuance in March 2000, renewable upon application 30 days prior to expiration. Consequently, the impact of changes in estimated proved reserves is reflected prospectively by amortizing the remaining book value of the oil and gas property assets over the expected future production. If proved reserve estimates are revised downward, earnings could be affected by higher depreciation expense or an immediate write-down of the property’s book value had the downward revisions been significant See “— Property, Plant and Equipment” below. Given our large number of producing properties in our portfolio, and the estimated proved reserves, it is unlikely that any changes in reserve estimates will have a significant effect on prospective charges for depreciation, depletion and amortization expenses.

In addition, due to the importance of these estimates in understanding the perceived value and future cash flows of a company’s oil and gas operations, we have also provided supplemental disclosures of “proved” oil and gas reserve estimates prepared in accordance with authoritative guidelines elsewhere in this annual report.

Property, Plant and Equipment

Where it is probable that property, plant and equipment, including oil and gas properties, will generate future economic benefits, their costs are initially recorded in the consolidated statement of financial position as assets. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use. Subsequent to their initial recognition, property, plant and equipment are carried at cost less accumulated depreciation, depletion and amortization (including any impairment).

Depreciation, to write off the cost of each asset, other than oil and gas properties, to their residual values over their estimated useful lives is calculated using the straight-line method.

The company uses the following useful lives for depreciation purposes:


Buildings and plant			8-40 years
Equipment and machinery			4-30 years
Motor vehicles			4-14 years
Other			5-12 years

No depreciation is provided on construction in progress until the assets are completed and ready for use.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Property, plant and equipment, including oil and gas properties, are reviewed for possible impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of a cash generating unit exceeds the higher of its fair value less costs to sell and its value in use, which is the estimated net present value of future cash flows to be derived from the cash generating unit.

Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are recorded in the consolidated profit or loss.

Interest and other costs on borrowings to finance the construction of property, plant and equipment are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Costs for repairs and maintenance activities are expensed as incurred except for costs of components that result in improvements or betterments which are capitalized as part of property, plant and equipment and depreciated over their useful lives.

Provision for Asset Decommissioning

Provision is recognized for the future decommissioning and restoration of oil and gas properties. The amounts of the provision recognized are the present values of the estimated future expenditures. The estimation of the future expenditures is based on current local conditions and requirements, including legal requirements, technology, price level, etc. In addition to these factors, the present values of these estimated future expenditures are also impacted by the estimation of the economic lives of oil and gas properties. Changes in any of these estimates will impact the operating results and the financial position of the company over the remaining economic lives of the oil and gas properties.

Operating Results

The following discussion is based on our historical results of operations. As a result of the factors discussed above, such results of operations may not be indicative of our future operating performance.

Our income statement for each of the years ended December 31, 2012, 2013 and 2014 is summarized in the table below.


	Year Ended December 31,
	2012			2013			2014
	(RMB in millions)
Turnover		2,195,296			2,258,124			2,282,962
Operating expenses		(2,020,777	)		(2,069,482	)		(2,113,129	)
Profit from operations		174,519			188,642			169,833
Exchange gain /(loss), net		131			52			(2,313	)
Interest expense, net		(16,101	)		(20,859	)		(21,723	)
Share of profit of affiliates and joint ventures		8,262			10,228			10,962
Profit before income tax expense		166,811			178,063			156,759
Income tax expense		(36,191	)		(35,789	)		(37,731	)
Profit for the year attributable to non-controlling interest		15,294			12,675			11,856

Profit for the year attributable to owners of the company		115,326			129,599			107,172

The table below sets forth our turnover by business segment for each of the years ended December 31, 2012, 2013 and 2014 as well as the percentage changes in turnover for the periods shown.


	2012			2013			2013 vs 2012			2014			2014 vs. 2013
	(RMB in millions, except percentages)
Turnover
Exploration and production		789,818			783,694			(0.8	%)		777,574			(0.8	%)
Refining and chemicals		883,218			871,815			(1.3	%)		846,082			(3.0	%)
Marketing		1,890,558			1,946,806			3.0	%		1,938,501			(0.4	%)
Natural gas and pipeline		202,196			232,751			15.1	%		284,262			22.1	%
Other		2,530			2,687			6.2	%		3,027			12.7	%

Total		3,768,320			3,837,753			1.8	%		3,849,446			0.3	%
Less intersegment sales		(1,573,024	)		(1,579,629	)		0.4	%		(1,566,484	)		(0.8	%)

Consolidated net sales from operations		2,195,296			2,258,124			2.9	%		2,282,962			1.1	%

The table below sets forth our operating income by business segment for each of the years ended December 31, 2012, 2013 and 2014, as well as the percentage changes in operating income for the periods shown. Other profit from operations shown below consists of research and development, business services and infrastructure support to our operating business segments.


	2012			2013			2013 vs. 2012			2014			2014 vs. 2013
	(RMB in millions, except percentages)
Profit/(loss) from operations
Exploration and production		214,955			189,698			(11.7	%)		186,897			(1.5	%)
Refining and chemicals		(43,511	)		(24,392	)		(43.9	%)		(23,560	)		(3.4	%)
Marketing		16,391			7,562			(53.9	%)		5,421			(28.3	%)
Natural gas and pipeline		(2,110	)		28,888			—			13,126			(54.6	%)
Other		(11,206	)		(13,114	)		17.0	%		(12,051	)		(8.1	%)

Total		174,519			188,642			8.1	%		169,833			(10.0	%)

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Consolidated Results of Operations

Overview

Our turnover was RMB2,282,962 million in 2014, representing an increase of 1.1% compared to the preceding year. Profit attributable to owners of the company in 2014 was RMB107,172 million, representing a decrease of 17.3% compared to the preceding year. The basic and diluted earnings per share attributable to owners of the company were RMB0.59 in 2014, representing a decrease of RMB0.12 compared to the preceding year.

Turnover Turnover increased by 1.1% from RMB2,258,124 million in 2013 to RMB2,282,962 million in 2014. This increase was primarily due to a combined effect of an increase in selling prices of natural gas coupled with an increase in the sales volume of crude oil, natural gas, gasoline and other products. The table below sets out the external sales volume and average realized prices for major products sold by the company and the percentage change in 2013 and 2014, respectively:


	Sales Volume (‘000 ton)							Average Realized Price (RMB/ton)
	2013		2014		Percentage of Change (%)			2013		2014		Percentage of Change (%)
Crude oil⁽¹⁾		75,482		91,772		21.6			4,533		3,939		(13.1	)
Natural gas (hundred million cubic meter, RMB/‘000 cubic meter)		985.41		1,252.78		27.1			1,226		1,366		11.4
Gasoline		52,350		59,821		14.3			7,866		7,354		(6.5	)
Diesel		93,301		87,041		(6.7	)		6,810		6,437		(5.5	)
Kerosene		13,482		14,016		4.0			6,015		5,651		(6.1	)
Heavy oil		14,788		14,003		(5.3	)		4,443		4,316		(2.9	)
Polyethylene		3,391		4,159		22.6			9,665		9,724		0.6
Lubricant		1,740		1,498		(13.9	)		9,319		9,202		(1.3	)

(1)	The sales volume of crude oil listed in the table above represents all external sales volume of crude oil of the company.

Operating Expenses Operating expenses increased by 2.1% from RMB2,069,482 million in 2013 to RMB2,113,129 million in 2014, of which:

Purchases, Services and Other Purchases, services and other operating expenses increased by 1.5% from RMB1,464,805 million in 2013 to RMB1,486,225 million in 2014. This was primarily due to the company’s expansion of its trading capacity.

Employee Compensation Costs Employee compensation costs (including salaries and such additional costs as various insurances, provident funds and training fees for the 534,652 employees of the company and the 319,346 temporary and seasonal staff recruited from the market) increased by 3.8% from RMB116,422 million in 2013 to RMB 120,822 million in 2014. This increase was primarily due to the company’s initiative to increase the compensation of its front-line employees to reflect the expansion of its operations and the consequent increase in business volumes, and rises in the domestic consumer price index, wage inflation and social security contributions in line with changes to local government policies.

Exploration Expenses Exploration expenses decreased by 12.8% from RMB25,301 million in 2013 to RMB22,064 million in 2014. This was primarily due to the fact that some overseas projects of the company have entered into the production phase.

Depreciation, Depletion and Amortization Depreciation, depletion and amortization increased by 8.6% from RMB163,365 million in 2013 to RMB177,463 million in 2014. This increase was primarily due to the increased average carrying value of fixed assets and the increased average net value of oil and gas properties of the company.

Selling, General and Administrative Expenses Selling, general and administrative expenses decreased by 7.1% from RMB79,021 million in 2013 to RMB73,413 million in 2014. This decrease was primarily due to the fact that the company proactively implemented measures for broadening sources of income, reducing expenditures, cutting costs and enhancing efficiency to strengthen control over costs and expenses.

Taxes other than Income Taxes Taxes other than income taxes decreased by 4.1% from RMB248,086 million in 2013 to RMB237,997 million in 2014. This decrease was primarily due to the drop in the price of crude oil in 2014, leading to a decrease in the crude oil special gain levy from RMB72,726 million in 2013 to RMB64,376 million in 2014.

Other Income, net Other income, net in 2014 was RMB4,855 million, representing a decrease of 82.4% from RMB27,518 million in 2013. This decrease was primarily because the company recognized the gain on investment of certain pipeline net assets and operations in 2013.

Profit from Operations The profit from operations in 2014 was RMB169,833 million, representing a decrease of 9.97% from RMB188,642 million in 2013.

Net Exchange Gain/Loss Net exchange loss in 2014 was RMB2,313 million, while net exchange gain in 2013 was RMB52 million. This was primarily due to the fact that the depreciation of Kazakhstani Tenge (KZT) caused an increase of exchange loss during the reporting period.

Net Interest Expenses Net interest expenses increased by 4.1% from RMB20,859 million in 2013 to RMB21,723 million in 2014. This increase was primarily due to an increase in the principal amount of the interest-bearing debt of the company to finance production, operation, investment and construction.

Profit Before Income Tax Expense Profit before income tax expense decreased by 12.0% from RMB178,063 million in 2013 to RMB156,759 million in 2014.

Income Tax Expense Income tax expense increased by 5.4% from RMB35,789 million in 2013 to RMB37,731 million in 2014. This increase was primarily due to the combined effect of the increase in income tax expense arising from adjustments to the policy for crude oil special gain levy deduction before income tax and the decrease in profit before income tax expense for the current period.

Profit for the Year Profit for the year decreased by 16.3% from RMB142,274 million in 2013 to RMB119,028 million in 2014.

Profit Attributable to Non-controlling Interests of the Company Profit attributable to non-controlling interests decreased by 6.5% from RMB12,675 million in 2013 to RMB11,856 million in 2014, which was primarily due to the decrease in profits of certain overseas subsidiaries of the company.

Profit Attributable to Owners of the Company Profit attributable to owners of the company decreased by 17.3% from RMB129,599 million in 2013 to RMB107,172 million in 2014. This decrease was primarily due to a decrease in the prices of crude oil and refined oil products, and a decrease in the income generated from the pipeline assets and operations.

Segment Information

Exploration and Production

Turnover Realized turnover of the Exploration and Production segment decreased by 0.8% from RMB783,694 million in 2013 to RMB777,574 million in 2014. This decrease was primarily due to the combined effect of the drop in the crude oil price, partially offset by the increase in the natural gas price as well as the increase in sales volume. The average realized crude oil price of the company decreased by 5.6% from US$100.42 per barrel in 2013 to US$94.83 per barrel in 2014.

Operating Expenses Operating expenses of the Exploration and Production segment decreased by 0.6% from RMB593,996 million in 2013 to RMB590,677 million in 2014, which was primarily due to a decrease in the crude oil special gain levy paid for the sales of domestic crude oil during the current period and an increase in depreciation, depletion and amortization expenses.

The oil and gas lifting cost of the company increased by 4.0% from US$13.23 per barrel in 2013 to US$13.76 per barrel in 2014. Excluding the effect of exchange rate movements, the oil and gas lifting cost increased by 3.2% compared to the preceding year. The growth of lifting cost has been effectively controlled as a result of the active implementation of measures for broadening sources of income and reducing expenditure, as well as cutting costs and improving efficiency.

Profit from Operations Profit from operations of the exploration and production segment decreased by 1.5% from RMB189,698 million in 2013 to RMB186,897 million in 2014. Nevertheless, the exploration and production segment remained the most important profit contributing segment of the company.

Refining and Chemicals

Turnover Turnover of the refining and chemicals segment decreased by 3.0% from RMB871,815 million in 2013 to RMB846,082 million in 2014. This decrease was primarily due to a decrease in the price of refined and chemicals products.

Operating Expenses Operating expenses of the refining and chemicals segment decreased by 3.0% from RMB896,207 million in 2013 to RMB869,642 in 2014. This decrease was primarily due to a reduction in the expenses in relation to the purchase of crude oil and feedstock oil from external suppliers.

The cash processing cost of the refineries of the company increased by 10.8% from RMB160.55 per ton in 2013 to RMB177.85 per ton in 2014, primarily due to an increase in fuel and power cost.

Loss from Operations The refining and chemicals segment recorded a loss of RMB23,560 million in 2014, which represented a decrease in loss of RMB832 million as compared to RMB24,392 million in 2013. The operating losses of the refining operations increased by RMB2,447 million as compared to that of 2013, resulting in a loss of RMB7,155 million in 2014. The operating losses of the chemicals operations decreased by RMB3,279 million as compared to RMB19,684 million in 2013, resulting in a loss of RMB16,405 million in 2014. This decrease in losses was primarily due to the company’s initiatives in optimizing resource allocation and cost control.

Marketing

Turnover Turnover of the marketing segment decreased by 0.4% from RMB1,946,806 million in 2013 to RMB1,938,501 million in 2014, which was primarily due to continuous downward adjustments in the refined oil prices and a decrease in the sales volume of diesel.

Operating Expenses Operating expenses of the marketing segment decreased by 0.3% from RMB1,939,244 million in 2013 to RMB1,933,080 million in 2014, which was primarily due to a decrease in the expenses arising from the purchase of refined oil from external suppliers.

Profit from Operations The marketing segment recorded a profit from operations of RMB5,421 million in 2014, representing a decrease of 28.3% from RMB7,562 million in 2013. This decrease was primarily attributable to the weaker domestic economy and lower demand for refined oil products in 2014.

Natural Gas and Pipeline

Turnover Turnover of the natural gas and pipeline segment increased by 22.1% from RMB232,751 million in 2013 to RMB284,262 million in 2014. This increase was primarily due to an increase in both the sales volume and the selling price of natural gas.

Operating Expenses Operating expenses of the natural gas and pipeline segment amounted to RMB271,136 million in 2014, representing an increase of 18.6% as compared to 2013, excluding the effect of the contribution of certain pipeline net assets and business in 2013.

Profit from Operations Operating profit of the natural gas and pipeline segment decreased by 54.6% from RMB28,888 million in 2013 to RMB13,126 million in 2014. Excluding the effect brought about by the income generated from the contribution of certain pipeline net assets and business in 2013, the profit from operations increased by RMB9,060 million as compared with the preceding year. In 2014, the natural gas and pipeline segment recorded a net loss of RMB35,020 million from sales of imported gas, representing a decrease of loss of RMB6,852 million as compared with the preceding year consisting of a loss of RMB17,683 million for the sale of 29.270 billion cubic meters of natural gas imported from Central Asia, a loss of RMB20,450 million for the sale of 7.258 billion cubic meters of imported LNG, and a loss of RMB3,465 million for the sale of 3.226 billion cubic meters of natural gas imported from Myanmar.

In 2014, the company’s overseas operations^(note) realized a turnover of RMB803,779 million, representing 35.2% of the company’s total turnover. Profit before income tax expense amounted to RMB19,242 million, representing 12.3% of the company’s total profit before income tax expense.

Note: The four operating segments of the company are exploration and production, refining and chemicals, marketing as well as natural gas and pipeline. Overseas operations do not constitute a separate operating segment of the company. The financial data of overseas operations are included in the financial data of respective operating segment mentioned above.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Consolidated Results of Operations

Overview

Our turnover was RMB2,258,124 million in 2013, representing an increase of 2.9% compared with the preceding year. Profit attributable to owners of the company in 2013 was RMB129,599 million, representing an increase of 12.4% compared with the preceding year. The basic and diluted earnings per share attributable to owners of the company were RMB0.71 in 2013, representing an increase of RMB0.08 compared with the preceding year.

Turnover Turnover increased by 2.9% from RMB2,195,296 million in 2012 to RMB2,258,124 million in 2013. This was primarily due to an increase in selling prices of natural gas coupled with the increase in the sales volume of natural gas, gasoline and other products. The table below sets out the external sales volume and average realized prices for major products sold by the company and the respective percentage change in 2012 and 2013, respectively:


	Sales Volume (thousand tons)							Average Realized Price (RMB per ton)
	2012		2013		Percentage of Change (%)			2012		2013		Percentage of Change (%)
Crude oil⁽¹⁾		76,203		75,482		(0.9	)		4,678		4,533		(3.1	)
Natural gas (hundred million cubic meter, RMB/’000 cubic meter)		853.88		985.41		15.4			1,125		1,226		9.0
Gasoline		47,407		52,350		10.4			8,007		7,866		(1.8	)
Diesel		94,515		93,301		(1.3	)		7,046		6,810		(3.3	)
Kerosene		11,355		13,482		18.7			6,399		6,015		(6.0	)
Heavy oil		12,615		14,788		17.2			4,612		4,443		(3.7	)
Polyethylene		3,045		3,391		11.4			9,082		9,665		6.4
Lubricant		2,104		1,740		(17.3	)		8,973		9,319		3.9

(1)	The sales volume of crude oil listed in the table above represents all external sales volume of crude oil of the company.

Operating Expenses Operating expenses increased by 2.4% from RMB2,020,777 million in 2012 to RMB2,069,482 million in 2013, of which:

Purchases, Services and Other Purchases, services and other operating expenses increased by 3.8% from RMB1,411,036 million in 2012 to RMB1,464,805 million in 2013. This was primarily due to the company’s expansion of its trading capacity.

Employee Compensation Costs Employee compensation costs (including salaries and such additional costs as various insurances, provident funds and training fees for 544,083 employees of the company and 319,741 temporary or seasonal staff recruited from the market) increased by 9.6% from RMB106,189 million in 2012 to RMB116,422 million in 2013. The increase was primarily due to the company’s initiative to increase the compensation of its front-line employees to reflect the expansion of its operations and consequent increase in business volumes, and rises in the domestic consumer price index, wage inflation and rises in social security contributions in line with changes to local government policies.

Exploration Expenses Exploration expenses increased by 5.5% from RMB23,972 million in 2012 to RMB25,301 million in 2013. This was primarily due to the fact that the company continued to increase its investments in oil and gas exploration in order to further strengthen its oil and gas resource reserves.

Depreciation, Depletion and Amortization Depreciation, depletion and amortization increased by 7.5% from RMB151,975 million in 2012 to RMB163,365 million in 2013. This was primarily due to the increased average carrying value of fixed assets and the increased average net value of oil and gas properties of the company.

Selling, General and Administrative Expenses Selling, general and administrative expenses increased by 5.8% from RMB74,692 million in 2012 to RMB79,021 million in 2013. This was primarily due to the expansion of business scale and the corresponding increase in the maintenance, transportation, lease, warehousing and other costs of the company.

Taxes other than Income Taxes Taxes other than income taxes decreased by 2.7% from RMB254,921 million in 2012 to RMB248,086 million in 2013. This was primarily due to the drop in the price of crude oil in 2013, leading to a decrease in the crude oil special gain levy payable by the company from RMB79,119 million in 2012 to RMB72,726 million in 2013.

Other Income, net Other income, net, in 2013 was RMB27,518 million, representing an increase of RMB25,510 million from RMB2,008 million in 2012. This was primarily because the company recognized the gain on disposal of certain pipeline net assets and operations during the reporting period.

Profit from Operations The profit from operations in 2013 was RMB188,642 million, representing an increase of 8.1% from RMB174,519 million in 2012.

Net Exchange Gain/Loss Net exchange gain in 2013 was RMB52 million, representing a decrease of RMB79 million from the net exchange gain of RMB131 million in 2012. This was primarily due to the continued appreciation of Renminbi and the depreciation of Canadian dollars against US dollars during the reporting period.

Net Interest Expenses Net interest expenses increased by 29.6% from RMB16,101 million in 2012 to RMB20,859 million in 2013. The increase was primarily due to increase in the principal amount of interest-bearing debt of the company to finance production, operation, investment and construction.

Profit Before Income Tax Expense Profit before income tax expense increased by 6.7% from RMB166,811 million in 2012 to RMB178,063 million in 2013.

Income Tax Expenses Income tax expense decreased by 1.1% from RMB36,191 million in 2012 to RMB35,789 million in 2013.

Profit for the Year Profit for the year increased by 8.9% from RMB130,620 million in 2012 to RMB142,274 million in 2013.

Profit attributable to non-controlling interests of the company Profit attributable to non-controlling interests decreased by 17.1% from RMB15,294 million in 2012 to RMB12,675 million in 2013, which was primarily due to the decrease in the profits of certain overseas subsidiaries of the company as a result of a range of factors such as the drop in the international crude oil price and the adjustment of certain policies in relation to the oil and gas cooperation with overseas resource countries.

Profit attributable to owners of the company Profit attributable to owners of our company increased by 12.4% from RMB115,326 million in 2012 to RMB129,599 million in 2013.

Segment Information

Exploration and Production

Turnover Realized turnover of the Exploration and Production segment decreased by 0.8% from RMB789,818 million in 2012 to RMB783,694 million in 2013. This was primarily due to the decrease of the average realized crude oil price of the company by 3.1% from US$103.65 per barrel in 2012 to US$100.42 per barrel in 2013.

Operating Expenses Operating expenses of the Exploration and Production segment increased by 3.3% from RMB574,863 million in 2012 to RMB593,996 million in 2013. Of which, depreciation, depletion and amortization increased by RMB11,690 million as compared with last year.

The oil and gas lifting cost of the company increased by 12.7% from US$11.74 per barrel in 2012 to US$13.23 per barrel in 2013. Excluding the effect of exchange rate movements, the oil and gas lifting cost increased by 10.6% as compared with last year, which was primarily due to an increase in the basic operational costs in 2013 as compared with last year.

Profit from Operations Profit from operations of the exploration and production segment decreased by 11.7% from RMB214,955 million in 2012 to RMB189,698 million in 2013. This decrease was primarily attributable to a reduction in the price of crude oil, the increase in costs and changes to oil and gas cooperation policies introduced by governments in countries in which we have operations. Nevertheless, the exploration and production segment remained the most important profit contributing segment of the company.

Refining and Chemicals

Turnover Turnover of the refining and chemicals segment decreased by 1.3% from RMB883,218 million in 2012 to RMB871,815 million in 2013. The decrease was primarily due to an adjustment in the crude oil processing volume in response to market changes, resulting in a decrease in output and sales volume of refined oil.

Operating Expenses Operating expenses of the refining and chemicals segment decreased by 3.3% from RMB926,729 million in 2012 to RMB896,207 million in 2013. The decrease was primarily due to a reduction in the volume of crude oil imported as a result of the company’s initiatives in optimizing its resource allocation.

The cash processing cost of refineries of the company increased by 3.8% from RMB154.61 per ton in 2012 to RMB160.55 per ton in 2013, which was primarily due to increase in fuel cost and production expenses as compared with the preceding year.

Loss from Operations The refining and chemicals segment recorded a loss of RMB24,392 million in 2013 which represented a decrease in losses of RMB19,119 million as compared to the previous year. This decrease in losses was primarily due to the introduction of a new statutory pricing mechanism for refined oil products and the company’s initiatives in optimizing resource allocation and product mix. The operating losses of the refining operations decreased by RMB28,964 million as compared to the previous year, resulting in a loss of RMB4,708 million in 2013. The operating losses of the chemicals operations increased by RMB9,845 million as compared to the previous year, resulting in a loss of RMB19,684 million in 2013. The increase was primarily due to the weaker market for chemicals and the provision for impairment of assets.

Marketing

Turnover Turnover of the marketing segment increased by 3.0% from RMB1,890,558 million in 2012 to RMB1,946,806 million in 2013, which was primarily due to increase in the sales volume of petroleum and the turnover of oil products trading business.

Operating Expenses Operating expenses of the marketing segment increased by 3.5% from RMB1,874,167 million in 2012 to RMB1,939,244 million in 2013, which was primarily due to an increase in the expenses arising from the oil products trading business.

Profit from Operations The marketing segment recorded a profit from operations of RMB7,562 million in 2013, representing a decrease of 53.9% from RMB16,391 million in 2012. This was primarily attributable to the weaker domestic economy and less demand for refined oil products in 2013.

Natural Gas and Pipeline

Turnover Turnover of the natural gas and pipeline segment increased by 15.1% from RMB202,196 million in 2012 to RMB232,751 million in 2013. The increase was primarily due to (i) an increase in both the sales volume and the selling price of natural gas; and (ii) an increase in the sales revenue generated from city gas, CNG and other businesses in 2013.

Operating Expenses Operating expenses of the natural gas and pipeline segment amounted to RMB203,863 million in 2013, which was broadly in line with the operating expenses of RMB204,306 million in 2012.

Profit from Operations The natural gas and pipeline segment achieved an operating profit of RMB28,888 million in 2013, representing an increase of RMB30,998 million as compared with an operating loss of RMB2,110 million in 2012. The increase was primarily due to the contribution of certain pipeline assets and operations, improved control of pipeline transmission costs and increased focus by the company on the its sales and pricing strategies.

In 2013, the natural gas and pipeline segment recorded a loss of RMB28,259 million on sales of 27.453 billion cubic meters of natural gas imported from Central Asia, a loss of RMB20,281 million on sales of 7.335 billion cubic meters of imported LNG, and a loss of RMB420 million on the sales of 0.409 billion cubic meters of natural gas imported from Myanmar. Excluding the refund of the import value-added tax totaling RMB7,088 million, a net loss of RMB41,872 million was recorded on sales of imported gas in 2013, which was broadly in line with the previous year.

In 2013, the company’s overseas operations^(note) realized a turnover of RMB754,227 million, representing 33.4% of the company’s total turnover. Profit before income tax expense amounted to RMB20,520 million, representing 11.5% of the company’s profit before income tax expense.

Liquidity and Capital Resources

Our primary sources of funding include cash generated by operating activities and short-term and long-term borrowings. Our primary uses of funds were for operating activities, acquisitions, capital expenditures, repayment of short-term and long-term borrowings and distributions of dividends to shareholders. Our payments to CNPC are limited to dividends and payments for services provided to us by CNPC. For the year ended December 31, 2014, we distributed as dividends 45% of our reported income for the year attributable to our shareholders. See “Item 8 — Financial Information — Dividend Policy” for a discussion of factors which may affect the determination by our board of directors of the appropriate level of dividends.

Our financing ability may be limited by our financial condition, our results of operations and the international and domestic capital markets. Prior to accessing the international and domestic capital markets, we must obtain approval from the relevant PRC government authorities. In general, we must obtain PRC government approval for any project involving significant capital investment for our refining and chemicals, marketing and natural gas and pipeline segments. For a more detailed discussion of factors which may affect our ability to satisfy our financing requirements, see “Item 3 — Key Information — Risk Factors”.

We plan to fund the capital and related expenditures described in this annual report principally through cash from operating activities, short-term and long-term borrowings and cash and cash equivalents. Net cash flows from operating activities in the year ended December 31, 2014 was RMB356,477 million. As of December 31, 2014, we had cash and cash equivalents of RMB73,778 million. While each of the projects described in this annual report for which significant capital expenditures will be required is important to our future development, we do not believe that failure to implement any one of these projects would have a material adverse effect on our financial condition or results of operations. If the price of crude oil undergoes a steep decline in the future, it is likely that we would delay or reduce the scale of the capital expenditures for our exploration and production segment.

We currently do not have any outstanding options, warrants or other rights for any persons to require us to issue any common stock at a price below its market value. We do not currently intend to issue any such rights or to otherwise issue any common stock for a price below its market value.

In addition, we did not have for the year ended December 31, 2014, and do not currently have, any transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the liquidity or availability of or requirements for our capital resources.

The table below sets forth our cash flows for each of the years ended December 31, 2012, 2013 and 2014 and our cash equivalents at the end of each year.


	Year Ended December 31,
	2012			2013			2014
	(RMB in millions)
Net cash flows from operating activities		239,288			288,529			356,477
Net cash flows used for investing activities		(332,226	)		(266,510	)		(290,838	)
Net cash flows from /(used for) financing activities		75,356			(12,239	)		(44,312	)
Currency translation difference		(195	)		(1,768	)		1,044
Cash and cash equivalents at year end		43,395			51,407			73,778

Our cash and cash equivalents increased by 43.5% from RMB51,407 million as of December 31, 2013 to RMB73,778 million as of December 31, 2014.

Net Cash Flows from Operating Activities

Our net cash flows from operating activities for the year ended December 31, 2014 was RMB356,477 million, representing an increase of 23.5% from RMB288,529 million for the year ended December 31, 2013. This increase was mainly due to the company’s efforts to enhance the management of the use of funds and inventory and an increase in operating funds. As of December 31, 2014, we had cash and cash equivalents of RMB73,778 million. The cash and cash equivalents were mainly denominated in Renminbi (approximately 73.9% were denominated in Renminbi, approximately 20.0% were denominated in US dollars, approximately 4.8% were denominated in HK dollars and approximately 1.3% were denominated in other currencies).

Our net cash flows from operating activities for the year ended December 31, 2013 was RMB288,529 million, representing an increase of 20.6% from RMB239,288 million for the year ended December 31, 2012. This was mainly due to the combined effect of the increase in profits during the reporting period as compared with the preceding year and changes in inventory and other account payables, as a result of the strengthening of our management and optimization of production and operation. As of December 31, 2013, we had cash and cash equivalents of RMB51,407 million. The cash and cash equivalents were mainly denominated in Renminbi (approximately 77.8% were denominated in Renminbi, approximately 8.8% were denominated in US dollars, approximately 7.3% were denominated in HK dollars and approximately 6.1% were denominated in other currencies).

Our net cash flows from operating activities for the year ended December 31, 2012 was RMB239,288 million, representing a decrease of 17.5% from RMB290,155 million in the year ended December 31, 2011. This was mainly due to the combined impact of the decrease in profit, changes in accounts receivables and payables, inventories and other kinds of working capital, and the increase in taxes and levies paid. As at December 31, 2012, we had cash and cash equivalents of RMB43,395 million. The cash and cash equivalents were mainly denominated in Renminbi (approximately 64.1% were denominated in Renminbi, approximately 16.6% were denominated in US Dollars, approximately 15.2% were denominated in HK Dollars, approximately 1.7% were denominated in KZT and approximately 2.4% were denominated in other currencies).

Net Cash Flows Used for Investing Activities

Our net cash flows used for investing activities for the year ended December 31, 2014 amounted to RMB290,838 million, representing an increase of 9.1% from RMB266,510 million for the year ended December 31, 2013. The increase was primarily due to the increase of capital from our investment in a joint venture with certain pipeline assets and operations in 2013.

Our net cash flows used for investing activities for the year ended December 31, 2013 amounted to RMB266,510 million, representing a decrease of 19.8% from RMB332,226 million for the year ended December 31, 2012. The decrease was primarily due to the combined effect of the cash inflow resulting from our investment in a joint venture with certain pipeline assets and operations as well as the enhancement of our external cooperation and introduction of strategic investors, the strengthening of our investment management and the decrease in our cash payment of capital expenditures.

Our net cash flows used for investing activities for the year ended December 31, 2012 were RMB332,226 million, representing an increase of 17.1% from RMB283,638 million in the year ended December 31, 2011. The increase was primarily due to the increase in the payment of capital expenditures in cash during the reporting period.

Net Cash Flows (Used for)/From Financing Activities

Our net cash used for financing activities was RMB44,312 million for the year ended December 31, 2014, representing an increase of RMB32,073 million compared to the net cash outflows of RMB12,239 million used for financing activities for the year ended December 31, 2013. This was primarily due to our efforts to strengthen the management of our interest-bearing borrowings and to optimize our debt structure.

Our net cash used for financing activities was RMB12,239 million for the year ended December 31, 2013, representing a decrease of RMB87,595 million as compared with the net cash inflows of RMB75,356 million from financing activities for the year ended December 31, 2012. This was primarily due to our efforts to strengthen the management of our interest-bearing borrowings and to optimize our debt structure, resulting in a decrease in the net new borrowings during the reporting period as compared with the preceding year.

Our net cash flows from financing activities for the year ended December 31, 2012 increased by RMB66,097 million to RMB75,356 million from RMB9,259 million in the year ended December 31, 2011. Such change was primarily due to an increase in loans during the reporting period as compared with the preceding year.

Our net borrowings as of December 31, 2012, 2013 and 2014 were as follows:


	December 31,
	2012		2013		2014
	(RMB in millions)
Short-term debt (including current portion of long-term debt)		151,247		192,767		169,128
Long-term debt		293,774		302,862		370,301

Total debt		445,021		495,629		539,429

Less:
Cash and cash equivalents		43,395		51,407		73,778

Net debt		401,626		444,222		465,651

Our total borrowing as of December 31, 2014 consisted of approximately 63.2% fixed-rate loans and approximately 36.8% floating-rate loans. Of our borrowing as of December 31, 2014, approximately 74.6% were denominated in Renminbi, approximately 24.8% were denominated in US Dollars and approximately 0.6% were denominated in other currencies.

Our total borrowings as of December 31, 2013 consisted of 67.8% fixed-rate loans and approximately 32.2% floating-rate loans. Of our borrowings as of December 31, 2013, approximately 75.9% were denominated

in Renminbi, approximately 23.3% were denominated in US Dollars and approximately 0.8% were denominated in other currencies.

Our total borrowings as of December 31, 2012 consisted of 78.4% fixed-rate loans and approximately 21.6% floating-rate loans. Of our borrowings as of December 31, 2012, approximately 84.9% were denominated in Renminbi, approximately 14.1% were denominated in US Dollars and approximately 1.0% were denominated in other currencies.

Our debt to capital ratio (calculated by dividing interest-bearing debts by the aggregate of interest-bearing debts and shareholder’s equity) was 29.0%, as of December 31, 2014.

Our debt to capital ratio (calculated by dividing interest-bearing debts by the aggregate of interest-bearing debts and shareholder’s equity) was 28.1%, as of December 31, 2013.

Our debt to capital ratio (calculated by dividing interest-bearing debts by the aggregate of interest-bearing debts and shareholder’s equity) was 27.4%, as of December 31, 2012.

As of December 31, 2014, the outstanding amount of our debts secured by CNPC and its subsidiaries and other third parties was RMB50,878 million.

Capital Expenditures and Investments

In 2014, we focused on the principles of quality and profitability for capital expenditures, continued to optimize our investment structure, and increased investment in upstream oil and gas projects in order to enhance our sustainable development capability. In 2014, our capital expenditures decreased by 8.5% from RMB318,696 million in 2013 to RMB291,729 million.

The table below sets forth our capital expenditures and investments by business segment for each of the years ended December 31, 2012, 2013 and 2014 as well as those anticipated for the year ending December 31, 2015. Actual capital expenditures and investments for periods after January 1, 2015 may differ from the amounts indicated below.


	2012				2013				2014				2015 Anticipated
	(RMB in millions)		%		(RMB in millions)		%		(RMB in millions)		%		(RMB in millions)		%
Exploration and production⁽¹⁾		227,211		64.45		226,376		71.03		221,479		75.92		200,200		75.26
Refining and chemicals		36,009		10.21		26,671		8.37		30,965		10.61		25,900		9.74
Marketing		14,928		4.23		7,101		2.23		5,616		1.93		9,000		3.38
Natural gas and pipeline		72,939		20.69		57,439		18.02		32,919		11.28		30,200		11.35
Other		1,429		0.42		1,109		0.35		750		0.26		700		0.27

Total		352,516		100.0		318,696		100.0		291,729		100.0		266,000		100.0

(1)

If investments related to geological and geophysical exploration costs are included, the capital expenditures and investments for the exploration and production segment for 2012, 2013, 2014 and the estimates for the same in 2015 would be RMB239,266 million, RMB239,641 million, RMB231,480 million and RMB210,200 million, respectively.

As of December 31, 2014, the capital commitments contracted but not provided for were approximately RMB63,027 million.

Exploration and Production

A majority of our capital expenditures and investments relate to our exploration and production segment. For each of the three years ended December 31, 2012, 2013 and 2014, capital expenditures in relation to the exploration and production segment amounted to RMB227,211 million, RMB226,376 million and RMB221,479 million, respectively. In 2014, our capital expenditures were primarily used for domestic oil and gas exploration projects such as those in Changqing, Daqing, Southwestern, Tarim and Liaohe, and construction of production capacities for various oil and gas fields, and five large overseas oil and gas development projects.

We anticipate that capital expenditures for our exploration and production segment for 2015 would amount to RMB200,200 million. Domestic exploration activities will remain focused on the “Peak Oil and Gas Reserves” Program and more efforts will be devoted to key oil and gas regions such as Songliao Basin, Erdos Basin, Tarim Basin, Sichuan Basin and Bohai Bay Basin. Domestic development activities will be focused on maintaining the output of crude oil production and achieving rapid growth in the output of natural gas. We will aim for steady growth in the output of oil and gas in Daqing, Changqing, Xinjiang, Tarim and the Southwestern region and continue to develop unconventional oil and gas sources such as coal seam gas and shale gas. Overseas operations will be aimed at continued cooperation with our current partners in oil and gas exploration and development projects in the Middle East, Central Asia, the Americas and the Asia-Pacific regions to achieve rapid growth of our reserves and production.

Refining and Chemicals

Our capital expenditures for our refining and chemicals segment for each of the years ended December 31, 2012, 2013 and 2014 were RMB36,009 million, RMB26,671 million and RMB30,965 million, respectively. In 2014, RMB23,091 million was spent on the construction of refinery facilities and RMB7,874 million was spent on the construction of chemicals facilities, including the Yunnan Petrochemical project and other quality enhancement projects to comply with the China IV standard for gasoline and diesel products.

We anticipate that capital expenditures for the refining and chemicals segment for 2015 will amount to RMB25,900 million, which are expected to be used primarily for the construction of refining and chemicals projects as well as the construction of quality enhancement projects for gasoline and diesel products.

Marketing

Our capital expenditures for our marketing segment for each of the years ended December 31, 2012, 2013 and 2014 were RMB14,928 million, RMB7,101 million and RMB5,616 million, respectively. Our capital expenditures for the marketing segment in 2014 were mainly used for the construction of service stations, storage facilities and other facilities for our sales network.

We anticipate that capital expenditures for our marketing segment for the year of 2015 will amount to RMB9,000 million, which are expected to be used primarily for the construction and expansion of high-efficiency sales networks in China as well as the construction of oil and gas operating centers abroad.

Natural Gas and Pipeline

Our capital expenditures for the natural gas and pipeline segment for each of the three years ended December 31, 2012, 2013 and 2014 were RMB72,939 million, RMB57,439 million and RMB32,919 million, respectively. Our capital expenditures for the natural gas and pipeline segment in 2014 were mainly used for the construction of the Third West-East Gas Pipeline, the Zhongwei-Guiyang Gas Pipeline, the Third Daqing-Tieling Crude Oil Pipeline, the Fourth Daqing-Tieling Crude Oil Pipeline, and the Tangshan LNG project.

We anticipate that our capital expenditures for the natural gas and pipeline segment for 2015 will amount to approximately RMB30,200 million, which are expected to be used primarily for the construction of major oil and gas transmission projects such as the Third West-East Gas Pipeline, the Shaanxi-Beijing Fourth Gas Pipeline, the Tieling-Daqing Crude Oil Pipeline and Jinzhou-Zhengzhou Refined Oil Pipeline and storage facilities and city gas facilities.

Headquarters and Others

Our non-segment-specific capital expenditures and investments for each of the years ended December 31, 2012, 2013 and 2014 were RMB1,429 million, RMB1,109 million and RMB750 million, respectively.

Our anticipated capital expenditures for the headquarters and other segments for 2015 amount to RMB700 million. These planned capital expenditures and investments mainly include capital expenditures for scientific research activities and the construction of the information system.

Off-Balance Sheet Arrangements

As of December 31, 2014, there were no off-balance sheet arrangements that had or were reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Long-Term Contractual Obligations and Other Commercial

Commitments and Payment Obligations

All information that is not historical in nature disclosed under “Item 5 — Operating and Financial Review and Prospects — Long-Term Contractual Obligations and Other Commercial Commitments and Payment Obligations” is deemed to be a forward looking statement. See “Forward-Looking Statements” for additional information.

The tables below set forth our long-term contractual obligations outstanding as of December 31, 2014.


	Payment Due by Period
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
	(RMB in millions)
Long-term debt		424,096		53,795		168,570		92,684		109,047
Capital lease obligations		783		164		303		270		46
Operating leases		197,946		9,855		15,822		14,834		157,435
Capital commitments		63,027		29,117		33,910		—		—
Other long-term obligations		—		—		—		—		—
Debt-related interest		74,695		17,038		25,363		12,761		19,533

Total		760,547		109,969		243,968		120,549		286,061

We are obligated to make annual payment with respect to our exploration and production licenses to the Ministry of Land and Resources. The table below sets forth the estimated amount of the annual payments in the next five years:


Year	Annual Payment
	(RMB in millions)
2015		800
2016		800
2017		800
2018		800
2019		800

Assets Retirement Obligation

A number of provinces and regions in which our oil and gas exploration and production activities are located have promulgated environmental protection regulations, which set forth specific abandonment and disposal processes for oil and gas exploration and production activities. We have established standard abandonment procedures, including plugging all retired wells, dismantling all retired metering stations and other related facilities and performing site restoration, in response to the issuance of these provincial and regional regulations. As of December 31, 2014 the balance of assets retirement obligation was RMB109,154 million.

Research and Development

We have a research and development management department, directly under which there are three research institutions. Except for our branch companies which are engaged in marketing activities, each of our branch companies has its own research and development management department. Most of our branch companies have their own research institutions. Our research and development management departments are mainly responsible for managing and coordinating the research and development activities conducted by each of the research institutions. As of December 31, 2014, we had 28,894 employees engaged in research and development functions.

In each of the years ended December 31, 2012, 2013 and 2014, our total expenditures for research and development were approximately RMB14,453 million, RMB14,157 million and RMB13,088 million, respectively.

Exploration and Production

Most of China’s major oil and gas fields are characterized by a broad range of geological conditions, and a majority of China’s oil and gas fields are in continental sedimentary basins with complex structures. Our research and development efforts with respect to our exploration and production business focus on:

•

theories and technologies of crude oil and natural gas exploration;

•

oil and gas development theory and technology;

•

engineering technology and equipment;

•

theory and technology for oil and gas storage and transportation; and

•

security, energy conservation and environment protection.

Refining and Chemicals

Currently, our research and development efforts in the refining and chemicals segment are focusing on the following areas:

•

technology for clean refined oil products;

•

technology for unqualified heavy oil processing;

•

refining-chemical integration technology;

•

technology for new products of synthetic resin and synthetic rubber; and

•

new catalyst and catalytic materials.

Trend Information

The world economic situation and energy industry are developing and changing rapidly. China may encounter unexpected challenges and obstacles in maintaining a stable economic development. The increase in China’s domestic demand for refined oil products is still subject to many uncertainties. The competition on China’s domestic petroleum and petrochemical market will be more intense.

Other than as disclosed above and elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the periods from January 1, 2012 to December 31, 2014 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

Other Information

Inflation

Inflation or deflation did not have a significant impact on our results of operations for the year ended December 31, 2014.

Related Party Transactions

For a discussion of related party transactions, see “Item 7 — Major Shareholders and Related Party Transactions — Related Party Transactions” and Note 37 to our consolidated financial statements included elsewhere in this annual report.

Recent Developments in IFRS

For a detailed discussion of recent developments in IFRS, see Note 3 to our consolidated financial statements.

ITEM 6 — DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors, Senior Management and Supervisors

As of the date of this report, our board of directors consisted of ten directors, four of whom were independent non-executive directors. We will elect one additional director at the annual general meeting to be held on May 27, 2015. Directors are elected at shareholder meetings for three-year terms. The directors may be

re-elected and re-appointed upon the expiration of his/her term of office. The functions and duties conferred on the board of directors include:

(1)

convening shareholders’ meetings and reporting its work to the shareholders’ meeting;

(2)

implementing the resolutions of the shareholders’ meeting;

(3)

determining our business plans and investment programs;

(4)

formulating our annual budget and final accounts;

(5)

formulating our profit distribution and loss recovery proposals;

(6)

formulating proposals for the increase or reduction of our registered capital and the issuance of our debentures or other securities and listings;

(7)

proposing to redeem shares, merge, spin-off, dissolve or otherwise change the form of the company;

(8)

deciding on our internal management structure;

(9)

appointing or dismissing the President of the company, and upon the nomination of the President, appointing or dismissing the senior vice president, vice president, chief financial officer and other senior management, and determining matters relating to their remuneration;

(10)

formulating our basic management system;

(11)

preparing amendments to our articles of association;

(12)

managing the information disclosures of our company; and

(13)

exercising any other powers and duties conferred by the shareholders at general meetings.

Six of the directors are affiliated with CNPC or an affiliate of CNPC.

The PRC Company Law requires a joint stock company with limited liability to establish a supervisory board. This requirement is reflected in our articles of association. The supervisory board is responsible for monitoring our financial matters and overseeing the corporate actions of our board of directors and our management personnel. At the end of this reporting period, the supervisory board consisted of nine supervisors, five of whom are elected, and may be removed, by the shareholders in a general meeting, and four of whom are employees’ representatives who are elected by our staff, and may be removed, by our staff. Five of our supervisors are affiliated with CNPC. The term of office of our supervisors is three years. The supervisors may be re-elected and re-appointed upon the expiration of his/her term of office. An elected supervisor cannot concurrently hold the position of a director, manager or financial controller.

The supervisory board shall be responsible to the shareholders’ meeting and shall exercise the following functions and powers in accordance with law:

•

to review the periodic reports prepared by the board of directors and issue written opinions in connection with such review;

•

to review the company’s financial condition;

•

to oversee the performance of duties by the directors, the president, senior vice presidents, vice presidents, the chief financial officer and other senior officers of the company and to propose the removal of any of the foregoing persons who acts in contravention of any law, regulation, the company’s articles of association or any resolutions of the shareholders’ meeting;

•

to demand any director, the president, senior vice president, vice president, the chief financial officer or any other senior officer who acts in a manner which is harmful to the company’s interest to rectify such behavior;

•

to check the financial information such as the financial report, business report and plans for distribution of profits to be submitted by the board of directors at the shareholders’ meetings and to authorize, in the company’s name, publicly certified and practicing auditors to assist in the re-examination of such information should any doubt arise in respect thereof;

•

to propose the convening of an extraordinary shareholders’ meeting and convene and preside over a shareholders’ meeting when the board fails to perform its duties to do so as set forth in the PRC Company Law;

•

to submit proposals at the shareholders’ meetings;

•

to confer with any director, or initiate legal proceedings on behalf of the company against any director, the president, senior vice president, vice president, the chief financial officer or any other senior officer in accordance with Article 152 of the PRC Company Law;

•

to initiate investigations upon being aware of any extraordinary development in the operational conditions of the company;

•

together with the audit committee of the board of directors, to review the performance of the outside auditors on a yearly basis, and to propose the engagement, renewal of engagement and termination of engagement of the outside auditors, as well as the service fees with respect to the audit services;

•

to oversee the compliance of related party transactions; and

•

other functions and powers as set forth in the articles of association of the company.

Supervisors shall attend meetings of the board of directors as observers.

In the event that any action of our directors adversely affects our interests, supervisors shall confer with or initiate legal proceedings against such directors on our behalf. A resolution proposed at any meeting of the supervisory board shall be adopted only if it is approved by two-thirds or more of our supervisors.

Our senior management is appointed by and serves at the supervision of our board of directors. The board of directors will review, evaluate and supervise the performance of the management and reward or punish the members of the management in accordance with relevant rules and regulations.

The following table sets forth certain information concerning our directors, supervisors and executive officers as of the date of this report:


Name⁽¹⁾	Age		Position	Date of Election⁽²⁾
Zhou Jiping		62	Chairman of the Board of Directors	May 18, 2011
Wang Dongjin		52	Vice-Chairman and President	May 18, 2011
Yu Baocai		49	Non-executive Director	May 18, 2011
Shen Diancheng		55	Non-executive Director	May 22, 2014
Liu Yuezhen		53	Non-executive Director	May 22, 2014
Liu Hongbin		51	Executive Director and Vice President	May 22, 2014
Chen Zhiwu		52	Independent Non-executive Director	May 18, 2011
Richard H. Matzke		77	Independent Non-executive Director	May 22, 2014
Lin Boqiang		57	Independent Non-executive Director	May 22, 2014
Zhang Biyi		61	Independent Non-executive Director	October 29, 2014
Guo Jinping		57	Chairman of the Board of Supervisors
Zhang Fengshan		52	Supervisor
Li Qingyi		54	Supervisor
Jia Yimin		54	Supervisor
Jiang Lifu		51	Supervisor
Yang Hua		51	Supervisor
Yao Wei		58	Supervisor
Li Jiamin		51	Supervisor
Liu Hehe		51	Supervisor
Sun Longde		52	Vice President
Zhao Zhengzhang		58	Vice President
Huang Weihe		57	Vice President
Xu Fugui		57	Vice President
Yu Yibo		51	Chief Financial Officer
Lin Aiguo		56	Chief Engineer
Wang Lihua		58	Vice President
Lv Gongxun		57	Vice President
Wu Enlai		54	Secretary to the Board of Directors

(1)	The following changes have taken place to our board and senior management since our last annual report:

On April 26, 2014, Bo Qiliang resigned from the position of vice president of the company.

On May 22, 2014, having completed their terms, Li Xinhua, Wang Guoliang, Liu Hongru, Franco Bernabè, Li Yongwu and Cui Junhui stepped down as directors of the company, and Wang Guangjun, Wang Daocheng and Fan Fuchun stepped down as supervisors of the company. Concurrently, Shen Diancheng, Liu Yuezhen, Liu Hongbin, Richard H. Matzke and Lin Boqiang were elected directors of the company, and Zhang Fengshan, Jia Yimin, Li Luguang, Li Jiamin were elected supervisors of the company. Liao Yongyuan was elected vice-chairman of the company, and resigned from the position of vice president of the company. Wang Dongjin was elected vice-chairman of the company. Guo Jinping was elected chairman of the board of supervisors.

On June 18, 2014, Wang Lihua and Lv Gongxun were elected vice presidents of the company.

On August 26, 2014, as a result of new PRC legislation, Wang Lixin resigned from the position of supervisor. Li Luguang resigned from the position of supervisor due to his transfer to CNPC.

On October 29, 2014, Zhang Biyi was elected independent non-executive director of the Company and Jiang Lifu and Yang Hua were elected supervisors.

On March 17, 2015, Liao Yongyuan resigned from the position of non-executive director and vice-chairman of the Company.

(2)	For directors only.

Directors

Zhou, Jiping, age 62, is currently the chairman of our board of directors and the chairman of CNPC. Mr. Zhou is a professor-level senior engineer, holds a master’s degree and has nearly 45 years of work experience in China’s oil and petrochemical industry. In November 1996, he was appointed deputy director of the International Exploration and Development Co-operation Bureau of China National Petroleum Company and deputy general manager of China National Oil & Gas Exploration and Development Corporation. In December 1997, Mr. Zhou was promoted to general manager of China National Oil & Gas Exploration and Development Corporation. He was appointed assistant to the general manager of CNPC in August 2001 and deputy general manager of CNPC in December 2003. Mr. Zhou was elected as director of our company in May 2004 and appointed vice chairman and president of our company in May 2008. In October 2011, Mr. Zhou rose to general manager and director of CNPC. In April 2013, he became the chairman of CNPC and was promoted to chairman and president of our company. Mr. Zhou left his post as president of our company in July 2013.

Wang, Dongjin, age 52, is currently the vice-chairman and president of our company and the deputy general manager of CNPC. Mr. Wang is a professor-level senior engineer, holds a doctorate degree and has over 30 years of work experience in China’s oil and gas industry. In July 1995, he was appointed deputy director of the Jiangsu Oil Exploration Bureau, and in December 1997, he was appointed deputy general manager of China National Oil & Gas Exploration and Development Corporation. From December 2000, Mr. Wang was concurrently the general manager of CNPC International (Kazakhstan) Ltd. and Aktobe Oil and Gas Co., Ltd. In October 2002, Mr. Wang was appointed general manager of China National Oil and Gas Exploration and Development Corporation, and in January 2004, he became the assistant to the general manager of CNPC and deputy chairman and general manager of China National Oil & Gas Exploration and Development Corporation. In September 2008, he was appointed deputy general manager of CNPC. He was elected director of our company in May 2011, and in July 2013, he was appointed the president of our company. In May 2014, he was appointed vice-chairman of our board of directors.

Yu, Baocai, age 49, is currently a director of our company and deputy general manager of CNPC. Mr. Yu is a senior engineer, holds a master’s degree and has nearly 30 years of work experience in China’s oil and petrochemical industry. He was appointed deputy general manager of PetroChina Daqing Petrochemical Company in September 1999 and was promoted to general manager in December 2001. In September 2003, Mr. Yu was appointed general manager of PetroChina Lanzhou Petrochemical Company, and September 2008, he was appointed the deputy general manager of CNPC. Mr. Yu was elected a representative of the 10^th National People’s Congress of PRC in February 2003 and a representative of the 11^th National People’s Congress of PRC in February 2008. In May 2011, Mr.Yu was elected as a director of our company.

Shen, Diancheng, age 55, is currently a director of our company and concurrently serves as deputy general manager and safety director of CNPC. Mr. Shen is a professor-level senior engineer, holds a doctorate degree and has over 30 years of work experience in China’s oil and petrochemical industry. Mr. Shen was appointed standing deputy general manager of Daqing Refining & Chemical Company in October 2000, general manager of Liaoyang Petrochemical Company in April 2002 and general manager of Jilin Petrochemical Company in November 2005. In June 2007, he was appointed vice president of our company, concurrently serving as general manager of PetroChina Refining & Marketing Company. Mr. Shen served as general manager of PetroChina Refining & Chemical Company from November 2007, and he was appointed deputy general manager of CNPC in April 2011. Mr. Shen stepped down as vice president of our company and general manager of PetroChina Refining & Chemical Company in October 2011, but he has continued to serve as safety director of CNPC since February 2012. Mr. Shen was elected director of our company in May 2014.

Liu, Yuezhen, age 53, is currently a director of our company and the chief accountant of CNPC. Mr. Liu is a researcher-level senior accountant, holds a master’s degree and has nearly 35 years of work experience in the

financial and accounting industries. He served as deputy general manager and chief accountant of AVIC Jianghan Aviation Life-saving Appliance Corporation since March 1996. In February 2000, he was promoted to general manager of Jianghan Aviation Life-saving Appliance Corporation and concurrently served as director of 610 Research Institute. Mr. Liu served as chairman of the board and general manager of AVIC Beijing Qingyun Aviation Instruments Co., Ltd. since May 2003 and as chief accountant of CASIC (Group) Company since November 2006. He was elected a director of our board of directors in May 2014.

Liu, Hongbin, age 51, is a director and vice president of our company and deputy general manager of CNPC. Mr. Liu is a senior engineer, holds a bachelor’s degree and has over 30 years of work experience in China’s oil and gas industry. He was appointed vice president of Exploration and Development Research Institute of Yumen Petroleum Administration Bureau in May 1991, director of Tuha Petroleum Exploration & Development Headquarters in October 1994, chief engineer of Tuha Petroleum Exploration & Development Headquarters in June 1995, deputy general manager of PetroChina Tuha Oilfield Company in July 1999, commander of Tuha Petroleum Exploration & Development Headquarters in July 2000, the general manager of the planning department of our company in March 2002 and director of the planning department of CNPC in September 2005. Mr. Liu was appointed vice president of our company in June 2007 and general manager of PetroChina Marketing Company in November 2007. In July 2013, he was appointed deputy general manager of CNPC. Mr. Liu was appointed executive director and general manager of Daqing Oilfield Company Ltd. in August 2013, and he was elected to our board of directors in May 2014.

Independent Non-executive Directors

Chen, Zhiwu, age 52, is currently an independent non-executive director of our company. Mr. Chen is a tenured professor of economic finance at Yale University School of Management and a distinguished professor of the Chang Jiang Scholar Program at Tsinghua University School of Humanities and Social Sciences. He received a bachelor’s degree in science from Central South University of Technology in China (now named Central South University), a master’s degree in engineering from National University of Defense Technology in China and a doctorate degree in finance from Yale University. Starting his teaching career in June 1990, Mr. Chen taught at University of Wisconsin, Madison. From July 1995 to July 1999, he worked at Ohio State University, where he was promoted to associate professor of finance in 1997. Since July 1999, he has been a tenured professor of finance at Yale University School of Management. Mr. Chen was elected as an independent non-executive director of our company in May 2011.

Matzke, Richard H., age 77, is currently an independent non-executive director of our company. He is concurrently a member of the human resources and compensation committee to the board of directors of OAO Lukoil and a director on the board of PHI Inc. in the United States. Mr. Matzke has a bachelor’s degree from Iowa State University, a master’s degree in geology from Pennsylvania State University and a master’s degree in business administration from St. Mary’s College. Since 1961, he worked in the exploration, planning, economic analysis and research departments of Chevron Oil Company. Mr. Matzke was made vice president of Chevron Chemical Company in 1979, director of Caltex Pacific Indonesia in 1982, president of Chevron Canada Resources Ltd. in 1986, president of Chevron Overseas Petroleum Inc. in 1997 and he was also elected to the board of directors of Chevron Chemical Company in 1997. Since his retirement from the board of directors of Chevron Oil Company in 2002, Mr. Matzke has served a director and chairman of the Strategy and Investment Committee of Lukoil, chairman of the US-Kazakhstan Business Association, chairman of the US-Azerbaijan Business Association, member of the Council on Foreign Relations and US-Russia Business Council, board member of the National Committee on US-China Relations, board member of the African-America Institute, member of the Advisory Board of the Center for Strategic and International Studies and counsel for the US International Commerce Chamber. Mr. Matzke was elected as an independent non-executive director of our company in May 2014.

Lin, Boqiang, age 57, is currently an independent non-executive director of our company. Mr. Lin holds a doctorate degree in economics from the University of California. He was a senior energy economist at the Asian Development Bank, and he currently serves as a vice principal of New Huadu Business School, director of Research Institute for China’s Energy Policy at Xiamen University, director of 2011 Collaborative Innovation Centre for Energy Economics and Energy Policy and director of China Centre for Energy Economics Research.

He is a doctoral tutor at Xiamen University. He was awarded a “Changjiang Scholar” distinguished professor by the Ministry of Education in 2008. Mr. Lin is vice-chairman of China Energy Society, a member of the National Energy Consultation Committee under the National Energy Commission, member of the Energy Price Consultation Committee under the National Development and Reform Commission, member of the Energy Advisory Council and vice-chairman of the Global Agenda Council on Energy Security of the World Economic Forum based in Davos, Switzerland. Mr. Lin was elected as an independent non-executive director of our company in May 2014.

Zhang, Biyi, age 61, is currently an independent non-executive director of our company. Mr. Zhang is a senior accountant and holds a bachelor’s degree in finance and banking from Xiamen University. He served as head of the Enterprise Division, assistant to the director, and deputy director of the Finance Bureau at China Ship Industry Corporation. In July 1999, Mr. Zhang was appointed deputy general manager of China Shipbuilding Industry Corporation, and he served as deputy general manager and chief accountant of China Shipbuilding Industry Corporation from December 2004 to February 2008. From March 2008 to January 2010, he also served concurrently as the general manager of China Shipbuilding Industry Company Ltd. Mr. Zhang was elected an independent non-executive director of our company in October 2014.

Supervisors

Guo, Jinping, age 57, is currently the chairman of our board of supervisors, general manager of our Legal Department, assistant to the general manager of CNPC, and general counsel and director of the Legal Department of CNPC. Mr. Guo is a professor-level senior economist, holds post-graduate qualification and has over 30 years of work experience in China’s oil and gas industry. In November 1996, he was appointed chief economist of the Bureau of Policy and Regulations of CNPC, and in October 1998, deputy director of the Development and Research Department of CNPC. Mr. Guo was appointed general manager of our Legal Department in September 1999 and director of the Legal Department of CNPC in September 2005. In 2007, he was appointed the general counsel of CNPC. Mr. Guo was elected as a supervisor of our company in May 2011, and he’s also been serving as the assistant to the general manager of CNPC since April 2014. In May 2014, Mr. Guo was appointed chairman of our board of supervisors.

Zhang, Fengshan, age 52, is currently a supervisor of our company. He is also the general manager and director of our Security, Environmental Protection, and Energy Conservation Department. In addition, he is the general manager and vice director of Security, Environmental Protection, and Energy Conservation Department of CNPC. Mr. Zhang is a professor-level senior engineer, holds a master’s degree and has nearly 35 years of experience in China’s oil and gas industry. He was appointed deputy director of Liaohe Oil Exploration Bureau in July 2000, safety director of Liaohe Oil Exploration Bureau in May 2002, director of Liaohe Petroleum Exploration Bureau in August 2004 and in February 2008, general manager of Great Wall Drilling and Exploration Company Ltd., where he also served as executive director since July 2008. Mr. Zhang has been the general manager of the Security, Environment, and Energy Conservation Department of our company and of CNPC since June 2012. He was elected to our board of supervisors in May 2014. In July 2014, Mr. Zhang was made director of security of our company and vice director of security of CNPC.

Li, Qingyi, age 54, is currently a supervisor and general manager of the Audit Department of our company. He is also the general manager of the Audit Department and director of the Auditing Services Centre of CNPC. Mr. Li is a senior accountant, holds a master’s degree in economics and has nearly 35 years of work experience in China’s oil and gas industry. Mr. Li was appointed chief accountant of Jinxi Oil Refinery in June 1999, deputy general manager and chief accountant of Jinxi Petrochemical in October 1999, director of the Capital Operation Department of CNPC in November 2000, general manager of Equipment & Supplies (Group) Company in April 2007 and general manager of CNPC Equipment Manufacturing Branch Company in December 2007. He was appointed director of CNPC Auditing Services Centre in September 2010 and appointed deputy general manager of our Audit Department and the director of the CNPC Auditing Services Centre in August 2011. In September 2012, Mr. Li was promoted to general manager of our Audit Department and concurrently the director of CNPC Auditing Services Centre. In May 2013, Mr. Li was elected a supervisor of our company.

Jia, Yumin, age 54, is currently a supervisor and general manager of the Capital Operation Department of our company. He is also serving as general manager of the Capital Operation Department of CNPC. Mr. Jia is a professor-level senior accountant, holds a master’s degree and has over 35 years of work experience. He was appointed as deputy general manager of the Finance Department of our company in February 2000, director of the Budget Planning Offices of our company and of CNPC in July 2007 and general manager of the Budget Planning Offices of our company and of CNPC in May 2011. He became the general manager of the Capital Operation Departments of our company and of CNPC in November 2013. Mr. Jia was elected a supervisor of our company in May 2014.

Jiang, Lifu, age 51, is currently a supervisor of our company. He has also been serving as the general manager of the Enterprise Management Departments (internal control management department) of our company and of CNPC. Mr. Jiang is a professor-level senior economist, holds a doctorate degree and has nearly 20 years of work experience in China’s oil and gas industry. He was appointed deputy general manager of our Capital Operation Department in August 2003, deputy director of CNPC’s Planning Department in May 2005, deputy general manager of our Planning Department in June 2007 and deputy director of CNPC’s Planning Department. Since April 2014, Mr. Jiang has been the general manager of the Enterprise Management Department of our company and the general manager of the Enterprise Management Department of CNPC. He was elected a supervisor of our company in October 2014.

Yang, Hua, age 51, is currently a supervisor of our company nominated by the employees’ representatives. He is also serving as general manager of PetroChina Changqing Oilfield Company as well as director of the Changqing Petroleum Exploration Bureau. Mr. Yang is a professor-level senior engineer, holds a doctorate degree and has over 30 years of work experience in China’s oil and gas industry. He was appointed deputy general manager of Changqing Oilfield Company in October 2002, standing deputy general manager in February 2008, principal in January 2014, and general manager in July 2014. Mr. Yang was also appointed director of the Changqing Oil Exploration Bureau in July 2014. He was elected as a supervisor of our company in October 2014.

Yao, Wei, age 58, is a supervisor of our company nominated by the employees’ representatives. He has also been a senior executive of Trans-Asia Gas Pipeline Company Ltd. since October 2014. Mr. Yao is a professor-level senior engineer, holds a master’s degree and has nearly 40 years of work experience in China’s oil and gas industry. Mr. Yao was appointed deputy manager of Beijing Natural Gas Transport Company in July 1995, deputy general manager of Beijing Huayou Gas Corporation Ltd. in April 2001 and general manager of PetroChina Pipeline Company in April 2007. Mr. Yao was elected as a supervisor of our company in May 2011.

Li, Jiamin, age 51, is currently a supervisor of our company nominated by the employees’ representatives. He is also the general manager of PetroChina Lanzhou Petrochemical Company and the general manager of Lanzhou Petroleum & Chemical Company. Mr. Li is a professor-level senior engineer, holds a master’s degree and has nearly 30 years of work experience in China’s oil and petrochemical industry. He was appointed deputy general manager and chief security officer of PetroChina Lanzhou Petrochemical Company in August 2004. He was promoted to general manager of PetroChina Lanzhou Petrochemical Company and Lanzhou Petroleum & Chemical Company in March 2012. Mr. Li was elected a supervisor of our company in May 2014.

Liu, Hehe, age 51, is currently a supervisor of our company nominated by the employees’ representatives. He has also been serving as general manager of PetroChina Inner Mongolia Marketing Company since November 2009. Mr. Liu is a professor-level senior economist, holds a bachelor’s degree and has nearly 30 years of work experience in China’s oil and petrochemical industry. He was appointed general manager of PetroChina East China Marketing Company in April 2004 and became general manager of PetroChina East China (Shanghai) in December 2008 . He was elected a supervisor of our company in May 2011.

Other Senior Management

Sun, Longde, age 52, is currently a vice president of our company and director of the consultancy center of CNPC. He is a professor-level senior engineer, holds a doctorate degree and has over 30 years of work experience in China’s oil and geological industry. Mr. Sun was appointed deputy chief geologist of Xianhe Oil Extraction Plant and deputy manager of Dongxin Oil Extraction Plant of the Shengli Petroleum Administration Bureau in January 1994, chief deputy director-general of the Exploration Business Department of Shengli Petroleum Administration Bureau in April 1997, manager of Exploration & Development Company of the Shengli Petroleum Administration Bureau in September 1997, chief geologist of Tarim Petroleum Exploration & Development Headquarters in November 1997, deputy general manager of PetroChina Tarim Oilfield Company in September 1999, and general manager of PetroChina Tarim Oilfield Company in July 2002. He has been a vice president of our company since June 2007 and was elected to the Chinese Academy of Engineering in December 2011. In April 2014, Mr. Sun was appointed director of the consultancy center of CNPC.

Zhao, Zhengzhang, age 58, is currently a vice president of our company. He is also general manager of the Exploration and Production Company of our company and deputy general manager of CNPC. Mr. Zhao is a professor-level senior engineer, holds a master’s degree and has nearly 30 years of work experience in China’s oil and gas industry. He was appointed deputy director of the New Zone Exploration Department of CNPC in June 1996, and in November 1996, deputy director of the Exploration Bureau of CNPC and director of the New Zone Exploration Department. In October 1998, Mr. Zhao was appointed deputy director of the CNPC Exploration and Production Company. Mr. Zhao was appointed a member of the Preparatory Group of CNPC Exploration and Production Company in September 1999 and deputy general manager of CNPC Exploration and Production Company in December 1999. He was appointed senior executive and deputy general manager of CNPC Exploration and Production Company in January 2005 and general manager of CNPC Exploration and Production Company in January 2006. In May 2008, he was appointed vice president of our company and general manager of our Exploration and Production Company. In August 2013, Mr. Zhao was appointed general manager of Changqing Oilfield Company and director of the Changqing Petroleum Exploration Bureau. He has also served as deputy general manager of CNPC since July 2014.

Huang, Weihe, age 57, is currently a vice president of our company. He is also general manager of PetroChina Natural Gas and Pipelines Company. Mr. Huang is a professor-level senior engineer, holds a doctorate degree and has over 30 years of work experience in China’s oil and gas industry. He was appointed deputy director of the Petroleum and Pipelines Bureau in December 1998. In November 1999, he was appointed deputy director of the Petroleum and Pipelines Bureau and concurrently the chief engineer. Mr. Huang was then appointed general manager of PetroChina Pipelines Company in October 2000 and concurrently held the position of general manager of PetroChina West-East Natural Gas Transmission Pipelines Company beginning in May 2002, a post he held until February 2006. In December 2002, Mr. Huang became general manager of PetroChina Natural Gas and Pipelines Company. In May 2008, he was appointed chief engineer of our company and in October 2011, he became vice president of our company.

Xu, Fugui, age 57, is currently a vice president of our company and general manager of PetroChina Refining & Chemical Company. He is a professor-level senior engineer, holds a doctorate degree and has over 30 years of work experience in China’s oil and petrochemical industry. Mr. Xu was appointed deputy manager of Dushanzi Petrochemical Planter of Refining Plant of the Xinjiang Petroleum Administration Bureau in November 1995, general manager of Dushanzi Petrochemical Plant of the Xinjiang Petroleum Administration Bureau in July 1999, and general manager of Dushanzi Petrochemical Company in September 1999. In September 2011, he was appointed general manager of PetroChina Refining & Chemical Company. Mr. Xu was appointed a vice president our company in October 2011.

Yu, Yibo, age 51, is currently the chief financial officer of our company. He is a professor-level senior accountant, holds a doctorate degree from Hitotsubashi University Business School in Japan and has approximately 20 years of experience in China’s oil and gas industry. Mr. Yu was appointed assistant to the president of CNPC in November 1998, member of the Restructuring and Listing Preparatory Team of PetroChina in February 1999, deputy general manager of our Finance Department in November 1999, and deputy general

manager of PetroChina Dagang Oilfield Branch Company in March 2002, a post he remained in until October 2002. He was appointed the vice general manager of the Finance Department of our Company in October 2002. In April 2003, he was appointed general manager of the Mergers and Acquisitions Department of our company, and he was also a supervisor of our company from May 2008 to May 2011. In March 2013, Mr. Yu was appointed chief financial officer of our company.

Lin, Aiguo, age 56, is currently the chief engineer of our company and the president of the PetroChina Petrochemical Research Institute. He is a professor-level senior engineer, holds a bachelor’s degree and has over 30 years of work experience in China’s oil and petrochemical industry. Mr. Lin was appointed deputy manager and standing deputy manager of the Shengli Refinery of Qilu Petrochemical Company in July 1993, deputy general manager of Dalian West Pacific Petrochemical Co. Ltd. in May 1996, general manager of Dalian West Pacific Petrochemical Co. Ltd. in August 1998, and general manager of our Refining & Marketing Company in December 2002. Mr. Lin has served as our chief engineer since June 2007 and has also been serving as the director of the Petrochemical Research Institute since February 2011.

Wang, Lihua, age 58, is currently a vice president of our company, an executive director and senior executive of PetroChina International Company Ltd., and chairman of China National United Oil Corporation. Ms. Wang is a professor-level senior economist, holds a master’s degree and has nearly 35 years of work experience in China’s oil and gas industry. She was appointed deputy general manager of China National United Oil Corporation in September 1997 and general manager in October 1998. She was appointed general manager of PetroChina International Company Ltd. in February 2002 and chief security officer of PetroChina International Company Ltd. (China National United Oil Corporation) in July 2006. Ms. Wang was appointed vice chief economist of CNPC and general manager and chief security officer of PetroChina International Company Ltd. (China National United Oil Corporation) in November 2007. Ms. Wang was appointed executive director of PetroChina International Company Ltd. in January 2009, stepping down as chief security officer in June 2009. In June 2014, she was appointed vice president of the company and stepped down as vice chief economist of CNPC. Since July 2014, Ms. Wang has been serving as senior executive of PetroChina International Company Ltd.

Lv, Gongxun, age 57, is currently a vice president of our company, general manager of PetroChina International Exploration & Development Company and general manager of China National Oil and Gas Exploration and Development Corporation. He is a professor-level senior engineer with over 35 years of work experience in China’s oil and gas industry. Mr. Lv was appointed deputy general manager and chief security officer of China National Oil and Gas Exploration and Development Corporation in October 2006, general manager of Turkmenistan Amu Darya River Gas Company in September 2007, and general manager of CNPC (Turkmenistan) Amu Darya River Gas Company in December 2008. He has been serving as general manager of PetroChina International (Kazakhstan) Co. Ltd., general manager of Trans-Asia Gas Pipeline Company Ltd., and director of Enterprises Coordination Group (Central Asia) since December 2012. Mr. Lv was appointed general manager of PetroChina International Exploration & Development Company and general manager of China National Oil and Gas Exploration and Development Corporation in May 2014. He was appointed as vice president of our company in June 2014.

Secretary to the Board of Directors

Wu, Enlai, age 54, is currently the secretary to the board of directors of our company, executive director and general manager of CNPC Hong Kong (Holding) Ltd., and director and chairman of Kunlun Energy Company Ltd. He is a professor-level senior engineer, holds a master’s degree and has over 30 years of work experience in China’s oil and petrochemical industry. Mr. Wu was appointed deputy director general of Tarim Petrochemical Engineering Construction Headquarters in August 1997, deputy director general of the Capital Operation Department of CNPC in August 2002, and deputy general manager of China National Oil and Gas Exploration and Development Corporation in January 2004. He was appointed head of the Preparatory Work Team for PetroChina Guangxi Petrochemical Company in May 2005, general manager in October 2005, and head of the Enterprise Coordination Team of our company in Guangxi in September 2012. He became secretary

to our board of directors in November 2013, and since 2013, has served concurrently as executive director and general manager of CNPC Hong Kong (Holding) Ltd. and director and chairman of Kunlun energy Company Ltd.

Compensation

Senior Management Compensation System

The senior management members’ compensation has two components, namely, fixed salaries and variable compensation. The variable component, which accounts for approximately 75% of the total compensation package, is linked to the attainment of specific performance targets, such as our income for the year, return on capital and the individual performance evaluation results. All of our senior management members have entered into performance contracts with us.

Directors’ and Supervisors’ Compensation

Our directors and supervisors, who hold senior management positions or are otherwise employed by us, receive compensation in the form of salaries, insurance and other benefits in kind, including our contribution to the pension plans for these directors and supervisors.

The aggregate amount of salaries, insurance and other benefits in kind paid by us to the five highest paid individuals of PetroChina during the year ended December 31, 2014 was RMB4,815,606. We paid RMB277,604 as our contribution to the pension plans with respect to those individuals in the year ended December 31, 2014.

The aggregate amount of salaries or other compensation, insurance and other benefits in kind paid by us to our directors, who hold senior management positions or are otherwise employed by us, during the year ended December 31, 2014 was RMB4,297,776.

Save as disclosed, no other payments have been paid or are payable, with respect to the year ended December 31, 2014, by us or any of our subsidiaries to our directors. In addition, we have no service contracts with our directors that provide for benefits to our directors upon the termination of their employment with us.

In 2014, we paid RMB126,328 as our contribution to the pension plans with respect to our directors and supervisors who hold senior management positions or are otherwise employed by us. The aggregate amount of salaries or other compensation, insurance and other benefits in kind paid by us to our supervisors who hold senior management positions or are otherwise employed by us during the year ended December 31, 2014 was RMB2,491,969.

For discussions about the compensations of our individual directors and supervisors, please see Note 11 to our consolidated financial statements included elsewhere in this annual report.

Board Practices

Our board of directors has four principal committees: an audit committee, an investment and development committee, an evaluation and remuneration committee and a health, safety and environment committee.

Audit Committee

Our audit committee is currently composed of two non-executive independent directors, Mr. Lin Boqiang and Mr. Zhang Biyi, and one non-executive director, Mr. Liu Yuezhen. Mr. Lin Boqiang serves as the chairman of the committee. Under our audit committee charter, the chairman of the committee must be an independent director and all resolutions of the committee must be approved by independent directors. The audit committee’s major responsibilities include:

•

reviewing and supervising the engagement of external auditors and their performance;

•

reviewing and ensuring the completeness of annual reports, interim reports and quarterly reports, if any, and related financial statements and accounts, and reviewing any material opinion contained in the aforesaid statements and reports with respect to financial reporting;

•

reporting to the board of directors in writing on the financial reports of the company and related information, having considered the issues raised by external auditors;

•

reviewing and scrutinizing the work conducted by the internal audit department in according with the applicable PRC and international rules;

•

monitoring the financial reporting system and internal control procedures of the company, as well as checking and assessing matters relating to, among others, the financial operations, internal control and risk management of the company;

•

receiving, keeping and dealing with complaints or anonymous reports regarding accounting, internal accounting control or audit matters and ensuring the confidentiality of such complaints or reports;

•

reporting regularly to the board of directors with respect to any significant matters which may affect the financial position of the company and its operations and with respect to the self-evaluation of the committee on the performance of their duties; and

•

performing other responsibilities as may be required under relevant laws, regulations and the listing rules of the stock exchanges where the shares of the company are listed (as amended from time to time).

Investment and Development Committee

The current members of our investment and development committee are Mr. Wang Dongjin, the chairman of the committee, Mr. Liu Hongbin and Mr. Chen Zhiwu. The investment and development committee’s major responsibilities include:

•

studying the strategies of the company as proposed by our president and making recommendations to the board of directors;

•

studying the annual investment budget and the adjustment proposal regarding the investment plan as proposed by our president and making recommendations to the board of directors; and

•

reviewing feasibility studies and preliminary feasibility studies for material investment projects subject to the approval of the board of directors and making recommendations to the board of directors.

Evaluation and Remuneration Committee

The current members of our evaluation and remuneration committee are Mr. Richard H. Matzke, the chairman of the committee, Mr. Liu Yuezhen and Mr. Lin Boqiang. The evaluation and remuneration committee’s major responsibilities include:

•

studying the evaluation criteria for directors and senior officers, conducting the evaluations and proposing suggestions;

•

studying and evaluating the remuneration policies and plans for directors and senior officers (including the compensation in connection with the removal or retirement of the director and senior officers);

•

organizing the evaluation of the performance of our president and reporting the evaluation result to the board of directors, supervising the evaluation of the performance of our senior vice presidents, vice presidents, chief financial officer and other senior management members conducted under the leadership of the president;

•

studying our incentive plan and compensation plan, supervising and evaluating the implementation of these plans and making recommendations for improvements to and perfection of such plans; and

•

studying the relevant laws, regulations and the listing rules of the stock exchanges where the shares of the company are listed (as amended from time to time) and other matters authorized by the board of directors.

Health, Safety and Environment Committee

The current members of our health, safety and environment committee are Mr. Yu Baocai and Mr. Shen Diancheng. The health, safety and environment committee’s major responsibilities include:

•

supervising the effective implementation of our Health, Safety and Environmental Protection Plan, or the HSE Plan;

•

making recommendations to the board of directors and our president regarding major decisions with respect to health, safety and environmental protection; and

•

inquiring about the occurrence of and determining the responsibilities for material accidents of the company, and examining and supervising the treatment of such accidents.

Employees

As of December 31, 2012, 2013 and 2014, we had 548,355, 544,083 and 534,652 employees, respectively. During 2014, we employed 319,168 temporary employees on an average. As of December 31, 2014, we had 319,346 temporary employees. The table below sets forth the number of our employees by business segment as of December 31, 2014.


	Employees		% of Total
Exploration and production		298,014		55.74
Refining and chemicals		155,321		29.05
Marketing		59,015		11.04
Natural gas and pipeline		16,707		3.12
Other⁽¹⁾		5,595		1.05

Total		534,652		100.00

(1)	Including the numbers of employees of the management of our headquarters, specialized companies, PetroChina Exploration & Development Research Institute, PetroChina Planning & Engineering Institute, Petrochemical Research Institute and other units.

Our employees participate in various basic social insurance plans organized by municipal and provincial governments whereby we are required to make monthly contributions to these plans at certain rates of the employees’ salary as stipulated by relevant local regulations. Expenses incurred by us in connection with the retirement benefit plans were approximately RMB13,400 million, RMB14,855 million and RMB15,674 million, respectively, for the years ended December 31, 2012, 2013 and 2014, respectively.

In 2014, we did not experience any strikes, work stoppages, labor disputes or actions that affected the operation of any of our businesses. Our company maintains good relationship with our employees.

Share Ownership

As of December 31, 2014 our directors, senior officers and supervisors did not have share ownership in PetroChina or any of PetroChina’s affiliates.

ITEM 7 — MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

PetroChina was established on November 5, 1999 with CNPC as its sole promoter. As of March 31, 2015, CNPC beneficially owned 158,325,211,528 shares, which include 291,518,000 H shares indirectly held by CNPC through Fairy King Investments Limited, an overseas wholly owned subsidiary of CNPC, representing approximately 86.507% of the share capital of PetroChina, and, accordingly, CNPC is our controlling shareholder.

The following table sets forth the major shareholders of our A shares as of March 31, 2015:

Name of Shareholders

Class of
Shares

Number of Shares
Held

Percentage of the
Issued Share Capital
of the Same Class of
Shares (%)

Percentage of
the Total Share
Capital(%)

CNPC

A shares

158,033,693,528

97.60

86.35

The following table sets forth the major shareholders of our H shares as of March 31, 2015:


Name of Shareholders	Number of Shares Held		Percentage of Such Share in That Class of the Issued Shares Capital (%)		Percentage of the Total Share Capital(%)
CNPC		291,518,000 (Long Position)⁽¹⁾		1.38		0.16
Aberdeen Asset Management Plc and its related parties (collectively, the “Group”), representing the accounts managed by the Group		1,680,255,599 (Long Position)		7.96		0.92
Black Rock, Inc.		1,502,968,891 (Long Position) 42,188,300 (Short Position)		7.12 0.20		0.82 0.02
JP Morgan Chase & Co		1,627,443,538 (Long Position) 205,236,560 (Short Position) 1,176,488,972 (Lending Pool)		7.71 0.97 5.58		0.89 0.11 0.64

(1)	Held by Fairy King Investments Limited, an overseas wholly-owned subsidiary of CNPC.

Related Party Transactions

CNPC is a controlling shareholder of our company. We enter into extensive transactions with CNPC and other members of the CNPC group, all of which constitute related party transactions for us. We also continue to carry out existing continuing transactions with other related parties in the year ended December 31, 2014.

Continuing Related Party Transactions

Since 2000, our company has engaged in a variety of continuing related party transactions with CNPC, who provides a number of services to us. These transactions are governed by several agreements between CNPC and us, including the comprehensive products and services agreement and its supplemental agreements, product and service implementation agreements, land use rights leasing contract, buildings leasing contract and buildings supplementary leasing agreement, intellectual property licensing contracts and contract for the transfer of rights under production sharing contracts. A detailed discussion of these agreements is set forth in Note 37 to our consolidated financial statements included elsewhere in this annual report and under the heading “Item 7 — Major Shareholders and Related Party Transactions — Related Party Transactions” in our annual report on Form 20-F filed with the SEC on May 27, 2008.

On August 28, 2014, with the existing comprehensive products and services agreement expiring on December 31, 2014, the company and CNPC entered into a new comprehensive agreement, which took effect from January 1, 2015 and will be valid for a term of three years. On the same day, under the framework of the existing land use rights leasing contract and the buildings leasing contract, the company and CNPC signed a confirmation letter with respect to the change in the areas of land parcels and leased buildings, pursuant to which the area of land parcels leased by the company from CNPC was adjusted to 1,777.21 million square meters and the estimated annual rental fees were confirmed to be RMB 4,831.21 million in aggregate. The area of buildings leased by the company from CNPC was adjusted to 1,179,585.57 million square meters for an estimated rental fee of RMB 707.70 million per year in aggregate. These new agreements were approved at the extraordinary general meeting of the Company held on October 29, 2014. For a detailed discussion of the comprehensive products and services agreement and the confirmation letter under the land use right lease agreement and building lease agreement, please refer to our Form 6-K filed with the SEC on August 28, 2014.

As of December 31, 2014, the outstanding amount of our debts secured by CNPC and its subsidiaries was RMB49,843 million.

During the reporting period, we carried out a number of continuing related party transactions with certain companies including CNPC Exploration and Development Company Limited. A detailed discussion of our relationships and transactions with these parties is set forth in “Item 7 — Major Shareholders and Related Party Transactions — Related Party Transactions” in our annual report on Form 20-F filed with the SEC on May 27, 2008.

Loans from Related Parties

As of December 31, 2014, we had unsecured short-term and long-term loans from CNPC and its affiliates in an aggregate amount of RMB364,789 million with an average annual interest rate of 4.23%.

Interests of Experts and Counsel

Not applicable.

ITEM 8 — FINANCIAL INFORMATION

Financial Statements

See pages F-1 to F-57 following Item 19.

Dividend Policy

Our board of directors will declare dividends, if any, in Renminbi on a per share basis and will pay such dividends in Renminbi with respect to A Shares and HK dollars with respect to H Shares. Any final dividend for a financial year shall be subject to shareholders’ approval. The Bank of New York will convert the HK dollar dividend payments and distribute them to holders of ADSs in U.S. dollars, less expenses of conversion. The holders of the A Shares and H Shares will share proportionately on a per share basis in all dividends and other distributions declared by our board of directors.

The declaration of dividends is subject to the discretion of our board of directors. Our board of directors will take into account factors including the following:

•

general business conditions;

•

our financial results;

•

capital requirements;

•

contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us;

•

our shareholders’ interests;

•

the effect on our debt ratings; and

•

other factors our board of directors may deem relevant.

We may only distribute dividends after we have made allowances for:

•

recovery of losses, if any;

•

allocations to the statutory common reserve fund; and

•

allocations to a discretionary common reserve fund if approved by our shareholders.

The allocation to the statutory funds is 10% of our income for the year attributable to our shareholders determined in accordance with PRC accounting rules. Under PRC law, our distributable earnings will be equal to our income for the year attributable to our shareholders determined in accordance with PRC accounting rules or IFRS, whichever is lower, less allocations to the statutory and discretionary funds.

We believe that our dividend policy strikes a balance between two important goals:

•

providing our shareholders with a competitive return on investment; and

•

assuring sufficient reinvestment of profits to enable us to achieve our strategic objectives.

A dividend of RMB0.16750 per share (inclusive of applicable taxes) for the six months ended June 30, 2014 was paid to our shareholders on September 19, 2014 with respect to our A Shares and September 29, 2014 with respect to our H Shares. The board of directors recommended that a final dividend of RMB0.09601 per share (inclusive of applicable taxes), which was calculated on the basis of the balance between 45% of our income for the year attributable to our shareholders under IFRS for the year ended December 31, 2014 and the interim dividend for the six months ended June 30, 2014, should be paid. The final dividend for the year ended December 31, 2014 is subject to the approval by the annual general meeting to be held on May 27, 2015.

Significant Changes

None.

ITEM 9 — THE OFFER AND LISTING

Nature of the Trading Market and Market Price Information

Our ADSs, each representing 100 H Shares, par value RMB1.00 per H Share, have been listed and traded on the New York Stock Exchange since April 6, 2000 under the symbol “PTR”. Our H Shares have been listed and traded on the Hong Kong Stock Exchange since April 7, 2000. In September 2005, our company issued an additional 3,196,801,818 H Shares. CNPC also sold 319,680,182 state-owned shares it held concurrently with our company’s issuance of new H Shares in September 2005. In October 2007, PetroChina issued 4 billion A Shares and these shares were listed on the Shanghai Stock Exchange on November 5, 2007. Following the issuance of A Shares, all the domestic shares of our company existing prior to the issuance of A Shares, i.e. the shares held by CNPC (our controlling shareholder) in our company, have been registered with China Securities Depository and Clearing Corporation Limited as tradable A Shares. The New York Stock Exchange, the Hong Kong Stock Exchange and Shanghai Stock Exchange are the principal trading markets for our ADSs, H Shares and A Shares, respectively.

As of December 31, 2014, there were 21,098,900,000 H Shares and 161,922,077,818 A Shares issued and outstanding. As of December 31, 2014, there were 247 registered holders of American depositary receipts evidencing 8,890,859 ADSs. The depositary of the ADSs is the Bank of New York.

The high and low closing sale prices of our A Shares on the Shanghai Stock Exchange, of H Shares on the Hong Kong Stock Exchange and of the ADSs on the New York Stock Exchange for each year from 2010 through 2014, for each quarter from 2013 to 2015 (up to the end of the first quarter of 2015), and for each month from October 2014 to April 2015 (through April 24, 2015) are set forth below.


	Price Per H Share				Price Per ADS				Price Per A Share
	HK$				US$				RMB
	High		Low		High		Low		High		Low
Annual Data
2010		10.50		7.97		136.45		101.92		14.28		9.94
2011		12.50		8.59		158.83		111.29		12.41		9.35
2012		11.86		9.08		153.23		117.11		10.60		8.47
2013		11.30		7.86		145.80		101.47		9.40		7.31
2014		11.62		7.33		149.48		94.75		10.81		7.47
Quarterly Data
2013
First quarter		11.30		10.14		145.80		130.40		9.40		8.69
Second quarter		10.28		7.86		132.03		101.47		8.73		7.31
Third quarter		9.45		8.27		121.29		107.45		8.24		7.69
Fourth quarter		9.59		8.44		122.92		108.84		8.27		7.51
2014
First quarter		8.49		7.33		110.21		94.75		7.99		7.51
Second quarter		9.82		8.55		126.28		110.46		7.73		7.47
Third quarter		11.62		9.65		149.48		125.03		8.12		7.48
Fourth quarter		10.08		7.94		129.25		102.01		10.81		7.56


	Price Per H Share				Price Per ADS				Price Per A Share
	HK$				US$				RMB
	High		Low		High		Low		High		Low
2015
First Quarter		9.02		8.13		116.37		103.74		13.09		10.71
Monthly Data
2014
October		10.08		9.29		129.25		119.13		7.84		7.56
November		9.71		8.41		125.50		107.02		8.17		7.71
December		8.78		7.94		113.65		102.01		10.81		8.17
2015
January		8.92		8.39		114.90		108.09		13.09		11.31
February		9.02		8.44		116.37		109.50		11.69		10.89
March		9.00		8.13		114.97		103.74		11.99		10.71
April(through April 24, 2015)		10.62		8.63		136.37		112.76		13.38		11.84

The closing prices per A Share, per H Share and per ADS on April 24, 2015 were RMB13.32, HK$9.97 and US$130.05, respectively.

ITEM 10 — ADDITIONAL INFORMATION

Memorandum and Articles of Association

Our Articles of Association Currently in Effect

On May 23, 2013, our annual general meeting approved the amendment to our Articles of Association which became effective as of the same day. The changes include, among others, (i) an expansion of our scope of business and (ii) an addition of a requirement to distribute cash dividends of no less than 30% of the net profits attributable to the parent company under certain circumstances. The amended and restated Articles of Association was filed with the SEC on Form 6-K on May 23, 2013.

Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described under Item 4 — Information on the Company, Item 7 — Major Shareholders and Related Party Transactions or elsewhere in this Form annual report.

Foreign Exchange Controls

The Renminbi currently is not a freely convertible currency. We receive most of our revenues in Renminbi. A portion of our Renminbi revenues must be converted into other currencies to meet our foreign currency obligations, including:

•

debt service on foreign currency-denominated debt;

•

external capital expenditures and equity investment;

•

purchases of imported equipment and materials; and

•

payment of any dividends declared with respect to the H Shares.

Under the existing foreign exchange regulations in China, we may undertake current account foreign exchange transactions, including the payment of dividends, without prior approval from the State Administration of Foreign Exchange by producing commercial documents evidencing such transactions, provided that they are processed through Chinese banks licensed to engage in foreign exchange transactions.

Foreign exchange transactions under the capital account, including principal payments with respect to foreign currency-denominated obligations, continue to be subject to limitations and require the prior approval of the State Administration of Foreign Exchange. These limitations could affect our ability to obtain foreign exchange through debt financing, or to obtain foreign exchange for capital expenditures.

We have been, and will continue to be, affected by changes in exchange rates in connection with our ability to meet our foreign currency obligations and will be affected by such changes in connection with our ability to pay dividends on the H Shares in Hong Kong dollars and on ADSs in U.S. dollars. We believe that we have or will be able to obtain sufficient foreign exchange to continue to satisfy these obligations. We do not engage in any financial contract or other arrangement to hedge our currency exposure.

We are not aware of any other PRC laws, decrees or regulations that restrict the export or import of capital or that affect the remittance of dividends, interest or other payments to non-resident holders.

Taxation

The following discussion addresses the main PRC and United States tax consequences of the ownership of H Shares or ADSs purchased held by the investor as capital assets.

PRC Taxation

Dividends and Individual Investors

Pursuant to the Individual Income Tax Law of the PRC, all foreign individuals are subject to a 20% withholding tax on dividends paid by a PRC company on its shares listed overseas, or Overseas Shares, unless specifically exempt by the financial authority of the State Council of the PRC. However, pursuant to the Notice on the Collection of Individual Income Tax after the Abolishment of Guoshuifa [1993] No. 045, or Circular 348, issued by the State General Administration of Taxation of the PRC on June 28, 2011, foreign individual shareholders holding H shares, or Individual H Shareholders, in a PRC company listed in Hong Kong may be subject to different levels of withholding taxes on dividends based on the tax treaties of their home countries with China. Individual H Shareholders, who are residents of Hong Kong or Macau or who enjoy a 10% tax rate on dividends based on the tax treaties of their home countries with China, are subject to a withholding tax rate of 10% in respect of the H-share dividends they receive. For those Individual H Shareholders whose home countries have tax treaties with China prescribing a tax rate on dividends lower than 10%, the PRC company, whose shares are held by such Individual H Shareholders, need to apply for such tax treatment under relevant PRC taxation regulation on behalf of the Individual H Shareholders in order for them to enjoy such tax treatment. For Individual H Shareholders whose home countries have tax treaties with China prescribing a tax rate on dividends between 10% and 20%, the PRC company, whose shares are held by such Individual H Shareholders, shall withhold the individual income tax at the agreed-upon tax rate. For Individual H Shareholders whose home countries have no tax treaties with China or whose home countries have tax treaties with China prescribing a tax rate on dividends higher than 20%, the PRC company shall withhold the tax at a rate of 20%.

Dividends and Foreign Enterprises

Pursuant to the Enterprise Income Tax Law of the PRC and the implementing rules thereunder, and the Circular on Issues Concerning the Withholding of Corporate Income Tax by PRC Resident Enterprises from Dividends Payable to H Share Non-resident Corporate Shareholders, or the Circular, each PRC resident enterprise, when paying any of its H share non-resident corporate shareholders any dividends for 2008 and the years thereafter, is required to withhold the corporate income tax from such dividends at a uniform rate of 10%. After its receipt of any dividends on its H shares, an H share non-resident corporate shareholder may by itself or through an agent or the withholding agent, apply to the competent taxation authority for the treatment under the applicable tax treaty and present the documents evidencing that such shareholder is qualified to be a beneficial

owner as defined under the applicable tax treaty. The competent tax authority, after having verified the correctness of such documents, shall refund the difference between the amount of the tax actually paid by such shareholder and the amount of the tax payable by such shareholder as calculated on the basis of the rate stipulated in the applicable tax treaty.

Tax Treaties

If you are a tax resident or citizen of a country that has entered into a double-taxation treaty with the PRC, you may be entitled to a reduction in the amount of tax withheld, if any, imposed on the payment of dividends. The PRC currently has such treaties with a number of countries, including but not limited to:

•

the United States;

•

Australia;

•

Canada;

•

France;

•

Germany;

•

Japan;

•

Malaysia;

•

Singapore;

•

the United Kingdom; and

•

the Netherlands.

Under certain treaties, the rate of withholding tax imposed by China’s taxation authorities may be reduced. Pursuant to the Measures for the Administration of the Enjoyment by Non-residents of the Treatments under the Tax Treaties (Trial) promulgated by the State Administration of Taxation on August 24, 2009, non-PRC resident are required to apply for approval or filing in order to claim any benefit under tax treaties.

Capital Gains

The Individual Income Tax Law of the PRC, provides for a capital gain tax of 20% on individuals. The Provisions for Implementing the Individual Income Tax Law of the PRC, provides that the measures to levy individual income tax on the gains realized on the sale of shares will be made in the future by the Ministry of Finance and subject to the approval of the State Council. However, the Ministry of Finance has not so far promulgated a specific taxation method to levy tax on the capital gains realized by individual holders of H Shares or ADSs from sale of shares. If in the future such specific taxation method is promulgated, an individual holder of H Shares or ADSs may be subject to a 20% tax on capital gains under the Individual Income Tax Law of the PRC as amended from time to time, unless exempted or reduced by an applicable double taxation treaty or relevant PRC law or regulation.

Under the Enterprise Income Tax Law of the PRC, capital gains realized by foreign enterprises which are non-resident enterprises in the PRC upon the sale of Overseas Shares by PRC companies are generally subject to a PRC withholding tax levied at a rate of 10%, unless exempted or reduced pursuant to an applicable double-taxation treaty or other exemptions. Currently pursuant to the Circular of the State Administration of Taxation on Printing and Issuing the Interim Measures for Administration of Withholding at Source of Income Tax of Non-resident Enterprises promulgated on January 9, 2009, where both parties to the transaction of equity transfer are non-resident enterprises and such transaction is conducted outside the territory of PRC, the non-resident enterprise that receives incomes shall, by itself or through its agent, declare and pay tax to the competent tax authority in the place where the Chinese enterprise whose equities have been transferred is located.

Additional PRC Tax Considerations

Under the Provisional Regulations of the People’s Republic of China Concerning the Stamp Duty, a stamp duty is not imposed by the PRC on the transfer of shares, such as the H Shares or ADSs, of PRC publicly traded companies that take place outside of China.

United States Federal Income Taxation

The following is a general discussion of the material United States federal income tax consequences of purchasing, owning and disposing of the H Shares or ADSs if you are a U.S. holder, as defined below, and hold the H Shares or ADSs as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code. This discussion does not address all of the tax consequences relating to the purchase, ownership and disposition of the H Shares or ADSs, and does not take into account U.S. holders who may be subject to special rules including:

•

tax-exempt entities;

•

certain insurance companies;

•

broker-dealers;

•

traders in securities that elect to mark to market;

•

U.S. holders liable for alternative minimum tax;

•

U.S. holders that own 10% or more of our voting stock;

•

U.S. holders that hold the H Shares or ADSs as part of a straddle or a hedging or conversion transaction; or

•

U.S. holders whose functional currency is not the U.S. dollar.

This discussion is based on the Code, its legislative history, final, temporary and proposed United States Treasury regulations promulgated thereunder, published rulings and court decisions as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with retroactive effect. In addition, this discussion is based in part upon representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreements will be performed according to its terms.

You are a “U.S. holder” if you are:

•

a citizen or resident of the United States for United States federal income tax purposes;

•

a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the United States, or any state thereof or the District of Columbia;

•

an estate the income of which is subject to United States federal income tax without regard to its source; or

•

a trust:

•

subject to the primary supervision of a United States court and the control of one or more United States persons; or

•

that has elected to be treated as a United States person under applicable United States Treasury regulations.

If a partnership holds the H Shares or ADSs, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership that holds the H Shares or ADSs, we urge you to consult your tax advisors regarding the consequences of the purchase, ownership and disposition of the H Shares or ADSs.

This discussion does not address any aspects of United States taxation other than federal income taxation.

We urge you to consult your tax advisors regarding the United States federal, state, local and non-United States tax consequences of the purchase, ownership and disposition of the H Shares or ADSs.

In general, if you hold American depositary receipts evidencing ADSs, you will be treated as owner of the H Shares represented by the ADSs. The following discussion assumes that we are not a passive foreign investment company, or PFIC, as discussed under “PFIC Rules” below.

Distributions on the H Shares or ADSs

The gross amount of any distribution (without reduction for any PRC tax withheld) we make on the H Shares or ADSs out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be includible in your gross income as dividend income when the distribution is actually or constructively received by you, in the case of the H Shares, or by the depositary in the case of ADSs. Subject to certain limitations, dividends paid to non-corporate U.S. holders, including individuals, currently are eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for United States federal income tax purposes. A qualified foreign corporation includes:

•

a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program; or

•

a foreign corporation if its stock with respect to which a dividend is paid (or ADSs backed by such stock) is readily tradable on an established securities market within the United States,

but does not include an otherwise qualified foreign corporation that is a PFIC in the taxable year that the dividend is paid or in the prior taxable year. We believe that we will be a qualified foreign corporation so long as we are not a PFIC and we are considered eligible for the benefits of the Agreement between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the Treaty. Our status as a qualified foreign corporation, however, may change.

Distributions that exceed our current and accumulated earnings and profits will be treated as a return of capital to you to the extent of your basis in the H Shares or ADSs and thereafter as capital gain. Any dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from United States corporations. The amount of any distribution of property other than cash will be the fair market value of such property on the date of such distribution.

If we make a distribution paid in HK dollars, you will be considered to receive the U.S. dollar value of the distribution determined at the spot HK dollar/ U.S. dollar rate on the date such distribution is received by you or by the depositary, regardless of whether you or the depositary convert the distribution into U.S. dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in your income to the date you or the depositary convert the distribution into U.S. dollars will be treated as United States source ordinary income or loss for foreign tax credit limitation purposes.

Subject to various limitations, any PRC tax withheld from distributions in accordance with PRC law, as limited by the Treaty, will be deductible or creditable against your United States federal income tax liability. For foreign tax credit limitation purposes, dividends paid on the H Shares or ADSs will be foreign source income, and will be treated as “passive category income” or, in the case of some U.S. holders, “general category income.” You may not be able to claim a foreign tax credit (and instead may claim a deduction) for non-United States taxes imposed on dividends paid on the H Shares or ADSs if you (i) have held the H Shares or ADSs for less than a specified minimum period during which you are not protected from risk of loss with respect to such Shares, or (ii) are obligated to make payments related to the dividends (for example, pursuant to a short sale).

Sale, Exchange or Other Disposition

Upon a sale, exchange or other disposition of the H Shares or ADSs, you will recognize a capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your tax basis, determined in U.S. dollars, in such H Shares or ADSs. Any gain or loss will generally be United States source gain or loss for foreign tax credit limitation purposes. Capital gain of certain non-corporate U.S. holders, including individuals, is generally taxed at a reduced rate where the property has been held more than one year. Your ability to deduct capital losses is subject to limitations. If any PRC tax is withheld from your gain on a disposition of H Shares or ADSs, such tax would only be creditable against your United States federal income tax liability to the extent that you have foreign source income. However, in the event that such PRC tax is withheld, a U.S. holder that is eligible for the benefits of the Treaty may be able to treat the gain as foreign source income for foreign tax credit satisfaction purposes. You are urged to consult your tax advisors regarding the United States federal income tax consequences if PRC tax is withheld from your gain on the sale or other disposition of H Shares or ADSs, including the availability of a foreign tax credit under your particular circumstances.

If you are paid in a currency other than U.S. dollars, any gain or loss resulting from currency exchange fluctuations during the period from the date of the payment resulting from sale, exchange or other disposition to the date you convert the payment into U.S. dollars will be treated as United States source ordinary income or loss for foreign tax credit limitation purposes.

PFIC Rules

In general, a foreign corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:

•

75% or more of its gross income consists of passive income, such as dividends, interest, rents and royalties; or

•

50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income.

We believe that we did not meet either of the PFIC tests in the taxable year that ended December 31, 2014 and believe that we will not meet either of the PFIC tests in the current or subsequent taxable years and therefore will not be treated as a PFIC for such periods. However, there can be no assurance that we will not be a PFIC in the current or subsequent taxable years.

If we were a PFIC in any taxable year that you held the H Shares or ADSs, you generally would be subject to special rules with respect to “excess distributions” made by us on the H Shares or ADSs and with respect to gain from your disposition of the H Shares or ADSs. An “excess distribution” generally is defined as the excess of the distributions you receive with respect to the H Shares or ADSs in any taxable year over 125% of the average annual distributions you have received from us during the shorter of the three preceding years or your holding period for the H Shares or ADSs. Generally, you would be required to allocate any excess distribution or gain from the disposition of the H Shares or ADSs ratably over your holding period for the H Shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in which we became a PFIC, would be taxed at the highest United States federal income tax rate on ordinary income in effect for such taxable year, and you would be subject to an interest charge on the resulting tax liability, determined as if the tax liability had been due with respect to such particular taxable years. The portion of the excess distribution or gain that is not allocated to prior taxable years, together with the portion allocated to the years prior to the first year in which we became a PFIC, would be included in your gross income for the taxable year of the excess distribution or disposition and taxed as ordinary income.

The foregoing rules with respect to excess distributions and dispositions may be avoided or reduced if you are eligible for and timely make a valid “mark-to-market” election. If your H Shares or ADSs were treated as

shares regularly traded on a “qualified exchange” for United States federal income tax purposes and a valid mark-to-market election was made, in calculating your taxable income for each taxable year you generally would be required to take into account as ordinary income or loss the difference, if any, between the fair market value and the adjusted tax basis of your H Shares or ADSs at the end of your taxable year. However, the amount of loss you would be allowed is limited to the extent of the net amount of previously included income as a result of the mark-to -market election. The New York Stock Exchange on which the ADSs are traded is a qualified exchange for United States federal income tax purposes.

Alternatively, a timely election to treat us as a qualified electing fund under Section 1295 of the Code could be made to avoid the foregoing rules with respect to excess distributions and dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy record keeping requirements that would permit you to make a qualified electing fund election.

If you own the H Shares or ADSs during any year that we are a PFIC, you must annually file Internal Revenue Service, or IRS, Form 8621(or any other form subsequently specified by the United States Treasury Department), subject to certain exceptions based on the value of PFIC stock held. We encourage you to consult your own tax advisor concerning the United States federal income tax consequences of holding the H Shares or ADSs that would arise if we were considered a PFIC.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to dividends in respect of the H Shares or ADSs or the proceeds of the sale, exchange, or redemption of the H Shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients, including corporations. In addition, you may, under some circumstances, be subject to “backup withholding” with respect to dividends paid on the H Shares or ADSs or the proceeds of any sale, exchange or transfer of the H Shares or ADSs, unless you:

•

are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or

•

provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules.

Any amount withheld under the backup withholding rules generally will be creditable against your United States federal income tax liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct taxpayer identification number you may be subject to penalties imposed by the IRS.

Certain U.S. holders who are individuals that hold certain foreign financial assets (which may include the H Shares or ADSs) may be required to report information relating to such assets, subject to certain exceptions. You should consult your own tax advisors regarding the effect, if any, of this requirement on your ownership and disposition of the H Shares or ADSs.

Documents on Display

You may read and copy documents referred to in this annual report on Form 20-F that have been filed with the U.S. Securities and Exchange Commission at the Commission’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.

The Commission allows us to “incorporate by reference” the information we file with the Commission. This means that we can disclose important information to you by referring you to another document filed separately with the Commission. The information incorporated by reference is considered to be part of this annual report on Form 20-F.

ITEM 11 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we hold or issue various financial instruments which expose us to interest rate and foreign exchange rate risks. Additionally, our operations are affected by certain commodity price movements. We historically have not used derivative instruments for hedging or trading purposes. Such activities are subject to policies approved by our senior management. Substantially all of the financial instruments we hold are for purposes other than trading. We regard an effective market risk management system as an important element of our treasury function and are currently enhancing our systems. A primary objective of our market risk management is to implement certain methodologies to better measure and monitor risk exposures.

The following discussions and tables, which constitute “forward-looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value, maturity and contract terms. Such discussions address market risk only and do not present other risks which we face in the normal course of business.

Interest Rate Risk

Our interest risk exposure arises from changing interest rates. The tables below provide information about our financial instruments including various debt obligations that are sensitive to changes in interest rates. The tables present principal cash flows and related weighted-average interest rates at expected maturity dates. Weighted-average variable rates are based on effective rates as of December 31, 2012, 2013 and 2014. The information is presented in Renminbi equivalents, our reporting currency.

Foreign Exchange Rate Risk

We conduct our business primarily in Renminbi. However, a portion of our RMB revenues are converted into other currencies to meet foreign currency financial instrument obligations and to pay for imported equipment, crude oil and other materials. Foreign currency payments for imported equipment represented 6.5%, 2.7% and 3.9% of our total payments for equipment in 2012, 2013 and 2014, respectively. Foreign currency payments for other imported materials represented 0.09%, 0.03% and 0.03%, of our total payments for materials in 2012, 2013 and 2014, respectively.

The Renminbi is not a freely convertible currency. Limitation in foreign exchange transactions imposed by the PRC government could cause future exchange rates to vary significantly from current or historical exchange rates.

The tables below provide information about our financial instruments including foreign currency denominated debt instruments that are sensitive to foreign currency exchange rates. The tables below summarize such information by presenting principal cash flows and related weighted-average interest rates at expected maturity dates in RMB equivalents, using the exchange rates in effect as of December 31, 2012, 2013 and 2014, respectively.

December 31, 2014


	Expected Maturity Date																				Percentage to Total Long-Term Debt			Fair Value
	2015			2016			2017			2018			2019			Thereafter			Total		Percentage to Total Long-Term Debt			Fair Value
	(RMB equivalent in millions, except percentages)
Long term debt
Loans in RMB
Fixed Rate Loan Amount		20,806			39,609			22,320			20,219			30,107			88,318			221,379		52.20	%		210,259
Average interest rate		4.06	%		4.56	%		4.19	%		4.52	%		4.65	%		4.82	%		—		—			—
Variable Rate Loan Amount		4,761			10,056			15,607			245			151			6,033			36,853		8.69	%		36,852
Average interest rate		5.49	%		4.92	%		4.58	%		5.56	%		5.40	%		5.24	%		—		—			—
Loans in Euros
Fixed Rate Loan Amount		21			21			21			21			31			14			129		0.03	%		148
Average interest rate		2.79	%		2.79	%		2.79	%		2.79	%		2.57	%		2.60	%		—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Loans in United States Dollars
Fixed Rate Loan Amount		185			34			34			34			34			177			498		0.12	%		533
Average interest rate		6.75	%		1.11	%		1.11	%		1.11	%		1.11	%		0.51	%		—		—			—
Variable Rate Loan Amount		8,010			12,920			20,426			14,141			11,661			6,505			73,663		17.37	%		73,663
Average interest rate		2.05	%		2.15	%		2.38	%		3.00	%		3.14	%		1.81	%		—		—			—
Loans in Japanese Yen
Fixed Rate Loan Amount		12			12			12			37			3			—			76		0.02	%		81
Average interest rate		2.50	%		2.50	%		2.50	%		2.37	%		2.50	%		—			—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in Canadian Dollar
Fixed Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in United States Dollar
Fixed Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in RMB
Fixed Rate Loan Amount		—			—			16,000			16,000			—			8,000			40,000		9.43	%		43,180
Average interest rate		—			—			4.55	%		4.47	%		—			4.93	%		—		—			—
Medium term note in RMB
Fixed Rate Loan Amount		20,000			498			31,000			—			—			—			51,498		12.14	%		51,301
Average interest rate		3.97	%		5.63	%		4.19	%		—			—			—			—		—			—
Total		53,795			63,150			105,420			50,697			41,987			109,047			424,096		100.00	%		416,017

December 31, 2013


	Expected Maturity Date																				Percentage to Total Long-Term Debt			Fair Value
	2014			2015			2016			2017			2018			Thereafter			Total		Percentage to Total Long-Term Debt			Fair Value
	(RMB equivalent in millions, except percentages)
Long term debt
Loans in RMB
Fixed Rate Loan Amount		40,008			20,104			49,936			13,549			40,003			40,003			203,603		52.92	%		192,402
Average interest rate		5.26	%		4.06	%		4.60	%		3.90	%		4.61	%		4.66	%		—		—			—
Variable Rate Loan Amount		6,642			14,431			1,614			2,256			121			6,050			31,114		8.09	%		31,114
Average interest rate		5.60	%		5.11	%		4.56	%		2.24	%		5.71	%		5.24	%		—		—			—
Loans in Euros
Fixed Rate Loan Amount		23			23			23			23			23			65			180		0.04	%		196
Average interest rate		2.73	%		2.73	%		2.73	%		2.73	%		2.73	%		2.86	%		—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Loans in United States Dollars
Fixed Rate Loan Amount		155			279			336			33			33			243			1,079		0.28	%		1,111
Average interest rate		6.51	%		7.12	%		4.14	%		1.09	%		1.09	%		1.20	%		—		—			—
Variable Rate Loan Amount		20,028			6,047			1,463			3,048			7,931			3,986			42,503		11.05	%		42,503
Average interest rate		2.39	%		2.36	%		3.68	%		3.58	%		3.04	%		1.97	%		—		—			—
Loans in Japanese Yen
Fixed Rate Loan Amount		17			17			17			17			17			17			102		0.03	%		109
Average interest rate		2.46	%		2.46	%		2.46	%		2.46	%		2.46	%		2.06	%		—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in Canadian Dollar
Fixed Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in United States Dollar
Fixed Rate Loan Amount		—			—			—			—			—			154			154		0.04	%		154
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in RMB
Fixed Rate Loan Amount		—			—			—			16,000			16,000			8,000			40,000		10.40	%		37,516
Average interest rate		—			—			—			4.55	%		4.47	%		4.93	%		—		—			—
Medium term note in RMB
Fixed Rate Loan Amount		15,000			20,000			—			31,000			—			—			66,000		17.15	%		63,610
Average interest rate		3.35	%		3.97	%		—			4.19	%		—			—			—		—			—
Total		81,873			60,901			53,389			65,926			64,128			58,518			384,735		100.00	%		368,715

December 31, 2012


	Expected Maturity Date																				Percentage to Total Long-Term Debt			Fair Value
	2013			2014			2015			2016			2017			Thereafter			Total		Percentage to Total Long-Term Debt			Fair Value
	(RMB equivalent in millions, except percentages)
Long term debt
Loans in RMB
Fixed Rate Loan Amount		22			50,003			20,002			23,048			13,192			56,003			162,270		53.80	%		157,754
Average interest rate		4.22	%		5.38	%		4.05	%		4.13	%		3.95	%		4.73	%		—		—			—
Variable Rate Loan Amount		6,062			6,736			10,103			4			2,117			6,003			31,025		10.29	%		31,025
Average interest rate		4.55	%		5.56	%		5.32	%		2.55	%		2.03	%		5.64	%		—		—			—
Loans in Euros
Fixed Rate Loan Amount		25			34			34			34			30			50			207		0.07	%		222
Average interest rate		2.83	%		3.10	%		3.10	%		3.10	%		3.00	%		2.00	%		—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Loans in United States Dollars
Fixed Rate Loan Amount		33			160			753			35			35			291			1,307		0.43	%		1,401
Average interest rate		1.13	%		6.51	%		5.50	%		1.09	%		1.09	%		1.26	%		—		—			—
Variable Rate Loan Amount		174			8,776			3,785			1,509			2,200			2,475			18,919		6.27	%		18,919
Average interest rate		0.73	%		2.94	%		2.37	%		3.31	%		3.21	%		1.00	%		—		—			—
Loans in Japanese Yen
Fixed Rate Loan Amount		22			22			22			22			22			40			150		0.05	%		163
Average interest rate		2.46	%		2.46	%		2.46	%		2.46	%		2.46	%		2.46	%		—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in Canadian Dollar
Fixed Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Variable Rate Loan Amount		—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in United States Dollar
Fixed Rate Loan Amount		—			—			—			—			—			234			234		0.08	%		234
Average interest rate		—			—			—			—			—			—			—		—			—
Debentures in RMB
Fixed Rate Loan Amount		1,500			—			—			—			16,000			4,000			21,500		7.13	%		21,265
Average interest rate		4.11	%		—			—			—			4.55	%		4.97	%		—		—			—
Medium term note in RMB
Fixed Rate Loan Amount		—			15,000			20,000			—			31,000			—			66,000		21.88	%		64,928
Average interest rate		—			3.35	%		3.97	%		—			4.19	%		—			—		—			—
Total		7,838			80,731			54,699			24,652			64,596			69,096			301,612		100.00	%		295,911

Commodity Price Risk

We are engaged in a wide range of petroleum-related activities and purchase certain quantity of oil from the international market to meet our demands. The prices of crude oil and refined products in the international market are affected by various factors such as changes in global and regional politics and economy, the demand and supply of crude oil and refined products, as well as unexpected events and disputes with international repercussions. The domestic crude oil price is determined with reference to the international price of crude oil whereby the prices of domestic refined products were allowed to adjust more in line with the prices in the international crude oil market. Other than certain subsidiaries of our company, we generally do not use any derivative instruments to evade such price risks.

ITEM 12 — DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Fees paid by our ADS holders

The Bank of New York Mellon, the depositary of our ADS program, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.


Persons Depositing or Withdrawing Shares Must Pay:		For:

$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property

		Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates

$0.02 (or less) per ADS		Any cash distribution to ADS registered holders

A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs		Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders

Registration or transfer fees		Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares

Expenses of the depositary		Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)

		Converting foreign currency to U.S. dollars

Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes		As necessary

Any charges incurred by the depositary or its agents for servicing the deposited securities		As necessary

Fees and Payments from the Depositary to Us

From January 1, 2014 to December 31, 2014, we received from the depositary a reimbursement of US$382,660.57, net of withholding tax, for our continuing annual stock exchange listing fees and our expenses incurred in connection with investor relationship programs. In addition, the depositary has agreed to reimburse us certain amount per year of the facility, including but not limited to, investor relations expenses or any other American depositary receipts program related expenses. The amount of such reimbursements is subject to certain limits.

PART II

ITEM 13 — DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES

None.

ITEM 14 — MATERIAL MODIFICATIONS TO THE RIGHTS TO SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15 — CONTROLS AND PROCEDURES

Evaluation of the Management on Disclosure Controls and Procedures

Our Chairman, who currently performs the function of Chief Executive Officer, and our Chief Financial Officer, after evaluating the effectiveness of PetroChina’s disclosure controls and procedures (as defined in the United States Exchange Act Rules 13a-15(e) and 15d(e)) as of the end of the period covered by this annual report, have concluded that, as of such date, our company’s disclosure controls and procedures were effective to ensure that material information required to be disclosed in the reports that we file and furnish under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and regulations and that such information is accumulated and communicated to our company’s management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our company’s management, including our principal executive officer and principal financial officer, our company evaluated the effectiveness of the its internal control over financial reporting based on criteria established in the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our company’s management has concluded that our internal control over financial reporting was effective as of December 31, 2014.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The effectiveness of our company’s internal control over financial reporting as of December 31, 2014 has been audited by KPMG, our company’s independent registered public accountants, as stated in its report attached hereto.

Attestation Report of the Registered Public Accounting Firm

The Board of Directors and Shareholders

PetroChina Company Limited:

We have audited PetroChina Company Limited’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). PetroChina Company Limited’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on PetroChina Company Limited’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our

audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, PetroChina Company Limited maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of PetroChina Company Limited and its subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, cash flows and changes in equity for each of the years in the two-year period ended December 31, 2014, and our report dated April 29, 2015 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG

Hong Kong, China

April 29, 2015

Changes in Internal Control over Financial Reporting

During the year ended December 31, 2014, there were no changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting. On May 14, 2013, the COSO published an updated Internal Control — Integrated Framework (2013) and related illustrative documents. Our company adopted the new framework in 2014.

ITEM 16A — AUDIT COMMITTEE FINANCIAL EXPERT

Our audit committee is composed of two non-executive independent directors, Mr. Lin Boqiang and Mr. Zhang Biyi, and one non-executive director, Mr. Liu Yuezhen. See “Item 6 — Directors, Senior Management and Employees — Board Practices — Audit Committee”. Mr. Zhang Biyi, our non-executive independent director has been confirmed as a “financial expert,” as defined in Item 16A of Form 20-F.

ITEM 16B — CODE OF ETHICS

We adopted our code of business conduct and ethics for senior management on March 23, 2004 and our code of business conduct and ethics for employees on March 2, 2005 and have disclosed the content of both codes on our website.

These two Codes of Ethics may be accessed as follows:

1. From our main web page, first click on “Investor Relations”.

2. Next, click on “Corporate Governance Structure”.

3. Finally, click on “Code of Ethics for Senior Management” or “Code of Ethics for Employees of PetroChina Company Limited”.

ITEM 16C — PRINCIPAL ACCOUNTANT FEES AND SERVICES

KPMG has served as PetroChina’s independent registered public accountant for the fiscal year ended December 31, 2014 and 2013, for which audited financial statements appear in this annual report on Form 20-F. The Company’s auditor is elected annually at the annual general meeting of PetroChina. The office of KPMG is located at 8th Floor, Prince’s Building, 10 Chater Road, Central, Hong Kong.

The following table presents the aggregate fees for professional audit services and other services rendered by KPMG to PetroChina for each of the years ended December 31, 2013 and 2014.


	December 31,
	2013		2014
	RMB		RMB
	(In millions)
Audit fees		53		53
Audit-related fees		—		—
Tax fees		—		—
All other fees		—		—

Total		53		53

The auditors’ remuneration above represents the annual audit fees paid by our company. The remuneration does not include fees of RMB28 million and RMB34 million paid by our subsidiaries to KPMG and its network firms which primarily relates to audit and other related services for the year ended December 31, 2013 and 2014, respectively.

Audit Committee Pre-approved Policies and Procedures

Currently, all audit services to be provided by our independent registered public accountants, KPMG, must be approved by our audit committee.

During 2014, services relating to all non-audit-related fees provided to us by KPMG were approved by our audit committee in accordance with the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

ITEM 16D — EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES

We rely on an exemption contained in paragraph (b)(1)(iv)(D) of Rule 10A-3 under the Securities and Exchange Act of 1934, as amended, from the New York Stock Exchange listing requirement that each member of

100

the audit committee of a listed issuer must be independent. Our single non-independent audit committee member, who is a representative of CNPC, has only observer status on the audit committee of our board of directors and is not an executive officer of our company, which qualifies us for the exemption from the independence requirements available under paragraph (b)(1)(iv)(D) of Rule 10A-3. See “Item 6 — Directors, Senior Management and Employees — Board Practice — Audit Committee.” We believe our reliance on this exemption does not have any adverse effect on the ability of our audit committee to act independently.

ITEM 16E — PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F — CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

In accordance with the relevant regulations concerning restrictions on the years of a registered public accountant to consecutively provide financial auditing services to an enterprise directly owned by the central government as well as its affiliates, promulgated by the Ministry of Finance of the People’s Republic of China and the State-owned Assets Supervision and Administration Commission of the State Council, or the SASAC, effective from the conclusion of our annual general meeting held on May 23, 2013, PricewaterhouseCoopers (“PwC’) retired as our independent registered public accountant and KPMG was appointed as our independent registered public accountant.

PwC’s report on our company’s consolidated financial statements as of and for the two fiscal years ended December 31, 2011 and 2012 did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principles.

In connection with the audits of our company’s consolidated financial statements for each of the two fiscal years ended December 31, 2011 and 2012 and through April 26, 2013, we did not have any “disagreements” (as defined in Item 16F(a)(1)(iv) of Form 20-F and related instructions to Item 16F of Form 20-F) with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope and procedure, which, if not resolved to the satisfaction of PwC, would have caused them to make reference thereto in their reports on the consolidated financial statements for such years. There were no “reportable events” (as described in Item 16F(a)(1)(v) of Form 20-F) during the two fiscal years ended December 31, 2011 and 2012 and through April 26, 2013.

We provided a copy of the foregoing disclosure to PwC and requested that PwC furnished a letter addressed to the SEC stating whether or not PwC agrees with such disclosure, and if not, stating the respects in which they do not agree. A copy of the letter from PwC addressed to the SEC, dated April 26, 2013, was filed as Exhibit 15.5 to our annual report on Form 20-F filed with the SEC on April 26, 2013.

During each of the fiscal years ended December 31, 2011 and 2012, neither we nor anyone on our behalf have consulted KPMG regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on our consolidated financial statements; or (iii) any matter that was either the subject of a “disagreement” (as defined in Item 16F(a)(1)(iv) of Form 20-F and related instructions to Item 16-F of Form 20-F) with KPMG or a “reportable event” (as described in Item 16F(a)(1)(v) of Form 20-F). Further, we have not obtained any written report or oral advice that KPMG concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue.

ITEM 16G — CORPORATE GOVERNANCE

We are incorporated under the laws of the PRC, with A Shares publicly traded on the Shanghai Stock Exchange, or the SSE, and H Shares publicly traded on the Hong Kong Stock Exchange, or the HKSE, and

101

American Deposit Shares representing H Shares on the NYSE. As a result, our corporate governance framework is subject to the mandatory provisions of the PRC Company Law and the Corporate Governance Rules as well as the securities laws, regulations and the listing rules of Hong Kong and the United States.

The following discussion summarizes the significant differences between our corporate governance practices and those that would apply to a U.S. domestic issuer under the NYSE corporate governance rules.

Director Independence

Under the NYSE corporate governance rule 303A.01, a listed company must have a majority of independent directors on its board of directors. A company of which more than 50% of the voting power is held by an individual, a group or another company, or a controlled company, is not required to comply with this requirement. We are not required under the PRC Company Law and the HKSE Listing Rules to have a majority of independent directors on our board of directors. As of the date of this report, four of our ten directors were independent non-executive directors. We will elect one executive director at the annual general meeting to be held on May 27, 2015.

Under the NYSE corporate governance rule 303A.03, the non-management directors of a listed company must meet at regularly scheduled executive sessions without management. There are no mandatory requirements under the PRC Company Law and the HKSE Listing Rules that a listed company should hold, and we currently do not hold, such executive sessions.

Nominating/Corporate Governance Committee

Under the NYSE corporate governance rule 303A.04, a listed company must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties, but a controlled company is not required to comply with this requirement. The Corporate Governance Code recently amended by the Stock Exchange of Hong Kong provides that issuers shall establish a nominating committee, and a majority of which should be independent non-executive directors and the chairman shall be served by an independent non-executive director or the board chairman. We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, a nominating/corporate governance committee.

Compensation Committee

Under the NYSE corporate governance rule 303A.05, a listed company must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. A controlled company is not required to comply with this requirement. We are not required under the PRC Company Law to have a compensation committee. Under the Corporate Governance Code of the HKSE Listing Rules, a listed company must have a remuneration committee composed of a majority of independent non-executive directors, with a written term of references that covers certain minimum specified duties.

We currently do not have a compensation committee composed entirely of independent directors. However, we have an evaluation and remuneration committee including a majority of independent non-executive directors.

102

Corporate Governance Guidelines

Under the NYSE corporate governance rule 303A.09, a listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects. We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, formal corporate governance guidelines. However, we have the Articles of Association, the Rules and Procedures of Board of Directors and the Trial Implementation Rules for Compensation of Senior Management that address the following subjects:

•

director qualification standards and responsibilities;

•

key board committee responsibilities;

•

director compensation; and

•

director orientation and continuing education.

In addition, under the HKSE Listing Rules, we are expected to comply with, but may choose to deviate from, certain code provisions in the Corporate Governance Code of the Listing Rules which sets forth the principles and standards of corporate governance for listed companies. Pursuant to the HKSE Listing Rules, if we choose to deviate from any code provisions of the Corporate Governance Code, we must disclose such deviations in our annual report.

In 2009, we formulated the Administrative Measures on Independent Directors, the Administrative Rules on Holding of Company Shares by Directors, Supervisors and Senior Management, the Administrative Measures on Investor’s Relationship and the rules and procedures of the Audit Committee, the Performance Review and Compensation Committee, the Investment and Development Committee, and the Safety and Environmental Protection Committee. All these policies have further enhanced our corporate governance system and can ensure the better performance of duties of directors, supervisors, senior managers and committee members.

In 2010, we adopted the revised Regulations of PetroChina Company Limited on Disclosure of Information and formulated the Rules and Regulations of PetroChina Company Limited on the Registration of Holders of Insider Information.

In 2013, we formulated an Independent Director Observation and Inquiry Policy to provide an assurance that independent directors will be better informed of the status of the daily operation, finance management and compliance matters of our company so as for them to better perform their duties.

In order to better adapt to the changes in the applicable regulatory frameworks, we have continued to improve our corporate governance during the reporting period. For example, in 2014, we formulated the Policy for Internal Regulations, Audit Project Regulation, and Enterprise Pension Regulation.

Code of Business Conduct and Ethics

Under the NYSE corporate governance rule 303A.10, a listed company must adopt and disclose its code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. See “Item 16B – Code of Ethics”. We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, a code of business conduct and ethics for directors. However, pursuant to the HKSE Listing Rules, all of our directors must comply with the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) as set out in the Listing Rules. The Model Code sets forth required standards with which the directors of a listed company must comply in securities transactions of the listed company.

103

Certification Requirements

Under the NYSE corporate governance rule 303A.12(a), each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. Our CEO is not required under the PRC Company Law and the HKSE Listing Rules to submit, and our CEO does not currently submit, such certification.

ITEM 16H — MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17 — FINANCIAL STATEMENTS

We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

ITEM 18 — FINANCIAL STATEMENTS

See page F-1 to F-57 following Item 19.

ITEM 19 — EXHIBITS

(a) See Item 18 for a list of the financial statements as part of this annual report.

(b) Exhibits to this annual report.


Exhibit Number		Description of Exhibits

1.1		Articles of Association (as amended on May 23, 2013) (English translation)⁽⁵⁾

4.1		Form of Non-competition Agreement between CNPC and PetroChina (English translation)⁽¹⁾

4.2		Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (English translation)⁽¹⁾

4.3		Form of Land Use Rights Leasing Contract between CNPC and PetroChina (English translation)⁽¹⁾

4.4		Form of Buildings Leasing Contract between CNPC and PetroChina (English translation)⁽¹⁾

4.5		Form of Trademark Licensing Contract between CNPC and PetroChina (English translation)⁽¹⁾

4.6		Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (English translation)⁽¹⁾

4.7		Form of Computer Software Licensing Contract between CNPC and PetroChina (English translation)⁽¹⁾

4.8		Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina (English translation)⁽¹⁾

4.9		Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina (English translation)⁽¹⁾

4.10		Form of Agreement for Transfer of Rights and Interests under the Crude Oil Premium and Discount Calculation Agreement between China Petrochemical Corporation, CNPC and PetroChina (English translation)⁽¹⁾

104


Exhibit Number		Description of Exhibits

4.11		Form of Agreement for the Transfer of Rights and Interests under the Retainer Contracts relating to Oil Exploration and Exploitation in Lengjiapu Area, Liaohe Oil Region and No. 9.1-9.5 Areas, Karamay Oil Field (together with English translation)⁽¹⁾

4.12		Form of Supplemental Agreement to the Land Use Rights Leasing Contract, dated August 25, 2011, between CNPC and PetroChina (English translation)⁽³⁾

4.13		Form of Amended Buildings Leasing Contract, dated August 25, 2011, between CNPC and PetroChina (English translation)⁽³⁾

4.14		Form of Finance Lease Agreement, dated August 23, 2012, between Sichuan Petrochemical and Kunlun Finance Leasing (English translation)⁽⁴⁾

4.15		Annual Crude Oil Mutual Supply Framework Agreement, dated January 1, 2015, between China Petroleum and Chemical Corporation and PetroChina (English translation)

8.1		List of major subsidiaries

11.1		Code of Ethics for Senior Management⁽²⁾

11.2		Code of Ethics for Employees⁽²⁾

12.1		Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002

12.2		Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002

13.1		Certification of Chief Executive Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2		Certification of Chief Financial Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15.1		Reserve Report for the year ended on December 31, 2014 prepared by DeGolyer and MacNaughton

15.2		Reserve Report for the year ended on December 31, 2014 prepared by Ryder Scott

15.3		Reserve Report for the year ended on December 31, 2014 prepared by GLJ Petroleum Consultants

15.4		Reserve Report for the year ended on December 31, 2013 prepared by Gaffney, Cline & Associates Inc.⁽⁶⁾

15.5		Reserve Report for the year ended on December 31, 2013 prepared by McDaniel & Associates Consultants, Ltd.⁽⁶⁾

15.6		Letter from PwC regarding Item 16F of this annual report⁽⁴⁾

(1)	Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-11566) filed with the Commission, as declared effective on March 29, 2000.

(2)	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2004 (File No. 1-15006) filed with the Commission.

(3)	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2011 (File No. 1-15006) filed with the Commission.

(4)	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2012 (File No. 1-15006) filed with the Commission.

(5)	Incorporated by reference to our report on Form 6-K (File No. 1-15006) filed with the Commission on May 23, 2013.

(6)	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2013 (File No. 1-15006) filed with the Commission.

105

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

PETROCHINA COMPANY LIMITED

/s/Wu Enlai

Name: Wu Enlai

Title: Secretary to Board of Directors

Date: April 29, 2015

106

INDEX OF CONSOLIDATED FINANCIAL STATEMENTS


	Page
PetroChina Company Limited and its Subsidiaries
Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2014		F-4

Consolidated Statements of Financial Position as of December 31, 2014 and 2013		F-5

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2014		F-6

Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2014		F-8

Notes to the Financial Statements		F-9

Supplementary Information on Oil and Gas Exploration and Production Activities (Unaudited)		F-50

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of PetroChina Company Limited:

In our opinion, the accompanying consolidated statements of comprehensive income, of changes in equity and of cash flows for the year ended December 31, 2012 present fairly, in all material respects, the results of operations and cash flows of PetroChina Company Limited (the “Company”) and its subsidiaries for the year ended December 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers

Hong Kong

April 26, 2013

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

PetroChina Company Limited:

We have audited the accompanying consolidated statements of financial position of PetroChina Company Limited and its subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, cash flows and changes in equity for each of the years in the two-year period ended December 31, 2014. These consolidated financial statements are the responsibility of the PetroChina Company Limited’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PetroChina Company Limited and its subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2014, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), PetroChina Company Limited’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 29, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/S/ KPMG

Hong Kong, China

April 29, 2015

F-3

PETROCHINA COMPANY LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2014, 2013 and 2012

(Amounts in millions, except for the per share data)


	Notes		2014			2013			2012
			RMB			RMB			RMB
TURNOVER		6		2,282,962			2,258,124			2,195,296

OPERATING EXPENSES
Purchases, services and other				(1,486,225	)		(1,464,805	)		(1,411,036	)
Employee compensation costs		8		(120,822	)		(116,422	)		(106,189	)
Exploration expenses, including exploratory dry holes				(22,064	)		(25,301	)		(23,972	)
Depreciation, depletion and amortization				(177,463	)		(163,365	)		(151,975	)
Selling, general and administrative expenses				(73,413	)		(79,021	)		(74,692	)
Taxes other than income taxes		9		(237,997	)		(248,086	)		(254,921	)
Other income, net				4,855			27,518			2,008

TOTAL OPERATING EXPENSES				(2,113,129	)		(2,069,482	)		(2,020,777	)

PROFIT FROM OPERATIONS				169,833			188,642			174,519

FINANCE COSTS
Exchange gain				5,020			4,157			3,339
Exchange loss				(7,333	)		(4,105	)		(3,208	)
Interest income				1,596			2,222			2,063
Interest expense		10		(23,319	)		(23,081	)		(18,164	)

TOTAL NET FINANCE COSTS				(24,036	)		(20,807	)		(15,970	)

SHARE OF PROFIT OF ASSOCIATES AND JOINT VENTURES		17		10,962			10,228			8,262

PROFIT BEFORE INCOME TAX EXPENSE		7		156,759			178,063			166,811
INCOME TAX EXPENSE		12		(37,731	)		(35,789	)		(36,191	)

PROFIT FOR THE YEAR				119,028			142,274			130,620

OTHER COMPREHENSIVE INCOME RECLASSIFIABLE TO PROFIT OR LOSS
Currency translation differences				(7,557	)		(11,432	)		(151	)
Fair value gain /(loss) from available-for-sale financial assets, net of tax				91			45			(18	)
Share of the other comprehensive income / (loss) of associates and joint ventures accounted for using the equity method				159			(218	)		127

OTHER COMPREHENSIVE LOSS, NET OF TAX				(7,307	)		(11,605	)		(42	)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR				111,721			130,669			130,578

PROFIT FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company				107,172			129,599			115,326
Non-controlling interests				11,856			12,675			15,294

				119,028			142,274			130,620

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company				101,279			120,577			115,340
Non-controlling interests				10,442			10,092			15,238

				111,721			130,669			130,578

BASIC AND DILUTED EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY(RMB)		14		0.59			0.71			0.63

The accompanying notes are an integral part of these financial statements.

F-4

PETROCHINA COMPANY LIMITED

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of December 31, 2014 and 2013


	Notes		2014			2013
			RMB			RMB
			(Amounts in millions)
NON-CURRENT ASSETS
Property, plant and equipment		16		1,747,691			1,648,823
Investments in associates and joint ventures		17		116,947			116,700
Available-for-sale financial assets		18		2,170			1,641
Advance operating lease payments		20		66,341			62,449
Intangible and other non-current assets		21		62,962			67,270
Deferred tax assets		31		14,995			11,226
Time deposits with maturities over one year				3,059			3,048

TOTAL NON-CURRENT ASSETS				2,014,165			1,911,157

CURRENT ASSETS
Inventories		22		165,977			227,017
Accounts receivable		23		53,104			64,027
Prepaid expenses and other current assets		24		83,379			68,299
Notes receivable		25		12,827			14,360
Time deposits with maturities over three months but within one year				2,243			5,843
Cash and cash equivalents		26		73,778			51,407

TOTAL CURRENT ASSETS				391,308			430,953

CURRENT LIABILITIES
Accounts payable and accrued liabilities		27		364,060			383,004
Income taxes payable				6,917			16,013
Other taxes payable				39,724			53,705
Short-term borrowings		28		169,128			192,767

TOTAL CURRENT LIABILITIES				579,829			645,489

NET CURRENT LIABILITIES				(188,521	)		(214,536	)

TOTAL ASSETS LESS CURRENT LIABILITIES				1,825,644			1,696,621

EQUITY
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY:
Share capital		29		183,021			183,021
Retained earnings				707,303			669,300
Reserves		30		285,570			280,414

TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY				1,175,894			1,132,735
NON-CONTROLLING INTERESTS				141,887			137,200

TOTAL EQUITY				1,317,781			1,269,935

NON-CURRENT LIABILITIES
Long-term borrowings		28		370,301			302,862
Asset retirement obligations		32		109,154			94,531
Deferred tax liabilities		31		15,900			15,166
Other long-term obligations				12,508			14,127

TOTAL NON-CURRENT LIABILITIES				507,863			426,686

TOTAL EQUITY AND NON-CURRENT LIABILITIES				1,825,644			1,696,621

The accompanying notes are an integral part of these financial statements.

Chairman

Vice Chairman and President

Chief Financial Officer

Zhou Jiping

Wang Dongjin

Yu Yibo

F-5

PETROCHINA COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2014, 2013 and 2012


	2014			2013			2012
	RMB			RMB			RMB
	(Amounts in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year		119,028			142,274			130,620
Adjustments for:
Income tax expense		37,731			35,789			36,191
Depreciation, depletion and amortization		177,463			163,365			151,975
Capitalized exploratory costs charged to expense		12,063			12,036			11,917
Safety fund reserve		4,847			4,898			3,895
Share of profit of associates and joint ventures		(10,962	)		(10,228	)		(8,262	)
Reversal of provision for impairment of receivables, net		30			(51	)		(30	)
Write down in inventories, net		1,850			360			543
Impairment of available-for-sale financial assets		5			7			5
Impairment of investments in associates and joint ventures		—			—			4
Loss on disposal of property, plant and equipment		3,721			3,543			3,487
Gain on disposal of certain pipeline net assets and operations		—			(24,822	)		—
Gain on disposal of other non-current assets		(1,089	)		(28	)		(46	)
Dividend income		(374	)		(363	)		(339	)
Interest income		(1,596	)		(2,222	)		(2,063	)
Interest expense		23,319			23,081			18,164
Changes in working capital:
Accounts receivable, prepaid expenses and other current assets		2,651			(13,621	)		(13,412	)
Inventories		59,215			(13,887	)		(32,586	)
Accounts payable and accrued liabilities		(20,362	)		17,205			(18,928	)

CASH FLOWS GENERATED FROM OPERATIONS		407,540			337,336			281,135
Income taxes paid		(51,063	)		(48,807	)		(41,847	)

NET CASH FLOWS FROM OPERATING ACTIVITIES		356,477			288,529			239,288

The accompanying notes are an integral part of these financial statements.

F-6

PETROCHINA COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Years Ended December 31, 2014, 2013 and 2012


	2014			2013			2012
	RMB			RMB			RMB
	(Amounts in millions)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(306,551	)		(304,100	)		(311,744	)
Acquisition of investments in associates and joint ventures		(2,587	)		(4,278	)		(7,238	)
Acquisition of available-for-sale financial assets		(219	)		(13	)		(22	)
Advance payments on long-term operating leases		(2,735	)		(3,172	)		(11,734	)
Acquisition of intangible assets and other non-current assets		(3,071	)		(2,951	)		(7,383	)
Purchase of non-controlling interests		(13	)		(99	)		(202	)
Acquisition of subsidiaries		—			—			(35	)
Proceeds from disposal of property, plant and equipment		7,250			38,687			493
Proceeds from disposal of other non-current assets		377			397			136
Interest received		777			2,074			1,812
Dividends received		12,319			9,628			7,134
Decrease / (increase) in time deposits with maturities over three months		3,615			(2,683	)		(3,443	)

NET CASH FLOWS USED FOR INVESTING ACTIVITIES		(290,838	)		(266,510	)		(332,226	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term borrowings		(524,137	)		(476,943	)		(364,498	)
Repayments of long-term borrowings		(175,297	)		(69,993	)		(84,433	)
Interest paid		(21,039	)		(21,389	)		(19,266	)
Dividends paid to non-controlling interests		(8,172	)		(5,404	)		(7,499	)
Dividends paid to owners of the Company		(59,475	)		(53,470	)		(58,041	)
Increase in short-term borrowings		528,907			446,845			408,509
Increase in long-term borrowings		214,695			154,373			167,049
Capital contribution from non-controlling interests		1,587			14,415			31,366
Capital reduction of subsidiaries		(17	)		(10	)		(21	)
(Decrease) /increase in other long-term obligations		(1,364	)		(663	)		2,190

NET CASH FLOWS (USED FOR) / FROM FINANCING ACTIVITIES		(44,312	)		(12,239	)		75,356

TRANSLATION OF FOREIGN CURRENCY		1,044			(1,768	)		(195	)

Increase/ (decrease) in cash and cash equivalents		22,371			8,012			(17,777	)
Cash and cash equivalents at beginning of the year		51,407			43,395			61,172

Cash and cash equivalents at end of the year		73,778			51,407			43,395

The accompanying notes are an integral part of these financial statements.

F-7

PETROCHINA COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2014, 2013 and 2012


	Attributable to Owners of the Company											Non-controlling Interests			Total Equity
	Share Capital		Retained Earnings			Reserves			Subtotal			Non-controlling Interests			Total Equity
	RMB		RMB			RMB			RMB			RMB			RMB
	(Amounts in millions)
Balance at January 1, 2012		183,021		556,717			263,007			1,002,745			79,801			1,082,546

Profit for the year ended December 31, 2012		—		115,326			—			115,326			15,294			130,620
Other comprehensive income/ (loss) for the year ended December 31, 2012		—		—			14			14			(56	)		(42	)
Special reserve-safety fund reserve		—		161			947			1,108			26			1,134
Transfer to reserves		—		(10,343	)		10,343			—			—			—
Dividends		—		(58,041	)		—			(58,041	)		(7,303	)		(65,344	)
Acquisition of subsidiaries		—		—			(77	)		(77	)		686			609
Transaction with non-controlling interests in subsidiaries		—		—			320			320			(522	)		(202	)
Capital contribution from non-controlling interests		—		—			2,279			2,279			29,097			31,376
Capital reduction of subsidiaries		—		—			—			—			(21	)		(21	)
Disposal of subsidiaries		—		—			—			—			(173	)		(173	)
Other		—		(12	)		348			336			(91	)		245

Balance at December 31, 2012		183,021		603,808			277,181			1,064,010			116,738			1,180,748

Profit for the year ended December 31, 2013		—		129,599			—			129,599			12,675			142,274
Other comprehensive loss for the year ended December 31, 2013		—		—			(9,022	)		(9,022	)		(2,583	)		(11,605	)
Special reserve-safety fund reserve		—		2,779			(1,132	)		1,647			43			1,690
Transfer to reserves		—		(13,436	)		13,436			—			—			—
Dividends		—		(53,470	)		—			(53,470	)		(4,147	)		(57,617	)
Acquisition of subsidiaries		—		—			—			—			117			117
Transaction with non-controlling interests in subsidiaries		—		—			—			—			(99	)		(99	)
Capital contribution from non-controlling interests		—		—			(20	)		(20	)		14,435			14,415
Capital reduction of subsidiaries		—		—			—			—			(10	)		(10	)
Disposal of subsidiaries		—		—			1			1			(117	)		(116	)
Other		—		20			(30	)		(10	)		148			138

Balance at December 31, 2013		183,021		669,300			280,414			1,132,735			137,200			1,269,935

Profit for the year ended December 31, 2014		—		107,172			—			107,172			11,856			119,028
Other comprehensive loss for the year ended December 31, 2014		—		—			(5,893	)		(5,893	)		(1,414	)		(7,307	)
Special reserve-safety fund reserve		—		—			1,423			1,423			28			1,451
Transfer to reserves		—		(9,686	)		9,686			—			—			—
Dividends		—		(59,475	)		—			(59,475	)		(7,429	)		(66,904	)
Acquisition of subsidiaries		—		—			(48	)		(48	)		53			5
Transaction with non-controlling interests in subsidiaries		—		—			—			—			(13	)		(13	)
Capital contribution from non-controlling interests		—		—			(9	)		(9	)		1,695			1,686
Capital reduction of subsidiaries		—		—			—			—			(28	)		(28	)
Disposal of subsidiaries		—		—			—			—			(67	)		(67	)
Other		—		(8	)		(3	)		(11	)		6			(5	)

Balance at December 31, 2014		183,021		707,303			285,570			1,175,894			141,887			1,317,781

The accompanying notes are an integral part of these financial statements.

F-8

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

(All amounts in millions, except for the per share data and otherwise stated)

1	ORGANIZATION AND PRINCIPAL ACTIVITIES

PetroChina Company Limited (the “Company”) was established as a joint stock company with limited liability on November 5, 1999 by China National Petroleum Corporation (“CNPC”) as the sole proprietor in accordance with the approval Guo Jing Mao Qi Gai [1999] No. 1024 “Reply on the approval of the establishment of PetroChina Company Limited” from the former State Economic and Trade Commission of the People’s Republic of China (“China” or “PRC”). CNPC restructured (“the Restructuring”) and injected its core business and the related assets and liabilities into the Company. CNPC is a wholly state-owned company registered in China. The Company and its subsidiaries are collectively referred to as the “Group”.

The Group is principally engaged in (i) the exploration, development and production and marketing of crude oil and natural gas; (ii) the refining of crude oil and petroleum products, production and marketing of primary petrochemical products, derivative petrochemical products and other chemical products; (iii) the marketing of refined products and trading business; and (iv) the transmission of natural gas, crude oil and refined products and the sale of natural gas (Note 38).

2	BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statement of financial position and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

3	SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a) Basis of consolidation

Subsidiaries are entities controlled by the Group. The group controls an entity when it is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

A subsidiary is consolidated from the date on which control is transferred to the Group and is no longer consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries except for business combinations under common control. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interests in the acquiree either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s net assets.

F-9

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statement of comprehensive income.

An acquisition of a business which is a business combination under common control is accounted for in a manner similar to a uniting of interests whereby the assets and liabilities acquired are accounted for at carryover predecessor values to the other party to the business combination with all periods presented as if the operations of the Group and the business acquired have always been combined. The difference between the consideration paid by the Group and the net assets or liabilities of the business acquired is adjusted against equity.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

A listing of the Group’s principal subsidiaries is set out in Note 19.

(b) Investments in associates

Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting in the consolidated financial statements of the Group and are initially recognized at cost.

Under this method of accounting, the Group’s share of the post-acquisition profits or losses of associates is recognized in the consolidated profit or loss and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amounts of the investments. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated loss and is tested for impairment as part of the overall balance. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired associate at the date of acquisition. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

A listing of the Group’s principal associates is shown in Note 17.

(c) Investments in joint ventures

Ventures are arrangements in which the Group with one or more parties have joint control, whereby the Group has rights to the net assets of the arrangements, rather than rights to their assets and obligations for their liabilities. The Group’s interests in joint ventures are accounted for by the equity method of accounting (Note 3(b)) in the consolidated financial statements.

A listing of the Group’s principal joint ventures is shown in Note 17.

F-10

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(d) Transactions with non-controlling interests

Transactions with non-controlling interests are treated as transactions with owners in their capacity as owners of the Group. Gains and losses resulting from disposals to non-controlling interests are recorded in equity. The differences between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired resulting from the purchase of non-controlling interests, are recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to profit or loss where appropriate.

(e) Foreign currencies

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Most assets and operations of the Group are located in the PRC (Note 38), and the functional currency of the Company and most of the consolidated subsidiaries is the Renminbi (“RMB”). The consolidated financial statements are presented in the presentation currency of RMB.

Foreign currency transactions of the Group are accounted for at the exchange rates prevailing at the respective dates of the transactions; monetary assets and liabilities denominated in foreign currencies are translated at exchange rates at the date of the statement of financial position; gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities are recognized in the consolidated profit or loss.

For the Group entities that have a functional currency different from the Group’s presentation currency, assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position. Income and expenses for each statement of comprehensive income presented are translated at the average exchange rates for each period and the resulting exchange differences are recognized in other comprehensive income.

(f) Property, plant and equipment

Property, plant and equipment, including oil and gas properties (Note 3(g)), are initially recorded in the consolidated statement of financial position at cost where it is probable that they will generate future economic benefits. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use. Subsequent to their initial recognition, property, plant and equipment are carried at cost less accumulated depreciation, depletion and amortization (including any impairment).

Depreciation, to write off the cost of each asset, other than oil and gas properties (Note 3(g)), to their residual values over their estimated useful lives is calculated using the straight-line method.

F-11

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

The Group uses the following useful lives for depreciation purposes:


Buildings			8 - 40 years
Equipment and Machinery			4 - 30 years
Motor vehicles			4 - 14 years
Other			5 - 12 years

No depreciation is provided on construction in progress until the assets are completed and ready for use.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Property, plant and equipment, including oil and gas properties (Note 3(g)), are reviewed for possible impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of a cash generating unit exceeds the higher of its fair value less costs to sell and its value in use. Value in use is the estimated net present value of future cash flows to be derived from the cash generating unit.

Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are recorded in the consolidated profit or loss.

(g) Oil and gas properties

The successful efforts method of accounting is used for oil and gas exploration and production activities. Under this method, all costs for development wells, support equipment and facilities, and proved mineral interests in oil and gas properties are capitalized. Geological and geophysical costs are expensed when incurred. Costs of exploratory wells are capitalized pending determination of whether the wells find proved oil and gas reserves. Proved oil and gas reserves are the estimated quantities of crude oil and natural 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 the time at which 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. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period before the ending date of the period covered by the proved oil and gas reserve report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The costs shall be that prevailing at the end of the period.

Exploratory wells in areas not requiring major capital expenditures are evaluated for economic viability within one year of completion of drilling. The related well costs are expensed as dry holes if it is determined that such economic viability is not attained. Otherwise, the related well costs are reclassified to oil and gas properties

F-12

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

and are subject to impairment review (Note 3(f)). For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is underway or firmly planned. Otherwise the related well costs are expensed as dry holes. The Group does not have any significant costs of unproved properties capitalized in oil and gas properties.

The Ministry of Land and Resources in China issues production licenses to applicants on the basis of the reserve reports approved by relevant authorities.

The cost of oil and gas properties is amortized at the field level based on the units of production method. Units of production rates are based on oil and gas reserves estimated to be recoverable from existing facilities based on the current terms of the Group’s production licenses.

(h) Intangible assets

Expenditures on acquired patents, trademarks, technical know-how and licenses are capitalized at historical cost and amortized using the straight-line method over their estimated useful lives. Intangible assets are not subsequently revalued. The carrying amount of each intangible asset is reviewed annually and adjusted for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount and is recognized in the consolidated profit or loss. The recoverable amount is measured as the higher of fair value less costs to sell and value in use. Value in use is the estimated net present value of future cash flows to be derived from the asset.

Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over the interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the amount of any non-controlling interests in the acquiree.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.

(i) Financial assets

Financial assets are classified into the following categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group has principally loans and receivables and available-for-sale financial assets and limited financial assets at fair value through profit or loss. The detailed accounting policies for loans and receivables, available-for-sale financial assets and financial assets at fair value through profit or loss held by the Group are set out below.

Classification

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than

F-13

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

12 months after the date of the statement of financial position, which are classified as non-current assets. The Group’s loans and receivables comprise accounts receivable, notes receivable, other receivables, time deposits and cash and cash equivalents. The recognition methods for loans and receivables are disclosed in the respective policy notes.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories; these are included in non-current assets unless management intends to dispose of the investment within 12 months of the date of the statement of financial position. The Group’s available-for-sale financial assets primarily comprise unquoted equity instruments.

(iii) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets are measured at fair value except where there are no quoted market prices in active markets and the fair values cannot be reliably measured using valuation techniques. Available-for-sale financial assets that do not have quoted market prices in active markets and whose fair value cannot be reliably measured are carried at cost. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in other comprehensive income. Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the income statement within “other income / (expenses), net” in the period in which they arise.

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the available-for-sale financial asset and the present value of the estimated cash flows.

(j) Leases

Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. The Group has no significant finance leases.

Leases of assets under which a significant portion of the risks and benefits of ownership are effectively retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are expensed on a straight-line basis over the lease terms. Payments made to

F-14

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

the PRC’s land authorities to secure land use rights (excluding mineral properties) are treated as operating leases. Land use rights are generally obtained through advance lump-sum payments and the terms of use range up to 50 years.

(k) Inventories

Inventories include oil products, chemical products and materials and supplies which are stated at the lower of cost and net realizable value. Cost is primarily determined by the weighted average cost method. The cost of finished goods comprises raw materials, direct labor, other direct costs and related production overheads, but excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

(l) Accounts receivable

Accounts receivable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision made for impairment of these receivables. Such provision for impairment is established if there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the receivables. The factors the Group considers when assessing whether an account receivable is impaired include but are not limited to significant financial difficulties of the customer, probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payments. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held with banks and highly liquid investments with original maturities of three months or less from the time of purchase.

(n) Accounts payable

Accounts payable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

(o) Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortized cost using the effective interest method. Any difference between proceeds (net of transaction costs) and the redemption value is recognized in the consolidated profit or loss over the period of the borrowings.

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Borrowings are classified as current liabilities unless the Group has unconditional rights to defer settlements of the liabilities for at least 12 months after the reporting period.

F-15

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(p) Taxation

Deferred tax is provided in full, using the liability method, for temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the date of the statement of financial position and are expected to apply to the period when the related deferred tax asset is realized or deferred tax liability is settled.

The principal temporary differences arise from depreciation on oil and gas properties and equipment and provision for impairment of receivables, inventories, investments and property, plant and equipment. Deferred tax assets relating to the carry forward of unused tax losses are recognized to the extent that it is probable that future taxable income will be available against which the unused tax losses can be utilized.

The Group also incurs various other taxes and levies that are not income taxes. “Taxes other than income taxes”, which form part of operating expenses, primarily comprise a crude oil special gain levy (Note 9), consumption tax (Note 9), resource tax (Note 9), urban construction tax, education surcharges and business tax.

(q) Revenue recognition

Sales are recognized upon delivery of products and customer acceptance or performance of services, net of value added taxes and discounts. Revenues are recognized only when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods in the ordinary course of the Group’s activities, and when the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably and collectability of the related receivables is reasonably assured.

The Group markets a portion of its natural gas under take-or-pay contracts. Customers under the take-or-pay contracts are required to take or pay for the minimum natural gas deliveries specified in the contract clauses. Revenue recognition for natural gas sales and transmission tariff under the take-or-pay contracts follows the accounting policies described in this note. Payments received from customers for natural gas not yet taken are recorded as deferred revenues until actual deliveries take place.

(r) Provisions

Provisions are recognized when the Group has present legal or constructive obligations as a result of past events, it is probable that an outflow of resources will be required to settle the obligations, and reliable estimates of the amounts can be made.

Provision for future decommissioning and restoration is recognized in full on the installation of oil and gas properties. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. A corresponding addition to the related oil and gas properties of an amount equivalent to the provision is also created. This is subsequently depreciated as part of the costs of the oil and gas properties. Any change in the present value of the estimated expenditure other than due to passage of time which is regarded as interest expense, is reflected as an adjustment to the provision and oil and gas properties.

F-16

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(s) Research and development

Research expenditure incurred is recognized as an expense. Costs incurred on development projects are recognized as intangible assets to the extent that such expenditure is expected to generate future economic benefits.

(t) Retirement benefit plans

The Group contributes to various employee retirement benefit plans organized by PRC municipal and provincial governments under which it is required to make monthly contributions to these plans at prescribed rates for its employees in China. The relevant PRC municipal and provincial governments undertake to assume the retirement benefit obligations of existing and future retired employees of the Group in China. The Group has similar retirement benefit plans for its employees in its overseas operations. Contributions to these PRC and overseas plans (“defined contribution plan”) are charged to expense as incurred. In addition, the Group joined the corporate annuity plan approved by relevant PRC authorities. Contribution to the annuity plan is charged to expense as incurred. The Group currently has no additional material obligations outstanding for the payment of retirement and other post-retirement benefits of employees in the PRC or overseas other than what described above.

(u) New accounting developments

(i) New and amended standards adopted by the Group

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after January 1, 2014 that would be expected to have a material impact on the Group.

(ii) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to address the impairment of financial assets and hedge accounting.

IFRS 9 (2010) and (2009) are effective for annual periods beginning on or after January 1, 2015, with early adoption permitted. The adoption of these standards is expected to have an impact on the Group’s financial assets, but no impact on the Group’s financial liabilities.

4	FINANCIAL RISK AND CAPITAL MANAGEMENT

4.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk.

(a) Market risk

Market risk is the possibility that changes in foreign exchange rates, interest rates and the prices of oil and gas products will adversely affect the value of assets, liabilities and expected future cash flows.

F-17

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(i) Foreign exchange risk

The Group conducts its domestic business primarily in RMB, but maintains a portion of its assets in other currencies to pay for imported crude oil, imported equipment and other materials and to meet foreign currency financial liabilities. The Group is exposed to currency risks arising from fluctuations in various foreign currency exchange rates against the RMB. The RMB is not a freely convertible currency and is regulated by the PRC government. Limitations on foreign exchange transactions imposed by the PRC government could cause future exchange rates to vary significantly from current or historical exchange rates.

Additionally, the Group operates internationally and foreign exchange risk arises from future acquisitions and commercial transactions, recognized assets and liabilities and net investments in foreign operations. Certain entities in the Group might use currency derivatives to manage such foreign exchange risk.

(ii) Interest rate risk

The Group has no significant interest rate risk on interest-bearing assets. The Group’s exposure to interest rate risk arises from its borrowings. The Group’s borrowings at floating rates expose the Group to cash flow interest rate risk and its borrowings at fixed rates expose the Group to fair value interest rate risk. However, the exposure to interest rate risk is not material to the Group. A detailed analysis of the Group’s borrowings, together with their respective interest rates and maturity dates, is included in Note 28.

(iii) Price risk

The Group is engaged in a wide range of oil and gas products-related activities. Prices of oil and gas products are affected by a wide range of global and domestic factors which are beyond the control of the Group. The fluctuations in such prices may have favorable or unfavorable impacts on the Group. The Group did not enter into any material hedging of its price risk during the year.

(b) Credit risk

Credit risk arises from cash and cash equivalents, time deposits with banks and credit exposure to customers with outstanding receivable balances.

A substantial portion of the Group’s cash at bank and time deposits are placed with the major state-owned banks and financial institutions in China and management believes that the credit risk is low.

The Group performs ongoing assessment of the credit quality of its customers and sets appropriate credit limits taking into account the financial position and past history of defaults of customers. The Group’s accounts receivable balances over 3 years have been substantially provided for and accounts receivable balances within one year are generally neither past due nor impaired. The aging analysis of accounts receivable (net of impairment of accounts receivable) is presented in Note 23. The Group’s accounts receivable balances that are neither past due nor impaired are with customers with no recent history of default.

The carrying amounts of cash and cash equivalents, time deposits placed with banks, accounts receivable, other receivables and notes receivable included in the consolidated statement of financial position represent the Group’s maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk.

The Group has no significant concentration of credit risk.

F-18

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(c) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.

In managing its liquidity risk, the Group has access to funding at market rates through equity and debt markets, including using undrawn committed borrowing facilities to meet foreseeable borrowing requirements.

Given the low level of gearing and continued access to funding, the Group believes that its liquidity risk is not material.

Analysis of the Group’s financial liabilities based on the remaining period at the date of the statement of financial position to the contractual maturity dates are presented in Note 28.

4.2 Capital management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, optimize returns for owners and to minimize its cost of capital. In meeting its objectives of managing capital, the Group may issue new shares, adjust its debt levels or the mix between short-term and long-term borrowings.

The Group monitors capital on the basis of the gearing ratio which is calculated as interest-bearing borrowings / (interest-bearing borrowings + total equity). The gearing ratio at December 31, 2014 is 29.0% (December 31, 2013: 28.1%).

4.3 Fair value estimation

The methods and assumptions applied in determining the fair value of each class of financial assets and financial liabilities of the Group at December 31, 2014 and 2013 are disclosed in the respective accounting policies.

The carrying amounts of the following financial assets and financial liabilities approximate their fair value as all of them are short-term in nature: cash and cash equivalents, time deposits with maturities over three months but within one year, accounts receivable, other receivables, trade payables, other payables and short-term borrowings. The fair values of fixed rate long-term borrowings are likely to be different from their respective carrying amounts. Analysis of the fair values and carrying amounts of long-term borrowings are presented in Note 28.

5	CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The matters described below are considered to be the most critical in understanding the estimates and judgments that are involved in preparing the Group’s consolidated financial statements.

F-19

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(a) Estimation of oil and natural gas reserves

Estimates of oil and natural gas reserves are key elements in the Group’s investment decision-making process. They are also an important element in testing for impairment. Changes in proved oil and natural gas reserves, particularly proved developed reserves, will affect unit-of-production depreciation, depletion and amortization recorded in the Group’s consolidated financial statements for property, plant and equipment related to oil and gas production activities. A reduction in proved developed reserves will increase depreciation, depletion and amortization charges. Proved reserve estimates are subject to revision, either upward or downward, based on new information, such as from development drilling and production activities or from changes in economic factors, including product prices, contract terms, evolution of technology or development plans, etc.

(b) Estimation of impairment of property, plant and equipment

Property, plant and equipment, including oil and gas properties, are reviewed for possible impairments when events or changes in circumstances indicate that the carrying amount may not be recoverable. Determination as to whether and how much an asset is impaired involves management estimates and judgments such as the future price of crude oil, refined and chemical products and the production profile. However, the impairment reviews and calculations are based on assumptions that are consistent with the Group’s business plans taking into account current economic conditions. Favorable changes to some assumptions, or not updating assumptions previously made, may allow the Group to avoid the need to impair any assets, whereas unfavorable changes may cause the assets to become impaired.

(c) Estimation of asset retirement obligations

Provision is recognized for the future decommissioning and restoration of oil and gas properties. The amount of the provision recognized is the present values of the estimated future expenditures. The estimation of the future expenditures is based on current local conditions and requirements, including legal requirements, technology, price levels, etc. In addition to these factors, the present values of these estimated future expenditures are also impacted by the estimation of the economic lives of oil and gas properties and estimates of discount rates. Changes in any of these estimates will impact the operating results and the financial position of the Group over the remaining economic lives of the oil and gas properties.

6	TURNOVER

Turnover represents revenues from the sale of crude oil, natural gas, refined products and petrochemical products and from the transmission of crude oil, refined products and natural gas. Analysis of turnover by segment is shown in Note 38.

F-20

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

7	PROFIT BEFORE INCOME TAX EXPENSE


	2014		2013		2012
	RMB		RMB		RMB
Items credited and charged in arriving at the profit before income tax expense include:

Credited
Dividend income from available-for-sale financial assets		275		358		339
Reversal of provision for impairment of receivables		56		80		45
Reversal of write down in inventories		74		53		81
Government grants⁽ⁱ⁾		10,931		10,347		9,406
Gain on disposal of certain pipeline net assets and operations⁽ⁱⁱ⁾		—		24,822		—

Charged
Amortization of intangible and other assets		4,531		3,695		3,215
Auditors’ remuneration⁽ⁱⁱⁱ⁾		53		53		61
Cost of inventories recognized as expense		1,713,290		1,676,539		1,610,847
Provision for impairment of receivables		86		29		15
Loss on disposal of property, plant and equipment		3,721		3,543		3,487
Operating lease expenses		12,582		11,902		10,827
Research and development expenses		13,088		14,157		14,453
Write down in inventories		1,924		413		624

(i)

Comprises proportionate refund of import value-added tax relating to the import of natural gas (including liquefied natural gas) provided by the PRC government. This value-added tax refund is applicable from January 1, 2011 to December 31, 2020 and available when the import prices of the natural gas and liquefied natural gas imported under any State-sanctioned pipelines are higher than their prescribed selling prices.

(ii)

In June 2013, the Company entered into a contract with two other parties to establish a joint venture named PetroChina United Pipelines Co., Ltd. (the “JV Company”). The Company contributed certain pipeline net assets and operations to the JV Company and holds 50% equity interest in the JV Company. The other parties contributed cash totalling RMB 60 billion and together hold the remaining 50% equity interest in the JV Company. The gain represents the gain realized on the contribution of the abovementioned pipeline net assets and operations into the JV Company to the extent that have been sold to the other parties and is recorded as “Other Income” in the consolidated statement of comprehensive income.

(iii)

The auditors’ remuneration above represents the annual audit fees paid by the Company. This remuneration does not include fees of RMB 34 payable to the Company’s current auditor and its network firms which primarily relates to audit fees paid by subsidiaries and other audit related services (2013: RMB 28, 2012: RMB 51 payable to the Company’s previous auditors and its network firms which primarily relates to audit fees paid by subsidiaries and other audit related services).

8	EMPLOYEE COMPENSATION COSTS


	2014		2013		2012
	RMB		RMB		RMB
Wages, salaries and allowances		78,329		75,691		68,790
Social security costs		42,493		40,731		37,399

		120,822		116,422		106,189

F-21

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Social security costs mainly represent contributions to plans for staff welfare organized by the PRC municipal and provincial governments and others including contributions to the retirement benefit plans (Note 33).

9	TAXES OTHER THAN INCOME TAXES


	2014		2013		2012
	RMB		RMB		RMB
Crude oil special gain levy		64,376		72,726		79,119
Consumption tax		104,262		99,800		101,416
Resource tax		26,305		28,409		28,079
Other		43,054		47,151		46,307

		237,997		248,086		254,921

In accordance with PRC new tax rules and regulations, the threshold above which crude oil special gain levy will be imposed (with the five-level progressive tax rates varying from 20% to 40% remaining) was raised from US$ 40 per barrel to US$ 55 per barrel. Resource tax on domestic sales of crude oil and natural gas, assessed based on value instead of volume (with rates from 5% to 10% and the resource tax rate applicable to the Group up to 5%), was implemented nationally. Both changes in tax regulations were effective from November 1, 2011.

10	INTEREST EXPENSE


	2014			2013			2012
	RMB			RMB			RMB
Interest on
Bank loans
—wholly repayable within five years		1,921			1,457			2,891
—not wholly repayable within five years		5			7			49
Other loans
—wholly repayable within five years		19,325			20,600			12,459
—not wholly repayable within five years		11			203			3,306
Accretion expense (Note 32)		5,406			4,690			4,237
Less: Amounts capitalized		(3,349	)		(3,876	)		(4,778	)

		23,319			23,081			18,164

Amounts capitalized are borrowing costs that are attributable to the construction of a qualifying asset. The average interest rate used to capitalize such general borrowing cost was 5.76% per annum for the year ended December 31, 2014(2013: 5.76%, 2012: ranged from 5.76% to 6.21%).

F-22

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

11	EMOLUMENTS OF DIRECTORS AND SUPERVISORS

Details of the emoluments of directors and supervisors for the years ended December 31, 2014, 2013 and 2012 are as follows:


	2014								2013		2012
Name	Fee for directors and supervisors		Salaries, allowances and other benefits		Contribution to retirement benefit scheme		Total		Total		Total
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
Chairman:
Mr. Zhou Jiping⁽ⁱ⁾		—		—		—		—		1,212		1,128

Vice Chairman:
Mr. Wang Dongjin⁽ⁱⁱ⁾		—		1,081		56		1,137		1,066		—

Executive directors:
Mr. Liu Hongbin⁽ⁱⁱⁱ⁾		—		945		56		1,001		855		—
Mr. Ran Xinquan^(viii)		—		—		—		—		402		930

		—		945		56		1,001		1,257		930

Non-executive directors:
Mr. Li Xinhua^(iv)		—		—		—		—		—		—
Mr. Wang Guoliang^(iv)		—		—		—		—		—		—
Mr. Yu Baocai		—		—		—		—		—		—
Mr. Shen Diancheng^(iv)		—		—		—		—		—		—
Mr. Liu Yuezhen^(iv)		—		—		—		—		—		—
Mr. Liu Hongru^(iv)		153		—		—		153		243		222
Mr. Franco Bernabè^(iv)		111		—		—		111		244		233
Mr. Li Yongwu^(iv)		161		—		—		161		252		241
Mr. Cui Junhui^(iv)		—		—		—		—		255		260
Mr. Chen Zhiwu		228		—		—		228		219		242
Mr. Richard H. Matzke^(iv)		116		—		—		116		—		—
Mr. Lin Boqiang^(iv)		172		—		—		172		—		—
Mr. Zhang Biyi^(iv)		153		—		—		153		—		—

		1,094		—		—		1,094		1,213		1,198

Supervisors:
Mr. Guo Jinping		—		—		—		—		—		—
Mr. Sun Xianfeng^(v)		—		—		—		—		—		—
Mr. Li Qingyi^(v)		—		—		—		—		—		—
Mr. Zhang Fengshan^(vi)		—		—		—		—		—		—
Mr. Jia Yimin^(vi)		—		—		—		—		—		—
Mr. Jiang Lifu^(vi)		—		—		—		—		—		—
Mr. Wang Guangjun^(vi)		—		461		22		483		779		794
Mr. Li Luguang^(vi)		—		510		19		529		—		—
Mr. Yao Wei		—		737		56		793		857		854
Mr. Liu Hehe		—		591		24		615		710		726
Mr. Yang Hua^(vi)		—		445		9		454		—		—
Mr. Li Jiamin^(vi)		—		593		37		630		—		—
Mr. Wang Daocheng^(vi)		112		—		—		112		228		228
Mr. Fan Fuchun^(v)(vi)		106		—		—		106		145		—

		218		3,337		167		3,722		2,719		2,602

		1,312		5,363		279		6,954		7,467		5,858

F-23

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(i)	Mr. Zhou Jiping was elected as the chairman and ceased being the vice chairman from April 25, 2013.

(ii)	Mr. Wang Dongjin was elected as the vice chairman from May 22, 2014, Mr. Wang Dongjin is also as the Chief Executive.

(iii)

Mr. Liu Hongbin was elected as the executive director from May 22, 2014.

(iv)	Mr. Li Xinhua, Mr.Wang Guoliang, Mr. Liu Hongru, Mr. Franco Bernabè, Mr. Li Yongwu and Mr. Cui Junhui ceased being directors from May 22, 2014; Mr. Shen Diancheng, Mr. Liu Yuezhen, Mr. Richard H. Matzke and Mr. Lin Boqiang were elected as directors from May 22, 2014.

Mr. Zhang Biyi was elected as a director from October 29, 2014.

(v)	Mr. Sun Xianfeng ceased being a supervisor from May 23, 2013, and Mr. Li Qingyi and Mr. Fan Fuchun were elected as supervisors from that date.

(vi)	Mr. Wang Guangjun, Mr. Wang Daocheng and Mr. Fan Fuchun ceased being supervisors from May 22, 2014; Mr. Zhang Fengshan, Mr. Jia Yimin, Mr. Li Luguang, Mr. Li Jiamin were elected as supervisors from May 22, 2014.

Mr. Li Luguang ceased being supervisors from August 26, 2014.

Mr. Jiang Lifu and Mr. Yang Hua were elected as supervisors from October 29, 2014.

(vii)

Emoluments set out above exclude RMB 3.31 paid to directors of the Company for the year of 2010, 2011 and 2012 of the deferred merit pay in accordance with relevant requirements by the PRC government in 2013.

(viii)

The emoluments received by the following persons are not reflected in the analysis shown above:

Mr. Jiang Jiemin ceased being the chairman from March 18, 2013, and received no emoluments from the Company during the year 2014, 2013 and 2012; Mr. Liao Yongyuan ceased being the non-executive director and vice chairman from March 17, 2015, and emoluments received from the Company during the year 2014, 2013 and 2012 were RMB nil, RMB 1.124 and RMB 0.976 respectively; Mr. Ran Xinquan ceased being the executive director from August 26, 2013, and emoluments received from the Company during the year 2014, 2013 and 2012 were RMB nil, RMB 0.402 and RMB 0.930, respectively; Mr. Wang Lixin ceased being the supervisor from August 26, 2014, and received no emoluments from the Company during the year 2014, 2013 and 2012; Mr. Wen Qingshan ceased being the supervisor from December 17, 2013, and received no emoluments from the Company during the year 2014, 2013 and 2012.

None of the directors and supervisors has waived their remuneration during the year ended December 31, 2014 except for Mr. Cui Junhui (2013: None, 2012: None).

The five highest paid individuals in the Company for the year ended December 31, 2014 include five directors whose emoluments are reflected in the analysis shown above and the note.

The five highest paid individuals in the Company for the year ended December 31, 2013 include four directors and one supervisor whose emoluments are reflected in the analysis shown above and the note.

During 2014, 2013 and 2012, the Company did not incur any severance payment to any director for loss of office or any payment as inducement to any director to join the Company.

12	INCOME TAX EXPENSE


	2014			2013			2012
	RMB			RMB			RMB
Current taxes		41,007			52,112			35,916
Deferred taxes (Note 31)		(3,276	)		(16,323	)		275

		37,731			35,789			36,191

F-24

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

In accordance with the relevant PRC income tax rules and regulations, the PRC corporate income tax rate applicable to the Group is principally 25%. Operations of the Group in western regions in China qualified for certain tax incentives in the form of a preferential income tax rate of 15% through the year 2020.

The tax on the Group’s profit before taxation differs from the theoretical amount that would arise using the corporate income tax rate in the PRC applicable to the Group as follows:


	2014			2013			2012
	RMB			RMB			RMB
Profit before income tax expense		156,759			178,063			166,811

Tax calculated at a tax rate of 25%		39,190			44,516			41,703
Prior year tax adjustment		1,900			1,005			92
Effect of income taxes from international operations in excess of taxes at the PRC statutory tax rate		2,302			2,351			3,106
Effect of preferential tax rate		(6,948	)		(15,687	)		(8,461	)
Tax effect of income not subject to tax		(4,953	)		(3,743	)		(4,036	)
Tax effect of expenses not deductible for tax purposes		6,240			7,347			3,787

Income tax expense		37,731			35,789			36,191

13	PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

The profit attributable to owners of the Company is dealt with in the consolidated financial statements of the Group to the extent of RMB 107,172 for the year ended December 31, 2014 (2013: RMB 129,599, 2012: RMB 115,326).

14	BASIC AND DILUTED EARNINGS PER SHARE

Basic and diluted earnings per share for the year ended December 31, 2014, 2013 and 2012 have been computed by dividing profit for the year attributable to owners of the Company by 183,021 million shares issued and outstanding for the year.

There are no potentially dilutive ordinary shares.

15	DIVIDENDS


	2014		2013		2012
	RMB		RMB		RMB
Interim dividends attributable to owners of the Company for 2014^(a)		30,656		—		—
Proposed final dividends attributable to owners of the Company for 2014^(b)		17,572		—		—
Interim dividends attributable to owners of the Company for 2013^(c)		—		29,485		—
Final dividends attributable to owners of the Company for 2013^(d)		—		28,835		—
Interim dividends attributable to owners of the Company for 2012^(e)		—		—		27,912
Final dividends attributable to owners of the Company for 2012^(f)		—		—		23,985

		48,228		58,320		51,897

F-25

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(a)	Interim dividends attributable to owners of the Company in respect of 2014 of RMB 0.16750 yuan per share amounting to a total of RMB 30,656 were paid on September 19, 2014 (A shares) and September 29, 2014 (H shares).

(b)

At the fifth meeting of the Sixth Session of the Board of the Company, the Board of Directors proposed final dividends attributable to owners of the Company in respect of 2014 of RMB 0.09601 yuan per share amounting to a total of RMB 17,572. These consolidated financial statements do not reflect this dividend payable as the final dividends were proposed after the reporting period and will be accounted for in equity as an appropriation of retained earnings in the year ending December 31, 2015 when approved at the forthcoming Annual General Meeting.

(c)	Interim dividends attributable to owners of the Company in respect of 2013 of RMB 0.16110 yuan per share amounting to a total of RMB 29,485 were paid on October 24, 2013.

(d)	Final dividends attributable to owners of the Company in respect of 2013 of RMB 0.15755 yuan per share amounting to a total of RMB 28,835 were paid on July 17, 2014.

(e)	Interim dividends attributable to owners of the Company in respect of 2012 of RMB 0.15250 yuan per share amounting to a total of RMB 27,912 were paid on October 24, 2012.

(f)	Final dividends attributable to owners of the Company in respect of 2012 of RMB 0.13106 yuan per share amounting to a total of RMB 23,985 were paid on July 18, 2013.

16	PROPERTY, PLANT AND EQUIPMENT


Year Ended December 31, 2014	Buildings			Oil and Gas Properties			Equipment and Machinery			Motor Vehicles			Other			Construction in Progress			Total
	RMB			RMB			RMB			RMB			RMB			RMB			RMB
Cost
At beginning of the year		177,705			1,495,374			759,411			27,743			17,412			288,538			2,766,183
Additions		1,406			43,935			5,160			1,127			890			251,670			304,188
Transfers		14,618			167,979			97,759			—			1,284			(281,640	)		—
Disposals or write offs		(1,974	)		(8,635	)		(12,519	)		(692	)		(348	)		(12,063	)		(36,231	)
Currency translation differences		271			(10,499	)		264			39			107			(411	)		(10,229	)

At end of the year		192,026			1,688,154			850,075			28,217			19,345			246,094			3,023,911

Accumulated depreciation and impairment
At beginning of the year		(59,919	)		(694,318	)		(339,545	)		(15,967	)		(7,493	)		(118	)		(1,117,360	)
Charge for the year and others		(9,713	)		(121,810	)		(40,541	)		(2,021	)		(1,670	)		(5	)		(175,760	)
Disposals or write offs or transfers		1,041			4,935			6,766			621			246			12			13,621
Currency translation differences		(58	)		3,481			(81	)		(14	)		(51	)		2			3,279

At end of the year		(68,649	)		(807,712	)		(373,401	)		(17,381	)		(8,968	)		(109	)		(1,276,220	)

Net book value
At end of the year		123,377			880,442			476,674			10,836			10,377			245,985			1,747,691

F-26

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)



Year Ended December 31, 2013	Buildings			Oil and Gas Properties			Equipment and Machinery			Motor Vehicles			Other			Construction in Progress			Total
	RMB			RMB			RMB			RMB			RMB			RMB			RMB
Cost
At beginning of the year		164,233			1,329,957			735,346			28,479			15,991			290,995			2,565,001
Additions		2,355			14,004			5,085			1,971			707			290,224			314,346
Transfers		16,608			167,015			94,650			—			1,676			(279,949	)		—
Disposals or write offs		(5,251	)		(7,017	)		(75,378	)		(2,663	)		(627	)		(12,038	)		(102,974	)
Currency translation differences		(240	)		(8,585	)		(292	)		(44	)		(335	)		(694	)		(10,190	)

At end of the year		177,705			1,495,374			759,411			27,743			17,412			288,538			2,766,183

Accumulated depreciation and impairment
At beginning of the year		(52,820	)		(596,428	)		(324,356	)		(14,854	)		(6,540	)		(115	)		(995,113	)
Charge for the year and others		(8,894	)		(104,308	)		(42,506	)		(2,244	)		(1,388	)		(7	)		(159,347	)
Disposals or write offs or transfers		1,720			4,389			27,201			1,107			346			4			34,767
Currency translation differences		75			2,029			116			24			89			—			2,333

At end of the year		(59,919	)		(694,318	)		(339,545	)		(15,967	)		(7,493	)		(118	)		(1,117,360	)

Net book value
At end of the year		117,786			801,056			419,866			11,776			9,919			288,420			1,648,823

The depreciation charge of the Group for the year ended December 31, 2014 included impairment losses of RMB 3,685 (2013: RMB 3,857 primarily related to certain of the Group’s chemical production facilities, 2012: RMB 458 and RMB 981 primarily related to certain of the Group’s oil and gas properties and refinery and chemical production facilities respectively) primarily related to oil and gas wells facilities. The impairment of these properties is due primarily to higher production costs and operating costs. The carrying values of these assets were written down to their recoverable values.

The following table indicates the changes to the Group’s exploratory well costs, which are included in construction in progress, for the years ended December 31, 2014, 2013 and 2012.


	2014			2013			2012
	RMB			RMB			RMB
At beginning of the year		24,507			22,338			20,184
Additions to capitalized exploratory well costs pending the determination of proved reserves		26,504			30,640			28,639
Reclassified to wells, facilities, and equipment based on the determination of proved reserves		(18,070	)		(16,433	)		(14,568	)
Capitalized exploratory well costs charged to expense		(12,063	)		(12,038	)		(11,917	)

At end of the year		20,878			24,507			22,338

F-27

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed.


	December 31, 2014		December 31, 2013
	RMB		RMB
One year or less		14,913		18,736
Over one year		5,965		5,771

Balance at December 31		20,878		24,507

RMB 5,965 at December 31, 2014 (December 31, 2013: RMB 5,771) of capitalized exploratory well costs over one year are principally related to wells that are under further evaluation of drilling results or pending completion of development planning to ascertain economic viability.

17	INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The summarized financial information of the Group’s principal associates and joint ventures, including the aggregated amounts of assets, liabilities, turnover, profit or loss and the interest held by the Group were as follows:

Name

Country of
Incorporation

Registered
Capital

Principle Activities

Interest Held

Direct %

Indirect %

As of or for the year ended December 31, 2014

Dalian West Pacific Petrochemical Co., Ltd.

PRC

USD 258
million

Production and

sale of petroleum and petrochemical products

28.44

—

China Marine Bunker (PetroChina) Co., Ltd.

PRC

1,000

Oil import and

export trade and transportation, sale and storage

—

50.00

China Petroleum Finance Co., Ltd.

PRC

5,441

Deposits, loans, settlement, lending, bills acceptance discounting, guarantee and other banking business

49.00

—

Arrow Energy Holdings Pty Ltd.

Australia

AUD 2

Exploration, development and sale of coal seam gas

—

50.00

PetroChina United Pipelines Co., Ltd.⁽ⁱ⁾

PRC

40,000

Storage and transportation of natural gas through pipeline, construction and related technology consulting of petroleum and natural gas pipeline

50.00

—

CNPC Captive Insurance Co., Ltd.⁽ⁱⁱ⁾

PRC

5,000

Property loss insurance, liability insurance, credit insurance and deposit insurance; as well as the application of the above insurance reinsurance and insurance capital business

49.00

—

F-28

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(i)	In June 2013, PetroChina United Pipelines Company Limited, in which the Group has a 50% equity interest, was established with a registered capital of 40,000 million.

(ii)	In December 2013, CNPC Captive Insurance Company Limited, in which the Group has a 49% equity interest, was established with a registered capital of 5,000 million.

Dividends received and receivable from associates and joint ventures were RMB 11,815 in 2014 (2013: RMB 9,226, 2012: RMB 5,345).

In 2014, investments in associates and joint ventures of RMB 71 (2013: RMB 238, 2012: RMB 29) were disposed of, resulting in a gain of RMB 41 (2013: a gain of RMB 11, 2012: a gain of RMB 3).

In 2014, the share of profit and other comprehensive income in all individually immaterial associates and joint ventures accounted for using equity method in aggregate was RMB 5,661 (2013: RMB 7,313, 2012: RMB 8,144) and RMB 113 (2013: RMB 15, 2012: RMB 2), respectively.

Interest in Associates

Summarized financial information in respect of the Group’s principal associates and reconciliation to carrying amount is as follows:


	Dalian West Pacific Petrochemical Co., Ltd.						China Petroleum Finance Co., Ltd.				CNPC Captive Insurance Co., Ltd.
	December 31, 2014			December 31, 2013			December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
	RMB			RMB			RMB		RMB		RMB		RMB
Percentage ownership interest (%)		28.44			28.44			49.00		49.00		49.00		49.00
Current assets		5,564			8,891			354,634		336,964		7,689		5,055
Non-current assets		3,472			2,960			285,833		312,244		1,010		13
Current liabilities		12,473			15,718			526,866		561,876		3,527		69
Non-current liabilities		2,368			391			74,876		52,054		—		—
Net (liabilities) / assets		(5,805	)		(4,258	)		38,725		35,278		5,172		4,999
Group’s share of net assets		—			—			18,975		17,286		2,534		2,449
Goodwill		—			—			349		349		—		—
Carrying amount of interest in associates		—			—			19,324		17,635		2,534		2,449

Summarized statement of comprehensive income is as follows:


	Dalian West Pacific Petrochemical Co., Ltd.									China Petroleum Finance Co., Ltd.							CNPC Captive Insurance Co., Ltd.
	2014			2013			2012			2014		2013			2012		2014		2013			2012
	RMB			RMB			RMB			RMB		RMB			RMB		RMB		RMB			RMB
Turnover		38,983			34,839			38,738			9,703		9,672			13,824		376		37			NA
(Loss) / profit for the year		(1,465	)		(828	)		(1,974	)		5,432		5,237			4,688		173		(1	)		NA
Other comprehensive income / (loss)		—			—			—			561		(588	)		240		—		—			NA

Total comprehensive (loss)/ income		(1,465	)		(828	)		(1,974	)		5,993		4,649			4,928		173		(1	)		NA

Group’s share of total comprehensive income/ (loss)		—			—			—			2,937		2,278			2,415		85		(1	)		NA

Dividends received by the Group		—			—			—			1,248		—			12		—		—			NA

F-29

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Interest in Joint Ventures

Summarized balance sheet in respect of the Group’s principal joint ventures and reconciliation to carrying amount is as follows:


	China Marine Bunker (PetroChina) Co., Ltd.				Arrow Energy Holdings Pty Ltd.						PetroChina United Pipelines Co., Ltd.
	December 31, 2014		December 31, 2013		December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
	RMB		RMB		RMB			RMB			RMB			RMB
Percentage ownership interest (%)		50.00		50.00		50.00			50.00			50.00			50.00
Non-current assets		1,966		2,059		42,363			45,271			73,861			81,015
Current assets		6,060		5,976		709			1,060			13,900			1,969
Including: cash and cash equivalents		1,585		1,496		460			582			266			6
Non-current liabilities		707		718		18,973			16,974			—			—
Including: Non-current financial liabilities excluding trade and other payables and provisions		518		510		11,873			9,530			—			—
Current liabilities		4,806		4,755		1,237			1,944			2,034			2,527
Including: Current financial liabilities excluding trade and other payables and provisions		2,277		1,656		257			253			—			—
Net assets		2,513		2,562		22,862			27,413			85,727			80,457
Net assets attributable to owners		2,406		2,370		22,862			27,413			85,727			80,457
Group’s share of net assets		1,203		1,185		11,431			13,706			42,864			40,229
Elimination of unrealized profit		—		—		—			—			(4,473	)		(4,694	)
Elimination of transactions with the Group		—		—		(38	)		(28	)		—			—
Carrying amount of interest in joint ventures		1,203		1,185		11,393			13,678			38,391			35,535

Summarized statement of comprehensive income and dividends received by the group is as follows:


	China Marine Bunker (PetroChina) Co., Ltd.									Arrow Energy Holdings Pty Ltd.									PetroChina United Pipelines Co., Ltd.
	2014			2013			2012			2014			2013			2012			2014			2013			2012
	RMB			RMB			RMB			RMB			RMB			RMB			RMB			RMB			RMB
Turnover		53,552			56,464			58,018			1,120			1,188			1,162			18,566			10,326			NA
Depreciation, depletion and amortization		(86	)		—			—			(553	)		(543	)		(662	)		(4,004	)		(2,209	)		NA
Interest income		48			18			17			11			14			21			631			3			NA
Interest expense		(71	)		(79	)		(92	)		(1,052	)		(987	)		(822	)		(9	)		—			NA
Income tax expense		(20	)		(34	)		(26	)		—			(1,459	)		(1,465	)		(2,297	)		(1,095	)		NA
Net profit / (loss)		101			73			(618	)		(4,439	)		(3,910	)		(3,592	)		8,919			4,333			NA
Total comprehensive (loss) / income 100%		(9	)		43			(616	)		(4,684	)		(6,608	)		(1,005	)		8,919			4,333			NA
Total comprehensive (loss) / income by share		(14	)		22			(308	)		(2,342	)		(3,304	)		(503	)		4,460			2,167			NA
Elimination of unrealized profit		—			—			—			—			—			—			221			(4,694	)		NA
Group’s share of profit and total comprehensive (loss)/ income		(14	)		22			(308	)		(2,342	)		(3,304	)		(503	)		4,681			(2,527	)		NA
Dividends received by the Group		11			—			—			—			—			—			1,950			1,950			NA

F-30

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

18	AVAILABLE-FOR-SALE FINANCIAL ASSETS


	December 31, 2014			December 31, 2013
	RMB			RMB
Available-for-sale financial assets		2,489			1,961
Less: Impairment losses		(319	)		(320	)

		2,170			1,641

Available-for-sale financial assets comprise principally unlisted equity securities and bonds.

In 2014, available-for-sale financial assets of RMB 67 (2013: RMB 51, 2012: RMB 25) were disposed of, resulting in the realization of a gain of RMB 100 (2013: a loss of RMB 10, 2012: a gain of RMB 45).

19	SUBSIDIARIES

The principal subsidiaries of the Group are:

Company Name

Country of
Incorporation

Issued
Capital
RMB

Type of
Legal
Entity

Attributable
Equity
Interest %

Voting
rights%

Principal Activities

Daqing Oilfield Company Limited

PRC

47,500

Limited
liability
company

100.00

Exploration, production and sale of crude oil and natural gas

CNPC Exploration and Development Company Limited⁽ⁱ⁾

PRC

16,100

Limited
liability
company

50.00

57.14

Exploration, production and sale of crude oil and natural gas in and outside the PRC

PetroChina Hong Kong Limited

Hong Kong

HK Dollar
7,592

Limited
liability
company

100.00

Investment holding. The principal activities of its subsidiaries, associates and joint ventures are the exploration, production and sale of crude oil in and outside the PRC as well as natural gas sale and transmission in the PRC

PetroChina International Investment Company Limited

PRC

31,314

Limited
liability
company

100.00

Investment holding. The principal activities of its subsidiaries and joint ventures are the exploration, development and production of crude oil, natural gas, oilsands and coalbed methane outside the PRC

F-31

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Company Name

Country of
Incorporation

Issued
Capital
RMB

Type of
Legal
Entity

Attributable
Equity
Interest %

Voting
rights%

Principal Activities

PetroChina International Company Limited

PRC

14,000

Limited
liability
company

100.00

Marketing of refined products and trading of crude oil and petrochemical products, storage, investment in refining, chemical engineering, storage facilities, service station, and transportation facilities and related business in and outside the PRC

PetroChina Northwest United Pipeline Company Limited

PRC

62,500

Limited
liability
company

52.00

Storage, transportation and development of crude oil and natural gas, construction and related technology consulting of petroleum and natural gas pipeline project, import and export of goods and technology, purchase and sale of materials in the PRC

PetroChina East Pipeline Company Limited⁽ⁱⁱ⁾

PRC

10,000

Limited
liability
company

100.00

Construction and related technology consulting of petroleum and natural gas pipeline project, import and export of goods and technology, technology promotion service, oil and gas pipeline transportation in the PRC

(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.

(ii)	In May 2014, PetroChina East Pipeline Company Limited, in which the Group has 100% equity interest, was established with a registered capital of RMB 10,000.

F-32

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Summarized financial information in respect of the Group’s principal subsidiaries with significant non-controlling interests as follows:


	CNPC Exploration and Development Company Limited						PetroChina Northwest United Pipeline Company Limited
	December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
	RMB			RMB			RMB			RMB
Percentage ownership interest (%)		50	%		50	%		52	%		52	%
Current assets		23,164			19,976			30,655			32,988
Non-current assets		127,503			134,796			38,148			30,530
Current liabilities		18,990			26,789			5,808			152
Non-current liabilities		19,496			20,749			—			—
Net assets		112,181			107,234			62,995			63,366

Summarized statement of comprehensive income is as follows:


	CNPC Exploration and Development Company Limited						PetroChina Northwest United Pipeline Company Limited
	2014		2013		2012		2014		2013		2012
	RMB		RMB		RMB		RMB		RMB		RMB
Turnover		52,258		63,260		63,685		658		186		—
Profit from continuing operations		12,473		12,700		18,658		408		882		(19	)
Total comprehensive income		9,549		9,568		18,414		408		882		(19	)
Profit allocated to non-controlling interests		7,535		8,424		11,744		196		424		(9	)
Dividends paid to non-controlling interests		3,268		3,534		7,583		373		—		—

Summarized statement of cash flows as follows:


	CNPC Exploration and Development Company Limited									PetroChina Northwest United Pipeline Company Limited
	2014			2013			2012			2014			2013			2012
	RMB			RMB			RMB			RMB			RMB			RMB
Net cash inflow / (outflow) from operating activities		13,792			9,523			18,071			(58	)		(257	)		—
Net cash inflow/ (outflow) from investing activities		18,060			(5,876	)		(14,481	)		836			(24,743	)		(37,500	)
Net cash (outflow) / inflow from financing activities		(7,731	)		(5,152	)		(2,204	)		1,523			25,000			37,500
Effect of foreign exchange rate changes on cash and cash equivalents		(44	)		(420	)		271			—			—			—
Net increase/(decrease) in cash and cash equivalents		24,077			(1,925	)		1,657			2,301			—			—
Cash and cash equivalents at the beginning of the year		2,793			4,718			3,061			—			—			—
Cash and cash equivalents at the end of the year		26,870			2,793			4,718			2,301			—			—

20	ADVANCE OPERATING LEASE PAYMENTS


	December 31, 2014		December 31, 2013
	RMB		RMB
Land use rights		48,702		45,194
Advance lease payments		17,639		17,255

		66,341		62,449

Advance operating lease payments are amortized over the related lease terms using the straight-line method.

F-33

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

21	INTANGIBLE AND OTHER NON-CURRENT ASSETS


	December 31, 2014							December 31, 2013
	Cost		Accumulated amortization			Net		Cost		Accumulated amortization			Net
	RMB		RMB			RMB		RMB		RMB			RMB
Patents and technical know-how		6,979		(4,275	)		2,704		6,698		(3,809	)		2,889
Computer software		8,244		(5,004	)		3,240		6,416		(3,833	)		2,583
Goodwill⁽ⁱ⁾		7,233		—			7,233		7,225		—			7,225
Other		17,497		(4,819	)		12,678		15,832		(4,075	)		11,757

Intangible assets		39,953		(14,098	)		25,855		36,171		(11,717	)		24,454

Other assets							37,107							42,816

							62,962							67,270

(i)

Goodwill primarily relates to the acquisition of Singapore Petroleum Company and Petroineos Trading Limited, completed in 2009 and 2011 respectively. The recoverable amount of all cash-generating units has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management. The discount rates used are pre-tax and reflect specific risks relating to the cash-generating unit. Based on the estimated recoverable amount, no impairment was identified.

22	INVENTORIES


	December 31, 2014			December 31, 2013
	RMB			RMB
Crude oil and other raw materials		59,870			94,823
Work in progress		13,165			17,529
Finished goods		95,154			115,247
Spare parts and consumables		39			49

		168,228			227,648
Less: Write down in inventories		(2,251	)		(631	)

		165,977			227,017

The carrying amounts of inventories of the Group, which are carried at net realizable value, amounted to RMB 6,025 at December 31, 2014 (December 31, 2013: RMB 5,426).

23	ACCOUNTS RECEIVABLE


	December 31, 2014			December 31, 2013
	RMB			RMB
Accounts receivable		53,620			64,523
Less: Provision for impairment of receivables		(516	)		(496	)

		53,104			64,027

F-34

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

The aging analysis of accounts receivable (net of impairment of accounts receivable) based on the invoice date (or date of revenue recognition, if earlier), at December 31, 2014 and 2013 is as follows:


	December 31, 2014		December 31, 2013
	RMB		RMB
Within 1 year		51,878		63,443
Between 1 and 2 years		862		475
Between 2 and 3 years		282		41
Over 3 years		82		68

		53,104		64,027

The Group offers its customers credit terms up to 180 days.

Movements in the provision for impairment of accounts receivable are as follows:


	2014			2013			2012
	RMB			RMB			RMB
At beginning of the year		496			585			850
Provision for impairment of accounts receivable		74			8			6
Receivables written off as uncollectible		(16	)		(36	)		(236	)
Reversal of provision for impairment of accounts receivable		(38	)		(61	)		(35	)

At end of the year		516			496			585

24	PREPAID EXPENSES AND OTHER CURRENT ASSETS


	December 31, 2014			December 31, 2013
	RMB			RMB
Other receivables		19,564			20,328
Advances to suppliers		22,977			11,462

		42,541			31,790
Less: Provision for impairment		(2,488	)		(2,543	)

		40,053			29,247
Value-added tax to be deducted		37,485			33,484
Prepaid expenses		989			945
Other current assets		4,852			4,623

		83,379			68,299

25	NOTES RECEIVABLE

Notes receivable represent mainly bills of acceptance issued by banks for the sale of goods and products. All notes receivable are due within one year.

26	CASH AND CASH EQUIVALENTS

The weighted average effective interest rate on bank deposits was 2.23% per annum for the year ended December 31, 2014 (2013: 2.03% per annum, 2012: 2.33% per annum).

F-35

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

27	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES


	December 31, 2014		December 31, 2013
	RMB		RMB
Trade payables		84,929		130,353
Advances from customers		54,007		46,804
Salaries and welfare payable		5,903		4,836
Accrued expenses		164		137
Dividends payable by subsidiaries to non-controlling shareholders		274		1,017
Interest payable		2,621		2,861
Construction fee and equipment cost payables		155,324		167,722
Other		60,838		29,274

		364,060		383,004

Other consists primarily of loans borrowed from foreign enterprises and customer deposits.

The aging analysis of trade payables at December 31, 2014 and 2013 is as follows:


	December 31, 2014		December 31, 2013
	RMB		RMB
Within 1 year		79,903		125,459
Between 1 and 2 years		2,898		2,756
Between 2 and 3 years		1,059		911
Over 3 years		1,069		1,227

		84,929		130,353

28	BORROWINGS


	December 31, 2014		December 31, 2013
	RMB		RMB
Short-term borrowings excluding current portion of long-term borrowings		115,333		110,894
Current portion of long-term borrowings		53,795		81,873

		169,128		192,767
Long-term borrowings		370,301		302,862

		539,429		495,629

Borrowings of the Group of RMB 50,878 were guaranteed by CNPC, its fellow subsidiaries and a third party at December 31, 2014 (December 31, 2013: RMB 44,052).

The Group’s borrowings include secured liabilities totaling RMB 3,367 at December 31, 2014 (December 31, 2013: RMB 5,604). These borrowings are majority secured over certain of the Group’s time deposits with maturities over one year amounting to RMB 3,301 (December 31, 2013: RMB 5,486 of the Group’s time deposits with maturities over one year and property, plant and equipment).

F-36

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)


	December 31, 2014			December 31, 2013
	RMB			RMB
Total borrowings:
— interest free		1,345			181
— at fixed rates		339,624			335,749
— at floating rates		198,460			159,699

		539,429			495,629

Weighted average effective interest rates:
— bank loans		1.90	%		2.34	%
— corporate debentures		4.59	%		4.59	%
— medium-term notes		4.12	%		3.93	%
— other loans		4.15	%		4.26	%

The borrowings by major currency at December 31, 2014 and December 31, 2013 are as follows:


	December 31, 2014		December 31, 2013
	RMB		RMB
RMB		402,180		376,113
US Dollar		134,011		115,649
Other currency		3,238		3,867

		539,429		495,629

The fair values of the Group’s long-term borrowings including the current portion of long-term borrowings are RMB 416,017 (December 31, 2013: RMB 368,715) at December 31, 2014. The carrying amounts of short-term borrowings approximate their fair values.

The fair values are based on discounted cash flows using applicable discount rates based upon the prevailing market rates of interest available to the Group for financial instruments with substantially the same terms and characteristics at the dates of the statement of financial position. Such discount rates ranged from 0.27% to 6.18% per annum as of December 31, 2014 (December 31, 2013: 0.37% to 6.55% )depending on the type of the borrowings.

The following table sets out the borrowings’ remaining contractual maturities at the date of the statement of financial position, which are based on contractual undiscounted cash flows including principal and interest, and the earliest contractual maturity date:


	December 31, 2014		December 31, 2013
	RMB		RMB
Within 1 year		189,435		209,010
Between 1 and 2 years		76,999		72,992
Between 2 and 5 years		222,379		203,330
After 5 years		128,580		59,831

		617,393		545,163

F-37

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

29	SHARE CAPITAL


	December 31, 2014		December 31, 2013
	RMB		RMB
Registered, issued and fully paid:
A shares		161,922		161,922
H shares		21,099		21,099

		183,021		183,021

In accordance with the Restructuring Agreement between CNPC and the Company effective as of November 5, 1999, the Company issued 160 billion state-owned shares in exchange for the assets and liabilities transferred to the Company by CNPC. The 160 billion state-owned shares were the initial registered capital of the Company with a par value of RMB 1.00 yuan per share.

On April 7, 2000, the Company issued 17,582,418,000 shares, represented by 13,447,897,000 H shares and 41,345,210 ADSs (each representing 100 H shares) in a global initial public offering (“Global Offering”) and the trading of the H shares and the ADSs on the Stock Exchange of Hong Kong Limited and the New York Stock Exchange commenced on April 7, 2000 and April 6, 2000, respectively. The H shares and ADSs were issued at prices of HK$ 1.28 per H share and US$ 16.44 per ADS respectively for which the net proceeds to the Company were approximately RMB 20 billion. The shares issued pursuant to the Global Offering rank equally with existing shares.

Pursuant to the approval of the China Securities Regulatory Commission, 1,758,242,000 state-owned shares of the Company owned by CNPC were converted into H shares for sale in the Global Offering.

On September 1, 2005, the Company issued an additional 3,196,801,818 new H shares at HK$ 6.00 per share and net proceeds to the Company amounted to approximately RMB 19,692. CNPC also sold 319,680,182 state-owned shares it held concurrently with PetroChina’s sale of new H shares in September 2005.

On November 5, 2007, the Company issued 4,000,000,000 new A shares at RMB 16.70 yuan per share and net proceeds to the Company amounted to approximately RMB 66,243 and the listing and trading of the A shares on the Shanghai Stock Exchange commenced on November 5, 2007.

Following the issuance of the A shares, all the existing state-owned shares issued before November 5, 2007 held by CNPC have been registered with the China Securities Depository and Clearing Corporation Limited as A shares.

Shareholders’ rights are governed by the Company Law of the PRC that requires an increase in registered capital to be approved by the shareholders in shareholders’ general meetings and the relevant PRC regulatory authorities.

F-38

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

30	RESERVES


	2014			2013
	RMB			RMB
Capital Reserve
Beginning balance		133,308			133,308

Ending balance		133,308			133,308

Statutory Common Reserve Fund^(a)
Beginning balance		175,051			161,623
Transfer from retained earnings		9,686			13,436
Others		—			(8	)

Ending balance		184,737			175,051

Special Reserve-Safety Fund Reserve
Beginning balance		8,922			10,054
Safety fund reserve		1,423			(1,132	)

Ending balance		10,345			8,922

Currency Translation Differences
Beginning balance		(13,956	)		(5,115	)
Currency translation differences		(6,158	)		(8,841	)

Ending balance		(20,114	)		(13,956	)

Other Reserves
Beginning balance		(22,911	)		(22,689	)
Acquisition of subsidiaries		(48	)		—
Fair value gain on available-for-sale financial assets		106			37
Share of the other comprehensive income / (loss) of associates and joint ventures accounted for using the equity method		159			(218	)
Capital contribution from non-controlling interests		(9	)		(20	)
Disposal of subsidiaries		—			1
Other		(3	)		(22	)

Ending balance		(22,706	)		(22,911	)

		285,570			280,414

(a)

Pursuant to the PRC regulations and the Company’s Articles of Association, the Company is required to transfer 10% of its net profit, as determined under the PRC accounting regulations, to a Statutory Common Reserve Fund (“Reserve Fund”). Appropriation to the Reserve Fund may cease when the fund aggregates to 50% of the Company’s registered capital. The transfer to this reserve must be made before distribution of dividends to shareholders.

The Reserve Fund shall only be used to make good previous years’ losses, to expand the Company’s production operations, or to increase the capital of the Company. Upon approval of a resolution of shareholders’ in a general meeting, the Company may convert its Reserve Fund into share capital and issue bonus shares to existing shareholders in proportion to their original shareholdings or to increase the nominal value of each share currently held by them, provided that the balance of the Reserve Fund after such issuance is not less than 25% of the Company’s registered capital.

F-39

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

(b)	According to the relevant PRC regulations, the distributable reserve is the lower of the retained earnings computed under PRC accounting regulations and IFRS. As of December 31, 2014, the Company’s distributable reserve amounted to RMB 608,423 (December 31, 2013: RMB 580,720).

31	DEFERRED TAXATION

Deferred taxation is calculated on temporary differences under the liability method using a principal tax rate of 25%.

The movements in the deferred taxation account are as follows:


	Year Ended December 31,
	2014			2013			2012
	RMB			RMB			RMB
At beginning of the year		3,940			20,843			20,244
Transfer to profit and loss (Note 12)		(3,276	)		(16,323	)		275
Charge / (credit) to other comprehensive income		45			(6	)		14
Acquisition of subsidiaries		413			—			220
Currency translation differences		(217	)		(574	)		90

At end of the year		905			3,940			20,843

Deferred tax balances before offset are attributable to the following items:


	December 31, 2014		December 31, 2013
	RMB		RMB
Deferred tax assets:
Current:
Receivables and inventories		11,965		13,522
Tax losses		20,861		15,615
Non-current:
Impairment of long-term assets		6,773		7,362
Other		6,976		4,859

Total deferred tax assets		46,575		41,358

Deferred tax liabilities:
Non-current:
Accelerated tax depreciation		41,605		40,476
Other		5,875		4,822

Total deferred tax liabilities		47,480		45,298

Net deferred tax liabilities		905		3,940

Deferred tax balances after offset are listed as below:


	December 31, 2014		December 31, 2013
	RMB		RMB
Deferred tax assets		14,995		11,226
Deferred tax liabilities		15,900		15,166

There were no material unrecognized tax losses at December 31, 2014 and 2013.

F-40

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

32	ASSET RETIREMENT OBLIGATIONS


	2014			2013			2012
	RMB			RMB			RMB
At beginning of the year		94,531			83,928			68,702
Liabilities incurred		9,992			6,729			11,519
Liabilities settled		(418	)		(662	)		(490	)
Accretion expense (Note 10)		5,406			4,690			4,237
Currency translation differences		(357	)		(154	)		(40	)

At end of the year		109,154			94,531			83,928

Asset retirement obligations relate to oil and gas properties (Note 16).

33	PENSIONS

The Group participates in various employee retirement benefit plans (Note 3(t)). Expenses incurred by the Group in connection with the retirement benefit plans for the year ended December 31, 2014 amounted to RMB 15,674 (2013: RMB 14,855, 2012: RMB 13,400).

34	CONTINGENT LIABILITIES

(a) Bank and other guarantees

At December 31, 2014 and 2013, the Group did not guarantee related parties or third parties any borrowings or others.

(b) Environmental liabilities

China has adopted extensive environmental laws and regulations that affect the operation of the oil and gas industry. Under existing legislation, however, management believes that there are no probable liabilities, except for the amounts which have already been reflected in the consolidated financial statements, which may have a material adverse effect on the financial position of the Group.

(c) Legal contingencies

Notwithstanding certain insignificant lawsuits as well as other proceedings outstanding, management believes that any resulting liabilities will not have a material adverse effect on the financial position of the Group.

(d) Group insurance

The Group has insurance coverage for vehicles and certain assets that are subject to significant operating risks, third-party liability insurance against claims relating to personal injury, property and environmental damages that result from accidents and also employer liabilities insurance. The potential effect on the financial position of the Group of any liabilities resulting from future uninsured incidents cannot be estimated by the Group at present.

F-41

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

35	COMMITMENTS

(a) Operating lease commitments

Operating lease commitments of the Group are mainly for leasing of land, buildings and equipment. Leases range from 1 to 50 years and usually do not contain renewal options. Future minimum lease payments as of December 31, 2014 and 2013 under non-cancellable operating leases are as follows:


	December 31, 2014		December 31, 2013
	RMB		RMB
No later than 1 year		9,855		6,421
Later than 1 year and no later than 5 years		30,656		19,013
Later than 5 years		157,435		74,270

		197,946		99,704

(b) Capital commitments

At December 31, 2014, the Group’s capital commitments contracted but not provided for mainly relating to property, plant and equipment were RMB 63,027 (December 31, 2013: RMB 55,743).

The operating lease and capital commitments above are transactions mainly with CNPC and its fellow subsidiaries.

(c) Exploration and production licenses

The Company is obligated to make annual payments with respect to its exploration and production licenses to the Ministry of Land and Resources. Payments incurred were RMB 719 for the year ended December 31, 2014 (2013: RMB 717, 2012: RMB 758).

Estimated annual payments for the next five years are as follows:


	December 31, 2014		December 31, 2013
	RMB		RMB
Within one year		800		800
Between one and two years		800		800
Between two and three years		800		800
Between three and four years		800		800
Between four and five years		800		800

36	MAJOR CUSTOMERS

The Group’s major customers are as follows:


	2014				2013				2012
	Revenue		Percentage of Total revenue		Revenue		Percentage of Total revenue		Revenue		Percentage of Total revenue
	RMB		%		RMB		%		RMB		%
China Petroleum & Chemical Corporation		101,364		5		72,641		3		93,394		4
CNPC and its fellow subsidiaries		95,670		4		80,757		4		69,729		3

		197,034		9		153,398		7		163,123		7

F-42

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

37	RELATED PARTY TRANSACTIONS

CNPC, the controlling shareholder of the Company, is a state-controlled enterprise directly controlled by the PRC government.

Related parties include CNPC and its fellow subsidiaries, their associates and joint ventures, other state-owned enterprises and their subsidiaries which the PRC government has control, joint control or significant influence over and enterprises which the Group is able to control, jointly control or exercise significant influence over, key management personnel of the Company and CNPC and their close family members.

(a) Transactions with CNPC and its fellow subsidiaries, associates and joint ventures of the Group

The Group has extensive transactions with other companies in CNPC and its fellow subsidiaries. Due to these relationships, it is possible that the terms of the transactions between the Group and other members of CNPC and its fellow subsidiaries are not the same as those that would result from transactions with other related parties or wholly unrelated parties.

The principal related party transactions with CNPC and its fellow subsidiaries, associates and joint ventures of the Group which were carried out in the ordinary course of business, are as follows:

On August 25, 2011, based on the terms of the Comprehensive Products and Services Agreement amended in 2008, the Company and CNPC entered into a new Comprehensive Products and Services Agreement (“the Comprehensive Products and Services Agreement”) for a period of three years which took effect on January 1, 2012. The Comprehensive Products and Services Agreement provides for a range of products and services which may be required and requested by either party. The products and services to be provided by CNPC and its fellow subsidiaries to the Group under the Comprehensive Products and Services Agreement include construction and technical services, production services, supply of material services, social services, ancillary services and financial services. The products and services required and requested by either party are provided in accordance with (1) government-prescribed prices; or (2) where there is no government-prescribed price, with reference to relevant market prices; or (3) where neither (1) nor (2) is applicable, the actual cost incurred or the agreed contractual price. On the basis of the existing Comprehensive Products and Services Agreement, the Company and CNPC entered into a new Comprehensive Products and Services Agreement on August 28, 2014 for a period of three years which took effect on January 1, 2015. The new Comprehensive Products and Services Agreement has already incorporated the terms of the current Comprehensive Products and Services Agreement which was amended in 2011.

•

Sales of goods represent the sale of crude oil, refined products, chemical products and natural gas, etc. The total amount of these transactions amounted to RMB 148,712 in the year ended December 31, 2014 (2013: RMB 115,884, 2012: RMB 97,137).

•

Sales of services principally represent the provision of services in connection with the transportation of crude oil and natural gas, etc. The total amount of these transactions amounted to RMB 9,413 in the year ended December 31, 2014 (2013: RMB 9,139, 2012: RMB 8,392).

•

Purchases of goods and services principally represent construction and technical services, production services, social services, ancillary services and material supply services, etc. The total amount of these transactions amounted to RMB 409,397 in the year ended December 31, 2014 (2013: RMB 397,015, 2012: RMB 365,748).

•

Purchases of assets principally represent the purchases of manufacturing equipment, office equipment and transportation equipment, etc. The total amount of these transactions amounted to RMB 1,498 in the year ended December 31, 2014 (2013: RMB 1,228, 2012: RMB 1,009).

F-43

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

•

Amounts due from and to CNPC and its fellow subsidiaries, associates and joint ventures of the Group included in the following accounts captions are summarized as follows:


	December 31, 2014		December 31, 2013
	RMB		RMB
Accounts receivable		4,144		7,945
Prepayments and other receivables		3,830		5,532
Other non-current assets		13,899		19,067
Accounts payable and accrued liabilities		104,361		105,431
Other non-current liabilities		3,000		3,000

•

Interest income represents interest from deposits placed with CNPC and its fellow subsidiaries. The total interest income amounted to RMB 665 in the year ended December 31, 2014 (2013: RMB 429, 2012: RMB 503). The balance of deposits at December 31, 2014 was RMB 31,307 (December 31, 2013: RMB 16,839).

•

Purchases of financial service principally represents interest charged on the loans from CNPC and its fellow subsidiaries, insurance fee, etc. The total amount of these transactions amounted to RMB 15,089 in the year ended December 31, 2014 (2013: RMB 17,638, 2012: RMB 13,998).

•

The borrowings from CNPC and its fellow subsidiaries at December 31, 2014 were RMB 364,789 (December 31, 2013: RMB 327,478).

•

Rents and other payments made under financial leasing represent the payable by the Group (including all rents, leasing service fees and prices for exercising purchase options) for the period according to the financial leasing agreements entered into by the Group and CNPC and its fellow subsidiaries. The total rents and other payments made under financial leasing amounted to RMB 201 in the year ended December 31, 2014 (December 31, 2013: RMB 193, December 31, 2012: RMB nil).

On August 25, 2011, based on the Land Use Rights Leasing Contract signed in 2000, the Company and CNPC entered into a Supplemental Land Use Rights Leasing Contract which took effect on January 1, 2012. The Supplemental Land Use Rights Leasing Contract provides for the lease of land covering an aggregate area of approximately 1,783 million square meters located throughout the PRC at a maximal annual fee (exclusive of tax and government charges) of RMB 3,892. The Supplemental Land Use Rights Leasing Contract will expire at the same time as the Land Use Rights Leasing Contract. The area and total fee payable for the lease of all such property may be adjusted with the Company’s operating needs and by reference to market price every three years. The Company and CNPC each issued a confirmation letter to the Land Use Rights Leasing Contract on August 28, 2014, which adjusted the rental payable and the area for the leased land parcels. The Company agreed to rent from CNPC parcels of land with an aggregate area of approximately 1,777 million square meters with rental payable adjusted to approximately RMB 4,831 in accordance with the area of leased land parcels and the current situation of the property market. The Land Use Rights Leasing Contract shall remain unchanged, apart from the rental payable and the leased area. The confirmation letter shall be effective from January 1, 2015.

On August 25, 2011, based on the Buildings Leasing Contract and Supplemental Building Leasing Agreement, the Company and CNPC entered into a Revised Buildings Leasing Contract which took effect thereafter. Under this contract, buildings covering an aggregate area of 734,316 square meters were leased at an average annual fee of RMB 1,049 yuan per square meter. The Revised Building Leasing Contract will expire at the same time as the Building Leasing Agreement. The area and total fee payable for the lease of all such property may, every three years, be adjusted with the Company’s operating needs and by reference to market price which the adjusted prices will not exceed. The Company and CNPC each issued a confirmation letter to the

F-44

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Building Leasing Contract on August 28, 2014, which adjusted the rental payable and the gross floor area for the buildings leased. The Company agreed to lease from CNPC buildings with an aggregate gross floor area of approximately 1,179,586 square meters with rental payable adjusted to approximately RMB 708 in accordance with the gross floor area leased and the current situation of the market. The Building Leasing Contract shall remain unchanged apart from the rental payable and the gross floor area leased. The confirmation letter shall be effective from January 1, 2015.

(b) Key management compensation


	Year End December 31,
	2014		2013		2012
	RMB’000		RMB’000		RMB’000
Emoluments and other benefits		13,381		14,677		14,284
Contribution to retirement benefit scheme		751		822		779

		14,132		15,499		15,063

Note:

Emoluments set out above for the year ended December 31, 2014 exclude RMB nil paid to key management of the Company for the year of 2010, 2011 and 2012 of the deferred merit pay in accordance with relevant requirements by the PRC government (2013: RMB 9.07, 2012: RMB 0.50).

(c) Transactions with other state-controlled entities in the PRC

Apart from transactions with CNPC and its fellow subsidiaries, associates and joint ventures of the Group, the Group’s transactions with other state-controlled entities include but not limited to the following:

•

Sales and purchases of goods and services,

•

Purchases of assets,

•

Lease of assets; and

•

Bank deposits and borrowings

These transactions are conducted in the ordinary course of the Group’s business.

38	SEGMENT INFORMATION

The Group is principally engaged in a broad range of petroleum related products, services and activities. The Group’s operating segments comprise: Exploration and Production, Refining and Chemicals, Marketing, and Natural Gas and Pipeline. On the basis of these operating segments, the management of the Company assesses the segmental operating results and allocates resources. Sales between operating segments are conducted principally at market prices. Additionally, the Group presents geographical information based on entities located in regions with a similar risk profile.

The Exploration and Production segment is engaged in the exploration, development, production and marketing of crude oil and natural gas.

The Refining and Chemicals segment is engaged in the refining of crude oil and petroleum products, production and marketing of primary petrochemical products, and derivative petrochemical products and other chemical products.

F-45

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

The Marketing segment is engaged in the marketing of refined products and the trading business.

The Natural Gas and Pipeline segment is engaged in the transmission of natural gas, crude oil and refined products and the sale of natural gas.

The Head Office and Other segment relates to cash management and financing activities, the corporate center, research and development, and other business services supporting the operating business segments of the Group.

The accounting policies of the operating segments are the same as those described in Note 3 — “Summary of Principal Accounting Policies”.

The segment information for the operating segments for the year ended December 31, 2014, 2013 and 2012 are as follows:


	Year Ended December 31, 2014
	Exploration and Production			Refining and Chemicals			Marketing			Natural Gas and Pipeline			Head Office and Other			Total
	RMB			RMB			RMB			RMB			RMB			RMB
Turnover		777,574			846,082			1,938,501			284,262			3,027			3,849,446
Less: intersegment sales		(629,186	)		(668,002	)		(244,226	)		(24,398	)		(672	)		(1,566,484	)

Turnover from external customers		148,388			178,080			1,694,275			259,864			2,355			2,282,962

Depreciation, depletion and amortization		(129,221	)		(21,533	)		(11,709	)		(12,804	)		(2,196	)		(177,463	)
Profit / (loss) from operations		186,897			(23,560	)		5,421			13,126			(12,051	)		169,833
Finance costs:
Exchange gain																	5,020
Exchange loss																	(7,333	)
Interest income																	1,596
Interest expense																	(23,319	)

Total net finance costs																	(24,036	)

Share of profit of associates and joint ventures		3,476			36			31			4,692			2,727			10,962

Profit before income tax expense																	156,759
Income tax expense																	(37,731	)

Profit for the year																	119,028

Segment assets		1,216,424			339,374			365,433			491,079			1,515,043			3,927,353
Other assets																	15,955
Investments in associates and joint ventures		42,283			1,118			10,249			41,439			21,858			116,947
Elimination of intersegment balances^(a)																	(1,654,782	)

Total assets																	2,405,473

Capital expenditure		221,479			30,965			5,616			32,919			750			291,729
Segment liabilities		505,029			136,492			169,804			172,402			688,203			1,671,930
Other liabilities																	62,541
Elimination of intersegment balances^(a)																	(646,779	)

Total liabilities																	1,087,692

F-46

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)


	Year Ended December 31, 2013
	Exploration and Production			Refining and Chemicals			Marketing			Natural Gas and Pipeline			Head Office and Other			Total
	RMB			RMB			RMB			RMB			RMB			RMB
Turnover		783,694			871,815			1,946,806			232,751			2,687			3,837,753
Less: intersegment sales		(618,851	)		(681,687	)		(263,100	)		(15,360	)		(631	)		(1,579,629	)

Turnover from external customers		164,843			190,128			1,683,706			217,391			2,056			2,258,124

Depreciation, depletion and amortization		(115,528	)		(22,478	)		(11,280	)		(11,838	)		(2,241	)		(163,365	)
Profit/ (loss) from operations		189,698			(24,392	)		7,562			28,888			(13,114	)		188,642
Finance costs:
Exchange gain																	4,157
Exchange loss																	(4,105	)
Interest income																	2,222
Interest expense																	(23,081	)

Total net finance costs																	(20,807	)

Share of profit of associates and joint ventures		4,688			(6	)		509			2,490			2,547			10,228

Profit before income tax expense																	178,063
Income tax expense																	(35,789	)

Profit for the year																	142,274

Segment assets		1,162,903			366,602			372,049			437,900			1,509,573			3,849,027
Other assets																	11,226
Investments in associates and joint ventures		46,366			1,023			10,606			38,621			20,084			116,700
Elimination of intersegment balances^(a)																	(1,634,843	)

Total assets																	2,342,110

Capital expenditure		226,376			26,671			7,101			57,439			1,109			318,696
Segment liabilities		487,745			151,415			191,534			174,808			661,173			1,666,675
Other liabilities																	84,884
Elimination of intersegment balances^(a)																	(679,384	)

Total liabilities																	1,072,175

F-47

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)


	Year Ended December 31, 2012
	Exploration and Production			Refining and Chemicals			Marketing			Natural Gas and Pipeline			Head Office and Other			Total
	RMB			RMB			RMB			RMB			RMB			RMB
Turnover		789,818			883,218			1,890,558			202,196			2,530			3,768,320
Less: intersegment sales		(623,166	)		(702,275	)		(225,618	)		(21,562	)		(403	)		(1,573,024	)

Turnover from external customers		166,652			180,943			1,664,940			180,634			2,127			2,195,296

Depreciation, depletion and amortization		(103,838	)		(17,295	)		(10,004	)		(19,503	)		(1,335	)		(151,975	)
Profit/ (loss) from operations		214,955			(43,511	)		16,391			(2,110	)		(11,206	)		174,519
Finance costs:
Exchange gain																	3,339
Exchange loss																	(3,208	)
Interest income																	2,063
Interest expense																	(18,164	)

Total net finance costs																	(15,970	)

Share of profit of associates and joint ventures		5,758			(5	)		(17	)		179			2,347			8,262

Profit before income tax expense																	166,811
Income tax expense																	(36,191	)

Profit for the year																	130,620

Segment assets		1,126,937			385,443			371,614			444,570			1,551,350			3,879,914
Other assets																	1,443
Investments in associates and joint ventures		50,054			914			10,677			3,022			15,375			80,042
Elimination of intersegment balances^(a)																	(1,792,503	)

Total assets																	2,168,896

Capital expenditure		227,211			36,009			14,928			72,939			1,429			352,516
Segment liabilities		445,919			141,889			203,179			195,385			717,104			1,703,476
Other liabilities																	94,331
Elimination of intersegment balances^(a)																	(809,659	)

Total liabilities																	988,148

F-48

PETROCHINA COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Geographical information


	Turnover						Non-current assets^(b)
Year Ended December 31,	2014		2013		2012		2014		2013		2012
	RMB		RMB		RMB		RMB		RMB		RMB
Mainland China		1,479,183		1,503,897		1,492,636		1,738,389		1,674,106		1,579,874
Other		803,779		754,227		702,660		255,552		221,136		189,266

		2,282,962		2,258,124		2,195,296		1,993,941		1,895,242		1,769,140

(a)	Elimination of intersegment balances represents elimination of intersegment accounts and investments.

(b)	Non-current assets mainly include non-current assets other than financial instruments and deferred tax assets.

39	APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors on April 27, 2015.

40	EVENTS AFTER THE REPORTING PERIOD

(1) Increase of the Threshold of the Crude Oil Special Gain Levy

Pursuant to the Notice from the Ministry of Finance of the PRC ( the “MOF”) on the Increase of the Threshold of the Crude Oil Special Gain Levy ( Cai Shui [2014] No. 115), the threshold of the crude oil special gain levy will increase to US$65, which has 5 levels and is still calculated and charged according to the progressive and valorem rates on the excess amounts from January 1, 2015.

(2) Increase of the Consumption Tax of the Refined Oil

In accordance with the Notice on Continuing to Raise the Refined Oil Consumption Tax (Cai Shui [2015] No. 11) jointly issued by the MOF and the State Administration of Taxation of the PRC , the unit amount of the consumption tax on gasoline, naphtha, solvent oil and the lubricating oil and that on diesel, jet fuel and fuel oil will be raised from RMB 1.4 yuan per liter to RMB 1.52 yuan per liter and from RMB 1.1 yuan per liter to RMB 1.2 yuan per liter, respectively, commencing from January 13, 2015. Collection of tax on jet fuel will continue to be suspended.

(3) Adjustment of the Price of the Natural Gas for Non-residential Users

In accordance with the Notice on Concerning the Adjustment of the Price of Natural Gas Consumed by Non-residential Users (Fa Gai Jia Ge [2015] No. 351) issued by the National Development and Reform Commission, the price of domestic natural gas for the consumption amount in 2012 and for that exceeds 2012 level will be officially adjusted to the same level, commencing from April 1, 2015. In consideration of the price movement of alternative energy like fuel oil and liquefied petroleum gas in the second half of 2014 and the current pricing mechanism of natural gas, the citygate price ceiling for the consumption amount exceeds 2012 level will decrease by RMB 440.00 yuan per Kilostere, the citygate price ceiling for the consumption amount in 2012 will increase by RMB 40.00 yuan per Kilostere.

F-49

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED)

(All amounts in millions, except for the per share data and otherwise stated)

In accordance with the Accounting Standards Update 2010-03 Extractive Activities — Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures (an update of Accounting Standards Codification Topic 932 Extractive Activities — Oil and Gas or “ASC 932”) issued by the Financial Accounting Standards Board and corresponding disclosure requirements of the U.S. Securities and Exchange Commission, this section provides supplemental information on oil and gas exploration and development; and results of operation related to oil and gas producing activities of the Company and its subsidiaries (the “Group”) and also the Group’s investments that are accounted for using the equity method of accounting.

The supplemental information presented below covers the Group’s proved oil and gas reserves estimates, historical cost information pertaining to capitalized costs, costs incurred for property acquisitions, exploration and development activities, result of operations for oil and gas producing activities, standardized measure of estimated discounted future net cash flows and changes in estimated discounted future net cash flows.

The “Other” geographic area includes oil and gas producing activities principally in countries such as Kazakhstan, Venezuela and Indonesia. As the Group does not have significant reserves held through its investments accounted for using the equity method, information presented in relation to these equity method investments is presented in the aggregate.

Proved Oil and Gas Reserve Estimates

Proved oil and gas reserves cannot be measured exactly. Reserve estimates are based on many factors related to reservoir performance that require evaluation by the engineers interpreting the available data, as well as price and other economic factors. The reliability of these estimates at any point in time depends on both the quality and quantity of the technical and economic data, and the production performance of the reservoirs as well as engineering judgment. Consequently, reserve estimates are subject to revision as additional data become available during the producing life of a reservoir. When a commercial reservoir is discovered, proved reserves are initially determined based on limited data from the first well or wells. Subsequent data may better define the extent of the reservoir and additional production performance, well tests and engineering studies will likely improve the reliability of the reserve estimate. The evolution of technology may also result in the application of improved recovery techniques such as supplemental or enhanced recovery projects, or both, which have the potential to increase reserves.

Proved oil and gas reserves are the estimated quantities of crude oil and natural 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 the time at which 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.

Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period before the ending date of the period covered by this report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The costs shall be that prevailing at the end of the period.

F-50

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Proved developed oil and gas reserves are proved reserves that can be expected to be recovered:

a. 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.

b. Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

The taxes, fees and royalty in China are domestic tax schemes and are paid in cash to PRC authorities. The proved reserves include quantities that are ultimately produced and sold to pay these taxes, fees and royalty.

Proved reserve estimates as of December 31, 2014 were based on reports prepared by DeGolyer and MacNaughton, Gaffney, Cline & Associates, McDaniel & Associates, Ryder Scott and GLJ independent engineering consultants. Proved reserve estimates as of December 31, 2013 and 2012 were based on reports prepared by DeGolyer and MacNaughton, Gaffney, Cline & Associates, McDaniel & Associates and GLJ independent engineering consultants.

Estimated quantities of net proved crude oil and condensate and natural gas reserves and of changes in net quantities of proved developed and undeveloped reserves for each of the periods indicated are as follows:


	Crude Oil and Condensate			Natural Gas			Total — All products
	(millions of barrels)			(billions of cubic feet)			(million barrels of oil equivalent)
Proved developed and undeveloped reserves

The Group
Reserves at December 31, 2011		11,128			66,653			22,237
Changes resulting from:
Revisions of previous estimates		(16	)		(2,731	)		(471	)
Improved recovery		86			—			86
Extensions and discoveries		737			6,218			1,773
Production		(917	)		(2,559	)		(1,343	)

Reserves at December 31, 2012		11,018			67,581			22,282
Changes resulting from:
Revisions of previous estimates		(124	)		(6,415	)		(1,193	)
Improved recovery		84			—			84
Extensions and discoveries		775			10,959			2,601
Production		(933	)		(2,802	)		(1,400	)

Reserves at December 31, 2013		10,820			69,323			22,374
Changes resulting from:
Revisions of previous estimates		(16	)		(2,707	)		(467	)
Improved recovery		94			—			94
Extensions and discoveries		646			7,511			1,898
Sales		(5	)		—			(5	)
Production		(946	)		(3,029	)		(1,451	)

Reserves at December 31, 2014		10,593			71,098			22,443

F-51

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)


	Crude Oil and Condensate		Natural Gas		Total — All products
	(millions of barrels)		(billions of cubic feet)		(million barrels of oil equivalent)
Proved developed reserves at:
December 31, 2012		7,396		31,607		12,663
December 31, 2013		7,219		32,813		12,688
December 31, 2014		7,253		35,824		13,224
Proved undeveloped reserves at:
December 31, 2012		3,622		35,974		9,619
December 31, 2013		3,601		36,510		9,686
December 31, 2014		3,340		35,274		9,219
Equity method investments
Share of proved developed and undeveloped reserves of associates and joint ventures
December 31, 2012		517		181		547
December 31, 2013		494		416		563
December 31, 2014		500		449		575

At December 31, 2014, total proved developed and undeveloped reserves of the Group and equity method investments is 23,017 million barrels of oil equivalent (December 31, 2013: 22,937 million barrels of oil equivalent, December 31, 2012: 22,829 million barrels of oil equivalent), comprising 11,093 million barrels of crude oil and condensate (December 31, 2013: 11,314 million barrels, December 31, 2012: 11,535 million barrels) and 71,547 billions of cubic feet of natural gas (December 31, 2013: 69,739 billions of cubic feet, December 31, 2012: 67,762.4 billions of cubic feet).

At December 31, 2014, 9,735 million barrels (December 31, 2013: 9,977 million barrels, December 31, 2012: 10,219 million barrels) of crude oil and condensate and 69,836 billion cubic feet (December 31, 2013: 68,085 billion cubic feet, December 31, 2012: 66,446.1 billion cubic feet) of natural gas proved developed and undeveloped reserves of the Group are located within Mainland China, and 858 million barrels (December 31, 2013: 843 million barrels, December 31, 2012: 799 million barrels) of crude oil and condensate and 1,262 billion cubic feet (December 31, 2013: 1,238 billion cubic feet, December 31, 2012: 1,135.1 billion cubic feet) of natural gas proved developed and undeveloped reserves of the Group are located overseas.

Capitalized Costs


	December 31, 2014			December 31, 2013
	RMB			RMB
The Group
Property costs and producing assets		1,331,810			1,166,870
Support facilities		356,344			328,504
Construction-in-progress		113,247			120,745

Total capitalized costs		1,801,401			1,616,119
Accumulated depreciation, depletion and amortization		(807,712	)		(694,318	)

Net capitalized costs		993,689			921,801

Equity method investments
Share of net capitalized costs of associates and joint ventures		35,092			35,060

F-52

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Costs Incurred for Property Acquisitions, Exploration and Development Activities


	2014
	Mainland China		Other		Total
	RMB		RMB		RMB
The Group
Property acquisition costs		—		20,406		20,406
Exploration costs		34,457		1,954		36,411
Development costs		126,097		34,117		160,214

Total		160,554		56,477		217,031

Equity method investments
Share of costs of property acquisition, exploration and development of associates and joint ventures		—		5,292		5,292


	2013
	Mainland China		Other		Total
	RMB		RMB		RMB
The Group
Property acquisition costs		—		17,701		17,701
Exploration costs		38,051		5,238		43,289
Development costs		137,783		25,563		163,346

Total		175,834		48,502		224,336

Equity method investments
Share of costs of property acquisition, exploration and development of associates and joint ventures		—		3,036		3,036


	2012
	Mainland China		Other		Total
	RMB		RMB		RMB
The Group
Property acquisition costs		—		24,586		24,586
Exploration costs		39,049		1,879		40,928
Development costs		152,534		21,355		173,889

Total		191,583		47,820		239,403

Equity method investments
Share of costs of property acquisition, exploration and development of associates and joint ventures		—		4,477		4,477

F-53

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Results of Operations for Oil and Gas Producing Activities

The results of operations for oil and gas producing activities for the years ended December 31, 2014, 2013 and 2012 are presented below. “Turnover” includes sales to third parties and inter-segment sales (at arm’s-length prices), net of value-added taxes. Resource tax, crude oil special gain levy and other taxes are included in “taxes other than income taxes”. Income taxes are computed using the applicable statutory tax rate, reflecting tax deductions and tax credits for the respective years ended.


	2014
	Mainland China			Other			Total
	RMB			RMB			RMB
The Group
Turnover
Sales to third parties		87,676			43,260			130,936
Inter-segment sales		466,051			9,205			475,256

		553,727			52,465			606,192
Production costs excluding taxes		(116,564	)		(9,739	)		(126,303	)
Exploration expenses		(20,787	)		(1,277	)		(22,064	)
Depreciation, depletion and amortization		(101,168	)		(17,522	)		(118,690	)
Taxes other than income taxes		(102,506	)		(10,367	)		(112,873	)
Accretion expense		(5,220	)		(186	)		(5,406	)
Income taxes		(41,119	)		(4,159	)		(45,278	)

Results of operations from producing activities		166,363			9,215			175,578

Equity method investments
Share of profit for producing activities of associates and joint ventures		—			6,940			6,940

Total of the Group and equity method investments results of operations for producing activities		166,363			16,155			182,518


	2013
	Mainland China			Other			Total
	RMB			RMB			RMB
The Group
Turnover
Sales to third parties		82,422			59,120			141,542
Intersegment sales		471,514			2,069			473,583

		553,936			61,189			615,125
Production costs excluding taxes		(108,302	)		(9,039	)		(117,341	)
Exploration expenses		(21,548	)		(3,753	)		(25,301	)
Depreciation, depletion and amortization		(88,569	)		(15,739	)		(104,308	)
Taxes other than income taxes		(110,350	)		(17,648	)		(127,998	)
Accretion expense		(4,505	)		(185	)		(4,690	)
Income taxes		(42,352	)		(5,325	)		(47,677	)

Results of operations from producing activities		178,310			9,500			187,810

Equity method investments
Share of profit for producing activities of associates and joint ventures		—			8,392			8,392

Total of the Group and equity method investments results of operations for producing activities		178,310			17,892			196,202

F-54

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)


	2012
	Mainland China			Other			Total
	RMB			RMB			RMB
The Group
Turnover
Sales to third parties		82,064			62,233			144,297
Intersegment sales		472,366			675			473,041

		554,430			62,908			617,338
Production costs excluding taxes		(95,085	)		(7,581	)		(102,666	)
Exploration expenses		(22,811	)		(1,161	)		(23,972	)
Depreciation, depletion and amortization		(80,293	)		(14,196	)		(94,489	)
Taxes other than income taxes		(116,030	)		(17,307	)		(133,337	)
Accretion expense		(4,098	)		(139	)		(4,237	)
Income taxes		(44,568	)		(7,045	)		(51,613	)

Results of operations from producing activities		191,545			15,479			207,024

Equity method investments
Share of profit for producing activities of associates and joint ventures		—			9,650			9,650

Total of the Group and equity method investments results of operations for producing activities		191,545			25,129			216,674

Standardized Measure of Discounted Future Net Cash Flows

The standardized measure of discounted future net cash flows related to proved oil and gas reserves at December 31, 2014, 2013 and 2012 is based on the prices used in estimating the Group’s proved oil and gas reserves, year-end costs, currently enacted tax rates related to existing proved oil and gas reserves and a 10% annual discount factor. “Future cash inflows from sales of oil and gas” are net of value-added taxes. Corporate income taxes are included in “future income tax expense”. Other taxes are included in “future production costs” as production taxes.

The standardized measure of discounted future net cash flows related to proved oil and gas reserves at December 31, 2014, 2013 and 2012 is as follows:


	RMB
The Group
At December 31, 2014
Future cash inflows		8,225,339
Future production costs		(3,650,129	)
Future development costs		(527,848	)
Future income tax expense		(863,348	)

Future net cash flows		3,184,014
Discount at 10% for estimated timing of cash flows		(1,589,255	)

Standardized measure of discounted future net cash flows		1,594,759

F-55

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)


	RMB
The Group
At December 31, 2013
Future cash inflows		8,369,464
Future production costs		(3,980,886	)
Future development costs		(492,655	)
Future income tax expense		(812,290	)

Future net cash flows		3,083,633
Discount at 10% for estimated timing of cash flows		(1,532,368	)

Standardized measure of discounted future net cash flows		1,551,265


	RMB
The Group
At December 31, 2012
Future cash inflows		8,716,686
Future production costs		(4,046,065	)
Future development costs		(507,905	)
Future income tax expense		(883,544	)

Future net cash flows		3,279,172
Discount at 10% for estimated timing of cash flows		(1,599,993	)

Standardized measure of discounted future net cash flows		1,679,179

At December 31, 2014, RMB 1,520,307 (December 31, 2013: RMB 1,473,852, December 31, 2012: RMB 1,599,784) of standardized measure of discounted future net cash flows related to proved oil and gas reserves located within mainland China and RMB 74,452 (December 31, 2013: RMB 77,413, December 31, 2012: RMB 79,395) of standardized measure of discounted future net cash flows related to proved oil and gas reserves located overseas.

Share of standardized measure of discounted future net cash flows of associates and joint ventures:


December 31, 2014			37,118
December 31, 2013			39,187
December 31, 2012			50,789

F-56

PETROCHINA COMPANY LIMITED

SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION

AND PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)

(All amounts in millions, except for the per share data and otherwise stated)

Changes in Standardized Measure of Discounted Future Net Cash Flows

Changes in the standardized measure of discounted net cash flows for the Group for each of the years ended December 31, 2014, 2013 and 2012 are as follows:


	Year Ended December 31,
	2014			2013			2012
	RMB			RMB			RMB
The Group
Beginning of the year		1,551,265			1,679,179			1,677,627
Sales and transfers of oil and gas produced, net of production costs		(352,016	)		(350,512	)		(380,439	)
Net changes in prices and production costs and other		62,017			(216,677	)		(7,750	)
Extensions, discoveries and improved recovery		189,828			265,039			212,372
Development costs incurred		59,075			70,183			13,420
Revisions of previous quantity estimates		(51,424	)		(117,817	)		(58,354	)
Accretion of discount		160,293			178,064			214,045
Net change in income taxes		(23,786	)		43,806			8,258
Sales		(493	)		—			—

End of the year		1,594,759			1,551,265			1,679,179

F-57

Exhibit 4.15

English Translation of Chinese Original

Crude Oil Mutual Supply

Framework Agreement for Year 2015

between

PetroChina Company Limited

and

China Petrochemical Corporation

January 2015

Crude Oil Mutual Supply Framework Agreement for Year 2015

PetroChina Company Limited (“PetroChina”) and China Petrochemical Corporation (“Sinopec”), following friendly consultations, have reached consensus on mutual supply of crude oil in the year of 2015 and hereby enter into this Agreement (this “Agreement”).

I.	Mutual Supply and Cross Supply of Crude Oil

Mutual supply of crude oil: In 2015, PetroChina shall supply Sinopec with 4.74 million tons of domestic onshore crude oil, including 2.64 million tons of blended oil produced at the Daqing Oil Region (including replacement crude oil of 0.15 million tons), 0.57 million tons of oil produced at the Jizhong Oil Region, 0.4 million tons of oil produced at the Erlian Oil Region and Tamtsag Oil Region, 1.1 million tons of oil produced at the Changqing Oil Region, and 30,000 tons of oil produced at PetroChina Zhejiang Exploration Company.

In 2015, Sinopec shall supply PetroChina with 2.27 million tons of domestic onshore crude oil, including 0.40 million tons of blended oil produced at the Tahe Oil Region, 0.80 million tons of oil produced at the Chunguang Oil Region, 0.50 million tons of oil produced at the Chunfeng Oil Region, 40,000 tons of oil produced at the Yanqi Oil Region, and 0.53 million tons of oil produced at the Shengli Oil Region.

The parties hereto shall, in principle, make available crude oil of the above supply and take delivery thereof on an evenly distributed basis. The quarterly mutual supply of crude oil may be adjusted as necessary by mutual agreement thereon and in light of the availability of crude oil resources, price and the State’s macro-economic planning requirements.

II.

Quality of Crude Oil

Matters with respect to the quality of the crude oil to be supplied hereunder shall be handled pursuant to applicable provisions of SY7513-88 Technical Conditions of Crude Oil at Wellhead.

III. Quarterly Supply Agreements; Sales and Purchase Contracts on an Enterprise-by-Enterprise Basis

The parties hereto agree that quarterly supply agreements shall be entered into by and between the Production Management Department of PetroChina and the Production Management Department of Sinopec in accordance with this Agreement. After the quarterly plans have been issued to the respective subsidiaries, PetroChina’s relevant regional companies (including its oil fields, refineries and pipeline companies) and Sinopec’s relevant subsidiaries (including its oil fields and refineries) will enter into specific sales and purchase contracts with each other. The total quantities and varieties of crude oil to be supplied under such contracts shall be consistent with those specified under the above quarterly supply agreements.

IV.

Price of Crude Oil

The price of crude oil to be supplied hereunder shall be settled on the basis of the benchmark crude oil price and the crude oil premium mutually agreed between the parties.

V.	Payment Guarantee

Payment of the price of crude oil to be supplied hereunder shall be made on a timely basis and pursuant to the principles agreed upon by the parties hereto. PetroChina and Sinopec agree to be guarantors, and to assume joint and several guarantee liabilities for the failure of timely payment of the price of crude oil and other amounts payable by their respective oil refineries. The payer shall make timely payments to the payee upon receipt of and pursuant to the payment notice.

VI.

Miscellaneous

Both parties undertake that their subsidiaries will perform this Agreement strictly in accordance with the terms hereof while maintaining the free flow of the downstream operations of their respective oil field enterprises. Any issues not covered hereunder shall be resolved through consultations between the parties hereto.

This Agreement shall be executed in four counterparts, with each of PetroChina and Sinopec to hold two. This Agreement shall remain effective from January 1, 2015 to December 31, 2015.

Production Management Department,

PetroChina Company Limited

Production Management Department,

China Petrochemical Corporation


By:		By:
	, 2015		, 2015

Exhibit 8.1

LIST OF SUBSIDIARIES

A List of PetroChina Company Limited’s principal subsidiaries is provided in Note 19 to the consolidated financial statements included in this annual report following Item 19.

Exhibit 12.1

CERTIFICATION

I, Zhou Jiping, certify that:

1. I have reviewed this annual report on Form 20-F of PetroChina Company Limited (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.


/s/ Zhou Jiping
Name:		Zhou Jiping
Title:		Chairman (performing the functions of Chief Executive Officer)

Date: April 29, 2015

Exhibit 12.2

CERTIFICATION

I, Yu Yibo, certify that:

1. I have reviewed this annual report on Form 20-F of PetroChina Company Limited (the “Company”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

/s/ Yu Yibo

Name: Yu Yibo

Title: Chief Financial Officer

Date: April 29, 2015

EXHIBIT 13.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of PetroChina Company Limited (the “Company”) on Form 20-F for the period ending December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhou Jiping, hereby certify that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Zhou Jiping
Name:		Zhou Jiping
Title:		Chairman (performing the functions of Chief Executive Officer)

Date: April 29, 2015

EXHIBIT 13.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of PetroChina Company Limited (the “Company”) on Form 20-F for the period ending December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yu Yibo, hereby certify that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Yu Yibo
Name:		Yu Yibo
Title:		Chief Financial Officer

Date: April 29, 2015

Exhibit 15.1

DEGOLYER AND MACNAUGHTON

5001 SPRING VALLEY ROAD

SUITE 800 EAST

DALLAS, TEXAS 75244

This is a digital representation of a DeGolyer and MacNaughton report.

Each file contained herein is intended to be a manifestation of certain data in the subject report and as such is subject to the definitions, qualifications, explanations, conclusions, and other conditions thereof. The information and data contained in each file may be subject to misinterpretation; therefore, the signed and bound copy of this report should be considered the only authoritative source of such information.

LOGO

DEGOLYER AND MACNAUGHTON

5001 SPRING VALLEY ROAD

SUITE 800 EAST

DALLAS, TEXAS 75244

March 16, 2015

PetroChina Company Limited

9 Dongzhimen North Street, Dongcheng District

Beijing 100007

P.R. China

Ladies and Gentlemen:

Pursuant to your request, we have conducted a reserves evaluation of the extent and value of the net proved crude oil, condensate, liquefied petroleum gas (LPG), and natural gas reserves, as of December 31, 2014, of certain selected properties owned by PetroChina Company Limited (PetroChina). This evaluation was completed on March 16, 2015. PetroChina has represented that these properties account for 98.8 percent on a net equivalent barrel basis of PetroChina’s net proved reserves as of December 31, 2014. The net proved reserves estimates prepared by us have been prepared in accordance with the reserves definitions of Rules 4-10(a) (l)-(32) of Regulation S-X of the Securities and Exchange Commission (SEC) of the United States. This report was prepared in accordance with guidelines specified in Item 1202 (a)(8) of Regulation S-K and is to be used for inclusion in certain SEC filings by PetroChina.

Reserves included herein are expressed as net reserves. Gross reserves are defined as the total estimated petroleum to be produced from these properties after December 31, 2014. Net reserves are defined as that portion of the gross reserves attributable to the interests owned or controlled by PetroChina after deducting all interests owned by others.

Certain properties in which PetroChina has an interest are subject to the terms of various profit sharing agreements. The terms of these agreements generally allow for working interest participants to be reimbursed for portions of capital costs and operating expenses and to share in the profits. The reimbursements and profit proceeds are converted to a barrel of oil equivalent or standard cubic foot of gas equivalent by dividing by product prices to estimate the “entitlement reserves.” These entitlement reserves are equivalent in principle to net reserves and are used to calculate an equivalent net share, termed an “entitlement interest.” In this report, PetroChina’s net reserves or interest for certain properties subject to these agreements is the entitlement based on PetroChina’s working interest.

Values included herein are expressed in terms of future net revenue and present worth. Future net revenue is calculated by deducting estimated operating expenses, capital costs, and taxes from the revenue which will accrue to PetroChina from the production and sale of the estimated net reserves. Present worth is defined as future net revenue discounted at a specified arbitrary rate compounded monthly over the expected period of realization. Present worth values using a discount rate of 10 percent are reported herein.

Estimates of oil, condensate, LPG, and natural gas reserves and values should be regarded only as estimates that may change as further production history and additional information become available. Not only are estimates of reserves and values based on that information which is currently available, but such estimates are also subject to the uncertainties inherent in the application of judgmental factors in interpreting such information.

Data used in this evaluation were obtained from reviews with PetroChina personnel, PetroChina files, from records on file with the appropriate regulatory agencies, and from public sources. In the preparation of this report we have relied, without independent verification, upon such information furnished by PetroChina with respect to property interests, production from such properties, current costs of operation and development, current prices for production, agreements relating to current and future operations and sale of production, and various other information and data that were accepted as represented.


DEGOLYER AND MACNAUGHTON		2

Methodology and Procedures

Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation principles and techniques that are in accordance with practices generally recognized by the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information (Revision as of February 19, 2007).” The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, quality and completeness of basic data, and production history.

When applicable, the volumetric method was used to estimate the original oil in place (OOIP) and the original gas in place (OGIP). Structure and isopach maps were constructed to estimate reservoir volume. Electrical logs, radioactivity logs, core analyses, and other available data were used to prepare these maps as well as to estimate representative values for porosity and water saturation.

Estimates of ultimate recovery were obtained after applying recovery factors to OOIP or OGIP. These recovery factors were based on consideration of the type of energy inherent in the reservoirs, analyses of the petroleum, the structural positions of the properties, and the production histories.

For depletion-type reservoirs or those whose performance disclosed a reliable decline in producing-rate trends or other diagnostic characteristics, reserves were estimated by the application of appropriate decline curves or other performance relationships. In the analyses of production-decline curves, reserves were estimated only to the limits of economic production or to the limit of the production licenses as appropriate.

In certain cases, when the previously named methods could not be used, reserves were estimated by analogy with similar wells, reservoirs, or fields for which more complete data were available.

Natural gas quantities reported herein for the properties in China are expressed as marketable gas. Marketable gas is defined as the total gas produced from the reservoir after reduction for shrinkage resulting from field separation; processing, including removal of nonhydrocarbon gas to meet pipeline specifications; and flare and other losses but not from fuel usage. Fuel gas is included as reserves. Natural gas quantities reported herein for the properties in Other Countries, except in Mongolia, are reported as sales gas. Sales gas is defined as marketable gas less fuel gas. Natural gas quantities reported herein for the properties in Mongolia are reported as marketable gas.

The oil, condensate, and LPG reserves estimated in this report are expressed in terms of 42 United States gallons per barrel. Crude oil reserves are to be recovered by conventional field operations. LPG reserves are to be recovered from gas processing. Condensate reserves are to be recovered both by normal field separation and by low-temperature separation from gas processing.

Definition of Reserves

Petroleum reserves estimated by us included in this report are classified as proved. Only proved reserves have been evaluated for this report. Reserves classifications used by us in this report are in accordance with the reserves definitions of Rules 4-10(a) (l)-(32) of Regulation S-X of the SEC. Reserves are judged to be economically producible in future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. In the analyses of production-decline curves, reserves were estimated only to the limit of economic rates of production under existing economic and operating conditions using prices and costs consistent with the effective date of this report, including consideration of changes in existing prices provided only by contractual arrangements but not including escalations based upon future conditions. The petroleum reserves are classified as follows:

Proved oil and gas reserves – 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


DEGOLYER AND MACNAUGHTON		3

producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes:

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

Developed oil and gas reserves – Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Undeveloped oil and gas reserves – Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.


DEGOLYER AND MACNAUGHTON		4

such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in [section 210.4-10 (a) Definitions], or by other evidence using reliable technology establishing reasonable certainty.

The extent to which probable and possible reserves ultimately may be reclassified as proved reserves is dependent upon future drilling, testing, and well performance. The degree of risk to be applied in evaluating probable and possible reserves is influenced by economic and technological factors as well as the time element. No probable or possible reserves have been evaluated for this report.

Primary Economic Assumptions

The following economic assumptions were used for estimating existing and future prices and costs:

Oil and Condensate Prices

PetroChina has represented that the oil and condensate prices were based on reference prices. Each reference price was calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. PetroChina has also represented that it has supplied the appropriate differentials to the reference prices.

PetroChina has represented that the 12-month average oil and condensate prices for the fields in China are based on a 12-month average reference price of 99.24 United States dollars (U.S.$) per barrel for Dubai crude oil with appropriate differentials applied to this reference price. The volume-weighted average adjusted oil and condensate price in China attributable to estimated proved reserves was U.S.$91.56 per barrel. The oil and condensate prices in China were held constant for the lives of the properties.

PetroChina also has represented that the 12-month average oil and condensate prices for the fields in Other Countries are based on 12-month average reference prices of U.S.$99.24 per barrel for Dubai crude oil, U.S.$101.11 per barrel for Brent, U.S.$100.02 per barrel for Urals RCMB, and U.S.$103.23 per barrel for Oman OSP with appropriate differentials applied to these reference prices. The volume-weighted average adjusted oil and condensate price in Other Countries attributable to estimated proved reserves was U.S.$76.71 per barrel. The oil and condensate prices in Other Countries were held constant for the lives of the properties.

LPG Prices

PetroChina has represented that the LPG prices were based on a 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements. These prices were held constant over the lives of the properties. The volume weighted average LPG price for the fields evaluated was U.S.$40.50 per barrel.

Natural Gas Prices

PetroChina has represented that the natural gas prices in China are defined by contractual arrangements. The volume-weighted average gas price in China attributable to estimated proved reserves was U.S.$6.24 per thousand cubic feet. The natural gas prices in China were held constant for the lives of the properties.

PetroChina has also represented that all of the natural gas reserves in Other Countries will be sold through contractual arrangements and the gas prices are defined by these contracts. The volume-weighted 12-month average product price in Other Countries attributable to estimated proved reserves was U.S.$2.22 per thousand cubic feet. The natural gas prices in Other Countries were held constant for the lives of the properties except for certain properties where escalations are contractually allowed under the terms of the gas sales agreements.


DEGOLYER AND MACNAUGHTON		5

Operating Expenses and Capital Costs

Operating expenses and capital costs, based on information provided by PetroChina, were used in estimating future costs required to operate the properties. In certain cases, future costs, either higher or lower than existing costs, may have been used because of anticipated changes in operating conditions. These costs were not escalated for inflation.

Taxes

For PetroChina’s properties in China, local taxes and value- added taxes were applied in addition to the consideration of the national Chinese income tax. A 25-percent income tax rate was applied to taxable income to estimate the applicable tax. The tax provisions provided by PetroChina were assumed to remain unchanged from current legislation.

For PetroChina’s properties in Other Countries, local taxes were applied where appropriate. The future net revenue values presented in this report reflect the consideration of the host country income taxes. The tax provisions provided by PetroChina were assumed to remain unchanged from current legislation. Chinese income taxes, however, were not considered in estimating revenue values from the properties in Other Countries.

Royalties

In properties where royalties are paid in kind, the petroleum quantities associated with these royalties are excluded from the net proved reserves estimates. For properties where royalties are paid in cash, these royalties are considered production taxes and associated quantities have not been excluded from the net proved reserves estimates. PetroChina has represented that it has no royalty obligations for the properties in China that were evaluated for this report.

While the oil and gas industry may be subject to regulatory changes from time to time that could affect an industry participant’s ability to recover its petroleum reserves, we are not aware of any such governmental actions which would restrict the recovery of the December 31, 2014, estimated oil, condensate, LPG, and gas reserves.

Our estimates of PetroChina’s net proved reserves attributable to the reviewed properties are based on the definition of proved reserves of the SEC and are as follows, expressed in thousands of barrels (Mbbl) and millions of cubic feet (MMcf):


	Estimated by DeGolyer and MacNaughton
	Net Proved Reserves as of December 31, 2014
	Oil and Condensate (Mbbl)		LPG (Mbbl)		Natural Gas (MMcf)
China
Proved Developed		6,816,244		0		35,061,131
Proved Undeveloped		2,919,250		0		34,774,363
Total Proved China		9,735,494		0		69,835,494

Other Countries
Proved Developed		299,570		25,414		623,227
Proved Undeveloped		236,156		9,830		327,439
Total Proved Other Countries		535,726		35,244		950,666

Notes:

1.	Our estimates of PetroChina’s net proved reserves in China include 10,597 Mbbl of oil reserves and zero MMcf of natural gas reserves that are attributable to minority interests owned by others.


DEGOLYER AND MACNAUGHTON		6

2.	Our estimates of PetroChina’s net proved reserves in Other Countries include 192,265 Mbbl of oil and condensate reserves, 18,686 Mbbl of LPG reserves, and 507,536 MMcf of natural gas reserves that are attributable to minority interests owned by others.

Estimates of natural gas reserves in China are reported as marketable gas reserves. Estimates of natural gas reserves in Other Countries, except in Mongolia, are reported as sales-gas reserves. Gas reserves estimates for Mongolia are reported as marketable-gas reserves of 8,322 MMcf, which will be used for field fuel.

4.	Other Countries are all in Asia.

Our estimates of PetroChina’s future net revenue to be derived from the proved reserves of PetroChina’s petroleum interests in China, as of December 31, 2014, and the present worth of that revenue discounted at 10 percent are listed as follows, expressed in millions of United States dollars (MM U.S.$):


	Estimated by DeGolyer and MacNaughton
	Proved Developed		Proved Undeveloped		Total Proved
Future Net Revenue, MM U.S.$		350,003		150,565		500,568
Present Worth at 10 Percent, MM U.S.$		207,372		40,639		248,011

Our estimates of PetroChina’s future net revenue to be derived from the proved reserves of PetroChina’s petroleum interests in Other Countries, as of December 31, 2014, and the present worth of that revenue discounted at 10 percent are listed as follows, expressed millions of United States dollars (MM U.S.$):


	Estimated by DeGolyer and MacNaughton
	Proved Developed		Proved Undeveloped		Total Proved
Future Net Revenue, MM U.S.$		7,973		5,641		13,614
Present Worth at 10 Percent, MM U.S.$		5,849		2,716		8,565

In our opinion, the information relating to estimated proved reserves, estimated future net revenue from proved reserves, and present worth of estimated future net revenue from proved reserves of oil, condensate, LPG, and gas contained in this report has been prepared in accordance with Paragraphs 932-235-50-4, 932-235-50-6 through 932-235-50-9, 932-235-50-30, and 932-235-50-31 of the Accounting Standards Update 932-235-50, Extractive Industries – Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures (January 2010) of the Financial Accounting Standards Board and Rules 4-10(a) (l)-(32) of Regulation S-X and Rules 302(b), 1201, 1202(a) (1), (2), (3), (4), (8), and 1203(a) of Regulation S-K of the Securities and Exchange Commission; provided, however, that (i) estimates of proved developed and proved undeveloped reserves are not presented at the beginning of the year and (ii) future Chinese income tax expenses have not been taken into account in estimating the future net revenue and present worth values set forth for properties evaluated herein that are located in Other Countries.

To the extent the above-enumerated rules, regulations, and statements require determinations of an accounting or legal nature, we, as engineers, are necessarily unable to express an opinion as to whether the above-described information is in accordance therewith or sufficient therefor.


DEGOLYER AND MACNAUGHTON		7

DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world since 1936. DeGolyer and MacNaughton does not have any financial interest, including stock ownership, in PetroChina. Our fees were not contingent on the results of our evaluation. This letter report has been prepared at the request of PetroChina. DeGolyer and MacNaughton has used all assumptions, data, procedures, and methods that it considers necessary and appropriate to prepare this report.


		Submitted,



		DeGOLYER and MacNAUGHTON Texas Registered Engineering Firm F-716



		Thomas C. Pence, P.E.
		Senior Vice President
		DeGolyer and MacNaughton


DEGOLYER AND MACNAUGHTON		8

CERTIFICATE of QUALIFICATION

I, Thomas C. Pence, Petroleum Engineer with DeGolyer and MacNaughton, 5001 Spring Valley Road, Suite 800 East, Dallas, Texas, 75244 U.S.A., hereby certify:

1. That I am a Senior Vice President with DeGolyer and MacNaughton, which company did prepare the report entitled the letter addressed to PetroChina dated March 16, 2015, and that I, as Senior Vice President, was responsible for the preparation of this report.

2. That I attended Texas A&M University, and that I graduated with a degree in Petroleum Engineering in the year 1982; that I am a Registered Professional Engineer in the State of Texas; that I am a member of the International Society of Petroleum Engineers; and that I have in excess of 32 years of experience in the oil and gas reservoir studies and reserves evaluations.

SIGNED: March 16, 2015

LOGO

Thomas C. Pence, P.E.

Senior Vice President

DeGolyer and MacNaughton

Exhibit 15.2

THIRD PARTY REPORT

RESERVES ESTIMATION AND EVALUATION OF

CHAD, WEST QURNA AND KAZAKHSTAN ASSETS

AS OF 31st DECEMBER, 2014

Prepared for

PETROCHINA COMPANY LIMITED

APRIL 2, 2015

CONFIDENTIAL

This document is confidential and has been prepared for the exclusive use of CNODCI/PetroChina or parties named herein, It may not be distributed or made available, in whole or in part, to any other company or person without the prior knowledge and written consent of Ryder Scott. No person or company other than those for whom it is intended may directly or indirectly rely upon its contents. Ryder Scott is acting in an advisory capacity only and, to the fullest extent permitted by law, disclaims all liability for actions or losses derived from any actual or purported reliance on this document (or any other statements or opinions of Ryder Scott) by CNODCI/PetroChina or by any other person or entity.



		Daniel R. Olds, RE. TBPE License No. 60996 Managing Senior Vice President
		RYDER SCOTT COMPANY, LR TBPE Firm Registration No. F-1580

Table of Contents


		Page No.
INTRODUCTION			1
METHODOLOGY			1
1.	RESULTS SUMMARY		2
	1.1 Net Reserves		2
	1.2 Gross Volumes		3
	1.3 Net Present Values		4
2.	QUALIFICATIONS		4
3.	BASIS OF OPINION		5

APPENDICES
I.	SEC Reserve Definitions
II.	Glossary


TBPE REGISTERED ENGINEERING FIRM F-1580		FAX (713) 651-0849
1100 LOUISIANA SUITE 4600	HOUSTON, TEXAS 77002-5294	TELEPHONE (713) 651-9191

April 2, 2015

PetroChina Company Limited

9 Dongzhimen North Street

Dongcheng District

Beijing 100007

China

THIRD PARTY REPORT

RESERVES ESTIMATION AND VALUATION OF

CHAD, WEST QURNA AND KAZAKHSTAN ASSETS

AS OF 31^st DECEMBER, 2014

Ladies and Gentlemen,

Ryder Scott Company, L.P. (Ryder Scott) was requested by China National Oil and Gas Exploration and Development Corporation International Holding Ltd. (“CNODCI”), to conduct reserves estimation and evaluation (as of December 31, 2014) of selected petroleum assets in Chad, West Qurna, and Kazakhstan, in which CNODCI has current interests. These reserves were prepared in accordance with U.S. Securities and Exchange Commission (SEC) regulations.

The SEC Executive and SEC Technical Reports documenting this work were submitted to CNODCI in January and February 2015, respectively. These reports are required for CNODCI internal management reporting purposes and are limited to proved reserves only. The report references are as follows:


Asset	SEC Executive Report	SEC Technical Report
West Qurna
Chad

Kazakhstan

Recently, CNODCI requested Ryder Scott to prepare a Third Party Report intended to be submitted to PetroChina Company Limited (“PetroChina”). This report is to summarize the results of reserves estimation and evaluations of December 31, 2014 as mentioned above of only selected petroleum assets. The selected petroleum assets, as determined by CNODCI, are in Chad, West Qurna (Iraq), and Kazakhstan

METHODOLOGY

In carrying out the review, Ryder Scott relied upon information and data provided by CNODCI, which comprised basic engineering data; geosciences information and engineering interpretation associated with such data; other technical reports; costs and commercial data; and development plans. The available data and interpretations were reviewed for reasonableness and the latter adjusted where appropriate.


SUITE 600, 1015 4TH STREET S.W.	CALGARY, ALBERTA T2R 1 J4	TEL (403) 262-2799	FAX (403) 262-2790
621 17TH STREET, SUITE 1550	DENVER, COLORADO 80293-1 501	TEL (303)623-9147	FAX (303) 623-4258

PetroChina Company Limited

April 2, 2015

Page 2

The results presented in this report are based upon information and data made available to Ryder Scott in December 2014. The reserve estimates, future production and Net Present Value (NPV) computations as presented herein are based upon these data and represent Ryder Scott’s opinion as of December 31, 2014, as presented in the individual Ryder Scott reports for those areas.

Economic models were constructed based on terms of the applicable petroleum contracts as provided by CNODCI, in order to calculate CNODCI’s net revenue interest in the proved reserves. As of December 31, 2014, all proved SEC reserves were allocated up to the end of the license contract period only.

As per SEC guidelines (Appendix I), the oil prices which were used in the evaluation are the un-weighted 12-month arithmetic averages of the first-day-of-the month price for each month within the 12-month period prior to the end of reporting period, unless prescribed by contract. Those prices were held constant throughout the evaluation period except where alternate prices are prescribed by contract. The historical 12-month oil prices or contract prices, with supporting differentials, were supplied by CNODCI.

Future capital costs were derived from development program forecasts prepared by CNODCI for each production unit and corresponding recent historical unit cost data. The recent historical cost data for each relevant production unit were utilized to determine current operating cost conditions. These costs were not escalated throughout the evaluation period.

CNODCI’s net reserve volumes are derived by converting calculated net revenues accruing to CNODCI under the terms of the relevant petroleum contract into equivalent barrels of oil utilizing the average 2014 oil pricing explained above. The CNODCI net revenue interest volumes reported in this document represent those amounts that are determined to be attributable to CNODCI’s net economic interest after the deduction of amounts attributable to third parties (government and other working interest partners).

Net Present Value (NPV) computations were also undertaken and derived using cost and production profiles input to the various economic models established for the selected assets in Chad, West Qurna, and Kazakhstan. These NPVs represent future net revenue, after taxes, attributable to the interests of CNODCI, discounted over the economic life of the project at the SEC specified discount rate of ten percent to a present value as of December 31, 2014. Unless otherwise stated, no opening tax positions were considered.

A glossary of abbreviations and key industry standard terms, some but not all of which have been used in this report, is attached as Appendix II.

1.	RESULTS SUMMARY

1.1

Net Reserves

The following tables present the net entitlement Proved Developed, Proved Undeveloped and Total Proved oil reserves attributable to CNODCI’s working interests (WI) estimated in accordance with SEC guidelines.

As required under SEC guidelines, these estimates were prepared under the prevailing fiscal terms and exclude any government share. The economic cut offs were applied using costs which are unescalated throughout the period of calculation and constant prices, except where alternate prices are prescribed by contract. The oil prices used for these computations were the un-weighted 12-month arithmetic average of the first-day-of-the month price for each month within the 12-month period (January to December 2014) or the applicable contract price, with appropriate differentials applied.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PetroChina Company Limited

April 2, 2015

Page 3

NET ENTITLEMENT PROVED OIL RESERVES

AS OF DECEMBER 31, 2014


Country	Company	Proved Developed (Mstb)		Proved Undeveloped (Mstb)		Total Proved (Mstb)
Chad			51,574		31,202		82,776
Iraq – West Qurna			9,656		57,981		67,637
Kazakhstan	PKKR		32,129		5,176		37,305
	Kolzhan		9,718		3,447		13,165
	PKVI		424		0		424

TOTAL CNODCI			103,501		97,806		201,307

Notes:

1.	The net entitlement In Kazakhstan assets is attributable to CNODCI’s 67% net interest.

2.	CNODCI holds 100% WI in Chad and 34.413 % WI in West Qurna assets. Royalty of 12¹⁄₂% in Permit H (Chad) is paid in kind; therefore, it is deducted from the Gross Reserves volumes.

3.	Both Chad and West Qurna assets produce oil only. Gas has been discovered in some structures in Chad, but at this time there is no market available for the gas.

4.	Totals may not add exactly due to rounding errors.

1.2

Gross Volumes

Gross production volumes are presented for reference information only. Gross volumes include volumes attributable to third parties, government and other working interest partners.

GROSS PROVED OIL RESERVES

AS OF DECEMBER 31, 2014


Country	Company	Proved Developed (Mstb)		Proved Undeveloped (Mstb)		Total Proved (Mstb)
Chad			60,143		36,388		96,531
Iraq – West Qurna			645,039		914,952		1,559,991
Kazakhstan	PKKR		47,954		7,724		55,678
	Kolzhan		22,761		8,547		31,308
	PKVI		843		0		843

TOTAL CNODCI			776,740		967,611		1,744,351

Note: Totals may not add exactly due to rounding errors.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PetroChina Company Limited

April 2, 2015

Page 4

1.3

Net Present Values

The NPVs as of December 31, 2014 of estimated cash flows discounted at 10%, attributable to CNODCI’s working interest in the projects identified above (excluding any balance sheet adjustments or financing costs), are summarized below.

NET PRESENT VALUES ATTRIBUTABLE TO CNODCI

AS OF DECEMBER 31, 2014

DISCOUNT RATE 10%


Country	Oil field	Proved Developed (US$M)		Proved Undeveloped (US$M)		Total Proved (US$M)
Chad			2,999,021		241,397		3,240,418
Iraq – West Qurna			129,221		214,538		343,759
Kazakhstan	PKKR		1,065,737		156,635		1,089,870
	Kolzhan		294,452		88,356		348,044
	PKVI		12,512		—		11,400

TOTAL CNODCI			4,500,943		700,926		5,033,491

Notes:

1.	NPVs in Chad, West Qurna and Kazakhstan assets represent CNODCI’s 100%, 34.413% and 67% WI, respectively.

2.	For Kazakhstan, Proved Developed and Proved Undeveloped are before consideration of the property and mineral extraction taxes, which are calculated on a Total Proved basis. The Total Proved NPV includes these taxes.

Reserves are those quantities of petroleum that are anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, and commercial and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by development and production status. All categories of reserve volumes quoted herein have been determined within the context of an economic limit test (pre-tax and exclusive of accumulated depreciation amounts) assessment prior to any NPV analysis.

2.	STANDARDS OF INDEPENDENCE AND PROFESSIONAL QUALIFICATION

Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world since 1937. Ryder Scott is employee-owned and maintains offices in Houston, Texas; Denver, Colorado; and Calgary, Alberta, Canada. We have over eighty engineers and geoscientists on our permanent staff. By virtue of the size of our firm and the large number of clients for which we provide services, no single client or job represents a material portion of our annual revenue. We do not serve as officers or directors of any privately-owned or publicly-traded oil and gas company and are separate and independent from the operating and investment decision-making process of our clients. This allows us to bring the highest level of independence and objectivity to each engagement for our services.

Ryder Scott actively participates in industry-related professional societies and organizes an annual public forum focused on the subject of reserves evaluations and SEC regulations. Many of our staff have authored or co-authored technical papers on the subject of reserves related topics. We encourage our staff to maintain and enhance their professional skills by actively participating in ongoing continuing education.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PetroChina Company Limited

April 2, 2015

Page 5

Prior to becoming an officer of the Company, Ryder Scott requires that staff engineers and geoscientists have received professional accreditation in the form of a registered or certified professional engineer’s license or a registered or certified professional geoscientist’s license, or the equivalent thereof, from an appropriate governmental authority or a recognized self-regulating professional organization.

We are independent petroleum engineers with respect to CNODCI. Neither we nor any of our employees have any financial interest in the subject properties and neither the employment to do this work nor the compensation is contingent on our estimates of reserves for the properties which were reviewed.

The results of this study, presented herein, are based on technical analysis conducted by teams of geoscientists and engineers from Ryder Scott. The professional qualifications of the undersigned, the technical person primarily responsible for overseeing the evaluation of the reserves information discussed in this report, are included as an attachment to this letter.

3.	BASIS OF OPINION

This document must be considered in its entirety. It reflects Ryder Scott’s informed professional judgment based on accepted standards of professional investigation and, as applicable, the data and information provided by the CNODCI, and/or obtained from other sources e.g. public domain, the limited scope of engagement, and the time permitted to conduct the evaluation.

In line with those accepted standards, this document does not in any way constitute or make a guarantee or prediction of results, and no warranty is implied or expressed that actual outcome will conform to the outcomes presented herein. Ryder Scott has not independently verified any information provided by or at the direction of the CNODCI, and has accepted the accuracy and completeness of these data. Ryder Scott has no reason to believe that any material facts have been withheld from it, but does not warrant that its inquiries have revealed all of the matters that a more extensive examination might otherwise disclose.

The opinions expressed herein are subject to and fully qualified by the generally accepted uncertainties associated with the interpretation of engineering and geoscience data and do not reflect the totality of circumstances, scenarios and information that could potentially affect decisions made by the report’s recipients and/or actual results. The opinions and statements contained in this report are made in good faith and in the belief that such opinions and statements are representative of prevailing physical and economic circumstances as of December 31, 2014.

This assessment has been conducted within the context of Ryder Scott’s understanding of the effects of petroleum legislation and other regulations that currently apply to these properties. However, Ryder Scott is not in a position to attest to property title or rights, conditions of these rights including environmental and abandonment obligations, and any necessary licenses and consents including planning permission, financial interest relationships or encumbrances thereon for any part of the appraised properties.

In carrying out this study, Ryder Scott is not aware that any conflict of interest has existed. As an independent consultancy, Ryder Scott is providing impartial technical, commercial and strategic advice within the energy sector. Ryder Scott’s remuneration was not in any way contingent on the contents of this report. In the preparation of this document, Ryder Scott has maintained, and continues to maintain, a strict independent consultant-client relationship with CNODCI. Furthermore, the management and employees of Ryder Scott have no interest in any of the assets evaluated or related with the analysis carried out as part of this report.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PetroChina Company Limited

April 2, 2015

Page 6

Staff members who prepared this report are professionally-qualified with appropriate educational qualifications and levels of experience and expertise to perform the scope of work set out in the Proposal for Services.

Ryder Scott has not undertaken a site visit and inspection because it is not included in the scope of work and its related budget. As such, Ryder Scott is not in a position to comment on the operations or facilities in place, their appropriateness and condition and whether they are in compliance with the regulations pertaining to such operations. Further, Ryder Scott is not in a position to comment on any aspect of health, safety or environment of such operation.

It should be clearly noted that the Net Present Values (NPVs) contained herein do not represent a Ryder Scott opinion as to the market value of the subject property, nor any interest in it.

In assessing a likely market value, it would be necessary to take into account a number of additional factors including: reserves risk (i.e. that Proved and/or Probable and/or Possible Reserves may not be realized within the anticipated time frame for their exploitation); perceptions of economic and sovereign risk; potential upside, such as in this case exploitation of reserves beyond the Proved and the Probable level; other benefits, encumbrances or charges that may pertain to a particular interest; and the competitive state of the market at the time. Ryder Scott has explicitly not taken such factors into account in deriving the referenced NPVs presented herein.

In the preparation of this report Ryder Scott has used Part 210 Rule 4-10(a) of Regulation S-X of the United States Securities and Exchange Commission (Appendix I).

There are numerous uncertainties inherent in estimating reserves and resources, and in projecting future production, development expenditures, operating expenses and cash flows. Oil and gas reserve engineering and resource assessment must be recognized as a subjective process of estimating subsurface accumulations of oil and gas that cannot be measured in an exact way. Estimates of oil and gas reserves or resources prepared by other parties may differ, perhaps materially, from those contained within this report. The accuracy of any reserve estimate is a function of the quality of the available data and of engineering and geological interpretation. Results of drilling, testing and production that post-date the preparation of the estimates may justify revisions, some or all of which may be material. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered, and the timing and cost of those volumes that are recovered may vary from that assumed.

Oil and condensate volumes appearing in this report have been quoted at stock tank conditions. Typically these volumes have been referred to in thousand barrel increments (Mstb). Natural gas volumes have been quoted in billions at standard cubic feet (Bscf) and are volumes of sales gas, after an allocation has been made for fuel and process shrinkage losses, at the standard conditions appropriate for the area.

Ryder Scott prepared an independent assessment of the reserves based on data and interpretations provided by CNODCI.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PetroChina Company Limited

April 2, 2015

Page 7

It is Ryder Scott’s opinion that the estimates of Proved Developed and Total Proved oil and gas volumes at December 31, 2014, are, in the aggregate, reasonable and the reserves classification and categorization is appropriate and consistent with the definitions and guidelines for reserves.


				Very truly yours,


				RYDER SCOTT COMPANY, L.P. TBPE Firm Registration No. F-1580

				Daniel R. Olds, P.E. TBPE License No. 60996 Managing Senior Vice President

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Professional Qualifications of Primary Technical Person

The conclusions presented in this report are the result of technical analysis conducted by teams of geoscientists and engineers from Ryder Scott Company, L.P. Daniel R. Olds was the primary technical person responsible for overseeing the estimate of the reserves, future production, and income prepared by Ryder Scott presented herein.

Mr. Olds, an employee of Ryder Scott Company, L.P. (Ryder Scott) since 2001, is a Managing Senior Vice President and also serves as an Engineering Group Coordinator responsible for coordinating and supervising staff and consulting engineers of the company in ongoing reservoir evaluation studies worldwide. He is a member of Ryder Scott’s Board of Directors. Before joining Ryder Scott, Mr. Olds served in a number of engineering and evaluation positions with PricewaterhouseCoopers, Wintershall Oil and Gas Company and Cities Service Oil Company. For more information regarding Mr. Olds’ geographic and job specific experience, please refer to the Ryder Scott Company website at www.ryderscott.com/Company/Employees.

Mr. Olds earned a Bachelor of Science degree in Petroleum Engineering from West Virginia University in 1981, an MBA from the University of Houston in 1991 and is a licensed Professional Engineer in the State of Texas, He is also a member of the Society of Petroleum Evaluation Engineers (past president) and the Society of Petroleum Engineers.

In addition to gaining experience and competency through prior work experience, the Texas Board of Professional Engineers requires a minimum of fifteen hours of continuing education annually, including at least one hour in the area of professional ethics, which Mr. Olds fulfills. For 2014, Mr. Olds had over 35 hours of continuing education hours related to reserves, reserve evaluation, and ethics. More specifically, 2014 training included short courses on unconventional reservoirs and specialized data analysis. Mr. Olds was a speaker at a national accounting conference. Mr. Olds has had at least 30 hours of continuing education for each of the last 5 years.

Based on his educational background, professional training and more than 33 years of practical experience in the estimation and evaluation of petroleum reserves, Mr. Olds has attained the professional qualifications as a Reserves Estimator and Reserves Auditor set forth in Article III of the ‘Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information’ promulgated by the Society of Petroleum Engineers as of February 19, 2007.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

APPENDIX I

PETROLEUM RESERVES DEFINITIONS

As Adapted From:

RULE 4-10(a) of REGULATION S-X PART 210

UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)

PREAMBLE

On January 14, 2009, the United States Securities and Exchange Commission (SEC) published the “Modernization of Oil and Gas Reporting; Final Rule” in the Federal Register of National Archives and Records Administration (NARA). The “Modernization of Oil and Gas Reporting; Final Rule” includes revisions and additions to the definition section in Rule 4-10 of Regulation S-X, revisions and additions to the oil and gas reporting requirements in Regulation S-K, and amends and codifies Industry Guide 2 in Regulation S-K. The “Modernization of Oil and Gas Reporting; Final Rule”, including all references to Regulation S-X and Regulation S-K, shall be referred to herein collectively as the “SEC regulations”. The SEC regulations take effect for all filings made with the United States Securities and Exchange Commission as of December 31, 2009, or after January 1, 2010. Reference should be made to the full text under Title 17, Code of Federal Regulations, Regulation S-X Part 210, Rule 4-10(a) for the complete definitions (direct passages excerpted in part or wholly from the aforementioned SEC document are denoted in italics herein).

Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. All reserve estimates involve an assessment of the uncertainty relating the likelihood that the actual remaining quantities recovered will be greater or less than the estimated quantities determined as of the date the estimate is made. The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. Under the SEC regulations as of December 31, 2009, or after January 1, 2010, a company may optionally disclose estimated quantities of probable or possible oil and gas reserves in documents publicly filed with the SEC. The SEC regulations continue to prohibit disclosure of estimates of oil and gas resources other than reserves and any estimated values of such resources in any document publicly filed with the SEC unless such information is required to be disclosed in the document by foreign or state law as noted in §229.1202 Instruction to Item 1202.

Reserves estimates will generally be revised only as additional geologic or engineering data become available or as economic conditions change.

Reserves may be attributed to either natural energy or improved recovery methods. Improved recovery methods include all methods for supplementing natural energy or altering natural forces in the reservoir to increase ultimate recovery. Examples of such methods are pressure maintenance, natural gas cycling, waterflooding, thermal methods, chemical flooding, and the use of miscible and immiscible displacement fluids. Other improved recovery methods may be developed in the future as petroleum technology continues to evolve.

Reserves may be attributed to either conventional or unconventional petroleum accumulations. Petroleum accumulations are considered as either conventional or unconventional based on the nature of their in-place characteristics, extraction method applied, or degree of processing prior to sale. Examples of unconventional petroleum accumulations include coalbed or coalseam methane (CBM/CSM), basin-centered gas, shale gas, gas hydrates, natural bitumen and oil shale deposits. These unconventional accumulations may require specialized extraction technology and/or significant processing prior to sale.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

Page 2

Reserves do not include quantities of petroleum being held in inventory.

Because of the differences in uncertainty, caution should be exercised when aggregating quantities of petroleum from different reserves categories.

RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §210.4-10(a)(26) defines reserves as follows:

Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

PROVED RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §210.4-10(a)(22) defines proved oil and gas reserves as follows:

Proved oil and gas reserves. 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 regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i)

The area of the reservoir considered as proved includes:

(A)

The area identified by drilling and limited by fluid contacts, if any, and

(B)

Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii)

In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii)

Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

Page 3

(iv)

Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

(A)

Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and

(B)

The project has been approved for development by all necessary parties and entities, including governmental entities.

(v)

Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

PROBABLE RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §210.4-10(a)(18) defines probable oil and gas reserves as follows:

Probable reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.

(i)

When deterministic methods are used, it is as likely as not that actual remaining quantities recovered will exceed the sum of estimated proved plus probable reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates.

(ii)

Probable reserves may be assigned to areas of a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain, even if the interpreted reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be assigned to areas that are structurally higher than the proved area if these areas are in communication with the proved reservoir.

(iii)

Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.

(iv)

See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section.

POSSIBLE RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S.X §210.4-10(a)(17) defines possible oil and gas reserves as follows:

Possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.

(i)

When deterministic methods are used, the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves. When probabilistic methods are used, there should be at least a 10% probability that the total quantities ultimately recovered will equal or exceed the proved plus probable plus possible reserves estimates.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

Page 4

(ii)

Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where data control and interpretations of available data are progressively less certain. Frequently, this will be in areas where geoscience and engineering data are unable to define clearly the area and vertical limits of commercial production from the reservoir by a defined project.

(iii)

Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves.

(iv)

The proved plus probable and proved plus probable plus possible reserves estimates must be based on reasonable alternative technical and commercial interpretations within the reservoir or subject project that are clearly documented, including comparisons to results in successful similar projects.

(v)

Possible reserves may be assigned where geoscience and engineering data identify directly adjacent portions of a reservoir within the same accumulation that may be separated from proved areas by faults with displacement less than formation thickness or other geological discontinuities and that have not been penetrated by a wellbore, and the registrant believes that such adjacent portions are in communication with the known (proved) reservoir. Possible reserves may be assigned to areas that are structurally higher or lower than the proved area if these areas are in communication with the proved reservoir.

(vi)

Pursuant to paragraph (a)(22)(iii) of this section, where direct observation has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves should be assigned in the structurally higher portions of the reservoir above the HKO only if the higher contact can be established with reasonable certainty through reliable technology. Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as probable and possible oil or gas based on reservoir fluid properties and pressure gradient interpretations.

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

APPENDIX II

GLOSSARY

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

List of Standard Oil Industry Terms and Abbreviations


ABEX		Abandonment Expenditure
ACQ		Annual Contract Quantity
°API		Degrees API (American Petroleum Institute)
AAPG		American Association of Petroleum
AVO		Amplitude versus Offset
A$		Australian Dollars
B		Billion (109)
Bbl		Barrels
/BbI		per barrel
BBbl		Billion Barrels
BHA		Bottom Hole Assembly
BHC		Bottom Hole Compensated
Bscf or Bcf		Billion standard cubic feet
Bscfd or Bcfd		Billion standard cubic feet per day
Bm3		Billion cubic meters
Bcpd		Barrels of condensate per day
BHP		Bottom Hole Pressure
Blpd		Barrels of liquid per day
Bpd		Barrels per day
Boe		Barrels of oil equivalent @ xxx mcf/Bbl
Boepd		Barrels of oil equivalent per day @ xxxmcf/Bbl
BOP		Blow Out Preventer
Bopd		Barrels oil per day
Bwpd		Barrels of water per day
BS&W		Bottom sediment and water
BTU		Bottom sediment and water
Bwpd		Barrels water per day
CBM		Coal Bed Methane
CO2		Carbon Dioxide
CAPEX		Capital Expenditure
CCGT		Combined Cycle Gas Turbine
Cm		centimeters
CMM		Coal Mine Methane
CNG		Compressed Natural Gas
Cp		Centipoise (a measure of viscosity)
CSG		Coal Seam Gas
CT		Corporation Tax
DCQ		Daily Contract Quantity
Deg C		Degrees Celsius
Deg F		Degrees Fahrenheit
DHI		Direct Hydrocarbon Indicator
DST		Drill Stem Test
DWT		Dead-weight ton
E&A		Exploration & Appraisal


EMV		Expected Monetary Value
EOR		Enhanced Oil Recovery
EUR		Estimated Ultimate Recovery
FEED		Front End Engineering and Design
FPSO		Floating Production, Storage and Offloading
FSO		Floating Storage and Offloading
Ft		Foot/feet
Fx		Foreign Exchange Rate
G		gram
g/cc		grams per cubic centimeter
Gal		gallon
gal/d		gallons per day
G&A		General and Administrative costs
GBP		Pounds Sterling
GDT		Gas Down to
GIIP		Gas initially in place
GJ		Gigajoules (one billion Joules)
GOR		Gas Oil Ratio
GTL		Gas to Liquids
GWC		Gas water contact
HDT		Hydrocarbons Down to
HSE		Health, Safety and Environment
HSFO		High Sulphur Fuel Oil
HUT		Hydrocarbons up to
H2S		Hydrogen Sulphide
IOR		Improved Oil Recovery
IPP		Independent Power Producer
IRR		Internal Rate of Return
J		Joule (Metric measurement of energy) 1 kilojoule =0.9478 BTU)
k		Permeability
KB		Kelly Bushing
KJ		Kilojoules (one Thousand Joules)
KI		Kilolitres
Km		Kilometers
km2		Square kilometers
kPa		Thousands of Pascals (measurement of pressure)
KW		Kilowatt
KWh		Kilowatt hour
LKG		Lowest Known Gas
LKH		Lowest Known Hydrocarbons
LKO		Lowest Known Oil
LNG		Liquefied Natural Gas
LoF		Life of Field
LPG		Liquefied Petroleum Gas

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS


E&P		Exploration and Production
EBIT		Earnings before Interest and Tax
EBITDA		Earnings before interest, tax, depreciation and amortization
E1		Entitlement Interest
EIA		Environmental Impact Assessment
Mcf or Mscf		Thousand standard cubic feet
MCM		Management Committee Meeting
MMcf or MMscf		Million standard cubic feet
m3d		Cubic meters per day
mD		Measure of Permeability in millidarcies
MD		Measured Depth
MDT		Modular Dynamic Tester
Mean		Arithmetic average of a set of numbers
Median		Middle value in a set of values
MFT		Multi Formation Tester
mg/l		milligrams per litre
MJ		Megajoules (One Million Joules)
Mm3		Thousand Cubic meters
Mm3d		Thousand Cubic meters per day
MM		Million
MMBbl		Millions of barrels
MMBTU		Millions of British Thermal Units
Mode		Value that exists most frequently in a set of values=most likely
Mscfd		Thousand standard cubic feet per day
MMscfd		Million standard cubic feet per day
MW		Megawatt
MWD		Measuring While Drilling
MWh		Megawatt hour
Rw		Resistivity of water
SCAL		Special core analysis
cf or scf		Standard Cubic Feet
cfd or scfd		Standard Cubic Feet per day
scf/ton		Standard cubic foot per ton
SL		Straight line (for depreciation)
So		Oil Saturation
SPE		Society of Petroleum Engineers
SPEE		Society of Petroleum Evaluation Engineers
Ss		Subsea
Stb		Stock tank barrel


STOIIP		Stock tank oil initially in place
Sw		Water Saturation
T		Tonnes
TD		Total Depth
Te		Tonnes equivalent
THP		Tubing Head Pressure
TJ		Terajoules (10¹² Joules)
LTI		Lost Time Injury
LWD		Logging while drilling
m		Meters
M		Thousand
m3		Cubic meters
Mya		Million years ago
NGL		Natural Gas Liquids
N2		Nitrogen
NPV		Net Present Value
OBM		Oil Based Mud
OCM		Operating Committee Meeting
ODT		Oil down to
OPEX		Operating Expenditure
OWC		Oil Water Contact
p.a.		Per annum
Pa		Pascals (metric measurement of pressure)
p.a.		Per annum
Pa		Pascals (metric measurement of pressure)
P&A		Plugged and Abandoned
PDP		Proved Developed Producing
PI		Productivity Index
PJ		Petajoules (10¹⁵ Joules)
PSDM		Post Stack Depth Migration
Psi		Pounds per square inch
Psia		Pounds per square inch absolute
Psig		Pounds per square inch gauge
PUD		Proved Undeveloped
PVT		Pressure volume temperature
P10		10% Probability
P50		50% Probability
P90		90% Probability
Rf		Recovery factor
RFT		Repeat Formation Tester
RT		Rotary Table

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS


Tscf or Tcf	Trillion standard cubic feet	TVD	True Vertical Depth
TCM	Technical Committee Meeting	TVDss	True Vertical Depth Subsea
TOC	Total Organic Carbon	USGS	United States Geological Survey
TOP	Take or Pay	US$	United States Dollar
Tpd	Tonnes per day
VSP	Vertical Seismic Profiling
WC	Water Cut
WI	Working Interest
WPC	World Petroleum Council
WTI	West Texas Intermediate
wt%	Weight percent
1 H05	First half (6 months) of 2005 (example of date)
2Q06	Second quarter (3 months) of 2006 (example of date)
2D	Two dimensional
3D	Three dimensional
4D	Four dimensional
1P	Proved Reserves
2P	Proved plus Probable Reserves
3P	Proved plus Probable plus Possible Reserves
%	Proved plus Probable plus Possible Reserves

AYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Exhibit 15.3

BRION ENERGY CORPORATION

RESERVES ASSESSMENT AND EVALUATION OF

CANADIAN OIL AND GAS PROPERTIES

THIRD PARTY CORPORATE SUMMARY

Effective December 31, 2014

1143014

THIRD PARTY CORPORATE SUMMARY

TABLE OF CONTENTS


	Page
COVERING LETTER		3

INDEPENDENT PETROLEUM CONSULTANTS’ CONSENT		5

INTRODUCTION		6

SUMMARY		8

EVALUATION PROCEDURE		12

PRODUCT PRICE AND MARKET FORECASTS		16

APPENDIX I
Certificates of Qualification		17

LOGO

Principal Officers:

Keith M. Braaten, P. Eng.

President & CEO

Jodi L. Anhorn, M.Sc., P. Eng.

Executive Vice President & COO

Officers / Vice Presidents:

March 23, 2015

Project 1143014

Caralyn P. Bennett, P. Eng.

Tim R. Freeborn, P. Eng.

Leonard L. Herchen, P. Eng.

Myron J. Hladyshevsky, P. Eng.

Todd J. Ikeda, P. Eng.

Bryan M. Joa, P. Eng.

Mark Jobin, P. Geol.

John E. Keith, P. Eng.

Mr. Michael Fox

Brion Energy Corporation

1500, 250 – 6^th Avenue SW

Calgary, Alberta T2P 3H7

Dear Sir:

Re:

Brion Energy Corporation

Corporate Evaluation

Effective December 31, 2014

GLJ Petroleum Consultants (GLJ) has completed an independent reserves assessment and evaluation of the oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

This report has been prepared for the Company for the purpose of annual disclosure and other financial requirements. This evaluation has been prepared in accordance with reserves definitions, standards and procedures of the United States Securities and Exchange Commission (SEC).

It was GLJ’s primary mandate in this evaluation to provide an independent evaluation of the oil and gas reserves of the Company in aggregate. Accordingly it may not be appropriate to extract individual property or entity estimates for other purposes.

Reserves included in this report represent the consolidation of the Groundbirch Montney, Duvernay Joint Venture and CNPC International conventional assets.

Our engagement letter notes these limitations on the use of this report.

4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada T2P 4H2 (403) 266-9500 Fax (403) 262-1855 GLJPC.com


		Page 2

It is trusted that this evaluation meets your current requirements. Should you have any questions regarding this analysis, please contact the undersigned.

Yours very truly,

GLJ PETROLEUM CONSULTANTS LTD.

LOGO

Trisha S. MacDonald, P. Eng.

Senior Engineer

LOGO

Jodi L. Anhorn, M. Sc., P. Eng.

Executive Vice President & COO

TSM/JLA/ljn

Attachments

INDEPENDENT PETROLEUM CONSULTANTS’ CONSENT

The undersigned firm of Independent Petroleum Consultants of Calgary, Alberta, Canada has prepared an independent evaluation of the Brion Energy Corporation (the “Company”) Canadian oil and gas properties and hereby gives consent to the use of its name and to the said estimates. The effective date of the evaluation is December 31, 2014.

In the course of the evaluation, the Company provided GLJ Petroleum Consultants Ltd. personnel with basic information which included land data, well information, geological information, reservoir studies, estimates of on-stream dates, contract information, current hydrocarbon product prices, operating cost data, capital budget forecasts, financial data and future operating plans. Other engineering, geological or economic data required to conduct the evaluation and upon which this report is based, were obtained from public records, other operators and from GLJ Petroleum Consultants Ltd. nonconfidential files. The Company has provided a representation letter confirming that all information provided to GLJ Petroleum Consultants Ltd. is correct and complete to the best of its knowledge. Procedures recommended in the United States Securities and Exchange Commission (SEC) to verify certain interests and financial information were applied in this evaluation. In applying these procedures and tests, nothing came to GLJ Petroleum Consultants Ltd.’s attention that would suggest that information provided by the Company was not complete and accurate. GLJ Petroleum Consultants Ltd. reserves the right to review all calculations referred to or included in this report and to revise the estimates in light of erroneous data supplied or information existing but not made available which becomes known subsequent to the preparation of this report.

The accuracy of any reserves, resources and production estimate is a function of the quality and quantity of available data and of engineering interpretation and judgment. While reserves, resources and production estimates presented herein are considered reasonable, the estimates should be accepted with the understanding that reservoir performance subsequent to the date of the estimate may justify revision, either upward or downward.

Revenue projections presented in this report are based in part on forecasts of market prices, currency exchange rates, inflation, market demand and government policy which are subject to many uncertainties and may, in future, differ materially from the forecasts utilized herein. Present values of revenues documented in this report do not necessarily represent the fair market value of the reserves evaluated herein.


PERMIT TO PRACTICE
GLJ PETROLEUM CONSULTANTS LTD.
Signature:

Date:		January 30, 2015


PERMIT NUMBER: P 2066
The Association of Professional Engineers and Geoscientists of Alberta

LOGO

INTRODUCTION

GLJ Petroleum Consultants (GLJ) was commissioned by Brion Energy Corporation (the “Company”) to prepare an independent evaluation of its oil and gas reserves and resources effective December 31, 2014. The locations of the most significant reserves properties are indicated on the attached index map.

The evaluation was initiated in November 2014 and completed by January 2015. Estimates of reserves, resources and projections of production were generally prepared using well information and production data available from public sources to approximately October 31, 2014. The Company provided land, accounting data and other technical information not available in the public domain to approximately January 22, 2015. In certain instances, the Company also provided recent engineering, geological and other information up to December 23, 2014. The Company has confirmed that, to the best of its knowledge, all information provided to GLJ is correct and complete as of the effective date.

The reserves definitions used in preparing this report (included herein under “Reserves Definitions”) are those required by the United States Securities Exchange Commission (SEC). The summary of reserves and value, using the SEC reserves definitions, uses the average historical prices derived from the first day of the month for January to December 2014.

Tables summarizing production, royalties, costs, revenue projections, reserves and present value estimates for various reserves and resources categories for individual properties and the Company total are provided in the tabbed sections of this Summary Report.

The Evaluation Procedure section outlines general procedures used in preparing this evaluation. The individual property reports, provided under separate cover, provide additional evaluation details. The following summarizes evaluation matters that have been included/excluded in cash flow projections:

•

processing income has been included as “Other Income”,

•

provisions for the abandonment of all of the Company’s wells to which reserves and resources have been attributed have been included; all other abandonment and reclamation costs have not been included,

•

general and administrative (G&A) costs and overhead recovery have not been included,

•

undeveloped land values have not been included.

•

Carbon taxes associated with greenhouse gas emissions as part of Alberta Environment and Sustainable Resource Development’s specified Gas Emitters Regulation have not been included.

Economic forecasts are provided on an after tax basis including tax pools provided by the Company in the “Evaluation Procedure” section.

Map 1

Index Map

Property Locations


Company: Brion Energy Corporation				Effective Date: December 31, 2014
Property: Western Canada				Scale 1:6,000,000 s1143014/indm01

LOGO


Company:	Brion Energy Corporation	Reserve Class:	Various
Property:	Corporate	Development Class:	Classifications
Description:	After Tax	Pricing:	SEC 2014-Dec-31 Posted (12 Month Avg.)
		Effective Date:	December 31, 2014

Summary of Reserves and Values


	Proved Producing		Proved Developed Non- Producing		Proved Undeveloped		Total Proved
MARKETABLE RESERVES

Light & Medium Oil (Mbbl)
Total Company Interest		669		0		0		669
Working Interest		669		0		0		669
Net After Royalty		542		0		0		542

Natural Gas (MMcf)
Total Company Interest		141,898		12,454		191,004		345,357
Working Interest		141,890		12,454		191,004		345,348
Net After Royalty		127,768		11,824		171,761		311,353

Natural Gas Liquids (Mbbl)
Total Company Interest		3,814		1,565		14,755		20,133
Working Interest		3,813		1,565		14,755		20,133
Net After Royalty		2,953		1,219		11,897		16,069

Oil Equivalent (Mboe)
Total Company Interest		28,132		3,640		46,589		78,361
Working Interest		28,131		3,640		46,589		78,360
Net After Royalty		24,790		3,189		40,523		68,503
BEFORE TAX PRESENT VALUE (M$)
0%		510,219		152,361		609,551		1,272,131
5%		418,458		124,989		354,762		898,209
8%		379,860		113,695		256,601		750,155
10%		358,641		107,543		205,613		671,797
12%		340,209		102,230		163,321		605,760
15%		316,685		95,486		112,440		524,611
20%		285,579		86,612		51,440		423,631
AFTER TAX PRESENT VALUE (M$)
0%		495,993		152,361		609,551		1,257,905
5%		410,504		124,989		354,762		890,255
8%		374,012		113,695		256,601		744,308
10%		353,803		107,543		205,613		666,959
12%		336,160		102,230		163,321		601,710
15%		313,520		95,486		112,440		521,446
20%		283,370		86,612		51,440		421,421


	BOE Factors:	HVY OIL	1.0	RES GAS	6.0	PROPANE	1.0	ETHANE	1.0
		COND	1.0	SLN GAS	6.0	BUTANE	1.0	SULPHUR	0.0

Run Date: March 25, 2015 10:28:49 1143014 Class (A,B1,B2,C), SEC 2014-Dec-31 Posted (12 Month Avg.), psum									March 25, 2015 10:35:34


Company:	Brion Energy Corporation	Reserve Class:	Various
Property:	Corporate	Development Class:	Classifications
Description:	After Tax	Pricing:	SEC 2014-Dec-31 Posted (12 Month Avg.)
		Effective Date:	December 31, 2014

Company and Net Reserves and Present Value Summary


			Company Interest Reserves										Net After Royalty Reserves										Before Income Tax Discounted Present Value (M$)								After Income Tax Discounted Present Value (M$)
Entity Description	Reserve Class		Gas MMcf		Oil Mbbl		NGL Mbbl		Sulphur Mlt		Oil Eq. Mboe		Gas MMcf		Oil Mbbl		NGL Mbbl		Sulphur Mlt		Oil Eq. Mboe		0%		8%		10%		12%		0%		5%		8%		10%		12%
*Proved Producing*
*Total*
*Brion Energy Corp*
*Joint Venture Gas Project*
*Duvernay*
Kaybob Duvernay				16,029		0		2,865		0		5,537		15,304		0		2,178		0		4,728		189,067		148,833		141,858		135,693		189,067		161,199		148,833		141,858		135,693
Simonette Montney				715		0		67		0		186		647		0		45		0		153		6,452		4,634		4,347		4,100		6,452		5,165		4,634		4,347		4,100
Willesden Green Duvernay				4,975		555		256		0		1,641		4,676		433		205		0		1,417		44,251		36,086		34,546		33,154		44,251		38,723		36,086		34,546		33,154

Total: Duvernay				21,719		555		3,188		0		7,364		20,627		433		2,428		0		6,298		239,770		189,553		180,751		172,946		239,770		205,087		189,553		180,751		172,946
Groundbirch Property		A		119,795		0		624		0		20,590		106,781		0		525		0		18,322		264,043		185,755		173,636		163,266		251,429		201,604		181,054		169,870		160,224

Total: Joint Venture Gas Project				141,514		555		3,812		0		27,953		127,408		433		2,953		0		24,620		503,813		375,308		354,387		336,212		491,199		406,691		370,607		350,622		333,171


Total: Brion Energy Corp				141,514		555		3,812		0		27,953		127,408		433		2,953		0		24,620		503,813		375,308		354,387		336,212		491,199		406,691		370,607		350,622		333,171
*CNPC International Canada Limited*
*Conventional Assets*
Drumheller		A		161		19		1		0		48		150		19		1		0		44		1,309		998		942		893		1,309		1,095		998		942		893
Lone Rock (Sask)		A		3		63		0		0		63		3		60		0		0		61		2,752		1,950		1,823		1,714		2,752		2,183		1,950		1,823		1,714
Twining		A		219		31		0		0		68		207		30		0		0		65		2,346		1,603		1,488		1,390		2,346		1,817		1,603		1,488		1,390

Total: Conventional Assets				384		113		1		0		179		361		109		1		0		171		6,406		4,551		4,254		3,997		6,406		5,095		4,551		4,254		3,997

Total: CNPC International Canada Limited				384		113		1		0		179		361		109		1		0		171		6,406		4,551		4,254		3,997		6,406		5,095		4,551		4,254		3,997

Total				141,898		669		3,814		0		28,132		127,768		542		2,953		0		24,790		510,219		379,860		358,641		340,209		497,605		411,787		375,159		354,876		337,168

Total: Proved Producing				141,898		669		3,814		0		28,132		127,768		542		2,953		0		24,790		510,219		379,860		358,641		340,209		497,605		411,787		375,159		354,876		337,168
*Proved Developed Non-Producing*
*Total*
*Brion Energy Corp*
*Joint Venture Gas Project*
*Duvernay*
Kaybob Duvernay				11,251		0		1,471		0		3,347		10,720		0		1,145		0		2,931		142,525		105,770		99,948		94,926		142,525		116,479		105,770		99,948		94,926
Simonette Montney				663		0		90		0		201		605		0		72		0		172		8,972		7,277		6,988		6,733		8,972		7,793		7,277		6,988		6,733
Willesden Green Duvernay				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: Duvernay				11,914		0		1,562		0		3,547		11,325		0		1,216		0		3,104		151,497		113,047		106,936		101,660		151,497		124,272		113,047		106,936		101,660
Groundbirch Property		B1		541		0		3		0		93		498		0		2		0		85		864		647		607		570		864		717		647		607		570

Total: Joint Venture Gas Project				12,454		0		1,565		0		3,640		11,824		0		1,219		0		3,189		152,361		113,695		107,543		102,230		152,361		124,989		113,695		107,543		102,230

Total: Brion Energy Corp				12,454		0		1,565		0		3,640		11,824		0		1,219		0		3,189		152,361		113,695		107,543		102,230		152,361		124,989		113,695		107,543		102,230
*CNPC International Canada Limited*
*Conventional Assets*
Drumheller				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Lone Rock (Sask)				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Twining				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: Conventional Assets				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: CNPC International Canada Limited				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total				12,454		0		1,565		0		3,640		11,824		0		1,219		0		3,189		152,361		113,695		107,543		102,230		152,361		124,989		113,695		107,543		102,230


1143014 Class (A,B1,B2,B,C), SEC 2014-Dec-31 Posted (12 Month Avg.), grv				March 25, 2015 10:35:27

Page 2

Company and Net Reserves and Present Value Summary


			Company Interest Reserves										Net After Royalty Reserves										Before Income Tax Discounted Present Value (M$)								After Income Tax Discounted Present Value (M$)
Entity Description	Reserve Class		Gas MMcf		Oil Mbbl		NGL Mbbl		Sulphur Mlt		Oil Eq. Mboe		Gas MMcf		Oil Mbbl		NGL Mbbl		Sulphur Mlt		Oil Eq. Mboe		0%		8%		10%		12%		0%		5%		8%		10%		12%
Total: Proved Developed Non-Producing				12,454		0		1,565		0		3,640		11,824		0		1,219		0		3,189		152,361		113,695		107,543		102,230		152,361		124,989		113,695		107,543		102,230
*Proved Undeveloped*
*Total*
*Brion Energy Corp*
*Joint Venture Gas Project*
*Duvernay*
Kaybob Duvernay				69,731		0		13,131		0		24,753		66,575		0		10,535		0		21,631		390,365		150,612		114,799		84,907		390,365		218,766		150,612		114,799		84,907
Simonette Montney				3,320		0		371		0		924		3,093		0		302		0		817		21,004		10,714		9,181		7,893		21,004		13,624		10,714		9,181		7,893
Willesden Green Duvernay				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: Duvernay				73,051		0		13,502		0		25,677		69,668		0		10,837		0		22,448		411,368		161,327		123,979		92,800		411,368		232,390		161,327		123,979		92,800
Groundbirch Property		B2		117,953		0		1,253		0		20,912		102,093		0		1,060		0		18,075		198,183		95,275		81,634		70,521		198,183		122,372		95,275		81,634		70,521

Total: Joint Venture Gas Project				191,004		0		14,755		0		46,589		171,761		0		11,897		0		40,523		609,551		256,601		205,613		163,321		609,551		354,762		256,601		205,613		163,321

Total: Brion Energy Corp				191,004		0		14,755		0		46,589		171,761		0		11,897		0		40,523		609,551		256,601		205,613		163,321		609,551		354,762		256,601		205,613		163,321
*CNPC International Canada Limited*
*Conventional Assets*
Drumheller				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Lone Rock (Sask)				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Twining				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: Conventional Assets				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: CNPC International Canada Limited				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total				191,004		0		14,755		0		46,589		171,761		0		11,897		0		40,523		609,551		256,601		205,613		163,321		609,551		354,762		256,601		205,613		163,321

Total: Proved Undeveloped				191,004		0		14,755		0		46,589		171,761		0		11,897		0		40,523		609,551		256,601		205,613		163,321		609,551		354,762		256,601		205,613		163,321
*Total Proved Non-Producing*
*Total*
*Brion Energy Corp*
*Joint Venture Gas Project*
*Duvernay*
Kaybob Duvernay				80,982		0		14,603		0		28,100		77,295		0		11,680		0		24,563		532,890		256,382		214,747		179,833		532,890		335,245		256,382		214,747		179,833
Simonette Montney				3,982		0		461		0		1,125		3,698		0		373		0		990		29,975		17,992		16,169		14,627		29,975		21,417		17,992		16,169		14,627
Willesden Green Duvernay				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: Duvernay				84,964		0		15,064		0		29,225		80,993		0		12,053		0		25,552		562,865		274,374		230,915		194,460		562,865		356,662		274,374		230,915		194,460
Groundbirch Property				118,494		0		1,255		0		21,004		102,592		0		1,062		0		18,161		199,047		95,922		82,240		71,091		199,047		123,089		95,922		82,240		71,091

Total: Joint Venture Gas Project				203,458		0		16,319		0		50,229		183,585		0		13,115		0		43,713		761,912		370,296		313,156		265,551		761,912		479,751		370,296		313,156		265,551

Total: Brion Energy Corp				203,458		0		16,319		0		50,229		183,585		0		13,115		0		43,713		761,912		370,296		313,156		265,551		761,912		479,751		370,296		313,156		265,551
*CNPC International Canada Limited*
*Conventional Assets*
Drumheller				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Lone Rock (Sask)				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Twining				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: Conventional Assets				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total: CNPC International Canada Limited				0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0		0

Total				203,458		0		16,319		0		50,229		183,585		0		13,115		0		43,713		761,912		370,296		313,156		265,551		761,912		479,751		370,296		313,156		265,551

Total: Total Proved Non-Producing				203,458		0		16,319		0		50,229		183,585		0		13,115		0		43,713		761,912		370,296		313,156		265,551		761,912		479,751		370,296		313,156		265,551


1143014 Class (A,B1,B2,B,C), SEC 2014-Dec-31 Posted (12 Month Avg.), grv				March 25, 2015 10:35:27

Page 3

Company and Net Reserves and Present Value Summary


			Company Interest Reserves										Net After Royalty Reserves										Before Income Tax Discounted Present Value (M$)								After Income Tax Discounted Present Value (M$)
Entity Description	Reserve Class		Gas MMcf		Oil Mbbl		NGL Mbbl		Sulphur Mlt		Oil Eq. Mboe		Gas MMcf		Oil Mbbl		NGL Mbbl		Sulphur Mlt		Oil Eq. Mboe		0%		8%		10%		12%		0%		5%		8%		10%		12%
*Total Proved*
*Total*
*Brion Energy Corp*
*Joint Venture Gas Project*
*Duvernay*
Kaybob Duvernay				97,011		0		17,468		0		33,637		92,599		0		13,858		0		29,291		721,957		405,215		356,605		315,525		721,957		496,444		405,215		356,605		315,525
Simonette Montney				4,697		0		528		0		1,311		4,345		0		418		0		1,142		36,428		22,626		20,516		18,727		36,428		26,582		22,626		20,516		18,727
Willesden Green Duvernay				4,975		555		256		0		1,641		4,676		433		205		0		1,417		44,251		36,086		34,546		33,154		44,251		38,723		36,086		34,546		33,154

Total: Duvernay				106,683		555		18,252		0		36,588		101,620		433		14,481		0		31,850		802,635		463,927		411,667		367,406		802,635		561,749		463,927		411,667		367,406
Groundbirch Property				238,289		0		1,879		0		41,594		209,372		0		1,587		0		36,482		463,090		281,677		255,876		234,357		450,476		324,693		276,976		252,111		231,316

Total: Joint Venture Gas Project				344,973		555		20,132		0		78,183		310,993		433		16,068		0		68,333		1,265,725		745,604		667,543		601,762		1,253,111		886,442		740,903		663,777		598,721

Total: Brion Energy Corp				344,973		555		20,132		0		78,183		310,993		433		16,068		0		68,333		1,265,725		745,604		667,543		601,762		1,253,111		886,442		740,903		663,777		598,721
*CNPC International Canada Limited*
*Conventional Assets*
Drumheller		A		161		19		1		0		48		150		19		1		0		44		1,309		998		942		893		1,309		1,095		998		942		893
Lone Rock (Sask)		A		3		63		0		0		63		3		60		0		0		61		2,752		1,950		1,823		1,714		2,752		2,183		1,950		1,823		1,714
Twining		A		219		31		0		0		68		207		30		0		0		65		2,346		1,603		1,488		1,390		2,346		1,817		1,603		1,488		1,390

Total: Conventional Assets				384		113		1		0		179		361		109		1		0		171		6,406		4,551		4,254		3,997		6,406		5,095		4,551		4,254		3,997

Total: CNPC International Canada Limited				384		113		1		0		179		361		109		1		0		171		6,406		4,551		4,254		3,997		6,406		5,095		4,551		4,254		3,997

Total				345,357		669		20,133		0		78,361		311,353		542		16,069		0		68,503		1,272,131		750,155		671,797		605,760		1,259,517		891,538		745,454		668,032		602,718

Total: Total Proved				345,357		669		20,133		0		78,361		311,353		542		16,069		0		68,503		1,272,131		750,155		671,797		605,760		1,259,517		891,538		745,454		668,032		602,718


BOE Factors:	HVY OIL	1.0	RES GAS	6.0	PROPANE	1.0	ETHANE	1.0
	COND	1.0	SLN GAS	6.0	BUTANE	1.0	SULPHUR	0.0


1143014 Class (A,B1,B2,B,C), SEC 2014-Dec-31 Posted (12 Month Avg.), grv				March 25, 2015 10:35:27

EVALUATION PROCEDURE

The following outlines the methodology employed by GLJ Petroleum Consultants (GLJ) in conducting the evaluation of the Company’s oil and gas properties. GLJ evaluation procedures are in compliance with standards contained in the Canadian Oil and Gas Evaluation (COGE) Handbook.

INTEREST DESCRIPTIONS

The Company provided GLJ with current land interest information. The Company provided a representation letter confirming accuracy of land information. Certain cross-checks of land and accounting information were undertaken by GLJ as recommended in the COGE Handbook. In this process, nothing came to GLJ’s attention that indicated that information provided by the Company was incomplete or unreliable.

In GLJ’s reports, “Company Interest” reserves, resources and values refer to the sum of royalty interest* and working interest reserves and resources before deduction of royalty burdens payable. “Working Interest” reserves and resources equate to those reserves and resources that are referred to as “Company Gross” reserves and resources by the Canadian Securities Administrators (CSA) in NI 51-101.

In the Securities Reporting section, working interest (or Company Gross) volumes are presented in tables to correspond to NI 51-101 disclosure requirements.

*	Royalty interest reserves and resources include royalty volumes derived only from other working interest owners.

WELL DATA

Pertinent interest and offset well data such as drill stem tests, workovers, pressure surveys, production tests, etc., were provided by the Company or were obtained from other operators, public records or GLJ nonconfidential files.

ACCOUNTING SUMMARY

The Company provided GLJ with available accounting data on a property basis and for the corporate total for the period January 2014, to September 30, 2014. In some circumstances this information was also provided on a cost centre basis to address major reserves entities that are a subset of a Company property.

For reserves and resources attributable to the Company’s oil sands project, no historical accounting was provided by the Company, as these projects are undeveloped.

PRODUCTION FORECASTS

In establishing all production forecasts, consideration was given to existing gas contracts and the possibility of contract revisions, to the operator’s plans for development drilling and to reserves and resources and well capability. Generally, development drilling in an area was not considered unless there was some indication from the operator that drilling could be expected.

The on-stream date for currently shut-in reserves and resources was estimated with consideration given to the following:

•

proximity to existing facilities

•

plans of the operator

•

economics

AFTER TAX ANALYSIS

Canadian income taxes were calculated based on currently legislated federal and provincial tax rates, tax regulations and tax pool information provided by the Company. After tax values for reserves development status or production status subcategories (i.e. developed, undeveloped, producing, non-producing) are calculated by difference.

Tax Pools

The following tax pools as of the effective date were included in the income tax calculations:


Tax Pool Classification	Write-Off Rate (%)		Tax Pool (M$)
Canadian Oil and Gas Property Expense (COGPE)		10		335,823
Canadian Exploration Expense (CEE)		100		25,459
Non-Capital Losses		100		26,622
Canadian Development Expense (CDE)		30		765,851
Capital Cost Allowance: (CCA)
Class 1		10		73
Class 50		55		268,527

Tax Rates

Federal income tax calculations incorporate recently enacted reductions in general corporate income tax rates as follows:


Year	Federal Income Tax Rate
2015+		15.0	%

Allocation of revenues to Canadian provinces for income tax purposes depends on several factors in addition to the provincial origin of the resource revenues. The average future annual provincial tax rate has been calculated based on an allocation of provincial resource revenues and their respective tax rate as follows:

Reserves

Class

Year

Alberta
Tax Rate

Alberta
Allocation

B.C.
Tax Rate

B.C.
Allocation

Sask.
Tax Rate

Sask.
Allocation

Avg. Ann.
Tax Rate

Proved Producing

2015+

10.00

42.3

11.00

57.2

12.00

0.5

10.6

Company total after tax economic forecasts for all reserves categories are attached.

ECONOMIC PARAMETERS

Pertinent economic parameters are listed as follows:

a)	The effective date is December 31, 2014.

b)	Operating and capital costs were estimated in 2015 dollars and then escalated as summarized in the Product Price and Market Forecasts section of this report.

c)	Economic forecasts were prepared for each property on a before income tax basis. Detailed discounting of future cash flow was performed using a discount factor of 10.0 percent with all values discounted annually to December 31, 2014, on a mid-calendar-year basis.

d)	Royalty holidays applicable to existing wells or forecast drilling are included in individual well economics. These credits are itemized within the property reports.

e)	Gas processing allowances relating to remaining undepreciated capital bases, were included in individual property economic evaluations.

f)	Mineral taxes on freehold interests were included.

g)	Field level overhead charges have been included; recovery of overhead expenses has not been included.

h)	The Company’s office G&A costs have not been included.

i)	Well abandonment costs for all wells with reserves have been included at the property level. Additional abandonment costs associated with non-reserves wells, lease reclamation costs and facility abandonment and reclamation expenses have not been included in this analysis.

j)	The Saskatchewan Resource Surcharge was included.

OIL EQUIVALENT OR GAS EQUIVALENT

In this report, quantities of hydrocarbons have been converted to barrels of oil equivalent (boe); or to sales gas equivalent (sge) using factors of 6 Mcf/boe for gas, 1 bbl/boe for all liquids, and 0 boe for sulphur. Users of oil equivalent values are cautioned that while boe based metrics are useful for comparative purposes, they may be misleading when used in isolation.

LIST OF ABBREVIATIONS


AOF		absolute open flow
bbl		barrels
Bcf		billion cubic feet of gas at standard conditions
BIIP		bitumen initially-in-place
boe		barrel of oil equivalent, in this evaluation determined using 6 Mcf/boe for gas, 1 bbl/boe for all liquids, and 0 boe for sulphur
bopd		barrels of oil per day
Btu		British thermal units
bwpd		barrels of water per day
DSU		drilling spacing unit
GCA		gas cost allowance
GIIP		gas initially-in-place
GOC		gas-oil contact
GOR		gas-oil ratio
GORR		gross overriding royalty
GWC		gas-water contact
Mbbl		thousand barrels
Mboe		thousand boe
Mcf		thousand cubic feet of gas at standard conditions
Mcfe		thousand cubic feet of gas equivalent
Mlt		thousand long tons
M$		thousand dollars
MM$		million dollars
MMbbl		million barrels
MMboe		million boe
MMBtu		million British thermal units
MMcf		million cubic feet of gas at standard conditions
MRL		maximum rate limitation
Mstb		thousand stock tank barrels
MMstb		million stock tank barrels
NGL		natural gas liquids (ethane, propane, butane and condensate)
NPI		net profits interest
OIIP		oil initially-in-place
ORRI		overriding royalty interest
OWC		oil-water contact
P&NG		petroleum and natural gas
PIIP		petroleum initially-in-place


psia		pounds per square inch absolute
psig		pounds per square inch gauge
PVT		pressure-volume-temperature
RLI		reserves life index, calculated by dividing reserves by the forecast of first year production
scf		standard cubic feet
sge		sales gas equivalent – if presented in this evaluation, determined using 1 barrel of oil or natural gas liquid = 6 Mcfe; 0 for sulphur
stb		stock tank barrel
WI		working interest
WTI		West Texas Intermediate

GLJ Petroleum Consultants

Crude Oil and Natural Gas Liquids

SEC 2014-Dec-31 Posted (12 Month Avg.)

Effective January 01, 2015

Table 1

Inflation %

Bank of
Canada
Average Noon
Exchange Rate
USD/CAD

NYMEX WTI
Near Month
Futures Contract
Crude Oil at
Cushing
Oklahoma

Brent Blend
Crude Oil
FOB North Sea

Light, Sweet
Crude Oil
(40 API, 0.3%S)
at Edmonton

Bow River
Crude Oil
Stream
Quality at
Hardisty

WCS
Crude Oil
Stream
Quality at
Hardisty

Heavy
Crude Oil
Proxy
(12 API)
at Hardisty

Light Sour
Crude Oil
(35 API, 1.2%S)
at Cromer

Medium
Crude Oil
(29 API, 2.0%S)
at Cromer

Alberta Natural Gas Liquids
(Then Current Dollars)

Constant
2014 $
USD/bbl

Then
Current
USD/bbl

Then
Current
CAD/bbl

Spec
Ethane
CAD/bbl

Edmonton
Propane
CAD/bbl

Edmonton
Butane
CAD/bbl

Edmonton
C5+
Stream
Quality
CAD/bbl

0.0

0.9099

95.28

101.30

94.74

82.69

82.63

75.39

95.01

89.56

15.12

48.89

70.49

103.42

GLJ Petroleum Consultants

Natural Gas and Sulphur

SEC 2014-Dec-31 Posted (12 Month Avg.)

Effective January 01, 2015

Table 2

Midwest
Price at Chicago

Alberta Plant Gate

Henry Hub Nymex
Near Month Contract

AECO/NIT
Spot

Spot

Saskatchewan Plant Gate

British Columbia

Constant
2014 $
USD/
MMBtu

Then Current
USD/MMBtu

Then
Current
USD/
MMBtu

Then
Current
CAD/
MMBtu

Constant
2014 $
CAD/
MMBtu

Then
Current
CAD/
MMBtu

ARP
CAD/
MMBtu

Alliance
CAD/
MMBtu

SaskEnergy
CAD/
MMBtu

Spot
CAD/
MMBtu

Sumas Spot
USD/
MMBtu

Westcoast
Station 2
CAD/
MMBtu

Spot
Plant Gate
CAD/
MMBtu

Sulphur
FOB
Vancouver
USD/lt

Alberta
Sulphur
at Plant
Gate
CAD/lt

4.35

7.36

4.58

4.34

6.61

4.44

4.50

4.44

4.30

4.10

145.41

109.81

GLJ Petroleum Consultants

International and Frontier

SEC 2014-Dec-31 Posted (12 Month Avg.)

Effective January 01, 2015

Table 3


Inflation %	Bank of Canada Average Noon Exchange Rate USD/CAD						NYMEX WTI Near Month Futures Contract Crude Oil at Cushing Oklahoma				Light Louisiana Sweet Crude Oil				Maya Crude Oil				Brent Blend Crude Oil FOB North Sea				Henry Hub Spot				Nova Scotia Goldboro				National Balancing Point (UK)
Inflation %	Bank of Canada Average Noon Exchange Rate USD/CAD		CAD - GBP Exchange Rate CAD/GBP		CAD - EURO Exchange Rate CAD/EUR		Then Current USD/bbl		Then Current CAD/bbl		Then Current USD/bbl		Then Current CAD/bb		Then Current USD/bbl		Then Current CAD/bbl		Then Current USD/bbl		Then Current CAD/bbl		Then Current USD/ MMBtu		Then Current CAD/ MMBtu		Then Current USD/ MMBtu		Then Current CAD/ MMBtu		Then Current USD/ MMBtu		Then Current CAD/ MMBtu
0.0		0.910		1.8185		1.4680		95.28		104.71		95.32		104.76		88.57		97.34		101.30		111.33		4.35		4.78		7.38		8.11		8.36		9.19

APPENDIX I

CERTIFICATES OF QUALIFICATION

Jodi L. Anhorn

Chad P. Lemke

Mirek Zaoral

Mano M. Catania

Trisha S. MacDonald

Miranda L. Stoffman

Warren R. Bindon

Natasha Gvozdenovic

CERTIFICATION OF QUALIFICATION

I, Jodi L. Anhorn, Professional Engineer, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am a principal officer of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

That I attended the University of Calgary and that I graduated with a Master of Science Degree in Chemical and Petroleum Engineering in 1992; that I am a Registered Professional Engineer in the Province of Alberta; and that I have in excess of twenty-two years experience in engineering studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

LOGO

CERTIFICATION OF QUALIFICATION

I, Chad P. Lemke, Professional Engineer, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

That I attended the University of Calgary where I graduated with a Bachelor of Science Degree in Mechanical Engineering in 2004; that I am a Registered Professional Engineer in the Province of Alberta; and, that I have in excess of eleven years of experience in engineering studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

LOGO

CERTIFICATION OF QUALIFICATION

I, Mirek Zaoral, Professional Geologist, 4100, 400 – 3rd Avenue S.W. Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

That I attended the University of Calgary and that I graduated in 1977 with a Bachelor of Science Degree with honours in Geology; that I am a registered Professional Geologist in the Province of Alberta; and, that I have in excess of thirty-seven years experience in geological studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

LOGO

CERTIFICATION OF QUALIFICATION

I, Mano M. Catania, Professional Engineer, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

That I attended the University of Regina where I graduated with a Bachelor of Applied Science Degree in Industrial Systems Engineering in 1995; that I am a Registered Professional Engineer; and, that I have in excess of seventeen years experience in engineering studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

LOGO

CERTIFICATION OF QUALIFICATION

I, Trisha S. MacDonald, Professional Engineer, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

That I attended the University of Calgary where I graduated with a Bachelor of Science Degree in Oil and Gas Engineering in 2004; that I am a Registered Professional Engineer in the Province of Alberta; and, that I have in excess of ten years of experience in engineering studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

LOGO

CERTIFICATION OF QUALIFICATION

I, Miranda L. Stoffman, Professional Geologist, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

That I attended the University of Calgary where I graduated with two Bachelor of Science Degrees in Geology and Applied and Environmental Geology in 2005; that I am a Registered Professional Geologist in the Province of Alberta; and, that I have in excess of seven years of experience in geological studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

LOGO

CERTIFICATION OF QUALIFICATION

I, Warren R. Bindon, Geoscientist In Training, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

3.	That I attended the University of Alberta where I graduated with a Master’s of Science Degree in Geology in 2011; and, that I am a Geoscientist In Training and have in excess of four years of experience in geological studies relating to oil and gas fields.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.

Warren R. Bindon, M.Sc., G.I.T.

CERTIFICATION OF QUALIFICATION

I, Natasha Gvozdenovic, Engineer In Training, 4100, 400 - 3rd Avenue S.W., Calgary, Alberta, Canada hereby certify:

1.	That I am an employee of GLJ Petroleum Consultants Ltd., which company did prepare a detailed analysis of Canadian oil and gas properties of Brion Energy Corporation (the “Company”). The effective date of this evaluation is December 31, 2014.

2.	That I do not have, nor do I expect to receive any direct or indirect interest in the securities of the Company or its affiliated companies.

3.	That I attended the University of Calgary, where I graduated with a Bachelor’s Degree in Chemical Engineering in 2014; and, that I am an Engineer In Training.

4.	That a personal field inspection of the properties was not made; however, such an inspection was not considered necessary in view of the information available from public information and records, the files of the Company, and the appropriate provincial regulatory authorities.