PTR Petrochina Company Ltd

1. Market Review

(1) Crude Oil Market

The supply in the international oil market was relatively ample in 2014. International crude oil prices fluctuated and went up slightly in the first half of the year and plummeted in the second half. The price at the end of the year was less than half of the highest price in the middle of the year. The spread between the West Texas Intermediate (“WTI”) crude oil price and other benchmark oil prices narrowed generally. The annual average spot price of North Sea Brent crude oil was US$98.95 per barrel in 2014, representing a decrease of 8.9% as compared with last year. The annual average spot price of WTI crude oil was US$93.21 per barrel, representing a decrease of 4.9% as compared with last year.

(2) Refined Products Market

The market demand for refined products grew at a low to medium rate in 2014. The demand for gasoline maintained a comparatively rapid growth, while the demand for diesel fell for the first time since 2009. The domestic refining capacity continued to grow, leading to a generally ample supply in the market and a further increase in the net exports of refined products.

According to the relevant information, domestically processed crude oil amounted to 456.42 million tons in 2014, representing an increase of 2.8% as compared with last year. Domestic output of refined products was 284.91 million tons, representing an increase of 4.4% as compared with last year. The apparent consumption of refined products was 269.28 million tons, representing an increase of 2.0% as compared with last year. Of the foregoing amount, the

apparent consumption of gasoline and diesel increased by 8.3% and decreased by 1.5%, respectively, as compared with last year. The State reduced the domestic refined oil price 11 times consecutively in the second half of 2014. As a result, the reference gasoline price, in aggregate, dropped by RMB2,050 per ton and the reference diesel price, in aggregate, dropped by RMB2,205 per ton. The price trend of domestic refined products was broadly in line with that of oil prices in the international markets.

(3) Chemical Products Market

In 2014, the slow global economic recovery resulted in insufficient motivation for consumption. A sharp drop in the crude oil price and the release of excess capacity in the global chemical industry led to a continuous downturn of the chemical products market. With the adjustment of domestic economic structure and increased imports of low-priced products, the price of chemical products remained at a low level and the supply still exceeded the demand in the chemical products market.

(4) Natural Gas Market

In 2014, the domestic output of natural gas grew steadily, the growth in natural gas imports slowed down and the growth in demand for natural gas similarly slowed down, and with the continuous optimisation of the consumption structure, the supply and demand in the natural gas market were basically balanced. According to relevant information and statistics, domestic output of natural gas reached 127.9 billion cubic metres in 2014, representing an increase of 5.7% as compared with last year; natural gas imports amounted to 57.8 billion cubic metres, representing an increase of 8.2% as compared with last year; and the apparent consumption of natural gas was 178.6 billion cubic metres, representing an increase of 5.6% as compared with last year.

2. Business Review

(1) Exploration and Production

Domestic Exploration

The Group continued to implement its “Peak Growth in Oil and Gas Reserves” Program in 2014. Emphasis was put on key basins and target zones. The Group pushed forward its oil exploration in a steady manner and made important discoveries during the course of oil exploration in the Junggar Basin, the Qaidam Basin, the Songliao Basin and the Bohai Bay Basin. The Group achieved outstanding results in gas exploration and made a number of important exploration achievements in the Sichuan Basin, the Erdos Basin and the Tarim Basin. The Group made significant breakthroughs in exploration of non-conventional resources such as tight oil in the Erdos Basin, the Songliao Basin and the Turpan-Hami Basin, indicating encouraging development of the exploration business.

Domestic Production and Development

In 2014, the Group optimised its overall development plan, accelerated the construction of key production capacities, carried out fine water injection, and implemented secondary development and major development experiments in a steady manner. As a result, the domestic crude oil output once again hit a new high. With regard to the natural gas business, emphasis was put on key gas areas. The Group organised its production and operation in a scientific manner and achieved safe and stable operation according to the annual plan, maintaining a high growth rate in the output of natural gas. The crude oil output in Daqing Oilfield has remained stable at more than 40 million tons for 12 consecutive years, the oil and natural gas equivalent output in Changqing Oilfield exceeded 55 million tons and

the development of the “Xinjiang Daqing” and the Sichuan-Chongqing Gas Area proceeded as scheduled.

Overseas Oil and Gas

In 2014, the Group made major breakthroughs in the overseas oil and gas cooperation projects. The Group further diversified its gas source and signed a batch of new joint venture or cooperation agreements with several Central Asian countries and pushed forward the development of Central Asian oil and gas cooperation in a steady manner. In relation to overseas oil and gas exploration, the Group adhered to the principles of overall research, scientific argumentation and reasonable organisation and made further achievements in key exploration areas. The Group continued implementing three major projects, namely, water injection, horizontal well and enhancement of recovery rate, and optimised the arrangement for key production capacity construction, so as to ensure a stable output in the major oil and gas fields in Central Asia and other areas and to push forward the commencement and improvement of output in the new oil and gas fields in Iraq and other areas. In 2014, oil and gas equivalent output from overseas operations reached 147.2 million barrels, representing 10.1% of the total oil and natural gas equivalent output of the Group.

In 2014, the Group’s total crude oil output reached 945.5 million barrels, representing an increase of 1.4% as compared with last year. The marketable natural gas output reached 3,028.8 billion cubic feet, representing an increase of 8.1% as compared with last year. The oil and natural gas equivalent output amounted to 1,450.4 million barrels, representing an increase of 3.6% as compared with last year. As at the end of the current reporting period, the total area to which the Group had the exploration and mining right of oil and natural gas (including coalbed methane) is 380.4 million acres, in which the area of exploration right was 353.2 million acres and the area of mining right was for 27.2 million acres. The net number of wells under drilling is 340. The net number of wells drilled during the current reporting period was 17,918.

(2) Refining and Chemicals

In 2014, the Group adhered to principles of market orientation and profitability, enhanced the allocation of resources and arrangements for production and operation, and optimised processing routing and product structure in accordance with market trends. The Group increased the production of products with merchantability, high-profitability

and high added value. In 2014, the Group processed 1,010.6 million barrels of crude oil and produced 92.671 million tons of refined products, with a number of technical and economic indicators remaining favourable. For the sale of chemical products, the Group strengthened the overall synergy, arrangement and optimisation, accelerated the development and marketing of new products and achieved stable growth in sales volume of high-profitability products and in high-profitability regions. In 2014, the Group pushed forward its key refining and chemicals projects in an orderly manner. Sichuan Petrochemical fully commenced production and Yunnan Petrochemical accelerated its construction.

The diesel quality upgrading and reformation projects were completed as scheduled and all automobile diesel reached the China IV standard.

(3) Marketing

Domestic Operations

In 2014, the Group took active steps to cope with unfavourable conditions such as the slowdown in the growth rate of refined oil market demand and downturn of market price, including making scientific allocation of oil products resources, optimising marketing structure and inventory control, emphasising on creating profits through retail business and sale of products with high profit and high efficiency, continuously enhancing the sale capacity per service station, promoting the transformation and potential-tapping of low-profitability service stations, and constructing

golden terminals. The Group strengthened the development of its marketing network with approximately 150 new service stations. The total number of service stations operated by the Group reached 20,422.

International Trading Operations

The Group’s international trading operations continued to develop rapidly in 2014 with the further enhancement of international trade scale and operation quality. The Group’s ability to adjust its resources allocation continued to improve and the Group has made significant achievements in innovation, profit creation and market development.

Turnover Turnover increased by 1.1% from RMB2,258,124 million for 2013 to RMB2,282,962 million for 2014. This was primarily due to the combined effects of the decreasing selling prices of crude oil and refined oil, the rising selling prices of natural gas coupled with the increase

in the sales volume of crude oil, natural gas, gasoline and other major products. The table below sets out external sales volume and average realised prices for major products sold by the Group and their respective percentage of change in 2014 and 2013, respectively:

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

Purchases, Services and Other Purchases, services and other increased by 1.5% from RMB1,464,805 million for 2013 to RMB1,486,225 million for 2014. This was primarily due to the Group’s expansion of its trade scale.

Employee Compensation Costs Employee compensation costs (including salaries, such additional costs as different types of insurances, housing funds and training fees for the 534,652 employees of the Group and 319,346 market-oriented temporary and seasonal contractors) were RMB120,822 million for 2014, representing an increase of 3.8% from RMB116,422 million for 2013, primarily due to the fact that the level of income of frontline employees was duly protected by the Group and the increase of social insurances based on such factors as increases in the Consumer Price Index (“CPI”) and social average salary.

Exploration Expenses Exploration expenses amounted to RMB22,064 million for 2014, representing a decrease of 12.8% from RMB25,301 million for 2013. This was primarily due to the reduction of overseas exploration workload due to the fact that some overseas projects of the Group have entered into production phase.

Depreciation, Depletion and Amortisation Depreciation, depletion and amortisation increased by 8.6% from RMB163,365 million for 2013 to RMB177,463 million for 2014. This was primarily due to increased average carrying value of fixed assets and the increased average net value of oil and gas properties of the Group leading to increase in the amounts of depreciation and depletion.

Selling, General and Administrative Expenses Selling, general and administrative expenses decreased by 7.1% from RMB79,021 million for 2013 to RMB73,413 million for 2014. This was primarily due to the fact that the Group proactively implemented measures for broadening sources of income, reducing expenditure, 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 for 2013 to RMB237,997 million for 2014. This 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 payable by the Group from RMB72,726 million for 2013 to RMB64,376 million for 2014.

Other Income, net Other income, net, for 2014 was RMB4,855 million, representing a decrease of 82.4% from RMB27,518 million for 2013. This was primarily because the Group recognised the gain on investment of certain pipeline net assets and operations during the same period of last year.

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

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

Net Interest Expenses Net interest expenses increased by 4.1% from RMB20,859 million for 2013 to RMB21,723 million for 2014. This was primarily due to increase in the balance of interest-bearing debts to finance production, operation and capital expenditures.

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

Income Tax Expense Income tax expense increased by 5.4% from RMB35,789 million for 2013 to RMB37,731 million for 2014, which was primarily due to the combined effect of the increase in income tax expense arising from adjustments

of the policy for crude oil special gain levy deduction before income tax and the decrease of profit for the current period.

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

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

Profit Attributable to Owners of the Company Affected by the impact of the decrease in the selling price of crude oil and refined oil and the income generated from the contribution of certain pipeline net assets and business of the Group over the same period of last year, net profit attributable to owners of the Company decreased by 17.3% from RMB129,599 million for 2013 to RMB107,172 million for 2014.

(2) Segment Results

Turnover The realised turnover of the Exploration and Production segment for 2014 was RMB777,574 million, representing a decrease of 0.8% from RMB783,694 million for 2013, which was primarily due to the combined effect of the drop in the crude oil price and the increase in the natural gas price as well as the increase in the sales volume. The average realised crude oil price of the Group in 2014 was US$94.83 per barrel, representing a decrease of 5.6% from US$100.42 per barrel in 2013.

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

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

Profit from Operations In 2014, the Exploration and Production segment continued to maintain a stable profitability by proactively coping with the unfavourable conditions caused by the drop in oil price, through carrying out oil and gas production efficiently and enhancing its control over costs and expenses continuously. The realised profit from operations of the Exploration and Production segment was RMB186,897 million, representing a decrease of 1.5% from RMB189,698 million for 2013. Nevertheless, the Exploration and Production segment remained the most important profit contributing segment of the Group.

Turnover Turnover of the Refining and Chemicals segment decreased by 3.0% from RMB871,815 million for 2013 to RMB846,082 million for 2014, primarily due to the combined effect of the fall in refined and chemicals products price and optimisation of the allocation of resources, structure of products and production workload in the Refining and Chemicals segment.

Operating Expenses Operating expenses of the Refining and Chemicals segment decreased by 3.0% from RMB896,207 million for 2013 to RMB869,642 million for 2014, primarily due to the decrease in the expenses associated with the purchase of crude oil and feedstock oil from external suppliers.

In 2014, cash processing cost of refineries of the Group was RMB177.85 per ton, representing an increase of 10.8% from RMB160.55 per ton over the same period last year. This was primarily due to the increase in fuel and power costs.

Profit from Operations In 2014, the Refining and Chemicals segment adhered to the principle of market orientation, adjusted its operation strategy, and took various measures to enhance controls over key cost indicators. The Refining and Chemicals segment incurred a loss of RMB23,560 million, representing a decrease in loss of RMB832 million as compared with RMB24,392 million recorded in 2013. Of this, the refining operations recorded an operating loss of RMB7,155 million due to the impact of a reduction in gross profit from the decrease in the selling price of refined oil and the price of the inventory, representing an increase in loss of RMB2,447 million as compared with last year. The chemical operations recorded an operating loss of RMB16,405 million from the decrease in the demand of the chemical market. The Group kept optimising the structure of products and controlled its costs, resulting a decrease in loss of RMB3,279 million compared to the operation loss of RMB19,684 million for the same period last year.

Turnover Turnover of the Marketing segment decreased by 0.4% from RMB1,946,806 million for 2013 to RMB1,938,501 million for 2014, primarily due to continuous downward adjustments in the refined oil price 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 for 2013 to RMB1,933,080 million for 2014, primarily due to a decrease in the expenses arising from the purchase of refined oil from external suppliers.

Profit from Operations In 2014, the Marketing sector aimed for maximisation of the whole value of the Company, enhanced connection between production and sales, strengthened inventory management and focused on increasing sales of high grade gasoline and jet fuel. However, due to factors including a reduced speed of growth of the domestic economy and mild demand from the market, the Marketing segment recorded a profit from operations of RMB5,421 million for 2014, representing a decrease of 28.3% from RMB7,562 million for 2013.

Turnover Turnover of the Natural Gas and Pipeline segment amounted to RMB284,262 million for 2014, representing an increase of 22.1% from RMB232,751 million for 2013. The increase was primarily due to the increases 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 for 2014, representing an increase of 18.6% as compared to the same period last year, excluding the effect of the contribution of certain pipeline net assets and business in 2013, primarily due to the increase in the expense of the purchase of natural gas.

Profit from Operations In 2014, the Natural Gas and Pipeline segment enhanced management of the demand side, strengthened market development and resource allocation ability, realised an increase in both volume and efficiency of sales of natural gas, and achieved a profit from operations of RMB13,126 million for 2014, representing a decrease of 54.6% from RMB28,888 million in 2013. 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 last 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 last year and consisting of a loss of RMB17,683 million for the sales of 29.270 billion cubic metres of natural gas imported from Central Asia, a loss of RMB20,450 million for the sales of 7.258 billion cubic metres of imported LNG, and a loss of RMB3,465 million for the sales of 3.226 billion cubic metres of natural gas imported from Myanmar.

In 2014, the Group’s international operations(note) realised a turnover of RMB803,779 million, representing

35.2% of the Group’s total turnover. Profit before income tax expense amounted to RMB19,242 million, representing 12.3% of the Group’s profit before income tax expense. The international operations achieved notable results and further increased their contribution to the Group.

Total assets amounted to RMB2,405,473 million, representing an increase of 2.7% from that as at the end of 2013, of which:

Current assets amounted to RMB391,308 million, representing a decrease of 9.2% from that as at the end of 2013, primarily due to the decrease in inventories.

Non-current assets amounted to RMB2,014,165 million, representing an increase of 5.4% from that as at the end of 2013, primarily due to the increase in capital expenditures, resulting in increase in properties, plants and equipment (including fixed assets, oil and gas properties, etc.).

Total liabilities amounted to RMB1,087,692 million, representing an increase of 1.4% from that as at the end of 2013, of which:

Current liabilities amounted to RMB579,829 million, representing a decrease of 10.2% from that as at the end of 2013, primarily due to the decrease in short-term borrowings.

Non-current liabilities amounted to RMB507,863 million, representing an increase of 19.0% from that as at the end of 2013, primarily due to the increase in long-term borrowings.

Equity attributable to owners of the Company amounted to RMB1,175,894 million, representing an increase of 3.8%

from that as at the end of 2013, primarily due to the increase in undistributed profits.

(4) Cash Flows

As at December 31, 2014, the primary source of funds of the Group was cash from operating activities and short-term and long-term borrowings. The funds of the Group were mainly used for operating activities, capital expenditures, repayment of short-term and long-term borrowings as well as distribution of dividends to shareholders of the Company.

The net cash flows of the Group from operating activities for 2014 amounted to RMB356,477 million, representing an increase of 23.5% from RMB288,529 million in 2013. This was mainly due to the Group’s increased efforts to promote tight balance management of funds, enhance inventory management and increase operating funds. As at December 31, 2014, the Group 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).

Net cash flows of the Group used for investing activities in 2014 amounted to RMB290,838 million, representing an increase of 9.1% from RMB266,510 million in 2013. The increase was primarily due to the impact of the increase of capital from the Group’s investment in a joint venture with certain pipeline net assets and business last year.

Net cash used by the Group for financing activities in 2014 was RMB44,312 million, representing an increase of RMB32,073 million from RMB12,239 million in 2013. This was primarily due to the efforts of the Group in strengthening the management of its interest-bearing borrowings, overall arrangement and optimisation of its debt structure and the increase in the repayment of borrowings as compared with last year.

Capital expenditures for the Group’s Refining and Chemicals segment for 2014 amounted to RMB30,965 million, which were primarily used in the construction of large-scale refining and chemical projects, such as Yunnan Petrochemical, and the China IV standard quality upgrade projects for petroleum and diesel products.

It is anticipated 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 large-scale refining and chemical projects, such as Yunnan Petrochemical, and the China V standard quality upgrade projects for petroleum and diesel products.

Capital expenditures for the Group’s Marketing segment for 2014 amounted to RMB5,616 million, which were mainly

used for the construction of sales network facilities such as service stations and oil depots.

It is anticipated that capital expenditures for the Marketing segment for 2015 will amount to RMB9,000 million, which are expected to be used primarily for the construction and expansion of sales networks for domestic high-profitability markets and the construction of overseas oil and gas operating hubs.

Capital expenditures for the Group’s Natural Gas and Pipeline segment for 2014 amounted to RMB32,919 million, which were mainly used for construction projects including the Third West-East Gas Pipeline, the Zhongwei-Guiyang Gas Pipeline, the Third Daqing-Tieling Crude Oil Pipeline and the Fourth Daqing-Tieling Crude Oil Pipeline as well as the Tangshan LNG.

1. Material litigation, arbitration and events commonly disputable by the media

Regarding the disclosed class action proceedings brought by individual overseas shareholders before the United States Federal District Court for the Southern District of New York against the Company and certain individuals based on the fact that certain former directors and former senior management were subject to investigation conducted by the relevant PRC authorities, the notice in respect of such action was served to the Company. Details are further described in the Company’s announcements in connection with the disclosure of the proceedings (No. Lin 2013-025 and Lin 2013-031 respectively) posted on the website of Shanghai Stock Exchange and on China Securities Journal, Shanghai Securities News and Securities Times dated September 6, 2013 and November 26, 2013, and on the website of the Hong Kong Stock Exchange. On April 4, 2014, the United States Federal District Court for the Southern District of New York entered an order consolidating the related actions and appointing the lead plaintiff and the chief counsel.

On June 6, 2014, the lead plaintiff submitted the revised indictment and changed defendants to Jiang Jiemin, Ran Xinquan and Li Hualin, who are the former directors and

former senior management of the Company. The relevant charges set out in the indictment were roughly the same as those in the previous indictment in connection with violation of the U.S. Securities Act.

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

In November 2014, upon approval by the court, the U.S. plaintiff further submitted a Revised Joinder Indictment. In view of the indictment, the Company filed another motion to dismiss with the court in February 2015.

During the current reporting period, the normal course of business of the Company has not been affected. The Company will use its best endeavour to proactively defend against such action so as to protect its lawful interests.

Except for those set forth above, the Company was not involved in any material litigation or arbitration or events commonly disputable by the media during the reporting period.

3. Acquisitions, Disposals and Mergers during the reporting period

(1) In March 2014, the Group, through its subsidiary PetroChina International Iraq FZE, paid a consideration of US$442 million to ExxonMobil Iraq Limited to raise its working interest in the West Qurna-1 project in Iraq from 25% to 32.7%. The Group acquired a 25% working interest in this project on December 2, 2013.

(2) On November 13, 2013, the Group, through its subsidiaries CNPC E&D Holding Cooperatief U.A. and CNODC International Holding Ltd. (the “Purchasers”), entered into an acquisition agreement with Petrobras International Braspetro B.V. and Petrobras De Valores Internacional De Espana S.L. (the “Sellers”), for the Purchasers to acquire 100% of the shares in Petrobras Energia Peru S.A. owned by the Sellers. The Group paid US$2.643 billion in consideration on November 6, 2014.

The above-mentioned transactions did not affect the continuity of business or the stability of management of the Group. They are conducive to the sustainable and healthy development of the overseas business of the Group and will continuously benefit the future financial conditions and operating results of the Group.

4. Significant connected transactions during the reporting period

Please refer to the section “Connected Transactions” in this annual report. During the reporting period, no substantial shareholder of the Company has utilised the funds of the Company for non-operating purposes.

5. Material contracts and the performance thereof

(1) During the reporting period, there were no trusteeship, sub-contracting and leasing of properties of other companies by the Company which would contribute profit to the Company of 10% or more of its total profit for the year.

(2) The Company had no material guarantee during the current reporting period.

(3) The Company did not entrust any other person on wealth management during the current reporting period.

(4) The Company had no material external entrustment loans during the current reporting period.

(5) The Company had no overdue principals or interests of material bank loans during the current reporting period.

(6) Save as disclosed in this annual report, during the reporting period, the Company did not enter into any material contract which requires disclosure.

6. Performance of Undertakings

In order to support the business development of the Company, consolidate the relevant quality assets and avoid industry competition, CNPC, the controlling shareholder of the Company, entered into the Agreement on Non-Competition and Pre-emptive Right to Transactions (the “Agreement”) with the Company on March 10, 2000. As at the end of the reporting period, except for those already performed, the undertakings not performed by CNPC, the controlling shareholder of the Company, included as follows: (1) due to the fact that the laws of the jurisdiction where ADSs are listed prohibit local citizens from directly or indirectly financing or investing in the oil and gas projects in certain countries, CNPC failed to inject the overseas oil and gas projects in certain countries into the Company; (2) upon execution of the Agreement, CNPC did not make use of the business opportunities that competed or were likely to compete with the principal business of the Company strictly in accordance with the Agreement. Nevertheless, such industry competition primarily concentrated on oil and gas exploration and development operations at certain overseas countries and regions in which the resources owned by CNPC were insufficient or uncertain.

In connection with matters described above, CNPC issued a Letter of Undertaking to the Company on June 20, 2014 and made additional undertakings that: (1) within ten years from the date of the Letter of Undertaking, after taking into account of political, economic and other factors, the Company may request CNPC to sell offshore oil and gas assets which remain in possession by CNPC as at the date of the Letter of Undertaking; (2) for business opportunities relating to investment in offshore oil and gas assets after the date of the Letter of Undertaking, the relevant prior approval procedure of the Company shall be initiated strictly in accordance with the Agreement. Subject to the applicable laws, contractual agreements and procedure requirements, CNPC will sell to the Company offshore oil and gas assets as described in items (1) and (2) above at the request of the Company.

Save for the above additional undertakings, undertakings made by CNPC in the Agreement remain unchanged.

7. Engagement and disengagement of firm of accountants

During the reporting period, the Company has not changed its accounting firm.

During the reporting period, the Company continued to retain KPMG Huazhen (Special General Partnership) to serve as the domestic auditors, and KPMG Certified Public Accountants as the overseas auditors, for 2014. Remuneration in respect of the 2014 audit work amounted to RMB53 million, mainly for the provision of auditing services for the Company’s domestic and international needs, in which the financial report auditing fee amounted to RMB44 million and the financial report internal control auditing fee amounted to RMB9 million. Please refer to Note 7 of the Financial Statements prepared in accordance with IFRS in this annual report for details of the remuneration of the auditors.

As at the end of the reporting period, KPMG Huazhen (Special General Partnership) and KPMG Certified Public Accountants have provided audit service to the Company for two consecutive years.

8. Penalties on the Company and its Directors, Supervisors, senior management, controlling shareholder and de facto controller and remedies thereto

During the reporting period, none of the Company or its current Directors, Supervisors, senior management, controlling shareholder or de facto controller of the Company was subject to any investigation by the competent authorities or enforcement by judicial or disciplinary departments, or was handed over to judicial departments or subject to criminal liability, or subject to investigation or administrative

penalty by the China Securities Regulatory Commission, or any denial of participation in the securities market or was deemed unsuitable to act as directors, or was punished by other

administrative authorities or was subject to any public criticisms made by a stock exchange.

On March 16, 2015, the Company was informed by CNPC, the controlling shareholder of the Company, that Mr. Liao Yongyuan, non-executive Director and Vice Chairman of the Company, is currently under investigation by the competent authorities for suspected severe violation of relevant discipline and laws. The Company published an announcement regarding this matter on March 16, 2015. Mr. Liao Yongyuan has tendered his resignation to the Board on March 17, 2015 and resigned from all his positions in the Company, including non-executive Director and Vice Chairman, with immediate effect.

9. Events after the Balance Sheet Date

(1) Pursuant to the Notice on the Increase of the Threshhold of the Crude Oil Special Gain Levy (Cai Shui [2014] No. 115) of the Ministry of Finance, the threshold of the crude oil special gain levy will increase to US$65 per barrel, which has 5 levels and is still calculated and charged according to the progressive and valorem rate on the excess amounts from January 1, 2015.

(2) In accordance with the Notice on Continuing to Raise the Refined Oil Consumption Tax (Cai Shui [2015] No. 11) jointly issued by the Ministry of Finance and the State Administration of Taxation, the unit amount of the consumption tax on gasoline, naphtha, solvent oil and lubricating oil and that on diesel, jet fuel and fuel oil will be raised from RMB 1.4/L to RMB 1.52/L and from RMB 1.1/L to RMB 1.2/L respectively, commencing from January 13, 2015. Collection of tax on jet fuel will continue to be suspended.

(3) In accordance with the Notice on Adjusting 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 “NDRC”), 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/Kilostere and the citygate price ceiling for the consumption amount in 2012 will increase by RMB 40/Kilostere.