Ensure availability of resources

In 2009, Sinopec intensified and accelerated exploratory efforts in China, and invested 146.7 billion RMB in exploration and development. Additional proven geological oil reserves of 285 million tons and additional proven geological natural gas reserves of 176.67 billion cubic meters were found in 2009, with additional oil production capacity of 5.7 million tons and additional natural gas production capacity of 1.38 billion cubic meters built in place. 42.42 million tons crude oil and 8.47 billion cubic meters natural gas were produced in 2009, both of which were historic high.

In 2009, equity oil yield from outside China reached 12.79 million tons, increasing the cumulative equity oil yield to 36.45 million tons. Sinopec successfully acquired five companies, including Switzerland-based Addax. The company made considerable achievements in oil and gas exploration abroad.

Sinopec is the second largest oil and gas producer in China. Through continuous, steady investment and strategic expansion efforts, Sinopec’s oil and gas production in oil-rich areas of the country grew steadily. Sinopec’s oilfields in Africa, Russia and South America also took initial shape, with exploration and development being conducted in 21 countries.

Pursue technological progress

We are fully aware that science and technology is essential to sustainable development of oil and gas resources. Therefore, we have long been pursuing technological progress in the field of oil and gas exploration and development, exploring new oil and gas resources and expanding the reserves of existing oil and gas fields, thus realizing sustainable succession of oil and gas reserves. We endeavored to raise the level of utilization of oil an d gas resources and maintain steady oil and gas output.

In 2009, Sinopec won the national top science and technology award for its proprietary naphtha catalytic reforming plant technology. The same year, many other technological achievements of the company were crowned with national awards for scientific and technological progress, including “EOR technology through highly efficient binary drive”, “development and application of drilling techniques for structurally complex wells at Shengli Oilfield”, “high-speed rolling bit and vibration screen development and application based on deep-well drilling stem dynamics”, and “non-planar fracturing technology for considerable increase in oil and gas output and its industrial application”.

Thanks to significant theoretical and technological achievements made in offshore oil and gas exploration, Sinopec discovered Puguang Gas Field, the largest and most abundant self-contained marine phase offshore gas field in China. Rapid growth of proven natural gas reserves was effectively supported by further implementation of key exploration technology for large-sized gas fields in northeast Sichuan Province, resulting in cumulative proven natural gas reserves of 498 billion cubic meters. In 2007, Sinopec won the national top science and technology award for its deep marine phase carbonate--gas-reservoir formation mechanism and exploration technology and the discovery of Puguang Gas Field. Sinopec constantly develops key technologies for improving the production capacity of Puguang Gas Field and for Sichuan-East China gas transmission project in order to ensure the project is successfully completed. This project was put into operation in late 2009.

In order to provide more energy sources, Sinopec worked hard to improve resource utilization through technological progress and delicacy management practices, so hard that Sinopec people describe such efforts as spooning out oil from underground. Over the past decade, Sinopec increased recovery ratio by 0.3% and added 10 million tons recoverable reserves each year at Shengli Oilfield, the largest and most geologically complex productive oilfield in China. This is equivalent to discovery of another giant oilfield with 300 million tons of high-quality reserves.

Expand the scope of energy sources

Non-conventional oil and gas resources are an important potential area for Sinopec. We will focus on development of coal-seam gas and shale gas in North and South China and actively prepare for development and exploitation of oil shale.

With respect to clean development and utilization of coal, Sinopec has built a 3,000t/a Fischer-Tropsch synthesis pilot plant at Zhenhai Refinery Complex.

Partly replacing fossil energy with biomass liquid fuel can both generate energy products such as transport fuel and realize zero carbon dioxide emissions. Sinopec has set foot in development of such biomass liquid fuels as fuel ethanol bio-diesel oil and started research and development of microalgae biodiesel and cellulose ethanol technologies. Since 2006, we have sold 29.20 million tons ethanol gasoline in total and utilized 2.98 million tons modified fuel methanol. We successfully developed SRCA bio-diesel oil production process and completed its commercial test. We have been working with Chinese Academy of Sciences in the field of new energy to develop microalgae biodiesel production technology.

Furthermore, Sinopec made substantial progress in development of geothermal resources. As at the end of 2009, we built heat capacity of 2 million square meters and provided geothermal heat to 1.6 million square meters floorage.

Facilitate energy development

Sinopec provides a wide range of engineering services for oil and gas exploration and production, including drilling, well logging, well cementation, geophysical exploration, and ground, ocean and oilfield integrated services. Currently, we provide engineering services in 38 countries, including China. In 2009, Sinopec Petroleum Engineering Research Institute and Sinopec Prospecting Technology Research Institute were established. Specialized petroleum engineering management will provide more specialized services for energy development.

In 2009, the global financial crisis posed daunting challenges to Sinopec’s petroleum engineering business. Nonetheless, Sinopec managed to maintain rapid and sound development of its petroleum engineering business, thanks to the raised level of service and the dedication of Sinopec’s petroleum engineering personnel.

In 2009, Sinopec worked hard to drive implementation of four important petroleum engineering projects: Sichuan-East China gas transmission project (including surface collection and transmission, purification plants and a long-distance pipeline), #3 platform at Shengli Oilfield, 1,000-km-long Yulin-Jinan gas transmission pipeline and the third phase of surface works of capacity expansion at block #12 of Tahe Oilfield.

In 2009, Sinopec secured 2.81 billion dollars-worth petroleum engineering contracts outside China, a 7.7% rise over the 2008 level, and completed contract value of 2.43 billion dollars, 29.2% higher than the previous year’s level. 355 petroleum engineering service contracts in 37 countries are currently underway. Sinopec entered the petroleum engineering service market in Kuwait for the first time in 2009 by wining a bid that involved 13 drilling rigs and contract value of 790 million dollars. Sinopec also won a 200 million dollars -worth geophysical exploration service contract in Saudi Arabia, the largest exploration project ever undertaken by Sinopec abroad, in addition to seven surface engineering projects. Sinopec is also working hard to improve its service level in offshore petroleum engineering.