In 2009, oil and gas exploration and production took on a good momentum of sustainable development. Reviewed by Ministry of Land Resources, incremental proven geological reserves of petroleum and natural gas reached 285 million tonnes and 176.67 cubic meters respectively. Crude output amounted to 42.4155 million tonnes and natural gas production grew to 8.468 billion cubic meters, both striking historical highs. Newly built crude and gas production capacity were 5.7 million tonnes and 1.2 billion cubic meters respectively.

Oil and Gas Exploration

In 2009, Sinopec Group made a number of important achievements in oil and gas exploration, and achieved a sustainable and steady development.

Breakthroughs were made in the newly discovered dolomite reservoir on top of Leikoupo Formation of northeast Sichuan and continental phase multi-layer exploration, which indicated considerable potentials in northeast Sichuan and were very likely to develop into a new reserve of over 100 billion cubic meters.

Significant progress was made in exploration of Tuoputai. Drilling of 40 wells was deployed. Reserves of 125 million tonnes were newly proven. New outcome was also achieved in exploration of subtle reservoir of beach sandbar, glutenite body and buried hill in Jiyang. Newly-added proven reserves surpassed 100 million tonnes for 27 years in a row. Big progress was made in deep gas exploration in Xinchang. Integrated exploration and production of 28 wells was deployed, among which 11 wells generated commercial flow.

Newly-discovered layers in the matured fields of east China and blocks in the west provided new base for reserve increase. Progress was made in exploration of offshore and non-conventional resources.

More efforts were put to coal seam gas resource evaluation and pilot experiment of processing technologies. Preliminary studies on shale gas and bituminite resources were conducted.

Oil field Development

Oil production ran smoothly throughout the year. In 2009, oil output amounted to 42.4155 million tonnes, up by 610,000 tonnes over the last year. The production of the oil fields in east China stayed stable, and that of the oil fields in the west continued to rise.

In 2009, the Group continued to intensify progressive exploration and oil reserve evaluation, and strived to maintain the magnitude of producing reserves. As to management mode, the Group shifted from single-well management to project management, and from overall control to job-lot control. Preliminary study was stressed, deployment was optimized, and the success rate of projects was enhanced. The Group did a great deal to articulate all production segments and boost the integration of progressive exploration, reserve evaluation and capacity buildup.

The Group improved the quality of capacity building by means of optimization of deployment, planning and single well design. Based on profitability, scale and potential, the Group reined in the construction of low-grade projects and moderately accelerated the adjustment of the workload of matured fields. Development plan incorporated relevant aspects including geology, oil reservoir, drilling, oil recovery, surface engineering and economic evaluation. Great efforts were made to promote the integration of geology, oil reservoir and processing, accelerate the transition of plan design from a relay mode to a collaborative, and enhance the optimization of plan design and level of decision-making. Individual well design was optimized to increase single-well capacity. Persistent efforts were put forth to promote precision management in drilling of new wells and improved wells. Application of horizontal well shifted the focus from expanding scale to increasing profitability.

In 2009, newly-built production capacity totaled 5.7 million tonnes, with development cost effectively controlled.

Natural Gas Development

The Group centered its gas development on two key projects, namely Puguang Gas Field and Songnan Gas Field. Great efforts were made to enhance the operation organization and optimize the development plan. Giving full play to the integration of production and sales, the Group realized safe production and reliable supply, and fulfilled its annual production and sales target.

Drilling of 38 main development wells of Pugang Gas Field was completed with success rate of 100%. Gas testing results met the requirement. Given this, the gas field was put into trial operation and production on 28 November 2009.

As for Songnan Gas Field, the construction of auxiliary facilities like production preparation, surface gathering system, CO2-removal unit and exporting pipeline network was completed as scheduled. On November 1, the first phase of capacity building was completed and put into use. This 500-million-cubic-meter capacity has begun to supply gas to Jilin Province. During the process, the Group constantly optimized development and deployment by using horizontal wells so as to increase reserve producing level and single-well productivity.

The Group strived to overcome dull sale in spring and shortage of supply in winter. In the first half of the year, affected by the global financial crisis and a subsequent downturn market, Daniudi Gas Field was forced to shut down gas wells and trim its output. In such circumstances, the Group made coordinated and proactive responses. It urged enterprises in Inner Mongolia to restore gas use for production purpose, guaranteed sales revenues in north Henan and Shandong Province, increased industrial gas consumption in Yanshan and Qilu to ensure stable output, and provided gas supply to Sichuan-East China Gas Transmission Project as planned to leverage the productivity of Yakela-Dalaoba Gas Field.

Early November 2009, unprecedented rain and snow storms swept most parts of China, leading to a more exacerbated tension between gas supply and demand. A series of immediate measures were taken, which included increasing resources, optimizing supply plan and strengthening operation. With those measures, the Group succeeded in keeping the stability of natural gas market and setting up a positive corporate image for Sinopec.