PETROCHINA CO LTD [PCCYF] Filings

20-F 1 d456049d20f.htm FORM 20-F Form 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

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

For the fiscal year ended December 31, 2022.

☐	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

Commission File Number

1-15006

(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 (the “PRC”)

(Jurisdiction of incorporation or organization)

9 Dongzhimen North Street

Dongcheng District

, Beijing

100007

, the PRC

(Address of principal executive offices)

WANG Hua

Telephone number: (8610) 59982622

Facsimile number: (

8610

)

62099557

Email address:

zhouyunpeng@petrochina.com.cn

Address: 9 Dongzhimen North Street, Dongcheng District, Beijing 100007, the PRC

WEI Fang

Telephone number: (852) 2899 2010

Facsimile number: (852) 2899 2390

Email address:

hko@petrochina.com.hk

Address: Suite 3705, Tower 2, Lippo Centre, 89 Queensway, Hong Kong, the PRC

(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.

None

(1)

(1)	The Company has delisted its American Depositary Shares, or ADSs, from the NYSE on September 8, 2022.

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

ADSs

(2)

, each representing 100 Class H ordinary shares, par value RMB 1.00 per share.

H Shares, par value RMB1.00 per share

(Title of Class)

(2)	The Company has terminated its ADR Program on October 17, 2022.

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	(3)
H Shares, par value RMB1.00 per share**	21,098,900,000	***

(3)	Includes 147,103,617,108 A Shares held by CNPC and 14,818,460,710 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 ☐ 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

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule

12b-2

of the Exchange Act:


Large Accelerated Filer ☒		Accelerated Filer ☐		Non-Accelerated Filer ☐		Emerging Growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to

§240.10D-1(b). ☐

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


U.S. GAAP ☐	International Financial Reporting Standards as issued	Other ☐
	by the International Accounting Standards Board ☒

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 ☒

(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 A Shares are listed and traded on the Shanghai Stock Exchange.

**	PetroChina’s H Shares are listed and traded on The Stock Exchange of Hong Kong Limited.

***	Includes 245,589,700 H Shares represented by the ADSs.

Table of Contents


			Page
Certain Terms and Conventions				1
Forward-Looking Statements				4
Part I				6
Item 1	—	Identity of Directors, Senior Management and Advisors		6
Item 2	—	Offer Statistics and Expected Timetable		6
Item 3	—	Key Information		6
		Cash and Asset Flows within Our Organization		6
		Risk Factors		9
Item 4	—	Information on the Company		27
		Introduction		27
		Oil, Gas and New Energy		29
		Refining, Chemicals and New Materials		41
		Marketing		45
		Natural Gas Sales		47
		Competition		47
		Environmental Matters		49
		Properties, Plants and Equipment		50
		Intellectual Property		50
		Regulatory Matters		51
Item 4 A	—	Unresolved Staff Comments		61
Item 5	—	Operating and Financial Review and Prospects		61
		General		61
		Operating Results		65
		Liquidity and Capital Resources		71
		Off-Balance Sheet Arrangements		75
		Long-Term Contractual Obligations and Other Commercial Commitments and Payment Obligations		75
		Assets Retirement Obligation		75
		Research and Development		76
		Trend Information		77
		Other Information		78
Item 6	—	Directors, Senior Management and Employees		78
		Directors, Senior Management and Supervisors		78
		Compensation		91
		Board Practices		91
		Employees		94
		Share Ownership		94
Item 7	—	Major Shareholders and Related Party Transactions		95
		Major Shareholders		95
		Related Party Transactions		96
		Interests of Experts and Counsel		100
Item 8	—	Financial Information		100
		Financial Statements		100
		Legal Proceedings		100
		Dividend Policy		100
		Significant Changes		104
Item 9	—	The Offer and Listing		104
		Trading Market Information		104


			Page
Item 10	—	Additional Information		104
		Memorandum and Articles of Association		104
		Material Contracts		109
		Foreign Exchange Regulation		109
		Taxation		109
		Documents on Display		115
		Annual Report to Security Holders		116
Item 11	—	Quantitative and Qualitative Disclosures About Market Risk		116
Item 12	—	Description of Securities Other Than Equity Securities		118

Part II				120
Item 13	—	Defaults, Dividends Arrearages and Delinquencies		120
Item 14	—	Material Modifications to the Rights to Security Holders and Use of Proceeds		120
Item 15	—	Controls and Procedures		120
Item 16 A	—	Audit Committee Financial Expert		120
Item 16 B	—	Code of Ethics		121
Item 16 C	—	Principal Accountant Fees and Services		121
Item 16 D	—	Exemptions from Listing Standards for Audit Committees		122
Item 16 E	—	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		122
Item 16 F	—	Change in Registrant’s Certifying Accountant		122
Item 16 G	—	Corporate Governance		122
Item 16 H	—	Mine Safety Disclosure		122
Item 16 I	—	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		122

Part III				123
Item 17	—	Financial Statements		123
Item 18	—	Financial Statements		123
Item 19	—	Exhibits		123
Signature				125
Index of Consolidated Financial Statements				F-1

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 PRC with limited liability and its subsidiaries and branch companies.

•

“PRC” or “China” are to the People’s Republic of China. Unless otherwise indicated, the policies, laws, regulations and interpretations adopted by the government in the mainland of China which are specifically referenced in this annual report are not applicable to Hong Kong, Macau or Taiwan. The Company’s assets, business and revenues in Hong Kong as well as in foreign countries and regions outside of the mainland of China are accounted as “overseas” and not “domestic”.

Our financial statements are presented 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 reserves 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 reserves 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.

“reserves-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.

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

“undeveloped reserves”		Under the SEC reserves 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.

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 prospects of our new energy and new materials business;

•

our strategies and blueprints for addressing climate change;

•

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, including those 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. 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

Cash and Asset Flows within Our Organization

As a company incorporated in China, we operate our business primarily through our branch companies and subsidiaries in China. We also operate our international business through our overseas subsidiaries. We hold our interests in our subsidiaries through shareholding. We do not operate our business through variable interest entities. The cash flows within our organization mainly consist of payment of capital contributions, dividend distributions, loans and trade payables. For the information of our corporate structure, please refer to “Item 4 – Information on the Company.”

Since our shares were listed on The Stock Exchange of Hong Kong Limited (the “HKSE”) and New York Stock Exchange (the “NYSE”) in 2000, we have distributed dividends to our shareholders (including our ADS holders) twice a year, and we have continued to do so after our ADSs were delisted from the NYSE. When paying dividends to our non-PRC resident shareholders, we are obliged to withhold and pay tax on the dividends according to the Enterprise Income Tax Law of the PRC (the “EIT Law”), the Individual Income Tax Law of the PRC (the “IIT Law”), the implementing regulations of the EIT Law and the IIT law, the rules and interpretations of the State Taxation Administration (the “SAT”), the tax treaties or arrangements signed between China and foreign countries or Hong Kong and Macau. At present, we withhold and pay income tax for all shareholders of non-resident enterprises at the rate of 10%, as provided under Article 91 of the Implementation Regulation of the EIT Law. All the withholding tax rates discussed in this paragraph are based on the gross amount of dividends pursuant to the relevant tax laws. If any shareholder as a non-resident enterprise meets the conditions for a more preferential tax rate under any tax treaty, it may submit supporting documents such as a tax form and beneficial owner’s certificate to us in accordance with the Administrative Measures for Non-Resident Taxpayers Enjoying Treaty Treatment which has been implemented by the SAT since January 1, 2020. Once we receive complete supporting document, we will submit the same to the tax authorities for their retention and we will apply the applicable preferential tax rate for the shareholder. We withhold and pay personal income tax at a rate of 10% for non-resident individual shareholders who are residents of Hong Kong, Macau and other countries with which China has signed tax treaties which provide a tax rate at 10%. If any non-resident individual shareholder whose home country has a tax treaty with China that provide a tax rate lower than 10%, he/she needs to submit the tax form and beneficiary certificate to us, and we will submit the same to the tax authority for retention and we will apply the preferential tax rate for the shareholder. If a non-resident individual shareholder whose home country has a tax treaty with China providing a tax rate higher than 10% and less than 20%, we will withhold tax at the agreed effective tax rate. If the non-resident individual shareholder whose home country does not have any tax agreement with China or whose home country has a tax treaty with China providing a rate of 20% or otherwise, we will withhold the tax at 20%. For more details of income tax on dividends of non-resident shareholders, please refer to “Item 10 — Additional Information — Taxation” and “Item 8 — Financial Information — Dividend Policy”. Please note that our discussion of PRC tax law is not intended to provide and should not be construed as providing legal or tax advice to any particular investor. We urge you to consult your tax advisor.

Prior to paying dividends or other distributions to us, our subsidiaries will pay taxes in accordance with applicable tax laws and regulations of China or the jurisdictions in which they operate. The statutory rate of

enterprise income tax in China is 25% on taxable income, and enterprises that meet certain conditions can enjoy preferential treatment. In 2022, we paid approximately RMB54,686 million in the aggregate to our shareholders as dividends for the second half of 2021 and the first half of 2022, which included approximately RMB5,713 million paid to the holders of our H Shares (including ADSs) after withholding and paying the PRC withholding tax of approximately RMB591 million. See “Item 4 — Information on the Company — Regulatory Matters — Taxes, Fees and Royalties”, “Item 5 — Operating and Financial Review and Prospects—Liquidity and Capital Resources”, “Item 8 — Financial Information —Dividend Policy”, “Item 10 — Additional Information — Taxation”, “Item 10 — Additional Information — Memorandum and Articles of Association — Dividends”, the financial statements and the Note 12.

Although other financing means are available to us, our ability to pay dividends to our shareholders and to service our debt depends in part on the cash generated by our branch companies and the dividends paid to us by our subsidiaries. We and our PRC subsidiaries’ ability to distribute earnings are mainly subject to the following restrictions and limitations:

•

Accumulated profit: Under PRC laws and regulations, we and our PRC subsidiaries can pay dividends only out of accumulated profit as determined in accordance with PRC accounting standards and regulations.

•

Statutory reserve fund: Under PRC laws and regulations, PRC companies are required to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of their respective registered capital. Such reserve funds cannot be distributed as dividends, except as part of liquidation in the event of insolvency. In 2022, we allocated a total of RMB12,987 million to our statutory common reserve fund. See Note 32 to the financial statements for further details.

•

Capital requirements: To achieve our strategies and to meet our contractual or other obligations, we and our subsidiaries need to retain sufficient cash to satisfy the capital requirements. We and our subsidiaries are subject to the limits on distribution of dividends as provided in the articles of associations. For example, our articles of association provides that we can distribute dividends only if our net profit attributable to owners and the accumulated undistributed profit for a year are positive, and our cash flow can satisfy our normal operation and sustainable development.

•

Debt instrument restrictions: For the debts incurred by us or our subsidiaries, the instruments governing such debts may restrict our or our subsidiaries’ ability to pay dividends.

•

Foreign exchange regulation: Cash transfers from China to outside of China are subject to foreign exchange regulations by the PRC government. Shortages in the availability of foreign currency may temporarily delay our ability to remit sufficient foreign currency to pay dividends or other payments, or otherwise satisfy our foreign currency denominated obligations. Remittance of dividends by us out of China is also subject to the review by the financial institutions engaging in foreign exchange settlement as approved by the State Administration of Foreign Exchange (the “SAFE”), and the SAFE may also exercise its supervision and inspection authority over our remittance of dividends out of China, which could delay the distribution of dividends to our overseas investors. Although we have not experienced any delay in distribution of dividends to our overseas investors in the past due to any issues in relation to foreign exchange regulation or shortage in foreign currency, we cannot rule out the possibility of the occurrence of such delay in the future. See “Item 3 – Key Information — Risk Factors — Risks Related to Pricing and Foreign Exchange”.

In 2022, the cash transfers between us and our subsidiaries mainly consisted of the following:

•

Transfer from us to our subsidiaries

•

Contributed capital of approximately RMB5,221 million;

•

Repaid loans of approximately RMB70,296 million

•

Transfer from our subsidiaries to us

•

Paid dividends of approximately RMB10,039 million;

•

Granted loans of approximately RMB81,734 million

The figures listed above with regard to our subsidiaries include both our domestic and overseas subsidiaries.

In addition, we are a group company with integrated upstream and downstream businesses. We and our subsidiaries work closely in the normal operations by supplying products and services to each other and settling the payments on an arm’s length basis, which are performed pursuant to the relevant regulation requirements in all material respects. See “Item 7 — Major Shareholders and Related Party Transactions — Related Party Transactions.”

At present, Hong Kong does not have foreign exchange regulations similar to those in the mainland of China, and the foreign exchange regulations in the mainland of China do not apply to Hong Kong. Therefore, at present, the transfer of funds by our subsidiaries in Hong Kong to out of Hong Kong is not subject to the restrictions under the foreign exchange regulations in the mainland of China. Our Hong Kong subsidiaries are free to transfer funds out of Hong Kong provided that they meet the general compliance obligations under Hong Kong law in terms of taxation, anti-money laundering, accounting rules, etc. In the future, if Hong Kong were to adopt any regulations that restrict the transfer of funds, and thereby affect the transfer of funds by our Hong Kong subsidiaries, our Hong Kong subsidiaries may be restricted in providing funds for operations outside of Hong Kong or distributing funds to their investors located out of Hong Kong.

Risk Factors

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

Risks Related to Government Regulation

Our operations in China contribute a large majority of our revenue. Accordingly, we are affected and regulated by the economic and industrial policies, laws and regulations adopted in China. This may in turn adversely affect our financial condition, operation results, liquidity, and the value of our shares. These effects are reflected mainly in the following respects:

(1) In terms of general economic policies: The Chinese government regulates China’s economic development by stimulating general economic policies such as monetary and financial policy, fiscal and tax policy and foreign exchange policy. The application of any policy to us may affect our business decisions, production plans and strategy executions, which in turn may have an impact on our financial condition, operating results and value of our shares.

(2) In terms of industrial policies, laws and regulations: The business sector in which we operate is subject to regulation and regulatory control by the Chinese government. The regulation and regulatory control relate to many material aspects of our operations. As a result, we may face constraints and restrictions on our ability to implement our business strategies, to develop or expand our business operations or to maximize our profitability. For example:

•

Energy transition policy: In order to address climate change concerns, the Chinese government has set the goal to hit carbon peak by 2030 and achieve carbon neutrality by 2060. To achieve that goal, China has introduced and is expected to introduce a series of economic policies and supporting laws and regulations. These regulations would pose severe challenges to traditional oil extraction and refining operations and drive us to adjust our operational strategies and initiate steps to expand into new energy business while continuing to develop our traditional business with high quality. If our efforts to address climate change fail to produce satisfactory results, the overall operations, liquidity, profitability and the value of the shares of our company may suffer an adverse effect.

•

Product pricing mechanism: In China, the pricing of gasoline, diesel and natural gas products is subject to government regulation, and we cannot freely determine prices for these products. We are required to price these products in compliance with the Chinese government’s pricing mechanism. As a major supplier of essential energy sources in China, we are not permitted to cease supply to the market even if market prices are not favorable and we cannot exceed the pricing limit set by the government.

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Crude oil special gain levy: China collects a crude oil special gain levy on all oil production companies that sell crude oil produced from China. At present, we are required to pay the crude oil special gain levy for the excessive revenue received by us from the sale of domestically produced crude oil above US$65 per barrel.

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Mineral rights granting system: We are subject to various requirements under the Mineral Resources Law of the PRC and supporting laws and regulations, including those requirements relating to exploration licenses, production licenses, mineral rights fees, and minimum investment into mining blocks.

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Ecological and environmental protection and safety production: We are subject to a series of ecological and environmental protection and safety production laws and standards, which have become increasingly stringent over recent years in China with respect to the oil and gas industries.

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Project approvals: In China, the construction of significant refining and petrochemical facilities is subject to governmental approval. 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.

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Oil and gas production targets: The National Energy Administration of the PRC (“NEA”) publishes certain guiding targets for annual production of domestic energy companies. For example, for 2023, the NEA announced that its target is to procure China’s annual production of domestic crude oil to increase to about 205 million tons and annual production of domestic natural gas to increase by about 6 billion cubic meters, and at the same time, to vigorously promote the integrated development of oil and gas exploration and development and alternative energy. Although failure to achieve these targets will not subject us or other relevant companies to fines, these targets themselves would have an effect on our business decisions, hence, driving our management to make plans to work towards achievement of the pre-set targets.

(3) In terms of generally applicable business laws and regulations: We are subject to generally applicable business laws and regulations, including, without limitation, corporate governance, securities regulation, employee benefits, information protection, anti-monopoly and anti-money-laundering laws and regulations. We are required to continue to invest substantial management resources to ensure compliance with all these laws and regulations. Any noncompliance with any of these laws or regulations will subject our company to penalties and reputational risks, and in turn harm the interests of our investors. For example:

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Anti-monopoly: We are subject to anti-monopoly laws and regulations. We are prohibited from entering into or implementing anti-competitive agreements, abusing market position or conducting any concentration of business operators which has or may have the effect of excluding or limiting competition. Occupying a leading position in the oil and gas industry, we are more susceptible to anti-monopoly compliance risks. See the “Risks Related to Anti-Monopoly Initiatives” for a more detailed discussion of this risk.

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Corporate governance and securities regulatory compliance: Our securities are currently traded on the Shanghai Stock Exchange (“SSE”), and the HKSE. Although our securities have been delisted from the NYSE, they have not been deregistered from the SEC, and therefore, till the completion of the deregistration, we continue to have a reporting obligation under the Securities Exchange Act of 1934. Accordingly, we are subject to all the applicable requirements under the listing rules, disclosure rules, securities laws as well as corporate governance and compliance rules adopted in relevant jurisdictions. As a result, we are required to continue to invest substantial management resources to ensure compliance with all these requirements.

(4) In terms of regulation and supervision of state-owned assets: We are a company with controlling shares ultimately owned by the state. Our controlling shareholder CNPC is a state-owned enterprise. Although the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”) does not exert influence directly on us, it is positioned to make decisions on significant matters of CNPC in its capacity as shareholder and CNPC can in turn resolve on significant matters of our company in its capacity as shareholder (see the provisions regarding shareholders’ rights and obligations in our Articles of Association). As a consolidated subsidiary of CNPC, we are subject to certain regulations in relation to state-owned assets. For example, we are subject to the audits by the National Audit Office of the PRC relating to our business, finance and staff. For certain material transactions, we are required to retain external asset appraisal firms to evaluate the target assets. All these would increase our compliance burden. Please see “Item 7 — Major Shareholders and Related Party Transactions — Related Party Transactions” and “Item 3—Key Information—Risk Factors— Risks Related to Controlling Shareholder” for a detailed description of our transactions and relationships with our controlling shareholder.

(5) National security concerns, foreign investment restrictions and other considerations: The Chinese regulations requiring national security review with regard to foreign investment in certain sectors and overseas

offering and listing by certain domestic companies or prohibiting or restricting foreign investment in certain businesses in China, are not applicable to us in light of our current situation. Nevertheless, we cannot assure you that the circumstances will not change or those regulations will not be amended and become applicable to us in the future.

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National security review of foreign investment: According to the Measures for Security Review of Foreign Investment (the “Security Review Measures”) that were promulgated by the PRC government on December 19, 2020 and came into effect on January 18, 2021, where a foreign investor intends to invest in a business in China and seeks to obtain actual control of the business, and that business falls into a key sector that may cause national security concerns as set forth in the Security Review Measures, such investment should be filed with the Office of Foreign Investment Security Review (the “Security Review Office”) established by the PRC government for review. If the Security Review Office determines that, based on its review, such investment may have an impact on China’s national security, it may block the investment or grant a conditional approval. The Security Review Measures set forth a number of sectors where foreign investment would be subject to security review, and the critical energy and resources sectors are among them. The Security Review Measures delegate the China Securities Regulatory Commission (“CSRC”) to formulate rules regarding security review of foreign investment through purchasing shares of listed companies through stock exchanges. As of the date of this annual report, CSRC has not proposed any such rules. With regard to our company, as CNPC owns the majority of our share capital, it is our controlling shareholder. All other holders of our A Shares and H Shares (including ADSs) owned less than 20% of our share capital in the aggregate, and our H Shares (including ADSs) accounted for approximately 11.53% of our total share capital. Therefore, at present, based on our shareholding structure, our foreign investors are minority shareholders and do not have control over us. We believe that it is also extremely remote that our foreign investors could acquire actual control over us by holding our shares (including ADSs), and that the national security review requirement could be triggered. Nevertheless, we cannot assure you that the PRC government will not amend the Security Review Measures or promulgate new rules, including among other things, amending the conditions for triggering the security review. If the PRC government were to prohibit foreign persons from investing into our shares on the grounds of “national security concern”, we may have to take such actions including but not limited to buying back our H Shares (including ADSs) then issued and outstanding.

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Overseas offering and listing: On February 17, 2023, the CSRC issued the Trial Measures for Administration of Overseas Offering and Listing of Securities by Domestic Enterprises (the “Measures”). According to the Measures, for overseas offering and listing of securities by a PRC domestic company, that company shall submit filings with the CSRC. The company shall strictly abide by the national security laws, administrative regulations and relevant provisions such as foreign investment, cybersecurity, and data security, and earnestly perform their obligations to safeguard national security. Where security review is involved, relevant safety review procedures shall be performed in accordance with law before submitting to the CSRC. The company shall, in accordance with the requirements of the relevant competent departments under the State Council, employ measures such as timely rectification, making commitments, and divesting business assets to eliminate or avoid the impact on national security arising out of overseas offering and listing. The CSRC also stated that it does not require immediate filing for those companies that have already been listed overseas, until such companies submit a filing for a follow-on financing. We have obtained the necessary government approvals, including the CSRC’s approval, prior to offering of our H Shares and ADSs in 2000 and getting listed on the HKSE and the NYSE, and we currently have no refinancing plan, so at present we will not be required to make any filings with the CSRC under the Measures. If in the future we seek to conduct a follow-on overseas offering or listing on another foreign stock exchange, we would be required to make the requisite filings under the Measures. If we were to be subject to security review, we cannot rule out the possibility that the Chinese government may impose restriction on our overseas offering and listing, or require us to take such measures as rectification, making commitment or

divesting assets in order to eliminate or avoid the impact on national security arising out of our overseas offering and listing.

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Foreign investment restrictions: According to the Special Management Measures for Foreign Investment Access (Negative List) (2021 Version) (the “Negative List”) currently in effect in China, where any PRC domestic company operating in a sector in which foreign investment is prohibited under the Negative List intends to offer its shares and become listed on a foreign stock exchange, such company shall file the proposed overseas offering and listing with and obtain the approvals from the competent PRC governmental authorities, and it shall procure that at any time from and after the closing of its overseas offering and listing, its foreign investors will not participate in its business operation or management and its foreign ownership will not exceed certain limits. As of the date of this Annual Report, none of our business falls under the Negative List. On the contrary, our oil and gas exploration and development business and certain petrochemical business fall into the sectors in which foreign investment is encouraged under the Industry Catalogue of Sectors Encouraging Foreign Investment of 2022. Based on the foregoing, our business currently is not subject to foreign investment restrictions other than the national security review with regard to foreign investment in critical energy sector with actual control, as discussed above. If in the future the PRC government were to prohibit foreign investment in the sector in which we operate for any reason, we may face the following consequences pursuant to the Negative List: (i) any follow-on or new overseas share offering and overseas listing contemplated by us will need further approval by the competent PRC governmental authorities, although we have already received all required governmental approvals necessary for our initial offering and listing of our H Shares and ADSs in 2000; (ii) our foreign investors will not be permitted to participate in our business operations or management, although it is currently the case that our current holders of our H Shares (including ADSs) are financial investors only, who are entitled to vote at the shareholders’ meetings but do not participate in our business operation or management; and (iii) the percentage of foreign ownership in our company will be subject to certain limits, that is, the number of shares held by any foreign shareholder(s) individually may not exceed 10%, and collectively may not exceed 30%, of the total shares outstanding of the company.

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Effects on our daily operations, etc.: Although currently there are no specific restrictions imposed on our daily operations or our ability to legally transfer capital out of China or enter into normal business transactions with non-Chinese parties under any law or regulation on the grounds of “national security concerns” or foreign investment restrictions, we cannot assure you that the PRC government will not impose such type of restrictions on us in the future.

(6) Impact of rapid evolution of PRC laws and regulations: PRC laws, regulations and legal requirements dealing with economic matters have experienced rapid development during the decades after China’s adoption of the reform and opening-up policy, especially during the most recent two decades. Some laws having a material effect on our company may be put into force or implementation without any transitional period or only after a very short transitional period, which have required us to quickly adjust our operation and compliance strategies in order to comply with the new rules.

We are advised by King & Wood Mallesons (“KWM”), our external PRC counsel, that we have obtained the necessary permissions and approvals from the Chinese governmental authorities in all material aspects for operating our principal business in China, including but not limited to the exploration licenses, exploitation licenses, refined oil operation licenses, ecological and environmental protection and other permissions in relation to our business operations; and we have obtained all requisite approvals for offering our H Shares and ADSs in 2000 including but not limited to the approval from the CSRC. As advised by KWM, our current principal business operation in China and listing status on the SSE and the HKSE do not involve extra material approvals of the Chinese government; and neither the currently valid rules and interpretations of the CSRC, the Cyberspace Administration of China (“CAC”) nor other government agencies require us to obtain any additional approvals. No permissions or licenses requisite for maintaining our main business operations in China and our listing status on the SSE and HKSE have been denied. Please note that we have delisted from the NYSE and our ADR

program has been terminated. However, there is no assurance that we can obtain the permissions from the government for any new project and new offering in the future. If we or our subsidiaries (i) fail to receive or maintain the required permissions or approvals as set forth above, or (ii) inadvertently determine that such permissions or approvals are not required, we or our subsidiaries may be subject to administrative penalties, including fines, rectification, etc., which may result in fluctuations in our stock price and bring loss to our investors. In the future, if any applicable law, regulation or legal interpretation were to change and we are required to obtain any other permission or approval, such as in relation to data security associated with an overseas listing or security review in relation to outbound transmission of data, if we cannot obtain such permission or fail to pass any security review, we may be ordered to make rectifications for protection of critical information infrastructure data, or for protection of the personal data of our individual customers of our retail business on internet platforms, and if after such rectification, we still fail to meet the requirements of the CAC, such situation may cause an impact on our listing status on the HKSE and may also hinder any potential listing on other foreign exchanges.

We are also advised by KWM, our PRC and Hong Kong external counsel, that the Chinese economic policies, industry policies, laws and regulations with respect to mining rights, foreign exchange, pricing, taxation, general commercial affairs, anti-monopoly, foreign investment restrictions, data security reviews, etc. as referenced in this risk factor, are only applicable to the mainland of China. Therefore, “Risks Related to Government Regulation” is limited to the discussion of the risks associated with our exposure to government regulation in the mainland of China, except for the securities regulation of Hong Kong in connection with our listing of shares on HKSE. At present, we operate oil and gas trading, investment and retail businesses in Hong Kong and we do not have any oil and gas exploration, exploitation and refining businesses in Hong Kong. We have no business operations in Macau. We are advised by KWM that the laws and regulations of the mainland of China presently do not require us to cease, materially change or limit, in part or in whole, our trading, investment and retail business in Hong Kong, limit the development prospects of such business, nor require us not to comply with any law or regulation of Hong Kong, which could have a material adverse effect on our trading, investment and retail business in Hong Kong and our ability to maintain our listing status on the HKSE. We are also advised by KWM that Hong Kong has its own general commercial laws and regulations applicable to Hong Kong businesses, such as with regard to corporate, financial, securities, commercial, competition, labor, personal information protection, accounting and other regulations, as well as its own general economic policies, while it has no policies and regulations for the oil and gas industry which are commensurate to those in the mainland of China as discussed under this Risk Factors section, and it has no foreign exchange regulations and foreign investment regulations commensurate to those in the mainland of China. The current regulatory regime in Hong Kong has no material adverse effect on our oil and gas trading, investment and retail business in Hong Kong and our ability to maintain our listing status on HKSE, and, as of the date of this annual report, there are no material adverse changes expected in this regard. However, if in the future Hong Kong and/or Macau were to adopt equivalent or similar regulations in any respect commensurate to those in the mainland of China and thereby have an effect on our business in Hong Kong and/or Macau (if any, in the future) at that time, then the relevant aspects of the above discussed risk factor may also apply to our businesses in Hong Kong and/or Macau (if any, in the future).

See also “Item 4 — Information on the Company — Regulatory Matters” and the other relevant risk factors disclosed in this section, including without limitation, “Risks Related to Marco Economic Conditions”, “Risks Related to Competition”, “Risks Related to Financial Reporting Differences”, “Risks Related to Pricing and Exchange Rate”, “Risks Related to Environmental Protection and Safety Production”, and “Risks Related to Climate Change”, “Risks Related to Audit Reports Prepared by an Auditor Who Is Not Inspected by the Public Company Accounting Oversight Board” and “Risks Related to China’s Anti-Monopoly Initiatives”.

Risks Related to Controlling Shareholder

We are a company with controlling shares ultimately owned by the state. CNPC, which is controlled by SASAC, is our controlling shareholder. SASAC’s control over CNPC and CNPC’s control over us are mainly

shareholding relationships. SASAC holds the equity interests in state-owned enterprises (such as CNPC) on behalf of the Chinese government. As a result, in the corporate governance structure SASAC is a shareholder and accordingly has to comply with the shareholder’s rights and obligations under the PRC Company Law. Likewise, CNPC’s control over us is also subject to the shareholder’s rights and obligations under the PRC Company Law. Although SASAC does not exert direct influence over us, it can make decisions on significant matters relating to CNPC in its capacity as CNPC’s shareholder and CNPC can in turn resolve on significant matters of our company in its capacity as our shareholder (see the provisions in relation to shareholders’ rights and obligations in our Articles of Association). As a consolidated subsidiary of CNPC, we are subject to certain regulations in relation to state-owned assets. For example, we are subject to the audits by the National Audit Office of the PRC on the compliance of our business, finance and staff. For material merger and acquisition transactions, we are required to retain external asset appraisal firms to evaluate the target assets.

As of March 31, 2023, CNPC beneficially owned approximately 82.62% of our share capital. As a result, CNPC can vote on significant matters relating to our company by exercising its rights as our controlling shareholder, as set forth in detail in our Articles of Association. Accordingly, CNPC is in a position to:

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direct our policies, management and other various affairs;

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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

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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 occasionally 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, social 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 adjust our crude oil median prices periodically based on the international trading prices for crude oil.

In recent years, international prices for crude oil have fluctuated substantially in response to a wide range of factors, including changes in global and regional economy, the 2020-2022 pandemic, politics, geopolitical tensions 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 and volatility in crude oil prices have a significant impact on our results of operations. The decline in international crude oil prices would have a material adverse effect on our upstream business profits, and also have an impact on our downstream business profits through China’s pricing mechanism of refined oil products, thereby adversely affecting our overall sales revenue and profits. Further, in the situations where crude oil prices remain at a low level for a long period of time, we would be required to determine and estimate whether our oil and gas assets may suffer impairment and, if so, the amount of the impairment. 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.

Under the current refined oil pricing mechanism implemented by the PRC government, 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 significant increases or volatility, the PRC government may strengthen 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.

We negotiate the actual settlement price with natural gas users within the price range permitted by the PRC government. When the domestic price is lower than the international natural gas price, the cost of our imported natural gas will be higher than the sales price of our natural gas, which may reduce our revenues and profit, or result in losses, cause our natural gas assets to suffer impairment.

Currently, RMB is not a freely convertible currency. Conversion and remittance of foreign currencies out of China are subject to the supervision of the PRC government’s foreign exchange administrative agencies, through filings and/or approval requirements. We receive and maintain a portion of cash and cash equivalents in foreign currencies as part of our international business. We receive most of our revenue in RMB. We convert RMB into foreign currencies from time to time to meet our foreign currency obligations, including repayment of foreign currency denominated debt, payment of overseas capital expenditures and equity investments, import of oil, gas, equipment and materials, and payment of dividends declared with respect to the H Shares. Although we have not been denied any application for converting foreign currency for use in our outbound investments, international trade and distribution of dividends, etc., the PRC government’s regulation on foreign exchange may influence our international strategies, and/or prolong, delay or otherwise impose restrictions on our international business, and may also result in an increase of our financing costs in certain circumstances. For example, unlike our competitors located in countries where foreign exchange is not regulated, we must consider foreign exchange implications when making and pursuing our international business strategies. Where we expect to encounter difficulties in obtaining sufficient foreign currency to support certain international strategies, we may have to choose not to pursue those plans. Pursuant to the PRC’s foreign exchange rules currently in effect, in most circumstances, the entities of our company incorporated in China cannot directly use their receipts in foreign currencies to satisfy their payment obligations in foreign currencies. Instead, they are required to convert their receipts in foreign currencies into RMB. As a result, they have to apply for and purchase foreign exchange when they have a need for funds in foreign currencies. We are prohibited from obtaining overseas financing through debt offerings or loan facilities, or providing guarantees for overseas debts, without the approval of and/or registration with the relevant PRC government authorities. Consequently, we may not be able to make use of certain low-cost sources of funds which may be available to non-PRC companies. We are required to obtain approvals from and/or register with the relevant PRC government authorities, and make filings with the foreign exchange authorities before we can conduct and/or finance our overseas direct investment projects. Therefore, we may not be able to take advantage of international business opportunities if we do not hold, or cannot obtain in a timely fashion, sufficient foreign currency.

The value of RMB against U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The PRC government has implemented a floating exchange rate system to allow the value of RMB to fluctuate within a regulated band based on market supply and demand and by reference to a basket of foreign currencies. Because a substantial part of our imports 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 purchase costs and our investment costs.

Risks Related to the Enforceability of Securities Law Liabilities against Our Officers and Directors

PRC laws and regulations have their foundation in written laws, and PRC laws, regulations and legal requirements dealing with economic matters continue to evolve. PRC laws and regulations are different in certain material areas such as legislation, judicial system, and enforcement from those in the United States and other common law jurisdictions. Because of the non-binding nature of prior court decisions in China, the enforcement of laws, regulations and legal requirements involve some degree of uncertainty. Given that the PRC laws and regulations with respect to companies, securities and litigation are different in certain important aspects from those in the United States and other common law jurisdictions, and most of our assets are located in the PRC and

most of our directors and substantially all of our executive officers reside in the PRC, it may be difficult for our shareholders (including investors of our ADSs) to enforce any judgments against our assets or the assets of our directors and officers located in China in an event that they believe their rights have been infringed and even if they successfully bring an action against us or our directors and officers and they are successful in an action of this kind.

The ability of U.S. government agencies, such as the U.S. Securities and Exchange Commission, or the SEC, and the U.S. Department of Justice, or the DOJ, to investigate and bring enforcement actions against us may be constrained by the PRC laws. For example, the securities regulators of the U.S. cannot directly enter into China to carry out investigations and collect evidence, but need to resort to the regulatory cooperation channels with the regulatory authorities in China, and the DOJ can only conduct investigations through bilateral judicial assistance channels with the PRC judicial authorities. According to Article 177 of the PRC Securities Law, the securities regulatory authority under the State Council of China may establish a supervision and administration cooperation mechanism with the securities regulatory authorities of other countries or regions for cross-border securities supervision and administration, and no foreign securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory of China. Without the consent of the securities regulatory department of the State Council and other competent authorities under the State Council, no organization or individual may provide documents or materials relating to securities business activities to overseas parties.

Where an effective civil judgment or ruling of a foreign court requires recognition and enforcement by a court in China, a party may apply directly to a court in China which has the jurisdiction or apply to the foreign court for the foreign court to request recognition and enforcement by a court in China according to the treaty concluded or acceded to by China with the home country of the party or under the principle of reciprocity. After examining an application or request, if the court deems that the judgment or ruling does not violate the basic principles of the laws of China and the sovereignty, national security and public interest of China, the court shall issue a ruling to recognize the legal validity of the judgment or ruling and issue an order for enforcement as needed to enforce the judgment or ruling. If the court deems that the judgment or ruling violates the basic principles of the laws of China or the sovereignty, national security or public interest of China, the court will not grant recognition and enforcement. Where an arbitration award of a foreign arbitral tribunal requires recognition and enforcement by a court in China, a party shall apply directly to the court at the place of domicile of the party against whom enforcement is sought or at the place where the property of that party is located, and the court shall process the application in accordance with the treaty concluded or acceded to by China or under the principle of reciprocity.

Civil judgments of U.S. courts cannot be directly enforced in Hong Kong either. At present, there are no treaties or other arrangements between the U.S. and Hong Kong for reciprocal enforcement of foreign judgments. However, common law permits an action to be brought upon a foreign judgment. Because a judgment can be regarded as creating a debt between the parties, the foreign judgment itself may form the basis of the cause of action. To enforce a foreign judgment in Hong Kong, a common law action for debt must be brought and the enforcement of a foreign judgment in Hong Kong is subject to a number of conditions, including but not limited to: (a) the foreign judgment is a final judgment on the merits of the case; (b) the judgment is a judgment on liquidated damages in a civil action and not on taxes, fines, or similar complaints; (c) the proceedings in which the judgment was obtained were not contrary to natural justice; and (d) that the enforcement of the judgment is not contrary to the public policy of Hong Kong. In addition, there is a six-year limitation period from the date of the foreign judgment to commence enforcement proceedings under common law in Hong Kong. The defenses that are available to a defendant in a common law action brought on the basis of a foreign judgment include lack of jurisdiction, fraud, or inconsistency of any previous judgment of a Hong Kong court or a foreign judgment recognized in Hong Kong.

As a result of the reasons including but not limited to the foregoing, our foreign public shareholders may have difficulty and face uncertainties in protecting their interests through actions against our company, directors,

officers or our majority shareholder. Shareholder protection through actions initiated by the SEC, DOJ and other U.S. government agencies may also be limited.

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. Changes in macro-economic conditions can 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 sales volumes. Inflation may lead to increase in our operating costs. Notwithstanding the measures taken by the PRC government to control inflation, China may experience an increase in inflation in the future and our operating costs may become higher than anticipated. The financial, economic or political situation may also have a negative impact on third parties with whom we do business, and may impact their ability to perform contractual obligations to us. In addition, other factors that affect the macro economy, such as declining population growth rates, inflationary pressures, supply chain disruptions, geopolitical tensions, conflicts and wars, trade and tariff policies, and major public health may have an adverse impact on oil and gas and petrochemical industries, including us.

In addition, if in the future any government or governmental authorities were to impose restrictions, or any negative comments or warnings are made by any government or governmental authorities on the investments and inflow of capital into China or China-based companies in general or about us specifically, or if there is any escalation of geopolitical tensions or any news or rumors thereof or if we are involved in any negative news, rumors or controversies, or if investment and trading restrictions are imposed on us or we are threatened with investment or trading restrictions, we may suffer from disruptions in our supply chain and it may be difficult for us to obtain substitution from other sources in a timely, sufficiently and costly manner, which may increase our costs and reduce our profits, and potential investors may shun away from our securities and/or certain of our existing investors may divest from us. Any of these factors may adversely affect our financial condition, results of operations, liquidity, and the value and liquidity of our shares.

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 the intensive reform of China’s petroleum, refining and chemical, natural gas, LNG and refined oils sales industries, we have been facing increasingly intense competition in the exploration, refinery, chemical, sales, and oil and gas service sectors from privately-owned companies, foreign-invested enterprises and other state-owned enterprises that recently entered the oil and gas industries.

Alternative energy sources and new products also pose strong competition against the oil and gas and petrochemical industries. In particular, the booming of the new energy vehicle industry confronts the oil industry with tough challenges. In October 2020, the State Council issued the New Energy Vehicle Industry Development Plan (for 2021-2035), according to which, China expects that the share of new energy vehicles out of total vehicle sales in China to rise to 20% by 2025 and pure electric vehicles to account for the majority of vehicle sales by 2035. We expect to see continued rapid development of the new energy vehicle industry, which will adversely affect the consumption of refined oil products. 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, and refining & chemicals 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 traditional domestic oil companies, local independent refineries and other competitors. As a result, we expect that we will continue to encounter some difficulty in increasing our sales of refined products and chemical products in these regions.

Risks Related to Anti-Monopoly Initiatives

The Anti-Monopoly Law of the PRC (the “Anti-Monopoly Law”) prohibits the entry into or implementation of any horizontal or vertical monopoly agreements, the taking of any action by abusing dominant market position, and any concentration of business operators that has or may have the effect of excluding or limiting competition. Penalties for violations of the Anti-Monopoly Law include, inter alia, confiscation of illegal gains and imposition of penalties as high as 10% of the sales revenue in the preceding year. We have directed our headquarter office and subsidiaries not to take any action in violation of the Anti-Monopoly Law or any of its supporting laws and regulation in their conduct of business, and have monitored company-wide anti-monopoly compliance through our internal compliance system. Despite that, we cannot assure you that our company can prevent all anti-monopoly compliance risks due to the fact that our company occupies a leading market position, the large scale of our business operations and our company has a large number of subsidiaries and branches. If in the future our company is determined to have deficiencies in the anti-monopoly compliance, or any business model adopted or particular transaction conducted by our company is determined, for example, to have abused our market position, entered into monopoly agreements, or implemented a concentration of business operators in violation of anti-monopoly requirements, we may be subject to investigations or enforcement actions by the government. In the case of such determination, in addition to being subject to a substantial fine, we may need to adjust our business model accordingly or make corresponding changes to a particular transaction structure. All of these would have a material adverse effect on our business operations, financial condition, operating results and corporate reputation, and may reduce the value of our securities and the profits distributable to our shareholders.

Risks Related to Economic Sanctions and Trade Controls

The U.S. government has imposed various sanctions on Chinese companies and individuals. For example, many Chinese companies have been placed on the trade control lists administered by the U.S. Department of Commerce Bureau of Industry and Security (“BIS”) due to various allegations, thereby prohibiting or restricting the supply of certain designated U.S. goods and technologies to such companies. Certain Chinese companies were designated by the Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury on a list that prohibits U.S. entities from investing in the publicly traded securities of such companies, resulting in U.S. investors having to dispose of their securities within a specified period of time. The U.S. government has also worked with the European Union, the governments of United Kingdom and other countries to expand the scope of these sanctions. We are not currently included in any sanction lists, but there can be no assurance that we or any of our subsidiaries would not be a target, be involved in or impacted by sanctions in any way in the future.

In addition, CNPC, our controlling shareholder, has for a long time engaged in international oil and gas operations. Some of these operations are located in countries which are subject to sanctions by the U.S. government, the European Union or other governments or international organizations. Some operations involve certain entities, which are subject to sanctions. We are also heavily dependent on imports of crude oil and natural gas, a part of which is indirectly or directly sourced from Russia.

In summary, sanctions and trade controls may pose the following risks to us:

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Risks of being sanctioned or implicated in sanctions: We have always endeavored to prevent our own business and/or our direct or indirect ties with any sanctioned entity from violating the sanctions imposed by the U.S. or any other governments or international organizations. However, we cannot assure you that any future sanctions will not target or implicate CNPC or our company.

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Divestment: Some investors (including U.S. investors) are prohibited from investing or may not wish to invest and have proposed or adopted divestment or similar initiatives regarding investments in companies that do business in countries and regions or have trade or investment ties with entities that are subject to sanctions. As a result, these investors may also divest their investment in us because of our and/or CNPC’s (including its subsidiaries) investments, trade and other operations in certain countries which are subject to sanctions, and our and/or CNPC’s (including its subsidiaries) trade and investment ties with certain sanctioned companies, or the concerns that our company may be the target or subject of sanctions. As a result, the liquidity and value of our securities may be materially and adversely affected.

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Supply disruptions and wind-down of operations: Since certain U.S. sanction programs have extraterritorial effect or effect on non-US persons, such as certain secondary sanctions administered by the OFAC, and certain trade controls administered by the BIS, especially under the “foreign direct product rules”, in certain circumstances, we and certain of our business partners may need to exercise business judgment to wind down certain existing projects or abandon or change some business plans. As a result, we may suffer adverse consequences, such as supply disruptions, increased costs of raw materials, impairment of assets or loss of profit-making opportunities. If any sanctions were to directly target or indirectly affect us, we could face immediate supply chain disruptions which could have a material adverse impact on our operations.

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Reputation risks: Although most of the sanction programs do not prohibit us or our parent company from carrying on existing operations in sanctioned countries, or from maintaining direct or indirect ties with any sanctioned entity, to maintain such operations may have an adverse impact on our reputation.

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Compliance risks: In view of the complexity of the various sanctions regimes, the frequent expansion and escalation of sanctions policies and programs, the power of sanction regulators to interpret policies, and the increasing enforcement of sanction laws, we are required to continuously invest substantial resources in compliance management, and the risk of being penalized for any non-compliance cannot be completely avoided and any non-compliance of sanctions may subject us to penalties.

Set forth below, please see our disclosure on a country-by-country basis of CNPC’s and our operations in certain sanctioned countries and business ties with certain sanctioned entities.

About Iran

In 2018, the United States government withdrew from the Joint Comprehensive Plan of Action (“JCPOA”) and reimposed certain sanctions against Iran, which were conditionally lifted in 2015 following entry into the JCPOA. These reimposed sanctions have implications for non-U.S. companies, including requiring foreign companies to cease participation in projects in certain sectors of Iran (including the energy sector), and prohibiting or restricting oil and petrochemicals imports from Iran, except for eight countries and regions (including China) which were granted a Significant Reduction Exception (“SRE”) to be able to continue to import limited oil and petrochemicals until May 2019. Pursuant to section 13(r) to the U.S. Securities Exchange Act of 1934, reporting issuers are required to disclose whether they or any of their affiliates have knowingly engaged in certain activities, transactions, or dealings related to Iran during the reporting period, including activities not prohibited by U.S. law. Based on CNPC’s response to our inquiries, a subsidiary of CNPC (the “CNPC Sub”) held interests in certain oil and gas development projects in Iran, namely, (i) the MIS oilfields in

which the CNPC Sub obtained a 100% interest in 2010, and (ii) the North Azadegan oilfield, in which the CNPC Sub obtained a 100% interest in 2009. From the re-imposition of U.S. sanctions, the CNPC Sub has been providing minimal support and services to the two oilfields. Since May 2019 when the SRE expired, the two oilfields have suspended lifting oil for recovery and did not generate any revenue for the CNPC Sub.

In July 2012, OFAC added Bank of Kunlun Co., Ltd., or Kunlun Bank, a subsidiary of CNPC, to its “List of Foreign Financial Institutions Subject to Part 561”, which was replaced by the list of Correspondent Account of Payable-Through Account Sanctions, pursuant to the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. According to OFAC, Kunlun Bank allegedly 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 paying letters of credit on behalf of the designated banks. Since 2018, Kunlun Bank’s settlement business involving Iran has been limited to settlement of humanitarian materials and other business activities that are not subject to sanctions. We have 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.

About Russia

Since July 2014, the United States government has adopted economic sanctions against certain Russian persons and entities, including various entities operating in the financial, energy and defense sectors, such as Rosneft, Gazprom, Transneft, and OAO Novatek as well as those companies in which the foregoing companies independently or jointly hold a 50% or more interest. These sanctions prohibit U.S. persons from transacting in, providing financing for or otherwise dealing in debt issuance by certain of these entities, or exporting, transferring, or providing certain technologies, equipment or services to certain oil-development projects in Russia.

Since February 2022, the U.S. government has expanded the sanctions against Russia. Please refer to the websites of OFAC and other sanction regulators for details. In conjunction with such measures by the U.S. government, E.U., U.K. and certain other countries have also announced similar sanctions against Russia.

Pursuant to certain pre-existing agreements or arrangements, CNPC has for a long time imported crude oil and natural gas from Russia and held investment interests in certain projects in Russia. Our company also has direct or indirect business ties with certain sanctioned Russian entities. These operations include the following:

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CNPC indirectly holds 20% equity interest in OAO Yamal LNG and 10% equity interest in Arctic LNG 2, both of which are more than 50% owned by OAO Novatek.

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CNPC has long-term agreements with Rosneft, Transneft, Gazprom and Arctic LNG 2 (all subject to OFAC sanctions), to import crude oil, natural gas or LNG from Russia. CNPC has resold, and will for the foreseeable future resell or transfer, all or a substantial portion of the imported crude oil and gas under the agreements to us.

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Our company has for a long time imported natural gas from Gazprom, and LNG from a subsidiary of OAO Yamal LNG.

In 2022, the revenue derived from our operations in oil and gas involving those sourced from Russia accounted for 6.2% of our total revenue.

Both CNPC and our company have been continuously assessing the risks related to operations involving Russia. The above business ties may cause a high risk in the context of the Ukraine crisis. At present, the U.S. and certain other countries implement a price limit policy on Russian oil exports. It is possible that such countries may implement more severe policies in the future, and we cannot guarantee that these countries will not intervene in our Russia-related business. We also cannot guarantee that our business partners will not have any negative perception of us as a result of the business ties mentioned above, or they may even consider divesting from us and/or terminating the business relationships with us.

About Venezuela

In 2017, the United States imposed economic sanctions against the Government of Venezuela and certain state-owned entities, including Petroleos de Venezuela, S.A. (“PdVSA”). These sanctions prohibit U.S. persons from transacting in, providing financing for or otherwise dealing in “new debt” issued by these entities on or after August 25, 2017, with certain exceptions for short-term debt. In 2019, the United States issued enhanced sanction measures against Venezuela, which included blocking the property of Venezuelan government and its controlled entities (including PdVSA), and introducing new restrictions on Venezuela’s oil sector. Under these programs, persons determined to be operating in the oil sector of the Venezuelan economy, or to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person included on the list of SDNs and Blocked Persons, may also be subject to risk of being designated for sanctions. In 2008, CNPC Exploration and Development Company Limited (“CNPC E&D”), a joint venture held as to 50% by us and 50% by CNPC, established a joint venture with PdVSA (the “JV”) to operate the Sinovensa block located in Carabobo, Monagas State, Venezuela, which block produces and sells extra-heavy oil. CNPC E&D holds a 40% interest in the JV and PdVSA holds 60%. In the past three years, CNPC E&D contributed no new investment in the JV. We also indirectly hold minority interests in a few other small projects in Venezuela. For the year ended December 31, 2022, the share of net profit from the Sinovensa block and the other projects in aggregate accounted for approximately 0.56% of our net profit attributable to owners of the company.

Others

As a major supplier of essential energy sources in China, we may in the ordinary course of our business, develop ties with certain Chinese entities or individuals who are currently or in the future could be subject to various sanctions. In performing daily compliance work, on the one hand, we take great care to identify and assess the risks of violating the US and other countries’ sanction regimes, and on the other hand, we strive to comply with PRC anti-sanctions and anti-boycott laws and regulations. When faced with the situation where foreign sanctions conflict with China’s anti-sanctions and anti-boycott rules, we may be obligated to comply with China’s rules. Hence, we may be unable to completely prevent all sanctions compliance risks.

Our controlling shareholder, CNPC, may have some operations in certain other countries and regions sanctioned by the U.S. to different extents. None of such activities result in us violating any U.S. or any other international sanctions.

Risks Related to Outbound Investments and Trading

We are subject to various political, legal and regulatory environments in foreign countries in which we have investments or with which we conduct trading transactions. The legal and regulatory regimes of some of those countries may not be as developed or sophisticated and may differ in many significant respects from those prevailing in developed countries. Expansion into new international markets requires significant resources, management attention and increased legal compliance costs and subjects us to regulatory, economic, tax and political risks. We are also subject to general risks inherent in international operations, such as fluctuations in exchange rates, changes in trade policies, tariff regulations, embargoes and customs clearances, or other trade restrictions, as well political or social unrest or economic instability in regions in which we operate.

As we continue to expand our business and geographic footprint, including in countries with regulatory and compliance regimes with which we are unfamiliar, we will need to adapt and implement compliance and operational protocols to ensure compliance in each such market. The laws and regulations of various countries in which we currently operate or may operate in the future are evolving. Consequently, such laws and regulations may change and sometimes may conflict with each other, making it more complicated for us to be compliant and sometimes may be at odds such that we must make a strategic decision to abandon or scale back operations in some markets. At any time, authorities in the countries where we currently operate may require us to obtain additional, or extend existing, licenses, permits or approvals. However, there is no guarantee that we will be able

to obtain these in a timely and cost-effective manner. Authorities may revoke existing licenses, and we may not be able to appeal any such revocations in a timely and/or effective manner, or at all.

Risks Related to Climate Change

In recent years, the oil industry has faced increasingly severe challenges posed by global climate change. Numerous international, domestic and regional treaties and agreements which restrict carbon emissions have been executed and become effective. China and some other countries in which we operate have adopted, or are considering the adoption of, regulations to reduce carbon emissions. These include the adoption of carbon emissions “cap and trade” regimes, carbon taxes, more stringent efficiency standards, and incentives or mandates for clean energy. The Chinese government has announced that China strives to hit carbon peak by 2030 and achieve carbon neutrality by 2060. These policies and measures will bring opportunities to our new energy business, but may lead to changes to our oil extraction and refining businesses. We will continue to enhance our oil and gas exploration and development while seek to explore and use new energy sources, aiming to achieve an integrated development of fossil energy and clean energy. Our proposed initiatives to pursue this strategy will include without limitation: to put more efforts into the development and exploitation of geothermal energy, solar energy, wind energy, hydrogen energy and other new energy; to promote the substitution of energy used for our operation with clean energy; to promote the development of gas-to-power business; to increase investments in R&D of new energies; and to enhance carbon capture, utilization and storage (“CCUS”) measures. We will strive to achieve the following goals (i) by 2025, our new energy production capacity to reach 7% of our domestic energy supply capacity; (ii) by 2035, the volume of our external supply of carbon-free energy to exceed the fossil energy we consume, and to achieve an equal share among new energy, oil and gas in our total production capacity (i.e., each accounting for one-third), and (iii) by around 2050, to achieve near-zero emissions, when our new energy capacity to amount to half of our total energy production capacity. In the course of striving to achieve these goals, we expect to encounter the following major risks:

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In terms of market position: As a result of the acceleration of energy transition in China, clean energy players are expected to be offered more development opportunities and become increasingly competitive. On the contrary, the share of fossil fuels in primary energy consumption is expected to decrease. The Chinese government plans to increase the share of non-fossil fuels in primary energy consumption from 15% in 2019 to around 25% by 2030. This would have an effect on our position in the refined oil market and the development strategies for the new energy market that we are currently implementing.

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In terms of liquidity: In order to achieve a success in relation to energy transition initiatives, we expect to spend more on developing and obtaining new technologies and investing in and implementing our business expansion strategy. This will require our company to maintain an appropriate level of liquidity sufficient to support our transition strategies.

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In terms of compliance: the Chinese government is expected to introduce more stringent policies and standards relating to climate change (mainly relating to energy conservation and carbon emission reduction), which could increase our compliance cost. Any noncompliance may subject us to government investigation or penalties.

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In terms of legal proceedings: as advised by our PRC legal counsel, at present, under existing PRC laws, the legal basis for initiating any environment-related litigation mainly relates to the laws governing natural resources, environmental or ecological protection. Whether such legal basis is directly applicable to climate change-related litigation remains subject to clarification by further legislation or judicial interpretation. There have only been a few cases in China that are directly or indirectly related to climate change and they are not typical enough to be referred to as precedents. As a result, the potential impact of climate change-related litigation in China on us is not estimable at this stage. Despite that, we have noticed that the Chinese government is working on building a comprehensive legal regime with respect to climate change, and hence we cannot rule out the risk of potential legal proceedings involving oil and gas companies or petrochemical companies in the future.

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In terms of reputation: A low carbon profile has become an important indication of the influence of energy companies and a major concern for stakeholders. If we fail to meet our low-carbon development goals, our reputation may be affected adversely.

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In terms of physical impact: Natural disasters such as typhoons, rainstorms, floods, and landslides caused by climate change may directly damage our assets and business operations, and the resulting tentative disruption to the supply chain will indirectly affect our operations. As we are an integrated oil and gas operator, with operations extending from upstream to downstream, any tentative supply chain disruption will primarily impact the supply among different segments within our company, and to a lesser extent, the supply to external customers and suppliers. The aforementioned natural disasters may result in, among others, flooding of oil and gas wells, limitations on our ability to operate certain facilities, pipelines exposure, road disruptions and shipping suspensions, any of which can reduce the production of our oil and gas fields, and reduce the workload of our refineries and/or the sales volumes of our sales enterprises. In extreme scenarios, it may cause tentative disruption of delivery and supply at various parts of the supply chains and adversely affect us and our external suppliers and customers.

See also “Risk Factors – Risks Related to Environmental Protection and Safety Production”.

Risks Related to Environmental Protection and Safety Production

Compliance with changes in laws, regulations and obligations relating to environmental protection and safety production could result in substantial expenditures and reduced profitability from increases in operating costs. In recent years, the PRC government has implemented environmental and ecological protection and safety production laws and regulations and has gradually raised refined oil standards which have stricter requirements for our business, and the requirements as to the increase in provision of safety production funds led to an increase in our operating costs. In the future, the PRC government will implement more stringent environmental protection and safety production regulations and impose higher standards on refined oil products. Compliance with these new regulations and standards will increase our costs and expenses.

Our oil and gas exploration and production activities shall comply with relevant PRC environmental protection laws and regulations governing abandonment and disposal processes for oil and gas exploration and production activities. We have established standard abandonment procedures pursuant to these laws and 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 national or local governments may enact stricter environmental protection regulations and our abandonment costs may increase as a result.

Exploring, 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 and production facilities 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. Any natural disaster or accident encountered by our oil or natural gas fields or production facilities would aggravate any personal injuries, deaths and property damage.

Significant operating hazards and natural disasters such as earthquake, tsunami and health epidemics and pandemic (such as the 2020-2021 pandemic), may cause partial interruptions to our operations, property damage, personal injuries or deaths and environmental damage that could have an adverse impact on our production and operations and financial condition.

Risks Related to Oil and Gas Reserves

The crude oil and natural gas reserves data in this annual report are only estimates. The reliability of reserves 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 reserves 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 making our efforts to find high-quality large-scale reserves, strengthening capacity building in key areas, constructing new, expanding and upgrading some existing, refinery and petrochemical facilities and expanding the oil and gas terminal markets, we may have to make substantial capital expenditures and investments. In addition, we are endeavoring to advance energy transition and striving to achieve our pre-set goals (see also “Risks Related to Climate Change”). 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 arises, 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 Audit Reports Prepared by an Auditor who is not Inspected by the Public Company Accounting Oversight Board

As a company with shares registered with the SEC, and previously traded publicly in the United States, our independent registered public accounting firm is required under the laws of the United States to be registered with the Public Company Accounting Oversight Board, or the PCAOB, and undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Under PRC laws, the PCAOB’s inspection of a registered public accounting firm’s audit work in China should be by way of regulatory cooperation from relevant Chinese authorities. The CSRC also stated that cross-border audit supervision should be realized through regulatory cooperation between China and the U.S. Therefore, the PCAOB’s inspection of our independent registered public accounting firm should be realized through regulatory cooperation between China and the U.S. In 2020, the Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law. According to the HFCAA, where a covered foreign company listed in the U.S. retains an auditor who has a branch or office located in a foreign jurisdiction, and the PCAOB is unable to completely inspect or investigate the auditor for three consecutive years because of a position taken by an authority in the foreign jurisdiction, the SEC may prohibit securities of such covered foreign company from being traded on any national securities exchange or over-the-counter market in the U.S. and such covered foreign company is required to satisfy certain additional disclosure requirements. On December 29, 2022, President Biden signed the 2023 Consolidated Appropriations Act, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified Issuer before the SEC must impose an initial trading prohibition on the issuer’s securities from three years to two years. In December 2021, the SEC issued the rules to implement the requirements of the HFCAA. In December 2021, PCAOB issued the list of accounting firms that it is unable to inspect or investigate completely as determined by

it (the “2021 Determination”), which included our external auditor. In May 2022, we were identified as a covered issuer. In August 2022, the CSRC, the Ministry of Finance (the “MOF”) and the PCAOB signed an audit supervision cooperation agreement. From September 2022, PCAOB conducted audit inspections in Hong Kong. In December 2022, PCAOB announced that it had secured complete inspection and vacated its 2021 Determination. The SEC subsequently announced that it would no longer identify issuers to which the HFCAA applies until the PCAOB again decides that it cannot conduct a complete inspection and investigation.

Our shares have been delisted from the NYSE on September 8, 2022 and we have terminated our ADR program on October 17, 2022. We expect to deregister our shares with the SEC upon satisfaction of the relevant conditions under the Securities Exchange Act. Prior to the deregistration, we will continue to need to meet the disclosure obligations under the Securities Exchange Act. Given that our shares have been delisted from the NYSE, the risk of trading prohibition under the HFCAA no longer applies to us. However, if PCAOB determines that it cannot conduct complete inspection and investigation of accounting firms located in China again, the risk of resuming the implementation of the HFCAA may adversely affect the value of our H Shares.

By conducting inspections of independent registered public accounting firms, the PCAOB has at times identified deficiencies in the audit procedures and quality control procedures of those accounting firms. Such deficiencies may be addressed in those accounting firms’ future inspection process to improve their audit quality. If PCAOB is unable to conduct regular inspections of audit work undertaken in China again, it may cause the investors to lose confidence in the financial statements and reports of the issuers audited by such independent registered public accounting firms.

Risks Related to Effectiveness of Internal Control over Financial Reporting

The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, has 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 our internal control over financial reporting. In addition, an independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Although our management concluded that our internal control over our financial reporting as of December 31, 2022 was effective, and our independent registered public accounting firm has issued an attestation report, which concluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2022, 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 shares.

Risks Relating Financial Reporting Differences

As a foreign private issuer, we are exempt from certain disclosure requirements under the U.S. Exchange Act, which may afford less protection to you than you would enjoy if we were a domestic U.S. company. As a foreign private issuer, we are exempt from, among other things, the rules prescribing the furnishing and content of proxy statements under the U.S. Exchange Act and the rules relating to selective disclosure of material nonpublic information under Regulation FD under the U.S. Exchange Act. In addition, our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit and recovery provisions contained in Section 16 of the U.S. Exchange Act. We are also not required under the U.S. Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered under the U.S. Exchange Act. For example, in addition to annual

reports with audited financial statements, domestic U.S. companies are required to file with the SEC quarterly reports that include interim financial statements reviewed by an independent registered public accounting firm and certified by the companies’ principal executive and financial officers. By contrast, as a foreign private issuer, we are not required to file such quarterly reports with the SEC or to provide quarterly certifications by our principal executive and financial officers. Although we are required by the listing rules of SSE with respect to our A Shares to publish quarterly and semi-annual reports and also required by listing rules of HKSE with respect to our H Shares to publish semi-annual reports, and such reports are furnished to the SEC on Form 6-K, our financial statements included in the reports are not reviewed by an independent registered public accounting firm, and are only reviewed and signed by all our directors, president and CFO.

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 price of our shares. We have gradually reinforced and enhanced our internal control and corporate governance policies and procedures in order to strengthen our ability to detect and prevent employee 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 shares could be adversely affected.

Risks Related to Cyber Security

In recent years, we have increased the utilization of artificial intelligence, cloud computing, big data, Internet of Things, and other types of information technology (“IT”) in our production and operations, our activities are therefore heavily dependent on the reliability and security of our IT systems. Our IT systems may suffer disruptions due to technical failure and disruptions, cyber-attack, computer intrusions and viruses, power and network outages or natural disasters. We have adopted multi-layer technological measures for prevention and detection of cybersecurity problems, and we also train our employees in order to improve their awareness and ability to detect and respond to cybersecurity situations. If our measures prove to be insufficient, deficiencies in any processes could adversely affect or disrupt our normal operations or result in incidents or property loss or personal injuries. Cyberattacks may also result in proprietary information being altered, lost, or stolen, result in employee, customer, or third-party information or material intellectual property being breached, or otherwise disrupt our business operations. In case we suffer any grave cybersecurity incident, we could face regulatory actions, third party litigations or reputational harm in addition to being required to make compensation for direct losses resulting from the incident. As a result, we and our customers, employees, or third parties could be adversely affected, potentially having a material adverse effect on our business and financial conditions.

Risks Related to Insurance

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 risks we are exposed to. We maintain insurance coverage against liability risks relating to assets that have significant operational risks, auto risks, and third-party liabilities for personal, property, and environmental risks, but not all, potential losses. We may suffer material losses resulting from uninsurable or uninsured risks or insufficient insurance coverage.

Item 4— INFORMATION ON THE COMPANY

Introduction

History and Development of Our Company

Our legal name is “中国石油天然气股份有限公司” and its English translation is PetroChina Company Limited.

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. In April 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. In October 2007, we issued 4 billion A Shares. The A Shares were listed on the SSE in November 2007. As of March 31, 2023, CNPC beneficially owned 150,923,565,570 A Shares and 291,518,000 H Shares in us, representing approximately 82.62% of our share capital in aggregate. The H Shares held by CNPC were through Fairy King Investments Limited, an overseas wholly owned subsidiary of CNPC.

We are the largest oil and gas producer and seller occupying a leading position in the oil and gas industry in China, one of the largest companies in China in terms of sales revenue, and also one of the largest companies in the world. Currently, our principal business lines include the exploration, development, transmission, production and marketing of crude oil, natural gas and new energy; 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 and new materials; the marketing and trading of refined oil products and non-oil products; and 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. For seven decades, we have conducted crude oil and natural gas exploration activities in many regions of China. We commenced limited refining operations in the mid-1950s. Our chemicals operations commenced in the early 1950s. Our natural gas transmission and marketing activities commenced in Sichuan in Southwestern China in the 1950s. In the early 1960s, we began producing ethylene.

We have continued 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. At the same time, we have been maintaining certain proportion of imported crude oil and natural gas in accordance with our needs. In 2020, 2021 and 2022, we imported approximately 679.3 million barrels, 583.1 million barrels and 528.8 million barrels of crude oil, respectively.

To address the climate change concerns, we have adopted a three-steps energy transition plan. We will strive to achieve the following goals (i) by 2025, our new energy production capacity to reach 7% of our domestic energy supply capacity; (ii) by 2035, the volume of our external supply of carbon-free energy to exceed the fossil energy we consume, and to achieve an equal share among new energy, oil and gas in our total production capacity (i.e., each accounting for one-third), and (iii) by around 2050, to achieve near-zero emissions, when our new energy capacity to amount to half of our total energy production capacity.

Our headquarters are located at 9 Dongzhimen North Street, Dongcheng District, Beijing, China, 100007, and our telephone number at this address is (8610) 5998-2622. Our website address is www.petrochina.com.cn. The information on our website is not part of this annual report. We file our annual reports on Form 20-F, interim reports on Form 6-K and other documents required to be filed with the SEC on the SEC’s website www.sec.gov.

Our Corporate Organization Structure

The following chart illustrates our corporate organization structure as of March 31, 2023.

LOGO

(1)	Indicates approximate shareholding.

(2)	Indicates approximate shareholding, including 291,518,000 H Shares indirectly held by CNPC as of March 31, 2023 through Fairy King Investments Limited, a wholly owned overseas subsidiary of CNPC.

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

Our major subsidiaries, all included in the chart above, are classified into different business segments based on the nature of their principal business activities. See Note 19 to our financial statements for a detailed discussion. Other than the major subsidiaries, companies in which we hold equity interest mainly include China Oil & Gas Pipeline Network Corporation (“PipeChina”), CNPC Finance Co., Ltd., CNPC Captive Insurance Company Limited and other associate companies and joint ventures as well as other equity investments measured at fair value through other comprehensive income. See Note 17 and Note 18 to our financial statements for a detailed discussion.

For information on capital expenditures, please see “Item 5 — Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Expenditures and Investments.”

Oil, Gas and New Energy

We engage in crude oil and natural gas exploration, development and production and new energy business. Substantially all of our 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 2022, we strengthened our overall research and top-down design in the domestic oil and gas business, risk exploration in new areas and new fields and the concentrated exploration and fine exploration in key reserve-increasing areas and strategic replacement areas. We achieved multiple breakthroughs and important discoveries in Tarim, Junggar, Sichuan, Bohai Bay and other key basins, developing into various large-scale oil and gas reserve areas. We vigorously enhanced the stable output in the existing oil and gas fields and optimized the layout of production capacity in new fields, and the output of oil and gas continued to increase. In 2022, our domestic business achieved a crude oil output of 767.4 million barrels, representing an increase of 1.9% as compared with last year, a marketable natural gas output of 4,471.3 Bcf, representing an increase of 5.9% as compared with last year, and an oil and natural gas equivalent output of 1,512.6 million BOE, representing an increase of 3.8% as compared with last year.

In 2022, our overseas oil and gas business adhered to high quality development, and important discoveries have been made in various projects such as Niger and Chad; we enhanced full-cycle management of development plans, promoting various key capacity projects put into operation. In 2022, we enhanced the acquisition of new projects and cooperation in existing projects, completed the restructuring and closing of the Rumaila project, and extended the contract term of the Aktobe project. In 2022, the crude oil output from overseas operations amounted to 138.8 million barrels, representing an increase of 3.3% as compared with last year, the output of marketable natural gas from overseas operations was 203.7 Bcf, representing an increase of 3.0% as compared with last year; and the output of oil and gas equivalent from overseas operations was 172.8 million BOE, representing an increase of 3.2% as compared with last year, accounting for 10.3% of our total oil and natural gas equivalent output.

In 2022, our crude oil output amounted to 906.2 million barrels, representing an increase of 2.1% as compared with last year. The marketable natural gas output reached 4,675.0 Bcf, representing an increase of 5.8% as compared with last year. The oil and natural gas equivalent output amounted to 1,685.4 million BOE, representing an increase of 3.7% as compared with last year.

As of December 31, 2022, our exploration and exploitation licenses for oil and gas (including coalbed methane) covered a total area of approximately 240.7 million acres, including the exploration licenses covering a total area of approximately 203.0 million acres and the production licenses covering a total area of approximately 37.7 million acres.

The following table sets forth the financial and operating data of our oil, gas and new energy segment for each of the years ended December 31, 2020, 2021 and 2022:


	Year Ended December 31,
	2020		2021		2022
Revenue (RMB in millions)		530,807		688,334		929,279
Profit from operations (RMB in millions)		23,092		68,452		165,748
Proved developed and undeveloped reserves
Crude oil (million barrels)		5,206.1		6,063.8		6,418.4
Natural gas (Bcf)		76,437.1		74,915.9		73,452.7
Production
Crude oil (million barrels)		921.8		887.9		906.2
Natural gas for sale (Bcf)		4,221.0		4,420.0		4,675.0

Reserves

As of December 31, 2022, our total estimated proved reserves of crude oil was approximately 6,418.4 million barrels and our total estimated proved reserves of natural gas was approximately 73,452.7 Bcf. As of December 31, 2022, our proved developed reserves of crude oil accounted for 86.8% of our total proved reserves of crude oil, and our proved developed reserves of nature gas accounted for 56.5% of our total proved reserves of natural gas. Total proved hydrocarbon reserves, including our overseas crude oil reserves of 722.5 million barrels and overseas natural gas reserves of 1,288.1 Bcf, increased by 0.6% from approximately 18,549.8 million BOE as of December 31, 2021 to approximately 18,660.6 million BOE as of December 31, 2022. Natural gas reserves accounted for 65.6% of our total proved hydrocarbon reserves as of December 31, 2022.

Approximately 54%, 57% and 58% of our estimated proved reserves as of December 31, 2020, 2021 and 2022, respectively, were assessed by our internal assessment team and audited by our independent engineering consultants. Other portions were based on the estimates performed by our independent engineering consultants, DeGolyer and MacNaughton, McDaniel & Associates, Ryder Scott and GLJ. The reserves assessments and reports of our company were performed and prepared in compliance with SEC’s oil and gas reserves reporting rules. Our reserves 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 to 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 — Risks Related to Oil and Gas Reserves” for a discussion of the uncertainty inherent in the estimation of proved reserves.

We have adopted methods generally accepted in the industry to assess our proved reserves, including production decline curve analysis methods, volumetric methods, material balance methods, and reservoir simulation methods, or a combination of these methods, and took into account economic conditions in performing the assessments. Basic data used by us to assess our proved reserves estimates include geological, geophysical, engineering and financial data as well as other relevant data. In order to satisfy the requirements for establishing a reasonable certainty for proved reserves, including material increase in proved reserves estimates, we adopted field-tested repeatable and consistent reliable technologies, including, among others, logging, 3D seismic data, rock core analyses, static or dynamic pressure tests and production well testing. To the extent that appropriate analogous reservoirs are available, we use analogous reservoir parameters to enhance the quality of our reserves assessment results so as to be consistent with the reliable results required for proved reserves assessment as specified in applicable SEC rules.

Internal Controls Over Reserves Estimates

We have an oil and gas reserves management committee, which is chaired by the president of our company.

We require our employees engaged in oil and gas reserves evaluation and audit must hold a competent professional qualification. Both our headquarters and regional companies are staffed with reserves personnels. We have a reserves management department in our oil, gas and new energy branch company. The main staff of the department have over 20 years of experience in the oil industry and many years of experience in reserves evaluation pursuant to SEC rules. All of the staff of the department hold national certificates for reserves assessment. Each regional company has a reserves management committee and a multi-disciplinary reserves research office. Mr. Duan Xiaowen from the reserves administration division of our oil, gas and new energy branch company, is the person in charge of our reserves estimation. Mr. Duan holds a bachelor’s degree in geology and a master’s degree in business administration. He has many years of work experience in oil and gas exploration and development industry and has been engaged in reserves estimate and management for a long time. Since 2008, Mr. Duan has been participating in the supervision of reserves estimation and management in our company. In 2016, Mr. Duan became the division head primarily responsible for overseeing the preparation of the reserves estimates, estimation technology and management. The reserves 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 reserves assessment are subject to a two-level review by both the regional companies and our oil, gas and new energy branch company, with final examination and approval of the reserves management committee.

In addition, we retain independent assessment firms to perform reserves evaluation and/or audit our estimates of proved reserves each year in accordance with relevant SEC rules. We disclose the reserves in accordance with the SEC’s oil and gas reporting rules. The independent engineering consultants providing us with reserves audit and/or assessment services for 2022 were DeGolyer and MacNaughton, Ryder Scott Company L.P., GLJ Petroleum Consultants and McDaniel & Associates Consultants Ltd. None of them 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 reserves estimates. The summaries of the reserves assessment reports and audit reports issued to us by the foregoing independent engineering consultants have been included as exhibits 15.1 through 15.5 to this annual report on Form 20-F.

The following table sets forth our estimated reserves and the changes in the years ended December 31, 2020, 2021 and 2022.


	Crude Oil and Condensate⁽¹⁾			Natural Gas ⁽²⁾			Combined
	(Million barrels)			(Bcf)			(BOE, in millions)
Proved developed and undeveloped reserves
On a consolidated basis:
Reserves as of December 31, 2020		5,206.1			76,437.1			17,945.6
Revisions of previous estimates		1,159.1			(2,011.6	)		824.1
Extensions and discoveries		472.3			4,885.3			1,286.5
Improved recovery		116.7			27.0			121.2
Purchased		—			—			—
Sold		(2.5	)		(1.9	)		(2.8	)
Production for the year		(887.9	)		(4,420.0	)		(1,624.8	)
Reserves as of December 31, 2021		6,063.8			74,915.9			18,549.8
Revisions of previous estimates		511.4			(3,155.9	)		(14.4	)
Extensions and discoveries		622.9			6,236.8			1,662.3
Improved recovery		124.9			130.9			146.7
Purchased		1.6			—			1.6
Sold		—			—			—
Production for the year		(906.2	)		(4,675.0	)		(1,685.4	)
Reserves as of December 31, 2022		6,418.4			73,452.7			18,660.6
Proved developed reserves
As of December 31, 2020		4,653.6			42,076.7			11,666.4
Of which: domestic		3,987.0			40,732.3			10,775.8
Overseas		666.6			1,344.4			890.6
As of December 31, 2021		5,374.8			42,575.6			12,470.7
Of which: domestic		4,799.6			41,343.5			11,690.2
Overseas		575.2			1,232.1			780.5
As of December 31, 2022		5,574.2			41,508.4			12,492.3
Of which: domestic		5,024.3			40,449.3			11,765.9
Overseas		549.9			1,059.1			726.4
Proved undeveloped reserves
As of December 31, 2020		552.5			34,360.4			6,279.2
Of which: domestic		387.9			34,062.0			6,064.9
Overseas		164.6			298.4			214.3
As of December 31, 2021		689.0			32,340.3			6,079.1
Of which: domestic		486.0			32,116.5			5,838.8
Overseas		203.0			223.8			240.3
As of December 31, 2022		844.2			31,944.3			6,168.3
Of which: domestic		671.6			31,715.3			5,957.5
Overseas		172.6			229.0			210.8
Share of proved developed and undeveloped reserves in associates and joint ventures calculated by the equity method
As of December 31, 2020		195.5			362.7			256.0
As of December 31, 2021		208.5			511.4			293.7
As of December 31, 2022		175.6			537.1			265.1

(1)	As of December 31, 2022, the crude oil and condensate reserves included 318.3 million barrels of natural gas liquid.

(2)	Represents the remaining natural gas after on-site condensate separation treatment and minus the vented combustion gas.

As of December 31, 2020, 2021 and 2022, our total proved developed and undeveloped reserves on consolidated basis and on equity method, were 18,202 million BOE, 18,844 million BOE and 18,926 million BOE, including 5,402 million, 6,272 million and 6,594 million barrels of crude oil and condense, and 76,799.8 Bcf, 75,427.3 Bcf and 73,989.8 Bcf of natural gas.

Our proved undeveloped reserves were 6,168.3 million BOE as of December 31, 2022, representing an increase of 1.5% as compared to 6,079.1 million BOE for 2021. The main changes in our proved undeveloped reserves in 2022 included (i) an increase of 1,662.3 million BOE through extensions and discoveries; (ii) an increase of 146.7 million BOE through improved recovery; (iii) a reduction of 459.2 million BOE due to certain downward adjustments primarily for purposes of optimizing investment in proved undeveloped reserves; (iv) the conversion of 1,260.7 million BOE of proved undeveloped reserves into proved developed reserves; and (v) an increase of 0.2 million BOE through purchase. In 2022, we spent RMB161,933 million on developing proved undeveloped reserves.

The overwhelming majority of our proved undeveloped reserves are situated around the oil fields that are currently producing. Some of our proved undeveloped reserves of natural gas are scheduled for development 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 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 in our gas fields in China is put into the nationwide, long-range pipeline system to be 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 pipeline systems to be sold to customers in the areas adjacent to our 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 year end 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).

Most of our proved reserves are located in China, and no individual country, region or continent outside of China contains 15% or more of our total proved reserves. In the years ended December 31, 2020, 2021 and 2022, our overseas proved reserves, taken together, accounted for 6.2%,5.5% and 5.0% of our total proved reserves, respectively.

The following tables set forth our crude oil and natural gas proved reserves and proved developed reserves by region as of December 31, 2020, 2021 and 2022.


	As of December 31,
	2020				2021				2022
	Proved Developed and Undeveloped		Proved Developed		Proved Developed and Undeveloped		Proved Developed		Proved Developed and Undeveloped		Proved Developed
Crude oil reserves (Million barrels)
Daqing		928.6		881.5		960.1		936.6		929.3		922.5
Changqing		1,262.5		1,185.8		1,516.1		1,380.4		1,607.1		1,342.9
Xinjiang		717.2		677.8		825.9		774.1		961.8		864.0
Other regions in China		1,479.6		1,254.9		1,983.5		1,708.5		2,197.7		1,894.9

Overseas		818.2		653.6		778.2		575.2		722.5		549.9

Total		5,206.1		4,653.6		6,063.8		5,374.8		6,418.4		5,574.2

Natural gas Reserves⁽¹⁾ (Bcf)
Changqing		25,969.8		10,700.7		25,467.6		10,910.4		23,806.1		10,610.0
Tarim		22,680.6		15,091.9		21,128.9		14,711.3		19,633.1		13,118.3
Chuanyu		14,933.6		8,316.5		15,580.2		9,074.3		16,663.8		10,030.0
Other regions in China		11,212.0		6,624.9		11,283.3		6,647.5		12,061.6		6,691.0

Overseas		1,641.1		1,342.7		1,455.9		1,232.1		1,288.1		1,059.1

Total		76,437.1		42,076.7		74,915.9		42,575.6		73,452.7		41,508.4

(1)	Represents the remaining natural gas after on-site condensate separation treatment and minus the vented combustion gas.

Exploration and Development

We currently conduct exploration and development 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.

The following table sets forth the number of wells we drilled, or in which we owned an interest, and the results thereof, in 2020, 2021 and 2022.


Year		Daqing		Xinjiang		Changqing		Tarim		Other regions in China ⁽¹⁾		Overseas		Total
2020
	Net exploratory wells drilled⁽²⁾		166		151		661		35		526		24.0		1,563.0
	Crude oil		142		120		380		11		345		17.9		1,015.9
	Natural gas		9		9		53		8		65		1.8		145.8
	Dry⁽³⁾		15		22		228		16		116		4.3		401.3
	Net development wells drilled⁽²⁾		3,264		1,048		4,630		123		2,998		210.5		12,273.5
	Crude oil		3,240		1,040		3,082		57		2,349		209.5		9,977.5
	Natural gas		11		8		1,512		59		642		1.0		2,233.0
	Dry⁽³⁾		13		—		36		7		7		—		63.0
2021
	Net exploratory wells drilled⁽²⁾		207		149		604		39		457		23.3		1,479.3
	Crude oil		160		86		371		15		265		15.6		912.6
	Natural gas		17		17		43		8		90		1.1		176.1
	Dry⁽³⁾		30		46		190		16		102		6.6		390.6
	Net development wells drilled⁽²⁾		3,387		736		4,034		75		3,124		266.4		11,622.4
	Crude oil		3,370		732		2,483		42		2,497		262.2		9,386.2
	Natural gas		6		4		1,518		30		620		4.2		2,182.2
	Dry⁽³⁾		11		—		33		3		7		—		54.0
2022
	Net exploratory wells drilled⁽²⁾		167		136		557		31		460		24.2		1,375.2
	Crude oil		112		116		318		9		232		18.2		805.2
	Natural gas		16		20		43		8		116		2		205.0