UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                ______________

                                   FORM 20-F

(Mark One)
|_|      REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
         SECURITIES EXCHANGE ACT OF 1934
                                      OR
|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
                                      OR
|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

                        COMMISSION FILE NUMBER 1-15138
                        ______________________________
                    CHINA PETROLEUM & CHEMICAL CORPORATION
            (Exact name of Registrant as specified in its charter)
                            _______________________

                        The People's Republic of China
                (Jurisdiction of incorporation or organization)
                            _______________________
                            A6, Huixingdong Street
                      Chaoyang District, Beijing, 100029
                        The People's Republic of China
                   (Address of principal executive offices)
                           ________________________

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

<TABLE>
<CAPTION>

                                                                         Name of Each Exchange
             Title of Each Class                                          On Which Registered
             -------------------                                         ---------------------
<S>                                                                  <C>
American Depositary Shares, each representing
100 H Shares of par value RMB1.00 per share ......................   New York Stock Exchange, Inc.
H Shares of par value RMB1.00 per share ..........................   New York Stock Exchange, Inc.*
</TABLE>


Securities registered or to be registered pursuant to Section 12 (g) of the Act.
                                     None
                               (Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15 (d)
of the Act.
                                     None
                               (Title of Class)
         Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by
the annual report.
<TABLE>
<CAPTION>

<S>                                                                                  <C>
         State-owned domestic shares, par value RMB 1.00 per share  ................ 67,121,951,000
         H Shares, par value RMB 1.00 per share    ................................. 16,780,488,000
         A Shares, par value RMB 1.00 per share    .................................  2,800,000,000
</TABLE>

         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 as required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                        Yes _X_             No __

         Indicate by check mark which financial statement item the Registrant
has elected to follow.
                        Item 17 ___         Item 18 _X_

______________
*   Not for trading, but only in connection with the registration of American
    Depository Shares.

===============================================================================
<PAGE>

<TABLE>
<CAPTION>

                                     Table of Contents

                                                                                                       Page

<S>                                                                                                     <C>
CERTAIN TERMS AND CONVENTIONS...........................................................................

CURRENCIES AND EXCHANGE RATES...........................................................................

FORWARD-LOOKING STATEMENTS..............................................................................

Statements regarding competitive position...............................................................

PART I..................................................................................................

   ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS......................................

   ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE....................................................

   ITEM 3.   KEY INFORMATION............................................................................

      A. Selected Financial Data........................................................................

      B. CAPITALIZATION AND INDEBTEDNESS................................................................

      C. REASONS FOR THE OFFER AND USE OF PROCEEDS......................................................

      D. RISK FACTORS...................................................................................

   ITEM 4.   INFORMATION ON THE COMPANY.................................................................

      A. HISTORY AND DEVELOPMENT........................................................................

      B. BUSINESS OVERVIEW..............................................................................

      C. ORGANIZATIONAL STRUCTURE.......................................................................

      D. PROPERTY, PLANT AND EQUIPMENT..................................................................

   ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS...............................................

      A. OPERATING RESULTS..............................................................................

      B. LIQUIDITY AND CAPITAL RESOURCES................................................................

      C. RESEARCH AND DEVELOPMENT.......................................................................

      D. TREND INFORMATION..............................................................................

   ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.................................................

      A. DIRECTORS, supervisors AND SENIOR MANAGEMENT...................................................

      B. COMPENSATION...................................................................................

      C. BOARD PRACTICE.................................................................................

      D. EMPLOYEES......................................................................................

      E. SHARE OWNERSHIP................................................................................

   ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..........................................

      A. MAJOR SHAREHOLDERS.............................................................................

      B. INTERESTS OF EXPERTS AND COUNSEL...............................................................

   ITEM 8.   FINANCIAL INFORMATION......................................................................

      A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION........................................

      B. SIGNIFICANT CHANGES............................................................................

   ITEM 9.   THE OFFER AND LISTING......................................................................

   ITEM 10.  ADDITIONAL INFORMATION.....................................................................

      A. SHARE CAPITAL..................................................................................

      B. MEMORANDUM AND ARTICLES OF ASSOCIATION.........................................................

      C. MATERIAL CONTRACTS.............................................................................

      D. EXCHANGE CONTROLS..............................................................................

      E. TAXATION.......................................................................................

      F. DIVIDENDS AND PAYING AGENTS....................................................................

      G. STATEMENT BY EXPERTS...........................................................................

      H. DOCUMENTS ON DISPLAY...........................................................................

      I. SUBSIDIARY INFORMATION.........................................................................

   ITEM 11.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.................................

   ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.....................................

PART II.................................................................................................

   ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELIN QUENCIES...........................................

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

      A. MATERIAL MODIFICATIONS TO THE RIGHTS TO SECURITIES HOLDERS.....................................

      B. USE OF PROCEEDS................................................................................

   ITEM 15.  controls and procedures....................................................................

   ITEM 16.  [RESERVED].................................................................................

PART III................................................................................................

   ITEM 17.  FINANCIAL STATEMENTS.......................................................................

   ITEM 18.  FINANCIAL STATEMENTS.......................................................................

   ITEM 19.  EXHIBITS...................................................................................
</TABLE>

<PAGE>


                        CERTAIN TERMS AND CONVENTIONS


Definitions

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

       o    "Sinopec Corp.," "we," "our" and "us" are to China Petroleum &
            Chemical Corporation, a PRC limited liability company, and its
            subsidiaries;

       o    "Sinopec Group Company" are to our controlling shareholder, China
            Petrochemical Corporation, a PRC limited liability company;

       o    "Sinopec Group" are to the Sinopec Group Company and its
            subsidiaries other than Sinopec Corp. and its subsidiaries;

       o    "Old Sinopec" are to the ministerial level enterprise of China
            Petrochemical Corporation and its affiliates before the industry
            restructuring in March 1998;

       o    "China" or the "PRC" are to the People's Republic of China,
            excluding for purposes of this annual report Hong Kong, Macau and
            Taiwan;

       o    "provinces" are to provinces and to provincial-level autonomous
            regions and municipalities in China which are directly under the
            supervision of the central PRC government;

       o    "RMB" are to renminbi, the currency of the PRC; and

       o    "US$" are to US dollars, the currency of the United States of
            America.

Conversion Conventions

       Conversions of crude oil from tonnes to barrels are made at a rate of
one tonne to 7.35 barrels for crude oil we purchase from external sources and
one tonne to 7.1 barrels for crude oil we produce, representing the typical
gravity of the respective source of crude oil. Conversions of natural gas from
cubic meters to cubic feet are made at a rate of one cubic meter to 35.315
cubic feet.

Glossary of Technical Terms

       Unless otherwise indicated in the context, references to:

       o    "billion" are to a thousand million.

       o    "BOE" are to barrels-of-oil equivalent; natural gas is converted
            at a ratio of 6,000 cubic feet of natural gas to one BOE.

       o    "primary distillation capacity" are to the crude oil throughput
            capacity of a refinery's basic distillation units, calculated by
            estimating the number of days in a year that such basic
            distillation units are expected to operate, including downtime for
            regular maintenance, and multiplying that number by the amount
            equal to the units' optimal daily crude oil throughput.

       o    "rated capacity" are to the output capacity of a given production
            unit or, where appropriate, the throughput capacity, calculated by
            estimating the number of days in a year that such production unit
            is expected to operate, including downtime for regular
            maintenance, and multiplying that number by an amount equal to the
            unit's optimal daily output or throughput, as the case may be.

       o    "utilization rate" are to the amount of output or throughput by a
            production unit per annum as a proportion of the capacity of that
            unit per annum at the end of a year.


                        CURRENCIES AND EXCHANGE RATES

       We publish our financial statements in renminbi. Unless otherwise
indicated, all translations from renminbi to US dollars have been made at a
rate of RMB 8.2800 to US$1.00, the noon buying rate as certified for customs
purposes by the Federal Reserve Bank of New York on December 31, 2002. We do
not represent that renminbi or US dollar amounts could be converted into US
dollars or renminbi, as the case may be, at any particular rate, the rates
below or at all.

       The following table sets forth noon buying rate for US dollars in New
York City for cable transfers in renminbi as certified for customs purposes by
the Federal Reserve Bank of New York for the periods indicated:

<TABLE>
<CAPTION>

                                                              Noon Buying Rate
                                                         --------------------------
Period                                            End       Average(1)       High           Low
------                                            ---       ----------       ----           ---
                                                             (RMB per US$1.00)
<C>                                             <C>            <C>          <C>           <C>
1996.....................................       8.3284         8.3395       8.3549        8.3002
1997.....................................       8.3100         8.3193       8.3290        8.2911
1998.....................................       8.2789         8.2968       8.3100        8.2774
1999.....................................       8.2795         8.2785       8.2800        8.2770
2000.....................................       8.2774         8.2784       8.2799        8.2768
2001.....................................       8.2766         8.2770       8.2786        8.2676
2002.....................................       8.2800         8.2772       8.2800        8.2759
December 2002............................       8.2800           ____       8.2800        8.2768
January 2003.............................       8.2768           ____       8.2800        8.2768
February 2003............................       8.2775           ____       8.2800        8.2768
March 2003 ..............................       8.2774           ____       8.2776        8.2770
April 2003...............................       8.2771           ____       8.2774        8.2769
May 2003.................................       8.2768           ____       8.2771        8.2768
June 2003 (up to June 15, 2003)..........       8.2768           ____       8.2773        8.2768
</TABLE>

__________

(1) Determined by averaging the rates on the last business day of each month
during the relevant period.


                          FORWARD-LOOKING STATEMENTS

       This annual report includes "forward-looking statements." All
statements, other than statements of historical facts, included in this annual
report that address activities, events or developments which we expect or
anticipate will or may occur in the future are forward-looking statements. The
words believe, intend, expect, anticipate, project, estimate, predict, plan
and similar expressions are also intended to identify forward-looking
statements.

       These forward-looking statements address, among others, such issues as:

       o    amount and nature of future exploration and development,
       o    future prices of and demand for our products,
       o    future earnings and cash flow,
       o    development projects and drilling prospects,
       o    future plans and capital expenditures,
       o    estimates of proved oil and gas reserves,
       o    exploration prospects and reserves potential,
       o    expansion and other development trends of the petroleum and
            petrochemical industry,
       o    production forecasts of oil and gas,
       o    expected production or processing capacities, including expected
            rated capacities and primary distillation capacities, of units
            or facilities not yet in operation,
       o    expansion and growth of our business and operations, and
       o    our prospective operational and financial information.

       These statements are based on assumptions and analyses made by us in
light of our experience and our perception of historical trends, current
conditions and expected future developments, as well as other factors we
believe are appropriate in particular circumstances. However, whether actual
results and developments will meet our expectations and predictions depends on
a number of risks and uncertainties which could cause actual results to differ
materially from our expectations, including the risks set forth in "Item 3 --
Key Information -- Risk Factors" and the following:

       o    fluctuations in prices of our products,
       o    failures or delays in achieving production from development
            projects,
       o    potential acquisitions and other business opportunities,
       o    general economic, market and business conditions, and
       o    other risks and factors beyond our control.

       Consequently, all of the forward-looking statements made in this annual
report are qualified by these cautionary statements. We cannot assure you that
the actual results or developments anticipated by us will be realized or, even
if substantially realized, that they will have the expected effect on us or
our business or operations.

Statements regarding competitive position

       Certain statements made in Item 4 -- Information on the Company that
refer to our market share or competitive position are based on our belief, and
in some cases rely on a range of sources, including government surveies,
investment analysts' reports, independent market studies and our internal
assessments of publicly available information about the financial results and
performance of other market participants.
<PAGE>


                                    PART I


ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

       Not applicable.


ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

       Not applicable.


ITEM 3.  KEY INFORMATION


A.  SELECTED FINANCIAL DATA

Historical Financial Information

       The selected income statement data and cash flow data for the years
ended December 31, 2000, 2001 and 2002, and the selected balance sheet data as
of December 31, 2001 and 2002 have been derived from, and should be read in
conjunction with, the audited consolidated financial statements included
elsewhere in this annual report. The selected income statement and cash flow
data for the years ended December 31, 1998 and 1999 and the selected balance
sheet data as of December 31, 1998,1999 and 2000 are derived from our audited
consolidated financial statements which are not included in this annual
report.

        This financial data reflect the reorganization and have been prepared
as if our current structure had been in existence throughout the relevant
periods. In addition, the financial data prior to December 31, 1999 also
include the operations retained by Sinopec Group Company that were
historically associated with Sinopec Group Company's petroleum and
petrochemical operations. The results of operations, financial positions and
cash flows associated with such businesses are not reflected in our
consolidated financial statements as of December 31, 1999 or a later date, or
for periods ended after December 31, 1999. Therefore, the following selected
financial data as of December 31, 1998 and for the years ended December 31,
1998 and 1999 are not necessarily comparable with selected financial data as
of a later date or for a later period. In addition, the financial data
included herein may not necessarily reflect what our results of operations,
financial position and cash flows would have been had we been a separate,
stand-alone entity during the periods presented. Further, the selected
financial data should be read in conjunction with the consolidated financial
statements together with accompanying notes and "Item 5 - Operation and
Financial Review and Prospects" included elsewhere in this annual report.
Unless otherwise indicated, the consolidated financial statements are prepared
and presented in accordance with International Financial Reporting Standards,
or IFRS. For a reconciliation of our net income and shareholders' equity to US
GAAP, see note 31 to the consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

                                                                       Years Ended December 31,
                                                                 ------------------------------------
                                                      1998       1999       2000       2001       2002       2002
                                                      ----       ----       ----       ----       ----       ----
                                                      RMB        RMB        RMB        RMB        RMB       US$(6)
                                                           (in millions, except per share and per ADS data)
Income Statement Data(1)(2):
IFRS
<S>                                                  <C>         <C>        <C>        <C>        <C>        <C>
   Consolidated results
   Operating revenues..........................     199,967    241,671    331,576    318,471     340,042     41,068
   Purchased crude oil, products and operating
     supplies and expenses.....................    (134,675)  (161,168)  (226,533)  (220,313)   (235,245)   (28,411)
   Selling, general and administrative expenses     (17,014)   (18,558)   (19,519)   (17,138)    (21,088)    (2,547)
   Depreciation, depletion and amortization....     (16,095)   (18,431)   (20,781)   (22,430)    (24,282)    (2,932)
   Exploration expenses, including dry holes...      (2,524)    (2,309)    (3,030)    (3,775)     (4,363)      (527)
   Personnel expenses..........................     (11,544)   (12,696)   (13,264)   (12,889)    (13,625)    (1,646)
   Employee reduction expenses.................           -          -          -     (2,546)       (244)       (29)
   Taxes other than income tax.................      (8,655)    (9,536)   (12,220)   (11,887)    (11,852)    (1,432)
   Other operating expenses, net...............      (3,259)    (3,261)      (718)      (193)     (1,066)      (129)
   Operating income............................       6,201     15,712     35,511     27,300      28,277      3,415
   Interest expense, net of interest income and
     net foreign exchange gains (losses).......     (11,146)   (10,282)    (4,936)    (3,152)     (3,945)      (476)
   Gains from issuance of shares by subsidiaries      2,114        607          -          -           -          -
   Other income ...............................         771        814        461        519         500         60

   Income/(loss) before income tax and
     minority interests......................        (2,060)     6,851     31,036     24,667      24,832      2,999
   Income tax................................         2,345       (351)    (9,638)    (8,029)     (7,635)      (922)
   Income before minority interests..........           285      6,500     21,398     16,638      17,197      2,077
   Minority interests........................          (457)    (1,577)    (1,814)      (613)     (1,117)      (135)
   Net (loss)/income.........................          (172)     4,923     19,584     16,025      16,080      1,942

   Basic (loss)/earnings per share(3)........         (0.00)      0.07       0.27       0.19        0.19       0.02
   Basic (loss)/earnings per ADS(3)..........         (0.25)      7.16      27.22      18.82       18.55       2.24
   Cash dividends declared per share.........             -          -       0.01       0.08        0.10       0.01
   Segment results
     Exploration and production..............         3,550      3,005     25,411     23,185      14,787      1,786
     Refining................................         2,550      6,065      1,394      2,106       5,922        715
     Marketing and distribution..............           155      2,550      6,358      2,443       8,401      1,014
     Chemicals...............................          (564)     3,677      2,437       (758)         72          9
     Corporate and others....................          (144)      (831)       (89)       324        (905)      (109)
     Operating income........................         5,547     14,466     35,511     27,300      28,277      3,415
US GAAP
   Net (loss)/income.........................           (54)      5,426    22,011     17,315      19,515      2,356
   Basic (loss)/earnings per share (3).......         (0.00)       0.08      0.31       0.20        0.23       0.03
   Basic (loss)/earnings per ADS (3).........         (0.08)       7.89     30.60      20.33       22.51       2.72
   Cash dividends declared per share.........             -          -       0.01       0.08        0.10       0.01
</TABLE>

<TABLE>
<CAPTION>

                                                                              As of December 31,
                                                                          --------------------------
                                                              1998      1999      2000     2001     2002     2002
                                                              ----      ----      ----     ----     ----     ----
                                                              RMB       RMB       RMB       RMB      RMB    US$(6)
                                                                                (in millions)
Balance Sheet Data(1)(2):
IFRS
<S>                                                           <C>       <C>       <C>      <C>      <C>       <C>
     Cash and cash equivalents............................    27,234    21,759    19,621   21,023   17,699    2,138
     Total current assets.................................   112,609    89,159   136,173  109,795  101,884   12,305
     Total non-current assets(4)..........................   204,486   194,085   218,569  256,914  273,997   33,091
     Total assets(4)......................................   317,095   283,244   354,742  366,709  375,881   45,396
     Short-term debts and loans from Sinopec Group
       Company and its affiliates (including current
       portion of long-term debts)........................    86,172    83,686    59,110   49,211   35,552    4,294
     Long-term debts and loans from Sinopec Group Company
       and its affiliates (excluding current portion of
       long-term debts)...................................    78,747    42,846    71,004   67,001   75,208    9,083
     Shareholders' equity(4)..............................    74,060    89,878   133,154  147,669  154,485   18,658
     Capital employed(5)..................................   227,798   216,667   266,857  266,399  271,466   32,786
US GAAP
     Total assets.........................................   304,585   246,928   320,381  336,626  348,650   42,107
     Long-term debts and loans from Sinopec Group Company
       and its affiliates (excluding current portion of
       long-term debts)...................................    77,995    42,448    70,554   66,501   74,893    9,045
     Shareholders' equity.................................    73,742    67,691   112,633  130,371  140,829   17,009
</TABLE>

<TABLE>
<CAPTION>

                                                                      Years Ended December 31,
                                                                    ----------------------------
                                                       1998       1999      2000       2001       2002      2002
                                                       ----       ----      ----       ----       ----      ----
                                                       RMB        RMB       RMB        RMB        RMB       US$(6)
                                                                          (in millions)
<S>                                                    <C>       <C>       <C>         <C>        <C>     <C>
Other Financial Data(1)(2):
IFRS
   Net cash from operating
        activities...........................         22,452    25,902     29,180     55,279      53,890   6,509
   Net cash from/(used in)
        financing activities.................         17,790     4,319     33,003    (15,387)    (14,563) (1,759)
   Net cash used in investing activities.....        (34,828)  (35,700)   (64,319)   (38,483)    (42,658) (5,152)
   Capital expenditures
     Exploration and production..............          8,795    10,531     14,813     20,276      20,228   2,443
     Refining................................         10,809     6,942      5,511      8,992       6,533     789
     Marketing and distribution..............          2,075     3,176     16,080     17,256       6,982     843
     Chemicals...............................         12,127    12,919      6,205     11,947       7,324     885
     Corporate and others....................            809     1,092        251        358         545
                                                                                                              66
     Total...................................         34,615    34,660     42,860     58,829     41,612    5,026
</TABLE>

__________
(1)  Data for the years ended December 31, 1998 and 1999 and as of December
     31, 1998include the results of operations and net assets of certain
     petroleum and petrochemical operations that were included in the
     consolidated financial statements but were retained by Sinopec Group
     Company. These net assets were reflected as a distribution to shareholder
     as of December 31, 1999.
(2)  The acquisition of Sinopec National Star in 2001 is considered a
     "combination of entities under common control" which is accounted in a
     manner similar to a pooling-of-interests ("as-if pooling-of-interests
     accounting"). Accordingly, the assets and liabilities of Sinopec National
     Star acquired have been accounted for at historical cost and the
     consolidated financial statements for periods prior to the combination
     have been restated to include the accounts and results of operations of
     Sinopec National Star on a combined basis. The consideration paid has
     been treated as an equity transaction.
(3)  Basic (loss)/earnings per share and per ADS have been computed by
     dividing net (loss)/income by the weighted average number of shares in
     issue.
 (4) Includes the effect of the revaluation of property, plant, and equipment
     as of September 30, 1999. In addition, property, plant and equipment of
     Sinopec National Star were revalued as of December 31, 2000 in connection
     with the acquisition by Sinopec Corp.
(5)  Equals the sum of short-term debts, long-term debts, loans from Sinopec
     Group Company and its affiliates, shareholders' equity and minority
     interests less cash and cash equivalents.

(6)  Translated solely for the convenience of the reader into US dollars at
     the rate prevailing on December 31, 2002 of US$1.00 to RMB 8.2800.


B.     CAPITALIZATION AND INDEBTEDNESS

       Not applicable.


C.     REASONS FOR THE OFFER AND USE OF PROCEEDS

       Not applicable.


D.     RISK FACTORS

Risks Relating to Sinopec Corp.

       Our limited operating history as an integrated petroleum and
       petrochemical company could affect our operating efficiency.

       In 1983, the PRC government formed Old Sinopec to take primary
responsibility for the administration and development of the petrochemical
industry in China. Old Sinopec administered 38 production enterprises and was
the PRC's predominant force in petroleum refining and petrochemical
production. As a result of the restructuring of the petroleum and
petrochemical industry in China in March 1998, Sinopec Group Company acquired
most of the businesses of Old Sinopec, some of the exploration and production
of crude oil business of China National Petroleum Company, or CNPC, and a
large number of businesses which were engaged in retail and wholesale sales of
refined petroleum products in the PRC.

       In anticipation of the October 2000 global offering of our H shares and
ADSs representing H shares, we were created in our present form on February
25, 2000 with Sinopec Group Company as the sole shareholder. Therefore, we
have a limited history as an integrated company and in operating our assets.

       The integration of the exploration and production business with our
refining, petrochemical and marketing operations will present management
challenges. Our newly established management structure and management
information and financial systems may also need further adjustment and
development. Our future business will depend in part on our ability to
successfully manage our businesses and operations as an integrated petroleum
and petrochemical company and to successfully implement our vision and
strategy.

       Our development plans have significant capital expenditure and
       financing requirements, which are subject to a number of risks and
       uncertainties.

       The petroleum and petrochemical business is a capital intensive
business. Our ability to maintain and increase our revenues, net income and
cash flows depends upon continued capital spending. Our current capital
expenditures plan contemplates approximately RMB 37.6 billion (US$4.54
billion) in 2003. Our actual capital expenditures may vary significantly from
these planned amounts due to various factors, including, among others, our
ability to generate sufficient cash flows from operations to finance our
capital expenditures, general economic, market and business conditions and
other factors that are beyond our control. In addition, there can be no
assurance as to whether, or at what cost, our capital projects will be
completed or the success of these projects if completed.

       In addition, our ability to obtain external financing in the future is
subject to a variety of uncertainties including:

       o    our future results of operations, financial condition and cash
            flows;

       o    the economic condition in China and the market environment for our
            products;

       o    the cost of financing and the condition of financial markets; and

       o    the issuance of relevant government approvals and other project
            risks associated with the development of infrastructure in China.

       Our failure to obtain sufficient funding for our operations or
development plans could adversely affect our business, results of operations
and financial condition.

       Competition from domestic as well as international petroleum and
       petrochemical companies.

       The industry in which we operate is highly competitive. Our principal
market in eastern, southern and central regions in China has enjoyed stronger
economic growth and a higher demand for refined products and petrochemicals
than other regions of China. As a result, we believe that our competitors will
try to expand their sales and build up their distribution networks in our
principal market.

       Among our competitors are PetroChina and some of the world's major
integrated petroleum and petrochemical companies, many of which have recently
become more significant participants in the petroleum and petrochemicals
industry in China. We believe such trend will continue and probably
accelerate. Increased competition may have a material adverse effect on our
financial condition and results of operations.

       We may not be able to pass on all increases in costs of our raw
materials.

       We currently consume large amounts of crude oil and other raw materials
to manufacture our refined products and petrochemical products. We have been
sourcing an increasing amount of crude oil from outside suppliers. In 2002,
approximately 73% of the crude oil required for our refinery business was
sourced from outside suppliers. While we try to match cost increases with
corresponding raw material price increases, our ability to pass on cost
increases to our customers is dependent on international and domestic market
conditions and government regulations. Consequently, there may be periods
during which increases in costs of raw materials due to either price increases
or increases in the amounts we source from third parties are not fully
recovered by us due to an inability to increase the sale prices of our
products. This may have a material adverse effect on our financial condition,
results of operations or cash flows.

       Related party transactions; non-competition; conflicts of interest.

       We have engaged from time to time and will continue to engage in a
variety of transactions with Sinopec Group Company, which provides to us a
number of services, including, but not limited to, ancillary supply,
engineering, maintenance, transport, educational and community services. The
nature of our transactions with Sinopec Group Company is governed by a number
of service and other contracts between Sinopec Group Company and us. In
addition, Sinopec Group Company has interests in businesses which compete or
are likely to compete, either directly or indirectly, with our businesses. We
and Sinopec Group Company have entered into a non-competition agreement
whereby Sinopec Group Company has agreed to refrain from operating businesses
which compete or could compete with us in any of our domestic or international
markets; grant us an option to purchase Sinopec Group Company's operations
that compete or could compete with our businesses; operate its sales
enterprises and service stations in a manner uniform to our sales and service
operations; and appoint us as sales agent for certain of its products which
compete or could compete with our products. Notwithstanding the foregoing
contractual arrangements, because Sinopec Group Company is our dominant
shareholder and the interests of the Sinopec Group Company may conflict with
our own interests, Sinopec Group Company may take actions that favor its
interests over ours.

       In addition, while we and Sinopec Group Company have entered into
agreements which generally provide that these services provided by Sinopec
Group Company will be priced on terms at least as favorable to us as ordinary
commercial terms, we have limited or no practical alternative source of supply
for some of these services, utilities, materials and equipment at reasonable
cost. As a result, in the future we may have limited ability to negotiate with
Sinopec Group Company over the terms of our agreements with respect to these
services, utilities, materials and equipment.

       Our insurance coverage may not be sufficient to cover the risks related
       to exploration, development and production and losses caused by natural
       disasters.

       Due to the nature of our business, we handle many highly flammable and
explosive materials and operate many facilities under high pressure and high
temperatures. We have experienced accidents that have caused property damage
and personal injuries, and we cannot assure that industry-related accidents
will not occur in the future.

       We currently maintain insurance coverage with Sinopec Group Company on
our property, plant, equipment and inventory. The amount of coverage is
determined on the basis of the historical value of the covered fixed assets
and, with respect to inventory, twice each year on the basis of the average
month-end inventory value of the most recent six months. The amount of our
insurance coverage may be less than the replacement cost of the covered
properties and plants and may not be sufficient to cover all our financial
losses.

       We do not carry any business interruption insurance or third party
liability insurance to cover claims in respect of personal injury, property or
environmental damage arising from accidents on our property or relating to our
operations other than third party liability insurance with respect to certain
transportation vehicles. Losses incurred or payments required to be made by
us, which are not fully insured, may have a material adverse effect on our
results of operations.

       The oil and natural gas reserves data in this annual report are only
       estimates, and our actual production, revenues and expenditures with
       respect to our reserves may differ materially from these estimates.

       There are numerous uncertainties inherent in estimating quantities of
proved oil and natural gas reserves, and in the timing of development
expenditures and the projection of future rates of production. The reserve
data set forth in this annual report represent estimates only. Adverse changes
in economic conditions may render it uneconomical to develop certain reserves.
Our actual production, revenues, taxes and fees payable and development and
operating expenditures with respect to our reserves may likely vary from these
estimates.

       The reliability of reserves estimates depends on:

       o    the quality and quantity of technical and economic data;

       o    the prevailing oil and gas prices applicable to our production;

       o    the production performance of the reservoirs;

       o    extensive engineering judgments; and

       o    consistency in the PRC government's oil policies.

       In addition, new drilling, testing and production following the
estimates may cause substantial upward or downward revisions in the estimates.
Furthermore, the discounted future cash flow calculated by applying the 10%
discount rate, which was included in "Consolidated Financial
Statements-Supplemental Information on Oil and Gas Producing Activities
(Unaudited)" following Item 19, may not represent the actual net present value
of the relevant cash flow.

       Our continued business success depends in part on our ability to replace
       reserves and develop newly discovered reserves.

       Our ability to achieve our growth objectives is dependent in part on
our level of success in discovering or acquiring additional oil and natural
gas reserves and further exploring our current reserve base. Our exploration
and development activities for additional reserves expose us to inherent risks
associated with drilling, including the risk that no economically productive
oil or natural gas reservoirs will be encountered. Without reserve additions
through further exploration and development or acquisition activities, our
reserves and production will decline over time as our reserves will be
depleted. Exploring for, developing and acquiring reserves is highly capital
intensive. If these activities are unsuccessful and we do not acquire
properties containing proved reserves, our total proved reserves will decline,
which may adversely affect our results of operations and financial condition.

Risks Relating to the Petroleum and Petrochemical Industry

       Our business operations may be adversely affected by present or future
       environmental regulations.

       As an integrated petroleum and petrochemical company, we are subject to
extensive environmental protection laws and regulations in China. These laws
and regulations permit:

       o    the imposition of fees for the discharge of waste substances;

       o    the levy of fines and payments for damages for serious
            environmental offenses; and

       o    the central government, at its discretion, to close any facility
            which fails to comply with orders and require it to correct or
            stop operations causing environmental damage.

       Our production operations produce substantial amounts of waste water,
gas and solid waste materials. In addition, our production facilities require
operating permits that are subject to renewal, modification and revocation. We
have established a system to treat waste materials to prevent and reduce
pollution and believe that our operations substantially comply with all
applicable PRC environmental laws and regulations as they have been previously
interpreted and enforced. The PRC government, however, has moved, and may move
further, toward more rigorous enforcement of applicable laws, and toward the
adoption of more stringent environmental standards, which, in turn, would
require us to incur additional expenditures on environmental matters.

       Our operations may be adversely affected by the cyclical nature of the
       petroleum and petrochemical market and by the volatility of prices of
       crude oil and refined petroleum products.

       Most of our revenues are attributable to sales of crude oil, refined
petroleum products and petrochemical products which have historically been
cyclical and sensitive to the availability and prices of feedstock and general
economic conditions. Regional and global markets for many of our products are
sensitive to changes in industry capacity and output levels, cyclical changes
in regional and global economic conditions, prices and availability of
substitute products and changes in consumer demand, which from time to time
have had a significant impact on product prices in the regional and global
markets. Historically, the markets for these products have experienced
alternating periods of tight supply, causing prices and margins to increase,
followed by periods of capacity additions, possibly resulting in oversupply
and declining prices and margins. After its accession to the WTO, China
further reduced the tariffs and other import restrictions and further relaxed
the control of product allocation and pricing, and, as a result, the domestic
markets for many of our products have become increasingly subject to the
cyclicality of regional and global markets. Historically, international prices
of crude oil and refined products have fluctuated widely due to many other
factors that are beyond our control. Between 1994 and 2002, the markets for
many of our principal products experienced substantial price fluctuations.
While our integrated upstream, midstream and downstream operations to certain
extent help us reduce the effects of industry cycles, we cannot assure you
that future growth in demand for these products will be sufficient to
alleviate any existing or future conditions of excess industry capacity or
that such condition will not be sustained or further aggravated by anticipated
or unanticipated capacity additions or other events. In addition, we expect
that the volatility and uncertainty of the prices of crude oil and refined
products will continue. Declines in prices of refined products and
petrochemical products may adversely affect our business and results of
operations and financial condition.

       Our business faces natural disasters and operation risks that may cause
       significant interruption of operations.

       Exploring for, producing and transporting crude oil and natural gas and
producing and transporting refined and petrochemical products involve a number
of hazards. As with many other companies in the world which conduct similar
businesses, we have experienced accidents that have caused property damage and
personal injuries. Our safety and maintenance measures at our production
facilities and for our transportation facilities may not be sufficient, and
significant natural disasters may cause significant interruption of our
operations and property and environmental damage that could have a material
adverse impact on our financial condition.

Risks Relating to the PRC

       Government regulations may limit our activities and adversely affect
       our business operations.

       The central and local PRC governments continue to exercise a certain
degree of control over the petroleum and petrochemical industry in China by,
among others:

       o    licensing the right to explore and produce crude oil and natural
            gas;

       o    publishing from time to time retail guidance prices for gasoline
            and diesel based on formulas linked to relevant international
            market prices;

       o    allocating and pricing of certain resources and services;

       o    assessing taxes and fees payable;

       o    setting import and export quotas and procedures; and

       o    setting safety, environmental and quality standards.

       In addition, we may be required from time to time to make capital
expenditures to comply with PRC government policies regarding the development
of the domestic petroleum and petrochemical industry. As a result, we may face
significant constraints on our flexibility and ability to expand our business
operations or to maximize our profitability.

       Our development plans require regulatory approval.

       Many of our large construction and expansion projects are subject to
extensive governmental review and approval. Such projects include most
exploration and production projects and construction of significant refining
and petrochemical facilities, significant expansions or renovations to
existing facilities, as well as the construction of significant oil and
natural gas pipelines, refined product pipelines and storage facilities. The
timing and cost of completion of these projects will depend on numerous
factors, including approvals from relevant PRC government authorities and
general economic conditions in China.

       While in general we attempt to obtain governmental approval as far in
advance as practicable, we may not be able to control the timing and outcome
of these governmental reviews and approvals. If any of our important projects
required for our future growth are not approved, or not approved on a timely
basis, our results of operations and financial condition could be adversely
impacted.

       Entry by China into the World Trade Organization significantly increases
       competition from foreign companies in our lines of business.

       China became a member of the World Trade Organization in December 2001.
In entering the WTO, China has agreed to significantly reduce the trade
barriers over time for imports that have historically existed and that
currently exist in China such as:

       o    granting foreign-owned companies the right to import into China
            crude oil and refined products through companies authorized by the
            PRC government;

       o    permitting foreign companies to distribute and market refined
            petroleum products in both retail and wholesale markets in China;

       o    significantly reducing tariffs on refined products and
            petrochemical products; and

       o    eliminating over time quotas and other non-tariff barriers for
            imports and exports of crude oil and refined products.

       As a result of China's entry to the WTO, we have faced, and will
continue to face, increasing competition from foreign producers of refined
petroleum products and petrochemical products. In addition, the trade
agreements under the WTO are periodically renegotiated, sometimes resulting in
continuing reductions in tariffs, elimination of non-tariff barriers such as
import quota and opening of markets to foreign competition. Any present or
future increase in foreign competition may have a material adverse effect on
our results of operations.

       Government control of currency conversion and future movements in
       exchange rates may adversely affect our operations and financial results.

       We receive substantially all of our revenues in renminbi. A portion of
such revenues will need to be converted into other currencies to meet our
foreign currency obligations, including:

       o    import of crude oil and other materials;

       o    debt service on foreign currency denominated debt;

       o    purchases of imported equipment; and

       o    payment of any cash dividends declared in respect of the H shares.

       The existing foreign exchange regulations have significantly reduced
government foreign exchange controls for transactions under the current
account, including trade and service related foreign exchange transactions and
payment of dividends. We may undertake current account foreign exchange
transactions without prior approval from the State Administration of Foreign
Exchange by producing commercial documents evidencing such transactions,
provided that they are processed through Chinese banks licensed to engage in
foreign exchange transactions. The PRC government has stated publicly that it
intends to make the renminbi freely convertible in the future. However, we
cannot predict whether the PRC government will continue its existing foreign
exchange policy and when the PRC government will allow free conversion of
renminbi to foreign currency.

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

       Since 1994, the conversion of renminbi into Hong Kong dollars and
United States dollars has been based on rates set by the People's Bank of
China, which are set daily based on the previous day's PRC interbank foreign
exchange market rate and current exchange rates on the world financial
markets. Although the renminbi to US dollar exchange rate has been relatively
stable since 1994, we cannot predict nor give any assurance of its future
stability. We do not hedge exchange rate fluctuations between the renminbi and
the US dollar or other currencies and currently have no plans to do so.
Fluctuations in exchange rates may adversely affect the value, translated or
converted into US dollars or Hong Kong dollars, of our net assets, earnings
and any declared dividends.

       Enforcement of shareholder rights; mandatory arbitration.

       Currently, the primary sources of shareholder rights are our articles
of association, the PRC Company Law and the Listing Rules of the Hong Kong
Stock Exchange, which, among other things, impose certain standards of
conduct, fairness and disclosure on us, our directors and our controlling
shareholder. In general, their provisions for protection of shareholder's
rights and access to information, are different from those applicable to
companies incorporated in the U.S., the U.K. and other Western countries. In
addition, the mechanisms for enforcement of rights under the corporate
framework to which we are subject may also be relatively undeveloped and
untested. To our knowledge, there has not been any published report of
judicial enforcement in the PRC by H share shareholders of their rights under
constituent documents of joint stock limited companies or the PRC Company Law
or in the application or interpretation of the PRC or Hong Kong regulatory
provisions applicable to PRC joint stock limited companies. We cannot assume
that our shareholders will enjoy protections that they may be entitled in
other jurisdictions.

       China does not have treaties providing for the reciprocal recognition
and enforcement of judgments of courts with the United States, the United
Kingdom, Japan or most other Western countries, and therefore recognition and
enforcement in China of judgments of a court in any of these jurisdictions in
relation to any matter not subject to a binding arbitration provision may not
be assured. Our articles of association as well as the Listing Rules of the
Hong Kong Stock Exchange provide that most disputes between holders of H
shares and us, our directors, supervisors, officers or holders of domestic
shares, arising out of the articles of association or the PRC Company Law
concerning the affairs of our company or with respect to the transfer of our
shares are to be resolved through arbitration by arbitration organizations in
Hong Kong or China, rather than through a court of law. On June 18, 1999, an
arrangement was made between Hong Kong and the PRC for the mutual enforcement
of arbitral awards. This new arrangement was approved by the Supreme People's
Court of the PRC and the Hong Kong Legislative Council, and became effective
on February 1, 2000. So far as we are aware, no action has been brought in
China by any shareholder to enforce an arbitral award, and we are uncertain as
to the outcome of any action brought in China to enforce an arbitral award
granted to shareholders.


                      ITEM 4. INFORMATION ON THE COMPANY

A.  HISTORY AND DEVELOPMENT

       Our legal and commercial name is China Petroleum & Chemical
Corporation. Our head office is located at A6, Huixindong Street, Chaoyang
District, Beijing 100029, the People's Republic of China and our telephone
number is (8610) 6499-0060. We have appointed SINOPEC USA Co., Ltd., 150 E.
52nd St., 28th Fl., Flushing, NY 10022, USA (telephone number: (212) 759-5085)
as our agent for service of processes for actions brought under the U.S.
securities laws.

       Sinopec Group Company was reorganized in anticipation of the October
2000 global offering of our H shares and ADSs representing H shares, and as a
result, we were established as a joint stock limited company on February 25,
2000 under the Company Law of the PRC with Sinopec Group Company as the sole
shareholder. To effect the reorganization, we and Sinopec Group Company
entered into a reorganization agreement which had effect from December 31,
1999. As part of the reorganization, certain of Sinopec Group Company's
petroleum and petrochemical operations, together with the related assets and
liabilities that were transferred to us, were segregated and separately
managed by us beginning December 31, 1999. Sinopec Group Company transferred
to us most of its petroleum and petrochemical operations, including most of
their production assets, and retained most of the social and ancillary service
operations, as well as certain production assets, including certain
petrochemical facilities, small capacity refineries and retail service
stations. Sinopec Group Company's operations transferred to us include:

       o    exploration for and development of crude oil and natural gas;

       o    refining of crude oil and marketing and distribution of refined
            petroleum products, including transportation, storage, trading,
            import and export of petroleum products; and

       o    production and sales of petrochemical products.

       Sinopec Group Company's continuing activities consist, among other
things, of:

       o    operating certain petrochemical facilities, small capacity
            refineries and retail service stations retained by Sinopec Group
            Company;

       o    providing well survey, logging and downhole operational services;

       o    manufacturing and maintaining production equipment;

       o    providing construction services;

       o    providing utilities, such as electricity and water; and

       o    providing social services, such as health care, education and
            transportation services.

       Sinopec Group Company transferred the businesses to us either by
transferring its equity holdings in subsidiaries or by transferring their
assets and liabilities. For its subsidiaries with publicly traded shares,
Sinopec Group Company transferred its entire equity interests to us. These
subsidiaries include companies whose shares or depositary receipts are listed
on various stock exchanges including the New York Stock Exchange, the Hong
Kong Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock
Exchange. For the remaining subsidiaries, Sinopec Group Company transferred
operating assets and associated liabilities directly to us.

       In consideration of the assets and operations transferred to us, we
issued and allocated 68.8 billion of our shares to Sinopec Group Company on
February 25, 2000. These shares represented our entire issued share capital
before our October 2000 global offering of H shares and ADSs representing H
shares.

       We and Sinopec Group Company entered into an asset swap agreement on
December 19, 2002, pursuant to which we transferred to Sinopec Group Company
certain of our water plants, inspection, maintenance, geologic and geophysical
assets and liabilities in exchange of certain service stations and oil depots
owned by Sinopec Group Company. Sinopec Group Company's net assets transferred
to us were appraized at approximately RMB 1,040 million (US$125.6 million),
and our assets transferred to Sinopec Group Company were appraized at
approximately RMB 1,021 million (US$123.4 million). We paid the difference of
approximately RMB 19 million (US$2.3 million) in cash to Sinopec Group
Company, and the assets swap transaction was completed on December 31, 2002.

B.     BUSINESS OVERVIEW

       We are an integrated petroleum and petrochemical company with upstream,
midstream and downstream operations. Based on our operating revenues of RMB340
billion (US$41.1 billion) in 2002, we are one of the largest petroleum and
petrochemical companies in China and in Asia.

       We are the second largest crude oil and natural gas producer in China.
Our crude oil and natural gas productions are mostly internally consumed by
our refining and petrochemical operations.

       As of December 31, 2002, we had proved developed and undeveloped
reserves of 3,887 million barrels-of-oil equivalent, including 3,320 million
barrels of crude oil and 3,329 billion cubic feet of natural gas. In 2002, we
produced 270 million barrels of crude oil, which accounted for approximately
23% of the total crude oil production in China. In addition, we produced 179
billion cubic feet of natural gas, which accounted for approximately 15% of
the total natural gas production in China.

       We are the largest refiner of petroleum products in China. In 2002, we
processed approximately 105.01 million tonnes of crude oil, representing
approximately 50% of the total crude oil throughput in China. In 2002, we
produced approximately 19.62 million tonnes of gasoline and 37.74 million
tonnes of diesel, each representing approximately 50% of the total respective
production in China.

       We are the largest distributor and seller of refined petroleum products
in China and in Asia. In 2002, sales volume of gasoline, diesel and kerosene
including jet fuel through our Sinopec branded retail and wholesale
distribution networks accounted for approximately 58% of the total consumption
of these products in China and approximately 78% in our principal market in
the eastern and southern regions of China. Sales volume of gasoline and diesel
through our 24,000 service stations in 2002 accounted for approximately 68% of
the total retail volume in our principal market.

       We are also the largest producer and distributor of petrochemicals in
China. Our production of ethylene, a key petrochemical building block, was
over 2.7 million tonnes in 2002, representing approximately 50% of the total
ethylene production in China. We produce a full range of petrochemical
products including intermediate petrochemicals, synthetic resins, synthetic
fiber monomers and their polymers, synthetic fibers, synthetic rubber and
chemical fertilizers. We are the largest producer in China of all of these
product categories.

Exploration and Production

       Summary

       We currently explore for, develop and produce crude oil and natural gas
in a number of areas across China. As of December 31, 2002, we held 193
production licenses with terms ranging from seven (7) to fifty-five (55)
years, which were equal to or longer than the maximum numbers of years of the
estimated life of the reserves as evaluated by us as of December 31, 2002. Our
production licenses are renewable upon our application 30 days prior to
expiration. During the term of our production license, we will pay an annual
production right usage fee of RMB 1,000 (US$120.8) per square kilometers.
Among our oil and gas fields, the Shengli field in Shandong province is the
second largest oil field in China and accounted for approximately two-thirds
of our total production in 2002. In 2002, we produced an average of 821,000
barrels-of-oil equivalent per day, of which 90% was crude oil and 10% was
natural gas.

       As of December 31, 2002, we held 294 exploration licenses for various
blocks in which we engaged in exploration activities. The maximum term of our
exploration licenses is seven (7) years. Our exploration licenses may be
renewed twice upon our application 30 days prior to expiration of the original
term with each renewal for a two-year term. We are obligated to make a
progressive annual minimum exploration investment relating to the exploration
blocks in respect of which the exploration licenses are issued. In addition,
we are also obligated to pay an annual exploration license fee starting from
RMB 100 (US$12.1) per square kilometer up to RMB 500 (US$60.4) per square
kilometer.

       Properties

       We currently operate 11 oil and gas producing fields, each of which
consists of many oil and gas producing zones and all of which are located in
mainland China.

       The Shengli field is our most important producing oil field and the
second largest producing oil field in China. It consists of 67 oil producing
zones of various size extending over an area of 61,000 square kilometers in
northern Shandong province. In 2002, Shengli field produced 189.7 million
barrels of crude oil and 26.5 billion cubic feet of natural gas, accounting
for approximately 65% of our total annual crude oil and natural gas production
for the year.

         Our other oil and gas producing fields are located in the border area
of Hebei, Shandong and Henan as well as in Xinjiang, Sichuan, Henan, Jiangsu,
Yunnan, Guizhou, Guangxi and the East China Sea areas.

       Oil and Natural Gas Reserves and Productions

       Oil and gas proved reserves cannot be measured precisely. Reserve
estimates are based on many factors related to reservoir performance which
require evaluation by engineers interpreting the available data, as well as
price and other economic factors. The reliability of these estimates at any
point in time depends on both the quality and quantity of the technical and
economic data, the production performance of the reservoirs as well as
extensive engineering judgment. Consequently, reserve estimates are subject to
revision as additional data become available during the producing life of a
reservoir. When a commercial reservoir is discovered, proved reserves are
initially determined based on limited data from the first well or wells.
Subsequent data may better define the extent of the reservoir and additional
production performance, well tests and engineering studies will often improve
the reliability of the reserve estimate.

       The following table sets forth our estimated proved oil and gas
reserves and productions and the respective yearly changes for the years ended
December 31, 2000, 2001 and 2002. Our proved reserves do not include
additional quantities recoverable beyond the term of the relevant production
licenses, or that may result from extensions of currently proved areas, or
from application of improved recovery processes not yet tested and determined
to be economical. Our estimated proved reserves do not include any quantities
that are recoverable through application of tertiary recovery techniques.
Proved developed reserves are the quantities expected to be recovered through
existing wells with existing equipment and operating methods.

<TABLE>
<CAPTION>

                                                                                Years ended December 31,
                                                                            --------------------------------
                                                                            2000         2001          2002
                                                                            ----         ----          ----
Proved developed and undeveloped reserves (crude oil) (million
barrels)
<S>                                                                         <C>         <C>           <C>
Beginning of year....................................................       3,028       3,168         3,215
Revisions of previous estimates......................................          72         (23)          119
Improved recovery....................................................         140         125           126
Extensions and discoveries...........................................         191         214           130
Production...........................................................        (263)       (269)        (270)
                                                                            -----       -----         -----
End of year..........................................................       3,168       3,215         3,320
                                                                            =====       =====         =====

Proved developed reserves (crude oil) (million barrels)
Beginning of year....................................................       2,418       2,490         2,444
                                                                            =====       =====         =====
End of year..........................................................       2,490       2,444         2,732
                                                                            =====       =====         =====
Proved developed and undeveloped reserves (natural gas)
   (billion cubic feet)
Beginning of year....................................................       2,031       3,342         3,488
Revisions of previous estimates......................................         164        (429)        (133)
Extensions and discoveries...........................................       1,281         738           153
Production...........................................................        (134)       (163)        (179)
                                                                            -----       -----         -----
End of year..........................................................       3,342       3,488         3,329
                                                                            =====       =====         =====
Proved developed reserves (natural gas) (billion cubic feet)
Beginning of year....................................................       1,052       1,164         1,183
                                                                            =====       =====         =====
End of year..........................................................       1,164       1,183         1,056
                                                                            =====       =====         =====
</TABLE>

         The following table sets forth, by producing fields, our crude oil
and natural gas proved developed and undeveloped reserves as of December 31,
2002.


                              Crude Oil           Natural Gas         Combined
                              ---------           -----------         --------
                          (million barrels)  (billion cubic feet)  (million BOE)

Proved Developed and
Undeveloped Reserves
Shengli................         2,264                 267           2,309
Others.................         1,056               3,062           1,566
                                -----               -----           -----
Total..................         3,320               3,329           3,885
                                =====               =====           =====

Other Oil and Gas Data

Production Data

         The following tables sets forth the average daily production of crude
oil and natural gas for the years ended December 31, 2000, 2001 and 2002.

                                            For the Years Ended December 31,
                                         --------------------------------------
                                          2000            2001           2002
                                          ----            ----           ----
                                                 (in thousand barrels)
Average Daily Crude Oil Production
Shengli..............................      519            520            520
Others...............................      157            217            219
                                           ---            ---            ---
Total Production.....................      676            737            739
                                           ===            ===            ===

                                             For the Years Ended December 31,
                                          -------------------------------------
                                           2000           2001           2002
                                                 (in million cubic feet)
Average Daily Natural Gas Production
Shengli..............................       66             82             73
Others...............................      153            384            417
                                           ---            ---            ---
Total Production.....................      219            466            490
                                           ===            ===            ===

                                             For the Years Ended December 31,
                                          -------------------------------------
                                           2000           2001           2002
                                           ----           ----           ----
                                                    (in thousand BOE)
Average Daily Production of
   Crude Oil and Natural Gas
Shengli...............................     530            533             532
Others................................     182            279             289
                                           ---            ---             ---
Total Production......................     712            812             821
                                           ===            ===             ===

Lifting Cost Data

         The following table sets forth our average lifting costs per
barrel-of-oil equivalent of crude oil and natural gas produced, average sales
prices per barrel of crude oil and average sales prices per thousand cubic
meters of natural gas for the years ended December 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>

                                                             Total       Shengli     Others
                                                              (US$)       (US$)      (US$)
                                                           ---------------------------------
<S>                                                            <C>          <C>        <C>
For the year ended December 31, 2002
Average Petroleum Lifting Cost per BOE.................        6.12        5.76       6.78
Average Realized Sales Price...........................
   Per Barrel of Crude Oil.............................       22.42       22.59      21.97
   Per Thousand Cubic Meters of Natural Gas............       69.08       55.07      70.25
For the year ended December 31, 2001
Average Petroleum Lifting Cost per BOE.................        6.15        6.01       6.42
Average Realized Sales Price...........................
   Per Barrel of Crude Oil.............................       23.36       23.57      22.79
   Per Thousand Cubic Meters of Natural Gas............       67.76       50.95      69.71
For the year ended December 31, 2000
Average Petroleum Lifting Cost per BOE.................        6.63        5.75       9.18
Average Realized Sales Price...........................
   Per Barrel of Crude Oil.............................       27.95       27.50      26.33
   Per Thousand Cubic Meters of Natural Gas............       74.72       60.12      69.91
</TABLE>

Exploration and Development Activities

       The following table sets forth our exploratory and development wells,
including a breakdown of successful or productive ones and dry ones, for the
years ended December 31 2000, 2001 and 2002.

<TABLE>
<CAPTION>

                                                   Total           Shengli          Others
                                                   -----           -------          ------
<S>                                                  <C>              <C>             <C>
For the year ended December 31, 2002
Exploratory
    -- Successful.........................          289              146              143
    -- Dry................................          217               80              137
Development
    -- Productive.........................         2,186            1,026            1,160
    -- Dry................................           14               6                8
For the year ended December 31, 2001
Exploratory
    -- Successful.........................          232              116              116
    -- Dry................................          284              144              140
Development
    -- Productive.........................         2,119             990             1,129
    -- Dry................................           12               6                6
For the year ended December 31, 2000
Exploratory
    -- Successful.........................          121               72              49
    -- Dry................................          154               74              80
Development
    -- Productive.........................         2,102            1,138             964
    -- Dry................................           13               7                6
</TABLE>

       For additional information on our oil and gas exploration and
production activities, please see the Supplemental Information on Oil and Gas
Producing Activities (Unaudited) to our Combined Financial Statements included
elsewhere in this annual report.

Refining and Marketing and Distribution of Refined Petroleum Products

       Overview

       Our refining and marketing and distribution segments consist of
processing crude oil into refined petroleum products, buying and selling
refined petroleum products, and transporting, marketing and distributing
refined petroleum products. We are the largest refiner in China, both in terms
of total primary distillation capacity per annum as of December 31, 2002 and
total throughput in 2002. We processed approximately 105.01 million tonnes of
crude oil in 2002, representing approximately 50% of the national crude oil
throughput. We also have the largest refined petroleum products marketing and
distribution operations in China in terms of sales volume as well as the
number of sales outlets. We sold 70.09 million tonnes of gasoline, diesel and
jet fuel including kerosene in 2002 through our marketing and distribution
network, representing approximately 81% of the sales volume in our principal
market. As of December 31, 2002, we owned and operated a total of
approximately 24,000 service stations in China.

       We produce a full range of refined petroleum products. The following
table sets forth our production of our principal refined petroleum products
for the years ended December 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>

                                                       Our Production for the Years Ended December 31,
                                                   ----------------------------------------------------
                                                       2000            2001                 2002
                                                       ----            ----                 ----
                                                                     (in million tonnes)
<S>                                                    <C>             <C>                  <C>
Gasoline.......................................        20.2            18.7                 19.6
Diesel.........................................        37.5            37.9                 37.7
Kerosene including jet fuel....................         4.9            4.5                  5.1
Chemical feedstock.............................        13.5            12.4                 15.0
Lubricant......................................         0.9            0.8                  0.9
Liquefied petroleum gas........................         4.9            4.8                  5.1
Fuel oil.......................................         6.3            4.6                  4.5
</TABLE>

       Gasoline and diesel are our largest revenue producing products, and are
sold mostly through our marketing and distribution segment through both
wholesale and retail channels. We use most of our production of petrochemical
feedstock as feedstock for our own petrochemical operations. Most of our
production of other refined products are sold domestically to a wide variety
of industrial and agricultural customers, and a small amount are exported.

       Refining Facilities

       We operate 25 refineries in China, all of which are located in our
principal market. As of December 31, 2002, our consolidated primary
distillation capacity of 132.4 million tonnes per annum was the largest in
China, representing approximately 50% of the total domestic capacity.

       The following table sets forth our total primary distillation capacity
per annum, crude oil throughputs and crude oil distillation capacity
utilization rate as of and for the years ended December 31, 2000, 2001 and
2002.


<TABLE>
<CAPTION>

                                                                        As of and for the Years
                                                                           Ended December 31,
                                                                        -----------------------
                                                                   2000          2001           2002
                                                                   ----          ----           ----
<S>                                                                <C>           <C>           <C>
Primary distillation capacity (million tonnes per annum)....       130.3         130.3         132.4
Crude oil throughputs (million tonnes)......................       105.5         101.4         105.0
Crude oil distillation capacity utilization rate............       81.0%         77.8%         79.3%
</TABLE>

       Our consolidated refined petroleum product yields by volume in 2002
were approximately 18.7% for gasoline, 35.9% for diesel, 4.8% for jet fuel and
32.2% for other products including lubricant, fuel oil, liquified petroleum
gas, solvent oil, asphalt, petro coke, wax and petrochemical feedstock.

       The following table sets forth the primary distillation capacity per
annum, crude oil throughput and utilization rate calculated based on primary
distillation capacity per annum at each year-end as of and for the years ended
December 31, 2000, 2001 and 2002 of each of our 13 largest refineries. These
refineries represent 80% of our total primary distillation capacity per annum
as of December 31, 2002.

<TABLE>
<CAPTION>

                        2000                           2001                              2002
           -----------------------------------------------------------------------------------------------
              Primary    Crude              Primary     Crude               Primary      Crude
              Distilla-   Oil      Utiliza- Distil-      Oil      Utiliza-  Distilla-     Oil      Utiliza-
                tion    Through-    tion    lation     Through-    tion       tion      Through-    tion
 Refinery     Capacity    put       Rate    Capacity     put       Rate     Capacity      put       Rate
 --------     --------  --------   -------  --------   --------  --------  --------    --------   --------
                            (in million tonnes, except utilization rate data in percentage)

<S>           <C>        <C>       <C>       <C>        <C>       <C>        <C>         <C>        <C>
Maoming....   13.5       10.5      77.8%     13.5       10.6      78.8%      13.5        10.4       77.4%
Zhenhai....   12.0       10.5      87.5      12.0       10.7      89.3       14.0        11.9       84.9
Qilu.......   10.5        7.5      71.4      10.5       7.6       72.1        8.5        7.5        87.9
Yanshan....    8.0        6.9      86.3       8.0       6.5       81.0        8.0        7.0        86.9
Guangzhou..    7.7        6.5      84.4       7.7       6.3       81.6        7.7        6.7        87.5
Gaoqiao....    7.3        7.0      95.9       7.3       6.5       89.5        7.3        6.5        89.1
Jinling....   10.5        6.8      64.8      10.5       6.3       59.6       10.5        6.3        60.3
Tianjin....    5.0        4.0      80.1       5.0       4.7       93.2        5.0        4.1        83.0
Yangzi.....    5.5        4.9      89.1       5.5       4.3       78.5        6.0        4.9        82.3
Shanghai...    6.3        6.0      95.2       6.3       6.6       105.2       8.8        7.4        84.4
Changling..    5.0        4.0      80.0       5.0       3.2       63.4        5.0        3.3        65.7
Luoyang....    5.0        4.1      82.0       5.0       4.2       84.8        5.0        4.3        86.7
Jingmen....    5.0        3.4      68.0       5.0       2.8       56.6        5.0        2.9        58.6
Total......   101.3      82.1      81.0      101.3      80.3      79.3      104.3       83.2        80.0
</TABLE>

        In 2002, we had 21 sets of new or revamped refining units put on
stream. We increased in each of our Zhenhai and Shanghai Petrochemical
refineries distillation capacity for sour crude oil by 6 million tonnes per
annum; we increased in our Gaoqiao and refineries in northern China and along
the Yangtze River reforming capacity by 650,000 tonnes per annum, diesel and
kerosene hydro-refining capacity by 6.6 million tonnes per annum and coking
capacity by 2.7 million tonnes per annum. In addition, we have commenced
construction of the imported crude oil pipeline project connecting Ningbo,
Shanghai and Nanjing.



       Marketing, Sales and Distribution of Refined Petroleum Products

       Overview

       We operate the largest sales and distribution system for refined
petroleum products in China. Our principal market encompasses 19 provinces in
eastern, southern and central regions in China, which include many of the
largest cities and some of the fastest growing economic regions in China. We
estimate we have a market share of approximately 58% in China and 81% in our
principal market based on our sales volume of gasoline, diesel and kerosene
including jet fuel in 2002.

       In 2002, we distributed and sold in China approximately 70.09 million
tonnes of gasoline, diesel and kerosene including jet fuel, among which 34.73
million tonnes were sold through approximately 24,000, service stations that
we owned as at the end of 2002 and 12.63 million tonnes were sold through our
direct distribution network, and the remaining 22.73 million tonnes were sold
through our wholesale distribution network.

       In addition to our retail and wholesale sales within the PRC, we also
exported approximately 5.02 million tonnes of refined products to the overseas
market in 2002.

       Most of the refined products sold by us are produced internally.
Specifically in 2002, approximately 85% of our gasoline sales volume and
approximately 90.9% of our diesel sales volumes were produced internally by
us.

       The following table sets forth our sales volume of gasoline, diesel,
kerosene including jet fuel through various distribution channels, our average
throughput per service station, the number of service stations under the
Sinopec brand and refined products storage capacity for the years ended or as
of December 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>

                                                                        As of and for the Years
                                                                           Ended December 31,
                                                                        -----------------------
                                                                   2000          2001           2002
                                                                   ----          ----           ----
<S>                                                               <C>           <C>           <C>
Domestic sales volume of gasoline, diesel and kerosene
including jet fuel (in thousand tonnes)
   Retail ..................................................      23,940        30,430         34,730
   Direct distribution......................................         -          11,640         12,630
   Wholesale................................................      43,750        25,670         22,730
   Total....................................................      67,690        67,740         70,090
                                                                  ======        ======         ======

Average throughput per service station per annum (tonnes)          1,402         1,473          1,560
Number of service stations under Sinopec brand
   Sinopec Corp. owned......................................      20,259        24,062         24,000
   Franchised...............................................       5,234         4,184         4,127
   Total....................................................      25,493        28,246         28,127
                                                                  ======        ======         ======

Refined product storage capacity  (in thousand cubic meters)      14,640        15,134         13,970
</TABLE>

       Retail Distribution

       All of our retail sales are made through a network of service stations
and petroleum shops which operate under the Sinopec brand. Through this
unified distribution network we are more able to implement consistent pricing
policies, maintain both product and service quality standards and more
efficiently manage the retail distribution in our principal market.

       In 2002, we sold approximately 34.7 million tonnes of gasoline and
diesel through our retail distribution network, representing approximately
52.7% of our total gasoline and diesel sales volume. Our retail market share
in 2002 was approximately 68% in our principal market. Our retail distribution
network consists principally of our wholly-owned and operated service
stations. As at December 31, 2002, we owned and operated approximately 24,000
service stations. In addition, we have franchised the Sinopec brand to 4,127
service stations that are operated by third parties.

       Most of our wholly-owned service stations are located in central
commercial districts or relatively high traffic areas. They typically have
relatively long operating histories compared with other service stations and,
therefore, often enjoy better brand name recognition and higher sales volume.

       Wholesale Distribution

       In 2002, we sold approximately 22.73 million tonnes of gasoline,
diesel, kerosene including jet fuel through wholesale distribution channels,
representing approximately 32.4% of our total sales volume of gasoline,
diesel, and kerosene including jet fuel. Our wholesale sales include sales to
large customers and independent distributors, direct distribution sales to
corporate customers and other relatively large end-users as well as sales to
certain special customers designated by the central government.

       We sold approximately 9.4 million tonnes of gasoline, diesel and
kerosene including jet fuel to certain special customers designated by the
central government, representing approximately 41.4% of our aggregate
wholesale volume of these products. Among our sales to these special customer,
we sold approximately 839,000 tonnes of gasoline, 4.6 million tonnes of
diesel, 3.9 million tonnes of kerosene including jet fuel, representing,
respectively, 3.9%, 10.4% and 90.9% of our total sales volume of the
respective products. These special customers include the military, the
railway, aeronautical, marine and utility industries and these sales are made
at prices and in volumes directly or indirectly determined by the PRC
government.

       In 2002, we sold approximately 13.3 million tonnes of gasoline, diesel
and kerosene including jet fuel through distribution centers located in the 19
provinces in our principal market and our three branch sales companies outside
our principal market. Most sales by the distribution centers are made to large
customers and independent distributors from various industries such as public
transportation, tourism and agricultural industries.

       In 2002, we also sold approximately 12.6 million tonnes of gasoline,
diesel and kerosene including jet fuel through direct distribution to various
corporate customers and other relatively large end-users.

       Through our distribution centers, we operate 689 storage facilities
with a total capacity of approximately 13.97 million cubic meters,
substantially all of which are wholly-owned by us. Our distribution centers
are connected to our refineries by railway, waterway and, in some cases, by
pipelines. We also own some dedicated railways, oil wharfs, oil barges, rail
tankers and oil trucks. In 2002, our refined products pipeline from Jingmen to
Shashi and the one from Zhenhai to Kangqiao commenced operation, and thereby
further enhanced our distribution network.

Chemicals

       Overview

       Not only are we the largest petrochemical producer in China, we are
also the largest producer of most major petrochemical products produced in
China. For example, in 2002 , we produced 2.7 million tonnes of ethylene, a
major feedstock for its derivative products, representing approximately 50.18%
of total ethylene production in China . Because of strong domestic demand,
most of our petrochemical products are sold in the domestic market.

       We produce the full range of petrochemical products including
intermediate petrochemicals, synthetic resins, synthetic fiber monomers and
their polymers, synthetic fibers, synthetic rubber and chemical fertilizers.
Synthetic resins, synthetic fibers, synthetic rubber, chemical fertilizers and
some intermediate petrochemicals comprise a significant majority of our
external sales. Synthetic fiber monomers and their polymers and intermediate
petrochemicals, on the other hand, are mostly internally consumed as feedstock
for the production of these other products. Our petrochemical operations are
integrated with our exploration and production and refining and marketing
businesses. For example, natural gas liquids and certain refined petroleum
products, such as naphtha, are primarily supplied from our exploration and
production and refining operations and are the feedstock we use in the
extraction of olefins and aromatics as well as chemical fertilizers.

       Production of Major Chemical Products

       The following table sets forth our production volumes of major chemical
products for the years ended December 31, 2000, 2001 and 2002.


<TABLE>
<CAPTION>

                                                                   Our Production of Major Chemicals
                                                                   ---------------------------------
                                                                   2000          2001           2002
                                                                   ----          ----           ----
                                                                          (in thousand tonnes)
<S>                                                                <C>           <C>           <C>
Ethylene                                                           2,170         2,153         2,716
Synthetic resins                                                   3,183         3,204         4,005
   Of which: performance compound resins                           1,280         1,332         1,847
Synthetic rubbers                                                    317           398            458
Monomers/polymers for synthetic fibers                             3,795         3,598         3,834
Synthetic fibers                                                   1,068         1,028         1,153
   Of which: differential fibers                                     283           326            402
Urea                                                               2,923         2,342         2,666
</TABLE>

       Major Petrochemical Facilities

       We operate 17 petrochemical plants in China, all of which are located
in China's major petrochemical market. The following table sets forth our
major petrochemical plants and their major production facilities.

Plant                                Major Facilities
-----                     --------------------------------
Yanhua              Ethylene; polyethylene; polypropylene; synthetic rubber.

Shanghai            Ethylene; polyethylene; polypropylene; PET; AN and synthetic
                    fiber.

Qilu                Octanol; synthetic rubber; urea; ethylene; PVC; PE.

Yangzi              Ethylene; polyethylene; polypropylene; PTA.

Yizheng             PTA; Polyester, synthetic fiber.

       In 2002, we have completed revamping to a number of our petrochemical
production facilities. As a result, we increased in total in our Yangzi and
Shanghai plants ethylene capacity by 600,000 tonnes per annum, synthetic resin
capacity by 850,000 tonnes per annum, synthetic fiber polymers (bottle grade
polyester chips) capacity by 100,000 tonnes per annum.

       Products

       Intermediate Petrochemicals

       We are the largest producer of intermediate petrochemicals in China.
Intermediate petrochemicals produced by our facilities include olefins and
aromatics and organic petrochemicals. Our intermediate petrochemical
production is partly internally consumed for manufacture of synthetic resins,
synthetic rubber and synthetic fibers.

       Olefins can be extracted from natural gas liquids and refined petroleum
products such as naphtha and LPG. They are the basic feedstock of most
petrochemicals and include ethylene, propylene and butadiene. Ethylene is the
primary olefin product and the most widely-used chemical in the petrochemical
industry. We are the largest ethylene producer in China. Our rated ethylene
capacity of 2.795 million tonnes per annum represented 50.7% of the total
domestic ethylene capacity as of December 31, 2002. In 2002, we produced
2.7164 million tonnes of ethylene, representing approximately 50.2% of the
total domestic output, with a capacity utilization rate of 97%. Nearly all of
our olefins production is used as feedstock for our petrochemical operations.

       We produce aromatics mainly in the forms of benzene and xylene which
are used primarily as feedstock for purified terephthalic acid (PTA), the
preferred raw material for polyester. We are the largest aromatics producer in
China. Our annual rated capacities for benzene and xylene were 1.0194 million
tonnes and 0.5515 million tonnes per annum, respectively, as of December 31,
2002. In 2002, we produced 996,000 tonnes of benzene and 401,600 tonnes of
xylene.

       Organic chemicals are also intermediate petrochemicals extracted mainly
from olefins and aromatics and are essential raw materials for synthetic
resins, synthetic rubber and synthetic fibers. We are the largest producer in
China of butanol, styrene, paraxylene, vinyl acetate, phenol and acetone.

       The following table sets forth our rated capacity per annum, capacity
utilization rate, production volume and major plants of production as of or
for the year ended December 31, 2002 for our principal intermediate
petrochemical products.

<TABLE>
<CAPTION>

                            Our Rated   Utilization       Our
                            Capacity       Rate        Production         Major Plants of Production
                            ---------   -----------    ----------         --------------------------
                            (thousand
                            tonnes per                 (thousand
                             annum)      (percent)      tonnes)

<S>                          <C>           <C>          <C>          <C>
Ethylene.................    2,795.0       97.19%       2,716.4      Yanhua, Shanghai , Yangzi, Qilu and
                                                                                  Guangzhou
Propylene................    2,675.5       105.7        2,828.2        Yanhua, Shanghai , Yangzi, Qilu,
                                                                      Guangzhou, Gaoqiao, Anqing, Jinan,
                                                                              Jingmen and Wuhan.
Benzene..................    1,019.4        97.7         996.0         Yanhua, Shanghai, Yangzi, Qilu,
                                                                            Guangzhou and Zhenhai.
Xylene...................     551.5         72.8         401.6           Zhenhai, Jinling, Changling,
                                                                         Guangzhou and Shijiazhuang.
Acetic acid..............      130          72.2          93.8                Shanghai, Yangzi.
Styrene..................      224         111.2         249.0           Yanhua, Qilu and Guangzhou.
Para-xylene..............      879          92.3         811.1       Shanghai, Yangzi , Qilu and Tianjin.
Phenol...................      190         102.7         195.2                Yanhua and Gaoqiao
</TABLE>

       Synthetic Resins

       Synthetic resins are a core downstream product group. Our principal
synthetic resin products are polyethylene, polypropylene, polyvinyl chloride
(PVC) and polystyrene. We are the largest producer of polyethylene,
polypropylene and polystyrene in China. Synthetic resins are widely used in
various industries including agriculture, construction, automobile and
consumer product industries. The following table sets forth our principal
synthetic resin products and their major applications.

  Resins                            Major Applications
  ------                -----------------------------------------------
Polyethylene           films, boards, sheets, bottles, machinery parts, toys,
                       housewares, wire and cable insulation, industrial
                       packaging materials, pipes, ropes, fish nets, household
                       containers
Polypropylene          films or sheets, ropes, housewares, toys and household
                       electric appliance and automobile parts, fibers
Polyvinyl              chloride films, sheets, boards, wire and cable
                       insulation, pipes, construction materials, bottles,
                       toys, shoes, artificial leather
Polystyrene            automobile parts, optical devices, boards, sheets,
                       telecommunications devices, electronic appliances,
                       housewares, toys, containers and packaging materials

       The following table sets forth our rated capacity per annum, capacity
utilization rate, production volumes and major plants of production for each
of our principal synthetic resins as of or for the year ended December 31,
2002.

<TABLE>
<CAPTION>

                                     Our Rated     Utilization         Our           Major Plants of
                                      Capacity         Rate        Production           Production
                                     ---------     -----------     ----------        ----------------
                                     (thousand
                                     tonnes per                      (thousand
                                       annum)        (percent)        tonnes)

<S>                                   <C>              <C>            <C>            <C>
  Polyethylene....................    1,853.0          95.6%          1,770.7       Yanghua, Shanghai ,
                                                                                      Yangzi, Qilu and
                                                                                         Guangzhou
  Polypropylene...................    1,882.5           99.2          1,867.5       Yanghua, Shanghai ,
                                                                                    Yangzi, Guangzhou ,
                                                                                    Wuhan, Jingmen, Qilu
                                                                                         and Fujian
  Polyvinyl chloride..............      230            102.5           235.8                Qilu
  Polystyrene.....................      146             76.2           111.3          Yanhua, Qilu and
                                                                                         Guangzhou
</TABLE>

       Synthetic Fiber Monomers and Polymers

       Our principal synthetic fiber monomers and polymers are purified
teraphthalic acid, ethylene glycol, acrylonitrile, caprolactam, dimethyl
terephthalate. Based on our 2002 production, we are the largest producer of
all of these synthetic fiber monomers and polymers except for acrylonitrile in
China. Most of our production of synthetic fiber monomers and polymers are
used as feedstock for synthetic fibers.

       The following table sets forth our rated capacity per annum, capacity
utilization rate, our production volume and major plants of production as of
or for the year ended December 31, 2002 for each type of our principal
synthetic fiber monomers and polymers.

<TABLE>
<CAPTION>

                              Our Rated    Utilization        Our             Major Plants of
                              Capacity         Rate        Production           Production
                              ---------    -----------     ----------         ---------------
                              (thousand
                              tonnes per                   (thousand
                               annum)       (percent)        tonnes)

<S>                            <C>            <C>           <C>                <C>
Purified teraphthalic acid.    1,205.0        114.2%        1,375.6        Shanghai, Yangzi and Yizheng
Ethylene glycol............     570.0          79.2          451.3         Yanhua, Shanghai and Yangzi
Acrylonitrile..............     187.0         108.8          203.4        Shanghai, Gaoqiao, Anqing and
                                                                                       Qilu
Caprolactam................     120.0          85.7          102.8           Shijiazhuang and Baling
Polyester chips............    1,689.8         96.1         1,623.9       Yanhua, Shanghai, Yizheng and
                                                                                     Tianjin
Polyvinyl alcohol..........     38.3          122.5           46.9                   Shanghai
</TABLE>

       Synthetic Fibers

       We are the largest producer of polyester and acrylic fibers in China.
Our principal synthetic fiber products are polyester fiber, acrylic fiber,
nylon, vinylon fiber and polypropylene fiber. Synthetic fibers are widely used
to make apparel, carpets and industrial products such as canvas, sacking,
nautical rope and fishing nets in the textile industry.

       The following table sets forth our rated capacity per annum, capacity
utilization rate, production volume and principal place of origin for each
type of our principal synthetic fibers as of and for the year ended December
31, 2002.

<TABLE>
<CAPTION>

                                         Our Rated     Utilization      Our           Major Plants of
                                         Capacity         Rate       Production         Production
                                         ---------     -----------   ----------       ---------------
                                         (thousand
                                        tonnes per                   (thousand
                                          annum)        (percent)     tonnes)

<S>                                        <C>            <C>          <C>            <C>
Polyester fiber.......................     971.1          81.5%        791.5      Yizheng, Shanghai and
                                                                                         Tianjin
Acrylic fiber.........................     308.9          107.1        330.9    Shanghai, Anqing and Qilu
Nylon.................................     18.3           65.6          12.0              Baling
Polypropylene fiber...................      17            107.6         18.3             Shanghai
</TABLE>

       Synthetic Rubbers

       Our principal synthetic rubbers are cis-polybutadiene rubber, styrene
butadiene rubber ("SBR"), styrene butadiene-styrene thermoplastic elastomer
and isobutadiene isoprene rubber ("IIR"). Synthetic rubbers are widely used in
the manufacture of tires, inner tubes for tires, housewares, shoes, toys and
other industries. Based on our 2002 production, we are the largest producer of
SBR rubber and cis-polybutadiene rubber and the only producer of IIR in China.

       The following table sets forth our rated capacity per annum , capacity
utilization rate, production volume and major plants of production as of or
for the year ended December 31, 2002 for each of our principal synthetic
rubbers.

<TABLE>
<CAPTION>

                                         Our Rated     Utilization       Our          Major Plants of
                                          Capacity        Rate        Production       Production
                                         ---------     -----------    ----------      ---------------
                                     (thousand tonnes                 (thousand
                                        per annum)      (percent)       tonnes)

<S>                                        <C>            <C>           <C>             <C>
Cis-polybutadiene rubber.............      200.8          122.9%        246.9         Yanhua, Qilu and
                                                                                          Gaoqiao
Styrene butadiene rubber.............       163            80.5         131.2     Yanhua, Qilu and Gaoqiao
Styrene-butadiene-styrene                   60             96.8          58.1              Yanhua
thermoplastic elastomers ............
Isobulylene isoprene rubber..........       30             71.7          21.5              Yanhua
</TABLE>

       Chemical Fertilizers

       We produce synthetic ammonia and urea. Our synthetic ammonia is used to
manufacture urea, CPL and acrylintride. Urea is used primarily as a
fertilizer.

       The following table sets forth our rated capacity per annum, capacity
utilization rate, our production volume and major plants of production for
ammonia and urea as of or for the year ended December 31, 2002.

<TABLE>
<CAPTION>

                                  Our Rated     Utilization          Our            Major Plants of
                                  Capacity          Rate          Production          Production
                                  ---------     -----------       ----------        ---------------
                                  (thousand
                                 tonnes per
                                   annum)        (percent)    (thousand tonnes)

<S>                                 <C>            <C>             <C>            <C>
Ammonia........................     2,315          69.5%           1,608.6      Zhenhai, Jinling, Anqing,
                                                                                  Jiujiang, Qilu, Hubei
                                                                                        and Baling
Urea...........................     3,840           69.4           2,666.3      Zhenhai, Jinling, Anqing,
                                                                                  Jioujiang, Qilu, Hubei
                                                                                        and Baling
</TABLE>

       As the profit margin of our chemical fertilizers production continues
to be weak, we further reduced production of chemical fertilizers by operating
at a lower capacity utilization rate or temporarily shutting down some of our
chemical fertilizer facilities in 2002.

       Marketing and Sales of Petrochemicals

       Price and volume of petrochemical sales are market driven. The southern
and eastern regions in China, where most of our petrochemical plants are
located, constitute the major petrochemical markets in China. Our proximity to
the major petrochemical market gives us a competitive advantage over our
competitors.

       Our principal sales and distribution channels consist of (i) direct
sales to end-users, most of which are large and medium size manufacturing
enterprises, and (ii) sales to distributors in our national sales network. In
2002, we sold approximately 59% of our petrochemical products directly to
end-users and 41% to our distributors. We also provide after-sale services,
including technical support and technology assistance, to our customers. At
the same time, we can adjust our production level and product mix in
accordance with our customer's demand.

       To strengthen our petrochemical marketing and sales effort, we have
built a business-to-business e-commence platform for our petrochemicals
marketing to initiate the sales activities. In 2002, sales initiated by our
e-commerce platform amounted to RMB16.9 billion (US$2.0 billion), accounting
for approximately 24% of our total sales of chemical products and representing
an increase of 6.6% from 2001. Domain names for our e-commerce web sites are
www.sinopec-ec.com and www.sinopec-ec.com.cn.

Raw Materials

       Crude Oil

       Our most important raw material is crude oil. The following table sets
forth the sources of our crude oil supply and each source as a percentage of
our total crude oil supply for the years ended December 31, 2000, 2001 and
2002.

<TABLE>
<CAPTION>

Source of Supply                        2000                       2001                      2002
----------------                        ----                       ----                      ----
                               Amount of       As a       Amount of      As a       Amount of      As a
                               crude oil    percentage    crude oil   percentage    crude oil   percentage
                               purchased     of total     purchased    of total     purchased    of total
                                             amount of                 amount of                 amount of
                                             crude oil                 crude oil                 crude oil
                                             purchased                 purchased                 purchased

                                (million     (percent)    (million     (percent)    (million     (percent)
                                tonnes)                    tonnes)                   tonnes)
<S>                               <C>            <C>        <C>           <C>          <C>          <C>
Self-supply                       27.4           25.4%      29.4          29.6%        28.9         27.2%
Sinopec Group Company              0.2           0.2         NA             NA           NA          NA
PetroChina                        16.5          15.2        14.5          14.6         14.6        13.7
CNOOC                              5.2           4.8         6.2           6.3          6.2         5.8
Import                            58.9          54.4        49.2          49.5         56.7        53.3
         Total                   108.2           100        99.3           100        106.4         100

</TABLE>

       Other Raw Materials

       We produce most of the other raw materials used as feedstock for our
petrochemical operations from crude oil. When our demand exceeds our internal
supply of these other raw materials, we purchase the shortfall from domestic
or foreign sources.

Competition

       We are a major competitor in every sector in which we compete. Most of
our revenues are derived from domestic sales. Our competition is mainly in the
domestic market. As the domestic market is more open for foreign
participation, more foreign companies have become our competitors.

       Exploration and Production

       The business of exploration and development of crude oil and natural
gas is highly competitive. We compete in the PRC market primarily for the
acquisition of desirable oil and gas prospects. We also compete in the
international and domestic capital markets to finance our operations,
including exploration, development and production activities. Our principal
competitors in the PRC market in the above areas are PetroChina and CNOOC.
Because our production of crude oil has only constituted less than 30% of our
crude oil requirements, most of our crude oil production has been internally
consumed, and thus, we generally do not compete for crude oil customers.

       Refining and Marketing of Refined Petroleum Products

       The business of refining and marketing of refined products is highly
competitive. We are the market leader in the densely populated eastern,
central and southern coastal regions in China, which is what we call our
principal market. PetroChina controls most of the market for refined petroleum
products in the northeastern and western regions in China.

       Market participants compete primarily on the basis of quality of
products and service, efficiency of operations including proximity to
customers and awareness of brand name. We believe that we have a competitive
advantage in our principal market over many of our competitors in these
aspects arising from the quality of our personnel, technology, assets and
organizational management.

       Petrochemicals

       Our proximity to customers has given us significant competitive
advantages. Our petrochemical production facilities are located in the eastern
and southern regions in China, an area which has experienced higher economic
growth rates in China in the past two decades. Proximity of our production
facilities to our markets has given us an advantage over our competitors in
terms of easy access to our customers, resulting in reduced transportation
costs, more reliable delivery of products and better service to customers.

       We expect competition in the petrochemicals market to increase
substantially as the PRC markets open up to foreign competitors. Such
competitors are likely to be large, reputable foreign companies producing high
quality products at competitive prices. There can be no assurance that such
foreign competition will not adversely affect our existing market position and
our results of operations in our petrochemicals business.

       Competition and Opportunities after China's Accession to the WTO

       China became a member of the World Trade Organization ("WTO") in
December 2001. In line with the general progress of its economic reform
programs and as part of its WTO commitments, China has reduced import tariffs
on a wide range of products including petrochemical products in 2002. In
addition, China has agreed to further lower tariff and eliminate quotas, grant
foreign companies distribution rights of refined petroleum products and
eventually lift its restrictions that limit competition by foreign companies
in the PRC petroleum and petrochemicals industry. To the extent these
restrictions are relaxed, we are likely to face more fierce competition in our
businesses. In anticipation of the increased competition, we have taken
measures to improve our own competitiveness.

       China's accession to WTO also benefits us in a number of aspects. We
derive direct benefits from China's elimination of import tariff on crude oil.
We also derive indirect benefits from the significant growth in China's
domestic automobile consumption and export of light industrial and textile
products, which in turn increases the demand for refined petroleum and
petrochemical products.

Patents and Trademarks

         In 2002, we applied for 760 patents in China, of which 320 have been
granted patent rights. We also use domestic and foreign patents owned by
Sinopec Group Company under royalty-free licenses from Sinopec Group Company.
These patents expire from time to time and cover many products, processes and
product uses. No individual patent is of material importance to our business
as a whole. Our patent licenses from Sinopec Group Company are for a term of
ten years commencing on February 25, 2000. We also have royalty-free licenses
from Sinopec Group Company to use certain Sinopec Group Company's trademarks
and brands for our products and services. Our trademark licenses from Sinopec
Group Company are for a term of ten years commencing February 25, 2000.

Regulatory Matters

       Regulation of Exploration and Production

       Exploration and Production Rights

       The PRC Constitution provides that all mineral and oil resources belong
to the state. In 1988, the National People's Congress passed the Mineral
Resources Law which authorizes the Ministry of Land and Resources to exercise
administrative authority over the exploration and production of the mineral
and oil resources within the PRC, including its territorial waters. The
Mineral Resources Law and its supplementary regulations provide the basic
legal framework under which exploration licenses and production licenses are
granted. The Ministry of Land and Resources has the authority to grant
exploration licenses and production licenses on a competitive bidding or other
basis it considers appropriate. Applicants for these licenses must be
companies approved by the State Council to engage in oil and gas exploration
and production activities. Currently, only we, PetroChina and CNOOC have
received such approval.

       Applicants for exploration licenses must first register with the
Ministry of Land and Resources blocks in which they intend to engage in
exploration activities. The holder of an exploration license is obligated to
make a progressive annual minimum exploration investment relating to the
exploration blocks in respect of which the license is issued. Investment
ranges from RMB 2,000 per square kilometer for the initial year to RMB 10,000
per square kilometer for the third and subsequent years. Additionally, the
holder has to pay an annual exploration license fee that starts at RMB 100 per
square kilometer for each of the first three years and increases by an
additional RMB 100 per square kilometer per year for subsequent years up to a
maximum of RMB 500 per square kilometer. The maximum term of an exploration
license is 7 years. The exploration license may be renewed twice upon
application by the holder 30 days prior to expiration of the original term
with each renewal for a two-year term.

       At the exploration stage, an applicant can also apply for a progressive
exploration and production license that allows the holder to test and develop
reserves not yet fully proved. The progressive exploration and production
license has a maximum term of 15 years. Upon the reserves becoming proved for
a block, the holder must apply for a full production license in order to
undertake production.

       The Ministry of Land and Resources issues full production licenses to
applicants on the basis of the reserve reports approved by relevant
authorities. The maximum term of a full production license is 30 years unless
a special dispensation is given by the State Council. Due to a special
dispensation granted to us by the State Council, the maximum term of our full
production licenses is 55 years. The full production license is renewable upon
application by the holder 30 days prior to expiration. A holder of the full
production license has to pay an annual full production right usage fee of RMB
1,000 per square kilometer.

       All companies approved by the State Council to engage in oil and gas
exploration and production activities may apply for exploration and production
licenses for onshore oil and natural gas resources (including areas of shallow
water less than 5 meters deep) without geographical restrictions. Currently,
CNOOC and our wholly-owned subsidiary Sinopec National Star have the
exploration and production license of offshore oil and natural gas resources
in China, while we, PetroChina and Sinopec National Star have exploration and
production licenses of onshore (including areas of shallow water less than 5
meters deep) crude oil and natural gas in China.

       Exploration and production licenses do not grant the holders the right
to enter upon any land for the purpose of exploration and production. Holders
of exploration and production licenses must separately obtain the right to use
the land covered by the licenses, and current owners of the rights to use such
land may transfer or lease the land to the license holder.

       Volume and Price Controls on Crude Oil

       Each of the major crude oil producers is required to submit each year
estimated production volumes for the following year. Based on these estimates
and other data, such as forecasted domestic consumption and international oil
prices, the State Development Planning Commission(1) sets annual production
targets for us and other major oil producers and determines permitted levels
of crude oil imports and exports nationwide. The State Economic and Trade
Commission(2) then allocates the nationwide import and export quotas among us,
PetroChina and other licensed crude oil traders. The actual production levels
are determined by the producers themselves, which may vary from their
estimates submitted to the State Development Planning Commission.

--------
1    The National People's Congress held in March 2003 reconstituted the State
     Development Planning Commission, together with certain other government
     agencies, as the State Development and Reform Commission, which has
     assumed most of the regulatory functions discussed herein of the State
     Development Planning Commission.

2    The National People's Congress held in March 2003 reconstituted the
     Ministry of Foreign Trade and Economic Cooperation and certain functions
     of the State Economic and Trade Commission, together with certain other
     government agencies, as the Ministry of Commerce, which has assumed most
     of the regulatory functions discussed herein of the State Economic and
     Trade Commission and the Ministry of Foreign Trade and Economic
     Cooperation.



       The PRC government no longer regulates crude oil prices and generally
allows crude oil producers and buyers to negotiate the prices. We, PetroChina
and CNOOC negotiate the price for crude oil supplied to each other based on
international market prices.

       Volume and Price Controls on Natural Gas

       Each year, the State Development Planning Commission publishes the
production targets for natural gas producers based on consumption estimates
submitted by all natural gas producers. The State Development Planning
Commission also formulates the annual natural gas guidance supply plan, which
requires natural gas producers to distribute specified amounts of natural gas
to specified fertilizer producers. The actual production level of natural gas,
except the amount supplied to the fertilizer producers, is determined by the
natural gas producers.

       The price of natural gas has originally three components:

       o     wellhead price;

       o     pipeline transportation tariff; and

       o     purification fee.

       Wellhead prices vary depending on whether or not the natural gas sold
is within the government-formulated natural gas supply plan. For natural gas
sold within the government-formulated supply plan, the State Development
Planning Commission fixes wellhead prices at the wellhead according to the
nature of the customers.

       For sales of natural gas which was produced in excess of the
government-formulated natural gas supply plan, the State Development Planning
Commission publishes the wellhead guidance price and allows the producer to
set the price within +/-10% of this guidance price. Natural gas producers also
submit to the State Development Planning Commission for examination and
approval proposed pipeline transmission tariffs based on the capital
investment made in the pipeline, the depreciation period for the pipeline, and
the ability of end users to pay. Producers set the purification fee based on
the cost of natural gas purification. The purification fee must also be
approved by the State Development Planning Commission. Beginning on January 1,
2002, the State Development Planning Commission required that the purification
fee should be inclusively added to the wellhead price to reflect a unified
ex-factory price for domestic natural gas production.

       Regulation of Refining and Marketing of Refined Petroleum Products

       Volume and Price Controls on Gasoline and Diesel

       Controls on retail and wholesale sales. Other than as described below
for sales to special customers, there are no state controls on volume
allocations of gasoline and diesel. The PRC government, to a limited extent,
continues to exercise control over gasoline and diesel prices.

         Beginning on June 1, 2000, the State Development Planning Commission
determined and published the retail guidance prices of gasoline and diesel
monthly based on Singapore market price. Beginning on October 17, 2001, the
State Development Planning Commission has started determining the retail
guidance prices of gasoline and diesel based on the FOB prices on the
Singapore, Rotterdam and New York markets, instead of solely relying on the
Singapore market alone. In addition, instead of publishing the retail guidance
prices monthly, the State Development Planning Commission would publish the
retail guidance prices whenever it determines that the prices in those
international markets have fluctuated over a certain extent. As a result, both
the retail guidance prices of gasoline and diesel in the PRC and the timing of
changes in such prices are expected to more closely reflect prevailing
international market prices.

       We and PetroChina are permitted to set our own respective retail prices
within 8% of the published guidance prices. Service stations that do not
belong to either us or PetroChina, including foreign-owned service stations,
must fix their retail prices at the same prices as set by either us or
PetroChina, depending upon from whom the stations purchase gasoline and
diesel.

       We and PetroChina are permitted to determine our wholesale prices of
gasoline and diesel subject to the requirement of the State Development
Planning Commission that our wholesale prices are at least 5.5% below our
respective retail prices.

       There are no government restrictions on how we set prices for sales
among PetroChina and us, or among our segments and subsidiaries.

       Controls on sales to special customers. The State Development Planning
Commission allocates to us and PetroChina a quota of minimum supplies of
gasoline and diesel that must be made available to meet the requirements of
the military, national reserves, railways, airlines and other similar special
customers. Prices to these special customer are lower than the respective
wholesale prices determined based on the government published retail guidance
prices. Except for sales to the military and national reserve, we are
permitted to charge up to a 8% premium on the special customer prices to these
special customers.

       Imports and Exports

       The import and export of crude oil and refined products in China are
subject to quota and certificate of limited import or licensing control.
Currently, only a small number of companies, including our 70% owned
subsidiary China International United Petroleum and Chemicals Co., Ltd., also
known as Unipec, and PetroChina's 70% owned subsidiary China National United
Oil Corporation, have been granted licenses by the PRC government to import
and export crude oil and refined products. The State Economic and Trade
Commission sets nationwide import and export quotas for crude oil and refined
products by taking into account the supply and demand in China as well as the
country's overall import and export volumes, and allocates the quota for crude
oil and refined products and issues import registration certificates for crude
oil among the individual PRC companies. The Ministry of Foreign Trade and
Economic Cooperation is responsible for issuing import and export licenses for
refined products.

       Investment

       Depending on the size and type of investment, construction and other
investment projects are subject to different government approvals. Prior
approval from the State Development Planning Commission is required for
capital investments in any new projects as well as in any renovation and
expansion projects if the amount of capital involved exceeds RMB 50 million
(approval from the State Council may also be required for certain major
projects). If the investment is below RMB 50 million, no government approval
is required. All joint ventures with foreign participation require government
approval.

       Taxation, Fees and Royalty

       Companies which operate petroleum and petrochemical businesses in China
are subject to a variety of taxes, fees and royalties. The table below sets
forth the various taxes, fees and royalties generally payable by us or by such
companies in China.
<TABLE>
<CAPTION>

  Tax Item               Tax Base               Tax Rate
  --------               --------               --------
<S>                                             <C>
Corporate income tax     Taxable income         33%.

Value-added tax          Revenue                13% for liquified petroleum gas, natural gas, low density
                                                polyethylene for use as agricultural film and fertilizers
                                                and 17% for other items. We generally charge value-added
                                                tax to our customers at the time of settlement on top of
                                                the selling prices of our products on behalf of the
                                                taxation authority. We may directly claim refund from the
                                                value-added tax collected from our customers of any
                                                value-added tax that we paid for (i) purchasing materials
                                                consumed during the production process; (ii) charges paid
                                                for drilling and other engineering services; and (iii)
                                                labor consumed during the production process.

Business tax             Revenue from           3%.
                         transportation
                         services

Consumption tax          Sales volume           RMB 277.6 per tonne for gasoline and RMB 117.6 per tonne
                                                for diesel, payable by producer.

Import tariff            CIF China price        5% for gasoline and 6% for diesel.

Resource tax             Aggregate volume sold  RMB 8 to 30 per tonne for crude oil. RMB 2 to 15 per
                         or self-consumed       thousand cubic meter for natural gas. The actual
                                                applicable rate for each oil field may differ depending
                                                on the volume of the exploration and production
                                                activities and costs required for the production at the
                                                particular oil field.

Compensatory fee for     Revenue                1% for crude oil and natural gas.
   mineral resources

Exploration license fee  Area                   RMB 100 to 500 per square kilometer per annum.

Production license fee   Area                   RMB 1,000 per square kilometer per annum.

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

City construction tax    total amount of        1% to 7%.
                         value-added tax,
                         consumption tax
                         and business tax

Education Surcharge      total amount of        3%.
                         value-added tax,
                         consumption tax
                         and business tax
__________

(1)  Payable only by Sino-foreign oil and gas exploration and development
     cooperative projects, and the project entity of those cooperative
     projects is not subject to any other resource tax or fee.
</TABLE>

C. ~     ORGANIZATIONAL STRUCTURE

       For a description of our relationship with Sinopec Group Company, see
"Item 4 -- Information on the Company -- History and Development" and "Item 7
-- Major Shareholders and Related Party Transactions." For a description of
our significant subsidiaries, see note 29 to our consolidated financial
statements.

D. ~     PROPERTY, PLANT AND EQUIPMENT

       See "Item 4 -- Information on the Company -- Business Overview" for
description of our property, plant and equipment.

Environmental Matters

       We are subject to various national environmental laws and regulations
and also environmental regulations promulgated by the local governments in
whose jurisdictions we have operations. For example, national regulations
promulgated by the central government set discharge standards for emissions
into air and water. They also set forth schedules of discharge fees for
various waste substances. These schedules usually provide for discharge fee
increases for each incremental increase of the amount of discharge up to a
certain level. Above a certain level, the central regulations permit the local
government to order any of our facilities to cure certain behavior causing
environmental damage and subject to the central government's approval, the
local government may also issue orders to close any of our facilities that
fail to comply with the existing regulations.

       Each of our production subsidiaries has implemented a system to control
its pollutant emissions and to oversee compliance with the PRC environmental
regulations. We have a central safety and environmental compliance department
to set our internal environmental requirements and procedures, and to manage
and supervise the environmental protection programs at the various production
facilities. Each production subsidiary has an environmental compliance
department which is responsible for supervising environmental matters at the
subsidiary and implementing our environmental requirements and procedures.
These departments report both to the management of the subsidiary and to the
central environmental compliance department.

       Our production facilities have their own facilities to treat waste
water, solid waste and waste gases on site. Waste water first goes through
preliminary treatment at our own waste water treatment facilities. Thereafter,
the water is sent to nearby waste water treatment centers operated either by
us or by Sinopec Group for further treatment. All solid waste materials
generated by our production facilities are buried at disposal sites or burned
in furnaces either operated by us or by Sinopec Group. Waste gases are
generally treated and burned in furnaces before dissipation and the ash is
disposed in accordance with our solid waste disposal procedures.

       Environmental regulations also require companies to file an
environmental impact report to the environmental bureau for approval before
undertaking any construction of a new production facility or any major
expansion or renovation of an existing production facility. Such an
undertaking will not be permitted to operate until the environmental bureau
has performed an inspection and is satisfied that environmentally sound
equipment has been installed for the facility.

       We believe our environmental protection systems and facilities are
adequate for us to comply with current applicable national and local
environmental protection regulations. The PRC government, however, may impose
stricter regulations which require additional expenditure on compliance with
environmental regulations.

       We paid pollutant discharge fees of approximately RMB 305 million in
2000, RMB 221 million in 2001 and RMB 287 million (US$34.7 million) in 2002.

Insurance

       In respect of our refining, petrochemical production, and marketing and
sales operations, we currently maintain with Sinopec Group Company, under the
terms of its Safety Production Insurance Fund ("SPI Fund"), approximately RMB
224.8 billion (US$27.1 billion) of coverage on our property and plants and
approximately RMB 32.3 billion (US$3.9 billion) of coverage on our inventory.
In 2002, we paid an insurance premium of approximately RMB 976 million
(US$117.9 million) to Sinopec Group Company for such coverage. Transportation
vehicles and products in transit are not covered by Sinopec Group Company and
we maintain insurance policies for those assets with insurance companies in
the PRC.

       The insurance coverage under SPI Fund applies to all enterprises
controlled by Sinopec Group Company under regulations published by the
Ministry of Finance. We believe that, in the event of major accident, we will
be able to recover most of our losses from insurance proceeds paid under the
SPI Fund or by insurance companies.

       Pursuant to an approval of the Ministry of Finance, Sinopec Group
Company purchased from China People's Insurance Company a property and
casualty policy commencing on January 29, 2002 that would also cover our
assets. The policy provides for an annual maximum cumulative claim amount of
RMB 4.0 billion (US$0.5 billion) and a maximum of RMB 2.36 billion (US$0.29
billion) per occurrence.

       Consistent with what we believe to be customary practice among PRC
enterprises, we do not currently carry any third party liability insurance to
cover claims in respect of personal injury, environmental damage arising from
accidents on our property or relating to our operations other than on our
transportation vehicles. We have not had a third party liability claim filed
against us during the three years. We also do not carry business interruption
insurance, as such coverage is not customary in the PRC.

                          ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.     OPERATING RESULTS

       The following discussion and analysis should be read in conjunction
with our consolidated financial statements, together with the accompanying
notes, included elsewhere in this annual report. The consolidated financial
statements have been prepared in accordance with International Financial
Reporting Standards, or IFRS, which differ in certain material respects from
US GAAP. Note 31 to the consolidated financial statements provides a
reconciliation to US GAAP of net income and shareholders' equity as they
relate to us. Unless otherwise indicated, all financial data, whether
presented on a consolidated basis or by segment, is presented net of
intersegment transactions (i.e., intersegment and other intercompany
transactions have been eliminated).

       Our consolidated financial statements and this discussion present our
results:

       o    as if we had been in existence throughout the relevant period; and

       o    as if our operations and businesses were transferred to us by
            Sinopec Group Company and were conducted by us throughout the
            three-year period ended December 31, 2002.

       Prior to the reorganization of Sinopec Group and us, we did not exist
as a separate legal entity and our operations were conducted by Sinopec Group
Company and its various affiliates. As part of the reorganization, certain of
Sinopec Group's petroleum and petrochemical operations, together with the
related assets and liabilities that were transferred to us, were segregated
and separately managed by us beginning December 31, 1999. As Sinopec Group
Company controlled the operations transferred to us before the reorganization
and continues to control us after the reorganization, the accompanying
consolidated financial statements have been prepared on the basis of a
reorganization of businesses under common control in a manner similar to a
pooling-of-interests. Accordingly, the assets and liabilities transferred to
us have been stated at historical amounts. The consolidated financial
statements present the results of our operations as if our operations were
transferred to us from Sinopec Group since the beginning of the earliest
period presented.

Critical Accounting Policies

        Our consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards. Our principal accounting
policies are set out on pages F-10 to F-15 of our consolidated financial
statements. International Financial Reporting Standards require that we adopt
the accounting policies and estimation techniques that are most appropriate in
the circumstances for the purpose of giving a true and fair view of our
results and financial condition. However, different policies, estimation
techniques and assumptions in critical areas could lead to materially
different results. In particular:

       Oil and gas properties and reserves

       The accounting for our upstream oil and gas activities is subject to
special accounting rules that are unique to the oil and gas business. There
are two methods to account for oil and gas business activities, the successful
efforts method and the full cost method. We have elected to use the successful
efforts method. A description of our policies for oil and gas properties,
impairment, maintenance and repair activities is set forth in note 2 to our
consolidated financial statements.

       The successful efforts method reflects the volatility that is inherent
in exploring for mineral resources in that costs of unsuccessful exploratory
efforts are charged to expense as they are incurred. These costs primarily
include dry hole costs, seismic costs and other exploratory costs. Under the
full cost method, these costs are capitalized and written-off (depreciation)
over time.

       Engineering estimates of our oil and gas reserves are inherently
imprecise and represent only approximate amounts because of the subjective
judgments involved in developing such information. There are authoritative
guidelines regarding the engineering criteria that have to be met before
estimated oil and gas reserves can be designated as "proved". Proved and
proved developed reserve estimates are updated at least annually and take into
account recent production and technical information about each field. In
addition, as prices and cost levels change from year to year, the estimate of
proved and proved developed reserves also changes. This change is considered a
change in estimate for accounting purposes and is reflected on a prospective
basis in related depreciation rates.

       Despite the inherent imprecision in these engineering estimates, these
estimates are used in determining depreciation expense and impairment expense,
and in disclosing the supplemental standardized measure of discounted future
net cash flows relating to proved oil and gas properties. Depreciation rates
are determined based on estimated proved developed reserve quantities (the
denominator) and capitalized costs of producing properties (the numerator).
Producing properties' capitalized costs are amortized based on the units of
oil or gas produced. Therefore, assuming all other variables are held
constant, an increase in estimated proved developed reserves decreases our
depreciation, depletion and amortization expense. Also, estimated reserves are
often used to calculate future cash flows from our oil and gas operations,
which serve as an indicator of fair value in determining whether a property is
impaired or not. The larger the estimated reserves, the less likely the
property is impaired.

       Impairments

       If circumstances indicate that the net book value of an asset or
investment, including oil and gas properties, may not be recoverable, this
asset may be considered "impaired", and an impairment loss may be recognized
in accordance with IAS 36 "Impairment of Assets". The carrying amounts of
long-lived assets are reviewed periodically in order to assess whether the
recoverable amounts have declined below the carrying amounts. These assets are
tested for impairment whenever events or changes in circumstances indicate
that their recorded carrying amounts may not be recoverable. When such a
decline has occurred, the carrying amount is reduced to recoverable amount.
The amount of impairment loss is the difference between the carrying amount of
the asset and its recoverable amount. The recoverable amount is the greater of
the net selling price and the value in use. It is difficult to precisely
estimate selling price because quoted market prices for our assets are not
readily available. In determining the value in use, expected cash flows
generated by the asset are discounted to their present value, which requires
significant judgement relating to level of sale volume, selling price and
amount of operating costs. We use all readily available information in
determining an amount that is a reasonable approximation of recoverable
reserves, including estimates based on reasonable and supportable assumptions
and projections of reserve quantities.

       Depreciation

       Property, plant and equipment are depreciated on a straight-line basis
over the estimated useful lives of the assets, after taking into account their
estimated residual value. We review the estimated useful lives of the assets
regularly in order to determine the amount of depreciation expense to be
recorded during any reporting period. The useful lives are based on our
historical experience with similar assets and taking into account anticipated
technological changes. The depreciation expense for future periods is adjusted
if there are significant changes from previous estimates.

       Revaluation

       As required by the relevant PRC rules and regulations, our property,
plant and equipment were revalued in connection with our reorganization.
Subsequent to that revaluation, property, plant and equipment are carried at
the revalued amount, being the fair value as at the date of the revaluation,
less subsequent accumulated depreciation and impairment losses. Revaluations
are performed with sufficient regularity to ensure that the carrying amount
does not differ materially from that which would be determined using fair
value at the balance sheet date. The results of subsequent revaluations may
have an impact on our future results to the extent the fair values of our
property, plant and equipment change significantly.

       Provision for Doubtful Debts

       We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make the required payments.
We base our estimates on the aging of our accounts receivable balance,
customer credit-worthiness, and historical write-off experience. If the
financial condition of our customers were to deteriorate, actual write-offs
might be higher than expected.

Overview of Our Operations

       We are the largest integrated petroleum and petrochemical company in
China and one of the largest in Asia in terms of operating revenues for the
year ended December 31, 2002. We engage in exploring for, developing and
producing crude oil and natural gas, operating refineries and petrochemical
facilities and marketing crude oil, natural gas, refined petroleum products
and petrochemicals. We have reported our consolidated financial results
according to the following four principal business segments and the corporate
and others segment.

       o    exploration and production segment, which consists of our
            activities related to exploring for and developing, producing and
            selling crude oil and natural gas;

       o    refining segment, which consists of purchasing crude oil from our
            exploration and production segment and from third parties,
            processing of crude oil into refined products, selling refined
            products principally to our marketing and distribution segment;

       o    marketing and distribution segment, which consists of purchasing
            refined petroleum products from the refining segment and third
            parties, and marketing, selling and distributing refined products
            by wholesale to large customers and independent distributors and
            retail through our retail distribution network;

       o    chemicals segment, which consists of purchasing chemical feedstock
            principally from the refining segment and producing, marketing,
            selling and distributing chemical products; and

       o    corporate and others segment, which consists principally of
            trading activities of the import and export subsidiaries and our
            research and development activities.

Consolidated Results of Operations

       The following table sets forth certain income and expense items from
our consolidated statements of income for the periods indicated.

<TABLE>
<CAPTION>

                                                                           Years Ended December 31,
                                                                 --------------------------------------------
                                                                     2000       2001       2002       2002
                                                                     ----       ----       ----       ----
                                                                     RMB        RMB        RMB         US$
                                                                                 (in billions)
Operating revenues
<S>                                                                 <C>        <C>        <C>         <C>
     Sales of goods......................................           325.3      304.4      324.2       39.2
     Other operating revenues............................             6.2       14.1       15.8        1.9
          Total operating revenues.......................           331.5    318.5        340.0       41.1
Operating Expenses
     Purchased crude oil, products and operating
        supplies and expenses ...........................         (226.5)    (220.3)    (235.2)     (28.4)
     Selling, general and administrative expenses .......          (19.5)     (17.1)     (21.1)      (2.5)
     Depreciation, depletion and amortization ...........          (20.8)     (22.4)     (24.2)      (2.9)
     Exploration expenses, including dry holes...........           (3.0)      (3.8)      (4.4)      (0.5)
     Personnel expenses..................................          (13.3)     (12.9)     (13.6)      (1.6)
     Employee reduction expenses..........................            ---      (2.6)      (0.2)      (0.0)
     Taxes other than income tax.........................          (12.2)     (11.9)     (11.9)      (1.4)
     Other operating expenses, net.......................           (0.7)      (0.2)      (1.1)      (0.1)
          Total operating expenses.......................         (296.0)    (291.2)    (311.7)     (37.7)
Operating income.........................................           35.5       27.3       28.3        3.4
Net finance costs.........................................          (5.0)      (3.2)      (4.0)      (0.5)
Other income .                                                       0.5        0.5        0.5        0.1
Income before income tax and minority interests..........           31.0       24.6       24.8       (3.0)
Income tax................................................          (9.6)      (8.0)      (7.6)      (0.9)
Income before minority interests..........................          21.4       16.6       17.2        2.1
Minority interests........................................          (1.8)      (0.6)      (1.1)      (0.1)
Net income   ............................................           19.6       16.0       16.1        1.9
</TABLE>

       Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

       In 2002, our sales of goods and operating income were RMB 324.2 billion
(US$39.2 billion) and RMB 28.3 billion (US$3.4 billion), respectively, up by
6.5% and 3.7%, respectively, from those in 2001. The increase in our sales of
goods and operating income was largely attributable to our flexible adjustment
of operation in response to the opportunities presented by the better prices
and the more orderly market since March 2002, and we quickly turned around the
poor performance we went through in January and February 2002 by expanding our
market and carrying out various measures to cut cost and improve efficiency.
Since March 2002, our operating results have improved significantly and
continued to maintain a fair growth momentum. In particular, the refining
segment and marketing and distribution segment have significantly increased
their operating income and the chemicals segment has turned operating loss
into operating income.

       Operating Revenues

       Overview

       Sales of goods and other operating revenues increased by 6.8%, or RMB
21.5 billion (US$2.6 billion), from RMB 318.5 billion (US$38.5 billion) in
2001 to RMB 340 billion (US$41.1 billion) in 2002. Sales of goods increased by
RMB 19.8 billion (US$2.4 billion), or 6.5%, from RMB 304.4 billion (US$36.8
billion) in 2001 to RMB 324.2 billion (US$39.2 billion) in 2002. The increase
in sales of goods was primarily due to:

       o    The international market conditions of petroleum and petrochemical
            products gradually improved after March 2002;

       o    A number of chemicals production facilities have been revamped to
            increase capacity and production; and

       o    Sales volume of refined products and chemical products increased
            as a result of management's efforts to expand domestic as well as
            international market as the market condition improved.

       o    Other operating revenues increased by 12.1%, or RMB 1.7 billion
            (US$0.2 billion), from RMB 14.1 billion in 2001 to RMB 15.8
            billion (US$ 1.9 billion) in 2002. Other operating revenues
            primarily consist of revenues generated from sales of certain
            ancillary products and raw materials as well as rendering various
            services to Sinopec Group Company and third parties.

       Sales of crude oil and natural gas

       We produce crude oil and natural gas principally to supply our refining
and chemical operations. Natural gas and a relatively small portion of our
crude oil production are sold to the refineries owned by Sinopec Group Company
and third party customers.

       In 2002, sales revenues of crude oil and natural gas contributed RMB
10.9 billion (US$1.3 billion), or 3.2%, of our operating revenues, down by RMB
0.2 billion (US$24.2 million) compared with those in 2001. This decrease was
primarily due to a decline of 5.3% in the average realized price of crude oil
from RMB 1,255.67 (US$ 151.7) per tonne in 2001 to RMB 1,189.38 (US$143.6) per
tonne in 2002. However, the average realized price of natural gas slightly
rose by 0.7% from RMB 570.14 (US$68.9) per thousand cubic meter in 2001 to RMB
574.21 (US$69.3) per thousand cubic meter in 2002. The external sales volume
of crude oil increased from 6.05 million tonnes in 2001 to 6.35 million tonnes
in 2002, and external sales volume of natural gas increased from 2.9 billion
cubic meters in 2001 to 3.2 billion cubic meters in 2002. The increased
external sales volume of crude oil and natural gas partially offset the
negative impact of the price decline of crude oil on the sales revenues of
crude oil and natural gas.

       Sales of refined petroleum products

       Both the refining and the marketing and distribution segments make
external sales of refined petroleum products, which consist primarily of
gasoline, diesel, kerosene including jet fuel and other refined products.
Sales revenues of refined petroleum products from the two segments in 2002
were RMB 231.9 billion (US$28.0 billion), contributing 68.2% of our total
operating revenues, and representing an increase of RMB 1.8 billion (US$0.2
billion), or 0.8%, compared with RMB 230.1 billion (US$27.8 billion) in 2001.
The sales revenues of gasoline and diesel were RMB 169.3 billion (US$20.4
billion), contributing 73% of the sales revenues of refined petroleum
products, and representing an increase of RMB 4.9 billion (US$0.6 billion), or
3%, compared with RMB 164.4 billion (US$19.9 billion) in 2001. The sales
revenues of gasoline increased by 4.8%, or RMB 2.9 billion (US$0.4 billion),
from RMB 60.4 billion (US$7.3 billion) in 2001 to RMB 63.3 billion (US$7.6
billion) in 2002; the sales revenues of diesel increased by 1.9%, or RMB 2
billion (US$0.2 billion), from RMB 104 billion (US$12.6 billion) in 2001 to
RMB 106 billion (US$12.8 billion) in 2002. The increases in sales revenues of
gasoline and diesel were mainly due to the increased realized gasoline price
and the increased sales volume of diesel, which increases were attributable to
the gradual recovery of refined products prices on the international market as
well as our efforts to increase the retail proportion of our sales and to
further expand our market. In 2002, the average external sales price of
gasoline was RMB 2,806.04 (US$338.9) per tonne, representing an increase of
5.4% over that in 2001; the average external sales price of diesel was RMB
2,407.58 (US$290.8) per tonne, representing a decline of 1.3% compared with
that in 2001. The sales volume of gasoline was 22.54 million tonnes, down by
0.7% compared with that in 2001 and sales volume of diesel was 44.03 million
tonnes, up by 3.3% compared with that in 2001. The aggregate sales volume of
gasoline and diesel rose by 1.9% compared with that in 2001.

       Sales of chemicals

       Sales revenues of chemical products were RMB 58.4 billion (US$7.1
billion) in 2002, up by RMB 9.5 billion (US$1.1 billion), or 19.4%, compared
with RMB 48.9 billion (US$5.9 billion) in 2001. This increase was primarily
due to the significant increase of output and sales volume of the chemical
products as we completed revamping a number of chemicals production facilities
to expand capacity, and the gradual recovery of chemical products prices in
2002. The external sales volumes of synthetic resin, synthetic rubber,
synthetic fiber and monomers and polymers for synthetic fiber in 2002 were 3.3
million tonnes, 0.46 million tonnes, 1.18 million tonnes and 1.7 million
tonnes, respectively, representing an increase of 23.6%, 11%, 8.5% and 0.3%,
respectively, from those in 2001. The average realized prices of these
products were RMB 5,238.22 (US$632.6) per tonne, RMB 6,450.13 (US$779.0) per
tonne, RMB 8,435.24 (US$1018.7) per tonne and RMB 5,454.12 (US$658.7) per
tonne, respectively. Compared with 2001, the average realized prices of
synthetic rubber and monomers and polymers for synthetic fiber each went up by
4.5% and those of synthetic resin and synthetic fiber declined by 5.6% and
0.9%, respectively. As the prices of various chemical products went up and
others went down in 2002, the average realized external sales prices of all
six chemical product categories in 2002 were at a similar level to those in
2001.

       Operating Expenses

       Overview

       Operating expenses in 2002 were RMB 311.7 billion (US$37.6 billion),
representing an increase of RMB 20.5 billion (US$2.5 billion), or 7%, from
those in 2001. The increase in operating expenses was primarily attributable
to the increase in purchased crude oil, products and operating supplies and
expenses, selling, general and administrative expenses and depreciation,
depletion and amortization.

       Purchased crude oil, products and operating supplies and expenses

       In 2002, purchased crude oil, products and operating supplies and
expenses were RMB 235.2 billion (US$28.4 billion), accounting for 75.5% of our
total operating expenses, and representing an increase of RMB 14.9 billion
(US$1.8 billion), or 6.8%, compared with RMB 220.3 billion (US$26.6 billion)
in 2001.

       o    Purchased crude oil expenses were RMB 118.3 billion (US$14.3
            billion) in 2002, accounting for 38% of the total operating
            expenses, and representing an increase of RMB 2.3 billion (US$0.3
            billion), or 2%, compared with RMB 116 billion (US$14.0 billion)
            in 2001. The increase was mainly due to our increased crude oil
            throughput as a result of the strong market demand associated with
            the fast growing Chinese economy.

       o    The volume of purchased crude oil increased partially due to the
            decrease in the volume of crude oil supplied by our own
            production. The throughput of crude oil in 2002 were 104.15
            million tonnes (excluding crude oil processed for third parties),
            up by 3.11 million tonnes, or 3.1%, compared with 101.04 million
            tonnes in 2001. In 2002, we processed 28.98 million tonnes of
            crude oil supplied by our own exploration and production segment,
            down by 2.29 million tonnes, or 7.3%, compared to 31.27 million
            tonnes in 2001. The throughput of internally produced crude oil
            accounted for 27.8% of the total throughput of crude oil, while
            the throughput of externally sourced crude oil were 75.17 million
            tonnes, accounting for 72.2% of the total throughput of crude oil
            (among which, 53.81 million tonnes were sourced from imports,
            14.96 million tonnes from PetroChina and 6.4 million tonnes from
            CNOOC), and representing an increase of 5.4 million tonnes, or
            7.7%, compared with 69.77 million tonnes in 2001. Although the
            international crude oil prices gradually went up after March 2002,
            our average purchase price of externally sourced crude oil in 2002
            went down by RMB 88.52 (US$10.7) per tonne, or 5.3%, from RMB
            1,662.59 (US$200.8) per tonne in 2001 to RMB 1,574.07 (US$190.1)
            per tonne in 2002.

       o    In 2002, other purchased products and operating supplies and
            expenses accounted for RMB 116.9 billion (US$14.1 billion), or
            37.5% of the total operating expenses, up by 12.1%, or RMB 12.6
            billion (US$1.5 billion), compared with RMB 104.3 billion (US$12.6
            billion) in 2001. This increase was primarily due to the increased
            externally purchased chemical feedstock and the increased purchase
            expense associated with the increased sales revenues of our
            overseas trading subsidiaries as they increased their trading
            activities of crude oil and refined products in 2002.

       Selling, general and administrative expenses

       Selling, general and administrative expenses were RMB 21.1 billion (US$
2.5 billion) in 2002, up by 23.4% compared with RMB 17.1 billion (US$2.1
billion) in 2001. This increase was primarily due to:

       o    An increase of RMB 0.85 billion (US$102.7 million) in
            transportation and contracted labor expenses as a result of the
            increases of the retail proportion of the sales of gasoline and
            diesel and the total sales volume of refined products;

       o    An increase of RMB 0.6 billion (US$72.5 million) in the selling
            expenses associated with the increased sales volume of chemical
            products as a result of the expanded production capacity of
            certain chemical production facilities after revamp;

       o    An increase of approximately RMB 0.5 billion (US$60.4 million) in
            the selling, general and administrative expenses in 2002 due to
            the increased sales volume of refined products other than
            gasoline, diesel and kerosene including jet fuel;

       o    An increase of RMB 0.2 billion (US$24.2 million) for research and
            development;

       o    An increase of RMB 0.1 billion (US$12.1 million) for the
            implementation of our management information system; and

       o    We strengthened the administration of accounts receivable and
            collected certain aged outstanding debts in 2001 in which specific
            provisions were previously provided for and accordingly, reduced
            that year's allowance for doubtful accounts.

       Depreciation, depletion and amortization

       Depreciation, depletion and amortization were RMB 24.2 billion (US$2.9
billion) in 2002, up by RMB 1.8 billion (US$0.2 billion), or 8%, from RMB 22.4
billion (US$2.7 billion) in 2001. This increase was primarily due to the
commencement of operation of newly developed or acquired properties, plants
and equipment including oil and gas properties as a result of our capital
expenditure programmes.

       Exploration expenses

       Exploration expenses were RMB 4.4 billion (US$0.5 billion) in 2002, up
by RMB 0.6 billion (US$72.5 million), or 15.8%, from RMB 3.8 billion (US$0.5
billion) in 2001. This increase was primarily due to our implementation of our
strategy of continuously expanding resources, whereby we increased our
exploration expenditure in certain important areas in China's western region
and southern marine bed formation areas so as to lay a firm foundation for the
potential future expansion of our crude oil reserves and production.

       Personnel expenses

       In 2002, personnel expenses were RMB 13.6 billion (US$1.6 billion), up
by RMB 0.7 billion (US$84.5 million), or 5.4%, from RMB 12.9 billion (US$1.6
billion) in 2001. The increase was mainly because we reinforced our
performance-based incentive schemes, and in certain subsidiaries special
salaries were awarded for certain special positions, resulting in an increase
of RMB 0.9 billion (US$108.7 million) in salary expenses. In addition,
expenses related to welfare, contribution to retirement schemes and social
security increased by RMB 0.3 billion (US$36.2 million) in 2002. Despite the
increase, the personnel expenses in 2002 have been effectively controlled as a
whole.

       Employee reduction expenses

       Pursuant to the asset swap agreement between Sinopec Group Company and
us, we made payment of RMB 0.24 billion (US$29.0 million) relating to 11,000
employees transferred to Sinopec Group Company.

       Taxes other than income tax

       Taxes other than income tax were RMB 11.9 billion (US$1.4 billion),
which is similar to that in 2001.

       Other operating expenses

       The net amount of other operating expenses were RMB 1.1 billion (US$0.1
billion) in 2002, up by RMB 0.9 billion (US$108.7 million) compared to RMB 0.2
billion (US$24.2 million) in 2001. The increase was primarily attributable to
the increased expenses incurred for the disposal of certain obsolete and
retired equipment after various facilities' upgrade.

       Operating income

       Operating income in 2002 was RMB 28.3 billion (US$3.4 billion), up by
RMB 1 billion (US$0.1 billion), or 3.7%, from RMB 27.3 billion (US$3.3
billion) in 2001. This increase resulted from a combination of various
external and internal factors including the recovery of crude oil and
chemicals prices on the international market after March 2002, and the
operating strategy implemented by our management in response to a more
favorable market condition. Over the year, the operating income improved and
stabilized after the first quarter, in particular, operating income in the
first, second, third and fourth quarter of 2002 was RMB 1.6 billion (US$0.2
billion), RMB 9.1 billion (US$1.1 billion), RMB 8.5 billion (US$1.0 billion)
and RMB 9.1 billion (US$1.1 billion), respectively.

       Net finance cost

       Net finance cost was RMB 4 billion (US$0.5 billion) in 2002, up by 25%
compared with RMB 3.2 billion in 2001. The increase was due to the following
factors:

       o    Adversely affected by the fluctuation of exchange rates, we had a
            net foreign exchange loss of approximately RMB 0.3 billion
            (US$36.2 million), representing an increased finance cost of RMB
            0.7 billion (US$84.5 million) compared with approximately RMB 0.4
            billion (US$48.3 million) of net foreign exchange gain in 2001;

       o    Net interest income in 2002 decreased by RMB 0.85 billion
            (US$102.7 million) from that in 2001 as a result of the reduction
            of time deposits associated with the use of the offering proceeds
            and the lower interest rate set by People's Bank of China since
            February 2002; and

       o    Interest expense in 2002 decreased by RMB 0.69 billion (US$83.3
            million) from 2001 as a result of the lower average interest rate
            in 2002 and our effort to tighten our operational cash management
            and to improve our financing structure, including reducing the
            amount of short-term loans.

       Income before income tax and minority interests

       Income before income tax and minority interest in 2002 was RMB 24.8
billion (US$3.0 billion), slightly up by 0.8% from RMB 24.6 billion (US$3.0
billion) in 2001.

       Income tax

       Income taxes in 2002 was RMB 7.6 billion (US$0.9 billion), down by 5%
compared with RMB 8 billion in 2001, which decrease was primarily due to the
decrease of non-deductible expenses.

       Net income

       Net income in 2002 was RMB 16.1 billion (US$1.9 billion), slightly up
by 0.6% compared with RMB 16 billion (US$1.9 billion) in 2001. Basic earnings
per share in 2002 was RMB0.19 (US$0.023), which was the same as that in 2001.

       Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

       Our sales of goods, operating income and net income in 2001 declined
6.4%, 23.1% and 18.4%, respectively, from 2000 to RMB 304.4 billion (US$36.8
billion), RMB 27.3 billion (US$ 3.3 billion) and RMB 16 billion (US$1.9
billion), respectively. The decline was largely due to the our lower average
realized prices of crude oil, refined products and chemical products in 2001,
which were affected by the global economic downturn. These lower realized
prices were the major causes of our depressed profit margins in exploration
and production segment, marketing and distribution segment and chemical
segment.

       Operating revenues

       Overview

       Operating revenues were down by RMB 13 billion (US$1.6 billion), or
3.9%, from RMB 331.5 billion (US$40.1 billion) in 2000 to RMB 318.5 billion
(US$38.5 billion) in 2001. Sales of goods decreased by RMB 20.9 billion
(US$2.5 billion), or 6.4%, from RMB 325.3 billion (US$39.3 billion) in 2000 to
RMB 304.4 billion (US$36.8 billion) in 2001 primarily as a result of the fall
of the average realized prices of crude oil, refined products and chemical
products. The decrease in sales of goods was partially offset by an increase
of RMB 7.9 billion (US$1.0 billion), or 127.4%, in the other operating
revenues, which increased from RMB 6.2 billion (US$0.7 billion) in 2000 to RMB
14.1 billion (US$1.7 billion) in 2001 primarily because other operating
revenues in 2000 were reported net of the related expenses whereas in 2001
other operating revenues are reported on a gross basis and the related
expenses are reported separately in operating expenses. The other operating
revenues primarily consist of sales revenue generated by us in sales of
certain ancillary products and raw materials such as steel, cement and wood to
Sinopec Group Company and third parties. Had we reported the 2000 other
operating revenues on a gross basis, the year to year comparison of the change
in other operating revenues would not be significant.

       Sales of crude oil and natural gas

       In 2001, sales of crude oil and natural gas were RMB 11.1 billion
(US$1.3 billion), down RMB 1.2 billion (US$0.1 billion) from 2000, and
accounted for 3.5% of our operating revenues. The decline was largely due to
the lower average realized crude oil price, which was down 12% from RMB 1,427
(US$172.4) per tonne in 2000 to RMB 1,256 (US$151.8) per tonne in 2001.

       Sales of refined petroleum products

       In 2001, sales of refined products by those two segments were RMB 230.1
billion (US$27.8 billion), down 5.1% compared with RMB 242.5 billion (US$29.3
billion) in 2000, and accounted for 72.2% of our operating revenues. Sales of
gasoline and diesel in 2001 were RMB 164.4 billion (US$19.9 billion), down
5.6% compared with RMB 174.1 billion (US$21.0 billion) in 2000, and accounted
for 71.4% of our revenues from the sales of refined products. Sales of
gasoline decreased by 7.4% from RMB 65.2 billion (US$7.9 billion) in 2000 to
RMB 60.4 billion (US$7.3 billion) in 2001. Sales of diesel decreased by 4.5%
from RMB 108.9 billion (US$13.2 billion) in 2000 to RMB 104 billion (US$12.6
billion) in 2001. The decline of sales of gasoline and diesel was largely due
to the lower average realized prices of gasoline and diesel in 2001.

       Sales of chemicals

       Sales of chemical products in 2001 were RMB 48.9 billion (US$5.9
billion), down 13% compared to RMB 56.2 billion (US$6.8 billion) in 2000. The
decline was largely due to the continual slump in the prices of chemical
products in 2001, which was in part caused by the continued depression of the
global chemical products market and the fairly steep decline of the
international crude oil prices in 2001. While the sales volumes of synthetic
resins, synthetic rubbers, and synthetic fibers monomers and polymers slightly
increased compared to those in 2000, the average realized prices of these
products declined by 12%, 11% and 27.5%, respectively, from those in 2000.

       Operating expenses

       Overview

       Operating expenses in 2001 were RMB 291.2 billion (US$35.2 billion),
down RMB 4.8 billion (US$0.6 billion), or 1.6%, from 2000. The decline in
operating expenses was primarily attributable to the decline in the expense
item of purchased crude oil, products and operating supplies and expenses.

       Purchased crude oil, products and operating supplies and expenses

       Purchased crude oil, products and operating supplies and expenses in
2001 were RMB 220.3 billion (US$26.6 billion), down 2.7% compared with RMB
226.5 billion (US$27.4 billion) in 2000, and accounted for 75.7% of our total
operating expenses. Among the purchased crude oil, products and operating
supplies and expenses, purchased crude oil expenses were RMB 116 billion
(US$14.0 billion), down 17.8% compared with RMB 141.2 billion (US$17.1
billion) in 2000, which decline was largely due to :

       o    The volume of purchased crude oil decreased as more of our crude
            oil requirement was satisfied by our own production. We processed
            a total of 101.04 million tonnes of crude oil in 2001, down 3.7%
            compared with 104.88 million tonnes in 2000. Of the total amount
            of crude oil processed, 31.27 million tonnes, or 31%, were
            supplied by our exploration and production segment, up 13.7%
            compared with 27.5 million tonnes in 2000, and 69.77 million
            tonnes, or 69%, were purchased from external sources, down 9.8%
            compared with 77.38 million tonnes in 2000. In 2001, our purchased
            crude oil includes 48.98 million tonnes of imports, 14.09 million
            tonnes from PetroChina Limited and 6.7 million tonnes from CNOOC
            Limited; and

       o    The average realized price that we expensed on crude oil in 2001
            declined as the international crude oil prices fell. The average
            realized crude oil price that we expensed in 2001 decreased by
            8.9% from RMB 1,825 (US$220.5) per tonne in 2000 to RMB 1,663
            (US$200.9) per tonne in 2001.

       Among the purchased crude oil, products and operating supplies and
expenses, expenses other than purchased crude oil were RMB104.3 billion
(US$12.6 billion) in 2001, up 22% compared with RMB85.3 billion (US$10.3
billion) in 2000, and accounted for 35.8% of the our total operating expenses.
The increase was largely due to:

       o    Other operating revenues in 2000 were reported net of associated
            operating expenses whereas in 2001 other operating revenues are
            reported on a gross basis and the related operating expenses are
            reported separately in operating expenses; and

o Purchased diesel and gasoline expenses increased due to larger amount
purchased in 2001.

       Selling, general and administrative expenses

       Selling, general and administrative expenses in 2001 were RMB 17.1
billion (US$2.1 billion), down 12.3% compared with RMB 19.5 billion (US$2.4
billion) in 2000, which decline was largely due to our implementation of cost
reduction measures and strengthened administration on accounts receivables.

       Depreciation expenses

       Depreciation, depletion and amortization in 2001 were RMB 22.4 billion
(US$2.7 billion), up 7.7% compared with RMB 20.8 billion (US$2.5 billion) in
2000, which increase was largely due to the commencement of operation of newly
developed or acquired properties, plants and equipment, including oil and gas
properties.

       Exploration expenses

       Exploration expenses in 2001 were RMB 3.8 billion (US$0.5 billion), up
26.7% compared with RMB 3 billion (US$0.4 billion) in 2000. The increase was
largely a result of the implementation of our strategy to continue expanding
resources, which led to the increased exploration expenditure.

       Personnel expenses and employee reduction expenses

       Personnel expenses in 2001 were RMB 12.9 billion (US$1.6 billion), down
3% compared with RMB 13.3 billion (US$1.6 billion) in 2000, which decline was
largely a result of our employee reduction programme.

       In accordance with our employee reduction plan, we recorded employee
reduction expenses of RMB 2.6 billion (US$0.3 billion) in 2001 in respect of
the voluntary termination and the transfer to Sinopec Group Company totalling
approximately 68,000 employees.

       Taxes other than income tax

       Taxes other than income tax, which primarily are the consumption tax,
were RMB 11.9 billion (US$1.4 billion) in 2001, down 2.5% compared with RMB
12.2 billion (US$1.5 billion) in 2000. The decline was largely due to the
reduction in sales volume of gasoline and diesel produced by us, resulting in
lower consumption tax in 2001.

       Operating income

       Operating income in 2001 was RMB 27.3 billion (US$3.3 billion), down
23.1% compared with RMB 35.5 billion (US$4.3 billion) in 2000. The decline was
largely due to the fact that the decrease in our operating revenues exceeded
the decrease in our operating expenses.

       Net finance cost

       Net finance cost in 2001 was RMB 3.2 billion (US$0.4 billion), down 36%
compared with RMB 5 billion (US$0.6 billion) in 2000. The decrease was largely
due to:

       o    Lower interest rates in 2001 of a number of foreign currency
            loans;

       o    Lower average long and short-term debt level partly as a result of
            our enhanced centralization of fund management; and

       o    Increase in interest income from the proceeds from the public
            offering of domestic listed A shares in 2001 after deduction of
            the offering expenses.

       Income before income tax and minority interests

       Income before income tax and minority interests in 2001 was RMB 24.6
billion (US$3.0 billion), down 20.6% compared with RMB 31 billion (US$3.7
billion) in 2000. The decline was a result of the lower operating income, and
was partially offset by the decrease of net finance cost.

       Income tax

       Income tax in 2001 was RMB 8 billion (US$1.0 billion), down 16.7%
compared with RMB 9.6 billion (US$1.2 billion) in 2000 as a result of the
lower operating income.

       Net income

       Net income in 2001 was RMB 16 billion (US$1.9 billion), down 18.4%
compared with RMB 19.6 billion (US$2.4 billion) in 2000 primarily because the
decline in operating revenues outpaced the decline in operating expenses in
2001. Basic earnings per share in 2001 was RMB 0.19 (US$0.023) as compared to
basic earnings per share of RMB 0.27 in 2000 (US$0.033).

Discussion of Segment Operations

       We divide our operations into four principal business segments, namely,
exploration and production segment, refining segment, marketing and
distribution segment and chemicals segment, and a corporate and others
segment.

       Unless otherwise indicated, intersegment transactions have not been
eliminated from the financial data discussed in this section and the operating
revenue data for each of our business segments discussed in this section
include, in addition to the sales of goods, other operating revenues for each
such segment.

       The following table lists operating revenues by segment for the periods
indicated, the contribution of external sales and intersegment sales as a
percentage of consolidated operating revenues before elimination of
intersegment sales for 2001 and 2002, and the contribution of external sales
as a percentage of consolidated operating revenues (i.e., after elimination of
intersegment sales) for 2001 and 2002.

<TABLE>
<CAPTION>

                                                                  As a Percentage of  As a Percentage of
                                                                     Consolidated        Consolidated
                                                                  Operating Revenues  Operating Revenues
                                                                  Before Elimination   After Elimination
                                    Years Ended December 31,              of                  of
                                    ------------------------          Intersegment        Intersegment
                                                                         Sales              Sales
                                                                  ------------------  ------------------

                                 2000     2001     2002    2002     2001      2002     2001       2002
                                 ----     ----     ----    ----     ----      ----     ----       ----
                                  RMB      RMB      RMB     US$         Percent             Percent
                                          (in billions)
Operating Revenues
<S>                               <C>       <C>      <C>      <C>     <C>       <C>       <C>        <C>
Exploration & Production
   External sales(1)...........   13.7     17.3     18.2     2.2      3.2       3.2      5.4%      5.4%
   Intersegment sales..........   46.2     43.3     39.4     4.8      8.1       6.9
                                  ----     ----     ----     ---      ---       ---
     Total operating revenue...   59.9     60.6     57.6     7.0     11.3      10.1
                                  ====     ====     ====     ===     ====      ====
Refining
   External sales(1)...........   70.9     52.3     50.6     6.1      9.8       8.9      16.4      14.9
   Intersegment sales..........  162.2    156.8    161.3    19.5     29.3      28.3
                                 -----    -----    -----    ----     ----      ----
     Total operating revenue...  233.1    209.1    211.9    25.6     39.0      37.2
                                 =====    =====    =====    ====     ====      ====
Marketing and distribution
   External sales(1)...........  175.0    180.8    184.7    22.3     33.8      32.4      56.8      54.3
   Intersegment sales..........    0.6      2.5      2.3     0.3      0.5       0.4
                                 -----    -----    -----    ----     ----      ----
     Total operating revenue...  175.6    183.3    187.0    22.6     34.2      32.8
                                 =====    =====    =====    ====     ====      ====
Chemicals
   External sales(1)...........  57.5     53.3     62.4     7.5      10.0      10.9      16.7      18.4
   Intersegment sales..........   3.4      5.6      7.2     0.9       1.0       1.3
                                 -----    -----    -----    ----     ----      ----
     Total operating revenue...  60.9     58.9     69.6     8.4      11.0      12.2
                                 ====     ====     ====     ===      ====      ====
Corporate and others
   External sales(1)...........  14.5     14.8     24.1     2.9      2.8       4.2        4.7      7.0
   Intersegment sales..........  11.5      8.9     19.8     2.4      1.7       3.5
                                 ----      ---     ----     ---      ---       ---
     Total operating revenue...  26.0     23.7     43.9     5.3      4.5       7.7
                                 ====     ====     ====     ===      ===       ===
     Total operating revenue
before
     intersegment eliminations. 555.5    535.6    570.0    68.8     100%      100%
                                                                    ===       ===
Elimination of intersegment
sales   ...................... (224.0)  (217.1)  (230.0)  (27.8)               --
                               ======   ======   ======   =====
   Consolidated operating
revenues......................  331.5    318.5    340.0    41.1                --      100%      100%
                                =====    =====    =====    ====                        ===       ===
</TABLE>

___________
(1)  Includes other operating revenues. See note 28 to the consolidated
     financial statements for other operating revenues of each of our
     operating segments.

       The following table lists operating revenues, operating expenses and
operating income by segment before elimination of intersegment transactions
for the periods indicated.

<PAGE>
<TABLE>
<CAPTION>

                                                          Years Ended December 31,
                                                        ----------------------------
                                                  2000           2001           2002           2002
                                                  ----           ----           ----           ----
                                                  RMB             RMB            RMB           US$
                                                                    (in billions)
Exploration and Production
<S>                                                <C>             <C>           <C>            <C>
   Total operating revenues...........             59.9            60.6          57.6           7.0
   Total operating expenses...........            (34.5)          (37.4)        (42.8)         (5.2)
                                                  -----           -----         -----          ----
     Total operating income...........             25.4            23.2          14.8           1.8
                                                   ====            ====          ====           ===
Refining
   Total operating revenues...........            233.1           209.1         211.9          25.6
   Total operating expenses...........           (231.7)         (207.0)       (206.0)        (24.9)
                                                 ------          ------        ------         -----
     Total operating income...........              1.4             2.1           5.9           0.7
                                                    ===             ===           ===           ===
Marketing and distribution
   Total operating revenues...........            175.6           183.3         187.0          22.6
   Total operating expenses...........           (169.2)         (180.9)       (178.6)        (21.6)
                                                 ------          ------        ------         -----
     Total operating income...........              6.4             2.4           8.4           1.0
                                                    ===             ===           ===           ===
Chemicals
   Total operating revenues...........             60.9            58.9          69.6           8.4
   Total operating expenses...........            (58.5)          (59.6)        (69.5)         (8.4)
                                                  -----           -----         -----          ----
     Total operating income/(loss)....              2.4            (0.7)          0.1           0.0
                                                    ===            ====           ===           ===
Corporate and others
   Total operating revenues...........             26.0            23.7          43.9           5.3
   Total operating expenses...........            (26.1)          (23.4)        (44.9)         (5.4)
                                                  -----           -----         -----          ----
     Total operating (loss)/income....             (0.1)            0.3          (1.0)         (0.1)
                                                   ====             ===          ====          ====
</TABLE>

       Exploration and Production Segment

       Our exploration and production segment consists of our activities
related to exploring for and developing, producing and selling of crude oil
and natural gas.

       Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

       Operating revenues from the exploration and production segment in 2002
were RMB 57.6 billion (US$7.0 billion), down by RMB 3 billion (US$0.4
billion), or 5%, from RMB 60.6 billion (US$7.3 billion) in 2001. The decline
in operating revenues was primarily due to the decrease of the average
realized prices and sales volume of crude oil. Despite that crude oil prices
on the international market have gradually increased since March 2002, our
average realized crude oil price in 2002 was still lower than that of 2001,
partly because the crude oil pricing mechanism in China, though determined in
accordance with the international market prices, lags behind them for
approximately one month.

       In 2002, the segment's average realized price of crude oil was RMB
1,317.82 (US$159.2) per tonne, down by 4% compared with RMB 1,373.06
(US$165.8) per tonne in 2001. Average realized price of natural gas was RMB
571.69 (US$69.0) per thousand cubic meter in 2002, up by 1.9% compared with
RMB 561.08 (67.8) per thousand cubic meter in 2001.

       In 2002, the exploration and production segment sold 35.53 million
tonnes of crude oil, down by 0.48 million tonnes, or 1.3%, from 36.01 million
tonnes in 2001. It also sold 3.3 billion cubic meters of natural gas, up by
0.2 billion cubic meters, or 6.5%, from 3.1 billion cubic meters in 2001.
While the crude oil production volume in 2002 remained at the similar level to
that in 2001, crude oil sales volume declined primarily because the segment
sold 0.38 million tonnes more of inventory crude oil stored in the pipelines
in 2001 compared with 2002. The increase in natural gas sales volume was
primarily due to the increased production of natural gas from Sinopec National
Star and in China's western regions.

       Operating expenses for the exploration and production segment were RMB
42.8 billion (US$5.2 billion), up by RMB 5.4 billion (US$0.7 billion), or
14.4%, from RMB 37.4 billion (US$4.5 billion) in 2001, which increase is
primarily due to the following reasons:

       o    Depreciation, depletion and amortization increased by RMB 0.9
            billion (US$108.7 million)from RMB 8.1 billion (US$1.0 billion) in
            2001 to RMB 9 billion (US$1.1 billion) in 2002 as more fixed
            assets commenced operation as a result of various capital
            expenditure programmes;

       o    We continued to implement in 2002 our strategy of expanding
            resources, and increased our exploration expenditure in certain
            important areas in western China and southern China's marine bed
            formation areas so as to lay a firm foundation for the potential
            future increase of crude oil reserve and production. Exploration
            expenses (including dry holes expenses) were up by RMB 0.6 billion
            (US$72.5 million) from RMB 3.8 billion (US$0.5 billion) in 2001 to
            RMB 4.4 billion (US$0.5 billion) in 2002;

       o    We reducedapproximately RMB 0.2 billion (US$ 24.2 million) of the
            allowance for doubtful debts in 2001, while in 2002, we made a
            provision for allowance for doubtful accounts of approximately RMB
            0.4 billion (US$48.3 million). The related expenses in 2002 thus
            increased by approximately RMB 0.6 billion (US$72.5 million)
            compared with 2001.

       o    As a result of the segment's reinforcement of its performance
            based incentive schemes as well as the implementation of new
            incentive schemes in certain subsidiaries such as special salaries
            for special positions, expenses related to salaries, welfare and
            social security increased approximately by RMB 0.3 billion
            (US$36.2 million) in 2002 compared with 2001;

       o    The segment disposed certain obsolete and retired equipment after
            various facilities' upgrade, which resulted in an increase of the
            related expenses by approximately RMB 0.3 billion (US$36.2
            million) in 2002; and

       o    Other operating expenses of the segment including supplies of
            materials in 2002 increased by RMB 0.9 billion (US$108.7 million)
            compared with 2001.

       Operating income of the exploration and production segment was
approximately RMB 14.8 billion (US$1.8 billion) in 2002, down by RMB 8.4
billion (US$1.0 billion), or 36.2%, from RMB 23.2 billion (US$2.8 billion) in
2001. The decline was primarily due to the decline of realized prices of crude
oil as well as the increase of depreciation, depletion and amortization
expenses and exploration expenses.

       Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

       Operating revenues for the exploration and production segment in 2001
were RMB 60.6 billion (US$7.3 billion), up 1.2% compared with RMB 59.9 billion
(US$7.2 billion) in 2000. Despite the lower average realized crude oil price,
operating revenues increased in 2001 largely due to:

       o    Increased sales volumes of crude oil and natural gas in 2001; and

       o    Other operating revenues in 2000 were reported net of associated
            operating expenses, whereas in 2001 other operating revenues are
            reported on a gross basis and the related operating expenses are
            reported separately in operating expenses. Had we reported the
            2000 other operating revenues on a gross basis, the year to year
            comparison of the change in other operating revenues would not be
            significant.

       We sold 36.01 million tonnes of crude oil in 2001 (inclusive of 2.46
million tonnes sold by Sinopec National Star), up 2.6% compared with 35.1
million tonnes sold in 2000 (inclusive of 2.04 million tonnes sold by Sinopec
National Star). We also sold 3.084 billion cubic meters of natural gas in 2001
(inclusive of 1.5 billion cubic meters sold by Sinopec National Star), up 12%
compared with 2.76 billion cubic meters in 2000 (inclusive of 1.3 billion
cubic meters sold by Sinopec National Star). Increase in the sales volumes of
crude oil and natural gas were largely due to the increase in our production
of crude oil and natural gas.

       Our average realized price of crude oil in 2001 was RMB 1,373
(US$165.9) per tonne, down 14% compared with RMB 1,598 (US$193.1) per tonne in
2000. Decline in the average realized crude oil price reflected the downward
trend of the international crude oil prices in 2001.

       Our average realized price of natural gas in 2001 was RMB 561 (US$67.8)
per thousand cubic meters, slightly decreased by 2% from RMB 571 (US$69.0) per
thousand cubic meters in 2000.

       Operating expenses for the exploration and production segment in 2001
were RMB 37.4 billion (US$4.5 billion), up 8.4% compared with RMB 34.5 billion
(US$4.2 billion) in 2000. The increase was largely because:

       o    We implemented our strategy of expanding resources and increased
            exploration and production expenditures, causing the exploration
            expenses (including dry holes) to increase by 26.7% from RMB 3
            billion (US$0.4 billion) in 2000 to RMB 3.8 billion (US$0.5
            billion) in 2001;

       o    Depreciation, depletion and amortization expenses increased by
            18.5% from RMB 6.6 billion (US$0.8 billion) in 2000 to RMB 8.1
            billion (US$1.0 billion) in 2001, as we added more oil and gas
            properties in 2001 as a result of our various capital expenditure
            programmes; and

       o    The purchase expense in relation to the other operating revenues
            increased in 2001 as such expenses and the other operating
            revenues were separately reported.

       Operating income for the exploration and production segment in 2001 was
RMB 23.2 billion (US$2.8 billion), down 8.7% compared with RMB 25.4 billion
(US$3.1 billion) in 2000.

       Refining Segment

       Our refining segment consists of our operations related to purchasing
crude oil from our exploration and production segment and from third parties,
processing of crude oil into refined products, selling refined products
principally to our marketing and distribution segment and to domestic and
overseas customers. To operate more efficiently as an integrated company with
distinct refining and marketing and distribution segments, substantially all
the refining segment's sales of gasoline, diesel, kerosene including jet fuel,
other than for exports, are made to the marketing and distribution segment,
and the other refined products are sold to domestic and overseas customers.

       Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

       Operating revenues of the refining segment in 2002 were RMB 211.9
billion (US$25.6 billion), up by 1.3% compared with RMB 209.1 billion (US$25.3
billion) in 2001. The increase in operating revenues was primarily due to the
significant increase in revenues from the sales of chemical feedstock as well
as certain refined products other than gasoline and diesel.

       In 2002, the refining segment sold 19.3 million tonnes of gasoline at
an average realized price of RMB 2,280.51 (US$275.4) per tonne, and realized
sales revenues of RMB 44 billion (US$5.3 billion), accounting for 20.8% in the
total operating revenues of the refining segment. In 2001, the refining
segment sold 18.72 million tonnes of gasoline at an average realized price of
RMB 2,386.88 (US$288.3) per tonne, and realized sales revenues of RMB 44.7
billion (US$5.4 billion), accounting for 21.4% in the total operating revenues
of the refining segment in 2001.

       Compared with 2001, the sales volume of gasoline in 2002 increased by
0.58 million tonnes, or 3.1%; the realized gasoline price fell by RMB 106.37
(US$12.8) per tonne, or 4.5%; sales revenues of gasoline decreased by RMB 0.7
billion (US$84.5 million), and that as a percentage of the refining segment's
total operating revenues declined by 0.6 percentage point.

       In 2002, the refining segment sold 37.39 million tonnes of diesel at an
average realized price of RMB 2,126.55 (US$256.8) per tonne, and realized
sales revenues of RMB 79.5 billion (US$9.6 billion), accounting for 37.5% of
the total operating revenues of the refining segment. In 2001, the refining
segment sold 38.08 million tonnes of diesel at an average realized price of
RMB 2,199.94 (US$265.7) per tonne, and realized sales revenues of RMB 83.8
billion (US$10.1 billion), accounting for 40.1% of the total operating
revenues of the refining segment in 2001.

       Compared with 2001, the sales volume of diesel in 2002 decreased by
0.69 million tonnes, or 1.8%; the realized diesel price fell by RMB 73.39
(US$8.9) per tonne, or 3.3%; sales revenues of diesel decreased by RMB 4.3
billion (US$0.5 billion), and that as a percentage of the refining segment's
total operating revenues declined by 2.6 percentage points.

       In 2002, the refining segment sold 20.09 million tonnes of chemical
feedstock at an average realized price of RMB 1,934.24 (US$233.6) per tonne,
and realized sales revenues of RMB 38.9 billion (US$4.7 billion), accounting
for 18.4% of the total operating revenues of the refining segment. In 2001,
the refining segment sold 17.12 million tonnes of chemical feedstock at an
average realized price of RMB 1,990.49 (US$240.4) per tonne, and realized
sales revenues of RMB 34.1 billion (US$4.1 billion), accounting for 16.3% of
the total operating revenues of the refining segment in 2001.

       Compared with 2001, the sales volume of chemical feedstock in 2002
increased by 2.97 million tonnes, or 17.3%; sales price fell by RMB 56.25
(US$6.8) per tonne, or 2.8%; sales revenues increased by RMB 4.8 billion
(US$0.6 billion), and that as a percentage of the refining segment's total
operating revenues increased by 2.1 percentage points. In 2002, as part of its
optimization plan for resource allocations, the refining segment adjusted its
product mix in accordance with the increased demand from our chemical segment
and significantly increased its production as well as sales volume of chemical
feedstock.

       In 2002, the refining segment sold 24.98 million tonnes of other
refined products than gasoline, diesel and chemical feedstock at an average
realized price of RMB 1,860.99 (US$224.8) per tonne, and realized sales
revenues of RMB 46.5 billion (US$5.6 billion), accounting for 21.9% of the
total operating revenues of the refining segment. In 2001, the refining
segment sold 23.43 million tonnes of these other refined products at an
average realized price of RMB 1,872.36 (US$226.1) per tonne, and realized
sales revenues of RMB 43.9 billion (US$5.3 billion), accounting for 21% of the
total operating revenues of the refining segment in 2001.

       Compared with 2001, the sales volume of these other refined products
increased by 1.55 million tonnes, or 6.6%; average realized sales price fell
by RMB 11.37 (US$1.4) per tonne, or 0.6%; sales revenues increased by RMB 2.6
billion (US$0.3 billion), and that as a percentage of the segment's total
operating revenues increased by 0.9 percentage point. The increase in the
sales volume of these other refined products outpaced that of gasoline and
diesel, as we intended to capture the favorable opportunities presented in the
changing market by strengthening the management control of these other refined
products and increasing the production of those products with higher added
value.

       In 2002, operating expenses of the refining segment were RMB 206
billion (US$24.9 billion), down by RMB 1 billion (US$0.1 billion), or 0.5%,
from RMB 207 billion (US$25.0 billion) in 2001. The decrease was primarily due
to the reduction of average purchase cost of crude oil. In 2002, average cost
of crude oil was RMB 1,532.48 (US$185.1) per tonne, down by RMB 85.41
(US$10.3) per tonne, or 5.3%, from RMB 1,617.89 (US$195.4) per tonne in 2001.
In 2002, the segment processed 104.15 million tonnes of crude oil (excluding
crude oil processed for third parties), up by 3.11 million tonnes from 101.04
million tonnes in 2001, which increase was partially offset by the decline of
the average purchase cost of crude oil. In 2002, total purchase expenses of
crude oil were RMB 159.6 billion (US$19.3 billion), accounting for 77.5% of
the total operating expenses of the refining segment. In 2001, total purchase
expenses of crude oil was RMB 163.5 billion (US$19.7 billion), accounting for
79% of the total operating expenses of the refining segment. Compared with
2001, the total purchase expenses of crude oil for the segment in 2002
decreased by RMB 3.9 billion (US$0.5 billion), and that as a percentage of the
segment's total operating expenses decreased by 1.5 percentage points.

       In 2002, our refining margin (defined as the refining segment's sales
revenues less crude oil expenses, feedstock expenses and taxes other than
income tax; and divided by the volume of crude oil and feedstock processed)
was US$3.95 per barrel, which increased by US$0.38 per barrel, or 10.6%, from
US$3.57 per barrel in 2001.

       In 2002, operating income of the refining segment was RMB 5.9 billion
(US$0.7 billion), up by RMB 3.8 billion (US$0.5 billion), or 181%, from RMB
2.1 billion (US$0.3 billion) in 2001. The increase was largely due to the
increased refining margins as a result of, among others, the increased crude
oil throughput, the better adjustment of product mix, the expansion of the
market and the increased production of refined products with higher added
value.


       Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

       Operating revenues of the refining segment in 2001 were RMB 209.1
billion (US$25.3 billion), down 10.3% compared with RMB 233.1 billion (US$28.2
billion) in 2000. The decline was largely due to the reduction in the refining
throughput as the market demand slowed down in 2001, and apart from the slight
increase in the sales volume of diesel and chemical feedstocks due to
adjustment of the output ratio between diesel and gasoline, sales volumes of
gasoline and other refined products all decreased. In addition, under the
impact of the falling prices of crude oil and refined oil products on the
international markets, and particularly the irregular lower-than-crude
gasoline prices in Singapore from June to August 2001, the realized prices of
refined products decreased in 2001. Sales of gasoline, diesel, chemical
feedstocks in 2001 accounted for approximately 81% of the operating revenues
of the refining segment and amounted to RMB 170 billion (US$20.5 billion),
down 8.3% compared with RMB 185.3 billion (US$22.4 billion) in 2000.

       o    In 2001, the refining segment sold 18.72 million tonnes of
            gasoline at an average realized price of RMB 2,387 (US$288.4) per
            tonne, revenue from sales of gasoline was RMB 44.7 billion (US$5.4
            billion), representing approximately 21% of total operating
            revenues of the refining segment. Whereas in 2000, the refining
            segment sold 19.76 million tonnes of gasoline at an average
            realized price of RMB 2,581 (US$311.8) per tonne, revenue from
            sales of gasoline was RMB 51 billion (US$6.2 billion),
            representing approximately 22% of the total operating revenues of
            the refining segment.

       o    In 2001, the refining segment sold 38.08 million tonnes of diesel
            at an average realized price of RMB 2,200 (US$265.8) per tonne,
            revenue from sales of diesel was RMB 83.8 billion (US$10.1
            billion), representing approximately 40% of the total operating
            revenues of the refining segment. Whereas in 2000, the refining
            segment sold 37.38 million tonnes of diesel at an average realized
            price of RMB 2,426 (US$293.1) per tonne, revenue from sales of
            diesel was RMB 90.7 billion (US$11.0 billion), representing
            approximately 39% of the total operating revenues of the refining
            segment.

       o    In 2001, the refining segment sold 21.25 million tonnes of
            chemical feedstocks at an average realized price of RMB 1,957
            (US$236.4) per tonne, revenue from sales of chemical feedstocks
            was RMB 41.6 billion (US$5.0 billion), representing approximately
            20% of the total operating revenues of the refining segment.
            Whereas in 2000, the refining segment sold 20.59 million tonnes of
            chemical feedstocks at an average realized price of RMB 2,118
            (US$255.9) per tonne, revenue from sales of chemical feedstocks
            was RMB 43.6 billion (US$5.3 billion), representing approximately
            19% of the total operating revenues of the refining segment.

         Operating expenses of the refining segment in 2001 were RMB 207.0
billion (US$25.0 billion), down 10.7% compared with RMB 231.7 billion (US$28.0
billion) in 2000. The decline was largely due to the decrease in the purchase
expenses of crude oil, feedstocks, catalysts and other ancillary materials and
a lower cash operating cost.

         In 2001, the refining segment purchased a total of 101.04 million
tonnes of crude oil; the average purchase cost of crude oil was RMB 1,618
(US$195.5) per tonne, and the total cost of crude oil was RMB 163.5 billion
(US$19.8 billion), representing 79% of the total operating expenses of the
refining segment. Whereas in 2000, the refining segment purchased 104.88
million tonnes of crude oil; the average purchase cost of crude oil was RMB
1,793 (US$216.6) per tonne, and total cost of crude oil was RMB 188 billion
(US$22.7 billion), representing 81% of the total operating expenses of the
refining segment.

         In 2001, our refining margin (defined as sales revenue less crude oil
expenses, feedstock expenses and taxes other than income tax; divided by the
volume of crude oil and feedstocks processed) was US$ 3.57 per barrel slightly
declined when compared 2000. Prior to October 17, 2001, prices of domestic
refined products in the PRC were determined and announced on a monthly basis
with reference to the FOB prices of similar refined products on the Singapore
market. Due to the excess refining capacity in Asia, prices of gasoline on the
Singapore market from June to August 2001 were lower than crude oil prices,
which depressed our refining margin. After October 17, 2001, domestic prices
of gasoline and diesel have instead been benchmarked against three
international markets, namely, Singapore, Rotterdam and New York. The new
pricing scheme has a positive impact on our refining margin. After September
11, 2001, global demands for refined products have been adversely affected to
different extents, and despite improvements in November and December 2001, our
refining margin did not improve in 2001 compared with 2000.

         Operating income of the refining segment in 2001 was RMB 2.1 billion
(US$0.3 billion), up 50% compared with RMB 1.4 billion (US$0.2 billion) in
2000. The increase was largely due to the reduction in cash operating cost and
a decrease in inventory of refined products that were sold to marketing and
distribution segment at the end of 2001.

       Marketing and Distribution Segment

       Our marketing and distribution segment consists of our operations
related to purchasing refined petroleum products from the refining segment and
third parties, and marketing, selling and distributing refined products
wholesale to large domestic customers including independent distributors,
special customers and direct distribution customers, and retail through our
retail distribution network.

       Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

       Operating revenues of the marketing and distribution segment in 2002
were RMB 187 billion (US$22.6 billion), up by RMB 3.7 billion (US$0.4
billion), or 2%, from RMB 183.3 billion (US$22.1 billion) in 2001. The
increase was mainly due to the increased sales volume of the refined products.
The total sales volume of the refined products by the segment in 2002 was
73.61 million tonnes, up by 4.26 million tonnes, or 6.1%, from 69.35 million
tonnes in 2001.

       Retail sales as a percentage of the segment's total sales revenues
further increased in 2002. The retail sales revenue of gasoline and diesel
accounted for 43.7% of the segment's operating revenues in 2002, up from 39.7%
in 2001. Wholesale sales revenues of gasoline and diesel accounted for 46.1%
of the segment operating revenues in 2002, down from approximately 53% in
2001.

       Wholesale sales volume accounted for 55.2% of the total sales volume of
gasoline and diesel in 2002, down by 2.4 percentage points from 57.6% in 2001.
Retail sales volume accounted for 44.8% of the total sales volume of gasoline
and diesel in 2002, up by 2.4 percentage points from 42.4% in 2001.

       The increase in retail sales revenue and retail sales volume was mainly
a result of the increased average throughput at each service station, which
increase was attributable to our continued effort to enhance our retail
distribution network, to further optimize the locations of our existing
service stations and to improve our quality of service.

       Sales revenues of gasoline were RMB 61 billion (US$7.4 billion) in
2002, up by RMB 5.3 billion (US$0.6 billion), or 9.5%, from RMB 55.7 billion
(US$6.7 billion) in 2001. This increase was primarily due to the increased
sales volume as well as the increased sales prices of gasoline. Gasoline sales
price increased because of the increased retail sales proportion as well as
the increased sales volume of higher grade gasoline. Sales volume of gasoline
in 2002 was 21.36 million tonnes, up by 1.09 million tonnes, or 5.4%, from
20.27 million tonnes in 2001. In addition, the sales volume of gasoline with
octane level #90 and higher as a percentage of the segment's total gasoline
sales volume was further enhanced, up by 31% from 4.41 million tonnes in 2001
to 5.78 million tonnes in 2002. In 2002, the average realized sales price of
gasoline was RMB 2,856.68 (US$345.0) per tonne, up by RMB 107.56 (US$13.0) per
tonne, or 3.9%, compared with RMB 2,749.12 (US$332.0) per tonne in 2001.

       o    In 2002, the retail sales volume of gasoline increased to 12.34
            million tonnes, up by 1.5 million tones, or 13.9%, from 10.84
            million tonnes in 2001; and the average realized retail sales
            price of gasoline was RMB 3,061.82 (US$369.8) per tonne, up by
            4.3% compared with RMB 2,934.55 (US$354.4) per tonne in 2001;

       o    In 2002, the wholesale sales volume of gasoline (excluding direct
            distribution sales volume and those directly sold to special
            customers) was 7.25 million tonnes, down by 0.69 million tonnes,
            or 8.7%, from 7.94 million tonnes in 2001; and the average
            realized wholesale sales price of gasoline was RMB 2,585.31
            (US$312.2) per tonne, up by 1.9% compared with RMB 2,536.2
            (US$306.3) per tonne in 2001;

       o    In 2002, the direct distribution sales volume of gasoline was 1.04
            million tonnes, up by 0.41 million tonnes, or 64.5%, from 0.63
            million tonnes in 2001; and the average realized price for the
            direct distribution sales of gasoline was RMB 2,693.28 (US$325.3)
            per tonne, up by 1.9% compared with RMB 2,642.34 (US$319.1) per
            tonne in 2001; and

       o    In 2002, the direct sales volume of gasoline to special customers
            was 0.72 million tonnes, down by 0.14 million tonnes, or 16.3%,
            from 0.86 million tonnes in 2001; and the average realized price
            of gasoline sold to special customers was RMB 2,312.75 (US$279.3)
            per tonne, down by 5.9% compared with RMB 2,457.12 (US$296.8) per
            tonne in 2001.

       In 2002, the sales revenues of diesel were RMB 107 billion (US$12.9
billion), up by RMB 3.2 billion (US$0.4 billion), or 3.1%, from RMB 103.8
billion (US$12.5 billion) in 2001. The increase was primarily due to the
increased sales volume of diesel. In 2002, the sales volume of diesel was 44.5
million tonnes, up by 1.95 million tonnes, or 4.6%, from 42.55 million tonnes
in 2001; the average realized sales price of diesel was RMB 2,404.85
(US$290.4) per tonne, down by RMB 35.6 (US$4.3) per tonne, or 1.5%, compared
with RMB 2,440.45 (US$294.7) per tonne in 2001.

       o    In 2002, the retail sales volume of diesel increased to 17.16
            million tonnes, up by 1.34 million tonnes, or 8.5%, from 15.82
            million tonnes in 2001; and the average realized retail sales
            price of diesel was RMB 2,562.49 (US$309.5) per tonne, down by
            1.1% compared with RMB 2,590.59 (US$312.9) per tonne in 2001;

       o    In 2002, the wholesale sales volume of diesel (excluding the
            direct distribution sales volume and those directly sold to
            special customers) was 17.85 million tonnes, down by 1.12 million
            tonnes, or 5.9%, from 18.97 million tonnes in 2001; and the
            average realized wholesale sales price of diesel was RMB 2,297.06
            (US$277.4) per tonne, down by 2.6% compared with RMB 2,357.51
            (US$284.7) per tonne in 2001;

       o    In 2002, the direct distribution sales volume of diesel was 5.48
            million tonnes, up by 2.38 million tonnes, or 76.8%, from 3.1
            million tonnes in 2001; and the average realized price for the
            direct distribution sales of diesel was RMB 2,397.89 (US$289.6)
            per tonne, down by 1.7% compared with RMB 2,438.83 (US$294.5) per
            tonne in 2001;

       o    In 2002, the direct sales volume of diesel to special customers
            was 4.01 million tonnes, down by 0.65 million tonnes, or 13.9%,
            from 4.66 million tonnes in 2001; and the average realized price
            of diesel sold to special customers was RMB 2,219.39 (US$268.0)
            per tonne, down by 2.2% compared with RMB 2,269.32 (US$274.1) per
            tonne in 2001.

       Sales revenue of kerosene including jet fuel was RMB 9.2 billion
(US$1.1 billion) in 2002, down by RMB 1.1 billion (US$0.1 billion), or 11.3%,
from RMB 10.3 billion (US$1.2 billion) in 2001. The decrease was primarily due
to the decline of the average realized prices of kerosene including jet fuel.
The average realized price of kerosene including jet fuel was RMB 2,111.92
(US$255.1) per tonne in 2002, down by 23.4% compared with RMB 2,757.0
(US$333.0) per tonne in 2001.

       Operating expenses of the marketing and distribution segment were RMB
178.6 billion (US$21.6 billion) in 2002, down by RMB 2.3 billion (US$0.3
billion), or 1.3%, from RMB 180.9 billion (US$21.8 billion) in 2001. The
purchase costs of gasoline and diesel in 2002 were RMB 146.2 billion (US$17.7
billion), accounting for 81.9% of the total operating expenses of this
segment. The average purchase cost of gasoline and diesel decreased from 2001
by 8.6% and 6.4%, respectively, to RMB 2,357.28 (US$284.7) per tonne and RMB
2,155.17 (US$260.3) per tonne in 2002, respectively.

       Operating income of the marketing and distribution segment was RMB 8.4
billion (US$1.0 billion), up by RMB 6 billion (US$0.7 billion), or 250%, from
2001. Such increase was primarily because, as the general market conditions
improved, the total sales volume of refined products increased. The increase
was also due to the increased retail proportion in the total sales volume as
well as the increased sales volume of higher grade gasoline.

       Over the year, operating income of the marketing and distribution
segment gradually improved from a sluggish start in January and February 2002,
at which time the refined products prices were at the lowest level for the
entire year. With the gradual recovery of prices of crude oil and refined
products on the international market after March 2002, we closely monitored
the market changes with a view to capturing the favorable opportunities
presented and further optimizing our deployment of the resources for refined
products. In response to the market demand, we adopted a number of effective
initiatives including tighter control of our crude oil throughput and the
volume of refined products we made available in the domestic market. As a
result, the performance of the marketing and distribution segment improved
significantly over the year.

       Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

       Operating revenues of our marketing and distribution segment in 2001
were RMB 183.3 billion (US$22.1 billion), up 4.4% compared with RMB 175.6
billion (US$21.2 billion) in 2000. The increase was largely due to :

       o    Sales volumes of gasoline, diesel and kerosene including jet fuel
            increased by approximately 3%, 9% and 396% from 2000, to 20.27
            million tonnes, 42.55 million tonnes and 3.75 million tonnes,
            respectively;

       o    Sales of gasoline, diesel and kerosene including jet fuel to
            special customers have been redirected from our refining segment
            to the marketing and distribution segment since the beginning
            2001; and

       o    Retail sales of gasoline and diesel as a percentage of the
            marketing and distribution segment's total sales revenues further
            increased and the percentage of wholesale in the total sales
            revenues further decreased. Revenue from wholesale of gasoline and
            diesel in 2001 accounted for approximately 53% of the operating
            revenues of the marketing and distribution segment, compared with
            61% in 2000. Revenue from retail sales of gasoline and diesel in
            2001 accounted for approximately 40% of the operating revenues of
            the marketing and distribution segment, compared with 33% in 2000.
            The increase in the respective proportion of retail sales volume
            and retail sales revenue of gasoline and diesel was largely due to
            the continued expansion of our retail distribution network in 2001
            with more service stations brought into service. As at the end of
            2001, we operated 24,062 service stations, representing 3,803 more
            service stations than the 20,259 service stations as at the end of
            2000.

       In 2001, sales revenue of gasoline was RMB 55.7 billion (US$6.7
billion), down 4% compared with RMB 57.8 billion (US$7.0 billion) in 2000. In
particular:

       o    Wholesale volume (including direct sales to special customers) in
            2001 was approximately 9.44 million tonnes, down 19% compared with
            11.68 million tonnes in 2000. The average realized wholesale price
            was RMB 2,536 (US$306.4) per tonne, down 12% compared with RMB
            2,867 (US$346.4) per tonne in 2000; and

       o    Retail sales volume increased to approximately 10.84 million
            tonnes in 2001, up 37% compared with 7.92 million tonnes in 2000.
            The average realized retail price was RMB 2,935 (US$354.6) per
            tonne, down 4.5% compared with RMB 3,073 (US$371.3) per tonne in
            2000.

       In 2001, sales revenue of diesel was RMB 103.8 billion (US$12.5
billion), similar to RMB 103.9 billion (US$12.6 billion) in 2000. In
particular:

       o    Wholesale volume (including direct sales to special customers) was
            approximately 26.73 million tonnes, down 3% compared with 27.51
            million tonnes in 2000. The average realized wholesale price was
            RMB 2,352 (US$284.2) per tonne, down 9% compared with RMB 2,587
            (US$312.6) per tonne in 2000; and

       o    Retail sales volume increased to approximately 15.82 million
            tonnes in 2001, up 37% compared with 11.55 million tonnes in 2000.
            The average realized retail price was RMB 2,591 (US$313.1) per
            tonne, down 8% compared with RMB 2,830 (US$341.9) per tonne in
            2000.

       Sales revenue of jet fuel and kerosene in 2001 increased to
approximately RMB 10.3 billion (US$1.2 billion), representing an increase of
approximately 390% compared with RMB 2.1 billion (US$0.3 billion) in 2000. The
increase was largely because the direct sales to special customers of
gasoline, diesel, jet fuel and kerosene jet fuel have been redirected from the
refining segment to the marketing and distribution segment since the beginning
of 2001.

       Operating expenses of the marketing and distribution segment in 2001
increased to RMB 180.9 billion (US$21.9 billion), up approximately 7% compared
with RMB 169.2 billion (US$20.4 billion) in 2000. The purchase expenses of
gasoline and diesel in 2001 accounted for approximately 83% of the operating
expenses of the marketing and distribution segment. While the average realized
prices expensed for gasoline and diesel in 2001 were down 1% and 4% from 2000,
respectively, to RMB 2,579 (US$311.6) per tonne and RMB 2,303 (US$278.3) per
tonne, respectively, the purchased volumes of gasoline and diesel were up 3%
and 9%, respectively, from 2000 to 2,027 tonnes and 4,255 tonnes,
respectively.

       Operating income of the marketing and distribution segment in 2001 was
RMB 2.4 billion (US$0.3 billion), representing a reduction of RMB 4 billion
(US$0.5 billion) from RMB 6.4 billion (US$0.8 billion) in 2000.

       Chemicals Segment

       Our chemicals segment consists of our operations related to producing,
marketing, selling and distributing petrochemical and inorganic chemical
products.

       Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

       Operating revenues of the chemicals segment in 2002 were RMB 69.6
billion (US$8.4 billion), up by RMB 10.7 billion (US$1.3 billion), or 18.2%,
from RMB 58.9 billion (US$7.1 billion) in 2001. The increase was largely due
to a significant increase of sales volume of various chemical products as
their production capacities increased after the relevant facilities completed
their revamp in 2002. The sales revenues of the segment's six major chemical
product categories (namely, intermediate petrochemicals, synthetic resins,
synthetic rubbers, synthetic fiber, synthetic fiber monomers and polymers and
chemical fertilizers) were approximately RMB 57.3 billion (US$6.9 billion),
accounting for 82.3% of the operating revenues of the segment, and increased
by RMB 7.6 billion (US$0.9 billion), or 15.2%, from RMB 49.7 billion (US$6.0
billion) in 2001. The table below sets forth our sales volumes and average
realized sales prices of each major chemical product category for the periods
indicated and the respective rate of change from 2001 to 2002.

<TABLE>
<CAPTION>

                                                            Rate of                             Rate of
                                           Sales Volume   Change from         Average         Change from
                                                          2001 to 2002     Realized Prices    2001 to 2002
                                                          ------------     ---------------    ------------
                                           2002    2001    (percent)       2002       2001      (percent)
                                           (in million                     (RMB per tonne)
                                             tonnes)
<S>                                        <C>     <C>        <C>        <C>        <C>            <C>
Intermediate petrochemicals...........     6.16    4.83       27.5%      2,404.7    2,384.3        0.9%
Synthetic resins......................     3.30    2.67        23.6      5,238.2    5,550.3       (5.6)
Synthetic rubbers.....................     0.46    0.42         9.5      6,450.1    6,175.6        4.4
Synthetic fibers......................     1.18    1.08         9.3      8,435.2    8,512.4       (0.9)
Synthetic fiber monomers
      and polymers....................     1.70    1.70           0      5,454.1    5,220.6        4.5
Chemical fertilizers..................     2.72    2.73        (0.4)     1,084.1      995.9        8.9
</TABLE>

       Operating expenses of the chemical segment in 2002 were RMB 69.5
billion (US$8.4 billion), up by 16.6% compared with RMB 59.6 billion (US$7.2
billion) in 2001. The increase was largely because various expenses such as
purchased feedstock, fuels, utilities and ancillary materials increased as a
result of the increased production of various chemical products after the
completion of the revamping projects for certain ethylene and downstream
facilities. Among the increased expenses,

       o    the consumption of feedstock went up by 1.79 million tonnes in
            2002 compared with that in 2001, and their average unit price
            increased by RMB 189.25 (US$22.9 billion) per tonne, the
            combination of which led to an increase of approximately RMB 7
            billion (US$0.8 billion), or 21.7%, in the purchased products and
            operating supplies and expenses;

       o    the increased consumption of fuels, utilities and ancillary
            materials also led to an increase of approximately RMB 1.7 billion
            (US$0.2 billion), or 20.7%, in such expenses;

       o    the significant increase in production and sales volume increased
            the selling, general and administrative expenses in 2002 by
            approximately RMB 0.6 billion (US$72.5 million), or 23.1% compared
            with that in 2001; and

       o    the depreciation and amortization amounted to RMB 7.1 billion
            (US$0.9 billion) in 2002, up by approximately RMB 0.4 billion
            (US$48.3 million), or 6%, from 2001.

       Operating income of the chemicals segment in 2002 was RMB 0.1 billion
(US$12.1 million), up by approximately RMB 0.8 billion (US$96.6 million)
compared with the operating loss of approximately RMB 0.7 billion (US$84.5
million) in 2001. The increase was largely due to the increased production and
sales volume of certain major chemical products after the relevant production
facilities were revamped for increased production capacity.

       Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

       Operating revenues of the chemicals segment in 2001 were RMB 58.9
billion (US$7.1 billion), down 3.3% compared with RMB 60.9 billion (US$7.4
billion) in 2000. The decline was largely due to the lower average realized
prices of chemical products other than chemical fertilizers in 2001 as the
global economy slowed down and chemical products prices fell on the
international market. The decline in prices was partially offset by the
increase in sales volumes of most chemical products other than synthetic
fibers and chemical fertilizers. Sales revenues from our six major chemical
products (namely, intermediate petrochemicals, synthetic resins, synthetic
fibers, synthetic fiber monomers and polymers, chemical fertilizers) amounted
to RMB 49.7 billion (US$6.0 billion), down 9% compared with RMB 53.9 billion
(US$6.5 billion) in 2000, and accounted for 84% of the operating revenues of
the chemicals segment. The table below sets forth our sales volumes and
average realized sales prices of each major chemical product category for the
indicated periods and the respective rate of change from 2000 to 2001.

<TABLE>
<CAPTION>

                                                             Rate of                             Rate of
                                        Sales Volume      Change from          Average        Change from
                                                          2000 to 2001     Realized Prices    2000 to 2001
                                                          ------------     ---------------    ------------
                                           2001    2000      (percent)     2001       2000      (percent)
                                         (in million                       (RMB per tonne)
                                           tonnes)
<S>                                        <C>     <C>        <C>        <C>        <C>         <C>
Intermediate petrochemicals...........     4.83    3.05       58.5%      2,384.3    3,543.0      (32.7%)
Synthetic resins......................     2.67    2.60        2.9       5,550.3    6,289.4      (11.8)
Synthetic rubbers.....................     0.42    0.29       41.6       6,175.6    6,942.7      (11.1)
Synthetic fibers......................     1.08    1.09       (0.1)      8,512.4    9,969.7      (14.6)
Synthetic fiber monomers
      and polymers....................     1.70    1.43       19.2       5,220.6    7,199.6      (27.5)
Chemical fertilizers..................     2.73    3.79      (28.1)        995.9      974.7        2.2
</TABLE>

       Other operating revenues were RMB 4.4 billion (US$0.5 billion),
representing an increase of RMB 3.1 billion (US$0.4 billion) compared with RMB
1.3 billion (US$0.2 billion) in 2000. The increase was largely because the
other operating revenues in 2000 were reported net of certain associated
operating expenses whereas in 2001 other operating revenues are reported on a
gross basis and the related operating expenses are reported separately in
operating expenses.

       Operating expenses of the chemicals segment in 2001 were RMB 59.6
billion (US$7.2 billion), up 2% compared with RMB 58.5 billion (US$7.1
billion) in 2000. The increase was largely due to:

       o    As sales volumes of most chemical products other than chemical
            fertilizers and synthetic fibers increased considerably in 2001,
            the associated expenses in ancillary materials, fuel and power
            increased; and

       o    The purchase expense in relation to the other operating revenues
            increased in 2001 as such expenses and the other operating
            revenues were separately reported.

       The chemical segment had an operating loss of RMB 0.7 billion (US$0.1
billion) in 2001, representing a reduction of RMB 3.1 billion (US$0.4 billion)
compared with an operating income of RMB 2.4 billion (US$0.3 billion) in 2000.
The operating loss was a combined result of the decline in operating revenues
and the increase in operating expenses.

       Corporate and Others

       Our corporate and others segment principally involves trading
activities of our import and export subsidiaries and our research and
development activities as well as other activities at our corporate
headquarters.

       Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

       Operating revenues of corporate and others segment in 2002 were
approximately RMB 43.9 billion (US$5.3 billion), up by RMB 20.2 billion
(US$2.4 billion), or 85.2%, from RMB 23.7 billion (US$2.9 billion) in 2001.
The operating revenues comprised mainly consolidated operating revenues of
Sinopec (Hong Kong) Company Limited, Sinopec (Singapore) Company Limited and
Unipec Limited as well as our other subsidiaries. The increase was primarily
because some of these subsidiaries significantly expanded their independent
trading operations of crude oil and refined products on the international
market.

       Operating expenses of corporate and others segment in 2002 were
approximately RMB 44.9 billion (US$5.4 billion), up by RMB 21.5 billion
(US$2.6 billion), or 91.9%, compared with that in 2001. The increase was
largely due to the increased purchase expenses associated with the increased
trading activities of these subsidiaries.

       The corporate and others segment had an operating loss of approximately
RMB 1.0 billion (US$0.1 billion) in 2002, down by approximately RMB 1.3
billion (US$0.2 billion) compared with the operating income in 2001. The
decline was primarily due to the increased expenses in our corporate
headquartersas follows:

       o    the R&D expenses increased by RMB 0.22 billion (US$26.6 million)
            in 2002 compared with that in 2001;

       o    we recovered RMB 0.18 billion (US$21.7 million) of aged
            receivables in 2001 that were previously provided for resulting in
            a reduction of the allowance for doubtful accounts, while no such
            item in 2002; and

       o    the expenses related to the management information system
            increased by RMB 0.1 billion (US$12.1 million) in 2002 from 2001.

       Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

       Operating revenues from the corporate and others segment in 2001 were
RMB 23.7 billion (US$2.9 billion), down 8.8% compared with RMB 26 billion
(US$3.1 billion) in 2000. Operating expenses of the segment were RMB 23.4
billion (US$2.8 billion), down 10.3% compared with RMB 26.1 billion (US$3.2
billion) in 2000. Decrease in the operating revenues and the operating
expenses was largely due to the decreased sales and the associated decreases
in purchased crude oil, products or operating supplies and expenses of our
trading subsidiaries including Sinopec (Hong Kong) Company Limited and Unipec.

       Operating income from the corporate and others segment was RMB 0.3
billion (US$36.2 million), up RMB 0.4 billion (US$48.3 million) compared with
the operating loss of approximately RMB 0.1 billion (US$12.1 million) in 2000.


B.     LIQUIDITY AND CAPITAL RESOURCES

       Our primary sources of funding have been cash provided by operating
activities and short and long-term borrowings and our primary uses of funds
have been for working capital, capital expenditures and repayment of
short-term and long-term borrowings.

       As of December 31, 2002, our short-term debts (including short-term
loans from Sinopec Group Company and its affiliates) were RMB 35.6 billion
(US$4.3 billion) (including the current portion of long-term debts which was
RMB 8.6 billion (US$1.0 billion)) and accounted for 32% of our total
short-term and long-term debts (which long-term debts include interest free
subordinated loan from Sinopec Group Company due in 2020). Our interest
coverage ratio, calculated by dividing our operating income before
depreciation, depletion and amortization by our interest expense, was 13.1
times for the year ended December 31, 2002.

       The following table sets forth a condensed summary of the statements of
cash flows for the periods indicated and selected balance sheet items at the
end of the periods indicated.

<TABLE>
<CAPTION>

                                                                             For the Years Ended
                                                                                 December 31,
                                                                             -------------------
                                                                        2000     2001     2002      2002
                                                                        ----     ----     ----      ----
                                                                        RMB      RMB      RMB       US$
                                                                                 (in billions)
Net cash from operating activities:
<S>                                                                      <C>      <C>      <C>       <C>
   Net cash provided by operations(1)..............................      58.9     51.5     55.0      6.6
   Changes in working capital and other                                 (15.9)    13.6
     assets and liabilities(2).....................................                        10.5      1.3
   Net interest and cash tax (paid)(3).............................     (13.8)    (9.8)   (11.6)    (1.4)
                                                                        -----     ----    -----     ----
          Total....................................................      29.2     55.3     53.9      6.5
Cash flows from investing activities:
   Capital expenditure ............................................     (45.7)   (55.9)   (41.9)    (5.1)
   Purchase of investments net of proceeds from disposal of
     investments...................................................      (1.7)    (3.1)    (2.0)    (0.2)
   Net increase in time deposits...................................     (17.3)    20.0      0.8      0.1
   Net changes in other activities(4) .............................       0.4      0.5      0.4      0.0
                                                                          ---      ---      ---      ---
          Total....................................................     (64.3)   (38.5)   (42.7)    (5.2)
Cash flows from financing activities:
   Proceeds from public offering, net of issuing expenses..........      24.3     11.6      ---      ---
   Proceeds from bank and other loans, net of repayments...........      10.7    (13.5)    (5.6)    (0.7)
   Contribution from minority interest, net of distributions to
   minority interests..............................................      (0.6)    (0.4)    (0.2)    (0.0)
   Maturity of debentures, net of maturities.......................
                                                                         (0.7)     ---      ---      ---
   Cash and cash equivalents distributed to Sinopec Group
     Company ......................................................      (0.1)    (6.4)     ---      ---
   Divended paid                                                         (0.6)    (6.7)    (8.7)    (1.0)
          Total....................................................      33.0    (15.4)   (14.5)    (1.7)
Net increase/(decrease) in cash and cash equivalents...............      (2.1)     1.4     (3.3)    (0.4)
Selected consolidated balance sheet items
   (as of year-end)
Cash and cash equivalents..........................................      19.6     21.0     17.7      2.1
Time deposits with financial institutions(5).......................      21.9      1.8      1.0      0.1
</TABLE>

____________
(1)    Represents income/(loss) before income tax and minority interests as
       adjusted for depreciation, depletion and amortization, dry hole cost,
       income from associates and jointly controlled entities, investment
       income, interest income, interest expense, unrealized foreign exchange
       (gains)/losses, loss on disposal of property, plant and equipment,
       impairment losses on long-lived assets, and reversal of impairment
       losses on long-lived assets net of depreciation effect.
(2)    Represents decreases/(increases) in current assets,
       increases/(decreases) in current liabilities and increases in other
       assets, net of other liabilities.
(3)    Represents interest received, interest paid, investment income
       received, income tax paid, and tax refunds received. (4) Represents
       proceeds from disposal of property, plant and equipment and repayments
       of loans from associates and jointly
       controlled entities.
(5)    Represents time deposits with financial institutions with an initial
       term of three months or more and such deposits are not considered as
       cash equivalents.

       Net Cash from Operating Activities

       Net cash provided by operations, which represents income/(loss) before
income tax and minority interests as adjusted for depreciation, depletion and
amortization, dry hole cost, income from associates and jointly controlled
entities, investment income, interest income, interest expense, unrealized
foreign exchange (gains)/losses, loss on disposal of property, plant and
equipment, impairment losses on long-lived assets, and reversal of impairment
losses on long-lived assets net of depreciation effect, increased from RMB
51.5 billion (US$6.2 billion) in 2001 to RMB 55.0 billion (US$6.6 billion) in
2002. The increase was primarily due to the increased profitability of our
refining, marketing and distribution and chemical operations in 2002. Net cash
provided by working capital and other assets, which represents
decreases/(increases) in current assets, increases/(decreases) in current
liabilities and increases in other assets, net of other liabilities, was RMB
10.5 billion (US$1.3 billion) in 2002, which decreased partly due to the
increase of inventory in 2002. We believe our working capital is sufficient to
meet our present working capital requirement. Net cash provided by operations,
working capital and other assets was partially offset by the net interest and
tax paid of RMB 11.6 billion (US$1.4 billion). Net interest and tax paid in
2002 consisted primarily of RMB 5.6 billion (US$0.7 billion) of interest
payments and RMB 6.6 billion (US$0.8 billion) of income tax paid.

       Cash Flows from Investing Activities

       Our cash outflows for capital expenditure projects amounted to RMB 45.7
billion (US$5.5 billion), RMB 55.9 billion (US$6.8 billion) and RMB 41.9
billion (US$5.1 billion) in 2000, 2001 and 2002, respectively.

         In 2002, capital expenditures for the exploration segment were RMB
20.2 billion (US$2.5 billion), and as a result, we increased our crude oil and
natural gas production. In addition, in some of the oil fields with better
prospects, a number of oil and gas wells of higher yield potential and areas
with potentially sizeable reserves have been discovered. We have again
successfully achieved a larger than 100% reserve replacement ratio for a sixth
consecutive year. Capital expenditures for the refining segment were RMB 6.5
billion (US$0.8 billion). Twenty-one new or revamped refining facilities
commenced operation during 2002, thereby increased our cleaner fuel production
capacity and the processing capacity for sour crude oil. In addition,
construction of the Ningbo-Shanghai-Nanjing crude oil pipeline commenced in
2002. The pipeline, once in operation, would facilitate optimizing our crude
oil resource allocation and reducing crude oil costs. Capital expenditures for
the chemicals segment were RMB 7.3 billion (US$0.9 billion). Twelve new or
revamped petrochemical facilities commenced operation during 2002, adding
annual production capacities of 600,000 tonnes of ethylene, 885,000 tonnes of
synthetic resins and 223,900 tonnes of synthetic fiber monomers and polymers.
Capital expenditures for the marketing and distribution segment were RMB 7.0
billion (US$0.8 billion), which was mainly used to build new pipelines and
further improve the refined products marketing network through building new
refined products or renovating existing service stations, thereby reinforcing
our leading position in our principal markets and further enhancing our brand
recognition and customer loyalty. Other capital expenditure was RMB 550
million (US$66.4 million), which was mainly used for construction of our
management information system.

       We made investments of RMB 1.8 billion (US$0.2 billion), RMB 3.4
billion (US$0.4 billion) and RMB 2.1 billion (US$0.2 billion) in 2000, 2001
and 2002, respectively, in a variety of joint ventures. We also realized RMB
0.4 billion (US$48.3 million), RMB 0.7 billion (US$84.5 million) and RMB 0.5
billion (US$60.4 million) in 2000, 2001 and 2002, respectively, from the
disposal of investments and property, plant and equipment.

       Cash flow from investing activities also included RMB 0.8 billion
(US$0.1 billion) in maturity of time deposits net of increase in time
deposits.

       Cash Flows from Financing Activities

       Net cash generated from financing activities was RMB (14.5) billion
(US$(1.7) billion) in 2002, primarily because our repayment of bank and other
loans exceeded proceeds from bank and other loans by RMB 5.6 billion (US$0.7
billion). The net cash outflow was also due to the dividend paid in 2002 of
RMB8.7 billion (US$1.0 billion) and the net distribution of RMB 225.0 million
(US$27.0 million) to minority interests.

       Cash and cash equivalents as of December 31, 2002 were RMB 17.7 billion
(US$2.1 billion) as compared to RMB 21.0 billion (US$2.5 billion) as of
December 31, 2001. Time deposits with financial institutions as of December
31, 2002 were RMB 1.0 billion (US$0.1 billion) as compared to RMB 1.8 billion
(US$0.2 billion) as of December 31, 2001.

       Contractual Obligations and Commercial Commitments

       The following table sets forth our obligations and commitments to make
future payments under contracts and under contingent commitments as of
December 31, 2002.

<TABLE>
<CAPTION>

                                                                As of December 31, 2002
                                                    ------------------------------------------------
                                                                 Payment due by period
                                                    ------------------------------------------------
                                                       less than                             After 5
                                              Total      1 year    1-3 years    4-5 years     years
                                              -----    ---------   ---------    ---------    -------
                                                                     (RMB million)
Contractual obligations(1)
<S>                                           <C>        <C>         <C>         <C>        <C>
Short-term debts.........................     26,979     26,979           -           -           -
Long-term debts..........................     83,781      8,573      21,372      12,869      40,967
                                              ------      -----      ------      ------      ------

Total contractual obligations............    110,760     35,552      21,372      12,869      40.967
                                             =======     ======      ======      ======      ======

Other commercial commitments(2)
Standby credit facilities(3).............    100,000    100,000           -           -           -
Operating lease commitment...............     97,001      2,726       5,313       5,244      83,718
Capital commitment.......................     30,245     28,060       2,185         ---         ---
Exploration and production licenses......        566         55         142         106         263

Guarantees(4) & (5)......................      7,522      7,522           -           -           -
                                               -----      -----       -----       -----      ------

Total commercial obligations.............    235,334    138,363       7,640       5,350      83,981
                                             =======    =======       =====       =====      ======
</TABLE>

_________________
(1)  Contractual obligations represent on-balance sheet contractual liability
     as of the balance sheet date.
(2)  Other commercial commitments represent off-balance sheet contingent
     liabilities, and other potential cash outflows (as of the balance sheet
     date) which may result from contingent events.
(3)  Standby credit facilities represent standby loan facilities available to
     us as of the balance sheet date. As of December 31, 2002, our outstanding
     borrowings under these facilities totalled RMB 11,950 million which are
     included in short-term bank loans. These facilities expire at various
     dates in 2003 and contain no financial covenants.
(4)  Guarantee is not limited by time, therefore specific payment due period
     is not applicable. As of December 31, 2002, we have not entered into any
     off-balance sheet arrangements other than guarantees given to banks in
     respect of banking facilities granted to certain parties. As of December
     31, 2002, the maximum amount of potential future payments under the
     guarantees was RMB 7,522 million. We monitor the conditions that are
     subject to the guarantees to identify whether a loss is probable, and
     will recognise any such loss under guarantees when those losses are
     estimable. As of December 31, 2002, it was not probable that we would be
     required to make payments under these guarantees. See note 24 to the
     consolidated financial statements for further information of the
     guarantees.
(5)  In March 2003, we provided further guarantees of RMB 4,680 million to
     banks in respect of banking facilities granted to an associate.

       Historical and Planned Capital Expenditures

       The following table sets forth our capital expenditures by segment for
each of the years ended December 31, 2000, 2001 and 2002 and the capital
expenditures in each segment as a percentage of our total capital expenditures
for such year.

<TABLE>
<CAPTION>
                                         2000            2001              2002             Total
                                    ------------     ------------     ------------     -------------
                                    RMB  Percent     RMB  Percent     RMB  Percent      RMB  Percent

                                        (in billions, except percentage data)
<S>                                 <C>       <C>    <C>       <C>    <C>      <C>    <C>       <C>
Exploration and production .....    14.8      34%    20.2      35%    20.2     49%    55.3      39%
Refining........................     5.5       13     9.0       15     6.5      16    21.0       15
Marketing and distribution......    16.1       38    17.3       29     7.0      17    40.4       27
Chemicals.......................     6.2       15    11.9       20     7.3      17    25.4       18
Corporate.......................     0.3       --     0.4        1     0.5       1     1.2        1
                                    ----     ----    ----      ----   ----    ----   -----     ----
     Total......................    42.9     100%    58.8      100%   41.5    100%   143.3     100%
                                    ====     ===     ====      ====   ====    ====   =====     ====
</TABLE>

       In 2003, we plan to spend RMB 37.6 billion (US$4.5 billion) in capital
expenditure. Of our planned capital expenditure, RMB 18 billion (US$2.2
billion) is planned for our exploration and production segment, RMB 6.34
billion (US$0.8 billion) for our refining segment, RMB 7.64 billion (US$0.9
billion) for our chemicals segment, RMB 5.0 billion (US$0.6 billion) for our
marketing and distribution segment and RMB 620 million (US$74.9 million) for
construction of ERP system and other purposes. The focuses of our capital
expenditure in 2003 will be on

       o    further optimizing the investment structure, maintaining the
            investment efforts in the exploration and production segment and
            striving for increase in replacement resources;

       o    more vigorously tapping the potential and increasing the
            efficiency of the existing blocks of oilfields and the existing
            refining and chemical enterprises;

       o    continuously upgrading service stations in major cities and build
            more stations in new urban areas and off newly built expressways;

       o    completing the construction of the Ningbo-Shanghai-Nanjing crude
            oil pipeline; and

       o    fully launching of the ethylene facilities revamping project of
            Qilu Petrochemical Corp. and ensuring the completion and
            commissioning of the paraxylene project of Zhenhai Refining and
            Chemical Co., Ltd. and the PTA project of Yizheng Chemical Fiber
            Co., Ltd.

       In addition, the two world-class ethylene joint venture projects
between each of BASF and bp and us, respectively, will begin their intensive
construction period in 2003. We will make necessary investments in the
proportion of the equity held by us in the joint venture companies at
appropriate time according to the construction plans made by the joint venture
companies' boards of directors. We currently estimate that the total
construction investments for the two joint venture projects in 2003 will be
approximately RMB 10 billion (US$1.2 billion).

       We plan to fund the capital and related expenditures principally
through cash provided by operating activities and short- and long-term debts
from domestic as well as overseas sources. Our capital expenditure plans are
subject to a number of risks and uncertainties, and our actual capital
expenditures may vary significantly from these planned amounts due to various
factors. See "Item 3 -- Key Information -- Risk Factors -- Our development
plans have significant capital expenditure and financing requirements, which
are subject to a number of risks and uncertainties".

Inflation

       Inflation in the PRC has not had a significant impact on our results of
operations in recent years.

US GAAP Reconciliation

       Our consolidated financial statements are prepared in accordance with
IFRS which differs in certain material respects from US GAAP. These
differences, as they apply to our consolidated financial statements, relate
primarily to:

       o    the US GAAP requirement that payments made by Sinopec Group
            Company to employees that were transferred to and subsequently
            terminated by Sinopec Group Company are charged to current
            earnings, whereas under IFRS, such payments are not recorded in
            earnings;

       o    the US GAAP requirement that investments accounted for by the
            equity method while the investee has activities in progress
            necessary to commence its planned operations are considered as
            qualifying assets for which interest is capitalized, whereas under
            IFRS, such investments are not considered as qualifying assets for
            which interest is capitalized;

       o    the US GAAP requirement that foreign exchange differences on funds
            borrowed for property, plant and equipment be expensed, rather
            than capitalized as is allowed under IFRS;

       o    the US GAAP requirement that property, plant and equipment be
            carried at historical costs less accumulated depreciation
            (depreciation expense is based on the historical costs), whereas
            under IFRS revalued property can be carried in the consolidated
            financial statements at the revalued amount less accumulated
            depreciation (depreciation expense is based on the revalued
            amount); and

       o    the US GAAP requirement that an impairment loss be recognized on
            an asset when the sum of the expected undiscounted future cash
            flows resulting from the use of the asset and its eventual
            disposition is less than the carrying amount of the asset and the
            requirement that such impairment loss cannot be reversed, rather
            than the IFRS standard which involves the asset's discounted
            future expected cash flows and which permits, in some
            circumstances, the reversal of amounts previously written down.

       See note 31 to the consolidated financial statements for further
information.

C.     RESEARCH AND DEVELOPMENT

       We have six research and development institutes at corporate level, one
of which focuses on our exploration and production business, one of which
focuses on safety production and occupational sanitary research and four of
which focus on our refining and chemical business. In addition, we have
approximately 100 research and development departments in our subsidiaries.
The objectives of our research and development institutes and departments are
to develop new exploration and recovery technologies, to discover new
products, processes, technologies and equipment for our businesses and to
improve existing products and processes. Our research and development
institutes and departments also focus on improving efficiency, safety and
environmental protection.

       Our expenditures for research and development were approximately RMB
1.7 billion, RMB 1.3 billion and RMB 1.5 billion (US$0.2 billion) for the
years 2000, 2001 and 2002, respectively.

D.     TREND INFORMATION

       See " Item 5 -- Operating and Financial Review and Prospects --
Operating Results."


              ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


A.    DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT



Directors

       The table and discussion below set forth certain information concerning
our directors. Messrs. Li Yizhong, Wang Yi, Zhang Enzhao and Liu Guoguang and
Ms. Huang Min have served up their respective terms as our directors and were
no longer our directors after our extraordinary shareholders' meeting on April
22, 2002 (the "EGM"). Mr. Chen Tonghai was re-elected as our director at the
EGM and was subsequently elected as our Chairman of the board of directors.
Mr. Wang Jiming was re-elected as our director at the EGM and was subsequently
elected as our Vice Chairman of the board of directors. Messrs. Mou Shuling,
Zhang Jiaren and Cao Xianghong were re-elected as our directors, and Messrs.
Chen Qingtai and Charles Tsu Kwok Ho were re-elected as our independent
directors at the EGM. Messrs. Fan Yifei and Cao yaofeng were elected as our
directors, and Messrs. Shi Wanpeng and Zhang Youcai were elected as our
independent directors. Messrs. Liu Genyuan and Liu Kegu were elected as our
directors at our annual shareholders' meeting on June 10, 2003. The current
term for all our directors is three years, which will expire in April 2006.

<TABLE>
<CAPTION>

  Name                           Age  Positions with the Company
  ----                           ---  ----------------------------------------------------
<S>                              <C>   <C>
Li Yizhong*                      57   Chairman of the Board of Directors until April 22, 2003
Chen Tonghai                     54   Chairman of the Board of Directors after
                                      April 22, 2003; Vice Chairman of the Board
                                      of Directors before April 22, 2003
Wang Jiming                      60   Vice Chairman after April 22, 2003; President
Mou Shuling                      58   Director; Senior Vice President
Zhang Jiaren                     58   Director; Senior Vice President and Chief
                                      Financial Officer
Cao Xianghong                    57   Director; Senior Vice President
Wang Yi*                         46   Director until April 22, 2003
Fan Yifei                        39   Employee Representative; Director
Zhang Enzhao*                    56   Director until April 22, 2003
Cao Yaofeng                      49   Director
Liu Genyuan                      57   Director
Liu Kegu                         55   Director
Chen Qingtai                     65   Independent Non-executive Director
Liu Guoguang*                    79   Independent Non-executive Director until April 22, 2003
Ho Tsu Kwok Charles              53   Independent Non-executive Director
Shi Wanpeng                      65   Independent Non-executive Director
Zhang Youcai                     61   Independent Non-executive Director
Huang Min*                       59   Employee Representative Director until April 22, 2003

</TABLE>

_________
Note:
* These directors' term of service as our directors ended on April 22, 2003.

       Li Yizhong*, 57, is the former Chairman of the board of directors of
Sinopec Corp. Mr. Li is also the former President of Sinopec Group Company.
Mr. Li graduated from Beijing Petroleum Institute in 1966 specialising in
refining engineering. Mr. Li is a professor level senior engineer and has over
30 years' management experience in China's petroleum and petrochemical
industry. From January 1985 to October 1987, Mr. Li was President of Qilu
Petrochemical Company under Old Sinopec. From October 1987 to August 1997, Mr.
Li was a Vice President and then Managing Vice President of Old Sinopec. From
August 1997 to April 1998, Mr. Li served as Chairman and President of China
East United Petrochemical Group Limited, and Chairman of Yizheng Chemical
Fibre Company Limited. Mr. Li served as President of Sinopec Group Company
from April 1998 to April 2003 and as Chairman of Sinopec Corp. from February
2000 to April 2003.

       Chen Tonghai, 54, is Chairman of the board of directors of Sinopec
Corp. Mr. Chen is also President of Sinopec Group Company. Mr. Chen graduated
from Northeastern Petroleum Institute in 1976 specializing in exploration
engineering. Mr. Chen is a senior economist and a senior level administrator
with extensive management experience in petrochemical industry and
macro-economic control. From March 1983 to December 1986, Mr. Chen was Head of
Zhenhai Petroleum and Petrochemical Plant. From 1986 to 1994, Mr. Chen served
as a Deputy Mayor, Acting Mayor and Mayor of Ningbo City, Zhejiang Province.
From 1994 to 1998, Mr. Chen served as a Vice Minister of the State Development
and Planning Commission. Mr. Chen served as Vice President of Sinopec Group
Company from April 1998 to April 2003 and as Vice Chairman of Sinopec Corp.
from February 2000 to April 2003.

       Wang Jiming, 60, is Vice Chairman of the board of directors and
President of Sinopec Corp. Mr. Wang graduated from China Eastern Petrochemical
Institute in 1964 specializing in petroleum refining. Mr. Wang is a professor
level senior engineer with over 30 years' management experience in petroleum
and petrochemical industry. From 1984 to 1993, Mr. Wang served as a Vice
President, Acting President and President of Shanghai Petrochemical General
Plant. Mr. Wang served as Chairman and President of Shanghai Petrochemical
Company Limited from June 1993 and served as a Vice President of Old Sinopec
and Chairman of Shanghai Petrochemical Company from February 1994 to April
1998. Mr. Wang served as a Vice President of Sinopec Group Company from April
1998 to February 2000. Mr. Wang has been a director and President of Sinopec
Corp. since February 2000. Since December 2001, Mr. Wang has also served as
Chairman of Shanghai SECCO Petrochemical Company Limited.

       Mou Shuling, 58, is a director and Senior Vice President of Sinopec
Corp. Mr. Mou graduated from Beijing Petroleum Institute in 1968 specializing
in petroleum exploration engineering. Mr. Mou is a professor level senior
engineer and has over 30 years' management experience in China's petroleum
industry. From February 1992 to April 1997, Mr. Mou served as a Deputy
Director and Director of Petroleum Exploration Bureau of Jiangsu Province.
From April 1997 to April 1998, Mr. Mou served as Director of Shengli Petroleum
Administration Bureau. Mr. Mou has been a Vice President of Sinopec Group
Company from April 1998 to February 2000. Mr. Mou has been a director of
Sinopec Corp since February 2002 and was a Vice President of Sinopec Corp.
from February 2000 to April 2003.

       Zhang Jiaren, 59, is a director, Senior Vice President and Chief
Financial Officer of Sinopec Corp. Mr. Zhang graduated from Hefei Industrial
University in 1966 specializing in electrical engineering. Mr. Zhang is a
professor level senior economist with over 30 years' management experience in
petrochemical industry. From August 1987 to July 1994, Mr. Zhang served as a
Vice President and President of Zhenhai Petroleum and Petrochemical Plant, a
subsidiary of Old Sinopec. In July 1994, Mr. Zhang served as Chairman and
President of Zhenhai Refining and Petrochemical Company. Mr. Zhang served as a
Vice President of Sinopec Group Company from April 1998 to February 2000. Mr.
Zhang has been a director of Sinopec Corp. since February 2000 and the Chief
Financial Officer of Sinopec Corp. since March 2000, and was a Vice President
of Sinopec from February 2000 to April 2003.

       Cao Xianghong, 57, is a director and Senior Vice President of Sinopec
Corp. Mr. Cao graduated from Nanjing Petrochemical Institute in 1967
specializing in high polymer chemistry. Mr. Cao is a professor level senior
engineer and an Academician of China Academy of Engineering. Mr. Cao has over
30 years' management experience in China's petrochemical industry. From July
1984 to August 1997, Mr. Cao served as a Vice President and Chief Engineer of
Beijing Yanshan Petrochemical Company, a subsidiary of Old Sinopec. From
August 1997 to February 2000, Mr. Cao served as President, Vice Chairman and
Chairman of Beijing Yanshan Petrochemical Company Limited and Chairman of
Beijing Yanhua Petrochemical Company Limited. Mr. Cao has been a Director of
Sinopec Corp. since February 2000 and was a Vice President of Sinopec Corp.
from February 2000 to April 2003.

       Wang Yi*, 46, is a former director of Sinopec Corp. Mr. Wang graduated
from Peking University majoring in Chinese history in July 1982. He also
obtained a postgraduate degree from Peking University in contemporary Chinese
history in November 1984. In January 1998, Mr. Wang obtained a doctorate
degree in economics from Southwest Finance University. Mr. Wang was engaged in
policy research, financial securities administration and management over a
significant period of time, and has accumulated extensive experience in these
areas. From October 1985 to September 1992, he was Secretary of Bureau of
Government Offices Administration of the State Council. From September 1992 to
October 1995, he was Deputy Director of Office of Securities Commission under
the State Council. From October 1995 to January 1999, he was Vice Chairman of
China Securities Regulatory Commission ("CSRC"). He has been Vice President of
China Development Bank since January 1999. Mr. Wang was a director of Sinopec
Corp. from August 2001 to April 2003.

       Fan Yifei, 39, is a director of Sinopec Corp. Mr. Fan is Assistant to
the Governor of China Construction Bank. Mr. Fan graduated from Changzhou
Financial and Economic School in July 1982 specializing in infrastructure
finance and credit. He obtained a master's degree in finance from the
Financial Science Research Institute of the Ministry of Finance in September
1990. In July 1993, he obtained a doctoral degree in finance from the Renmin
University of China. He is a senior accountant. He has long engaged in
financial management work, and has relatively extensive experience in
financial management. From February 1994 to September 1994, he was the
Assistant to the General Manager and Manager of the Finance Department of the
Trust Investment Company of China Construction Bank. From September 1994 to
July 1996, he served as a Deputy Director of the Capital Planning Department
of China Construction Bank. He was the General Manager of the Finance and
Accounting Department of China Construction Bank from July 1996 to January
1998. He was the General Manager of the Planning and Finance Department of
China Construction Bank from January 1998 to February 2000. He has been the
Assistant to the Governor of China Construction Bank since February 2000.

       Zhang Enzhao*, 56, is a former director of Sinopec Corp. Mr. Zhang
graduated from Fudan University majoring in Finance in July 1984. He is a
senior economist. Mr. Zhang has been working in the financial management field
for many years, and has accumulated extensive experience in the area. From
July 1984 to January 1986, he was Vice President of China Investment Bank
Shanghai Branch. From January 1986 to June 1987, he was the Vice President of
China Construction Bank Shanghai Branch. From June 1987 to September 1999, he
was President of China Construction Bank Shanghai Branch. From September 1999
to January 2002, he was Vice President of China Construction Bank. He has been
President of China Construction Bank since January 2002.Mr. Zhang was a
director of Sinopec Corp. from August 2001 to April 2003.

       Cao Yaofeng, 49, is a director of Sinopec Corp. Mr. Cao is Chairman of
the board of directors of Sinopec Shengli Oilfield Company Limited. Mr. Cao
graduated from the General Section of East China Petroleum Institute in
September 1977 specializing in mining machinery. He obtained a master's degree
in mechanical design and theories from the Petroleum University (East China)
in June 2001. He is a professor level senior engineer. From April 1997 to
February 2002, he was a Deputy Director of Shengli Petroleum Administration
Bureau under China Petrochemical Group Company. He acted concurrently as a
Vice-chairman of the board of directors of Sinopec Shengli Oilfield Company
Limited in May 2000. From December 2001 to December 2002, he was a director
and the General Manager of Sinopec Shengli Oilfield Company Limited. He has
been the Chairman of the board of directors of Sinopec Shengli Oilfield
Company Limited since December 2002.

       Liu Genyuan, 57, is a director of Sinopec Corp. Mr. Liu is Managing
Vice President of Sinopec Group Company. Mr. Liu graduated from Shanghai
Science and Technology University in July 1968 specializing in radiation
chemistry. He is a professor level senior economist and has over 30 years'
extensive management experience in China's petroleum and petrochemical
industry. From May 1995 to July 2001, he served as President of Shanghai
Gaoqiao Petrochemical Company. Mr. Liu has been Managing Vice President of
Sinopec Group Company since July 2001.

       Liu Kegu, 55, is a director of Sinopec Corp. Mr. Liu is Vice President
of China Development Bank. Mr. Liu graduated from the Renmin University of
China in February 1982 specializing in politics and economics. He then
obtained a doctorate degree from Northeast Finance University in July 2000
specializing in finance. Mr. Liu was engaged in economic management over a
long period of time, and has accumulated extensive experience in
macro-economic management. From September 1986 to March 1990, he was Vice
President of Beijing Public Transportation Company. From March 1990 to October
1996, he served as Vice Chairman of Financial Structure and Tax System Reform
Bureau, and then as Chairman of Taxation Administration Bureau, of State
Ministry of Finance. From October 1996 to May 1999, he was the assistant to
President of Liaoning Province. From May 1999 to September 2002, he served as
Vice President of Liaoning Province. Mr. Liu has been Vice President of China
Development Bank since September 2002.

       Chen Qingtai, 65, is an independent director of Sinopec Corp. Mr. Chen
graduated from Tsinghua University in 1964 specializing in power and dynamics
engineering. Mr. Chen is a researcher and a well-known economist in China.
From October 1982 to July 1992, Mr. Chen was Chief Engineer, President and
Chairman of China No. 2 Automobile Works. From July 1992 to April 1993, Mr.
Chen served as a Deputy Director of the State Council Economic and Trade
Office. From April 1993 to March 1998, Mr. Chen served as a Vice Minister of
State Economic and Trade Commission. Mr. Chen has been a Vice Minister of the
State Council Development and Research Center since March 1998. Mr. Chen has
also served as the Dean of Public Administration School of Tsinghua University
since July 2000. Mr. Chen has been an independent director of Sinopec Corp
since February 2000.

       Liu Guoguang*, 79, is a former independent director of Sinopec Corp.
Mr. Liu is a well-known economist in China and is a Standing Committee Member
of the 8th National People's Congress. Mr. Liu graduated in 1946 from National
Southwestern United University specializing in economics. He later attended
and graduated from the Graduate School of Moscow National Institute of
Economics in 1955, where he was a research fellow and doctorate degree
candidate. From 1955 to 1982, Mr. Liu served as a research fellow and Vice
President of China Academy of Social Science. Mr. Liu also served as a Deputy
Director of the National Statistics Bureau. From 1982 to 1983 Mr. Liu served
as Dean of Economics at the Institute of China Academy of Social Science and
as a Vice President of the Academy. Since 1993, Mr. Liu has been a special
consultant to China Academy of Social Science. Mr. Liu was an independent
director of Sinopec Corp from February 2000 to April 2003.

       Ho Tsu Kwok Charles, 53, is an independent director of Sinopec Corp.
Mr. Ho is President and a director of Hong Kong Tobacco Company Limited, a
cigarette manufacturer and distributor in the Asia Pacific. Mr. Ho is also
Chairman and a director of Global China Investments Limited, a joint-venture
with a Canadian provincial government pension fund, the Ontario Municipal
Employees Retirement System, and he is responsible for devising investment and
management strategies of Global China Investments Limited. Mr. Ho is the
Honorary Chairman and a non-executive director of Sing Tao Holdings Limited,
and a non-executive director of China National Aviation Company Limited, each
listed on the Hong Kong Stock Exchange. Mr. Ho is also a member of the Chinese
People's Political Consultative Conference and a member of Economic
Consultative Advisor to the Shandong Provincial Government. He is a Trustee of
the University of International Business and Economics of China and an
Honorary Trustee of Peking University and the Chinese University of Hong Kong.
Mr. Ho has been an independent director of Sinopec Corp since June 2000.

       Shi Wanpeng, 65, is an independent director of Sinopec Corp. Mr. Shi is
a member of the Ninth Session of the National Committee of the Chinese
People's Political Consultative Conference. Mr. Shi graduated from Northern
Jiaotong University in August 1960 specializing in railway transportation
administration. He is a professor level senior engineer. He has long engaged
in economic management work, and has extensive experience in macro-economic
control. From January 1983 to January 1987, he served as a Deputy Director of
the Transport Bureau of the State Economic Commission. From January 1987 to
May 1988, he was the Director of the Economic and Technical Co-operation
Bureau of the State Economic Commission. From May 1988 to July 1991, he was
the Director of the Production and Dispatch Bureau of the State Planning
Commission. From July 1991 to July 1992, he served as a Deputy Secretary
General of the Production Office of the State Council. From July 1992 to April
1993, he served as a Deputy Director of the Economic and Trade Office of the
State Council. From April 1993 to July 1997, he was a Vice Minister of the
State Economic and Trade Commission. From July 1997 to March 1998, he was the
Chairman (minister level) of the China Textiles Association. From March 1998
to February 2002, he served as a Vice Minister of the State Economic and Trade
Commission. He has been a member of the Ninth Session of the National
Committee of the Chinese People's Political Consultative Conference since
March 2002.

       Zhang Youcai, 61, is an independent director of Sinopec Corp. Mr. Zhang
is Chairman of The Chinese Institute of Chief Accountants. Mr. Zhang graduated
from Nanjing Industrial University in August 1965 specializing in inorganic
chemistry. He is a professor. He has long engaged in business administration,
financial management and government work, and has extensive experience in
industrial, economic, financial and accounting management. From January 1968
to August 1980, he served as a technician, Vice-president, Deputy Secretary of
the Party Committee and President, respectively, of Nantong Chemical
Fertilizer Plant. From August 1980 to January 1982, he was a Deputy Director
and a member of the Leading Party Group of the Industrial Bureau of Nantong
Region. From January 1982 to February 1983, he served as a Deputy Director of
the Planning Commission of Nantong Region. From February 1983 to November
1989, he served as a Deputy Mayor, Deputy Secretary of the Party Committee and
Mayor, respectively, of Nantong City. He was a Vice Minister and a member of
the Leading Party Group of the Ministry of Finance from December 1989 to July
2002 (from May 1994 to March 1998 of this period, he served concurrently as
the Director of the State-owned Assets Administration Bureau). He has been the
Chairman of The Chinese Institute of Chief Accountants since November 2002.

       Huang Min*, 59, is a former director and the employee representative on
the Board of Directors of Sinopec Corp. Ms. Huang is a professor level
economist. Ms. Huang graduated from Beijing Petroleum Institute in 1968
specializing in petroleum exploration engineering. Ms. Huang has extensive
experience in personnel management and labor matters in petroleum industry.
Ms. Huang has been President of the Trade Union at Shengli Petroleum
Administration Bureau since December 1992. Ms. Huang was a director of Sinopec
Corp. from February 2000 to April 2003.

Supervisors

       The table and discussion below set forth certain information concerning
our supervisors. Messrs. Yu Qingbo, Hou Shaojian and Jiang Baoxing have served
up their respective terms as our supervisors and were no longer our
supervisors after our shareholders' extraordinary meeting on April 22, 2003
(the "EGM"). Mr. Wang Zuoran was re-elected as our supervisor at the EGM and
was subsequently elected as Chairman of our board of supervisors. Messrs.
Zhang Chongqing, Wang Peijun and Wang Xianwen were re-elected as our
supervisors at the EGM. Mr. Cui Jianmin was re-elected as our independent
supervisor at the EGM. Messrs. Zhang Baojian and Kang Xianzhang were elected
as our supervisors, and Mr. Li Yonggui was elected as our independent
supervisor at the EGM. In addition, our employees have elected Messrs. Su
Wensheng, Cui Guoqi, Zhang Xianglin and Zhang Haicao as our employee
representative supervisors as of April 22, 2003. The current term of our
supervisors is three years, which will expire in April 2006.

<TABLE>
<CAPTION>

  Name                            Age          Position with the Company
  ----                            ---  --------------------------------------------------------
<S>                               <C>   <C>
Yu Qingbo*                        65   Chairman of the Board of Supervisors until April 22, 2003
Wang Zuoran                       52   Chairman of the Board of Supervisors
Zhang Chongqing*                  58   Supervisor
Wang Peijun                       57   Supervisor
Wang Xianwen                      58   Supervisor
Zhang Baojian                     58   Supervisor
Kang Xianzhang                    54   Supervisor
Hou Shaojian*                     60   Supervisor until April 22, 2003
Jiang Baoxing*                    57   Employee Representative Supervisor until April 22, 2003
Cui Jianmin                       70   Independent Supervisor
Li Yonggui                        62   Independent Supervisor
Su Wensheng                       46   Employee Representative Supervisor
Cui Guoqi                         41   Employee Representative Supervisor
Zhang Xianglin                    56   Employee Representative Supervisor
Zhang Haicao                      45   Employee Representative Supervisor
</TABLE>

_________
* These supervisors' term of service as our supervisors ended on April 22,
2003.

       Yu Qingbo*, 65, is the former Chairman of the board of supervisors of
Sinopec Corp. Mr. Yu is a professor level senior economist. Mr. Yu graduated
from Harbin Military Engineering Institute in 1964 specializing in automation.
He has extensive experience in supervising management and employees. Mr. Yu
previously served as a Deputy Director of the General Administrative Office
and Deputy Secretary General of the Department of Central Organization. Since
1995, Mr. Yu has been Director of Disciplinary Supervision Committee at Old
Sinopec and Sinopec Group Company. Mr. Yu served as a supervisor and Chairman
of the board of supervisors of Sinopec Corp. in February 2000 to April 2003.

       Wang Zuoran, 52, is Chairman of the board of supervisors of Sinopec
Corp. Mr. Wang graduated from Shandong Economic Administration Institute in
1994 specializing in economic administration. From July 1994 to February 2000,
Mr. Wang served as a Deputy Director and chief officer of Shengli Petroleum
Administration Bureau. Since February 2000, Mr. Wang has been an assistant to
the President of Sinopec Group Company. Mr. Yu has been Director of
Disciplinary Supervision Committee of Sinopec Group Company since July 2001
and has been a supervisor of Sinopec Corp. since February 2000.

       Zhang Chongqing, 58, is a supervisor of Sinopec Corp. Mr. Zhang
graduated from China University of Science and Technology in 1967 specializing
in polymer chemistry. From April 1991 to February 1993, Mr. Zhang served as a
Deputy President of Planning Institute of Old Sinopec. From February 1993 to
December 1998, Mr. Zhang served as a Deputy Director and Director of General
Administrative Office of Old Sinopec. Mr. Zhang has been Director of General
Administrative Office of Sinopec Group Company since December 1998. Mr. Zhang
has been a supervisor of Sinopec Corp. since February 2000.

       Wang Peijun, 57, is a supervisor of Sinopec Corp. Mr. Wang graduated
from Northeastern Petroleum Institute in 1970 specializing in oil and gas
field engineering. From June 1989 to August 1991, Mr. Wang was Head of Qilu
Petroleum and Petrochemical Company of Old Sinopec. From August 1990 to
December 1998, he served as a Deputy Director and Director of the Human
Resource Department of Old Sinopec. Since December 1998, Mr. Wang has been
Director of the Human Resource Department of Sinopec Group Company. Mr. Wang
has been a supervisor of Sinopec Corp. since February 2000.

       Wang Xianwen, 58, is a supervisor of Sinopec Corp. Mr. Wang graduated
from Jilin University in 1968 specializing in chemistry. From April 1984 to
March 1990, Mr. Wang served as a Deputy Manager of Jinzhou Petrochemical
Company of Old Sinopec. From March 1990, Mr. Wang served as Deputy Director
and Director of Old Sinopec's Auditing Bureau. Mr. Wang has been Director of
Sinopec Group Company's Auditing Bureau since December 1998. Mr. Wang has been
a supervisor of Sinopec Corp. since February 2000.

       Zhang Baojian, 58, is a supervisor of Sinopec Corp. Mr. Zhang is
Director of the Finance and Planning Department of China Petrochemical Group
Company and Vice-chairman of the Board of Directors of Sinopec Finance Company
Limited. Mr. Zhang graduated from Shandong Financial and Economic College in
July 1968 specializing in accounting. He is a professor level senior
accountant. From October 1985 to April 1989, he was the Chief Accountant of
Yueyang Petrochemical General Plant. From April 1989 to October 1995, he
served as the chief accountant and a Deputy Director of the Finance Department
of the former China Petrochemical Corporation. He acted concurrently as the
Vice-chairman of Sinopec Finance Company Limited since May 1993. From October
1995 to February 2000, he served as the Director of the Finance Department of
the former China Petrochemical Corporation (and later China Petrochemical
Group Company), and concurrently served as Chairman of Sinopec Finance Company
Limited. Mr. Zhang has been Director of the Finance & Planning Department of
China Petrochemical Group Company, and has been acting concurrently as a
Vice-chairman of the board of directors of Sinopec Finance Company Limited
since February 2000.

       Kang Xianzhang, 54, is a supervisor of Sinopec Corp. Mr. Kang is
Director of the Supervisory Department of Sinopec Corp. He is also a Deputy
Head of the Discipline Inspection Group and the Director of the Supervisory
Bureau of China Petrochemical Group Company. Mr. Kang graduated from the
Correspondence Teaching Department of the Party School of the Beijing
Municipal Party Committee in March 1988 specializing in ideology politics. He
also graduated from the Correspondence Teaching College of the Party School of
the Central Committee of the Communist Party of China in December 1992
specializing in party and political affairs management (undergraduate course).
He is a senior political worker. From June 1995 to April 1996, he was the
Deputy Director of the Organization Department of the Communist Party
Committee of the Tibet Autonomous Region. From April 1996 to May 1997, he was
a senior researcher of the deputy director level in the Cadre Allocation
Bureau of the Organization Department of the Central Committee of the
Communist Party of China. He acted as the Deputy Secretary of the Communist
Party Committee of the Coal Scientific Research Institute of the Ministry of
Coal Industry from May 1997 to October 1998. From October 1998 to May 1999, he
was a supervisor of the deputy director level in the Discipline Inspection
Group and the Supervisory Bureau of China Petrochemical Group Company, and
acted as a Deputy Director of the Supervisory Bureau of the same company from
May 1999 to March 2001. He was the Deputy Director of the Supervisory
Department of Sinopec Corp. from February 2000 to March 2001. He has been a
Deputy Head of the Discipline Inspection Group of the Leading Party Group and
Director of the Supervisory Bureau of China Petrochemical Group Company, as
well as Director of the Supervisory Department of Sinopec Corp. since March
2001.

       Hou Shaojian*, 60, is a former supervisor of Sinopec Corp. Mr. Hou
graduated from Shandong University in 1967 specializing in chemistry. Mr. Hou
previously served as Deputy Director of Lanzhou Chemical Industrial Company
and President of Urumqi Petrochemical Works. From March 1997 to March 2001,
Mr. Hou was Deputy Director of Disciplinary Supervision Committee and Director
of Supervisory Bureau of Old Sinopec and Sinopec Group Company. Since March
2001, Mr. Hou has been a researcher in the Supervisory Bureau of Sinopec Corp.
Mr. Hou was a supervisor of Sinopec Corp. from February 2000 to April 2003.

       Jiang Baoxing*, 57, is the former employee representative supervisor of
Sinopec Corp. Mr. Jiang is a senior economist. Mr. Jiang graduated in 1987
from Shanghai Television University specializing in political science and
administration. Mr. Jiang was Chairman of the Trade Union of Shanghai
Petrochemical General Plant from August 1990 to June 1993. Mr. Jiang has been
Chairman of the Trade Union and an executive director of Shanghai
Petrochemical Company Limited, a subsidiary of Sinopec Corp. since June 1993.
Mr. Jiang was an employee representative supervisor of Sinopec Corp. from
February 2000 to April 2003.

       Cui Jianmin, 70, is an independent supervisor of Sinopec Corp. Mr. Cui
graduated from the People's University of China in 1962 specializing in
planning. Mr. Cui is a senior auditor and has extensive management experience
in audit and finance fields. From June 1983 to April 1985, Mr. Cui served as
Director of Industry and Transportation Bureau of State Audit Office. From
January 1985 to April 1995, Mr. Cui has served as a Deputy Auditor-General and
Managing Deputy Auditor-General of State Audit Office. Mr. Cui is now Chairman
of Chinese Certified Public Accountants Association. Mr. Cui has been an
independent supervisor of Sinopec Corp. since April 2000.

       Li Yonggui, 62, is an independent supervisor of Sinopec Corp. Mr. Li is
Chairman of the China Taxation Consulting Association. Mr. Li graduated from
Shandong Financial and Economic College in July 1965 specializing in finance.
He is a senior economist and a certified public accountant. He has long
engaged in tax management work and has extensive management experience in the
field of taxation. From February 1985 to December 1988, he was the Deputy
Director of the Taxation Bureau of the Ministry of Finance. He served as the
Chief Economist of the State Administration of Taxation from December 1988 to
April 1991. From April 1991 to February 1995, he served as the Deputy Director
of the State Administration of Taxation. He was the Chief Economist of the
State Administration of Taxation of China From February 1995 to September
2001. Mr. Li has been the Chairman of the China Taxation Consulting
Association since May 2000.

      Su Wensheng, 46, is an employee representative supervisor of Sinopec
Corp. Mr. Su is Acting Deputy Secretary of the Party Working Committee of the
Headquarter responsible for Sinopec Corp.'s Western China E&P operation, and
Director of the Ideology & Politics Department and a Deputy Secretary of the
Affiliated Party Committee of China Petrochemical Group Company. Mr. Su
graduated from Tsinghua University in December 1980 specializing in
environmental engineering. He obtained a master's degree in management science
and engineering from Petroleum University (Beijing) in June 2000. He is a
senior engineer. From September 1986 to November 1996, he was a Deputy
Secretary of the Party Committee of the former Beijing Designing Institute,
and acted concurrently as the Secretary of the Disciplinary Committee of the
same Institute. From November 1996 to December 1998, he was the Secretary of
the Party Committee of Beijing Designing Institute of the former China
Petrochemical Corporation. Mr. Su has been the Director of the Ideology &
Politics Department and a Deputy Secretary of the Affiliated Party Committee
of China Petrochemical Group Company since October 1998. He has acted
concurrently as the Acting Deputy Secretary of the Party Working Committee of
the Western New Region Exploration Headquarter of Sinopec Corp. since December
2001.

      Cui Guoqi, 49, is an employee representative supervisor of Sinopec Corp.
Mr. Cui is Chairman of the Trade Union of Sinopec Beijing Yanhua Petrochemical
Company Limited, a member of the Executive Committee of the All China
Federation of Trade Unions, and a member of the Standing Committee of the
National Committee of the Chinese Energy Resources and Chemical Industry and
Engineering Society of China. Mr. Cui graduated from the Correspondence
Teaching College of People's University in December 1985 specializing in
industrial business management. In January 1997, he obtained a master's degree
in business management from the Business Management School of Renmin
University of China. He is a senior economist. Mr. Cui has served as Chairman
of the Trade Union of Sinopec Yanshan Company since February 2000.

      Zhang Xianglin, 56, is an employee representative supervisor of Sinopec
Corp. Mr. Zhang is director and Chairman of the Trade Union of Sinopec Yangzi
Petrochemical Company Limited. Mr. Zhang graduated from Beijing Machinary
College in July 1970 specializing in precision machine tool. He is a Senior
Party Affairs Educator. He has served as a director and Chairman of the Trade
Union of Sinopec Yangzi Petrochemical Company limited since January 2000.

      Zhang Haichao, 45, is an employee representative supervisor of Sinopec
Corp. Mr. Zhang is Manager of Sinopec Zhejiang Petrochemical Company. Mr.
Zhang graduated from Zhoushan Petrochemical School in December 1979
specializing in oil storage and transportation. He also graduated from Jilin
Petrochemical Institute in July 1985 specializing in oil storage and
transportation. From January 2001 to June 2002, he participated in the
business administration programme at Macau Science & Technology University. He
is an economist. From April 1990 to March 1998, he was a Deputy Manager and
Manager, respectively, of Ningbo Petroleum Branch Company. He served as a
Deputy General Manager of Zhejiang Petroleum Company and served concurrently
as Manager of Ningbo Petroleum Branch Company from March 1998 to September
1999. He has served as the General Manager of Zhejiang Petroleum Company since
September 1999, and has served as the Manager of Sinopec Zhejiang Petroleum
Company since February 2000.

Other Executive Officers

       Wang Tianpu, 40, is a Senior Vice President of Sinopec Corp. Mr. Wang
graduated from Qingdao Chemical Institute specializing in fundamental organic
chemistry in July 1985. He then graduated from Dalian Science and Technology
University in July 1996 and obtained a master's degree in business
administration. He is a professor level senior engineer, and has accumulated
extensive experience in production management in petrochemical industry. From
March 1999 to February 2000, he was Vice President of Qilu Petroleum and
Petrochemical Company under Old Sinopec. From February 2000 to September 2000,
he was Vice President of Sinopec Corp.'s Qilu branch company. From September
2000 to August 2001, he was President of Sinopec Corp.'s Qilu branch company.
Mr. Wang served as Vice President of Sinopec Corp. from August 2001 to April
2003.

       Wang Zhigang, 46, is a Vice President of Sinopec Corp. Mr. Wang is Vice
Chairman of Shengli Petroleum Management Department of China Petrochemical
Corporation. Mr. Wang graduated from East China Petroleum Institute in January
1982 specializing in oil production, and then obtained a master degree from
University of Petroleum in June 2000 specializing in oil and gas development
engineering. He is a professor level senior engineer. From February 2000 he
was Vice-president of Shengli Oil Field Limited Company under Sinopec Corp.
From February to June in 2000, he was Vice-president of Shengli Oil Field
Limited Company under Sinopec Corp. From June 2000 to December 2001, Mr. Wang
served as Director and Managing President of Shengli Oil Field Limited Company
under Sinopec Corp. He was appointed Non-executive Vice-chairman of the
Committee of Economics and Trade of Ningxia Hui Autonomous Region in October
2001.

       Zhang Jianhua, 39, is a Vice President of Sinopec Corp. Mr. Zhang is
President of Shanghai Gaoqiao branch company under Sinopec Corp. Mr. Zhang
graduated from East China Chemistry and Engineering Institute in July 1986
specializing in petroleum refinery, and then obtained a master degree from
East China University of Science and Technology specializing in chemical
engineering. He is a professor level senior engineer. In April 1999 Mr. Zhang
was appointed Vice-president of Shanghai Gaoqiao Petrochemical Company under
China Petrochemical Corporation. From February to September in 2000, he was
Vice-president of Shanghai Gaoqiao branch company under Sinopec Corp. Mr.
Zhang has been President of Shanghai Gaoqiao branch company under Sinopec
Corp. since September 2000.

       Cai Xiyou, 41, is a Vice President of Sinopec Corp. Mr. Cai is Director
and Managing President of China International Petrochemical United Limited
Company. Mr. Cai graduated from Fushun Petroleum Institute in August 1982
specializing in petroleum refinery automation, and then obtained an MBA degree
from China Industry and Science Dalian Training Center. He is a senior
economist. From June 1995 to May 1996, Mr. Cai was Vice-president of Jinzhou
Petrochemical Company under China Petrochemical Corporation before the
industry reorganization. From May 1996 to December 1998, he was Managing
Vice-president of Dalian Western Pacific Petrochemical Limited Company. From
December 1998 to June 2001, he acted as Vice-president of Sales Company under
Sinopec Corp.; and from June to December in 2001, he acted as Managing
Vice-president of Sales Company under Sinopec Corp. He has been Director and
Managing President of China International Petrochemical United Limited Company
since December 2001.

       Li Chunguang, 47, is a Vice President of Sinopec Corp. Mr. Li is
Director of petroleum sales of Sinopec Corp. Mr. Li graduated from
Heilongjiang Business Institute in January 1982 specializing in petroleum
storage and transportation. He is a senior engineer. Mr. Li acted as
Vice-president of Sales Company under Sinopec Corp. from October 1995 to June
2001. From June 2001 to December 2001, he was President of Sales Company under
Sinopec Corp., and has been Director of petroleum sales department of Sinopec
Corp. since December 2001.

       Zhang Honglin, 60, is General Counsel of Sinopec Corp. Mr. Zhang
graduated from Nanjing Petrochemical Institute in 1967 specializing in
petrochemical engineering. Mr. Zhang is a professor level senior economist.
From August 1986 to August 1988, Mr. Zhang served as Head of Research
Institute of Petroleum and Petrochemical Industrial Science of Old Sinopec.
From August 1988 to May 1997, Mr. Zhang served as a Deputy Director of
Enterprise Management Department at Old Sinopec and President of Shanlong
Economic Development Company, a subsidiary of Old Sinopec. From May 1997 to
November 1997, Mr. Zhang was Director of Old Sinopec's Assets Operation and
Management Department. From November 1997 to June 1998, he served as a
director and Vice President of China Eastern United Petrochemical Group
Limited. Mr. Zhang has been Director of Sinopec Group Company's Assets
Operation and Management Department and Enterprise Reforming Department since
June 1998. Mr. Zhang served as company secretary to the Board of Directors of
Sinopec Corp. from February 2000 to April 2003.

       Chen Ge, 41, is secretary to the board of directors of Sinopec Corp.
Mr. Chen is Director of Sinopec Corp.'s Secretariat to the board of directors.
Mr. Chen graduated from Daqing Petroleum Institute in July 1983 specializing
in petroleum refinery, and then obtained an MBA degree from Dalian University
of Science and Technology in July 1996. He is a senior economist. From July
1983 to February 2000, he worked in Beijing Yanshan Petrochemical Company.
From February 2000 to December 2001, he was a Deputy Director of Sinopec
Corp.'s Secretariat to the board of directors. Mr. Chen has been the Director
of Sinopec Corp.'s Secretariat to the board of directors since December 2001.

B. ~              COMPENSATION

Salaries of Directors, Supervisors and Members of the Senior Management

       We are established and are continuously enhancing a fair and
transparent reward and supervision system for directors, supervisors and other
senior management members. We have adopted initiative policies approved by the
first extraordinary shareholders' meeting on September 7, 2000 including the
Performance Evaluation and Remunerations Incentive Scheme for the Senior
Management, the Share Appreciation Rights Scheme, and the Conditions for the
Implementation of the Initial Granting of Share Appreciation Rights Scheme.

       Our directors and supervisors receive their remuneration in the form of
basic salary and performance rewards, including the amount retirement pension
plan. During 2002, no share appreciation right is exercised.

       During 2002, directors in office (excluding directors and independent
directors who do not hold any office at Sinopec Corp.), supervisors (excluding
independent supervisors) and senior management were paid RMB1,822,757 in total
compensation. The three highest paid directors and the three highest paid
senior management members respectively received RMB418,372 (US$50,528) and
RMB452,192 (US$54,613) in total compensation. Independent directors Mr. Chen
Qingtai, Mr. Liu Guoguang, Mr. Ho Tsu Kwok Charles and independent supervisor
Mr. Cui Jianmin each received RMB16,000 remuneration. Directors Mr. Wang Yi
and Mr. Zhang Enzhao are not paid any emolument by us.

       During 2002, amongst our 16 directors (excluding directors and
independent directors who do not hold any office at Sinopec Corp.),
supervisors (excluding independent supervisors) and senior management members
who are in office, one of them received annual compensation an amount above
RMB150,000, 11 of them received annual compensation between RMB100,000 and
RMB150,000, and 4 of them received annual compensation between RMB50,000 and
RMB100,000.

       We do not have any service contract with any director that provides for
benefits upon termination of employment.

C.     BOARD PRACTICE

       In accordance with the Rules and Procedures for the Board of Directors'
Meeting that was adopted as an appendix to our articles of association at the
extraordinary shareholders' meeting on April 22, 2003, we are in the process
of setting up three special committees, namely, an audit committee, a strategy
committee and a remuneration and evaluation committee. Upon their
establishment, the majority of the members of these special committees shall
be independent directors. In addition, the audit committee shall have at least
one independent director who is a financial expert.

       The main responsibilities of the audit committee shall include:

       o    to propose the appointment or replacement of the external auditor;

       o    to oversee the internal auditing system and its implementation;

       o    to coordinate the communication between the internal auditing
            department and the external auditor;

       o    to examine and approve financial information and it disclosure;
            and

       o    to examine the internal control system.

       The main responsibilities of the strategy committee are to conduct
research and put forward proposals on the long-term development strategy and
significant investments.

       The main responsibilities of the remuneration and evaluation committee
shall include:

       o    to research on evaluation criteria for directors and the
            president, to conduct their evaluations and make necessary
            suggestions; and

       o    to research on and review the policies and proposals in respect of
            the remuneration of directors, supervisors, president,
            vice-president, Chief Financial Officer and secretary of the board
            of directors.

D.     EMPLOYEES

       As of December 31, 2000, 2001 and 2002, we had approximately 508,168 ,
443,808 and 418,871 employees. The following table sets forth the number of
our employees by our business segments, their scope of work and their
education as of December 31, 2002.
<TABLE>
<CAPTION>

     By Segment                                                     Number of       Percentage of Total
                                                                    Employees       Number of Employees
                                                                    ---------       -------------------
<S>                                                                    <C>                   <C>
     Exploration and Production ................................       144,142               34.4
     Refining ..................................................        82,921               19.8
     Marketing and Distribution ................................        91,169               21.8
     Chemicals .................................................        96,009               22.9
     Corporate and Others ......................................         4,630                1.1
                                                                         -----                ---
     Total   ...................................................       418,871              100.0
                                                                       =======              =====
</TABLE>

<TABLE>
<CAPTION>

    By Employee's Scope of Work              Number of Employees            Percentage of Total Number of
                                             -------------------                      Employees
                                                                            -----------------------------
<S>                                                <C>                                  <C>
Production                                         187,574                              44.8%
Sales                                               89,901                              21.5%
Technical                                           47,178                              11.3%
Finance                                             11,471                               2.7%
Administration                                      34,446                               8.2%
Others                                              48,301                              11.5%
Total                                              418,871                               100%
</TABLE>


<TABLE>
<CAPTION>

            By Education                     Number of Employees            Percentage of Total Number of
                                             -------------------                     Employees
                                                                            -----------------------------
<S>                                                 <C>                                  <C>
Master's degree and above                            2,657                               0.6%
University and college                              42,669                              10.2%
Polytechnic college                                 64,757                              15.5%
Technical/polytechnic school                        51,437                              12.3%
High school, technical/polytechnic                 257,351                              61.4%
secondary school and below
Total                                              418,871                               100%
</TABLE>

       We have trade unions that protect employee rights, organize educational
programs, assist in the fulfillment of economic objectives, encourage employee
participation in management decisions, and assist in mediating disputes
between us and individual employees. We have not been subjected to any strikes
or other labor disturbances that have interfered with our operation, and we
believe that our relations with our employees are good.

       The total remuneration of our employees includes salary, performance
bonuses and allowances. Employees also receive certain subsidies in housing,
health services, education and other miscellaneous items.

       As at December 31, 2002, we had a total of 91,912 retired employees,
and all of them have participated in basic pension schemes administered by
provincial (autonomous regions and municipalities under direct control of the
Central Government) governments. Government-administered pension schemes are
responsible for the payments of basic pensions. Details of our employee's
retirement scheme of the Company are set out in note 32 to our consolidated
financial statements included elsewhere in this annual report.

E.     SHARE OWNERSHIP

       Our directors, supervisors and senior officers do not have share
ownership in us.

          ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS


A.     MAJOR SHAREHOLDERS

       The following table sets forth information regarding our major
shareholders as of April 30, 2003.
<TABLE>
<CAPTION>

                                                        Number of
                                                       Shares Owned
Shareholder                                            (in millions)      Percentage
                                                       -------------      ----------
<S>                                                       <C>               <C>
Sinopec Group Company..............................       47,743            55.06%
China Development Bank ............................        8,776            10.12
China Xinda Asset Management Corporation...........        8,721            10.06
</TABLE>

       As at April 30, 2003, we had 67,121,951,000 state-owned shares,
16,780,488,000 H shares and 2,800,000,000 A shares outstanding. As at April
30, 2003, we had 12,793,748 ADRs outstanding, which represented underlying
ownership of 1,279,374,800 H shares and were beneficially owned by
approximately 4,400 record owners.

RELATED PARTY TRANSACTIONS

       Sinopec Group Company owns 55.06% of our outstanding equity as of April
30, 2003. Sinopec Group Company will be able to exercise all the rights of a
controlling shareholder, including the election of directors and voting in
respect of amendments to our articles of association. Sinopec Group Company,
as our controlling shareholder, will be subject to certain minority
shareholder protection provisions under our articles of association.

       We have engaged from time to time and will continue to engage in a
variety of transactions with Sinopec Group Company, which provide a number of
services to us, including ancillary supply, transport, educational and
community services. The nature of our transactions with Sinopec Group Company
are governed by a number of service and other contracts between Sinopec Group
Company and us.
 A discussion of these agreements and arrangements is set forth on pages 93
through 98 under the heading "Item 7 - Major Shareholders and Related Party
Transactions-Related Party Transactions" in our annual report on Form 20-F
filed with the Securities and Exchange Commission on April 17, 2001, which
discussion is hereby incorporated by reference.

       On December 19, 2002, we entered into an assets swap agreement with
Sinopec Group Company pursuant to which we transferred some of our water
plants, maintenance and repair equipment and geologic and geophysical assets
to Sinopec Group Company in exchange of its certain service stations and oil
depots. Sinopec Group Company's assets transferred to us had an appraised
value of approximately RMB1,040 million (US$125.6 million), and our assets
transferred to Sinopec Group Company had an appraised value of approximately
RMB1,021 million (US$123.4 million). We paid Sinopec Group Company the
difference of approximately RMB19 million (US$2.3 million) in cash. The assets
swap was completed on December 31, 2002.

       Please also see note 26 to our consolidated financial statements
included elsewhere in this annual report.

B.     INTERESTS OF EXPERTS AND COUNSEL

       Not applicable.


                        ITEM 8. FINANCIAL INFORMATION


A.     CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

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

Legal Proceedings

       We are involved in certain judicial and arbitral proceedings before
Chinese courts or arbitral bodies concerning matters arising in connection
with the conduct of our businesses. We believe, based on currently available
information, that the results of such proceedings, in the aggregate, will not
have a material adverse effect on our financial condition or results of
operations.

Dividend Distribution Policy

       Our board of directors will determine the payment of dividends, if any,
with respect to our shares on a per share basis. Any final dividend for a
financial year shall be subject to shareholders' approval. The board may
declare interim and special dividends at any time under general authorization
by a shareholders' ordinary resolution. A decision to declare or to pay any
dividends in the future, and the amount of any dividends, will depend on our
results of operations, cash flows, financial condition, the payment by our
subsidiaries of cash dividends to us, future prospects and other factors which
our directors may determine are important.

       For holders of our H shares, cash dividend payments, if any, shall be
declared by our board of directors in renminbi and paid in HK dollars. The
depositary will convert the HK dollar dividend payments and distribute them to
holders of ADSs in US dollars, less expenses of conversion.

       In addition to cash, dividends may be distributed in the form of
shares. Any distribution of shares, however, must be approved by special
resolution of the shareholders. Dividends in the form of shares will be
distributed to the depositary and, except as otherwise described in the
Deposit Agreement, will be distributed by the depositary in the form of
additional ADSs, to holders of ADSs.

       Dividends may be paid only out of our distributable profits (less
allocations to the statutory funds which generally range from 15% to 20% of
our net income determined in accordance with PRC GAAP) and may be subject to
PRC withholding tax. Our articles of association limit our distributable
profits to the lower of the amount determined in accordance with PRC GAAP and
IFRS. Subject to the above, we currently expect that we will distribute as
dividends up to 40% of our distributable profits.

       Our board of director has proposed a final dividend of RMB 0.08 per
ordinary share for the year ended December 31, 2002, which is equivalent to
RMB 8.0 (US$0.97) per ADS. After deducting the interim dividends distribution
of RMB 0.02 per ordinary share, the year-end dividend is RMB 0.06 per ordinary
share, which is equivalent to RMB 6.0 (US$0.72) per ADS . This proposal is
subject to approval by the shareholders' general meeting.


B.     SIGNIFICANT CHANGES

       None.


                        ITEM 9. THE OFFER AND LISTING

       Not applicable, except for Item 9A (4) and Item 9C.

       Our H Shares have been listed on the stock Exchange of Hong Kong Stock
(Code: 0386), and our ADSs, each representing 100 H Shares, have been listed
on the New York Stock Exchange and the London Stock Exchange under the symbol
"SNP", since we completed our initial public offering on October 19, 2000.
Prior to that time, there was no public market for our H Shares. The Stock
Exchange of Hong Kong is the principal non-U.S. trading market for our H
Shares. Our publicly traded domestic shares, or A shares, are listed on the
Stock Exchange of Shanghai (Code: 600028).

       The following table sets forth, for the periods indicated, the high and
low closing prices per H Share, as reported on the Stock Exchange of Hong
Kong, per ADS, as reported on the New York Stock Exchange and per A share, as
reported on the Stock Exchange of Shanghai .

<TABLE>
<CAPTION>

                                 The Stock Exchange       The New York Stock
                                    of Hong Kong               Exchange           The Shanghai Stock Exchange
                                 ------------------       ------------------      ---------------------------
Period                            High        Low         High          Low           High           Low
       Past 6 Months                    (HK$)                    (US$)                       (RMB)
<C>            <C>                 <C>         <C>         <C>          <C>            <C>           <C>
2003         June (up  to       1.84        1.71        24.25        22.20          4.04          3.78
             June 16, 2003)
             May                  1.67        1.45        21.74        18.84          3.99          3.77
             April                1.57        1.46        20.45        18.34          3.98          3.48
             March                1.56        1.39        19.84        17.56          3.60          3.39
             February             1.49        1.36        19.18        17.80          3.53          3.39
             January              1.38        1.24        19.33        17.30          3.51          2.94

2002         December             1.38        1.24        17.49        15.56          3.51          2.94

      Quarterly Data
2003         First Quarter        1.56        1.24        19.84        17.30          3.60          2.94

2002         Fourth Quarter       1.38        1.17        17.49        14.60          3.40          3.01
             Third Quarter        1.44        1.13        18.05        14.57          3.85          3.44
             Second Quarter       1.42        1.25        18.33        15.85          3.90          3.10
             First Quarter        1.30        1.05        16.68        13.50          3.40          3.01

2001         Fourth Quarter       1.21        1.02        15.55        12.83          3.96          3.29
             Third Quarter        1.56        1.00        20.05        12.83          4.36          3.85
             Second Quarter       1.65        1.14        21.00        14.50
             First Quarter        1.32        1.06        16.80        14.00

        Annual Data
2002                              1.44        1.05        18.33        13.50          3.90          3.01
2001                              1.65        1.00        21.00        12.80          4.36          3.29
2000         (October 19          1.70        1.19       21.437        14.875
             to December 31)
___________
Source: Bloomberg
</TABLE>


                       ITEM 10. ADDITIONAL INFORMATION


A.     SHARE CAPITAL

       Not applicable.


B.     MEMORANDUM AND ARTICLES OF ASSOCIATION

     The following is a summary of certain provisions of our articles of
association, as amended, the Company Law of the PRC (1993) and certain other
applicable laws and regulations of the PRC. You and your advisors should refer
to the text of our articles of association, as amended, and to the texts of
applicable laws and regulations for further information.

Objects and Purposes

     We are a joint stock limited company established in accordance with the
Company Law and certain other laws and regulations of the PRC. We are
registered with the PRC State Administration of Industry and Commerce with
business license number 1000001003298. Article 12 of our articles of
association provides that our scope of businesses includes, among other
things, exploration, development and sales of petroleum and natural gas;
pipeline transportation of petroleum and natural gas; petroleum refining;
production, sales and storage of refined petroleum products, petrochemical
products, chemical fiber products and other chemical products; wholesale,
retailing and storage of refined petroleum products and other petroleum
products; operation of convenience stores; power generation; manufacturing and
installation of machinery; purchase and sales of raw materials, charcoal, and
equipment; import and export; and provision of technology services and labor
services.

Directors

     Our directors shall be elected at our shareholders' general meeting.
Cumulative voting shall be adopted for the election of directors if a
controlling shareholder controls 30% or more of our shares. Details of the
cumulative voting mechanism are set forth in Article 57 of the Rules and
Procedures for the Shareholders' General Meetings that is an appendix to, and
forms an integral part of, our articles of association. Our directors shall be
elected for a term of three years and may serve consecutive terms upon
re-election, except that independent directors may only serve a maximum of two
terms. Our directors are not required to hold any shares in us, and there is
no age limit requirement for the retirement or non-retirement of our
directors.

      Where a director is materially interested, directly or indirectly, in a
contract, transaction or arrangement (including any proposed contract,
transaction or arrangement) with us, he or she shall declare the nature and
extent of his or her interests to the board of directors at the earliest
opportunity, whether or not such contract, transaction or arrangement is
otherwise subject to the approval of the board. A director shall not vote, and
shall not be counted in the quorum of the meeting, on any resolution
concerning any contract, transaction or arrangement where the director owns
material rights or interests therein. A director is deemed to be interested in
a contract, transaction or arrangement in which his associate is interested.

      Unless the interested director discloses his interests to the board and
the contract, transaction or arrangement in which the director is materially
interested is approved by the board at a meeting in which the director neither
votes nor is not counted in the quorum, such contract, transaction or
arrangement shall be voidable by us except with respect to a bona fide party
thereto who does not have notice of the director's interests.

      We are prohibited from making loans or providing guarantees to our
directors and their associates except where such loan or guarantee is to meet
expenditure requirement incurred or to be incurred by the director for the
purposes of the company or for the purpose of enabling the director to perform
his or her duties properly.

     The board of directors shall examine and approve the amount of the
long-term loans for the current year in accordance with the annual investment
plan as approved by the shareholders' general meeting. The chairman of the
board may make adjustments of not more than 10% of the total amount of the
long-term loans for the current year as approved by the board of directors.
The board of directors shall also approve the total amount of the working
capital loans for the current year. Within the total amount of the long-term
or working capital loans as approved by the board of directors, the chairman
of the board is authorized to approve and sign on behalf of the company any
such loan contract with loan amount over RMB 1.0 billion, and the president of
the company is authorized to approve and sign on behalf of the company any
such loan contract with loan amount not exceeding RMB 1.0 billion.

     Matters relating to the remuneration and liability insurance of our
directors shall be determined by the shareholders' general meeting.

Dividends

     Our board of directors may propose dividend distributions at any time.
Our board of directors may declare interim and special dividends under general
authorization by a shareholders' ordinary resolution. A distribution of final
dividends for any financial year is subject to shareholders' approval.
Dividends may be distributed in the form of cash or shares. A distribution of
shares, however, must be approved by special resolution of the shareholders.

     Dividends may only be distributed after allowance has been made for:

     o    recovery of losses, if any;
     o    allocations to the statutory common reserve fund;
     o    allocations to the statutory common welfare fund; and
     o    allocations to a discretionary common reserve fund if approved by the
          shareholders.

     The minimum and maximum aggregate allocations to the statutory funds are
15% and 20%, respectively, of our net income determined in accordance with PRC
accounting rules.

     The articles of association require us to appoint on behalf of the
holders of H shares a receiving agent which is registered as a trust
corporation under the Trustee Ordinance of Hong Kong to receive dividends
declared by us in respect of the H shares on behalf of such shareholders. The
articles of association require that cash dividends in respect of H shares be
declared in renminbi and paid by us in HK dollars. The depositary of our ADSs
will convert such proceeds into U.S. dollars and will remit such converted
proceeds to our holders of ADSs. If we record no profit for the year, we may
not normally distribute dividends for the year.

     Dividend payments may be subject to PRC withholding tax.

Voting Rights and Shareholders' Meetings

     Our board of directors shall convene a shareholders' annual general
meeting once every year and within six months from the end of the preceding
financial year. Our board shall convene an extraordinary general meeting
within two months of the occurrence of any one of the following events:

     o    where the number of directors is less than the number stipulated in
          the PRC Company Law or two-thirds of the number specified in our
          articles of association;
     o    where our unrecovered losses reach one-third of the total amount of
          our share capital;
     o    where shareholder(s) holding 10% or more of our issued and
          outstanding voting shares request(s) in writing the convening of an
          extraordinary general meeting; or
     o    whenever our board deems necessary or our board of supervisors so
          requests;


     Meetings of a special class of shareholders must be called in certain
enumerated situations when the rights of the holders of such class of shares
may be modified or adversely affected as discussed below. Resolutions proposed
by the board of supervisors or shareholder(s) holding 5% or more of the total
number of voting shares shall be included in the agenda for the relevant
annual general meeting if they are matters which fall within the scope of the
functions and powers of shareholders in general meeting.

     All shareholders' meetings must be convened by our board by written
notice given to shareholders not less than 45 days before the meeting. Based
on the written replies received by us 20 days before a shareholders' meeting,
we shall calculate the number of voting shares represented by shareholders who
have indicated that they intend to attend the meeting. Where the number of
voting shares represented by those shareholders amount to more than one-half
of our total voting shares, we may convene the shareholders' general meeting
(regardless of the number of shareholders who actually attend). Otherwise, we
shall, within five days, inform the shareholders again of the motions to be
considered and the date and venue of the meeting by way of public
announcement. After the announcement is made, the shareholders' meeting may be
convened. The accidental omission by us to give notice of a meeting to, or the
non-receipt of notice of a meeting by, a shareholder will not invalidate the
proceedings at that shareholders' meeting.

     Shareholders at meetings have the power, among other things, to approve
or reject our profit distribution plans, annual budget, financial statements,
increase or decrease in share capital, issuance of debentures, merger or
liquidation and any amendment to our articles of association. In addition, the
rights of a class of shareholders may not be modified or abrogated, unless
approved by a special resolution of all shareholders at a general
shareholders' meeting and by a special resolution of shareholders of that
class of shares at a separate meeting. Our articles of association enumerate,
without limitation, certain amendments which would be deemed to be a
modification or abrogation of the rights of a class of shareholders, including
increasing or decreasing the number of shares of a class disproportionate to
increases or decreases of other classes of shares, removing or reducing rights
to receive dividends in a particular currency or creating shares with voting
or equity rights superior to shares of such class.

     Cumulative voting is adopted for the election of directors. For all other
matters, each H share is entitled to one vote on all such matters submitted to
a vote of our shareholders at all shareholders' meetings, except for meetings
of a special class of shareholders where only holders of shares of the
affected class are entitled to vote on the basis of one vote per share of the
affected class.

     Shareholders are entitled to attend and vote at meetings either in person
or by proxy. Proxies must be in writing and deposited at our legal address, or
such other place as is specified in the meeting notice, not less than 24 hours
before the time for holding the meeting at which the proxy proposes to vote or
the time appointed for the passing of the relevant resolution(s). When the
instrument appointing a proxy is executed by the shareholder's
attorney-in-fact, such proxy when deposited must be accompanied by a notary
certified copy of the relevant power of attorney or other authority under
which the proxy was executed.

     Except for those actions discussed below which require supermajority
votes ("special resolutions"), resolutions of the shareholders are passed by
a simple majority of the voting shares held by shareholders who are present in
person or by proxy. Special resolutions must be passed by more than two-thirds
of the voting rights represented held by shareholders who are present in
person or by proxy.

     The following decisions must be adopted by special resolution:

            o an increase or reduction of our share capital or the issue of
shares, including stock distributions, of any class, warrants and other
similar securities;

       o    issuance of debentures;
       o    our division, merger, dissolution and liquidation; (Shareholders
            who object to a proposed merger are entitled to demand that either
            we or the shareholders who approved the merger purchase their
            shares at a fair price.)
       o    repurchase of shares;
       o    amendments to our articles of association; and
       o    any other matters considered by the shareholders in a general
            meeting and which they have resolved by way of an ordinary
            resolution to be of a nature which may have a material impact on
            us and should be adopted by special resolution.

     All other actions taken by the shareholders, including the appointment
and removal of our directors and supervisors and the declaration of cash
dividend payments, will be decided by an ordinary resolution of the
shareholders. The listing agreement between us and the Hong Kong Stock
Exchange (the "Listing Agreement") provided that we may not permit
amendments to certain sections of the articles of association which have been
mandated by the Hong Kong Stock Exchange. These sections include provisions
relating to:

       o    varying the rights of existing classes of shares; o voting rights;
       o    our power to purchase our own shares;
       o    rights of minority shareholders; and o procedure on liquidation.

     In addition, certain amendments to the articles of association require
the approval and consent of the relevant PRC authorities.

     Any shareholder resolution which is in violation of any laws or
regulations of the PRC or the articles of association will be null and void.

Liquidation Rights

     In the event of our liquidation, the H shares will rank pari passu with
the domestic ordinary shares, and payment of debts out of our remaining assets
shall be made in the order of priority prescribed by applicable laws and
regulations or, if no such standards exist, in accordance with such procedure
as the liquidation committee which has been appointed either by us or the
People's Court of the PRC may consider to be fair and reasonable. After
payment of debts, we shall distribute the remaining property to shareholders
according to the class and proportion of their shareholders.

Further Capital Call

     Shareholders are not liable to make any further contribution to the share
capital other than according to the terms, which were agreed by the subscriber
of the relevant shares at the time of subscription.

Increases in Share Capital and Preemptive Rights

     The articles of association require the approval by a special resolution
of the shareholders and by special resolution of holders of domestic ordinary
shares and H shares at separate shareholder class meetings be obtained prior
to authorizing, allotting, issuing or granting shares, securities convertible
into shares or options, warrants or similar rights to subscribe for any shares
or such convertible securities. No such approval is required if, but only to
the extent that:

       o    we issue domestic ordinary shares and H shares, either separately
            or concurrently, in numbers not exceeding 20% of the number of
            domestic ordinary shares and H shares then in issue, respectively,
            in any 12-month period, as approved by a special resolution of the
            shareholders; or

       o    if our plans for issuing H shares upon its establishment are
            implemented within fifteen months of the date of approval by the
            China Securities Regulatory Commission.

     New issues of shares must also be approved by the relevant PRC
authorities.

Reduction of Share Capital and Purchase by Us of Our Shares and General Mandate
to Repurchase Shares

     We may reduce our registered share capital only upon obtaining the
approval of the shareholders by a special resolution and, in certain
circumstances, of relevant PRC authorities. The number of H shares, which may
be purchased is subject to the Hong Kong Takeovers and Share Repurchase Codes.

Restrictions on Large or Controlling Shareholders

     Our articles of association provide that, in addition to any obligation
imposed by laws and administration regulations or required by the listing
rules of the stock exchanges on which our H shares are listed, a controlling
shareholder shall not exercise his voting rights in a manner prejudicial to
the interests of the shareholders generally or of some part of the
shareholders:

       o    to relieve a director or supervisor from his or her duty to act
            honestly in our best interests;

       o    to approve the expropriation by a director or supervisor (for his
            or her own benefit or for the benefit of another person) of our
            assets in any way, including, without limitation, opportunities
            which may benefit us; or

       o    to approve the expropriation by a director or supervisor (for his
            or her own benefit or for the benefit of another person) of the
            individual rights of other shareholders, including, without
            limitation, rights to distributions and voting rights (save
            according to a restructuring of our company which has been
            submitted for approval by the shareholders in a general meeting in
            accordance with our articles of association).

     A controlling shareholder, however, will not be precluded by our articles
of association or any laws and administrative regulations or the listing rules
of the stock exchanges on which our H shares are listed from voting on these
matters.

     When a controlling shareholder intends to put forward a new motion on
profit distribution at an annual general meeting, the controlling shareholder
shall, at not less than ten days before the date of the annual general
meeting, submit the motion to the board of directors to enable it to make an
announcement, failing which the shareholder is not entitled to put forward the
motion at the annual general meeting.

     A controlling shareholder is defined by our articles of association as
any person who acting alone or in concert with others:

       o    is in a position to elect more than one-half of the board of
            directors;
       o    has the power to exercise, or to control the exercise of, 30% or
            more of our voting rights;
       o    holds 30% or more of our issued and outstanding shares; or
       o    has de facto control of us in any other way.

       As of the date of this annual report, Sinopec Group Company is and
will be our only controlling shareholder.

Disclosure

     The Listing Agreement imposes a requirement on us to keep the Hong Kong
Stock Exchange, our shareholders and other holders of our listed securities
informed as soon as reasonably practicable of any information relating to us
and our subsidiaries, including information on any major new developments
which are not public knowledge, which:

       o    is necessary to enable them and the public to appraise the
            position of us and our subsidiaries;
       o    is necessary to avoid the establishment of a false market in its
            securities; and
       o    might be reasonably expected materially to affect market activity
            in and the price of its securities.

There are also requirements under the Listing Rules for us to obtain prior
shareholders' approval and/or to disclose to shareholders details of certain
acquisitions or disposals of assets and other transactions (including
transactions with controlling shareholders).

Sources of Shareholders' Rights

     The PRC's legal system is based on written statutes and is a system in
which decided legal cases have little precedent value. The PRC's legal system
is similar to civil law systems in this regard. In 1979, the PRC began the
process of developing its legal system by undertaking to promulgate a
comprehensive system of laws. In December 1993, the Standing Committee of the
8th National People's Congress adopted the PRC Company Law. Although the PRC
Company Law is expected to serve as the core of a body of regulatory measures,
which will impose a uniform standard of corporate behavior on companies and
their directors and shareholders, only a limited portion of this body of
regulatory measures has so far been promulgated.

     Currently, the primary sources of shareholder rights are our articles of
association, as amended, the PRC Company Law and the Listing Rules of the Hong
Kong Stock Exchange, which, among other things, impose certain standards of
conduct, fairness and disclosure on us, our directors and our controlling
shareholder, i.e., Sinopec Group Company. To facilitate the offering and
listing of shares of PRC companies overseas, and to regulate the behavior of
companies whose shares are listed overseas, the State Council Securities
Committee and the State Commission for Restructuring the Economic System
issued on August 27, 1994 the Mandatory Provisions for articles of association
of Company Listing Overseas (the "Mandatory Provisions"). These Mandatory
Provisions become entrenched in that, once they are incorporated into the
articles of association of a PRC company, any amendment to those provisions
will only become effective after approval by the companies approval department
of local governments authorized by the State-owned Assets Supervision and
Administration Commission of the State Council and the China Securities
Regulatory Commission. The Listing Rules require a number of additional
provisions to the Mandatory Provisions to be included in the articles of
association of PRC companies listing H shares on the Hong Kong Stock Exchange
(the "Additional Provisions"). The Mandatory Provisions and the Additional
Provisions have been incorporated into our articles of association.

     In addition, upon the listing of and for so long as the H shares are
listed on the Hong Kong Stock Exchange, we will be subject to those relevant
ordinances, rules and regulations applicable to companies listed on the Hong
Kong Stock Exchange, including the Listing Rules of the Hong Kong Stock
Exchange, the Securities (Disclosure of Interests) Ordinance (the "SDI
Ordinance"), the Securities (Insider Dealing) Ordinance and the Hong Kong
Codes on Takeovers and Mergers and Share Repurchases (the "Hong Kong
Takeovers and Repurchase Codes").

     Unless otherwise specified, all rights, obligations and protections
discussed below derive from our articles of association and/or the PRC Company
Law.

Enforceability of Shareholders' Rights

     There has not been any public disclosure in relation to the enforcement
by holders of H shares of their rights under constitutive documents of joint
stock limited companies or the PRC Company Law or in the application or
interpretation of the PRC or Hong Kong regulatory provisions applicable to PRC
joint stock limited companies.

     In most states of the United States, shareholders may sue a corporation
"derivatively". A derivative suit involves the commencement by a shareholder
of a corporate cause of action against persons (including corporate officers,
directors or controlling shareholders) who have allegedly wronged the
corporation, where the corporation itself has failed to enforce such claim
against such persons directly. Such action is brought based upon a primary
right of the corporation, but is asserted by a shareholder on behalf of the
corporation. Because the right to sue derivatively is not available under PRC
law, our shareholders may have to rely on other means to enforce the rights of
shareholders, such as through administrative proceedings.

     Our articles of association provide that all differences or claims:

     o    between a holder of H shares and us;
     o    between a holder of H shares and any of our directors, supervisors,
          general managers, deputy general managers or other senior officers;
          or
     o    between a holder of H shares and a holder of domestic ordinary
          shares, arising from any provision of our articles of association,
          any right or obligation conferred or imposed by the PRC Company Law
          or any other relevant law or administrative regulation which
          concerns our affairs

must, with certain exceptions, be referred to arbitration at either the China
International Economic and Trade Arbitration Commission in the PRC or the Hong
Kong International Arbitration Center. Our articles of association provide
that such arbitration will be final and conclusive. In June 1999, an
arrangement was made between the People's Courts of the PRC and the courts of
Hong Kong to mutually enforce arbitration rewards rendered in the PRC and Hong
Kong according to their respective laws. This new arrangement was approved by
the Supreme Court of the PRC and the Hong Kong Legislative Council and became
effective on February 1, 2000. We have provided an undertaking to the United
States Securities and Exchange Commission that, at such time, if any, as all
applicable laws and regulations of the PRC and (unless our H shares are no
longer listed on the Hong Kong Stock Exchange) all applicable regulations of
the Stock Exchange of Hong Kong Ltd. shall not prohibit, and to the extent
Section 14 under the United States Securities Act of 1933, as amended, so
requires, our board of directors shall propose an amendment to the articles of
association which would permit shareholders to adjudicate disputes arising
between our shareholders and us, our directors, supervisors or officers by
means of judicial proceedings.

     The holders of H shares will not be able to bring actions on the basis of
violations of the Listing Rules and must rely on the Hong Kong Stock Exchange
to enforce its rules. The SDI Ordinance establishes certain obligations in
relation to disclosure of shareholder interests in Hong Kong listed companies,
the violation of which is subject to prosecution by the Securities and Futures
Commission of Hong Kong. The Hong Kong Takeovers and Repurchase Codes do not
have the force of law and are only standards of commercial conduct considered
acceptable for takeover and merger transactions and share repurchases in Hong
Kong as established by the Securities and Futures Commission and the
securities and futures industry in Hong Kong.

     We have appointed our subsidiary in the U.S., SINOPEC-USA Co., Ltd., 150
E. 52nd Street, 28th Floor, Flushing, New York 10022, USA, as our agent to
receive service of process with respect to any action brought against us in
certain courts in New York under the United States federal and New York
State's securities laws. However, as the PRC does not have treaties providing
for the reciprocal recognition and enforcement of judgments of courts within
the United States, the United Kingdom, Japan or most other the Organization
for Economic Cooperation and Development countries, administrative actions
brought by regulatory authorities, such as the Commission, and other actions
which result in foreign court judgments, could (assuming such actions are not
required by PRC law and the articles of association to be arbitrated) only be
enforced in the PRC on a reciprocal basis or according to relevant
international treaty to which China is a party if such judgments or rulings do
not violate the basic principles of the law of the PRC or the sovereignty,
security and public interest of the society of the PRC, as determined by a
People's Court of the PRC which has the jurisdiction for recognition and
enforcement of judgments. We have been advised by our PRC counsel, Haiwen &
Partners, that there is certain doubt as to the enforceability in the PRC of
actions to enforce judgments of United States courts arising out of or based
on the ownership of H shares or ADSs, including judgments arising out of or
based on the civil liability provisions of United States federal or state
securities laws.

Restrictions on Transferability and the Share Register

     According to PRC Company Law, our domestic ordinary shares held by
Sinopec Group Company may not be transferred within three years of our
establishment on February 25, 2000, except as permitted under the March 23,
2000 debt to equity swap agreement executed on March 23, 2000 between Sinopec
Group Company and our other shareholders, whereby Sinopec Group Company may
transfer our domestic ordinary shares to such other shareholders. H shares may
be traded only among investors who are not PRC persons, and may not be sold to
PRC investors. There are no restrictions on the ability of investors who are
not PRC residents to hold H shares.

     As provided in the articles of associations we may refuse to register a
transfer of H shares unless:

     o    any relevant transfer fee is paid;
     o    the instrument of transfer is accompanied by the share certificates
          to which it relates, or such other evidence is given as may be
          reasonably necessary to show the right of the transferor to make the
          transfer;
     o    the instrument of transfer is in respect of one class of shares only;
          and
     o    the transfer is conducted in accordance with the laws and
          administrative regulations of or required by the securities
          exchanges on which the shares are listed.

     We are required to keep a register of our shareholders which shall be
comprised of various parts, including one part which is to be maintained in
Hong Kong in relation to H shares to be listed on the Hong Kong Stock
Exchange. Shareholders have the right to inspect and, for a nominal charge, to
copy the share register. No transfers of ordinary shares shall be recorded in
our share register within 30 days prior to the date of a shareholders' general
meeting or within 5 days prior to the record date established for the purpose
of distributing a dividend.

       We have appointed HKSCC Registrars Limited to act as the registrar of
our H shares. This registrar maintains our register of holders of H shares at
our offices in Hong Kong and enters transfers of shares in such register upon
the presentation of the documents described above.


C.     MATERIAL CONTRACTS

       A discussion of our material contracts is set forth on pages 93 through
98 under the heading " Item 7 - Major Shareholders and Related Party
Transactions-Related Party Transactions" in our 2000 annual report on Form
20-F filed with the Securities and Exchange Commission on April 17, 2001,
which discussion is hereby incorporated by reference.


D.     EXCHANGE CONTROLS

       The existing foreign exchange regulations have significantly reduced
government foreign exchange controls for transactions under the current
account, including trade and service related foreign exchange transactions and
payment of dividends. We may undertake current account foreign exchange
transactions without prior approval from the State Administration of Foreign
Exchange by producing commercial documents evidencing such transactions,
provided that they are processed through Chinese banks licensed to engage in
foreign exchange transactions. The PRC government has stated publicly that it
intends to make the renminbi freely convertible in the future. However, we
cannot predict whether the PRC government will continue its existing foreign
exchange policy and when the PRC government will allow free conversion of
renminbi to foreign currency.

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

       Since 1994, the conversion of renminbi into Hong Kong and United States
dollars has been based on rates set by the People's Bank of China, which are
set daily based on the previous day's PRC interbank foreign exchange market
rate and current exchange rates on the world financial markets. Although the
renminbi to US dollar exchange rate has been relatively stable since 1994, we
cannot predict nor give any assurance of its future stability. Fluctuations in
exchange rates may adversely affect the value, translated or converted into US
dollars or Hong Kong dollars, of our net assets, earnings and any declared
dividends. We cannot give any assurance that any future movements in the
exchange rate of the renminbi against the US dollar and other foreign
currencies will not adversely affect our results of operations and financial
condition. We do not currently hedge exchange rate fluctuations between the
renminbi and the US dollar or other currencies and currently have no plans to
do so. For further information on our foreign exchange risks, foreign exchange
rates, our hedging activities and our historical foreign currency
requirements, see "Currencies Exchange Rates" and "Item 11 -- Qualitative and
Quantitative Disclosure about Market Risk -- Foreign Exchange Rate Risk."


E.     TAXATION

PRC Taxation

       The following discussion addresses the principal PRC tax consequences
of investing in the H shares or ADSs.

       Taxation of Dividends

       Individual Investors

       According to the current PRC tax regulations, dividends paid by PRC
companies are ordinarily subject to a PRC withholding tax levied at a flat
rate of 20%. However, such withholding tax is not applicable with respect to
those PRC companies which have their shares listed on an overseas stock
exchange, such as H shares and ADSs, because of an exemption issued first in
1993 and then confirmed in 1994. The relevant tax authority has not collected
withholding tax on dividend payments on H shares or ADSs.

       In the event that the exemption is no longer available or is withdrawn,
a 20% tax may be withheld on dividends in accordance with the PRC individual
income tax law. Such withholding tax may be reduced under an applicable treaty
on the avoidance of double taxation.

       Enterprises

       According to the current PRC tax regulations, dividends paid by PRC
companies to enterprises are ordinarily subject to a PRC withholding tax
levied at a flat rate of 20%. However, foreign enterprises with no permanent
establishment in China receiving dividends paid with respect to a PRC
company's H shares or ADSs have been temporarily exempted from the 20%
withholding tax. If such withholding tax becomes applicable in the future, the
rate could be reduced under an applicable treaty on the avoidance of double
taxation.

       Tax Treaties

       Holders resident in countries which have entered into avoidance of
double taxation treaties with the PRC may be entitled to a reduction of the
withholding tax imposed on the payment of dividends. The PRC currently has
avoidance of double taxation treaties with a number of other countries, which
include Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands,
Singapore, the United Kingdom and the United States.

       Under a tax treaty between United States and China, China may tax
dividends paid by Sinopec Corp. to eligible US Holders up to a maximum of 10%
of the gross amount of such dividend. Under the tax treaty, an eligible US
Holder is a person who, by reason of domicile, residence, place of head
office, place of incorporation or any other criterion of similar nature is
liable to tax in the United States, subject to a detailed "treaty shopping"
provision.

       Taxation of Capital Gains

       A PRC tax regulation provides that gains realized upon the sale of
overseas shares by foreign enterprises and individuals are not subject to tax
on capital gains. However, the Provision for Implementing of the Individual
Income Tax Law of the PRC (the "Detailed Implementing Rules"), promulgated on
January 28, 1994, imposes income tax of 20% on gains derived from the sale of
equity shares by an individual. A notice issued in 1998 by the Ministry of
Finance and State Administration of Tax states that no capital gains tax will
be imposed on gains from the sale of shares by individuals from 1997. If such
tax exemption relief is no longer available, individual holders of H shares or
ADSs may be subject to a 20% capital gains tax unless such tax is reduced or
eliminated by an applicable double taxation treaty. As the Amendments and the
Detailed Implementing Rules only relate to individual income tax, the tax
exemption for foreign enterprises under the PRC tax regulation should still be
valid.

       PRC Stamp Tax Considerations

       Under the current PRC tax regulation, the PRC stamp tax is not imposed
on the transfer of H shares and ADSs of PRC companies publicly listed outside
China.

United States Federal Income Tax Considerations

       The following is a summary of United States federal income tax
considerations that are anticipated to be material for US Holders (as defined
below) who purchase H shares or ADSs in this offering. This summary is based
upon existing United States federal income tax law, which is subject to
change, possibly with retroactive effect. This summary does not discuss all
aspects of United States federal income taxation which may be important to
particular investors in light of their individual investment circumstances,
such as investors subject to special tax rules including: financial
institutions, insurance companies, broker-dealers, tax-exempt organizations,
and, except as described below, non-US Holders, or to persons that will hold H
shares or ADSs as part of a straddle, hedge, conversion, or constructive sale
transaction for United States federal income tax purposes or that have a
functional currency other than the United States dollar, all of whom may be
subject to tax rules that differ significantly from those summarized below. In
addition, this summary does not discuss any foreign, state, or local tax
considerations. This summary assumes that investors will hold their H shares
or ADSs as "capital assets" (generally, property held for investment) under
the United States Internal Revenue Code. Each prospective investor is urged to
consult its tax advisor regarding the United States federal, state, local, and
foreign income and other tax considerations of the purchase, ownership, and
disposition of H shares or ADSs.

       For purposes of this summary, a US Holder is a beneficial owner of H
shares or ADSs that is for United States federal income tax purposes:

       o    an individual who is a citizen or resident of the United States;

       o    a corporation, partnership or other entity created in or organized
            under the laws of, the United States or any State or political
            subdivision thereof;

       o    an estate the income of which is includible in gross income for
            United States federal income tax purposes regardless of its
            source;

       o    a trust the administration of which is subject to the primary
            supervision of a United States court and which has one or more
            United States persons who have the authority to control all
            substantial decisions of the trust; or

       o    a trust that was in existence on August 20, 1996, was treated as a
            United States person, for United States federal income tax
            purposes, on the previous day and elected to continue to be so
            treated.

       A beneficial owner of the H shares or ADSs that is not a US Holder is
referred to herein as a "Non-US Holder."

       A foreign corporation will be treated as a "passive foreign investment
company" (a "PFIC"), for United States federal income tax purposes, if 75% or
more of its gross income consists of certain types of "passive" income or 50%
or more of its assets are passive. Sinopec Corp. presently believes that it is
not a PFIC and does not anticipate becoming a PFIC. This is, however, a
factual determination made on an annual basis and is subject to change. The
following discussion assumes that Sinopec Corp. will not be subject to
treatment as a PFIC for United States federal income tax purposes.

       US Holders

       For United States federal income tax purposes, a US Holder of an ADS
will be treated as the owner of the proportionate interest of the H shares
held by the depositary that is represented by an ADS and evidenced by such
ADS. Accordingly, no gain or loss will be recognized upon the exchange of an
ADS for the holder's proportionate interest in the H shares. A US Holder's tax
basis in the withdrawn H shares will be the same as the tax basis in the ADS
surrendered therefor, and the holding period in the withdrawn H shares will
include the period during which the holder held the surrendered ADS.

       Dividends

       Any cash distributions paid by Sinopec Corp. out of earnings and
profits, as determined under United States federal income tax principles, will
be subject to tax as ordinary dividend income and will be includible in the
gross income of a US Holder upon receipt. Cash distributions paid by Sinopec
Corp. in excess of its earnings and profits will be treated as a tax-free
return of capital to the extent of the US Holder's adjusted tax basis in its
shares or ADSs, and after that as gain from the sale or exchange of a capital
asset. Dividends paid in Hong Kong dollar will be includible in income in a
United States dollar amount based on the United States dollar - Hong Kong
dollar exchange rate prevailing at the time of receipt of such dividends by
the depositary, in the case of ADSs, or by the US Holder, in the case of H
shares held directly by such US Holder. Dividends received on H shares or ADSs
will not be eligible for the dividends received deduction allowed to
corporations.

       Dividends received on H shares or ADSs will be treated, for United
States federal income tax purposes, as foreign source income. A US Holder may
be eligible, subject to a number of complex limitations, to claim a foreign
tax credit in respect of any foreign withholding taxes imposed on dividends
received on H shares or ADSs. US Holders who do not elect to claim a foreign
tax credit for foreign income tax withheld may instead claim a deduction, for
United States federal income tax purposes, in respect of such withholdings,
but only for a year in which the US Holder elects to do so for all creditable
foreign income taxes. In certain circumstances, a US Holder may not claim a
foreign tax credit (and instead may claim a deduction) for foreign taxes
imposed on the payment of a dividend if the US Holder:

       o    has not held the H shares or ADSs for at least 16 days in the
            30-day period beginning 15 days before the ex-dividend date,
            during which it is not protected from risk of loss;

       o    is obligated to make payments related to the dividends; or

       o    subject to the promulgation of future Treasury regulations that
            are anticipated to be retroactively applied, holds the H shares or
            ADSs in an arrangement in which the expected economic profit of
            the US Holder is insubstantial compared to the value of the
            foreign tax credit expected to be obtained as a result of the
            arrangement.

       In addition, the United States Treasury has expressed concerns that
parties to whom depositary shares are pre-released may be taking actions that
are inconsistent with the claiming of foreign tax credits by the holders of
ADSs. Accordingly, the analysis of the creditability of foreign withholding
taxes could be affected by future actions that may be taken by the United
States Treasury.

       A distribution of additional shares of Sinopec Corp.'s stock to US
Holders with respect to their H shares or ADSs that is pro rata to all Sinopec
Corp.'s shareholders may not be subject to United States federal income tax.
The tax basis of such additional shares will be determined by allocating the
US Holders' adjusted tax basis in the H shares or ADSs between the H shares or
ADSs and the additional shares, based on their relative fair market values on
the date of distribution.

       Sale or Other Disposition of H shares or ADSs

       A US Holder will recognize capital gain or loss upon the sale or other
disposition of H shares or ADSs in an amount equal to the difference between
the amount realized upon the disposition and the US Holder's adjusted tax
basis in such H shares or ADSs, as each is determined in US dollars. Any
capital gain or loss will be long-term if the H shares or ADSs have been held
for more than one year and will generally be United States source gain or
loss. The claim of a deduction in respect of a capital loss, for United States
federal income tax purposes, may be subject to limitations.

       PFIC Considerations

       If Sinopec Corp. were to be classified as a PFIC in any taxable year, a
U.S. Holder would be subject to special rules generally intended to reduce or
eliminate any benefits from the deferral of United States federal income tax
that a U.S. Holder could derive from investing in a foreign company that does
not distribute all of its earnings on a current basis. In such event, a U.S.
Holder of the H shares or ADSs may be subject to tax at ordinary income tax
rates on (i) any gain recognized on the sale of the H shares or ADSs and (ii)
any "excess distribution" paid on the H shares or ADSs (generally, a
distribution in excess of 125% of the average annual distributions paid by
Sinopec Corp. in the three preceding taxable years). In addition, a U.S.
Holder may be subject to an interest charge on such gain or excess
distribution.

Non-US Holders

       An investment in H shares or ADSs by a Non-US Holder will not give rise
to any United States federal income tax consequences unless:

       o    the dividends received or gain recognized on the sale of H shares
            or ADSs by such person is treated as effectively connected with
            the conduct of a trade or business by such person in the United
            States as determined under United States federal income tax law;
            or

       o    in the case of gains recognized on a sale of H shares or ADSs by
            an individual, such individual is present in the United States for
            183 days or more and certain other conditions are met.

       In order to avoid back-up withholding on dividend payments made in the
United States, a Non-US Holder of the H shares or ADSs may be required to
complete, and provide the payor with, an Internal Revenue Service Form W-8, or
other documentary evidence, certifying that such holder is an exempt foreign
person.


F.     DIVIDENDS AND PAYING AGENTS

       Not applicable.



G.     STATEMENT BY EXPERTS

       Not applicable.


H.     DOCUMENTS ON DISPLAY

       We filed with the Securities and Exchange Commission in Washington,
D.C. a Registration Statement on Form F-1 (Registration No. 333-12502) under
the Securities Act in connection with the ADSs offered in the global offering.
The Registration Statement contains exhibits and schedules. Any statement in
this annual report about any of our contracts or other documents is not
necessarily complete. If the contract or document is filed as an exhibit to
the Registration Statement, the contract or document is deemed to modify the
description contained in this annual report. You must review the exhibits
themselves for a complete description of the contract or documents.

       You may inspect and copy our registration statements, including their
exhibits and schedules, and the reports and other information we file with the
Securities and Exchange Commission in accordance with the Exchange Act at the
public reference facilities maintained by the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, Room 1024, N.W., Washington,
D.C. 20549 and at the regional offices of the Securities and Exchange
Commission located at 7 World Trade Center, 13th Floor, New York, N.Y. 10048
and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. You may also inspect the registration statements, including their
exhibits and schedules, at the office of the New York Stock Exchange, Wall
Street, New York, New York 10005. Copies of such material may also be obtained
from the Public Reference Section of the Securities and Exchange Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may
obtain information regarding the Washington D.C. Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330 or by
contacting the Securities and Exchange Commission over the internet at its
website at http://www.sec.gov.


I.     SUBSIDIARY INFORMATION

       Not applicable.

     ITEM 11. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

       Our primary market risk exposures are to fluctuations in oil and gas
prices, exchange rates and interest rates.

Commodity Price Risk

       We are exposed to fluctuations in prices of crude oil, refined products
and petrochemicals whose prices are volatile. We purchase substantial volumes
of crude oil from domestic and international suppliers and sell substantial
volumes of refined products and petrochemicals to domestic buyers. We do not
enter into commodity derivative instruments or futures to hedge the potential
price fluctuations of these products or for other purposes. Therefore,
fluctuations of prices of crude oil, refined products and petrochemicals have
a significant effect on our operating expenses and net profits.

Foreign Exchange Rate Risk

       A portion of the our renminbi revenues are converted into other
currencies to meet foreign currency financial instrument obligations and to
pay for imported materials and equipment. Foreign currency payments for
imported equipment represented 4.6%, and 6.9% and 9.7% of our total capital
expenditure in 2000, 2001 and 2002, respectively. Foreign currency payments
for other imports, principally crude oil, represented 39.9%, 34.3% and 34.8%
of our purchased crude oil, products and operating supplies and expenses in
2000, 2001 and 2002, respectively.

       The renminbi is not a freely convertible currency. Actions taken by the
PRC government could cause future exchange rates to vary significantly from
current or historical exchange rates. Although the renminbi to US dollar
exchange rate has been relatively stable since 1994, we cannot predict nor
give any assurance of its future stability. Fluctuations in exchange rates may
adversely affect the value, translated or converted into US dollars or Hong
Kong dollars, of our net assets, earnings and any declared dividends. We
cannot give any assurance that any future movements in the exchange rate of
the renminbi against the US dollar and other foreign currencies will not
adversely affect our results of operations and financial condition. However,
we believe that significant depreciation in the renminbi against major foreign
currencies may have a material adverse impact on our capital expenditure
program.

       The following presents various market risk information regarding
market-sensitive financial instruments that we held or issued as of December
31, 2002 and 2001. We conduct our business primarily in renminbi, which is
also our functional and reporting currency.

       The following tables provide information regarding instruments that are
sensitive to foreign exchange rates as of December 31, 2002 and 2001. For debt
obligations, the table presents cash flows and related weighted average rates
by expected maturity dates.

       As of December 31, 2002:
START HERE --
<TABLE>
<CAPTION>

                                                              Expected maturity
                                          ----------------------------------------------------------
                                             2003     2004     2005    2006     2007     thereafter       Total      Fair value
                                             ----     ----     ----    ----     ----     ----------       -----      ----------
                                                   (RMB equivalent in millions, except interest rates)

Assets
Cash and cash equivalents
<S>                                           <C>        <C>      <C>       <C>      <C>      <C>          <C>           <C>
         In United States dollar              1,269      -        -        -        -        -            1,269         1,269
         In Hong Kong dollar                     77      -        -        -        -        -               77            77
         In Japanese yen                         14      -        -        -        -        -               14            14
         In Great British pound                   3      -        -        -        -        -                3             3
         In Euro                                 36      -        -        -        -        -               36            36

Time deposits with financial institutions
         In United States dollar                 58      -        -        -        -        -               58            58

Liabilities

Debts in United States dollar
         Fixed rate                             441      149     144      144      77       39               994        1,030
         Average interest rate                  3.1%     2.9%    2.8%     2.7%    2.4%     0.1%
         Variable rate                        4,896      504     353    1,040     278      529             7,600        7,600
         Average interest rate (1)              2.2%     2.5%    2.5%     2.4%    3.0%     1.8%

Debts in Japanese yen
         Fixed rate                             179      180     170      164     118     1,105            1,916        2,334
         Average interest rate                  3.3%     3.2%    3.0%     2.9%    2.7%      2.6%
         Variable rate                          115      105      79       79      79        -               457          457
         Average interest rate (1)              0.2%     0.2%    0.2%     0.2%    0.2%       -

Debts in Hong Kong dollar
         Variable rate                          139        3       2        2       -        -               146          146
         Average interest rate (1)              5.4%     5.4%    5.4%     5.4%      -        -

Debts in Euro
         Fixed rate                              50       42      44       34       -        8               178          207
         Average interest rate (1)              6.6%     6.5%    6.3%     6.9%      -      8.1%



(1)      The average interest rates for variable rate loans are calculated based on the rates reported as of December 31, 2002.

</TABLE>


<PAGE>

       As of December 31, 2001:

<TABLE>
<CAPTION>

                                                                  Expected maturity
                                             ----------------------------------------------------------
                                                2002     2003     2004    2005     2006     thereafter    Total      Fair value
                                                ----     ----     ----    ----     ----     ----------    -----      ----------
                                                      (RMB equivalent in millions, except interest rates)
Assets
Cash and cash equivalents
<S>                                               <C>     <C>       <C>    <C>      <C>     <C>             <C>             <C>
         In United States dollar                  901     -        -        -        -        -              901            901
         In Hong Kong dollar                    2,312     -        -        -        -        -            2,312          2,312
         In Deutsche marks                          6     -        -        -        -        -                6              6
         In Japanese yen                           17     -        -        -        -        -               17             17
         In Great British pound                     3     -        -        -        -        -                3              3
         In Swiss francs                            1     -        -        -        -        -                1              1
         In French francs                          29     -        -        -        -        -               29             29

Time deposits with financial institutions
         In United States dollar                   57     -        -        -        -        -               57             57
         In Hong Kong dollar                       20     -        -        -        -        -               20             20

Liabilities
Debts in United States dollar
         Fixed rate                               741      300     282      256      256      551           2,386         2,429
         Average interest rate                    6.5%     6.6%    6.5%     6.7%     6.7%     6.7%
         Variable rate                          2,381      488     303      218      173      372           3,935         3,935
         Average interest rate (1)                3.4%     3.8%    3.9%     4.2%     4.6%     5.0%

Debts in Japanese yen
         Fixed rate                               167      193     191      151      149     1,115          1,966         2,441
         Average interest rate                    5.2%     4.9%    4.6%     4.3%     4.2%     2.6%
         Variable rate                             73       73      73       72       72        72            435           435
         Average interest rate (1)                0.3%     0.3%    0.3%     0.3%     0.3%     0.3%

Debts in Deutsche marks
         Fixed rate                                31       31      31       31       27        -             151           162
         Average interest rate                    6.6%     6.6%    6.6%     6.6%     6.6%       -

Debts in Dutch guilders
         Fixed rate                                -        -       28       -        -         -              28            31
         Average interest rate                     -        -      7.9%      -        -         -

Debts in Hong Kong dollar
         Variable rate                              4        3       3        2        2        -              14            14
         Average interest rate (1)                5.5%     5.5%    5.5%     5.5%     5.5%       -

Debts in French Francs
         Fixed rate                                -        -       -         8        -          7             15            19
         Average interest rate                     -        -       -       1.8%       -        8.1%


(1) The average interest rates for variable rate loans are calculated based on the rates reported as of December 31, 2001.

</TABLE>




Interest Rate Risk

       We are exposed to interest rate risk resulting from fluctuations in
interest rates on our short- and long-term debt. Upward fluctuations in
interest rates increase the cost of new debt and the interest cost of
outstanding floating rate borrowings.

       Our debts consist of fixed and variable rate debt obligations with
original maturities ranging from 1 to 30 years. Fluctuations in interest rates
can lead to significant fluctuations in the fair values of our debt
obligations.

       The following tables present principal cash flows and related weighted
average interest rates by expected maturity dates of our interest rate
sensitive financial instruments as of December 31, 2002 and 2001.

       As of December 31, 2002:

<TABLE>
<CAPTION>

                                                                 Expected maturity
                                             -----------------------------------------------------------
                                               2003      2004      2005     2006      2007    thereafter  Total    Fair value
                                               ----      ----      ----     ----      ----    ----------  -----    ----------
                                             (RMB equivalent in millions, except interest rates)

Assets
Cash and cash equivalents
<S>                                          <C>            <C>      <C>       <C>      <C>       <C>     <C>        <C>
      In Renminbi                            16,300         -        -         -         -         -     16,300     16,300
      In United States dollar                 1,269         -        -         -         -         -      1,269      1,269
      In Hong Kong dollar                        77         -        -         -         -         -         77         77
      In Japanese yen                            14         -        -         -         -         -         14         14
      In Great British pound                      3         -        -         -         -         -          3          3
      In Euro                                    36         -        -         -         -         -         36         36

Time deposits with financial institutions
      In Renminbi                               955         -        -         -         -         -        955        955
      In United States dollar                    58         -        -         -         -         -         58         58


Liabilities
Debts in Renminbi
      Fixed rate                             28,564     6,285    9,881     6,047     3,765    39,226     93,768     93,730 (1)
      Average interest rate                    5.5%      6.3%     6.6%      5.5%      5.6%      0.2%
      Variable rate                           1,168     1,409    2,022     1,022        20        60      5,701      5,701
      Average interest rate (2)                5.4%      5.5%     5.4%      5.7%      5.6%      3.2%

Debts in United States dollar
      Fixed rate                                441       149      144       144        77        39        994      1,030
      Average interest rate                    3.1%      2.9%     2.8%      2.7%      2.4%      0.1%
      Variable rate                           4,896       504      353     1,040       278       529      7,600      7,600
      Average interest rate (2)                2.2%      2.5%     2.5%      2.4%      3.0%      1.8%

Debts in Japanese yen
      Fixed rate                                179       180      170       164       118     1,105      1,916      2,334
      Average interest rate                    3.3%      3.2%     3.0%      2.9%      2.7%      2.6%
      Variable rate                             115       105       79        79        79         -        457        457
      Average interest rate (2)                0.2%      0.2%     0.2%      0.2%      0.2%         -

Debts in Hong Kong dollar
      Variable rate                             139         3        2         2         -         -        146        146
      Average interest rate (2)                5.4%      5.4%     5.4%      5.4%         -         -

Debts in Euro
      Fixed rate                                 50        42       44        34         -         8        178        207
      Average interest rate (2)                6.6%      6.5%     6.3%      6.9%         -       8.1%


(1)   Carrying amounts are used for loans from Sinopec Group Company and its affiliates as it is not practicable to estimate
      their fair values because the cost of obtaining discount and borrowing rates for comparable borrowings would be excessive.


(2)   The average interest rates for variable rate loans are calculated based on the rates reported as of December 31, 2002.

</TABLE>


       As of December 31, 2001:

<TABLE>
<CAPTION>


                                                                    Expected maturity
                                           ------------------------------------------------------------------
                                              2002       2003      2004     2005      2006    thereafter     Total     Fair value
                                              ----       ----      ----     ----      ----    ----------     -----     ----------
                                                       (RMB equivalent in millions, except interest rates)
Assets
Cash and cash equivalents
<S>                                          <C>          <C>      <C>         <C>     <C>      <C>            <C>        <C>
         In Renminbi                         17,754        -        -          -        -        -           17,754      17,754
         In United States dollar                901        -        -          -        -        -              901         901
         In Hong Kong dollar                  2,312        -        -          -        -        -            2,312       2,312
         In Deutsche marks                        6        -        -          -        -        -                6           6
         In Japanese yen                         17        -        -          -        -        -               17          17
         In Great British pound                   3        -        -          -        -        -                3           3
         In Swiss francs                          1        -        -          -        -        -                1           1
         In French francs                        29        -        -          -        -        -               29          29

Time deposits with financial institutions
         In Renminbi                          1,754        -        -          -        -        -            1,754       1,754
         In United States dollar                 57        -        -          -        -        -               57          57
         In Hong Kong dollar                     20        -        -          -        -        -               20          20

Liabilities
Debts in Renminbi
         Fixed rate                           6,774     6,796    6,494      2,964     2,535     39,494       65,057      64,759(1)
         Average interest rate                  5.5%      5.6%     4.9%       5.9%      5.9%       0.6%
         Variable rate                       39,040     2,499      145        121        21        399       42,225      42,225
         Average interest rate (2)              5.2%      5.1%     5.9%       6.2%      6.2%       6.2%

Debts in United States dollar
         Fixed rate                             741       300      282        256       256        551        2,386       2,429
         Average interest rate                  6.5%      6.6%     6.5%       6.7%      6.7%       6.7%
         Variable rate                        2,381       488      303        218       173        372        3,935       3,935
         Average interest rate (2)              3.4%      3.8%     3.9%       4.2%      4.6%       5.0%

Debts in Japanese yen
         Fixed rate                             167       193      191        151       149      1,115        1,966       2,441
         Average interest rate                  5.2%      4.9%     4.6%       4.3%      4.2%       2.6%
         Variable rate                           73        73       73         72        72         72          435         435
         Average interest rate (2)              0.3%      0.3%     0.3%       0.3%      0.3%       0.3%

Debts in Deutsche marks
         Fixed rate                              31        31       31         31        27       -             151         162
         Average interest rate                  6.6%      6.6%     6.6%       6.6%      6.6%      -

Debts in Dutch guilders
         Fixed rate                               -        -        28         -        -        -               28          31
         Average interest rate                    -        -       7.9%        -        -        -

Debts in Hong Kong dollar
         Variable rate                            4         3        3          2         2        -             14          14
         Average interest rate (2)              5.5%      5.5%     5.5%       5.5%      5.5%      -

Debts in French Francs
         Fixed rate                               -        -        -           8        -        7              15          19
         Average interest rate                    -        -        -         1.8%       -       8.1%

(1) Carrying amounts are used for loans from Sinopec Group Company and its affiliates as it is not practicable to estimate their
      fair values because the cost of obtaning discount and borrowing rates for comparable borrowings would be excessive.

(2) The average interest rates for variable rate loans are calculated based on the rates reported as of December 31, 2001.

</TABLE>


        ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

       Not applicable.


                                   PART II


           ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

       None.


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


A.     MATERIAL MODIFICATIONS TO THE RIGHTS TO SECURITIES HOLDERS

       None.


B.     USE OF PROCEEDS

       The following use of proceeds information relates to the registration
statement on Form F-1 (Registration No. 333-12502) filed by us in connection
with the global offering of American depositary shares underlying our H
shares, which went effective on October 11, 2000.

       The aggregate net offering proceeds to us from the sale of our H shares
registered pursuant to the registration statement were approximately
US$2,938.8 million. As of December 31, 2002, we have used approximately RMB
4.5 billion (US$0.5 billion) from the net offering proceeds to repay our
borrowings from third party financial institutions, and approximately RMB
16.56 billion (US$2.0 billion) to fund our capital expenditures.

                       ITEM 15. CONTROLS AND PROCEDURES

(a)    Our principal executive officer and principal financial officer have
       evaluated the effectiveness of our disclosure controls and procedures
       (as defined in the Exchange Act Rules 13a-14 and 15d-14) as of a date
       within 90 days prior to the filing date of this annual report (the
       "Evaluation Date"), and they have concluded that, based on their
       evaluation, our disclosure controls and procedures are effective as of
       the Evaluation Date to ensure that material information required to be
       included in this annual report would be made known to them by others on
       a timely basis.

(b)    There has been no significant change in our internal controls or in
       other factors that could significantly affect these controls subsequent
       to the Evaluation Date.


                             ITEM 16. [RESERVED]


                                   PART III


                        ITEM 17. FINANCIAL STATEMENTS

       Not applicable.


                        ITEM 18. FINANCIAL STATEMENTS

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


                              ITEM 19. EXHIBITS

1*     Articles of Association of the Registrant, amended and adopted by the
       shareholders' meeting on April 22, 2003  (English version).

4.1*   Director Service Contracts.

4.2*   Supervisor Service Contracts.

4.3    Reorganization Agreement between China Petrochemical Corporation and
       China Petroleum & Chemical Corporation dated June 3, 2000 (including
       English translation), incorporated by reference to Exhibit 10.1 to our
       Registration Statement on Form F-1 filed with the Securities and
       Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.4    Agreement for Mutual Provision of Products and Ancillary Services
       between China Petrochemical Corporation and China Petroleum & Chemical
       Corporation dated June 3, 2000 (including English translation),
       incorporated by reference to Exhibit 10.3 to our Registration Statement
       on Form F-1 filed with the Securities and Exchange Commission on
       October 10, 2000 (File Number: 333-12502).

4.5    Agreement for Provision of Cultural, Educational, Hygiene and Community
       Services between China Petrochemical Corporation and China Petroleum &
       Chemical Corporation dated June 3, 2000 (including English
       translation), incorporated by reference to Exhibit 10.4 to our
       Registration Statement on Form F-1 filed with the Securities and
       Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.6    Trademark License Agreement between China Petrochemical Corporation and
       China Petroleum & Chemical Corporation dated June 3, 2000 (including
       English translation), incorporated by reference to Exhibit 10.6 to our
       Registration Statement on Form F-1 filed with the Securities and
       Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.7    Patents and Proprietary Technology License Contract between China
       Petrochemical Corporation and China Petroleum & Chemical Corporation
       dated June 3, 2000 (including English translation), incorporated by
       reference to Exhibit 10.7 to our Registration Statement on Form F-1
       filed with the Securities and Exchange Commission on October 10, 2000
       (File Number: 333-12502).

4.8    Computer Software License Contract between China Petrochemical
       Corporation and China Petroleum & Chemical Corporation dated June 3,
       2000 (including English translation), incorporated by reference to
       Exhibit 10.8 to our Registration Statement on Form F-1 filed with the
       Securities and Exchange Commission on October 10, 2000 (File Number:
       333-12502).

4.9    Land Use Rights Leasing Contract between China Petrochemical
       Corporation and China Petroleum & Chemical Corporation dated June 3,
       2000 (including English translation), incorporated by reference to
       Exhibit 10.10 to our Registration Statement on Form F-1 filed with the
       Securities and Exchange Commission on October 10, 2000 (File Number:
       333-12502).

4.10   Property Leasing Contract between China Petrochemical Corporation and
       China Petroleum & Chemical Corporation dated June 3, 2000 (including
       English translation), incorporated by reference to Exhibit 10.11 to our
       Registration Statement on Form F-1 filed with the Securities and
       Exchange Commission on October 10, 2000 (File Number: 333-12502).

8*     A list of the Registrant's subsidiaries.

12*    Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as
       adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed as part of this annual report.

<PAGE>


<TABLE>
<CAPTION>

            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                                                             Page

<S>                                                                                                         <C>
Independent auditors' report ..............................................................................


Consolidated statements of income for the years ended December 31, 2000, 2001 and 2002 ....................


Consolidated balance sheets as of December 31, 2001 and 2002 ..............................................


Consolidated statements of cash flows for the years ended December 31, 2000, 2001 and 2002.................


Consolidated statements of shareholders' equity for the years ended December 31, 2000, 2001 and 2002.......


Notes to consolidated financial statements.................................................................


Supplemental information on oil and gas producing activities (unaudited)...................................

</TABLE>



                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders of
China Petroleum & Chemical Corporation:

     We have audited the accompanying consolidated balance sheets of China
Petroleum & Chemical Corporation and subsidiaries (the "Group") as of
December 31, 2001 and 2002, and the related consolidated statements of income,
cash flows and shareholders' equity for each of the years in the three-year
period ended December 31, 2002, all expressed in Renminbi. These consolidated
financial statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America and Hong Kong. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of China
Petroleum & Chemical Corporation and subsidiaries as of December 31, 2001 and
2002, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2002, in conformity with
International Financial Reporting Standards.

     International Financial Reporting Standards vary in certain significant
respects from accounting principles generally accepted in the United States of
America. Application of accounting principles generally accepted in the United
States of America would have affected results of operations for each of the
years in the three-year period ended December 31, 2002 and shareholders'
equity as of December 31, 2001 and 2002, to the extent summarized in note 31
to the consolidated financial statements.

     The accompanying consolidated financial statements as of and for the year
ended December 31, 2002 have been translated into United States dollars solely
for the convenience of the reader. We have audited the translation,and in our
opinion, the consolidated financial statements expressed in Renminbi have been
translated into United States dollars on the basis set forth in Note 1 to the
consolidated financial statements.








     KPMG
     Hong Kong, China
     March 28, 2003

<PAGE>



<TABLE>
<CAPTION>

            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
             FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                 (Amounts in millions, except per share data)


                                                                              Years ended December 31,
                                                                      ----------------------------------------
                                                             Note      2000       2001       2002       2002
                                                                       ----       ----       ----       ----
                                                                       RMB        RMB        RMB        US$
Operating revenues
<S>                                                           <C>      <C>        <C>        <C>        <C>
     Sales of goods.......................................            325,340    304,347    324,184    39,153
     Other operating revenues.............................    3         6,236     14,124     15,858     1,915
                                                                     --------   --------   --------   -------
                                                                      331,576    318,471    340,042    41,068
Operating expenses
     Purchased crude oil, products and operating supplies
        and expenses......................................           (226,533)  (220,313)  (235,245)  (28,411)
     Selling, general and administrative expenses.........            (19,519)   (17,138)   (21,088)   (2,547)
     Depreciation, depletion and amortization.............            (20,781)   (22,430)   (24,282)   (2,932)
     Exploration expenses, including dry holes............             (3,030)    (3,775)    (4,363)     (527)
     Personnel expenses...................................    4       (13,264)   (12,889)   (13,625)   (1,646)
     Employee reduction expenses..........................    5            --     (2,546)      (244)      (29)
     Taxes other than income tax..........................    6       (12,220)   (11,887)   (11,852)   (1,432)
     Other operating expenses, net........................    7          (718)      (193)    (1,066)     (129)
                                                                     --------   --------   --------   -------
          Total operating expenses........................           (296,065)  (291,171)  (311,765)  (37,653)
                                                                     --------   --------   --------   -------
Operating income..........................................             35,511     27,300     28,277     3,415
                                                                     --------   --------   --------   -------

Finance costs
     Interest expense.....................................    8        (6,663)    (4,706)    (4,018)     (485)
     Interest income......................................                861      1,183        338        41
     Foreign exchange losses..............................                (85)      (222)      (312)      (38)

     Foreign exchange gains...............................                951        593         47         6
                                                                     --------   --------   --------   -------
          Net finance costs...............................             (4,936)    (3,152)    (3,945)     (476)
Investment income.........................................                191        199        190        23
Income from associates and jointly controlled entities....                270        320        310        37
                                                                     --------   --------   --------   -------
Income before income tax and minority interests ..........             31,036     24,667     24,832     2,999
Income tax................................................    9        (9,638)    (8,029)    (7,635)     (922)
                                                                     --------   --------   --------   -------
Income before minority interests..........................             21,398     16,638     17,197     2,077
Minority interests........................................             (1,814)      (613)    (1,117)     (135)
                                                                     --------   --------   --------   -------
Net income .                                                           19,584     16,025     16,080     1,942
                                                                     ========   ========   ========   =======

Basic earnings per share..................................   10          0.27       0.19       0.19      0.02
                                                                     ========   ========   ========   =======

Weighted average number of shares.........................   10        71,936     85,168     86,702    86,702
                                                                     ========  =========   ========   =======


                            See accompanying notes to consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>

            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       AS OF DECEMBER 31, 2001 AND 2002
                             (Amounts in millions)


                                                                                  December 31,
                                                                        ---------------------------------
                                                                Note        2001        2002       2002
                                                                            ----        ----       ----
                                                                            RMB         RMB        US$
                             ASSETS
Current assets
<S>                                                               <C>       <C>         <C>         <C>
     Cash and cash equivalents.................................            21,023      17,699      2,138
     Time deposits with financial institutions.................             1,831       1,013        122
     Trade accounts receivable, net............................   11       11,082      10,670      1,289
     Bills receivable..........................................             3,542       4,684        566
     Inventories...............................................   12       46,194      46,297      5,591
     Prepaid expenses and other current assets.................   13       26,123      21,521      2,599
                                                                          -------     -------     ------
          Total current assets.................................           109,795     101,884     12,305
Non-current assets
     Property, plant and equipment, net........................   14      217,757     238,822     28,843
     Construction in progress..................................   15       26,450      21,504      2,597
     Investments...............................................   16        3,282       2,554        309
     Interests in associates and jointly controlled entities...   17        5,172       7,917        956
     Deferred tax assets.......................................   18          769         732         88
     Lease prepayments.........................................             2,115         803         97
     Other assets..............................................             1,369       1,665        201
                                                                          -------     -------     ------
          Total non-current assets.............................           256,914     273,997     33,091
                                                                          -------     -------     ------
          Total assets.........................................           366,709     375,881     45,396
                                                                          =======     =======     ======
              LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
     Short-term debts..........................................   19       45,349      31,278      3,778
      Loans from Sinopec Group Company and its affiliates......   19        3,862       4,274        516
     Trade accounts payable....................................   20       16,793      19,212      2,320
     Bills payable.............................................            26,022      30,139      3,640
     Accrued expenses and other payables.......................   21       29,876      29,755      3,593
     Income tax payable........................................             2,809       2,776        335
                                                                          -------     -------     ------
          Total current liabilities............................           124,711     117,434     14,182
Non-current liabilities
     Long-term debts...........................................   19       30,876      37,505      4,530
     Loans from Sinopec Group Company and its affiliates.......   19       36,125      37,703      4,553
     Deferred tax liabilities..................................   18        2,981       3,599        435
     Other liabilities.........................................               806       1,235        149
                                                                          -------     -------     ------
          Total non-current liabilities........................            70,788      80,042      9,667
                                                                          -------     -------     ------
          Total liabilities....................................           195,499     197,476     23,849
Minority interests.............................................            23,541      23,920      2,889
Shareholders' equity
     Share capital.............................................   22       86,702      86,702     10,472
     Reserves..................................................   23       60,967      67,783      8,186
                                                                          -------     -------     ------
                                                                          147,669     154,485     18,658
                                                                          -------     -------     ------
          Total liabilities and shareholders' equity...........           366,709     375,881     45,396
                                                                          =======     =======     ======


                          See accompanying notes to consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                             (Amounts in millions)



                                                                                         Years ended December 31,
                                                                           ---------------------------------------------


                                                                    Note         2000        2001      2002         2002
                                                                                 ----        ----      ----         ----
<S>                                                                             <C>        <C>         <C>           <C>
                                                                                  RMB         RMB        RMB         US$
Net cash from operating activities................................   (a)       29,180      55,279     53,890       6,509
                                                                               ------      ------     ------       -----
Cash flows from investing activities
     Capital expenditure..........................................            (45,669)    (55,935)   (41,941)     (5,066)
     Purchase of investments and investments in associates and                                        (2,064)
        jointly controlled entities...............................             (1,843)     (3,375)                  (249)
     Proceeds from disposal of investments and investments in
        associates and jointly controlled entities................                126         307         97          12
     Proceeds from disposal of property, plant and equipment......                270         374        432          52
     Repayments of loans from associates and jointly controlled
        entities..................................................                106         117         --          --
     Increase in time deposits with financial institutions........            (23,292)    (18,698)    (1,342)       (162)
     Maturity of time deposits with financial institutions........              5,983      38,727      2,160         261
                                                                                -----      ------      -----         ---
          Net cash used in investing activities...................            (64,319)    (38,483)   (42,658)     (5,152)
                                                                              -------     -------    -------      ------
Cash flows from financing activities
     Proceeds from public offering, net of issuing expenses.......             24,326      11,648         --          --
     Proceeds from bank and other loans...........................            131,900     258,928    252,675      30,516
     Repayments of bank and other loans...........................           (121,168)   (272,410)  (258,343)    (31,201)
      Maturity of debentures......................................               (683)         --         --          --
     Distributions to minority interests..........................               (642)       (682)      (455)        (55)
     Contributions from minority interests........................                 --         287        230          28
      Dividend paid...............................................               (579)     (6,712)    (8,670)     (1,047)
     Cash and cash equivalents distributed to Sinopec Group                                               --
        Company...................................................               (151)     (6,446)                    --
                                                                                 ----      ------
          Net cash generated from/(used in) financing activities.              33,003     (15,387)   (14,563)     (1,759)
                                                                               ------     -------    -------      ------
Net (decrease)/increase in cash and cash equivalents..............             (2,136)      1,409     (3,331)       (402)
Effect of foreign exchange rate...................................                 (2)         (7)         7           1
Cash and cash equivalents at beginning of year....................             21,759      19,621     21,023       2,539
                                                                               ------      ------     ------       -----
Cash and cash equivalents at end of year..........................             19,621      21,023     17,699       2,138
                                                                               ------      ------     ------       -----
</TABLE>


          See accompanying notes to consolidated financial statements.
<PAGE>

            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                             (Amounts in millions)


(a)  Reconciliation of income before income tax and minority interests to net
     cash from operating activities

     The reconciliation of income before income tax and minority interests to
net cash from operating activities is as follows:

<TABLE>
<CAPTION>
                                                                                            Years ended December 31,
                                                                               -----------------------------------------
                                                                               2000        2001       2002       2002
                                                                               ----        ----       ----       ----
                                                                                   RMB        RMB        RMB         US$
<S>                                                                             <C>        <C>        <C>          <C>
Income before income tax and minority interests..........................       31,036     24,667     24,832       2,999
     Adjustment for:
     Depreciation, depletion and amortization............................       20,781     22,430     24,282       2,933
     Dry hole cost.......................................................        1,944      1,770      1,771         214
     Income from associates and jointly controlled entities..............         (270)      (320)      (310)        (37)
     Investment income...................................................         (191)      (199)      (190)        (23)
     Interest income.....................................................         (861)    (1,183)      (338)        (41)
     Interest expense....................................................        6,663      4,706      4,018         485
     Unrealized foreign exchange (gain)/loss.............................         (365)      (413)       244          29
     Loss on disposal of property, plant and equipment...................          928         67        721          87
     Impairment losses on long-lived assets..............................          187         --         --          --
     Reversal of impairment losses on long-lived assets, net of
        depreciation effect..............................................         (936)        --         --          --
     (Increase)/decrease in trade accounts receivable....................       (5,328)     1,990        326          39
     Increase in bills receivable........................................         (343)      (823)    (1,144)       (138)
     (Increase)/decrease in inventories..................................      (21,983)     4,319       (137)        (17)
     (Increase)/decrease in prepaid expenses and other current assets....       (8,743)       668      4,122         498
     Decrease/(increase) in lease prepayments............................           --         50        (11)         (1)
     Increase in other assets............................................         (283)       (43)      (612)        (74)
     Increase/(decrease) in trade accounts payable.......................        9,104     (2,761)     2,517         304
     Increase in bills payable...........................................        8,575     14,819      4,165         503
     Increase/(decrease) in accrued expenses and other payables..........        3,387     (4,972)       572          69
     (Decrease)/increase in other liabilities............................         (348)       360        622          75
                                                                                  ----        ---        ---          --
Cash flow generated from operations .....................................       42,954     65,132     65,450       7,904
     Interest received...................................................        1,171      1,237        353          43
     Interest paid.......................................................       (8,221)    (5,057)    (5,592)       (675)
     Investment and dividend income received.............................          125        293        278          34
     Income tax paid.....................................................       (6,849)    (6,326)    (6,599)       (797)
                                                                                ------     ------     ------        ----
Net cash from operating activities.......................................       29,180     55,279     53,890       6,509
                                                                                ------     ------     ------       -----
</TABLE>


         See accompanying notes to consolidated financial statements.

<PAGE>

            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 (Amounts in millions, except per share data)

<TABLE>
<CAPTION>

                                                                                                                   Total
                                                       Share  Capital  Share    Revaluation  Other  Retained     Shareholder's
                                                      capital reserve premium       reserve reserves earnings     equity
                                                      ------- ------- -------       ------- -------- --------     -------
                                                        RMB      RMB     RMB          RMB    RMB       RMB          RMB
<S>                                                 <C>      <C>       <C>          <C>    <C>     <C>          <C>
Shareholders' equity at January 1, 2000..........       --        --      --        32,320 56,079    1,478        89,877
Revaluation surplus of Sinopec National Star after
    adjusting for the amount attributable to
    minority interests (Note i and 14)...........       --        --      --         1,136    --       --         1,136
Final dividend for 1999..........................       --        --      --            --    --     (579)         (579)
Capitalization as share capital upon legal
    establishment of the Company (Note 1) .......   68,800   (14,579)     --             (53,322)    (899)           --
Issue of shares, net of issuing expenses of RMB     15,102        --   9,224            --    --       --        24,326
1,476............................................
Transfer from retained earnings to other reserves       --        --      --            --   580     (580)           --
..
Elimination of net deferred tax assets (Note 18).       --        --      --            --   (34)      --           (34)
Net assets distributed to Sinopec Group Company in
    connection with the Acquisition .............       --        --      --              (1,156)      --        (1,156)
                                                                                         --
Net income.......................................       --        --      --            --    --   19,584        19,584
Appropriations (Note 23).........................       --        --      --            -- 3,230   (3,230)           --
Revaluation surplus realized.....................       --        --      --            --    --      199            --
                                                    ------   -------   -----        ------ -----   ------       -------
Shareholders' equity at December 31, 2000........   83,902   (14,579)  9,224        33,257 5,377   15,973       133,154
Final dividend for 2000..........................       --        --      --            --    --   (6,712)       (6,712)
Issue of shares, net of issuing expenses of RMB 168  2,800        --   8,848            --    --       --        11,648
Net income.......................................       --        --      --            --    --   16,025        16,025
Appropriations (Note 23).........................       --        --      --            -- 2,804   (2,804)           --
Consideration for Acquisition of Sinopec National
    Star (Note 1)................................       --        --      --            --(6,446)      --        (6,446)
Transfer from other reserves to capital reserve.        --    (4,299)     --            -- 4,299       --            --
Revaluation surplus realized.....................       --        --       --                          232          --
                                                                                      (232)   --
Shareholders' equity at December 31, 2001........   86,702   (18,878) 18,072        33,025 6,034   22,714       147,669
                                                    ------   -------  ------        ------ -----   ------       -------
Final dividend for 2001 .........................       --        --      --            --    --   (6,936)       (6,936)
Interim dividend for 2002........................       --        --      --            --    --   (1,734)       (1,734)
Net income.......................................       --        --      --            --    --   16,080        16,080
Appropriations (Note 23).........................       --        --      --            -- 9,824   (9,824)           --
Revaluation surplus realized.....................       --        --      --          (544)   --      544            --
Elimination of surplus on land use rights (Note ii)     --        --      --          (840)  246       --          (594)
..
                                                                           --
Deferred tax on land use rights (Note ii)........      --         --                   --     (5)       5           --
                                                    ------   -------  ------        ------------   ------       -------
Shareholders' equity at December 31, 2002........   86,702   (18,878) 18,072        31,64 116,099  20,849       154,485
                                                    ======   =======  ======        ===== =======  ======       =======
US Dollars equivalent............................   10,472    (2,280)  2,183        3,821   1,944   2,518        18,658
                                                    ======    ======   =====        =====   =====   =====        ======
</TABLE>


Note:

(i)   Net gains and losses not recognized in the combined statements of income
      represent revaluation surplus after adjusting for the amount
      attributable to minority interests. Net gains and losses not recognized
      in the combined statements of income amounted to RMB 1,136 for the year
      ended December 31, 2000 and nil for the years ended December 31, 2001
      and 2002. The recognized gains of the Group, which represents the
      aggregate of the net income and the revaluation surplus was RMB 20,720,
      RMB 16,025 and RMB 16,080 for the years ended December 31, 2000, 2001
      and 2002, respectively.

(ii)  Effective January 1, 2002, land use rights which are included in lease
      prepayments are carried at historical cost. Accordingly, the surplus on
      the revaluation of land use rights credited to revaluation reserve
      previously, net of minority interests, was eliminated during the year.
      The effect of this change did not have a material impact on the Group's
      financial condition and results of operations in the years prior to the
      change. As a result of the tax deductibility of the revaluation surplus,
      a deferred tax asset, net of minority interests, is created with a
      corresponding increase in other reserves.

         See accompanying notes to consolidated financial statements.
<PAGE>

            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)


1.   PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION

Principal activities

     China Petroleum & Chemical Corporation (``the Company'') is an oil and
energy company that, through its subsidiaries (hereinafter collectively
referred to as ``the Group''), engages in fully integrated oil and gas and
chemical operations in the People's Republic of China (``the PRC''). Oil and
gas operations consist of exploring for, developing and producing crude oil
and natural gas; transporting crude oil, natural gas and products by
pipelines; refining crude oil into finished petroleum products; and marketing
crude oil, natural gas and refined petroleum products. Chemical operations
include the manufacture and marketing of a wide range of chemicals for
industrial uses.


Organization

     The Company was established in the PRC on February 25, 2000 as a joint
stock limited company as part of the reorganization (``the Reorganization'')
of China Petrochemical Corporation (``Sinopec Group Company''), the ultimate
holding company of the Group and a ministry-level enterprise under the direct
supervision of the State Council of the PRC. Prior to the incorporation of the
Company, the oil and gas and chemical operations of the Group were carried on
by oil administration bureaux, petrochemical and refining production
enterprises and sales and marketing companies of Sinopec Group Company.

     As part of the Reorganization, certain of Sinopec Group Company's core
oil and gas and chemical operations and businesses together with the related
assets and liabilities that were to be transferred to the Company were
segregated such that the operations and businesses were separately managed
beginning December 31, 1999. On February 25, 2000, in consideration for
Sinopec Group Company transferring such oil and gas and chemical operations
and businesses and the related assets and liabilities to the Company, the
Company issued 68.8 billion domestic stated-owned ordinary shares with a par
value of RMB 1.00 each to Sinopec Group Company. The shares issued to Sinopec
Group Company on February 25, 2000 represented the entire registered and
issued share capital of the Company at that date. The oil and gas and chemical
operations and businesses transferred to the Company related to (i) the
exploration, development and production of crude oil and natural gas, (ii) the
refining, transportation, storage and marketing of crude oil and petroleum
products, and (iii) the production and sale of chemicals (collectively the
``Predecessor Operations'').


Basis of presentation

      Pursuant to the resolution passed at the Extraordinary General Meeting
held on August 24, 2001, the Company acquired the entire equity interest of
Sinopec National Star Petroleum Company ("Sinopec National Star") from Sinopec
Group Company for a consideration of RMB 6.45 billion (hereinafter referred to
as the "Acquisition").

      As the Group and Sinopec National Star are under the common control of
Sinopec Group Company, the Acquisition is considered a "combination of
entities under common control" which is accounted in a manner similar to a
pooling-of-interests ("as-if pooling-of-interests accounting"). Accordingly,
the assets and liabilities of Sinopec National Star acquired have been
accounted for at historical cost and the financial statements of the Group for
periods prior to the combination have been restated to include the accounts
and results of operations of Sinopec National Star on a combined basis. The
consideration paid by the Group has been treated as an equity transaction.

     The results of operations previously reported by the separate enterprises
and the combined amounts for the year ended December 31, 2000 presented in the
accompanying consolidated financial statements are summarized below.

                                         The Group
                                           without       Sinopec
                                           Sinopec      National
                                     National Star          Star        Combined
                                               RMB           RMB             RMB
Results of operations:
      Operating revenue                    328,901         2,675         331,576
      Net income                            19,004           580          19,584
      Basic earnings per share                0.26          0.01            0.27

      The accompanying consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS")
promulgated by the International Accounting Standards Board. IFRS includes
International Accounting Standards ("IAS") and related interpretations. The
significant differences between IFRS and accounting principles generally
accepted in the United States of America (``US GAAP'') and their effect on net
income for the years ended December 31, 2000, 2001 and 2002 and on
shareholders' equity as of December 31, 2001 and 2002 are set forth in Note
31.

      The accompanying consolidated financial statements are prepared on the
historical cost basis as modified by the revaluation of certain property,
plant and equipment (Note 14). The accounting policies described in Note 2
have been consistently applied by the Group. As described in note (ii) to the
consolidated statement of shareholders' equity, land use rights are carried at
cost effective January 2002. The effect of this change resulted in a decrease
in the revaluation reserve and an increase in other reserves relating to the
recognition of the deferred tax asset as of January 1, 2002. The effect of
this change did not have a material impact on the Group's financial condition
and results of operations in prior years.

     The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the year. Actual results could differ from those estimates.

     The accompanying consolidated financial statements are expressed in
Renminbi (``RMB''), the national currency of the PRC. Solely for the
convenience of the reader, the December 31, 2002 consolidated financial
statements have been translated into United States dollars at the noon buying
rate in New York City on December 31, 2002 for cable transfers in Renminbi as
certified for customs purposes by the Federal Reserve Bank of New York of US$
1.00 = RMB 8.280. No representation is made that the Renminbi could have been,
or could be, converted into United States dollars at that rate or at any other
certain rate on December 31, 2002, or at any other certain date.


2.   PRINCIPAL ACCOUNTING POLICIES

(a)   Basis of consolidation

     The consolidated financial statements include the financial statements of
the Company and its subsidiaries. Subsidiaries are those entities controlled
by the Company. Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as
to obtain benefits from its activities.

     The results of subsidiaries are included in the consolidated statements
of income from the date that control effectively commences until the date that
control effectively ceases, and the share attributable to minority interests
is deducted from or added to the income before minority interests. All
significant inter-company balances and transactions, and any unrealized gains
arising from inter-company transactions, are eliminated on consolidation.

     The particulars of the Group's principal subsidiaries are set out in Note
29.


(b)   Translation of foreign currencies

     The functional and reporting currency of the Group is Renminbi. Foreign
currency transactions during the year are translated into Renminbi at the
applicable rates of exchange quoted by the People's Bank of China (``PBOC
rates'') prevailing on the transaction dates. Foreign currency monetary assets
and liabilities are translated into Renminbi at the applicable PBOC rates at
the balance sheet date.

     Exchange differences, other than those capitalized as construction in
progress, are recognized as income or expenses in the consolidated statements
of income. There were no exchange differences capitalized for the years ended
December 31, 2000, 2001 and 2002.


(c)   Cash and cash equivalents

     Cash equivalents consist of time deposits with financial institutions
with an initial term of less than three months when purchased. Cash
equivalents are stated at cost, which approximates fair value.


(d)   Trade accounts receivable

     Trade accounts receivable are stated at cost less allowance for doubtful
accounts. An allowance for doubtful accounts is provided based upon the
evaluation of the recoverability of these accounts at the balance sheet date.



(e)   Inventories

     Inventories, other than spare parts and consumables, are stated at the
lower of cost and net realizable value. Cost includes the cost of purchase
computed using the weighted average method and, in the case of work in
progress and finished goods, direct labor and an appropriate proportion of
production overheads. Net realizable value is the estimated selling price in
the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.

     Spare parts and consumables are stated at cost less any provision for
obsolescence.


(f)   Property, plant and equipment

     Property, plant and equipment are initially recorded at cost less
accumulated depreciation and impairment losses. The cost of an asset comprises
its purchase price and any directly attributable costs of bringing the asset
to working condition and location for its intended use. Subsequent to the
revaluation (Note 14), which was based on depreciated replacement costs,
property, plant and equipment are carried at revalued amount, being the fair
value at the date of the revaluation less any subsequent accumulated
depreciation and impairment losses. Revaluations are performed periodically to
ensure that the carrying amount does not differ materially from that which
would be determined using fair value at the balance sheet date. Expenditure
incurred after the asset has been put into operation is capitalized only when
it increases the future economic benefits embodied in the item of property,
plant and equipment. All other expenditure is charged to the consolidated
statements of income in the period in which it is incurred.

     Gains or losses arising from the retirement or disposal of property,
plant and equipment, other than oil and gas properties, are determined as the
difference between the net disposal proceeds and the carrying amount of the
asset and are recognized as income or expense in the consolidated statements
of income on the date of retirement or disposal. On disposal of a revalued
asset, the related revaluation surplus is transferred from the revaluation
reserve to retained earnings.

     Depreciation is provided to write off the cost/revalued amount of each
asset, other than oil and gas properties, over its estimated useful life on a
straight-line basis, after taking into account its estimated residual value,
as follows:

  Buildings..................................................    15 to 45 years
  Plant, machinery, equipment and others.....................     4 to 18 years
  Oil depots, storage tanks and service station equipment....     8 to 14 years


(g)   Oil and gas properties

     The Group uses the successful efforts method of accounting for its oil
and gas producing activities. Under this method, costs of development wells
and the related support equipment are capitalized. The cost of exploratory
wells is initially capitalized as construction in progress pending
determination of whether the well has found proved reserves. The impairment of
exploratory well costs occurs upon the determination that the well has not
found proved reserves. Exploratory wells that find oil and gas reserves in any
area requiring major capital expenditure are expensed unless the well has
found a sufficient quantity of reserves to justify its completion as a
producing well if the required capital expenditure is made, and drilling of
the additional exploratory wells is under way or firmly planned for the near
future. However, in the absence of a determination of the discovery of proved
reserves, exploratory well costs are not carried as an asset for more than one
year following completion of drilling. If, after one year has passed, a
determination of the discovery of proved reserves cannot be made, the
exploratory well costs are impaired and charged to expense. All other
exploration costs, including geological and geophysical costs, other dry hole
costs and annual lease rentals, are expensed as incurred. Capitalized costs
relating to proved properties are amortized at the field level on a
unit-of-production method. The amortization rates are determined based on oil
and gas reserves estimated to be recoverable from existing facilities over the
shorter of the economic lives of crude oil and natural gas reservoirs and the
terms of the relevant production licenses.

     Gains and losses on the disposal of proved oil and gas properties are not
recognized unless the disposal encompasses an entire property. The proceeds on
such disposals are credited to the carrying amounts of oil and gas properties.


(h)   Lease prepayments

     Lease prepayments represent land use rights paid to the PRC's land
bureau. Land use rights are carried at cost and amortized on a straight-line
basis over the respective periods of the rights. As of December 31, 2002,
lease prepayments which comprise of land use rights have been presented in a
separate balance sheet caption. Accordingly, the comparative amount as of
December 31, 2001 which was previously included in property, plant and
equipment was reclassified to conform with the current year's presentation.


(i)   Construction in progress

     Construction in progress represents buildings, oil and gas properties,
various plant and equipment under construction and pending installation, and
is stated at cost less impairment losses. Cost comprises direct costs of
construction as well as interest charges, and foreign exchange differences on
related borrowed funds to the extent that they are regarded as an adjustment
to interest charges, during the periods of construction.

     Construction in progress is transferred to property, plant and equipment
when the asset is substantially ready for its intended use.

     No depreciation is provided in respect of construction in progress.


(j)   Investments

     Investments in unlisted equity securities are stated at cost less
provision for impairment losses. A provision is made where, in the opinion of
management, the carrying amount of the investments exceeds its recoverable
amount.

(k) Interests in associates and jointly controlled entities

     An associate is a company, not being a subsidiary, in which the Group
exercises significant influence over its management. A jointly controlled
entity is an entity over which the Group can exercise joint control with other
venturers. Significant influence is the power to participate in the financial
and operating policy decisions of the investee but is not control over those
policies. Joint control is the contractually agreed sharing of control over an
economic activity.

     The consolidated statements of income include the Group's share of the
results of its associates and jointly controlled entities for the period. In
the consolidated balance sheets, interests in associates and jointly
controlled entities are stated at the Group's attributable share of net
assets.


(l)  Provision

      A provision is recognized in the consolidated balance sheets when the
Group has a legal or constructive obligation as a result of a past event, and
it is probable that an outflow of economic benefits will be required to settle
the obligation.


(m)   Revenue recognition

     Revenues associated with the sale of crude oil, natural gas, petroleum
and chemical products and all other items are recorded when the customer
accepts the goods and the significant risks and rewards of ownership and title
have been transferred to the buyer. Revenue from the rendering of services is
recognized in the consolidated statements of income upon performance of the
services. No revenue is recognized if there are significant uncertainties
regarding recovery of the consideration due, the possible return of goods, or
when the amount of revenue and the costs incurred or to be incurred in respect
of the transaction cannot be measured reliably.

     Interest income is recognized on a time apportioned basis that takes into
account the effective yield on the asset.


(n)   Borrowing costs

     Borrowing costs are expensed in the consolidated statements of income in
the period in which they are incurred, except to the extent that they are
capitalized as being attributable to the construction of an asset which
necessarily takes a period of time to get ready for its intended use.

(o)   Repairs and maintenance expenditure

     Repairs and maintenance expenditure, including cost of major overhaul, is
expensed as incurred.


(p)   Environmental expenditures

     Environmental expenditures that relate to current ongoing operations or
to conditions caused by past operations are expensed as incurred.

     Liabilities related to future remediation costs are recorded when
environmental assessments and/or cleanups are probable and the costs can be
reasonably estimated. As facts concerning environmental contingencies become
known to the Group, the Group reassesses its position both with respect to
accrued liabilities and other potential exposures.

(q)   Research and development costs

     Research and development costs are recognized as expenses in the period
in which they are incurred. Research and development costs amounted to RMB
1,742, RMB 1,290 and RMB 1,514 for the years ended December 31, 2000, 2001 and
2002, respectively.


(r)   Operating leases

     Operating lease payments are charged to the consolidated statements of
income on a straight-line basis over the period of the respective leases.
Operating lease charges amounted to RMB 2,900, RMB 2,832 and RMB 3,192 for the
years ended December 31, 2000, 2001 and 2002, respectively.


(s)   Retirement benefits

     The contributions payable under the Group's retirement plans are charged
to the consolidated statements of income according to the contribution
determined by the plans. Further information is set out in Note 27.


(t)   Impairment loss

     The carrying amounts of long-lived assets are reviewed periodically in
order to assess whether the recoverable amounts have declined below the
carrying amounts. These assets are tested for impairment whenever events or
changes in circumstances indicate that their recorded carrying amounts may not
be recoverable. When such a decline has occurred, the carrying amount is
reduced to the recoverable amount. The recoverable amount is the greater of
the net selling price and the value in use. In determining the value in use,
expected future cash flows generated by the asset are discounted to their
present value. The amount of the reduction is recognized as an expense in the
consolidated statements of income unless the asset is carried at revalued
amount for which an impairment loss is recognized directly against any related
revaluation reserve to the extent that the impairment loss does not exceed the
amount held in the revaluation reserve for that same asset.

     The Group assesses at each balance sheet date whether there is any
indication that an impairment loss recognized for an asset in prior years may
no longer exist. An impairment loss is reversed if there has been a favorable
change in the estimates used to determine the recoverable amount. A subsequent
increase in the recoverable amount of an asset, when the circumstances and
events that led to the write-down or write-off cease to exist, is recognized
as income unless the asset is carried at revalued amount. Reversal of an
impairment loss on a revalued asset is credited to the revaluation reserve
except for impairment loss which was previously recognized as an expense in
the consolidated statements of income; a reversal of such impairment loss is
recognized as income. The reversal is reduced by the amount that would have
been recognized as depreciation had the write-down or write-off not occurred.

(u)   Income tax

      Income tax comprises current and deferred tax. Current tax is calculated
on taxable income by applying the applicable tax rates. Deferred tax is
provided using the balance sheet liability method on all temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is
calculated on the basis of the enacted tax rates that are expected to apply in
the period when the asset is realized or the liability is settled. The effect
on deferred tax of any changes in tax rates is charged or credited to the
consolidated statements of income.

     The tax value of losses expected to be available for utilization against
future taxable income is set off against the deferred tax liability within the
same legal tax unit and jurisdiction to the extent appropriate, and is not
available for set-off against the taxable profit of another legal tax unit.
Deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.


(v)   Dividends

      Dividends are recognized as a liability in the period in which they are
declared.


(w)   Segmental reporting

     A business segment is a distinguishable component of the Group that is
engaged in providing products or services and is subject to risks and rewards
that are different from those of other segments.


3.   OTHER OPERATING REVENUES

     Other operating revenues represent:

                                               Years ended December 31,
                                               -------------------------
                                              2000        2001       2002
                                              ----        ----       ----
                                               RMB         RMB       RMB
Sale of materials, services and others......   6,020     13,948     15,515
Rental income...............................     216        176        343
                                                 ---        ---        ---
                                               6,236     14,124     15,858
                                               =====     ======     ======


     For the year ended December 31, 2000, other operating revenues were
reported net of related expenses whereas for the years ended December 31, 2001
and 2002, other operating revenues were reported on a gross basis and the
related expenses were reported separately in operating expenses. The impact of
reporting other operating revenues on a net basis for the year ended December
31, 2000 was not significant to total revenues or expenses in the accompanying
consolidated financial statements.

4.   PERSONNEL EXPENSES

      Personnel expenses represent:

                                                 Years ended December 31,
                                                 ------------------------
                                                2000        2001       2002
                                                ----        ----       ----
                                                RMB          RMB       RMB
Wages and salaries..........................     9,697      9,402      9,871
Staff welfare...............................     1,317      1,311      1,375
Contribution to retirement schemes..........     1,387      1,358      1,549
Social security contributions...............       863        818        830
                                                   ---        ---        ---
                                                13,264     12,889     13,625
                                                ======     ======     ======


5.   EMPLOYEE REDUCTION EXPENSES


     During the year ended December 31, 2002, in connection with the assets
swap agreement between the Company and Sinopec Group Company (Note 26), the
Company made payments of RMB 244 relating to approximately 11,000 employees
that were transferred to Sinopec Group Company.

     In accordance with the Group's voluntary employee reduction plan, the
Group recorded employee reduction expenses of RMB 2,546 during the year ended
December 31, 2001 in respect of the voluntary termination and the transfer to
Sinopec Group Company totalling approximately 68,000 employees. The RMB 2,546
expense included approximately RMB 1,245 paid to employees that accepted
offers to transfer to Sinopec Group Company. As of December 31, 2001, all
payments to these employees have been made by the Group. For employees that
were transferred to Sinopec Group Company, the employees were entitled to
receive termination benefits from Sinopec Group Company to the extent that
their employment was subsequently terminated.


6.   TAXES OTHER THAN INCOME TAX

      Taxes other than income tax represent:

                                                 Years ended December 31,
                                                 ------------------------
                                                2000        2001       2002
                                                ----        ----       ----
                                                 RMB         RMB        RMB
Consumption tax.............................     9,260      9,025       8,823
City construction tax.......................     1,673      1,615       1,636
Education surcharge.........................       713        707         782
Resources tax...............................       382        406         499
Business tax................................       108        110         112
Others......................................        84         24          --
                                                    --         --          --
                                                12,220     11,887      11,852
                                                ======     ======      ======

      Consumption tax is levied on producers of gasoline and diesel based on a
tariff rate applied to the volume of sales. City construction tax is levied on
an entity based on its total amount of value-added tax, consumption tax and
business tax.

7.   OTHER OPERATING EXPENSES, NET

     Other operating expenses, net represent:

<TABLE>
<CAPTION>
                                                                            Years ended December 31,
                                                                            ------------------------
                                                                           2000        2001       2002
                                                                           ----        ----       ----
                                                                            RMB         RMB       RMB
<S>                                                                           <C>        <C>          <C>
Fines, penalties and compensations....................................        28         80           71
Donations.............................................................       123         62           66
Loss on disposal of property, plant and equipment, net................       928         67          721
Impairment losses on long-lived assets................................       187       ___           ___
Reversal of impairment losses on long-lived assets,
   net of depreciation effect.........................................      (936)      ___           ___
Others................................................................       388        (16)         208
                                                                             ---        ---          ---
                                                                            718         193        1,066
                                                                            ===         ===        =====
</TABLE>


Asset impairment

     There were no impairment losses and reversal of impairment losses
recognized on long-lived assets for the years ended December 31, 2001 and
2002.

     The factors resulting in the exploration and production (``E&P'') segment
impairment losses of RMB 92 for the year ended December 31, 2000 were
unsuccessful development drilling and high operating and development costs for
certain oil fields. The carrying values of these E&P properties, including
construction in progress assets, were written down to a recoverable value
which was determined based on the present values of the expected future cash
flows of the assets. The oil and gas pricing was a factor used in the
determination of the present values of the expected future cash flows of the
assets and had an impact on the recognition of the asset impairment.

     Reversal of impairment losses on long-lived assets of the E&P segment of
RMB 936 for the year ended December 31, 2000, represent the reversal of
impairment losses previously recognized primarily as a result of the increase
in crude oil prices used in determining the recoverable value.

     Impairment losses recognized on long-lived assets of the refining segment
of RMB 95 for the year ended December 31, 2000, primarily relate to
write-downs of certain refining production facilities including construction
in progress assets to their recoverable values which were determined based on
the present value of estimated future cash flows. These write-downs are
primarily the result of insufficient cash flows expected to be generated by
these facilities.


8.   INTEREST EXPENSE

     Interest expense represents:

<TABLE>
<CAPTION>
                                                                                Years ended December 31,
                                                                                ------------------------
                                                                            2000            2001           2002
                                                                            ----            ----           ----
                                                                            RMB             RMB            RMB
<S>                                                                        <C>             <C>            <C>
Interest expense incurred.......................................           7,265           5,692          4,951
Less: Interest expense capitalized*.............................            (602)           (986)          (933)
                                                                            ----            ----           ----
Interest expense................................................           6,663           4,706          4,018
                                                                           =====           =====          =====
* Interest rates per annum at which borrowing costs were
   capitalized for construction in progress.....................     4.5% to 9.7%    3.4% to 8.0%  3.1% to 6.2%
                                                                     ============    ============  ============
</TABLE>

9.   INCOME TAX
<TABLE>
<CAPTION>

     Income tax in the consolidated statements of income represents:
                                                                                Years ended December 31,
                                                                                ------------------------
                                                                               2000       2001        2002
                                                                               ----       ----        ----
Provision for PRC income tax
<S>                                                                            <C>         <C>       <C>
     - the Group.........................................................      8,994       6,414     6,566
     - associates and jointly controlled entities........................         21          23        43
Deferred taxation (Note 18)..............................................        623       1,592     1,026
                                                                                 ---       -----     -----
                                                                               9,638       8,029     7,635
                                                                               =====       =====     =====
</TABLE>

     A reconciliation of the expected tax with the actual tax expense is as
follows:
<TABLE>
<CAPTION>

                                                                                Years ended December 31,
                                                                                ------------------------
                                                                               2000       2001        2002
                                                                               ----       ----        ----
                                                                               RMB         RMB        RMB
<S>                                                                          <C>         <C>        <C>
Income before income tax and minority interests..........................    31,036      24,667     24,832
                                                                             ------      ------     ------
Expected PRC income tax expense at a statutory tax rate of 33%...........    10,242       8,140      8,195
Non-deductible expenses..................................................       648         398        208
Non-taxable income.......................................................      (415)       (261)      (441)
Differential tax rate on subsidiaries' income (Note).....................      (924)       (390)      (491)
Tax losses not recognized for deferred tax...............................        87         142        164
                                                                                 --         ---        ---
Income tax...............................................................     9,638       8,029      7,635
                                                                              =====       =====      =====
</TABLE>


Note:    The provision for PRC current income tax is based on a statutory rate
         of 33% of the assessable income of the Group as determined in
         accordance with the relevant income tax rules and regulations of the
         PRC, except for certain subsidiaries of the Company, which are taxed
         at a preferential rate of 15%.

10.   BASIC EARNINGS PER SHARE

     The calculation of basic earnings per share is based on the net income of
RMB 19,584, RMB 16,025 and RMB 16,080 and the weighted average number of
shares in issue during the year of 71,936,025,585, 85,168,192,425 and
86,702,439,000, for the years ended December 31, 2000, 2001 and 2002
respectively. The weighted average number of shares for the year ended
December 31, 2000 reflects the issuance of 15,102,439,000 shares in October
2000 in connection with the Company's initial public offering (Note 22) and as
if the 68,800,000,000 shares issued and outstanding upon the legal formation
of the Company on February 25, 2000 had been outstanding as of January 1,
2000. The weighted average number of shares for the year ended December 31,
2001 reflects the issuance of 2,800,000,000 shares in July 2001 in connection
with the Company's public offering of domestically listed ordinary shares in
the Shanghai Stock Exchange (Note 22).

     The amount of diluted earnings per share is not presented as there were
no dilutive potential ordinary shares in existence for each of the years in
the three-year period ended December 31, 2002.

11.   TRADE ACCOUNTS RECEIVABLE, NET

     Trade accounts receivable are analyzed as follows:

                                                            December 31,
                                                            ------------
                                                          2001        2002
                                                          ----        ----
                                                          RMB          RMB
Third parties.......................................     10,049       10,643
Sinopec Group Company and its affiliates............      3,503        2,628
Associates and jointly controlled entities..........         10           65
                                                             --           --
                                                         13,562       13,336
Less: Allowance for doubtful accounts...............     (2,480)      (2,666)
                                                         ------       ------
                                                         11,082       10,670
                                                         ======       ======

     The allowance for doubtful accounts is analyzed as follows:

                                                     Years ended December 31,
                                                     ------------------------
                                                  2000         2001        2002
                                                  ----         ----        ----
                                                   RMB         RMB          RMB
At beginning of year..........................    2,750       2,924       2,480
Provision for the year........................      369         331         554
Written-off/back..............................     (195)       (775)       (368)
                                                   ----        ----        ----
At end of year................................    2,924       2,480       2,666
                                                  =====       =====       =====

     Sales are generally on a cash term. Credit are generally only available
for major customers with well-established trading records. Amounts due from
Sinopec Group Company and its affiliates are repayable under the same terms.

<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)



12.   INVENTORIES

     Inventories represent:
<TABLE>
<CAPTION>

                                                                        December 31,
                                                                        ------------
                                                                       2001        2002
                                                                       ----        ----
                                                                       RMB         RMB
<S>                                                                  <C>          <C>
Crude oil and other raw materials...............................     17,749       21,295
Work in progress................................................      5,050        6,192
Finished goods..................................................     20,442       15,086
Spare parts and consumables.....................................      3,555        4,210
                                                                      -----        -----
                                                                     46,796       46,783
Less: Allowance for diminution in value of inventories..........       (602)       (486)
                                                                       ----        ----
                                                                     46,194       46,297
                                                                     ======       ======
</TABLE>


     The allowance for diminution in value of inventories is analyzed as
follows:

                                               Years ended December 31,
                                               ------------------------
                                           2000         2001        2002
                                           ----         ----        ----
                                           RMB           RMB        RMB
At beginning of year.................       736          849         602
Provision for the year...............       182          106         172
Written-off..........................       (69)        (353)       (288)
                                            ---         ----        ----
At end of year.......................       849          602         486
                                            ===          ===         ===

     The carrying amount of inventories carried at net realizable value
amounted to RMB 1,924 and RMB 1,624 as of December 31, 2001 and 2002,
respectively.

     The cost of inventories recognized as an expense in the consolidated
statements of income amounted to RMB 252,873, RMB 249,700 and RMB 258,594 for
the years ended December 31, 2000, 2001 and 2002, respectively.


13.   PREPAID EXPENSES AND OTHER CURRENT ASSETS

     Prepaid expenses and other current assets represent:

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                          2001       2002
                                                                                          ----       ----
                                                                                          RMB         RMB
<S>                                                                                       <C>          <C>
Advances to third parties..........................................................       6,618        3,500
Amounts due from Sinopec Group Company and its affiliates..........................       9,421       11,714
Other receivables..................................................................       3,406        1,645
Purchase deposits..................................................................       2,426        1,610
Prepayments in connection with construction work and equipment purchases...........       1,543        1,196
Prepaid value-added tax and customs duty...........................................       2,284        1,511
Amounts due from associates and jointly controlled entities........................         373          345
Prepaid rental.....................................................................          52           --
                                                                                          -----        -----
                                                                                         26,123       21,521
                                                                                         ======       ======
</TABLE>
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




14.   PROPERTY, PLANT AND EQUIPMENT, NET

By segment:
<TABLE>
<CAPTION>

                                                   Exploration            Marketing               Corporate
                                                       and                   and                     and
                                                    production  Refining distribution Chemicals     others      Total
                                                    ----------  -------- ------------ ---------     ------      -----

                                                       RMB        RMB        RMB         RMB         RMB         RMB
Cost/valuation:
<S>        <C>       <C>                              <C>         <C>        <C>       <C>           <C>        <C>
Balance at 1 January 2002........................     142,354     93,003     40,683    110,429       1,657      388,126
Additions........................................       1,623        453      1,860        306         102        4,344
Transferred from Sinopec Group Company (Note 26)          ___        ___      1,040        ___         ___        1,040
Transferred from construction in progress. ......      17,236      6,825      6,416     11,162         559       42,198
Transferred to Sinopec Group Company (Note 26) ..      (1,799)      (266)       ___       (144)        ___       (2,209)
Disposals........................................      (1,485)    (1,308)      (521)      (704)        (88)      (4,106)
                                                       ------     ------       ----       ----         ---       ------
Balance at 31 December 2002......................     157,929     98,707     49,478    121,049       2,230      429,393
                                                      -------     ------     ------    -------       -----      -------
Accumulated depreciation:
Balance at 1 January 2002........................      68,318     40,338      6,788     54,512         413      170,369
Depreciation charge for the year.................       9,024      6,002      1,935      6,880         126       23,967
Transferred to Sinopec Group Company (Note 26) ..        (619)      (125)       ___        (68)        ___         (812)
Written back on disposal.........................      (1,177)      (939)      (247)      (523)        (67)      (2,953)
                                                       ------       ----       ----       ----         ---       ------
Balance at 31 December 2002......................      75,546     45,276      8,476     60,801         472      190,571
                                                       ------     ------      -----     ------         ---      -------
Net book value:
At 31 December 2002..............................      82,383     53,431     41,002     60,248       1,758      238,822
                                                       ======     ======     ======     ======       =====      =======
At 31 December 2001..............................      74,036     52,665     33,895     55,917       1,244      217,757
                                                       ======     ======     ======     ======       =====      =======

By asset class:
</TABLE>


<TABLE>
<CAPTION>
                                                                                      Oil depots,   Plant,
                                                                                     storage tanks machinery,
                                                                          Oil and gas  and service  equipment
                                                               Buildings  properties   stations   and others    Total
                                                               ---------  ----------   --------   ----------    -----

                                                                  RMB        RMB          RMB         RMB        RMB
Cost/valuation:
<S>                                                               <C>       <C>           <C>        <C>        <C>
Balance at 1 January 2002....................................     33,397    125,119       33,321     196,289    388,126
Additions....................................................        365         52        1,160       2,767      4,344
Transferred from Sinopec Group Company (Note 26).............        ___        ___        1,040         ___      1,040
Transferred from construction in progress....................      1,407     16,431        6,019      18,341     42,198
Reclassification.............................................      1,077        295       (4,361)      2,989        ___
Transferred to Sinopec Group Company (Note 26)...............       (185)      (196)         ___      (1,828)    (2,209)
Disposals....................................................       (317)      (769)        (252)     (2,768)    (4,106)
                                                                    ----       ----         ----      ------     ------
Balance at 31 December 2002..................................     35,744    140,932       36,927     215,790    429,393
                                                                  ------    -------       ------     -------    -------
Accumulated depreciation:
Balance at 1 January 2002....................................     12,934     62,676        5,902      88,857    170,369
Depreciation charge for the year.............................      1,539      7,557        1,391      13,480     23,967
Reclassification.............................................        384        118         (748)        246        ___
Transferred to Sinopec Group Company (Note 26)...............        (56)       (51)         ___        (705)      (812)
Written back on disposal.....................................       (116)      (667)        (163)     (2,007)    (2,953)
                                                                    ----       ----         ----      ------     ------
Balance at 31 December 2002..................................     14,685     69,633        6,382      99,871    190,571
                                                                  ------     ------        -----      ------    -------
Net book value:
At 31 December 2002..........................................     21,059     71,299       30,545     115,919    238,822
                                                                  ------     ------       ------     -------    -------
At 31 December 2001..........................................     20,463     62,443       27,419     107,432    217,757
                                                                  ------     ------       ------     -------    -------
</TABLE>
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)


     As required by the relevant PRC regulations with respect to the
Reorganization, the property, plant and equipment of the Group as of September
30, 1999 were valued for each asset class by China United Assets Appraisal
Corporation, Beijing Zhong Zheng Appraisal Company, CIECC Assets Appraisal
Corporation and Zhong Fa International Properties Valuation Corporation,
independent valuers registered in the PRC, on a depreciated replacement cost
basis. The value of property, plant and equipment has been determined at RMB
159,788. The surplus on revaluation of RMB 32,320, net of amounts allocated to
minority interests, has been incorporated in the accounts of the Group as of
December 31, 1999. In connection with the Acquisition, the property, plant and
equipment of Sinopec National Star were revalued as of December 31, 2000, by a
firm of independent valuers and approved by the Ministry of Finance. The value
of property, plant and equipment of Sinopec National Star pursuant to the
valuation, based on a depreciated replacement cost basis, was determined at
RMB 4,373, resulting in a surplus on revaluation of RMB 1,136, net of amounts
allocated to minority interests.


15.   CONSTRUCTION IN PROGRESS

<TABLE>
<CAPTION>
                                                   Exploration          Marketing             Corporate
                                                      and                  and                   and
                                                   production Refining distribution Chemical    others     Total
                                                   ---------- -------- ------------ --------    ------     -----
                                                      RMB       RMB        RMB        RMB        RMB       RMB

<S>                                                  <C>        <C>        <C>      <C>           <C>     <C>
Balance at January 1, 2002.......................      3,163     6,636      8,722     7,420        509     26,450
Additions........................................     20,376     6,080      5,122     7,018        443     39,039
Dry hole costs written off.......................     (1,771)      ___        ___       ___        ___     (1,771)
Amount transferred to Sinopec Group Company (Note
    26)..........................................         (6)      (10)       ___       ___        ___        (16)
Transferred to fixed assets......................    (17,236)   (6,825)    (6,416)  (11,162)      (559)   (42,198)
                                                     -------    ------     ------   -------       ----    -------
Balance at December 31, 2002.....................      4,526     5,881      7,428     3,276        393     21,504
                    === =====                          =====     =====      =====     =====        ===     ======
</TABLE>



16.   INVESTMENTS

                                                              December 31,
                                                             2001        2002
                                                             ----        ----
                                                             RMB          RMB
Unlisted investments, at cost.........................      3,463        2,738
Less: Provision for impairment losses.................       (181)        (184)
                                                             ----         ----
                                                            3,282        2,554
                                                            =====        =====

     Provision for impairment losses is analyzed as follows:

                                            Years ended December 31,
                                            ------------------------
                                         2000         2001        2002
                                         ----         ----        ----
                                          RMB          RMB         RMB
At beginning of year....................   172          210         181
Provision for the year..................    73           18           8
Written-off.............................   (35)         (47)         (5)
                                           ---          ---          --
At end of year .........................   210          181         184
                                           ===          ===         ===

     Unlisted investments represent the Group's interests in PRC domiciled
enterprises which are mainly engaged in non-oil and gas activities and
operations. The Group has no investments in marketable securities.



<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)





17.   INTERESTS IN ASSOCIATES AND JOINTLY CONTROLLED ENTITIES

                                                               December 31,
                                                               ------------
                                                            2001        2002
                                                            ----        ----
                                                             RMB        RMB
Share of net assets......................................   5,172       7,917
                                                            =====       =====

     The Group's investments in associates and jointly controlled entities are
with companies primarily engaged in the oil and gas and chemical operations in
the PRC. These investments are accounted for under the equity method and
individually and in the aggregate not material to the Group's financial
condition or results of operations for all periods presented. The principal
investments in associates and jointly controlled entities, all of which are
incorporated in the PRC, are as follows:

<TABLE>
<CAPTION>
                                                                       Percentage Percentage of
                                    Form of                              of equity  equity held
                                   business      Particulars of issued    held by      by the
        Name of company            structure     and paid up capital      the Company Subsidiaries Principal activities
        ---------------            ---------     -------------------      ----------- ------------ --------------------
                                                                           %           %
<S>                                <C>         <C>                        <C>          <C>    <C>
Shengli Oil Field Dynamic         Incorporated  303,356,340 ordinary       26.33        __    Exploration of crude oil and
   Company Limited ("Dynamic")*                       shares of                                distribution of petrochemical
                                                    RMB 1.00 each                              products

Sinopec Shandong Taishan          Incorporated  480,793,320 ordinary       38.68        __    Trading of petroleum products and
   Petroleum Company Limited                          shares of                                decoration of service gas stations
("Taishan")*                                        RMB 1.00 each

Sinopec Finance Company           Incorporated   Registered capital        32.00       8.22   Provision of non-banking financial
   Limited                                        RMB 2,500,000,000                            services

Shanghai Petroleum National       Incorporated   Registered capital        30.00         __   Exploration and production of crude
   Gas Corporation                                 RMB 900,000,000                             oil and natural gas

BASF-YPC Company Limited          Incorporated   Registered capital        30.00     10.00     Manufacturing and distribution of
                                                  RMB 8,793,000,000                            petrochemical products

Shanghai Secco Petrochemical      Incorporated   Registered capital        30.00     20.00     Manufacturing and distribution of
   Company Limited                                 USD 901,440,964                             petrochemical products

Shanghai Chemical Industry Park   Incorporated   Registered capital       ___        38.26     Planning, development and operation
Development Company Limited                       RMB 2,372,439,000                            of the Chemical Industry Park in
                                                                                               Shanghai, the PRC
</TABLE>


     * Shares of Dynamic and Taishan are listed on the Shenzhen Stock
Exchange. Shares held by the Company are domestic state-owned A shares which
are not admitted for trading in any stock exchange in the PRC. The market
value of the investments in Dynamic based on the quoted market price are RMB
1,074 and RMB 625 as of December 31, 2001 and 2002. The market value of the
investments in Taishan based on the quoted market price are RMB 1,465 and RMB
1,764 as of December 31, 2001 and 2002.

<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)





18.   DEFERRED TAX ASSETS AND LIABILITIES

     Deferred tax assets and deferred tax liabilities are attributable to the
items detailed in the table below:




<TABLE>
<CAPTION>

                                                                Assets              Liabilities               Net balance

                                                            December 31,             December 31,             December 31,
                                                            -----------------        ------------------       ------------------
                                                               2001      2002         2001         2002        2001         2002
                                                               ----      ----         ----         ----        ----         ----
                                                                RMB       RMB          RMB          RMB         RMB          RMB
<S>                                                            <C>       <C>       <C>          <C>         <C>          <C>
Current
Provisions, primarily for receivables and
     inventories.....................................          432       275            --           --        432           275
Non-current
Property, plant and equipment........................           35        47         (788)        (627)       (753)        (580)
Accelerated depreciation.............................           --        --       (2,185)      (2,958)     (2,185)      (2,958)
Tax value of losses carried forward, net of
     valuation allowance.............................          173        30           --           --         173           30
Lease prepayment (Note)..............................           --       364           --           --          --          364
Others...............................................          129        16           (8)         (14)        121            2
                                                               ---        --           --          ---         ---            -
Deferred tax assets/(liabilities)....................          769       732       (2,981)      (3,599)     (2,212)      (2,867)
                                                               ===       ===       ======       ======      ======       ======
</TABLE>

      A valuation allowance on deferred tax assets is recorded if it is more
likely than not that some portion or all of the deferred tax assets will not
be realized through the recovery of taxes previously paid and/or future
taxable income. The allowance is subject to ongoing adjustments based on
changes in circumstances that affect the Group's assessment of the
realizability of the deferred tax assets. The Group has reviewed its deferred
tax assets as of December 31, 2000, 2001 and 2002. Based on this review,
valuation allowances of RMB 87 million, RMB 142 and RMB 164 were provided for
the years ended December 31, 2000, 2001 and 2002, respectively in respect of
the tax value of losses. The Group determined the valuation allowance relating
to the tax value of losses based on management's assessment of the probability
that taxable profits will be available against which the tax losses can be
utilized. In assessing the probability, both positive and negative evidence
was considered, including whether it is more likely than not that the
operations will have taxable profits before the tax losses expire, whether the
operations have sufficient taxable temporary differences relating to the same
tax authority and whether the tax losses result from identifiable causes which
are unlikely to recur. Based on this assessment, a valuation allowance was
provided for the tax value of losses to reduce the deferred tax asset to the
amount that is more likely than not to be realized. No valuation allowance was
established for the other deferred tax assets as management believes that the
amount of these deferred tax assets as of December 31, 2001 and 2002 is more
likely than not to be realized.

      The valuation allowance is analyzed as follows:

                                                   Years ended December 31,
                                                   ------------------------

                                               2000          2001         2002
                                               ----          ----         ----
                                                RMB           RMB          RMB
At beginning of year...........................  --            87          229
Allowance during the year......................   87          142         164
                                                  --          ---         ---
At end of year ................................   87          229         393
                                                  ==          ===         ===



<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)






     Movements in temporary differences between calculations of certain items
for accounting and for taxation purposes can be specified as follows:
<TABLE>
<CAPTION>
                                                                                                Recognized in
                                                                                Recognized in    consolidated
                                                                   Balance at    consolidated   statements of     Balance at
                                                                   January 1,   statements of   shareholders    December 31,
                                                                      2000          income        equity             2000
                                                                      ----          ------        ------             ----
                                                                       RMB           RMB             RMB             RMB
Current
<S>                                                                        <C>            <C>            <C>         <C>
Provisions, primarily for receivables and inventories............          173            911            (61)        1,023
Non-current
Property, plant and equipment....................................         (297)          (340)           291          (346)
Accelerated depreciation.........................................          104         (1,282)          (151)       (1,329)
Tax value of losses carried forward, net of valuation allowance..           67             70           (119)           18
Others...........................................................          (10)            18              6            14
                                                                           ---             --              -            --
Net deferred tax assets/(liabilities)............................           37           (623)           (34)         (620)
                                                                            ==           ====            ===          ====
                                                                                      (Note 9)
</TABLE>





     As a result of the December 31, 2000 revaluation of the assets and
liabilities of Sinopec National Star in connection with the Acquisition, the
tax base of Sinopec National Star's assets and liabilities have been adjusted
to the related financial statement carrying amounts. Accordingly, temporary
differences that gave rise to the net deferred tax assets of RMB 34 was
eliminated. The reduction in net deferred tax assets as of December 31, 2000
was reflected as a decrease in shareholders' equity.

<TABLE>
<CAPTION>
                                                                                 Recognized in
                                                                     Balance at   consolidated   Balance at
                                                                     January 1,  statements of  December 31,
                                                                       2001          income         2001
                                                                       ----          ------         ----
                                                                        RMB            RMB          RMB
<S>                                                                      <C>              <C>        <C>
Current
Provisions, primarily for receivables and inventories.............        1,023           (591)         432
Non-current
Property, plant and equipment.....................................         (346)          (407)        (753)
Accelerated depreciation..........................................       (1,329)          (856)      (2,185)
Tax value of losses carried forward, net of valuation allowance...           18            155          173
Others............................................................           14            107          121
                                                                             --            ---          ---
Net deferred tax liabilities .....................................         (620)        (1,592)      (2,212)
                                                                           ====         ======       ======
                                                                                      (Note 9)
</TABLE>

<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




<TABLE>
<CAPTION>

                                                                                                Recognized in
                                                                                Recognized in    consolidated
                                                                   Balance at    consolidated   statements of     Balance at
                                                                   January 1,   statements of   shareholders    December 31,
                                                                      2002          income          equity           2002
                                                                      ----          ------          ------           ----
                                                                       RMB           RMB             RMB             RMB
Current
<S>                                                                        <C>          <C>                <C>          <C>
Provisions, primarily for receivables and inventories............          432          (157)               --            275
Non-current
Property, plant and equipment....................................         (753)           173               --           (580)
Accelerated depreciation.........................................       (2,185)          (773)              --         (2,958)
Tax value of losses carried forward, net of valuation allowance.           173           (143)              --             30
Lease prepayments (Note).........................................           --             (7)             371            364
Others...........................................................          121           (119)              --              2
                                                                           ---           ----               --             --
Net deferred tax (liabilities)/assets............................       (2,212)        (1,026)             371         (2,867)
                                                                        ======         ======              ===         ======
                                                                                     (Note 9)
</TABLE>


   Note:   As described in note (ii) to the consolidated statements of
           shareholder's equity, land use rights are carried at cost effective
           January 1, 2002. The effect of this change resulted in a decrease
           in the revaluation reserve and an increase in other reserves
           relating to the recognition of deferred tax asset as of January 1,
           2002.


19.   SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY
      AND ITS AFFILIATES

     Short-term debts represent:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                 ------------
                                                                2001         2002
                                                                ----         ----
                                                                RMB         RMB
<S>                                                             <C>         <C>
Third parties' debts
Short-term bank loans......................................... 34,424       22,839
Short-term other loans........................................     43           19
                                                               ------       ------
                                                               34,467       22,858
                                                               ------       ------
Current portion of long-term bank loans....................... 10,140        8,120
Current portion of long-term other loans......................    742          300
                                                               ------       ------
                                                               10,882        8,420
                                                               ------       ------
                                                               45,349       31,278
                                                               ------       ------
Loans from Sinopec Group Company and its affiliates
Short-term loans..............................................  3,448        4,121
Current portion of long-term loans............................    414          153
                                                               ------       ------
                                                                3,862        4,274
                                                               ------       ------
                                                               49,211       35,552
                                                               ======       ======
</TABLE>

     The Group's weighted average interest rate on short-term loans was 5.1%
and 4.3% as of December 31, 2001 and 2002, respectively.

     As of December 31, 2002, the Company had standby credit facilities with
several PRC financial institutions which allowed the Company to borrow up to
RMB 100,000 on an unsecured basis, at rates ranging from 4.54% to 5.04%. As of
December 31, 2002, the Company's outstanding borrowings under these facilities
totalled RMB 11,950 which are included in short-term bank loans. These
facilities expire at various dates in 2003 and contain no financial covenants.

<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




<TABLE>
<CAPTION>
                                                                                                             December 31,
                                                                                                             ------------
                                              Interest rate and final maturity                            2001       2002
                                              --------------------------------                            ----       ----
                                                                                                           RMB          RMB
Third parties debts

Long-term bank loans

<S>                                    <C>                                                                <C>          <C>
Renminbi denominated                   Interest rates ranging from interest free to 11.2% per              32,231       36,855
                                       annum as of December 31, 2002 with maturities through
                                       2013

Japanese Yen denominated               Interest rates ranging from 0.2% to 7.3% per annum as                2,401        2,373
                                       of December 31, 2002 with maturities through 2024

US Dollar denominated                  Interest rates ranging from interest free to 7.9% per                4,300        4,294
                                       annum as of December 31, 2002 with maturities through
                                       2031

Deutsche Marks denominated             Fixed rates ranging from 6.6% to 6.8% per annum as of                  151          ___
                                       December 31, 2001 which was converted to Euro
                                       denominated during the year ended 31 December 2002

Dutch Guilders denominated             Fixed rate at 7.9% per annum as of December 31, 2001                    28          ___
                                       which was converted to Euro denominated during the year
                                       ended 31 December 2002

Hong Kong Dollar denominated           Floating rate at Hong Kong Prime Rate per annum plus                    14           10
                                       0.25% with maturities through 2006

Euro denominated                       Fixed rates ranging from 6.0% to 7.9% per annum as of                 ___           162
                                       December 31, 2002 with maturities through 2006
                                                                                                           39,125       43,694

Long-term other loans

Renminbi denominated                   Interest rates ranging from interest free to 7.5% per                  596          277
                                       annum as of December 31, 2002 with maturities through
                                       2015

US Dollar denominated                  Interest rates ranging from interest free to 3.4% per                  522          438
                                       annum as of December 31, 2002 with maturities through
                                       2015

French Francs denominated              Interest rates ranging from 1.8% to 8.1% per annum as                    15          ___
                                       of December 31, 2001 which was converted to Euro
                                       denominated during the year ended 31 December 2002

Euro denominated                       Interest rates ranging from 1.8% to 8.1% per annum as                 ___            16
                                       of December 31, 2002 with maturities through 2025
                                                                                                            1,133          731
Total long-term banks and other loans carried forward                                                      40,258       44,425
</TABLE>
<TABLE>
<CAPTION>
                                                                                                              December 31,
                                                                                                              ------------
                                                         Interest rate and final maturity                  2001         2002
                                                         --------------------------------                  ----         ----
                                                                                                           RMB          RMB

Total long-term banks and other loans carried forward                                                      40,258       44,425

<S>                                                   <C>                                                  <C>            <C>
Convertible bonds                      Fixed rates at 2.2% per annum as of December 31, 2002 and           1,500          1,500
                                       redeemable in July 2004 (a)                                         -----          -----

Total third parties' long-term debts                                                                      41,758         45,925

Less: Current portion                                                                                    (10,882)        (8,420)
                                                                                                         --------        -------
                                                                                                          30,876         37,505
                                                                                                          ------         ------
Long-term loans from Sinopec Group Company and its affiliates

        Renminbi denominated           Interest free with maturity in 2020                                35,561         35,561

Renminbi denominated                   Interest rates ranging from 5.0% to 6.0% per annum                    796          2,272
                                       as of December 31, 2002 with maturities through 2007

US Dollar denominated                  Interest rates ranging from 2.4% to 2.8% per annum                    182             23
                                       as of December 31, 2002 with maturities through                       ---             --
                                       2006
                                                                                                          36,539         37,856
Less: Current portion                                                                                       (414)       (153)
                                                                                                            ----        ----
                                                                                                          36,125       37,703
                                                                                                          ------       ------
                                                                                                          67,001       75,208
                                                                                                          ------       ------
</TABLE>

(a)   Convertible bonds amounting to RMB 1,500 were issued by a subsidiary on
      July 28, 1999. The bonds are convertible upon an initial public offering
      ("IPO") into ordinary shares of the subsidiary at the option of the
      holders during the period from July 28, 2000 to July 27, 2004.

     Third parties' loans of RMB 171 and RMB 85 as of December 31, 2001 and
2002, respectively were secured by certain of the Group's property, plant and
equipment. The net book value of property, plant and equipment of the Group
pledged as security amounted to RMB 233 and RMB 146 as of December 31, 2001
and 2002, respectively.

     The aggregate maturities of long-term debts and loans from Sinopec Group
Company and its affiliates subsequent to December 31, 2002 are as follows :

                                                                      RMB
2003.........................................................        8,573
2004.........................................................        8,677
2005.........................................................       12,695
2006.........................................................        8,531
2007.........................................................        4,338
Thereafter...................................................       40,967
                                                                    83,781
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




20.   TRADE ACCOUNTS PAYABLE

     Trade accounts payable are analyzed as follows:

                                                        December 31,
                                                        ------------
                                                      2001       2002
                                                      ----       ----
                                                     RMB          RMB
Third parties......................................  13,556       17,109
Sinopec Group Company and its affiliates...........   3,233        2,103
Associates and jointly controlled entities.........       4           --
                                                         --           --
                                                     16,793       19,212
                                                     ------       ------
     Amounts due to Sinopec Group Company and its affiliates are repayable in
accordance with normal commercial terms.

21.   ACCRUED EXPENSES AND OTHER PAYABLES

     Accrued expenses and other payables represent:
<TABLE>
<CAPTION>

                                                                         December 31,
                                                                         ------------
                                                                         2001        2002
                                                                         ----        ----
                                                                        RMB          RMB
<S>                                                                     <C>          <C>
Amounts due to Sinopec Group Company and its affiliates...........      10,220       9,967
Accrued expenditure...............................................       8,477       9,066
Taxes other than income tax.......................................       3,062       2,115
Receipts in advance...............................................       2,884       3,427
Advances from third parties.......................................       2,005       1,223
Others............................................................       3,228       3,957
                                                                         -----       -----
                                                                        29,876      29,755
                                                                        ======      ======
</TABLE>



22.   SHARE CAPITAL

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                             ------------
                                                                            2001        2002
                                                                            ----        ----
                                                                           RMB          RMB
Registered, issued and fully paid
<S>                                                 <C>                    <C>         <C>
67,121,951,000 domestic state-owned A shares of RMB 1.00 each..........    67,122      67,122
16,780,488,000 overseas listed H shares of RMB 1.00 each...............    16,780      16,780
2,800,000,000 domestic listed A shares of RMB 1.00 each................     2,800       2,800
                                                                            -----       -----
                                                                           86,702      86,702
                                                                           ======      ======
</TABLE>

      The Company was established on February 25, 2000 with a registered
capital of 68.8 billion domestic state-owned shares with a par value of RMB
1.00 each. Such shares were issued to Sinopec Group Company in consideration
for the assets and liabilities related to the Predecessor Operations
transferred to the Company (Note 1).

      Pursuant to the resolutions passed at an Extraordinary General Meeting
held on July 25, 2000 and approvals from relevant government authorities, the
Company is authorized to increase its share capital to a maximum of 88.3
billion shares with a par value of RMB 1.00 each and offer not more than 19.5
billion shares with a par value of RMB 1.00 each to investors outside the PRC.
Sinopec Group Company is authorized to offer not more than 3.5 billion shares
of its shareholdings in the Company to investors outside the PRC. The shares
sold by Sinopec Group Company to investors outside the PRC would be converted
into H shares.

      In October 2000, the Company issued 15,102,439,000 H shares with a par
value of RMB 1.00 each, representing 12,521,864,000 H shares and 25,805,750
American depositary shares ("ADSs", each representing 100 H shares), at prices
of HK$ 1.59 per H share and US$ 20.645 per ADS, respectively, by way of a
global initial public offering to Hong Kong and overseas investors. As part of
the global initial public offering, 1,678,049,000 domestic state-owned
ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted
into H shares and sold to Hong Kong and overseas investors.

      In July 2001, the Company issued 2.8 billion domestic listed A shares
with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to
natural persons and institutional investors in the PRC.

      All A shares and H shares rank pari passu in all material respects.

23.  RESERVES
<TABLE>
<CAPTION>

                                                                                             December 31,
                                                                                             ------------
                                                                                            2001        2002
                                                                                            ----        ----
                                                                                            RMB          RMB
Revaluation reserve
<S>                                                                                       <C>          <C>
    At January 1.....................................................................     33,257       33,025
    Revaluation surplus realized.....................................................       (232)        (544)
    Elimination of surplus on land use rights (Note (f)).............................         --         (840)
                                                                                              --         ----
    At December 31...................................................................     33,025       31,641
                                                                                          ------       ------

Capital reserve (Note (a))
    At January 1.....................................................................    (14,579)     (18,878)
    Transfer from other reserves.....................................................     (4,299)          --
                                                                                          ------      --------
    At December 31...................................................................    (18,878)     (18,878)
                                                                                         -------      -------

Share premium (Note (b))
    At January 1.....................................................................      9,224       18,072
    Share premium from issuance of share.............................................      9,016           --
    Issuing expenses.................................................................       (168)          --
                                                                                            -----          --
    At December 31...................................................................     18,072       18,072
                                                                                          ------       ------

Statutory surplus reserve (Note (c))
    At January 1.....................................................................      1,615        3,017
    Appropriation of net income......................................................      1,402        1,412
                                                                                           -----        -----
    At December 31...................................................................      3,017        4,429
                                                                                           -----        -----

Statutory public welfare fund (Note (d))
    At January 1.....................................................................      1,615        3,017
    Appropriation of net income......................................................      1,402        1,412
                                                                                           -----        -----
    At December 31...................................................................      3,017        4,429
                                                                                           -----        -----

Discretionary surplus reserve (Note (e))
    At January 1.....................................................................         --           --
    Appropriation of net income......................................................         --        7,000
                                                                                              --        -----
    At December 31...................................................................         --        7,000
                                                                                              --        -----

Other reserves
    At January 1.....................................................................      2,147           --
    Consideration for Acquisition of Sinopec National Star (Note 1)..................     (6,446)          --
    Deferred tax on land use rights (Note (f)).......................................
                                                                                              --          246
    Deferred tax on land use rights..................................................
                                                                                              --          (5)
    Transfer to capital reserves.....................................................      4,299           --
                                                                                           -----           --
    At December 31...................................................................         --         241
                                                                                              --         ---


Retained earnings (Note (g))
    At January 1.....................................................................     15,973       22,714
    Final dividend in respect of the previous financial years, approved and paid
       during the year...............................................................     (6,712)      (6,936)
    Interim dividend.................................................................                  (1,734)
    Net income.......................................................................     16,025       16,080
    Transfer to statutory surplus reserve............................................     (1,402)      (1,412)
    Proposed transfer to statutory public welfare fund...............................     (1,402)      (1,412)
    Proposed transfer to discretionary surplus reserve...............................         --       (7,000)
    Revaluation surplus realized.....................................................        232          544
    Deferred tax on land use rights..................................................         --            5
                                                                                             ---          ---
    At December 31...................................................................     22,714       20,849
                                                                                          ------       ------
                                                                                          60,967       67,783
                                                                                          ======       ======
</TABLE>


Notes:

(a)   The capital reserve represents (i) the difference between the total
      amount of the par value of shares issued and the amount of the net
      assets transferred from Sinopec Group Company in connection with the
      Reorganisation and (ii) the difference between the consideration paid
      over the amount of the net assets acquired from Sinopec National Star.

(b)   The application of the share premium account is governed by Sections 178
      and 179 of the PRC Company Law.

(c)   According to the Company's Articles of Association, the Company is
      required to transfer 10% of its net income, as determined in accordance
      with the PRC Accounting Rules and Regulations, to statutory surplus
      reserve until the reserve balance reaches 50% of the registered capital.
      The transfer to this reserve must be made before distribution of a
      dividend to shareholders.

      Statutory surplus reserve can be used to make good previous years'
      losses, if any, and may be converted into share capital by the issue of
      new shares to shareholders in proportion to their existing shareholdings
      or by increasing the par value of the shares currently held by them,
      provided that the balance after such issue is not less than 25% of the
      registered capital. During the years ended December 31, 2001 and 2002,
      the Company transferred RMB 1,402 and 1,412, respectively, being 10% of
      the current year's net income determined in accordance with the PRC
      Accounting Rules and Regulations to this reserve.

(d)   According to the Company's Articles of Association, the Company is
      required to transfer 5% to 10% of its net income, as determined in
      accordance with the PRC Accounting Rules and Regulations, to the
      statutory public welfare fund. This fund can only be utilized on capital
      items for the collective benefits of the Company's employees such as the
      construction of dormitories, canteen and other staff welfare facilities.
      This fund is non-distributable other than on liquidation. The transfer
      to this fund must be made before distribution of a dividend to
      shareholders.

      Pursuant to the shareholders' approval at the Annual General Meeting on
      June 13, 2002, the Board of Directors was authorized to determine the
      amount of the transfer. The directors authorized the transfer of RMB
      450, being 10% of the net income for the six-month period ended June 30,
      2002 as determined in accordance with the PRC Accounting Rules and
      Regulations, to this fund.

      The directors authorized the transfer of RMB 962, subject to
      shareholders' approval, being 10% of the net income for the six-month
      period ended December 31, 2002 determined in accordance with the PRC
      Accounting Rules and Regulations, to this fund. The transfer to this
      fund for the years ended December 31, 2001 and 2002 were RMB 1,402 and
      RMB 1,412, respectively.

(e)   The directors authorized the transfer of RMB 7,000 for the year ended
      December 31, 2002, subject to shareholders' approval at Annual General
      Meeting to the discretionary surplus reserve. There was no transfer to
      this fund for the year ended December 31, 2001. Its usage is similar to
      that of statutory surplus reserve.

(f)   Effective January 1, 2002, land use rights which are included in lease
      prepayments are carried at historical cost. Accordingly, the surplus on
      the revaluation of land use rights credited to revaluation reserve
      previously, net of minority interests, was eliminated during the year.
      The effect of this change did not have a material impact on the Group's
      financial condition and results of operations in the periods prior to
      the change. As a result of the tax deductibility of the revaluation
      surplus, a deferred tax asset, net of minority interests, is created
      with a corresponding increase in other reserves.

(g)   According to the Company's Articles of Association, the amount of
      retained earnings available for distribution to shareholders of the
      Company is the lower of the amount determined in accordance with the PRC
      Accounting Rules and Regulations and the amount determined in accordance
      with IFRS. As of December 31, 2001 and 2002, the amounts of retained
      earnings available for distribution were RMB 16,942 and RMB 12,569,
      respectively, being the amount determined in accordance with the PRC
      Accounting Rules and Regulations. Pursuant to a resolution passed at the
      Directors' meeting on March 28, 2003, a final dividend of RMB 0.06 per
      share totaling RMB 5,202 was proposed for shareholders approval at the
      Annual General Meeting. Final dividend of RMB 5,202 in respect of the
      financial year 2002 has not been provided for.

      Subject to the relevant provisions of the PRC Company Law and the
      Company's Articles of Association, Sinopec Group Company may seek to
      influence the Company's determination of dividends with a view to
      satisfying Sinopec Group Company's cash flow requirements.
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




24.   COMMITMENTS AND CONTINGENT LIABILITIES

Operating lease commitments

     The Group leases service stations and other equipment through
non-cancelable operating leases. These operating leases do not contain
provisions for contingent lease rentals. None of the rental agreements contain
escalation provisions that may require higher future rental payments.

     As of December 31, 2002, the future minimum lease payments under
operating leases are as follows:

                                                          RMB
Within one year.................................        2,726
Between one to two years........................        2,666
Between two to three years......................        2,647
Between three to four years.....................        2,635
Between four to five years......................        2,609
Thereafter......................................       83,718
Total minimum lease payments....................       97,001

     The Group's leasing arrangement impose no restrictions on dividends,
additional debt and/or further leasing.

Capital commitments

     As of December 31, 2002, the Group had capital commitments as follows:

                                                        RMB
Authorized and contracted for...................     30,245
Authorized but not contracted for...............     41,015
                                                     71,260

     These capital commitments relate to oil and gas exploration and
development, refining and petrochemical production capacity expansion
projects, and the construction of service stations and oil depots.

Exploration and production licenses

     Exploration licenses for exploration activities are registered with the
Ministry of Land and Resources. The maximum term of the Group's exploration
licenses is 7 years, and may be renewed twice within 30 days prior to
expiration of the original term with each renewal being for a two-year term.
The Group is obligated to make progressive annual minimum exploration
investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Land and Resources also issues production licenses
to the Group on the basis of the reserve reports approved by relevant
authorities. The maximum term of a full production license is 30 years unless
a special dispensation is given by the State Council. The maximum term of
production licenses issued to the Group is 55 years as a special dispensation
was given to the Company by the State Council. The Group's production license
is renewable upon application by the Group 30 days prior to expiration.

     The Group is required to make payments of exploration license fees and
production right usage fees to the Ministry of Land and Resources annually
which are expensed as incurred. Payments incurred were approximately RMB 19,
RMB 29 and RMB 65 for the years ended December 31, 2000, 2001 and 2002,
respectively.

     Estimated future annual payments as of December 31, 2002 are as follows:

                                                          RMB
Within one year................................            55
Between one to two years.......................            76
Between two to three years.....................            66
Between three to four years....................            63
Between four to five years.....................            43
Thereafter.....................................           263
Total payments.................................           566

Contingent liabilities

     (a) The Company has been advised by its PRC lawyers that, except for
liabilities constituting or arising out of or relating to the business assumed
by the Company in the Reorganization, no other liabilities were assumed by the
Company, and the Company is not jointly and severally liable for other debts
and obligations incurred by Sinopec Group Company prior to the Reorganization.

     (b) As of December 31, 2002, guarantees given to banks in respect of
banking facilities granted to the parties below were as follows:

                                                       RMB
Associates and jointly controlled entities......      7,492
Third parties...................................         30
                                                      7,522

      The Company monitors the conditions that are subject to the guarantees
to identify whether it is probable that a loss has occurred, and recognise any
such losses under guarantees when those losses are estimable.

      As of December 31, 2002, the Company's guarantees were primarily
provided to Shanghai Secco Petrochemical Company Limited ("Shanghai Secco"), a
jointly controlled entity. Shanghai Secco signed loan agreements of RMB 8,123
and USD 708 million in February 2002. To enhance the credit standing of
Shanghai Secco, the Company guarantees the interest payments as well as the
repayment of the loans to an amount of RMB 6,999. Payments are due if the
Company is notified that Shanghai Secco is not able to fulfill its obligations
at the maturity date. No collateral secures Shanghai Secco's obligation or the
Company's guarantee. As of December 31, 2002, it is not probable that the
Company will be required to make payments under the guarantee. Thus no
liability has been accrued for a loss related to the Company's obligation
under this guarantee arrangement.

      In March 2003, the Company made guarantees of RMB 4,680 given to banks
in respect of banking facilities granted to an associate.

Environmental contingencies

     To date, the Group has not incurred any significant expenditures for
environmental remediation, is currently not involved in any environmental
remediation, and has not accrued any amounts for environmental remediation
relating to its operations. Under existing legislation, management believes
that there are no probable liabilities that will have a material adverse
effect on the financial position or operating results of the Group. The PRC
government, however, has moved, and may move further towards more rigorous
enforcement of applicable laws, and towards the adoption of more stringent
environmental standards. Environmental liabilities are subject to considerable
uncertainties which affect the Group's ability to estimate the ultimate cost
of remediation efforts. These uncertainties include i) the exact nature and
extent of the contamination at various sites including, but not limited to
refineries, oil fields, service stations, terminals and land development
areas, whether operating, closed or sold, ii) the extent of required cleanup
efforts, iii) varying costs of alternative remediation strategies, iv) changes
in environmental remediation requirements, and v) the identification of new
remediation sites. The amount of such future cost is indeterminable due to
such factors as the unknown magnitude of possible contamination and the
unknown timing and extent of the corrective actions that may be required.
Accordingly, the outcome of environmental liabilities under proposed or future
environmental legislation cannot reasonably be estimated at present, and could
be material. The Group paid normal routine pollutant discharge fees of
approximately RMB 305, RMB 221 and RMB 287 for the years ended December 31,
2000, 2001 and 2002, respectively.

Legal contingencies

     The Group is a defendant in certain lawsuits as well as the named party
in other proceedings arising in the ordinary course of business. While the
outcomes of such contingencies, lawsuits or other proceedings cannot be
determined at present, management believes that any resulting liabilities will
not have a material adverse effect on the financial position or operating
results of the Group.


<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




25.   CONCENTRATION OF RISKS

Credit risk

      The carrying amounts of cash and cash equivalents, time deposits, trade
accounts and bills receivables, and other current assets, except for
prepayments and deposits, represent the Group's maximum exposure to credit
risk in relation to financial assets.

      The majority of the Group's trade accounts receivable relate to sales of
petroleum and chemical products to related parties and third parties operating
in the petroleum and chemical industries. The Group performs ongoing credit
evaluations of its customers' financial condition and generally does not
require collateral on trade accounts receivable. The Group maintains an
allowance for doubtful accounts and actual losses have been within
management's expectations. No single customer accounted for greater than 10%
of total revenues during the years ended December 31, 2000, 2001 and 2002.

      No other financial assets carry a significant exposure to credit risk.

Concentration of economic risk

     The Group's operations may be adversely affected by significant
political, economic, and social uncertainties in the PRC. In addition, the
ability to negotiate and implement specific projects in a timely and favorable
manner may be impacted by political considerations unrelated to or beyond the
control of the Group. Although the PRC government has been pursuing economic
reform policies for the past two decades, no assurance can be given that the
PRC government will continue to pursue such policies or that such policies may
not be significantly altered. There is also no guarantee that the PRC
government's pursuit of economic reforms will be consistent or effective and
as a result, changes in the rate or method of taxation, reduction in tariff
protection and other import restrictions, and changes in state policies
affecting the industries to which the Group sells its products, may have a
negative effect on its operating results and financial conditions.

Currency risk

     Substantially all of the revenue-generating operations of the Group are
transacted in Renminbi, which is not fully convertible into foreign
currencies. On January 1, 1994, the PRC government abolished the dual rate
system and introduced a single rate of exchange as quoted by the People's Bank
of China. However, the unification of the exchange rate does not imply
convertibility of Renminbi into United States dollars or other foreign
currencies. All foreign exchange transactions continue to take place either
through the People's Bank of China or other banks authorized to buy and sell
foreign currencies at the exchange rates quoted by the People's Bank of China.
Approval of foreign currency payments by the People's Bank of China or other
institutions requires submitting a payment application form together with
suppliers' invoices, shipping documents and signed contracts.

Business risk

     The Group conducts its principal operations in China and accordingly is
subject to special considerations and significant risks not typically
associated with investments in equity securities of the United States and
Western European companies. These include risks associated with, among others,
the political, economic and legal environment, influence of the State Council
over substantially all aspects of its operations and competition in the oil
and gas industry.

Interest rate risk

     The interest rates and terms of repayment of short-term and long-term
debts of the Group are disclosed in Note 19.

Supply risk

     The Group's largest domestic supplier of crude oil is PetroChina Company
Limited. Negotiating another contract with a key supplier at similar terms and
costs could have a severe and significant impact on the Group's results of
operations.

26.   RELATED PARTY TRANSACTIONS

     Companies are considered to be related if one company has the ability,
directly or indirectly, to control the other company or exercise significant
influence over the other company in making financial and operating decisions.
Companies are also considered to be related if they are subject to common
control or common significant influence.

     The Group is part of a larger group of companies under Sinopec Group
Company and has significant transactions and relationships with members of the
Sinopec Group. Because of these relationships, it is possible that the terms
of these transactions are not the same as those that would result from
transactions among wholly unrelated parties. Sinopec Group Company itself is
owned by the PRC government. There are also many other enterprises directly or
indirectly owned or controlled by the PRC government (``state-owned
enterprises''). Under IFRS, state-owned enterprises, other than Sinopec Group
Company and its affiliates, are not considered related parties. Related
parties refer to enterprises over which Sinopec Group Company is able to
exercise significant influence.

     The Group conducts business with state-owned enterprises. Furthermore,
the PRC government itself represents a significant customer of the Group both
directly through its numerous authorities and indirectly through its numerous
affiliates and other organizations. Sales of certain products to PRC
government authorities and affiliates and other state-owned enterprises may be
at regulated prices, which differ from market prices. The Group considers that
these sales are activities in the ordinary course of business in the PRC and
has not disclosed such sales as related party transactions.

     The principal related party transactions with Sinopec Group Company,
which were carried out in the ordinary course of business, are as follows:

<TABLE>
<CAPTION>
                                                                                     Years ended December 31,


                                                                            Note      2000      2001      2002
                                                                                       RMB       RMB       RMB

<S>                                                                         <C>       <C>      <C>     <C>
Sales of goods...........................................................    (i)     43,167    37,261   36,343
Purchases................................................................   (ii)     17,479    19,264     26,225
Transportation and storage...............................................   (iii)     1,700     1,471      1,514
Exploration and development services.....................................   (iv)      9,050    10,250     10,310
Production related services..............................................    (v)      6,604     6,116      7,316
Ancillary and social services............................................   (vi)      2,610     2,000      1,945
Operating lease charges..................................................   (vii)     2,377     2,489      2,716
Agency commission income.................................................  (viii)        11         7         37
Intellectual property licence fee paid...................................   (ix)          8        10         10
Interest received........................................................    (x)         60       153        104
Interest paid............................................................   (xi)        578       534        636
Net deposits placed with/(withdrawn from) related parties................   (xii)     4,090       528     (1,427)
Net loans obtained from/(repaid to) related parties......................  (xiii)    34,657    (5,034)     1,990
</TABLE>

     The amounts set out in the table above in respect of each of the years in
the three-year period ended December 31, 2002 represent the relevant costs to
the Group as determined by the corresponding contracts with the related
parties.

     There were no guarantees given to banks by the Group in respect of
banking facilities to Sinopec Group Company and its affiliates for the years
ended December 31, 2001 and 2002.

     The directors of the Company are of the opinion that the above
transactions with related parties were conducted in the ordinary course of
business and on normal commercial terms or in accordance with the agreements
governing such transaction, and this has been confirmed by the independent
non-executive directors.

Notes:

(i)    Sales of goods represent the sale of crude oil, intermediate
       petrochemical products and petroleum products.

(ii)   Purchases represent the purchase of material and utility supplies
       directly related to the Group's operations such as the procurement of
       raw and ancillary materials and related services, supply of water,
       electricity and gas.

(iii)  Transportation and storage represent the cost for the use of railway,
       road and marine transportation services, pipelines, loading, unloading
       and storage facilities.

(iv)   Exploration and development services comprise direct costs incurred in
       the exploration of crude oil such as geophysical, drilling, well
       testing and well measurement services.

(v)    Production related services represent ancillary services rendered in
       relation to the Group's operations such as equipment repair and general
       maintenance, insurance premium, technical research, communications,
       fire fighting, security, product quality testing and analysis,
       information technology, design and engineering, construction which
       includes the construction of oilfield ground facilities, refineries and
       chemical plants, manufacture of replacement parts and machinery,
       installation, project management and environmental protection.

(vi)   Ancillary and social services represent expenditures for social welfare
       and support services such as educational facilities, media
       communication services, sanitation, accommodation, canteens, property
       maintenance and management services.

(vii)  Operating lease charges represent the rental paid to Sinopec Group
       Company for operating leases in respect of land, buildings and service
       stations.

(viii) Agency commission income represents commission earned for acting as an
       agent in respect of sales of products of certain entities owned by
       Sinopec Group Company.

(ix)   Intellectual property license fee represents reimbursement paid to
       Sinopec Group Company for fees required to maintain the validity of
       certain licenses, for trademarks, patents, technology and computer
       software.

(x)    Interest received represents interest received from deposits placed
       with related companies. The applicable interest rate is determined in
       accordance with the prevailing saving deposit rate. The balances of
       deposits as of December 31, 2001 and 2002 were RMB 7,129 and RMB 5,702,
       respectively.

(xi)   Interest paid represents interest charges on the loans and advances
       obtained from Sinopec Group Company and Sinopec Finance Company
       Limited, a finance company controlled by Sinopec Group Company.

(xii)  Deposits were placed with/withdrawn from Sinopec Finance Company
       Limited.

(xiii) The Group obtained/repaid loans and advances from/to Sinopec Group
       Company and Sinopec Finance Company Limited.

       In connection with the Reorganization, the Company and Sinopec Group
Company entered into a number of agreements under which 1) Sinopec Group
Company will provide goods and products and a range of ancillary, social and
supporting services to the Group and 2) the Group will sell certain goods to
Sinopec Group Company. The terms of these agreements are summarized as
follows:

(a)   The Company has entered into a three year non-exclusive Agreement for
      Mutual Provision of Products and Ancillary Services ("Mutual Provision
      Agreement") with Sinopec Group Company effective from January 1, 2000 in
      which Sinopec Group Company has agreed to provide the Group with certain
      ancillary production services, construction services, information
      advisory services, supply services and other services and products.
      While each of Sinopec Group Company and the Company is permitted to
      terminate the Mutual Provision Agreement upon at least six months
      notice, Sinopec Group Company has agreed not to terminate the agreement
      if the Group is unable to obtain comparable services from a third party.
      The pricing policy for these services and products provided by Sinopec
      Group Company to the Group is as follows:

      o  the government-prescribed price;

      o  where there is no government-prescribed price, the
         government-guidance price;

      o  where there is neither a government-prescribed price nor a
         government-guidance price, the market price; or

      o  where none of the above is applicable, the price to be agreed between
         the parties, which shall be based on a reasonable cost incurred in
         providing such services plus a profit margin not exceeding 6%.

(b)   The Company has entered into a three year non-exclusive Agreement for
      Provision of Cultural and Educational, Health Care and Community
      Services with Sinopec Group Company effective from January 1, 2000 in
      which Sinopec Group Company has agreed to provide the Group with certain
      cultural, educational, health care and community services on the same
      pricing terms and termination conditions as agreed to in the above
      Mutual Provision Agreement.

(c)   The Company has entered into lease agreements with Sinopec Group Company
      effective from January 1, 2000 to lease certain land and buildings for
      terms the shorter of the period of the existing land use rights and 50
      years for land and 20 years for buildings at a rental of approximately
      RMB 2,007 and RMB 482, respectively, per annum. The Company and Sinopec
      Group Company can renegotiate the rental amount every three years for
      land and every year for buildings, such amount not to exceed the market
      price as determined by an independent third party. The Group has the
      option to terminate these leases upon six months notice to Sinopec Group
      Company.

(d)   The Company has entered into agreements with Sinopec Group Company
      effective from January 1, 2000 under which the Group has been granted
      the right to use certain trademarks, patents, technology and computer
      software developed by Sinopec Group Company for a term of ten years. The
      Group will reimburse Sinopec Group Company for fees required to maintain
      the validity of these licenses.

(e)   The Company has entered into agency agreements for a period of three
      years effective from January 1, 2000 with certain entities owned by
      Sinopec Group Company under which the Group acts as a sole agent in
      respect of the sale of all the products of these entities. In exchange
      for the Group's sales agency services, Sinopec Group Company has agreed
      to pay the Group a commission of between 0.2% and 1.0% of actual sales
      receipts depending on the products and to reimburse the Group for
      reasonable costs incurred in the capacity as its sales agent.


(f)   The Company has entered into a service stations franchise agreement with
      Sinopec Group Company effective from January 1, 2000 for a term of 10
      years under which its service stations and retail stores would
      exclusively sell the refined products supplied by the Group.

      On December 19, 2002, the Company and Sinopec Group Company entered into
an asset swap agreement whereby the Company transferred to Sinopec Group
Company certain individual assets and liabilities, consisting principally of,
water plants, inspection, maintenance, geology and geophysical assets and
related liabilities. The carrying amount of the net assets transferred to
Sinopec Group Company approximated the net appraised amount of RMB 1,021. In
return, Sinopec Group Company transferred to the Company certain gas stations
and oil depot assets. The carrying and appraised amounts of such assets
transferred to the Company were RMB 462 and RMB 1,040, respectively. The
difference between the appraised amounts of the assets exchanged of RMB 19 was
paid in cash by the Company.


27.   EMPLOYEE BENEFITS PLAN

     As stipulated by the regulations of the PRC, the Group participates in
various defined contribution retirement plans organized by municipal and
provincial governments for its staff. The Group is required to make
contributions to the retirement plans at rates ranging from 16.0% to 30.0% of
the salaries, bonuses and certain allowances of its staff. A member of the
plan is entitled to a pension equal to a fixed proportion of the salary
prevailing at his or her retirement date. The Group has no other material
obligation for the payment of pension benefits associated with these plans
beyond the annual contributions described above. The Group's contributions for
the years ended December 31, 2000, 2001 and 2002 were RMB 1,387, RMB 1,358 and
RMB 1,549 respectively.


28.   SEGMENTAL REPORTING

     The Group has five operating segments as follows:

     (i)  Exploration and production, which explores and develops oil fields,
          produces crude oil and natural gas and sells such products to the
          refining segment of the Group and external customers.

     (ii) Refining, which processes and purifies crude oil, which is sourced
          from the exploration and production segment of the Group and
          external suppliers, and manufactures and sells petroleum products to
          the chemicals and marketing and distribution segments of the Group
          and external customers.

     (iii)Marketing and distribution, which owns and operates oil depots and
          service stations in the PRC, and distributes and sells refined
          petroleum products (mainly gasoline and diesel) in the PRC through
          wholesale and retail sales networks.

     (iv) Chemicals, which manufactures and sells petrochemical products,
          derivative petrochemical products and other chemical products mainly
          to external customers.

     (v)  Corporate and others, which largely comprise the trading activities
          of the import and export companies of the Group and research and
          development undertaken by other subsidiaries.

     The segments were determined primarily because the Group manages its
exploration and production; refining; marketing and distribution; chemicals;
and corporate and others businesses separately. The reportable segments are
each managed separately because they manufacture and/or distribute distinct
products with different production processes and due to their distinct
operating and gross margin characteristics. In view of the fact that the
Company and its subsidiaries operate mainly in the PRC, no geographical
segment information is presented.
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)





      The Group evaluates the performance and allocates resources to its
operating segments on an operating income basis, without considering the
effects of finance costs or investment income. The accounting policies of the
Group's segments are the same as those described in the Principal Accounting
Policies (see Note 2). Corporate administrative costs and assets are not
allocated to the operating segments; instead, operating segments are billed
for direct corporate services. Inter-segment transfer pricing is based on cost
plus an appropriate margin, as specified by the Group's policy. Beginning
January 1, 2000, sales of the exploration and production segment to the
refining segment are based on market prices.

     Reportable information on the Group's business segments is as follows:
<TABLE>
<CAPTION>

                                                                                  Years ended December 31,
                                                                                  ------------------------

                                                                             2000        2001         2002
                                                                             ----        ----         ----
                                                                             RMB          RMB         RMB
Sales of goods
Exploration and production
<S>                                                                         <C>          <C>           <C>
     External sales....................................................     12,254       11,095        10,920
     Inter-segment sales...............................................     46,213       43,332        39,407
                                                                            ------       ------        ------
                                                                            58,467       54,427        50,327
Refining
     External sales....................................................     67,872       49,497        47,555
     Inter-segment sales...............................................    162,153      156,782       161,340
                                                                           -------      -------       -------
                                                                           230,025      206,279       208,895
Marketing and distribution
     External sales....................................................    174,645      180,610       184,378
     Inter-segment sales...............................................        652        2,460         2,329
                                                                               ---        -----         -----
                                                                           175,297      183,070       186,707
Chemicals
     External sales....................................................     56,224       48,945        58,401
     Inter-segment sales...............................................      3,443         5,626         7,204
                                                                             -----         -----         -----
                                                                            59,667       54,571        65,605
Corporate and others
     External sales....................................................     14,345       14,200        22,930
     Inter-segment sales...............................................     11,527        8,875        19,845
                                                                            ------        -----        ------
                                                                            25,872       23,075        42,775
Elimination of inter-segment sales.....................................   (223,988)    (217,075)     (230,125)
                                                                          --------     --------      --------
Total sales of goods...................................................    325,340      304,347       324,184
                                                                           -------      -------       -------

Other operating revenues
Exploration and production.............................................      1,441        6,168         7,305
Refining...............................................................      3,070        2,761         3,060
Marketing and distribution.............................................        326          201           342
Chemicals..............................................................      1,273        4,361         3,979
Corporate and others...................................................        126          633         1,172
                                                                               ---          ---         -----
Total other operating revenues.........................................      6,236       14,124        15,858
                                                                             -----       ------        ------
Total operating revenues...............................................    331,576      318,471       340,042
                                                                           =======      =======       =======

                                                                              Years ended December 31,
                                                                           2000         2001          2002
                                                                             RMB          RMB         RMB
Operating income by segment

   - Exploration and production........................................     25,411      23,185         14,787
   - Refining..........................................................      1,394       2,106          5,922
   - Marketing and distribution........................................      6,358       2,443          8,401
   - Chemicals.........................................................      2,437        (758)            72
   - Corporate and others..............................................        (89)        324           (905)
                                                                               ---         ---           ----
Total operating income.................................................     35,511      27,300         28,277
Income/(loss) from associates and jointly controlled entities
   - Exploration and production........................................        229         258           152
   - Refining..........................................................         33          10              1
   - Marketing and distribution........................................         60           71           63
   - Chemicals.........................................................        (64)        (23)            15
   - Corporate and others..............................................         12           4             79
                                                                                --           -             --
Aggregate income from associates and jointly controlled entities               270         320            310
                                                                               ---         ---            ---
Finance costs
     Interest expense..................................................     (6,663)     (4,706)        (4,018)
     Interest income...................................................        861       1,183            338
     Foreign exchange losses...........................................        (85)       (222)          (312)
     Foreign exchange gains............................................        951         593             47
                                                                               ---         ---             --
Net finance costs......................................................     (4,936)     (3,152)        (3,945)
Investment income.......................................................       191         199            190
                                                                               ---         ---            ---
Income before income tax and minority interests........................     31,036      24,667         24,832
Income tax.............................................................     (9,638)     (8,029)        (7,635)
                                                                            ------      ------         ------
Income before minority interests.......................................     21,398      16,638         17,197
Minority interests.....................................................     (1,814)       (613)        (1,117)
                                                                            ------        ----         ------
Net income.............................................................     19,584      16,025         16,080
                                                                            ======      ======         ======
</TABLE>


     Assets and liabilities dedicated to a particular segment's operations are
included in that segment's total assets and liabilities. Assets which benefit
more than one segment or are considered to be corporate assets are not
allocated. "Unallocated assets" consists primarily of cash and cash
equivalents, time deposits with financial institutions, investments and
deferred tax assets. "Unallocated liabilities" consists primarily of
short-term and long-term debts, loans from Sinopec Group Company and its
affiliates, income tax payable, deferred tax liabilities and other
liabilities.

     Interests in and income from associates are included in the segments in
which the associates operate. Information on associates is included in Note
17. Additions to long-lived assets by operating segment are included in Notes
14 and 15.
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)




<TABLE>
<CAPTION>
                                                                               December 31,
                                                                               ------------
                                                                          2000         2001        2002
                                                                          ----         ----        ----
                                                                            RMB         RMB         RMB
<S>                                                                       <C>        <C>            <C>
Assets
Segment assets
   - Exploration and production.......................................     68,073     80,063         90,983
   - Refining.........................................................     88,854     88,488         89,667
   - Marketing and distribution.......................................     61,497     72,014         71,516
   - Chemicals........................................................     76,455     78,277         78,246
   - Corporate and others.............................................     11,937     13,506         15,356
                                                                           ------     ------         ------
Total segment assets..................................................    306,816    332,348        345,768
                                                                          -------    -------        -------
Interests in associates and jointly controlled entities
   - Exploration and production.......................................        900      1,032          1,583
   - Refining.........................................................         51        120            147
   - Marketing and distribution.......................................      1,090      1,168          1,435
   - Chemicals........................................................        226      1,691          3,505
   - Corporate and others.............................................        151      1,161          1,247
                                                                              ---      -----          -----
Aggregate interests in associates and jointly controlled entities.....      2,418      5,172          7,917
                                                                            -----      -----          -----
Unallocated assets....................................................     45,508     29,189         22,196
                                                                           ------     ------         ------
Total assets..........................................................    354,742    366,709        375,881
                                                                          -------    -------        -------
Liabilities
Segment liabilities
   - Exploration and production.......................................     13,134     13,419         16,126
   - Refining.........................................................     26,022     23,985         22,331
   - Marketing and distribution.......................................     11,105     18,700         19,472
   - Chemicals........................................................     10,351      8,831         12,884
   - Corporate and others.............................................      3,143      7,760          8,293
                                                                            -----      -----          -----
Total segment liabilities.............................................     63,755     72,695         79,106
                                                                           ------     ------         ------
Unallocated liabilities...............................................    134,623    122,804        118,370
                                                                          -------    -------        -------
Total liabilities.....................................................    198,378    195,499        197,476
                                                                          =======    =======        =======
</TABLE>

     Segment capital expenditure is the total cost incurred during the period
to acquire segment assets that are expected to be used for more than one
period.

<TABLE>
<CAPTION>
                                                                              Years ended December 31,
                                                                              ------------------------
                                                                           2000        2001        2002
                                                                           ----        ----        ----
                                                                            RMB         RMB         RMB
<S>                                                                        <C>         <C>           <C>
Capital expenditure
Exploration and production............................................     14,813      20,276        20,228
Refining..............................................................      5,511       8,992         6,533
Marketing and distribution............................................     16,080      17,256         6,982
Chemicals.............................................................      6,205      11,947         7,324
Corporate and others..................................................        251         358           545
                                                                              ---         ---           ---
                                                                           42,860      58,829        41,612
                                                                           ======      ======        ======
Depreciation, depletion and amortization
Exploration and production............................................      6,643       8,081         9,033
Refining..............................................................      5,916       5,901         6,039
Marketing and distribution............................................      1,160       1,661         1,968
Chemicals.............................................................      6,986       6,686         7,113
Corporate and others..................................................         76         101           129
                                                                               --         ---           ---
                                                                           20,781      22,430        24,282
                                                                           ======      ======        ======
Impairment losses on long-lived assets
Exploration and production............................................         92          --            --
Refining..............................................................         95          --            --
                                                                               --          --            --
                                                                              187          --            --
                                                                              ===          ==            ==

Reversal of impairment losses, net of depreciation effect
Exploration and production............................................        936          --            --
                                                                              ===          ==            ==
</TABLE>
<PAGE>
            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)





29.   PRINCIPAL SUBSIDIARIES

     Details of the Group's principal subsidiaries are as follows:

<TABLE>
<CAPTION>

                                      Particulars of                         Direct
                                      issued capital                      attributable
              Name of                   and debt           Type of            equity       Principal
              company                   securities         legal entity      interest       activities
              -------                   ----------         ------------      --------       ----------
                                                                                %
<S>                                      <C>            <C>                  <C>      <C>
China Petroleum International            RMB 1,400       Limited company     100.00   Trading of crude oil and
Company  Limited                                                                      petrochemical products

Sinopec Beijing Yanhua                   RMB 3,374       Limited company      70.01   Manufacturing of chemical products
Petrochemical Company Limited

Sinopec Sales Company Limited            RMB 1,700       Limited company     100.00   Marketing and distribution of refined
                                                                                      petroleum products

Sinopec Shengli Oilfield Company        RMB 30,028       Limited company     100.00   Exploration and production of crude
   Limited                                                                            oil and natural gas

Sinopec Fujian Petrochemical Company     RMB 2,253       Limited company      50.00   Manufacturing of plastics,
Limited (i)                                                                           intermediate petrochemical products
                                                                                      and petroleum products

Sinopec Maoming Refining and           RMB 1,064 and     Limited company      99.81   Manufacturing of intermediate
Chemical          Company Limited        RMB 1,500                                    petrochemical products and petroleum
                                     convertible bonds                                products

Sinopec Qilu Petrochemical Company       RMB 1,950       Limited company      82.05   Manufacturing of intermediate
Limited                                                                               petrochemical products and petroleum
                                                                                      products

Sinopec Shanghai Petrochemical           RMB 7,200       Limited company      55.56   Manufacturing of synthetic fibres,
   Company Limited                                                                    resin and plastics, intermediate
                                                                                      petrochemical products and petroleum
                                                                                      products

Sinopec Shijiazhuang                     RMB 1,154       Limited company      79.73   Manufacturing of intermediate
Refining-Chemical          Company                                                    petrochemical products and petroleum
Limited                                                                               products

Sinopec Kantons Holdings Limited      HK$ 104 million    Limited company      72.40   Trading of crude oil and petroleum
                                                                                      products

Sinopec Wuhan Petroleum Group             RMB 147        Limited company      46.25   Marketing and distribution of refined
   Company Limited (i)                                                                petroleum products

Sinopec Wuhan Phoenix Company             RMB 519        Limited company      40.72   Manufacturing of petrochemical
   Limited (i)                                                                        products and petroleum products

Sinopec Yangzi Petrochemical Company     RMB 2,330       Limited company      84.98   Manufacturing of intermediate
Limited                                                                               petrochemical products and petroleum
                                                                                      products

Sinopec Yizheng Chemical Fibre           RMB 4,000       Limited company      42.00   Production and sale of polyester
Company Limited (i)                                                                   chips and polyester fibres

Sinopec Zhenhai Refining and             RMB 2,524       Limited company      71.32   Manufacturing of intermediate
Chemical          Company Limited                                                     petrochemical products and petroleum
                                                                                      products

Sinopec Zhongyuan Petroleum Company       RMB 816        Limited company      75.00   Exploration and production of crude
Limited                                                                               oil and natural gas
</TABLE>

     Except for Sinopec Kantons Holdings Limited, which is incorporated in
Bermuda, all of the above principal subsidiaries are incorporated in the PRC.

(i)   The Company consolidated the results of the entity because the Company
      controlled the board of this entity and had the power to govern its
      financial and operating policies.



<PAGE>
           CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (Amounts in millions of Renminbi, except per share data)



30.   FAIR VALUES OF FINANCIAL INSTRUMENTS

     Financial assets of the Group include cash and cash equivalents, time
deposits, investments, trade accounts receivable, bills receivable, amounts
due from Sinopec Group Company and its affiliates, loans to third parties, due
from associates and jointly controlled entities, and other receivables.
Financial liabilities of the Group include bank and other loans, loans from
Sinopec Group Company and its affiliates, trade accounts payable, bills
payable, amounts due to Sinopec Group Company and its affiliates, receipts in
advance, and advances from third parties. The Group has no derivative
instruments that are designated and qualified as hedging instruments as of
December 31, 2001 and 2002.

     The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of IAS 32 and IAS 39.
Fair value estimates, methods and assumptions, set forth below for the Group's
financial instruments, are made to comply with the requirements of IAS 32 and
IAS 39 and should be read in conjunction with the Group's consolidated
financial statements and related notes. The estimated fair value amounts have
been determined by the Group using market information and valuation
methodologies considered appropriate. However, considerable judgment is
required to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Group could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.

      The Group has not developed an internal valuation model necessary to
make the estimate of the fair value of loans from Sinopec Group Company and
its affiliates as it is not considered practicable to estimate their fair
value because the cost of obtaining discount and borrowing rates for
comparable borrowings would be excessive based on the Reorganization of the
Group, its existing capital structure, and the terms of the borrowings.

     The following table presents the carrying amounts and fair values of the
Group's long-term indebtedness other than loans from Sinopec Group Company and
its affiliates as of December 31, 2001 and 2002:


                                                   December 31,
                                                   ------------
                                                 2001        2002
                                                 ----        ----
                                                  RMB         RMB
Carrying amount...............................  41,758       45,925
Fair value....................................  41,996       46,370

     The fair values of long-term indebtedness are estimated by discounting
future cash flows thereon using current market interest rates offered to the
Group for debt with substantially the same characteristics and maturities.

     Investments are unquoted equity interests and there are no quoted market
prices for such interests in the PRC. Accordingly, a reasonable estimate of
fair value could not be made without incurring excessive costs.

     The fair values of all other financial instruments approximate their
carrying amounts due to the nature or short-term maturity of these
instruments.


31.   SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP

     The Group's accounting policies conform with IFRS which differ in certain
significant respects from US GAAP. Differences which have a significant effect
on net income and shareholders' equity are set out below.


(a) Foreign exchange gains and losses

     In accordance with IFRS, foreign exchange differences on funds borrowed
for construction are capitalized as property, plant and equipment to the
extent that they are regarded as an adjustment to interest costs during the
construction period. Under US GAAP, all foreign exchange gains and losses on
foreign currency debts are included in current earnings.


(b) Capitalization of property, plant and equipment

     In years prior to those presented herein, certain adjustments arose
between IFRS and US GAAP with regard to the capitalization of interest and
pre-production results under IFRS, that were reversed and expensed under US
GAAP. For the years presented herein, there were no adjustments related to the
capitalization of interest and pre-production results. Accordingly, the US
GAAP adjustments represent the amortization effect of such originating
adjustments described above.


(c) Revaluation of property, plant and equipment

     As required by the relevant PRC regulations with respect to the
Reorganization, the property, plant and equipment of the Group were revalued
as of September 30, 1999. In addition, the property, plant and equipment of
Sinopec National Star were revalued as of December 31, 2000 in connection with
the Acquisition. Under IFRS, such revaluations result in an increase in
shareholders' equity with respect to the increase in carrying amount of
certain property, plant and equipment above their historical bases.

     Under US GAAP, property, plant and equipment, including land use rights,
are stated at their historical cost less accumulated depreciation. However, as
a result of the tax deductibility of the revaluation surplus, a deferred tax
asset related to the reversal of the revaluation surplus is created under US
GAAP with a corresponding increase in shareholders' equity.

     Under IFRS, effective January 1, 2002, land use rights, which were
previously carried at revalued amount, are carried at cost under IFRS. The
effect of this change resulted in a decrease to revaluation reserve net of
minority interests of RMB 840 as of January 1, 2002. This revaluation reserve
was previously included as part of the revaluation reserve of property, plant
and equipment. This change under IFRS eliminated the US GAAP difference
relating to the revaluation of land use rights. However, as a result of the
tax deductibility of the revalued land use rights, the reversal of the
revaluation reserve resulted in a deferred tax asset.

     In addition, under IFRS, on disposal of a revalued asset, the related
revaluation surplus is transferred from the revaluation reserve to retained
earnings. Under US GAAP, the gain and loss on disposal of an asset is
determined with reference to the asset's historical carrying amount and
included in current earnings.


(d) Exchange of assets

     As described in Note 26, the Company and Sinopec Group Company entered
into an asset swap transaction on December 19, 2002. Under IFRS, the cost of
property, plant and equipment acquired in an exchange for a dissimilar item of
property, plant and equipment is measured at fair value. Under US GAAP, as the
exchange of assets was between entities under common control, the assets
received from Sinopec Group Company are measured at historical cost. The
difference between the historical cost of the net assets transferred and the
net assets received is accounted for as an equity transaction.

(e) Impairment of long-lived assets

     Under IFRS, impairment charges are recognized when a long-lived asset's
carrying amount exceeds the higher of an asset's net selling price and value
in use, which incorporates discounting the asset's estimated future cash
flows.

     Under US GAAP, determination of the recoverability of a long-lived asset
is based on an estimate of undiscounted future cash flows resulting from the
use of the asset and its eventual disposition. If the sum of the expected
future cash flows is less than the carrying amount of the asset, an impairment
loss is recognized. Measurement of an impairment loss for a long-lived asset
is based on the fair value of the asset.

     In addition, under IFRS, a subsequent increase in the recoverable amount
of an asset is reversed to the consolidated statements of income to the extent
that an impairment loss on the same asset was previously recognized as an
expense when the circumstances and events that led to the write-down or
write-off cease to exist. The reversal is reduced by the amount that would
have been recognized as depreciation had the write-off not occurred. Under US
GAAP, an impairment loss establishes a new cost basis for the impaired asset
and the new cost basis should not be adjusted subsequently other than for
further impairment losses.

     The US GAAP adjustment represents the effect of the reversing the
recovery of previous impairment charges recorded under IFRS.

(f) Employee reduction expenses

     As described in Note 5, certain employees of the Group were transferred
to Sinopec Group Company. During the year ended December 31, 2001, Sinopec
Group Company paid RMB 2,885 to employees that were transferred to Sinopec
Group Company and were subsequently terminated. Under IFRS, the payment made
to these employees by Sinopec Group Company is not recorded in current
earnings. Under US GAAP, with reference to Interpretation No. 1 to Accounting
Principles Board Opinion ("APB") No. 25, such payment made by Sinopec Group
Company is charged to current earnings with a corresponding increase in
shareholders' equity.

(g) Capitalized interest on investment in associates

      Under IFRS, investment accounted for by the equity method is not
considered a qualifying asset for which interest is capitalized. Under US
GAAP, an investment accounted for by the equity method while the investee has
activities in progress necessary to commence its planned principal operations,
provided that the investee's activities include the use of funds to acquire
qualifying assets for its operations, is a qualifying asset for which interest
is capitalized.


(h) Goodwill amortization

     Under IFRS, goodwill and negative goodwill are amortized on a systematic
basis over their useful lives.

     Under US GAAP, with reference to Statement of Financial Accounting
Standards No.142, "Goodwill and Other Intangible Assets" ("SFAS No.142"),
goodwill is no longer amortized beginning January 1, 2002, the date that SFAS
No. 142 was adopted. Instead, goodwill is reviewed for impairment upon
adoption of SFAS No.142 and annually thereafter. In connection with SFAS
No.142's transitional goodwill impairment evaluation, the Group determined
that no goodwill impairment existed as of the date of adoption. In addition,
under US GAAP, negative goodwill of RMB 11, net of minority interests, that
existed at the date of adoption of SFAS No.142 was written off as a cumulative
effect of a change in accounting principle.

(i) Companies included in consolidation

     Under IFRS, the Group consolidates less than majority owned entities in
which the Group has the power, directly or indirectly, to govern the financial
and operating policies of an entity so as to obtain benefits from its
activities. However, US GAAP requires that any entity of which the Group owns
20% to 50% of total outstanding voting stock not be consolidated, but rather
be accounted for under the equity method. Accordingly, Sinopec Fujian
Petrochemical Company Limited, Sinopec Wuhan Petroleum Group Company Limited,
Sinopec Wuhan Phoenix Company Limited and Sinopec Yizheng Chemical Fibre
Company Limited of which the Group owns 50%, 46.25%, 40.72%, and 42%,
respectively of the outstanding voting stock, are excluded from consolidation
under US GAAP and accounted for under the equity method. This exclusion does
not affect the net income or shareholders' equity reconciliations between IFRS
and US GAAP. Presented below is summarized financial information of Sinopec
Fujian Petrochemical Company Limited, Sinopec Wuhan Petroleum Group Company
Limited, Sinopec Wuhan Phoenix Company Limited and Sinopec Yizheng Chemical
Fibre Company Limited.


                                                Years ended December 31,
                                                ------------------------
                                           2000        2001        2002
                                           ----        ----        ----

                                            RMB         RMB         RMB

Revenues..............................      17,666      15,809      16,719
Income before income tax..............       1,233         531         666
Net income............................       1,029         329         468


                                                    December 31,
                                                    ------------
                                           2000        2001        2002
                                           ----        ----        ----

                                            RMB         RMB         RMB

Current assets........................       5,584       4,556       5,169
Total assets..........................      16,273      15,564      17,463
Current liabilities...................       3,998       3,267       4,612
Total liabilities.....................       4,449       3,823       4,992
Total equity..........................      11,824      11,741      12,471


(j) Related party transactions

     Under IFRS, transactions of state-controlled enterprises with other
state-controlled enterprises are not required to be disclosed as related party
transactions. Furthermore, government departments and agencies are deemed not
to be related parties to the extent that such dealings are in the normal
course of business. Therefore, related party transactions as disclosed in Note
26 only refers to transactions with enterprises over which Sinopec Group
Company is able to exercise significant influence.

     Under US GAAP, there are no similar exemptions. Although the majority of
the Group's activities are with PRC government authorities and affiliates and
other PRC state-owned enterprises, the Group believes that it has provided
meaningful disclosure of related party transactions in Note 26.

(k) Recently issued accounting standards


      SFAS No. 143

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 requires the Group to record the fair
value of an asset retirement obligation as a liability in the period in which
it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development
and/or normal use of the assets. The Group is also required to record a
corresponding asset which is depreciated over the life of the asset.
Subsequent to the initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect the passage
of time and changes in the estimated future cash flows underlying the
obligation. The Group is required to adopt SFAS No. 143 on January 1, 2003.
The Group does not expect the adoption of SFAS No.143 will have a material
impact on its consolidated financial statements.

      SFAS No. 145

     In April 2002, the FASB issued SFAS No.145, which rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", and an amendment of
that Statement, SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". SFAS No.145 also rescinds SFAS No. 44, "Accounting
for Intangible Assets of Motor Carriers". SFAS No.145 amends SFAS No.13,
"Accounting for Leases", to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No.145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions.

     The provisions of SFAS No. 145 related to the rescission of SFAS No. 4
shall be applied in fiscal years beginning after May 15, 2002. The provisions
in paragraphs 8 and 9(c) of SFAS No. 145 related to Statement 13 shall be
effective for transactions occurring after May 15, 2002. All other provisions
of SFAS No. 145 shall be effective for financial statements issued on or after
May 15, 2002. The Group does not expect the adoption of SFAS No. 145 will have
a material impact on its consolidated financial statements.

     SFAS No.146

     In July 2002, the FASB issued SFAS No.146, "Accounting for Costs
Associated with Exit or Disposal Activities" which applies to costs associated
with an exit activity (including restructuring) or with a disposal of
long-lived assets. SFAS No.146 requires an entity to record a liability for
cost associated with an exit or disposal activity when that liability is
incurred and can be measured at fair value. Commitment to an exit plan or a
plan of disposal expresses only management's intended future actions and does
not meet the requirement for recognizing a liability and the related expense.
An entity is required to disclose information about its exit and disposal
activities, the related costs, and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an
exit or disposal activity is initiated and in any subsequent period until the
activity is completed. The Group is required to adopt SFAS No.146 on January
1, 2003. The provisions of SFAS No.146 are required to be applied
prospectively after the adoption date to newly exit or disposal activities.
Therefore, management cannot determine the potential effect that adoption of
SFAS No.146 will have on the Group's consolidated financial statements.

     FIN No.45

     In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements
No.5, 57 and 107 and a rescission of FASB Interpretation No. 34". This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is required to
recognise, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of
the Interpretation are applicable to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial
statements of interim and annual periods ending after December 31, 2002. The
Group does not expect the application of this Interpretation will have a
material effect on its consolidated financial statements.

     FIN No. 46

     In January 2003, the FASB issued Interpretation No.46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51". This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if it is
reasonably possible that the Group will consolidate or disclose information
about variable interest entities when the Interpretation becomes effective.
The Group does not expect the application of this Interpretation will have a
material impact on its consolidated financial statements.

Reconciliation to US GAAP

     The effect on net income of significant differences between IFRS and US
GAAP for the years ended December 31, 2000, 2001 and 2002 is as follows:
<TABLE>
<CAPTION>

                                                                                Reference         Years ended December  31,
                                                                                 in Note          -------------------------------
                                                                                  above        2000      2001     2002       2002
                                                                                               ----      ----     ----       ----
                                                                                                 RMB       RMB      RMB       US$
                                                                                             millions  millions millions  millions

<S>                                                                                           <C>       <C>      <C>        <C>
Net income under IFRS......................................................                   19,584    16,025   16,080     1,942
US GAAP adjustments:
      Foreign exchange gains and losses....................................        (a)            76        76       76         9
      Capitalization of property, plant and equipment......................        (b)            12        12       12         1
      Depreciation on revalued property, plant and equipment...............        (c)         3,994     4,196    4,126       498
      Disposal of property, plant and equipment............................        (c)           199       232      544        66
      Reversal of impairment of long-lived assets,
         net of depreciation effect........................................        (e)          (808)       59       59         7
      Employee reduction expenses..........................................        (f)           --     (2,885)      --        --
      Capitalized interest on investment in associates.....................        (g)           --         70      110        13
      Goodwill amortization for the year...................................        (h)           --        --         6         1
      Cumulative effect of adopting SFAS No.142............................        (h)           --        --        11         1
      Deferred tax effect of US GAAP adjustments...........................                   (1,046)     (470)  (1,509)     (182)
                                                                                              ------      ----   ------     -----
Net income under US GAAP...................................................                   22,011    17,315   19,515     2,356
                                                                                              ======    ======   ======     =====
Basic earnings per share under US GAAP.....................................                     0.31      0.20     0.23      0.03
                                                                                              ======    ======   ======     =====
Basic earnings per ADS under US GAAP*......................................                    30.60     20.33    22.51      2.72
                                                                                              ======    ======   ======     =====
</TABLE>





     In accordance with SFAS No.142's disclosure requirements, a
reconciliation of reported net income under US GAAP to adjusted net income
under US GAAP is presented below.

<TABLE>
<CAPTION>

                                                                                    Years ended December 31,
                                                                                    ------------------------
<S>                                                                        <C>       <C>          <C>         <C>
                                                                           2000      2001         2002        2002
                                                                           ----      ----         ----        ----
                                                                             RMB       RMB          RMB         US$
                                                                         millions  millions     millions    millions
Net income under US GAAP............................................      22,011    17,315       19,515        2,356
Add:  Goodwill amortization.........................................           8         8           --          --
Less: Amortization of negative goodwill.............................                                             --
                                                                              (2)       (2)          --          --
                                                                          ------    ------       ------       -----
Adjusted net income under US GAAP...................................      22,017    17,321       19,515       2,356
                                                                          ======    ======       ======       =====

Basic earnings per share under US GAAP..............................        0.31      0.20         0.23        0.03
                                                                            ----      ----         ----        ----
Basic earnings per ADS under US GAAP*...............................       30.61     20.33        22.51        2.72
                                                                           -----     -----        -----        ----
Adjusted income before cumulative effect of a change in
       accounting principle.........................................      22,017    17,321       19,504       2,355
                                                                          ======    ======       ======       =====
</TABLE>


* Basic net income per ADS is calculated on the basis that one ADS is
equivalent to 100 shares.

     The effect on shareholders' equity of significant differences between
IFRS and US GAAP as of December 31, 2001 and 2002 is as follows:

<TABLE>
<CAPTION>

                                                                             Reference            December 31,
                                                                              in Note
                                                                              above        2001       2002        2002
                                                                                           ----       ----        ----
                                                                                           RMB         RMB         US$
                                                                                         millions    millions    millions
<S>                                                                                      <C>         <C>           <C>
Shareholders equity under IFRS...........................................               147,669     154,485       18,658
US GAAP adjustments:
      Foreign exchange gains and losses...................................      (a)         (504)       (428)         (52)
      Capitalization of property, plant and equipment.....................      (b)          (36)        (24)          (3)
      Revaluation of property, plant and equipment........................      (c)      (23,837)    (18,327)      (2,213)
      Deferred tax adjustments on revaluations............................      (c)        7,309       5,628          680
      Exchange of assets..................................................      (d)            -        (578)         (70)
      Reversal of impairment of long-lived assets.........................      (e)         (667)       (608)         (73)
      Capitalized interest on investment in associates....................      (g)           70         180           22
      Goodwill............................................................      (h)            -          17            2
      Deferred tax effect of US GAAP adjustments..........................                   367         484           58
                                                                                             ---         ---           --
Shareholders equity under US GAAP........................................               130,371     140,829       17,009
                                                                                         =======     =======       ======
</TABLE>




<PAGE>


            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                    SUPPLEMENTAL INFORMATION ON OIL AND GAS
                       PRODUCING ACTIVITIES (UNAUDITED)
                (All currency amounts in millions of Renminbi)



     In accordance with the United States Statement of Financial Accounting
Standards No. 69, ``Disclosures about Oil and Gas Producing Activities''
(``SFAS No. 69''), this section provides supplemental information on oil and
gas exploration and producing activities of the Group as of December 31, 2000,
2001and 2002, and for each of the years in the three-year period ended
December 31, 2002 in the following six separate tables. Tables I through III
provide historical cost information under US GAAP pertaining to capitalized
costs related to oil and gas producing activities; costs incurred in
exploration and development; and results of operations related to oil and gas
activities. Tables IV through VI present information on the Group's estimated
net proved reserve quantities; standardized measure of discounted future net
cash flows; and changes in the standardized measure of discounted future net
cash flows.

Table I:   Capitalized costs related to oil and gas producing activities

<TABLE>
<CAPTION>

                                                                                   Years ended
                                                                                   December 31,
                                                                                   ------------
                                                                           2000        2001        2002
                                                                           ----        ----        ----
                                                                            RMB         RMB          RMB
<S>                                                                       <C>         <C>         <C>
Property cost                                                                 --          --          --
Wells and related equipment and facilities...........................      94,251     109,977     125,790
Supporting equipment and facilities..................................       7,255      11,047      10,809
Uncompleted wells, equipment and facilities..........................       2,799       3,163       4,526
                                                                            -----       -----       -----
Total capitalized costs..............................................     104,305     124,187     141,125
Accumulated depreciation, depletion, amortization and impairment
   allowances........................................................     (49,401)    (56,069)    (62,397)
                                                                          -------     -------     -------
Net capitalized costs................................................      54,904      68,118      78,728
                                                                           ======      ======      ======
</TABLE>


Table II:   Cost incurred in exploration and development

<TABLE>
<CAPTION>
                                                                                      Years ended
                                                                                     December 31,
                                                                                     ------------
                                                                           2000        2001        2002
                                                                           ----        ----        ----
                                                                            RMB         RMB          RMB
<S>                                                                        <C>         <C>         <C>
Exploration..........................................................       4,329       5,666       5,798
Development..........................................................      13,987      18,385      18,793
                                                                           ------      ------      ------
Total cost incurred..................................................      18,316      24,051      24,591
</TABLE>


Table III:   Results of operations for oil and gas producing activities

<TABLE>
<CAPTION>
                                                                                     Years ended
                                                                                     December 31,
                                                                                     ------------
                                                                          2000        2001        2002
                                                                          ----        ----        ----
                                                                            RMB         RMB          RMB
<S>                                                                       <C>         <C>         <C>
Revenues
     Sales...........................................................      10,774       8,780       8,687
     Transfers.......................................................      46,213      43,269      39,407
                                                                           56,987      52,049      48,094
Production costs excluding taxes.....................................     (14,651)    (15,084)    (15,174)
Exploration expenses.................................................      (3,030)     (3,775)     (4,363)
Depreciation, depletion, amortization and impairment provisions.......     (5,745)     (7,126)     (8,133)
Taxes other than income tax..........................................        (971)       (875)       (860)
Income before income tax.............................................      32,590      25,189      19,564
Income tax expense...................................................     (10,245)     (8,312)     (6,456)
Results of operations from producing activities......................      22,345      16,877      13,108
</TABLE>


            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                    SUPPLEMENTAL INFORMATION ON OIL AND GAS
                PRODUCING ACTIVITIES (UNAUDITED) - (Continued)
                (All currency amounts in millions of Renminbi)


         The results of operations for producing activities for the years
ended December 31, 2000, 2001 and 2002 are shown above. Revenues include sales
to unaffiliated parties and transfers (essentially at third-party sales
prices) to other segments of the Group. All revenues reported in this table do
not include royalties to others as there were none. In accordance with SFAS
No. 69, income taxes are based on statutory tax rates, reflecting allowable
deductions and tax credits. General corporate overhead and interest income and
expense are excluded from the results of operations.


Table IV:   Reserve quantities information

     The Group's estimated net proved underground oil and gas reserves and
changes thereto for the years ended December 31, 2000, 2001 and 2002 are shown
in the following table.

     Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas, and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions, i.e.,
prices and costs as of the date the estimate is made. Prices include
consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions. Due to the
inherent uncertainties and the limited nature of reservoir data, estimates of
underground reserves are subject to change as additional information becomes
available.

     Proved reserves do not include additional quantities recoverable beyond
the term of the relevant production licenses, or that may result from
extensions of currently proved areas, or from application of improved recovery
processes not yet tested and determined to be economical. The Group's
estimated proved reserves do not include any quantities that are recoverable
through application of tertiary recovery techniques.

     Proved developed reserves are the quantities expected to be recovered
through existing wells with existing equipment and operating methods.

     ``Net'' reserves exclude royalties and interests owned by others and
reflect contractual arrangements in effect at the time of the estimate.


            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                    SUPPLEMENTAL INFORMATION ON OIL AND GAS
                PRODUCING ACTIVITIES (UNAUDITED) - (Continued)
                (All currency amounts in millions of Renminbi)

<TABLE>
<CAPTION>
                                                                                     Years ended
                                                                                     December 31,
                                                                                     ------------
                                                                            2000        2001         2002
                                                                            ----        ----         ----
<S>                                                                         <C>         <C>          <C>
Proved developed and undeveloped reserves (oil) (million barrels)
Beginning of year....................................................       3,028       3,168        3,125
Revisions of previous estimates......................................          72         (23)         119
Improved recovery....................................................         140         125          126
Extensions and discoveries...........................................         191         214          130
Production...........................................................        (263)       (269)        (270)
                                                                             ----        ----         ----
End of year..........................................................       3,168       3,215        3,320
                                                                            =====       =====        =====
Proved developed reserves
Beginning of year....................................................       2,418       2,490        2,444
                                                                            =====       =====        =====
End of year..........................................................       2,490       2,444        2,732
                                                                            =====       =====        =====
Proved developed and undeveloped reserves (gas)
   (billion cubic feet)
Beginning of year....................................................       2,031       3,342        3,488
Revisions of previous estimates......................................         164        (429)        (133)
Extensions and discoveries...........................................       1,281         738          153
Production...........................................................        (134)       (163)        (179)
                                                                             ----        ----         ----
End of year..........................................................       3,342       3,488        3,329
                                                                            =====       =====        =====
Proved developed reserves
Beginning of year....................................................       1,052       1,164        1,183
                                                                            =====       =====        =====
End of year..........................................................       1,164       1,183        1,056
                                                                            =====       =====        =====
</TABLE>


Table V: Standardized measure of discounted future net cash flows

     The standardized measure of discounted future net cash flows, related to
the above proved oil and gas reserves, is calculated in accordance with the
requirements of SFAS No. 69. Estimated future cash inflows from production are
computed by applying year-end prices for oil and gas to year-end quantities of
estimated net proved reserves. Future price changes are limited to those
provided by contractual arrangements in existence at the end of each reporting
year. Future development and production costs are those estimated future
expenditures necessary to develop and produce year-end estimated proved
reserves based on year-end cost indices, assuming continuation of year-end
economic conditions. Estimated future income taxes are calculated by applying
appropriate year-end statutory tax rates to estimated future pre-tax net cash
flows, less the tax basis of related assets. Discounted future net cash flows
are calculated using 10% midperiod discount factors. This discounting requires
a year-by-year estimate of when the future expenditure will be incurred and
when the reserves will be produced.

     The information provided does not represent management's estimate of the
Group's expected future cash flows or value of proved oil and gas reserves.
Estimates of proved reserve quantities are imprecise and change over time as
new information becomes available. Moreover, probable and possible reserves,
which may become proved in the future, are excluded from the calculations. The
arbitrary valuation prescribed under SFAS No. 69 requires assumptions as to
the timing and amount of future development and production costs. The
calculations are made for the years ended December 31, 2000, 2001 and 2002 and
should not be relied upon as an indication of the Group's future cash flows or
value of its oil and gas reserves.



            CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

                    SUPPLEMENTAL INFORMATION ON OIL AND GAS
                PRODUCING ACTIVITIES (UNAUDITED) - (Continued)
                (All currency amounts in millions of Renminbi)


<TABLE>
<CAPTION>
                                                                                   Years ended
                                                                                   December 31,
                                                                                   ------------
                                                                          2000        2001        2002
                                                                          ----        ----        ----
                                                                            RMB         RMB          RMB
<S>                                                                      <C>         <C>         <C>
Future cash flows....................................................     842,489     534,433     760,468
Future production costs..............................................    (248,338)   (224,487)   (287,887)
Future development costs.............................................     (22,790)    (25,221)    (26,852)
Future income tax expenses...........................................    (171,622)    (74,698)   (126,440)
                                                                         --------     -------    --------
Undiscounted future net cash flows...................................     399,739     210,027     319,289
10% annual discount for estimated timing of cash flows...............    (170,542)    (91,274)   (142,450)
                                                                         --------     -------    --------
Standardized measure of discounted future net cash flows.............     229,197     118,753     176,839
                                                                          =======     =======     =======
</TABLE>


Table VI:   Changes in the standardized measure of discounted
            future net cash flows

<TABLE>

                                                                                    Years ended
                                                                                    December 31,
                                                                                    ------------
                                                                          2000        2001         2002
                                                                          ----        ----         ----
                                                                            RMB         RMB          RMB
<S>                                                                       <C>        <C>          <C>
Sales and transfers of oil and gas produced, net of production costs.     (19,420)    (52,294)    (26,740)
Net changes in prices and production costs...........................     176,413    (162,554)     63,625
Net change due to extensions, discoveries and improved recoveries....      41,475      22,859      23,319
Revisions of previous quantity estimates.............................       6,287      (3,729)      8,253
Previously estimated development costs incurred during the period....       4,113       7,349       6,935
Accretion of discount................................................       7,149      19,259      10,323
Net change in income taxes...........................................     (65,128)     56,131     (27,793)
Others...............................................................        (526)      2,535         164
Net change for the year..............................................     150,363    (110,444)     58,086
</TABLE>
<PAGE>



                                   SIGNATURE

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

                                                China Petroleum & Chemical
                                                Corporation

                                                By /s/ Chen Ge
                                                ------------------------
                                                Name: Chen Ge
                                                Title: Secretary to the Board
                                                       of Directors



Date:  June 18, 2003
<PAGE>

                                CERTIFICATIONS

I, Wang Jiming, certify that:

1. I have reviewed this annual report on Form 20-F of China Petroleum &
Chemical Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a.       designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being
prepared;

         b.       evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

         c.       presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

         a.       all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and

         b.       any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

6. The registrants' other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weakness.

Date: June 18, 2003

                                                By /s/ Wang Jiming
                                                ----------------------
                                                Wang Jiming, President
<PAGE>

I, Zhang Jiaren, certify that:

1. I have reviewed this annual report on Form 20-F of China Petroleum &
Chemical Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a.       designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being
prepared;

         b.       evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

         c.       presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

         a.       all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and

         b.       any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

6. The registrants' other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weakness.

Date: June 18, 2003

                                                By /s/ Zhang Jiaren
                                                ---------------------------
                                                Zhang Jiaren,
                                                Senior Vice President and
                                                Chief Financial Officer