##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 20-F


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2004


Commission File Number 1-15006










PetroChina Company Limited







The Peoples Republic of China







16 Andelu


Dongcheng District, Beijing, 100011


The Peoples Republic of China









|                                                                                              |  |                       |                                 | 
|--------------------------------------------------------------------------------------------- |  | --------------------- | ------------------------------- | 
|Title of                                                                                      |  | Name of each exchange |                                
|Each class                                                                                    |  | on which registered   |                                
|                                                                                              |  |                       |                                
|American Depositary Shares, each representing 100
    H Shares, par value RMB 1.00 per share* |  |                       | New York Stock Exchange, Inc.   | 
|H Shares, par value RMB 1.00 per share                                                        |  |                       | New York Stock Exchange, Inc.** | 















|                                                 |  |  |                 |    
|------------------------------------------------ |  |  | --------------- | ---
|State-owned shares, par value RMB 1.00 per share |  |  | 158,241,758,000 |    
|H Shares, par value RMB 1.00 per share           |  |  | 17,582,418,000  | ***



X




X







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

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

|    |                                                                              
|--- | -----------------------------------------------------------------------------
|*** | Include 2,424,087,400 H Shares represented
    by American Depositary Shares.









---



##### Table of Contents










Table of Contents


|        |  |         |  |                                                                |  |      |     | 
|------- |  | ------- |  | -------------------------------------------------------------- |  | ---- | --- | 
|        |  |         |  |                                                                |  | Page |    
|        |  |         |  |                                                                |  |      |    
|        |  |         |  | Certain Terms and Conventions                                  |  |      | 3   | 
|        |  |         |  | Forward-looking Statements                                     |  |      | 6   | 
|Part I  |  | Item 1  |  | Identity of Directors, Senior Management
    and Advisors      |  |      | 8   | 
|        |  | Item 2  |  | Offer Statistics and Expected Timetable                        |  |      | 8   | 
|        |  | Item 3  |  | Key Information                                                |  |      | 8   | 
|        |  |         |  | Exchange Rates                                                 |  |      | 8   | 
|        |  |         |  | Selected Financial Data                                        |  |      | 9   | 
|        |  |         |  | Risk Factors                                                   |  |      | 12  | 
|        |  | Item 4  |  | Information on the Company                                     |  |      | 16  | 
|        |  |         |  | Introduction                                                   |  |      | 16  | 
|        |  |         |  | Exploration and Production                                     |  |      | 23  | 
|        |  |         |  | Refining and Marketing                                         |  |      | 34  | 
|        |  |         |  | Chemicals and Marketing                                        |  |      | 41  | 
|        |  |         |  | Natural Gas and Pipeline                                       |  |      | 45  | 
|        |  |         |  | Competition                                                    |  |      | 49  | 
|        |  |         |  | Environmental Matters                                          |  |      | 50  | 
|        |  |         |  | Legal Proceedings                                              |  |      | 51  | 
|        |  |         |  | Properties                                                     |  |      | 51  | 
|        |  |         |  | Regulatory Matters                                             |  |      | 52  | 
|        |  | Item 5  |  | Operating and Financial Review and
    Prospects               |  |      | 59  | 
|        |  |         |  | General                                                        |  |      | 59  | 
|        |  |         |  | Operating Results                                              |  |      | 67  | 
|        |  |         |  | Liquidity and Capital
    Resources                            |  |      | 76  | 
|        |  |         |  | Research and Development                                       |  |      | 84  | 
|        |  |         |  | Trend Information                                              |  |      | 85  | 
|        |  |         |  | Other Information                                              |  |      | 85  | 
|        |  | Item 6  |  | Directors, Senior Management and
    Employees                 |  |      | 89  | 
|        |  |         |  | Directors, Senior Management
    and Supervisors               |  |      | 89  | 
|        |  |         |  | Compensation                                                   |  |      | 95  | 
|        |  |         |  | Board Practices                                                |  |      | 96  | 
|        |  |         |  | Employees                                                      |  |      | 98  | 
|        |  |         |  | Share Ownership                                                |  |      | 98  | 
|        |  | Item 7  |  | Major Shareholders and Related Party
    Transactions          |  |      | 99  | 
|        |  |         |  | Major Shareholders                                             |  |      | 99  | 
|        |  |         |  | Related Party Transactions                                     |  |      | 99  | 
|        |  | Item 8  |  | Financial Information                                          |  |      | 103 | 
|        |  | Item 9  |  | The Offer and Listing                                          |  |      | 103 | 
|        |  | Item 10 |  | Additional Information                                         |  |      | 105 | 
|        |  |         |  | Memorandum and Articles of
    Association                     |  |      | 107 | 
|        |  |         |  | Material Contracts                                             |  |      | 113 | 
|        |  |         |  | Exchange Controls                                              |  |      | 113 | 
|        |  |         |  | Taxation                                                       |  |      | 114 | 
|        |  |         |  | Significant Differences in
    Corporate Governance Practices  |  |      | 115 | 
|        |  |         |  | Documents on Display                                           |  |      | 116 | 
|        |  | Item 11 |  | Quantitative and Qualitative Disclosures
    About Market Risk |  |      | 117 | 
|        |  | Item 12 |  | Description of Securities Other Than Equity
    Securities     |  |      | 121 | 
|Part II |  | Item 13 |  | Defaults, Dividend Arrearages and
    Delinquencies            |  |      | 121 | 
|        |  | Item 14 |  | Material Modifications to the Rights to
    Security Holders   |  |      | 121 | 
|        |  | Item 15 |  | Controls and Procedures                                        |  |      | 121 | 

1



---



##### Table of Contents



|                                                   |  |          |  |                                                                     |  |      |     | 
|-------------------------------------------------- |  | -------- |  | ------------------------------------------------------------------- |  | ---- | --- | 
|                                                   |  |          |  |                                                                     |  | Page |    
|                                                   |  |          |  |                                                                     |  |      |    
|                                                   |  | Item 16A |  | Audit Committee Financial Expert                                    |  |      | 122 | 
|                                                   |  | Item 16B |  | Code of Ethics                                                      |  |      | 122 | 
|                                                   |  | Item 16C |  | Principal Accountant Fees and Services                              |  |      | 122 | 
|                                                   |  | Item 16D |  | Exemptions from Listing Standards for Audit
    Committees          |  |      | 123 | 
|                                                   |  | Item 16E |  | Purchases of Equity Securities by the
    Issuer and its Affiliates |  |      | 123 | 
|Part III                                           |  | Item 17  |  | Financial Statements                                                |  |      | 123 | 
|                                                   |  | Item 18  |  | Financial Statements                                                |  |      | 123 | 
|                                                   |  | Item 19  |  | Exhibits                                                            |  |      | 123 | 
|                                                   |  |          |  | Consolidated Financial Statements                                   |  |      | F-1 | 
|EX-1.1 ARTICLES OF ASSOCIATION                    
|EX-4.1 2005 MANAGEMENT PERFORMANCE CONTRACT       
|EX-4.2 CRUDE OIL MUTUAL SUPPLY AGREEMENT          
|EX-4.3 CAPITAL CONTRIBUTION AGREEMENT             
|EX-4.4 TRANSFER AGREEMENT                         
|EX-4.5 SUPPLEMENTARY AGREEMENT, DATED JUNE 9, 2005
|EX-8.1 LIST OF MAJOR SUBSIDIARIES                 
|EX-10.1 SIGNIFICANT DIFFERENCES OF GOV'T PRACTICES
|EX-12.1 CERTIFICATION OF CEO REQUIRED BY SEC. 302 
|EX-12.2 CERTIFICATION OF CFO REQUIRED BY SEC. 302 
|EX-13.1 CERTIFICATION OF CEO REQUIRED BY SEC. 1350
|EX-13.2 CERTIFICATION OF CFO REQUIRED BY SEC. 1350
|EX-16.1 CODE OF ETHICS FOR SENIOR MANAGEMENT      
|EX-16.2 CODE OF ETHICS FOR EMPLOYEES              



2



---



##### Table of Contents






CERTAIN TERMS AND CONVENTIONS


Conventions Which Apply to this Annual Report






| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | CNPC or CNPC group are to our parent,
    China National Petroleum Corporation and its affiliates and
    subsidiaries, excluding PetroChina, its subsidiaries and its
    interests in long-term investments, and where the context refers
    to any time prior to the establishment of CNPC, those entities
    and businesses which were contributed to CNPC upon its
    establishment.
|
| |  | PetroChina, we, our,
    our company and us are to:                                                                                                                                                                                                                                                                                                                                   



| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PetroChina Company Limited, a joint stock company incorporated
    in the Peoples Republic of China with limited liability
    and its subsidiaries and branch companies, or                                                       
|
| |  | the CNPC groups domestic crude oil and natural gas
    exploration and production, refining and marketing, chemicals
    and natural gas businesses that were transferred to us in the
    restructuring of the CNPC group in 1999.



| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PRC or China are to the Peoples
    Republic of China, but do not apply to Hong Kong, Macau or
    Taiwan for purposes of this annual report.



Conversion Table


|                           |  |                             |  |                                                                         
|-------------------------- |  | --------------------------- |  | ------------------------------------------------------------------------
|1 barrel-of-oil equivalent |  | = 1 barrel of crude oil     |  | = 6,000 cubic feet of natural gas                                       
|1 cubic meter              |  | = 35.315 cubic feet         |  |                                                                         
|1 ton of crude oil         |  | = 1 metric ton of crude oil |  | = 7.389 barrels of crude oil (assuming an API gravity
    of 34 degrees)

Certain Oil and Gas Terms






|              |  |                                                                                                                                                                                                                                            
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|acreage     |  | The total area, expressed in acres, over which an entity has
    interests in exploration or production. Net acreage is the
    entitys interest, expressed in acres, in the relevant
    exploration or production area.                 
|             
|API gravity |  | An indication of the density of crude oil or other liquid
    hydrocarbons as measured by a system recommended by the American
    Petroleum Institute (API), measured in degrees. The lower the
    API gravity, the heavier the compound.
|             
|condensate  |  | Light hydrocarbon substances produced with natural gas that
    condense into liquid at normal temperatures and pressures
    associated with surface production equipment.                                                                
|             
|crude oil   |  | Crude oil, including condensate and natural gas liquids.                                                                                                                                                                                   

3



---



##### Table of Contents





|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|development cost                  |  | For a given period, costs incurred to obtain access to proved
    reserves and to provide facilities for extracting, treating,
    gathering and storing the oil and gas.                                                                                                                                                                                                                                                                                                                                                                                                       
|                                   
|finding cost                      |  | For a given period, costs incurred in identifying areas that may
    warrant examination and in examining specific areas that are
    considered to have prospects of containing oil and gas reserves,
    including costs of drilling exploratory wells and
    exploratory-type stratigraphic test wells. Finding cost is also
    known as exploration cost.                                                                                                                                                                                                                 
|                                   
|lifting cost                      |  | For a given period, costs incurred to operate and maintain wells
    and related equipment and facilities, including applicable
    operating costs of support equipment and facilities and other
    costs of operating and maintaining those wells and related
    equipment and facilities. Lifting cost is also known as
    production cost.                                                                                                                                                                                                                               
|                                   
|natural gas liquids               |  | Hydrocarbons that can be extracted in liquid form together with
    natural gas production. Ethane and pentanes are the predominant
    components, with other heavier hydrocarbons also present in
    limited quantities.                                                                                                                                                                                                                                                                                                                                                     
|                                   
|offshore                          |  | Areas under water with a depth of five meters or greater.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                   
|onshore                           |  | Areas of land and areas under water with a depth of less than
    five meters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                   
|primary distillation capacity     |  | At a given point in time, the maximum volume of crude oil a
    refinery is able to process in its basic distilling units.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                   
|proved developed reserves         |  | Reserves that can be expected to be recovered through existing
    wells with existing equipment and operating methods. Additional
    oil and gas expected to be obtained through the application of
    fluid injection or other improved recovery techniques for
    supplementing the natural forces and mechanisms of primary
    recovery are included as proved developed reserves
    only after testing by a pilot project or after the operation of
    an installed program has confirmed through production response
    that increased recovery will be achieved.
|                                   
|proved reserves                   |  | Estimated quantities of crude oil and natural gas 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 of
    escalations based upon future conditions.                                                                                       
|                                   
|proved undeveloped 
     reserves |  | Reserves that are expected to be recovered from new wells on
    undrilled acreage, or from existing wells where a relatively
    major expenditure is required for recompletion. Reserves on
    undrilled acreage shall be limited to those drilling units
    offsetting productive units that are reasonably certain of
    production when drilled. Proved reserves for other undrilled
    units can be claimed only where it can be demonstrated with
    certainty that there is                                                                                        

4



---



##### Table of Contents



|                              |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |  | continuity of production from the existing productive formation.
    Under no circumstances should estimates for proved undeveloped
    reserves be attributable to any acreage for which an application
    of fluid injection or other improved recovery technique is
    contemplated, unless such techniques have been proved effective
    by actual tests in the area and in the same reservoir.
|                             
|reserve-to-production ratio |  | For any given well, field or country, the ratio of proved
    reserves to annual production of crude oil or, with respect to
    natural gas, to wellhead production excluding flared gas.                                                                                                                                                                                                            
|                             
|sales gas                   |  | Marketable production of gas on an as sold basis,
    excluding flared gas, injected gas and gas consumed in
    operations.                                                                                                                                                                                                                                                                        
|                             
|water cut                   |  | For a given oil region, the percentage that water constitutes of
    all fluids extracted from all wells in that region.                                                                                                                                                                                                                                                                              





| |   |                                      
| | - | -------------------------------------
| |  | BOE are to barrels-of-oil equivalent,
|
| |  | Mcf are to thousand cubic feet, and  
|
| |  | Bcf are to billion cubic feet.       

5



---



##### Table of Contents






FORWARD-LOOKING STATEMENTS






| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | the amounts and nature of future exploration, development and
    other capital expenditures;                                               
|
| |  | future prices and demand for crude oil, natural gas, refined
    products and chemical products;                                            
|
| |  | development projects;                                                                                                                       
|
| |  | exploration prospects;                                                                                                                      
|
| |  | reserves potential;                                                                                                                         
|
| |  | production of oil and gas and refined and chemical products;                                                                                
|
| |  | development and drilling potential;                                                                                                         
|
| |  | expansion and other development trends of the oil and gas
    industry;                                                                     
|
| |  | the planned development of our natural gas operations;                                                                                      
|
| |  | the planned expansion of our refined product marketing network;                                                                             
|
| |  | the planned expansion of our natural gas infrastructure;                                                                                    
|
| |  | the anticipated benefit from our proposed acquisition of certain
    overseas assets from CNPC, our parent company;                         
|
| |  | the plan to continue to pursue attractive business opportunities
    outside China;                                                         
|
| |  | our future overall business development and economic performance;                                                                           
|
| |  | our anticipated financial and operating information regarding,
    and the future development and economic performance of, our
    business;
|
| |  | our anticipated market risk exposure arising from future changes
    in interest rates, foreign exchange rates and commodity
    prices; and
|
| |  | other prospects of our business and operations.                                                                                             







| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | fluctuations in crude oil and natural gas prices;                        
|
| |  | failure to achieve continued exploration success;                        
|
| |  | failures or delays in achieving production from development
    projects;
|
| |  | continued availability of capital and financing;                         
|
| |  | acquisitions and other business opportunities that we may pursue;        

6



---



##### Table of Contents





| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general economic, market and business conditions, including
    volatility in interest rates, changes in foreign exchange rates
    and volatility in commodity markets;                                     
|
| |  | liability for remedial actions under environmental regulations;                                                                                                                                              
|
| |  | impact of the PRCs entry into the World Trade Organization;                                                                                                                                                 
|
| |  | the actions of competitors;                                                                                                                                                                                  
|
| |  | wars and acts of terrorism or sabotage;                                                                                                                                                                      
|
| |  | changes in policies, laws or regulations of the PRC;                                                                                                                                                         
|
| |  | the other changes in global economic and political conditions
    affecting the production, supply and demand and pricing of crude
    oil, refined products, petrochemical products and natural
    gas; and
|
| |  | the other risk factors discussed in this annual report, and
    other factors beyond our control.                                                                                                            



7



---



##### Table of Contents






PART I


ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISORS







ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE







ITEM 3  KEY INFORMATION





Exchange Rates






|                            |  |                  |        |  |     |  |        | 
|--------------------------- |  | ---------------- | ------ |  | --- |  | ------ | 
|                            |  | Noon buying rate |       
|                            |  |                  |       
|                            |  | High             |        |  | Low | 
|                            |  |                  |        |  |     | 
|                            |  | (RMB per US$)    |       
|December 2004               |  |                  | 8.2767 |  |     |  | 8.2765 | 
|January 2005                |  |                  | 8.2765 |  |     |  | 8.2765 | 
|February 2005               |  |                  | 8.2765 |  |     |  | 8.2765 | 
|March 2005                  |  |                  | 8.2765 |  |     |  | 8.2765 | 
|April 2005                  |  |                  | 8.2765 |  |     |  | 8.2765 | 
|May 2005                    |  |                  | 8.2765 |  |     |  | 8.2735 | 
|June 2005 (through June 24) |  |                  | 8.2765 |  |     |  | 8.2765 | 



|     |  |                         
|---- |  | ------------------------
|     |  | Average noon buying rate
|     |  |                         
|     |  | (RMB per US$)           
|2000 |  | 8.2784                  
|2001 |  | 8.2770                  
|2002 |  | 8.2772                  
|2003 |  | 8.2772                  
|2004 |  | 8.2768                  

8



---



##### Table of Contents






Selected Financial Data


Historical Financial Information








9



---



##### Table of Contents



|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |   |         |          |          |   |        |         |         |  
|---------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | -------- | - | ------- | ------- | -------- | - | ------- | ------- | -------- | ---- | ------- | ------- | -------- | - | ------- | -------- | -------- | - | ------ | ------- | ------- | -
|                                               |                                                                         | Year ended December 31,                              |        
|                                               |                                                                         |                                                      |        
|                                               |                                                                         | 2000(2)                                              |         |         | 2001(2)  |   |         | 2002    |          |   | 2003    |         |          | 2004 |         |         | 2004     |  
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|                                               |                                                                         | RMB                                                  |         |         | RMB      |   |         | RMB     |          |   | RMB     |         |          | RMB  |         |         | US$      |  
|                                               |                                                                         | (in millions, except for per share and per ADS data) |        
|Income Statement Data                          |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |   |         |          |          |   |        |        
|IFRS                                           |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |   |         |          |          |   |        |        
|Revenues                                       |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |   |         |          |          |   |        |        
|                                               | Sales and other operating revenues                                      |                                                      |         | 245,279 |          |   |         | 241,320 |          |   |         | 244,424 |          |      |         | 303,779 |          |   |         | 388,633  |          |   |        | 46,956  |        
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Operating expenses                             |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |   |         |          |          |   |        |        
|                                               | Purchases, services and other                                           |                                                      |         | (64,251 | )        |   |         | (78,529 | )        |   |         | (71,690 | )        |      |         | (90,850 | )        |   |         | (116,353 | )        |   |        | (14,058 | )      
|                                               | Employee compensation costs                                             |                                                      |         | (15,129 | )        |   |         | (14,608 | )        |   |         | (16,248 | )        |      |         | (19,542 | )        |   |         | (22,309  | )        |   |        | (2,695  | )      
|                                               | Exploration expenses, including exploratory dry holes                   |                                                      |         | (8,680  | )        |   |         | (7,344  | )        |   |         | (8,095  | )        |      |         | (10,577 | )        |   |         | (11,723  | )        |   |        | (1,416  | )      
|                                               | Depreciation, depletion and amortization                                |                                                      |         | (34,209 | )        |   |         | (33,615 | )        |   |         | (36,782 | )        |      |         | (40,531 | )        |   |         | (46,411  | )        |   |        | (5,608  | )      
|                                               | Selling, general and administrative expenses                            |                                                      |         | (17,621 | )        |   |         | (21,735 | )        |   |         | (22,474 | )        |      |         | (23,930 | )        |   |         | (26,377  | )        |   |        | (3,187  | )      
|                                               | Employee separation costs and shutting down of manufacturing
    assets |                                                      |         | (6,579  | )        |   |         | (487    | )        |   |         | (2,121  | )        |      |         | (2,355  | )        |   |         | (220     | )        |   |        | (27     | )      
|                                               | Taxes other than income taxes                                           |                                                      |         | (13,258 | )        |   |         | (13,951 | )        |   |         | (14,613 | )        |      |         | (15,879 | )        |   |         | (18,685  | )        |   |        | (2,258  | )      
|                                               | Revaluation loss of property, plant and equipment                       |                                                      |         |        |          |   |         |        |          |   |         |        |          |      |         | (391    | )        |   |         |         |          |   |        |        |        
|                                               | Other (expenses) income, net                                            |                                                      |         | (119    | )        |   |         | 88      |          |   |         | (60     | )        |      |         | (538    | )        |   |         | 31       |          |   |        | 4       |        
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|                                               |                                                                         | Total operating expenses                             |         |         | (159,846 | ) |         |         | (170,181 | ) |         |         | (172,083 | )    |         |         | (204,593 | ) |         |          | (242,047 | ) |        |         | (29,245 | )
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Income from operations                         |                                                                         |                                                      | 85,433  |         |          |   | 71,139  |         |          |   | 72,341  |         |          |      | 99,186  |         |          |   | 146,586 |          |          |   | 17,711 |        
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Income from equity affiliates                  |                                                                         |                                                      | 584     |         |          |   | 341     |         |          |   | 268     |         |          |      | 985     |         |          |   | 1,824   |          |          |   | 220    |        
|Exchange gain (loss), net                      |                                                                         |                                                      | 1,172   |         |          |   | 250     |         |          |   | (316    | )       |          |      | (180    | )       |          |   | (73     | )        |          |   | (9     | )      
|Interest income                                |                                                                         |                                                      | 591     |         |          |   | 809     |         |          |   | 463     |         |          |      | 677     |         |          |   | 1,107   |          |          |   | 134    |        
|Interest expense                               |                                                                         |                                                      | (6,286  | )       |          |   | (4,408  | )       |          |   | (3,516  | )       |          |      | (2,346  | )       |          |   | (2,303  | )        |          |   | (278   | )      
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Income before taxes                            |                                                                         |                                                      | 81,494  |         |          |   | 68,131  |         |          |   | 69,240  |         |          |      | 98,322  |         |          |   | 147,141 |          |          |   | 17,778 |        
|Income taxes                                   |                                                                         |                                                      | (27,014 | )       |          |   | (23,066 | )       |          |   | (22,231 | )       |          |      | (28,072 | )       |          |   | (42,563 | )        |          |   | (5,143 | )      
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Income before minority interests               |                                                                         |                                                      | 54,480  |         |          |   | 45,065  |         |          |   | 47,009  |         |          |      | 70,250  |         |          |   | 104,578 |          |          |   | 12,635 |        
|Income (loss) applicable to minority interests |                                                                         |                                                      | 165     |         |          |   | 404     |         |          |   | (99     | )       |          |      | (636    | )       |          |   | (1,651  | )        |          |   | (199   | )      
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Net income                                     |                                                                         |                                                      | 54,645  |         |          |   | 45,469  |         |          |   | 46,910  |         |          |      | 69,614  |         |          |   | 102,927 |          |          |   | 12,436 |        
|                                               |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |  
|Basic and diluted net income per
    share(3)  |                                                                         |                                                      | 0.32    |         |          |   | 0.26    |         |          |   | 0.27    |         |          |      | 0.40    |         |          |   | 0.59    |          |          |   | 0.07   |        
|Basic and diluted net income per
    ADS(4)    |                                                                         |                                                      | 31.84   |         |          |   | 25.86   |         |          |   | 26.68   |         |          |      | 39.59   |         |          |   | 58.54   |          |          |   | 7.07   |        
|US GAAP                                        |                                                                         |                                                      |         |         |          |   |         |         |          |   |         |         |          |      |         |         |          |   |         |          |          |   |        |        
|Net income                                     |                                                                         |                                                      | 60,236  |         |          |   | 50,934  |         |          |   | 49,837  |         |          |      | 75,419  |         |          |   | 108,135 |          |          |   | 13,065 |        
|Basic and diluted net income per
    share(3)  |                                                                         |                                                      | 0.35    |         |          |   | 0.29    |         |          |   | 0.28    |         |          |      | 0.43    |         |          |   | 0.62    |          |          |   | 0.07   |        
|Basic and diluted net income per
    ADS(4)    |                                                                         |                                                      | 35.10   |         |          |   | 28.97   |         |          |   | 28.34   |         |          |      | 42.89   |         |          |   | 61.50   |          |          |   | 7.43   |        

|                   |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        |  |  |        |         |  |  |       |        | 
|------------------ | --------------------------------------------------------- | ---------------------------------------------------- |  | ------ | ------- |  |  | ------ | ------ |  | ---- | ------ | ------ | ---- |  | ------ | ------ |  |  | ------ | ------- |  |  | ----- | ------ | 
|                   |                                                           | As of December 31,                                   | 
|                   |                                                           |                                                      | 
|                   |                                                           | 2000(1)                                              |  |        | 2001(2) |  |  | 2002   |        |  | 2003 |        |        | 2004 |  |        | 2004   | 
|                   |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        | 
|                   |                                                           | RMB                                                  |  |        | RMB     |  |  | RMB    |        |  | RMB  |        |        | RMB  |  |        | US$    | 
|                   |                                                           | (in millions, except for per share and per ADS data) | 
|Balance Sheet Data |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        |  |  |        |         |  |  |      
|IFRS               |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        |  |  |        |         |  |  |      
|Assets             |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        |  |  |        |         |  |  |      
|Current assets     |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        |  |  |        |         |  |  |      
|                   | Cash and cash equivalents                                 |                                                      |  | 18,085 |         |  |  | 11,127 |        |  |      | 9,977  |        |      |  | 11,231 |        |  |  | 11,304 |         |  |  | 1,366 |       
|                   | Time deposits with maturities over three months           |                                                      |  |       |         |  |  | 3,253  |        |  |      | 2,612  |        |      |  | 2,640  |        |  |  | 1,400  |         |  |  | 169   |       
|                   | Receivables under resale agreements                       |                                                      |  | 5,815  |         |  |  | 11,505 |        |  |      | 9,786  |        |      |  | 24,224 |        |  |  | 33,217 |         |  |  | 4,013 |       
|                   | Accounts receivable, less allowance for doubtful accounts |                                                      |  | 12,786 |         |  |  | 7,392  |        |  |      | 6,079  |        |      |  | 3,263  |        |  |  | 2,662  |         |  |  | 322   |       
|                   | Inventories, at net book value                            |                                                      |  | 32,499 |         |  |  | 28,313 |        |  |      | 28,441 |        |      |  | 28,872 |        |  |  | 45,771 |         |  |  | 5,530 |       
|                   | Prepaid expenses and other current assets                 |                                                      |  | 11,913 |         |  |  | 24,427 |        |  |      | 18,269 |        |      |  | 15,944 |        |  |  | 22,387 |         |  |  | 2,705 |       
|                   |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        | 
|                   |                                                           | Total current assets                                 |  |        | 81,098  |  |  |        | 86,017 |  |      |        | 75,164 |      |  |        | 86,174 |  |  |        | 116,741 |  |  |       | 14,105 | 
|                   |                                                           |                                                      |  |        |         |  |  |        |        |  |      |        |        |      |  |        |        | 

10



---



##### Table of Contents



|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |        |        | 
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- | ---- | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ------- | ------ | ------ | 
|                                                                                             |                                                                                              | As of December 31,                                   |        
|                                                                                             |                                                                                              |                                                      |        
|                                                                                             |                                                                                              | 2000(1)                                              |         |         | 2001(2) |  |         | 2002    |         |  | 2003    |         |         | 2004 |         |         | 2004    | 
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                             |                                                                                              | RMB                                                  |         |         | RMB     |  |         | RMB     |         |  | RMB     |         |         | RMB  |         |         | US$     | 
|                                                                                             |                                                                                              | (in millions, except for per share and per ADS data) |        
|Non-current assets                                                                           |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|                                                                                             | Property, plant and equipment, less accumulated depreciation,
    depletion and amortization |                                                      |         | 341,175 |         |  |         | 363,367 |         |  |         | 393,296 |         |      |         | 427,875 |         |  |         | 468,519 |         |  |         | 56,608 |       
|                                                                                             | Long-term investments, at net book value                                                     |                                                      |         | 4,948   |         |  |         | 5,530   |         |  |         | 5,680   |         |      |         | 7,410   |         |  |         | 9,433   |         |  |         | 1,140  |       
|                                                                                             | Prepaid operating lease rentals                                                              |                                                      |         | 3,924   |         |  |         | 5,383   |         |  |         | 6,249   |         |      |         | 7,252   |         |  |         | 12,248  |         |  |         | 1,480  |       
|                                                                                             | Intangible and other assets                                                                  |                                                      |         | 901     |         |  |         | 2,368   |         |  |         | 2,760   |         |      |         | 3,024   |         |  |         | 2,987   |         |  |         | 361    |       
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                             | Total non-current assets                                                                     |                                                      |         | 350,948 |         |  |         | 376,648 |         |  |         | 407,985 |         |      |         | 445,561 |         |  |         | 493,187 |         |  |         | 59,589 |       
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                             |                                                                                              | Total assets                                         |         |         | 432,046 |  |         |         | 462,665 |  |         |         | 483,149 |      |         |         | 531,735 |  |         |         | 609,928 |  |         |        | 73,694 | 
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                            
|Liabilities and shareholders equity                                                        
|Current liabilities                                                                          |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|                                                                                             | Short-term debt                                                                              |                                                      |         | 41,514  |         |  |         | 25,323  |         |  |         | 20,633  |         |      |         | 28,890  |         |  |         | 27,276  |         |  |         | 3,296  |       
|                                                                                             | Accounts payable and accrued liabilities                                                     |                                                      |         | 39,550  |         |  |         | 53,210  |         |  |         | 57,793  |         |      |         | 64,180  |         |  |         | 70,696  |         |  |         | 8,542  |       
|                                                                                             | Income tax payable                                                                           |                                                      |         | 9,399   |         |  |         | 5,672   |         |  |         | 5,412   |         |      |         | 12,043  |         |  |         | 17,484  |         |  |         | 2,112  |       
|                                                                                             | Other taxes payable                                                                          |                                                      |         | 7,171   |         |  |         | 8,762   |         |  |         | 5,515   |         |      |         | 8,916   |         |  |         | 4,633   |         |  |         | 560    |       
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                             |                                                                                              | Total current liabilities                            |         |         | 97,634  |  |         |         | 92,967  |  |         |         | 89,353  |      |         |         | 114,029 |  |         |         | 120,089 |  |         |        | 14,510 | 
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|Non-current liabilities                                                                      |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|                                                                                             | Long-term debt                                                                               |                                                      |         | 53,412  |         |  |         | 65,546  |         |  |         | 60,655  |         |      |         | 41,959  |         |  |         | 38,458  |         |  |         | 4,646  |       
|                                                                                             | Deferred credits and other long-term obligations                                             |                                                      |         | 1,196   |         |  |         | 1,380   |         |  |         | 1,684   |         |      |         | 2,000   |         |  |         | 2,438   |         |  |         | 294    |       
|                                                                                             | Deferred income taxes                                                                        |                                                      |         | 3,169   |         |  |         | 7,030   |         |  |         | 9,927   |         |      |         | 11,526  |         |  |         | 14,340  |         |  |         | 1,733  |       
|                                                                                             |                                                                                              | Total non-current liabilities                        |         |         | 57,777  |  |         |         | 73,956  |  |         |         | 72,266  |      |         |         | 55,485  |  |         |         | 55,236  |  |         |        | 6,673  | 
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                             |                                                                                              | Total liabilities                                    |         |         | 155,411 |  |         |         | 166,923 |  |         |         | 161,619 |      |         |         | 169,514 |  |         |         | 175,325 |  |         |        | 21,183 | 
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|Minority interest                                                                            |                                                                                              |                                                      | 4,989   |         |         |  | 5,136   |         |         |  | 4,854   |         |         |      | 5,608   |         |         |  | 9,391   |         |         |  | 1,135   |       
|Shareholders equity                                                                         |                                                                                              |                                                      | 271,646 |         |         |  | 290,606 |         |         |  | 316,676 |         |         |      | 356,613 |         |         |  | 425,212 |         |         |  | 51,376  |       
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|                                                                                             |                                                                                              | Total liabilities and shareholders equity           |         |         | 432,046 |  |         |         | 462,665 |  |         |         | 483,149 |      |         |         | 531,735 |  |         |         | 609,928 |  |         |        | 73,694 | 
|                                                                                             |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         | 
|Share capital, issued and outstanding, RMB 1.00 par value                                    |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|                                                                                             | State-owned shares                                                                           |                                                      |         | 158,242 |         |  |         | 158,242 |         |  |         | 158,242 |         |      |         | 158,242 |         |  |         | 158,242 |         |  |         | 19,120 |       
|                                                                                             | H shares and ADSs                                                                            |                                                      |         | 17,582  |         |  |         | 17,582  |         |  |         | 17,582  |         |      |         | 17,582  |         |  |         | 17,582  |         |  |         | 2,124  |       
|US GAAP                                                                                      |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|Property, plant and equipment, less accumulated depreciation,
    depletion and amortization |                                                                                              |                                                      | 274,457 |         |         |  | 304,895 |         |         |  | 343,093 |         |         |      | 386,417 |         |         |  | 434,924 |         |         |  | 52,549  |       
|Total assets                                                                                 |                                                                                              |                                                      | 365,328 |         |         |  | 404,193 |         |         |  | 432,946 |         |         |      | 492,784 |         |         |  | 576,481 |         |         |  | 69,653  |       
|Shareholders equity                                                                         |                                                                                              |                                                      | 227,489 |         |         |  | 251,914 |         |         |  | 283,464 |         |         |      | 329,205 |         |         |  | 403,012 |         |         |  | 48,693  |       
|Other Financial Data                                                                         |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|Dividend per share                                                                           |                                                                                              |                                                      | 0.14    |         |         |  | 0.12    |         |         |  | 0.12    |         |         |      | 0.18    |         |         |  | 0.26    |         |         |  | 0.03    |       
|Dividend per ADS                                                                             |                                                                                              |                                                      | 14.14   |         |         |  | 11.98   |         |         |  | 12.00   |         |         |      | 17.82   |         |         |  | 26.34   |         |         |  | 3.18    |       
|Capital expenditures                                                                         |                                                                                              |                                                      | (59,311 | )       |         |  | (59,964 | )       |         |  | (72,766 | )       |         |      | (82,929 | )       |         |  | (95,349 | )       |         |  | (11,520 | )     
|Cash Flow Data                                                                               |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|IFRS                                                                                         |                                                                                              |                                                      |         |         |         |  |         |         |         |  |         |         |         |      |         |         |         |  |         |         |         |  |         |       
|Net cash provided by operating activities                                                    |                                                                                              |                                                      | 102,490 |         |         |  | 82,854  |         |         |  | 97,290  |         |         |      | 137,236 |         |         |  | 137,299 |         |         |  | 16,589  |       
|Net cash used for investing activities                                                       |                                                                                              |                                                      | (59,307 | )       |         |  | (59,906 | )       |         |  | (70,611 | )       |         |      | (96,213 | )       |         |  | (98,533 | )       |         |  | (11,905 | )     
|Net cash used for financing activities                                                       |                                                                                              |                                                      | (43,188 | )       |         |  | (29,906 | )       |         |  | (27,829 | )       |         |      | (39,769 | )       |         |  | (38,693 | )       |         |  | (4,675  | )     




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Certain financial data for these periods and as of these dates
    are derived from our unaudited consolidated financial
    statements, not included in this annual report, and were
    retroactively restated in 2002. See the paragraphs preceding
    these table for a detailed description.                                                                                                                                                                                                                                                                                 
|   
|(2) | Certain financial data for these periods and as of these dates
    are derived from our audited consolidated financial statements,
    not included in this annual report, and were retroactively
    restated in 2002. See the paragraphs preceding these tables for
    a detailed description.                                                                                                                                                                                                                                                                                  
|   
|(3) | Historical income per share for the years ended
    December 31, 2001, 2002, 2003 and 2004 has been calculated
    by dividing the net profit by the number of 175,824 million
    shares issued and outstanding for the periods presented.
    Historical income per share for the year ended December 31,
    2000 has been calculated by dividing the net profit by the
    weighted average number of 171,630 million shares issued
    and outstanding for the period presented.                                                                                              
|   
|(4) | Historical income per ADS for the years ended December 31,
    2001, 2002, 2003 and 2004 has been calculated by dividing the
    net profit by the number of 175,824 million shares issued
    and outstanding for the periods presented, assuming each ADS
    representing 100 H shares. Historical income per ADS
    for the year ended December 31, 2000 has been calculated by
    dividing the net profit by the weighted average number of
    171,630 million shares issued and outstanding for the
    period presented, assuming each ADS representing
    100 H shares.

11



---



##### Table of Contents






Risk Factors






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our operations are affected by the volatility of prices for
    crude oil and refined products. We and China Petroleum and
    Chemical Corporation, or Sinopec, set our crude oil median
    prices monthly based on the Singapore trading prices for crude
    oil. The PRC government publishes the retail median guidance
    prices for gasoline and diesel based on the FOB Singapore,
    Rotterdam and New York gasoline and diesel trading prices.
    Historically, international prices for crude oil and refined
    products have fluctuated widely in response to changes in many
    factors, such as global and regional economic and political
    developments and global and regional supply and demand for crude
    oil and refined products. We do not have, and will not have,
    control over the factors affecting international prices for
    crude oil and refined products. We expect continued volatility
    and uncertainty in international prices for crude oil and
    refined products. Declines in crude oil prices may adversely
    affect our business, results of operations and financial
    condition, our capital expenditure plans and the value of our
    proved reserves.                                                                                                                                                                                  
|
| |  | The crude oil and natural gas reserve data in this annual report
    are only estimates. The reliability of reserve estimates depend
    on a number of factors, assumptions and variables, such as the
    quality and quantity of our technical and economic data and the
    prevailing oil and gas prices applicable to our production, many
    of which are beyond our control and may prove to be incorrect
    over time. Results of drilling, testing and production after the
    date of the estimates may require substantial upward or downward
    revisions in our reserve data. Our actual production, revenues
    and expenditures with respect to our reserves may differ
    materially from these estimates because of these revisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Our proved crude oil reserves decreased gradually and modestly
    from 2001 to 2003 because the decrease in the crude oil reserves
    in our Daqing and Liaohe oil regions could not be offset by the
    increase in the crude oil reserves in our oil regions in
    northwestern China, such as the Xinjiang oil region, the
    Changqing oil and gas region and the Tarim oil region. Although
    our proved crude oil reserves increased slightly in 2004 mainly
    as a result of the increases in the crude oil reserves in our
    Xinjiang and Changqing oil regions, we cannot assure you that we
    will be able to increase or maintain our crude oil reserves in
    the future by our exploration activities in China. We are
    actively pursuing business opportunities outside China to
    supplement our domestic resources. For instance, in June 2005,
    we entered into an agreement to acquire certain overseas crude
    oil and natural gas assets from CNPC. We cannot assure you,
    however, that we can successfully locate sufficient alternative
    sources of crude oil supply or at all due to the complexity of
    the international political, economic and other conditions. If
    we fail to obtain sufficient alternative sources of crude oil
    supply, our results of operations and financial condition may be
    materially and adversely affected.
|
| |  | The United States Securities and Exchange Commission, as
    required by Section 404 of the Sarbanes-Oxley Act of 2002,
    adopted rules requiring every public company in the
    United States to include a management report on such
    companys internal controls over financial reporting in its
    annual report, which contains managements assessment of
    the effectiveness of the companys internal controls over
    financial reporting. In addition, an independent registered
    public accounting firm must attest to and report on
    managements assessment of the effectiveness of the
    companys internal controls over financial reporting. These
    requirements will first apply to our annual report on
    Form 20-F for the fiscal year ending December 31,
    2006. Our management may conclude that our internal controls
    over our financial reporting are not effective. Moreover, even
    if our management concludes that our internal controls over
    financial reporting are effective, our independent registered
    public accounting firm may still be unable to attest to our
    managements assessment or may issue a report that
    concludes that our internal controls over financial reporting
    are not effective. In                                                                                                                 

12



---



##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | preparation for the implementation of the requirements of
    Section 404, we are undertaking company-wide documentation
    of internal controls, performing the system and process
    evaluation and testing required. During the course of our
    evaluation, documentation and attestation, we have identified
    certain deficiencies that could adversely affect our ability to
    record, process, summarize and report financial data consistent
    with our managements assertions in our financial
    statements. Although we have commenced planing for remedial
    measures to make necessary improvements, we cannot assure you
    that we will be able to remedy those identified deficiencies in
    time to meet the deadline imposed by the Sarbanes-Oxley Act for
    compliance with the requirements of Section 404. We are
    also in the process of conducting further evaluation of our
    internal control over financial reporting and may identify other
    deficiencies that we may not be able to remedy in time by the
    deadline for compliance with Section 404. If we fail to
    achieve and maintain the adequacy of our internal controls, we
    may not be able to conclude that we have effective internal
    controls, on an ongoing basis, over financial reporting in
    accordance with the Sarbanes-Oxley Act. Moreover, effective
    internal controls, particularly those related to revenue
    recognition, are necessary for us to produce reliable financial
    reports and are important to help prevent fraud. As a result,
    our failure to achieve and maintain effective internal controls
    over financial reporting could result in the loss of investor
    confidence in the reliability of our financial statements, which
    in turn could harm our business and negatively impact the
    trading prices of our ADSs or H shares. Furthermore, we
    have already incurred considerable costs and spent significant
    management time and other resources in an effort to comply with
    Section 404 and other requirements of the Sarbanes-Oxley
    Act. We anticipate that we will continue to incur considerable
    costs and use significant resources for compliance with
    Section 404.
|
| |  | Exploring for, producing and transporting crude oil and natural
    gas and producing and transporting refined products and chemical
    products involve many hazards. These hazards may result in:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fires;                                                                                                                                                    
|
| |  | explosions;                                                                                                                                               
|
| |  | spills;                                                                                                                                                   
|
| |  | blow-outs; and                                                                                                                                            
|
| |  | other unexpected or dangerous conditions causing personal
    injuries or death, property damage, environmental damage and
    interruption of operations.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our oil and natural gas fields are surrounded by
    residential areas or located in areas where natural disasters,
    such as earthquakes, floods and sandstorms, tend to occur more
    frequently than in other areas. As with many other companies
    around the world that conduct similar businesses, we have
    experienced accidents that have caused property damage and
    personal injuries and death.                                                                                                                                                                                                                                                                           
|
| | Significant operating hazards and natural disasters may cause
    partial interruptions to our operations and property and
    environmental damage that could have an adverse impact on our
    financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Except limited insurance coverage for vehicles and certain
    assets that we consider to be subject to significant operating
    risks, we do not carry any other insurance for our property,
    facilities or equipment in respect of our business operations.
    We do not currently carry any third party liability insurance
    against claims relating to personal injury or death, property or
    environmental damage arising from accidents on our property or
    relating to our operations. We also do not currently carry any
    business interruption insurance. The limited insurance coverage
    of our assets exposes us to substantial risks and will not cover
    most losses.

13



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | CNPC owns approximately 90% of our share capital. This ownership
    percentage enables CNPC to elect our entire board of directors
    without the concurrence of any of our other shareholders.
    Accordingly, CNPC is in a position to:



| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | control our policies, management and affairs;                                                                                                                                                                                                                 
|
| |  | subject to applicable PRC laws and regulations and provisions of
    our articles of association, determine the timing and amount of
    dividend payments and adopt amendments to certain of the
    provisions of our articles of association; and          
|
| |  | otherwise determine the outcome of most corporate actions and,
    subject to the requirements of the Listing Rules of the Hong
    Kong Stock Exchange, cause our company to effect corporate
    transactions without the approval of minority shareholders.



| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | CNPCs interests may sometimes conflict with those of some
    or all of our minority shareholders. We cannot assure you that
    CNPC, as controlling shareholder, will always vote its shares in
    a way that benefits our minority shareholders.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In addition to its relationship with us as our controlling
    shareholder, CNPC by itself or through its affiliates also
    provides us with certain services and products necessary for our
    business activities, such as construction and technical
    services, production services and supply of material services.
    The interests of CNPC and its affiliates as providers of these
    services and products to us may conflict with our interests.
    Although we have entered into a Comprehensive Products and
    Services Agreement with CNPC and our transactions with CNPC over
    the past three years have been conducted on open, fair and
    competitive commercial terms, we have only limited leverage in
    negotiating with CNPC and its affiliates over the specific terms
    of the agreements for the provision of these services and
    products.                                                                                                      
|
| |  | The eastern and southern regions of China have a higher demand
    for refined products and chemical products than the western and
    northern regions. Most of our refineries and chemical plants are
    located in the western and northern regions of China. While we
    continue to expand the sales of these products in the eastern
    and southern regions of China, we face strong competition from
    Sinopec. In addition, we incur relatively higher transportation
    costs for delivery of our refined products and chemical products
    to certain areas of these regions from our refineries and
    chemical plants in western and northern China. As a result, we
    expect that we will continue to encounter difficulty in
    increasing our sales of refined products and chemical products
    in these regions.                                                                                                                                                
|
| |  | We are currently constructing and renovating several natural gas
    pipelines and plan to construct and renovate other natural gas
    pipelines. In addition, we may, subject to obtaining requisite
    licenses from the relevant authority, commence offshore crude
    oil and natural gas exploration and production activities, which
    could require substantial capital expenditures and investments.
    We cannot assure you that the cash generated by our operations
    will be sufficient to fund these development plans or that our
    actual future capital expenditures and investments will not
    significantly exceed our current planned amounts. If either of
    these conditions arises, we may have to seek external financing
    to satisfy our capital needs. Under such circumstance, our
    inability to obtain sufficient funding for our development plans
    could adversely affect our business, financial condition and
    results of operations.
|
| |  | We are also subject to a number of risks relating to the PRC and
    the PRC oil and gas industry. These risks are described as
    follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our operations, like those of other PRC oil and gas companies,
    are subject to extensive regulations and control by the PRC
    government. These regulations and control affect many material
    aspects of our operations, such as exploration and production
    licensing, industry-specific taxes and fees and environmental
    and safety standards. As a result, we may face significant
    constraints on our ability to implement our business strategies,
    to develop or

14



---



##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | expand our business operations or to maximize our profitability.
    Our business may also be adversely affected by future changes in
    certain policies of the PRC government with respect to the oil
    and gas industry.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Currently, the PRC government must approve the construction and
    major renovation of significant refining and petrochemical
    facilities as well as the construction of significant natural
    gas and refined product pipelines and storage facilities. We
    presently have several significant projects pending approval
    from the relevant government authorities and will need approvals
    from the relevant government authorities in connection with
    several other significant projects. We do not have control over
    the timing and outcome of the final project approvals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | We receive most of our revenues in Renminbi. A portion of our
    Renminbi revenues must be converted into other currencies to
    meet our foreign currency obligations. The existing foreign
    exchange limitations under the PRC laws and regulations could
    affect our ability to obtain foreign exchange through debt
    financing, or to obtain foreign exchange for capital
    expenditures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Because PRC laws, regulations and legal requirements dealing
    with economic matters are relatively new and continue to evolve,
    and because of the limited volume of published judicial
    interpretations and the non-binding nature of prior court
    decisions, the interpretation and enforcement of these laws,
    regulations and legal requirements involve some uncertainty. We
    have included the Mandatory Provisions and certain additional
    requirements that are imposed by the Hong Kong Stock Exchange
    Listing Rules in our Articles of Association for the purpose of
    reducing the scope of difference between the Hong Kong company
    law and the PRC Company Law. However, because the PRC Company
    Law is different in certain important aspects from company laws
    in the United States, Hong Kong and other common law
    jurisdictions and because the PRC securities laws and
    regulations are still at an early stage of development, you may
    not enjoy shareholders protections that you may be
    entitled to in other jurisdictions.
|
| |  | In addition to the adverse effect on our revenues, margins and
    profitability from any future fall in oil and natural gas
    prices, a prolonged period of low prices or other indicators
    would lead to a review for impairment of our oil and natural gas
    properties. This review would reflect managements view of
    long-term oil and natural gas prices. Such a review could result
    in a charge for impairment which could have a significant effect
    on our results of operations in the period in which it occurs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



15



---



##### Table of Contents






ITEM 4  INFORMATION ON THE COMPANY





Introduction


History and Development of the Company




| |                           
| | --------------------------
| | Overview of Our Operations





| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | the exploration, development, production and sale of crude oil
    and natural gas;                                                
|
| |  | the refining, transportation, storage and marketing of crude oil
    and petroleum products;                                       
|
| |  | the production and marketing of basic petrochemical products,
    derivative chemical products and other chemical
    products; and
|
| |  | the transmission and storage of crude oil, refined products and
    natural gas as well as sale of natural gas.                    









16



---



##### Table of Contents













17



---



##### Table of Contents













| |                                                          
| | ---------------------------------------------------------
| | Our Corporate Organization and Shareholding
    Structure



18



---



##### Table of Contents













|    |                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Indicates approximate shareholding.                                                                                                                                                                                                                               
|   
|(2) | Includes subsidiary companies and branches without legal person
    status.                                                                                                                                                                                       
|   
|(3) | Represents enterprises directly administered and operated by
    such segment.                                                                                                                                                                                    
|   
|(4) | Includes PetroChina Planning & Engineering Institute,
    PetroChina Exploration & Development Research
    Institute, PetroChina International Limited, PetroChina
    International Co., Ltd and PetroChina Refining &
    Chemicals Technology Research Center.

19



---



##### Table of Contents















|    |                                                                               
|--- | ------------------------------------------------------------------------------
|(1) | Includes subsidiary companies and branches without legal person
    status.   
|   
|(2) | Represents enterprises directly administered and operated by
    such segment.

20



---



##### Table of Contents



General Information





Launch of New Logo





21



---



##### Table of Contents








22



---



##### Table of Contents






Exploration and Production








Reserves








23



---



##### Table of Contents





|                                          |                                   |                       |          |         |                |  |          |                    |   |  |          |          |  
|----------------------------------------- | --------------------------------- | --------------------- | -------- | ------- | -------------- |  | -------- | ------------------ | - |  | -------- | -------- | -
|                                          |                                   | Crude oil             |          |         | Natural gas(1) |  |          | Combined(1)        |  
|                                          |                                   |                       |          |         |                |  |          |                    |  
|                                          |                                   | (millions of barrels) |          |         | (Bcf)          |  |          | (BOE, in millions) |  
|Proved developed and undeveloped reserves |                                   |                       |          |         |                |  |          |                    |   |  |          |         
|Reserves as of December 31, 2002          |                                   |                       | 10,937.0 |         |                |  | 38,816.8 |                    |   |  | 17,406.4 |         
|                                          | Revisions of previous estimates   |                       |          | 199.2   |                |  |          | 277.6              |   |  |          | 245.4    |  
|                                          | Extensions and discoveries        |                       |          | 475.7   |                |  |          | 2,853.3            |   |  |          | 951.3    |  
|                                          | Improved recovery                 |                       |          | 81.2    |                |  |          | 0                  |   |  |          | 81.2     |  
|                                          | Purchased
    reserves(2)         |                       |          | 0       |                |  |          | 0                  |   |  |          | 0        |  
|                                          | Production for the
    year(3)    |                       |          | (773.7  | )              |  |          | (878.5             | ) |  |          | (920.1   | )
|Reserves as of December 31, 2003          |                                   |                       | 10,919.3 |         |                |  | 41,069.2 |                    |   |  | 17,764.2 |         
|                                          | Revisions of previous estimates   |                       |          | 147.3   |                |  |          | 55.7               |   |  |          | 156.6    |  
|                                          | Extensions and
    discoveries(4) |                       |          | 542.2   |                |  |          | 4,405.3            |   |  |          | 1,276.4  |  
|                                          | Purchased reserves                |                       |          | 0       |                |  |          | 0                  |   |  |          | 0        |  
|                                          | Improved recovery                 |                       |          | 109.0   |                |  |          | 43.0               |   |  |          | 116.2    |  
|                                          | Production for the
    year(5)    |                       |          | (777.4  | )              |  |          | (1,019.6           | ) |  |          | (947.3   | )
|Reserves as of December 31, 2004          |                                   |                       | 10,940.5 |         |                |  | 44,553.6 |                    |   |  | 18,366.1 |         
|Proved developed reserves                 |                                   |                       |          |         |                |  |          |                    |   |  |          |         
|                                          | As of December 31, 2002           |                       |          | 9,198.1 |                |  |          | 11,921.2           |   |  |          | 11,185.0 |  
|                                          | As of December 31,
    2003(6)    |                       |          | 8,884.8 |                |  |          | 13,373.7           |   |  |          | 11,113.7 |  
|                                          | As of December 31,
    2004(7)    |                       |          | 8,748.1 |                |  |          | 16,787.1           |   |  |          | 11,546.0 |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents natural gas remaining after field separation for
    condensate removal and reduction for flared gas.                                                                                                                                                                                                                                                                                        
|   
|(2) | Excludes our share of the purchased reserves of approximately
    16.8 million barrels of crude oil and approximately
    76.6 billion cubic feet of natural gas in the Jabung block
    in Indonesia, totaling approximately 29.6 million
    barrel-of-oil equivalent, as a result of our acquisition of a
    50% interest in Amerada Hess Indonesia Holdings Co. in April
    2003.                 
|   
|(3) | Excludes our share of the production of approximately
    1.2 million barrels of crude oil and approximately
    1.0 billion cubic feet of natural gas in the Jabung block
    in Indonesia, totaling approximately 1.4 million
    barrels-of-oil equivalent, as a result of our acquisition of a
    50% interest in Amerada Hess Indonesia Holdings Co. in
    April 2003.                           
|   
|(4) | Excludes our share of the reserve extensions and discoveries of
    approximately 0.69 million barrels of crude oil and
    approximately 4.60 billion cubic feet of natural gas in the
    Jabung block in Indonesia, totaling approximately
    1.45 million barrels-of-oil equivalent, as a result of our
    acquisition of a 50% interest in Amerada Hess Indonesia Holdings
    Co. in April 2003.
|   
|(5) | Excludes our share of the production of approximately
    1.07 million barrels of crude oil and approximately
    3.67 billion cubic feet of natural gas in the Jabung block
    in Indonesia, totaling approximately 1.68 million
    barrels-of-oil equivalent, as a result of our acquisition of a
    50% interest in Amerada Hess Indonesia Holdings Co. in April
    2003.                        
|   
|(6) | Excludes our share of the proved developed reserves of
    approximately 4.1 million barrels of crude oil and
    approximately 21.3 billion cubic feet of natural gas in the
    Jabung block in Indonesia, totaling approximately
    7.7 million barrel-of-oil equivalent, as a result of our
    acquisition of a 50% interest in Amerada Hess Indonesia Holdings
    Co. in April 2003.            
|   
|(7) | Excludes our share of the proved developed reserves of
    approximately 2.9 million barrels of crude oil and
    approximately 19.2 billion cubic feet of natural gas in the
    Jabung block in Indonesia, totalling approximately
    6.1 million barrel-of-oil equivalent, as a result of our
    acquisition of a 50% interest in Amerada Hess Indonesia Holdings
    Co. in April 2003.           

24



---



##### Table of Contents





|                     |       |                       |         |          |           |  |           |             |  |  |           |           |  |             |         |         |           |  |         |          |  |  |         |         | 
|-------------------- | ----- | --------------------- | ------- | -------- | --------- |  | --------- | ----------- |  |  | --------- | --------- |  | ----------- | ------- | ------- | --------- |  | ------- | -------- |  |  | ------- | ------- | 
|                     |       | As of December 31,    |        
|                     |       |                       |        
|                     |       | 2002                  |         |          | 2003      |  |           | 2004        | 
|                     |       |                       |         |          |           |  |           |             | 
|                     |       | Proved                |         |          |           |  | Proved    |             |  |  |           | Proved    |  |             |        
|                     |       | developed             |         |          |           |  | developed |             |  |  |           | developed |  |             |        
|                     |       | and                   |         |          | Proved    |  |           | and         |  |  | Proved    |           |  | and         |         |         | Proved    | 
|                     |       | undeveloped           |         |          | developed |  |           | undeveloped |  |  | developed |           |  | undeveloped |         |         | developed | 
|                     |       |                       |         |          |           |  |           |             |  |  |           |           |  |             |         |         |           | 
|                     |       | (millions of barrels) |        
|Crude oil reserves   |       |                       |         |          |           |  |           |             |  |  |           |           |  |             |         |         |           |  |         |          |  |  |         |        
|Daqing               |       |                       | 5,073.8 |          |           |  | 4,729.6   |             |  |  | 4,832.3   |           |  |             | 4,407.7 |         |           |  | 4,615.0 |          |  |  | 4,122.3 |        
|Liaohe               |       |                       | 1,227.0 |          |           |  | 1,007.5   |             |  |  | 1,168.5   |           |  |             | 965.0   |         |           |  | 1,123.1 |          |  |  | 915.1   |        
|Xinjiang             |       |                       | 1,102.2 |          |           |  | 912.5     |             |  |  | 1,186.9   |           |  |             | 930.9   |         |           |  | 1,232.1 |          |  |  | 921.9   |        
|Changqing            |       |                       | 885.7   |          |           |  | 623.1     |             |  |  | 1,063.6   |           |  |             | 706.9   |         |           |  | 1,191.6 |          |  |  | 769.6   |        
|Jilin                |       |                       | 585.8   |          |           |  | 377.2     |             |  |  | 585.9     |           |  |             | 367.0   |         |           |  | 643.8   |          |  |  | 404.4   |        
|Dagang               |       |                       | 458.4   |          |           |  | 364.9     |             |  |  | 452.1     |           |  |             | 361.0   |         |           |  | 482.3   |          |  |  | 402.0   |        
|Tarim                |       |                       | 522.0   |          |           |  | 342.6     |             |  |  | 553.9     |           |  |             | 342.2   |         |           |  | 507.6   |          |  |  | 374.8   |        
|Huabei               |       |                       | 494.2   |          |           |  | 350.8     |             |  |  | 486.1     |           |  |             | 335.8   |         |           |  | 510.3   |          |  |  | 353.9   |        
|Qinghai              |       |                       | 240.6   |          |           |  | 192.7     |             |  |  | 229.7     |           |  |             | 182.8   |         |           |  | 226.1   |          |  |  | 181.2   |        
|Tuha                 |       |                       | 208.7   |          |           |  | 189.9     |             |  |  | 206.9     |           |  |             | 169.2   |         |           |  | 218.3   |          |  |  | 168.4   |        
|Sichuan              |       |                       | 5.5     |          |           |  | 5.5       |             |  |  | 7.1       |           |  |             | 3.9     |         |           |  | 8.6     |          |  |  | 5.3     |        
|Other
    regions(1) |       |                       | 133.1   |          |           |  | 101.9     |             |  |  | 146.3     |           |  |             | 112.4   |         |           |  | 181.7   |          |  |  | 129.2   |        
|                     |       |                       |         |          |           |  |           |             |  |  |           |           |  |             |         |         |           | 
|                     | Total |                       |         | 10,937.0 |           |  |           | 9,198.1     |  |  |           | 10,919.3  |  |             |         | 8,884.8 |           |  |         | 10,940.5 |  |  |         | 8,748.1 | 
|                     |       |                       |         |          |           |  |           |             |  |  |           |           |  |             |         |         |           | 

|                            |       |                    |          |          |           |  |           |             |  |  |           |           |  |             |         |          |           |  |          |          |  |  |         |          | 
|--------------------------- | ----- | ------------------ | -------- | -------- | --------- |  | --------- | ----------- |  |  | --------- | --------- |  | ----------- | ------- | -------- | --------- |  | -------- | -------- |  |  | ------- | -------- | 
|                            |       | As of December 31, |         
|                            |       |                    |         
|                            |       | 2002               |          |          | 2003      |  |           | 2004        | 
|                            |       |                    |          |          |           |  |           |             | 
|                            |       | Proved             |          |          |           |  | Proved    |             |  |  |           | Proved    |  |             |        
|                            |       | developed          |          |          |           |  | developed |             |  |  |           | developed |  |             |        
|                            |       | and                |          |          | Proved    |  |           | and         |  |  | Proved    |           |  | and         |         |          | Proved    | 
|                            |       | undeveloped        |          |          | developed |  |           | undeveloped |  |  | developed |           |  | undeveloped |         |          | developed | 
|                            |       |                    |          |          |           |  |           |             |  |  |           |           |  |             |         |          |           | 
|                            |       | (Bcf)              |         
|Natural gas
    reserves(2) |       |                    |          |          |           |  |           |             |  |  |           |           |  |             |         |          |           |  |          |          |  |  |         |         
|Sichuan                     |       |                    | 7,461.7  |          |           |  | 4,040.6   |             |  |  | 8,131.4   |           |  |             | 4,522.4 |          |           |  | 8,729.8  |          |  |  | 4,767.9 |         
|Changqing                   |       |                    | 11,222.6 |          |           |  | 2,719.5   |             |  |  | 12,976.3  |           |  |             | 3,847.6 |          |           |  | 14,932.7 |          |  |  | 4,091.3 |         
|Xinjiang                    |       |                    | 1,707.3  |          |           |  | 1,036.1   |             |  |  | 1,698.7   |           |  |             | 1,084.3 |          |           |  | 1,712.3  |          |  |  | 1,036.8 |         
|Daqing                      |       |                    | 1,324.8  |          |           |  | 1,171.9   |             |  |  | 1,122.9   |           |  |             | 946.5   |          |           |  | 1,060.5  |          |  |  | 879.4   |         
|Qinghai                     |       |                    | 3,416.1  |          |           |  | 837.2     |             |  |  | 3,379.7   |           |  |             | 889.9   |          |           |  | 4,603.6  |          |  |  | 1,583.4 |         
|Tarim                       |       |                    | 11,026.0 |          |           |  | 591.2     |             |  |  | 11,086.6  |           |  |             | 528.7   |          |           |  | 10,897.8 |          |  |  | 2,934.8 |         
|Liaohe                      |       |                    | 606.6    |          |           |  | 530.5     |             |  |  | 571.8     |           |  |             | 507.5   |          |           |  | 522.7    |          |  |  | 455.4   |         
|Tuha                        |       |                    | 621.2    |          |           |  | 338.4     |             |  |  | 711.6     |           |  |             | 430.1   |          |           |  | 705.3    |          |  |  | 427.8   |         
|Huabei                      |       |                    | 395.8    |          |           |  | 237.5     |             |  |  | 386.0     |           |  |             | 227.3   |          |           |  | 375.9    |          |  |  | 217.5   |         
|Dagang                      |       |                    | 655.4    |          |           |  | 252.4     |             |  |  | 609.5     |           |  |             | 201.9   |          |           |  | 599.5    |          |  |  | 186.8   |         
|Jilin                       |       |                    | 174.3    |          |           |  | 109.9     |             |  |  | 191.9     |           |  |             | 134.4   |          |           |  | 203.9    |          |  |  | 150.4   |         
|Other
    regions(1)        |       |                    | 204.9    |          |           |  | 55.9      |             |  |  | 202.8     |           |  |             | 53.1    |          |           |  | 209.6    |          |  |  | 55.6    |         
|                            |       |                    |          |          |           |  |           |             |  |  |           |           |  |             |         |          |           | 
|                            | Total |                    |          | 38,816.8 |           |  |           | 11,921.2    |  |  |           | 41,069.2  |  |             |         | 13,373.7 |           |  |          | 44,553.6 |  |  |         | 16,787.1 | 
|                            |       |                    |          |          |           |  |           |             |  |  |           |           |  |             |         |          |           | 






|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the Jidong and Yumen oil regions and our oil and gas
    fields in Indonesia as a result of our acquisition of Devon
    Energy Indonesia Limited in April 2002.
|   
|(2) | Represents natural gas remaining after field separation for
    condensate removal and reduction for flared gas.                                                           

25



---



##### Table of Contents



Exploration and Development






|     |  |                                      |  |        |       |  |          |  |       |        |  |  |           |  |  |        |       |  |        |  |     |         |  |  |           |  |  |       |    |  |  |  |       |  |  |  |       | 
|---- |  | ------------------------------------ |  | ------ | ----- |  | -------- |  | ----- | ------ |  |  | --------- |  |  | ------ | ----- |  | ------ |  | --- | ------- |  |  | --------- |  |  | ----- | -- |  |  |  | ----- |  |  |  | ----- | 
|Year |  |                                      |  | Daqing |       |  | Xinjiang |  |       | Liaohe |  |  | Changqing |  |  | Huabei |       |  | Dagang |  |     | Sichuan |  |  | Others(1) |  |  | Total |   
|     |  |                                      |  |        |       |  |          |  |       |        |  |  |           |  |  |        |       |  |        |  |     |         |  |  |           |  |  |       |   
|2002 |  | Net exploratory wells
    drilled(2) |  |        | 67    |  |          |  | 84    |        |  |  | 61        |  |  |        | 170   |  |        |  | 67  |         |  |  | 30        |  |  |       | 28 |  |  |  | 149   |  |  |  | 656   | 
|     |  | Crude oil                            |  |        | 27    |  |          |  | 63    |        |  |  | 28        |  |  |        | 69    |  |        |  | 28  |         |  |  | 21        |  |  |       | 4  |  |  |  | 60    |  |  |  | 300   | 
|     |  | Natural gas                          |  |        | 1     |  |          |  | 3     |        |  |  | 0         |  |  |        | 10    |  |        |  | 4   |         |  |  | 0         |  |  |       | 7  |  |  |  | 11    |  |  |  | 36    | 
|     |  | Dry(3)                               |  |        | 39    |  |          |  | 18    |        |  |  | 33        |  |  |        | 91    |  |        |  | 35  |         |  |  | 9         |  |  |       | 17 |  |  |  | 78    |  |  |  | 320   | 
|     |  | Net development wells
    drilled(2) |  |        | 1,988 |  |          |  | 1,247 |        |  |  | 603       |  |  |        | 1,285 |  |        |  | 246 |         |  |  | 212       |  |  |       | 40 |  |  |  | 955   |  |  |  | 6,576 | 
|     |  | Crude oil                            |  |        | 1,975 |  |          |  | 1,235 |        |  |  | 583       |  |  |        | 1,197 |  |        |  | 238 |         |  |  | 205       |  |  |       | 13 |  |  |  | 926   |  |  |  | 6,372 | 
|     |  | Natural gas                          |  |        | 6     |  |          |  | 7     |        |  |  | 20        |  |  |        | 55    |  |        |  | 2   |         |  |  | 3         |  |  |       | 25 |  |  |  | 22    |  |  |  | 140   | 
|     |  | Dry(3)                               |  |        | 7     |  |          |  | 5     |        |  |  | 0         |  |  |        | 33    |  |        |  | 6   |         |  |  | 4         |  |  |       | 2  |  |  |  | 7     |  |  |  | 64    | 
|2003 |  | Net exploratory wells
    drilled(2) |  |        | 291   |  |          |  | 170   |        |  |  | 103       |  |  |        | 371   |  |        |  | 82  |         |  |  | 46        |  |  |       | 25 |  |  |  | 287   |  |  |  | 1,375 | 
|     |  | Crude oil                            |  |        | 140   |  |          |  | 115   |        |  |  | 57        |  |  |        | 128   |  |        |  | 49  |         |  |  | 25        |  |  |       | 0  |  |  |  | 99    |  |  |  | 613   | 
|     |  | Natural gas                          |  |        | 1     |  |          |  | 11    |        |  |  | 2         |  |  |        | 22    |  |        |  | 0   |         |  |  | 0         |  |  |       | 12 |  |  |  | 5     |  |  |  | 53    | 
|     |  | Dry(3)                               |  |        | 150   |  |          |  | 44    |        |  |  | 44        |  |  |        | 221   |  |        |  | 33  |         |  |  | 21        |  |  |       | 13 |  |  |  | 183   |  |  |  | 709   | 
|     |  | Net development wells
    drilled(2) |  |        | 2,986 |  |          |  | 1,363 |        |  |  | 547       |  |  |        | 1,677 |  |        |  | 244 |         |  |  | 202       |  |  |       | 61 |  |  |  | 1,192 |  |  |  | 8,272 | 
|     |  | Crude oil                            |  |        | 2,975 |  |          |  | 1,354 |        |  |  | 528       |  |  |        | 1,489 |  |        |  | 241 |         |  |  | 199       |  |  |       | 8  |  |  |  | 1,173 |  |  |  | 7,967 | 
|     |  | Natural gas                          |  |        | 4     |  |          |  | 4     |        |  |  | 8         |  |  |        | 134   |  |        |  | 0   |         |  |  | 3         |  |  |       | 36 |  |  |  | 17    |  |  |  | 206   | 
|     |  | Dry(3)                               |  |        | 7     |  |          |  | 5     |        |  |  | 11        |  |  |        | 54    |  |        |  | 3   |         |  |  | 0         |  |  |       | 17 |  |  |  | 2     |  |  |  | 99    | 
|2004 |  | Net exploratory wells
    drilled(2) |  |        | 221   |  |          |  | 153   |        |  |  | 68        |  |  |        | 427   |  |        |  | 96  |         |  |  | 53        |  |  |       | 32 |  |  |  | 355   |  |  |  | 1,405 | 
|     |  | Crude oil                            |  |        | 85    |  |          |  | 85    |        |  |  | 40        |  |  |        | 201   |  |        |  | 49  |         |  |  | 32        |  |  |       | 4  |  |  |  | 172   |  |  |  | 668   | 
|     |  | Natural gas                          |  |        | 3     |  |          |  | 0     |        |  |  | 0         |  |  |        | 22    |  |        |  | 0   |         |  |  | 0         |  |  |       | 17 |  |  |  | 9     |  |  |  | 51    | 
|     |  | Dry(3)                               |  |        | 133   |  |          |  | 68    |        |  |  | 28        |  |  |        | 204   |  |        |  | 47  |         |  |  | 21        |  |  |       | 11 |  |  |  | 174   |  |  |  | 686   | 
|     |  | Net development wells
    drilled(2) |  |        | 2,857 |  |          |  | 1,440 |        |  |  | 622       |  |  |        | 1,675 |  |        |  | 224 |         |  |  | 188       |  |  |       | 76 |  |  |  | 1,463 |  |  |  | 8,545 | 
|     |  | Crude oil                            |  |        | 2,853 |  |          |  | 1,440 |        |  |  | 605       |  |  |        | 1,597 |  |        |  | 223 |         |  |  | 184       |  |  |       | 6  |  |  |  | 1,387 |  |  |  | 8,295 | 
|     |  | Natural gas                          |  |        | 4     |  |          |  | 0     |        |  |  | 13        |  |  |        | 46    |  |        |  | 1   |         |  |  | 3         |  |  |       | 56 |  |  |  | 73    |  |  |  | 196   | 
|     |  | Dry(3)                               |  |        | 0     |  |          |  | 0     |        |  |  | 4         |  |  |        | 32    |  |        |  | 0   |         |  |  | 1         |  |  |       | 14 |  |  |  | 3     |  |  |  | 54    | 






|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the Jilin, Tarim, Tuha, Qinghai, Jidong and Yumen oil
    regions.                                                      
|   
|(2) | Net wells refer to the wells after deducting
    interests of others. No third parties own any interests in any
    of our wells.
|   
|(3) | Dry wells are wells with insufficient reserves to
    sustain commercial production.                                             

26



---



##### Table of Contents





| |           
| | ----------
| | Properties



|                     |       |                                |        |         |             |  |     |             |  |  |             |         |  |           |       |         |             |  |       |         |  |  |         |         | 
|-------------------- | ----- | ------------------------------ | ------ | ------- | ----------- |  | --- | ----------- |  |  | ----------- | ------- |  | --------- | ----- | ------- | ----------- |  | ----- | ------- |  |  | ------- | ------- | 
|                     |       | Acreage(1)(thousands of acres) |       
|                     |       |                                |       
|                     |       | Productive wells(1)            |        |         | Developed   |  |     | Undeveloped | 
|                     |       |                                |        |         |             |  |     |             | 
|Oil region           |       | Crude oil                      |        |         | Natural gas |  |     | Crude oil   |  |  | Natural gas |         |  | Crude oil |       |         | Natural gas | 
|                     |       |                                |        |         |             |  |     |             |  |  |             |         |  |           |       |         |             | 
|Daqing               |       |                                | 37,833 |         |             |  | 145 |             |  |  | 625.7       |         |  |           | 41.2  |         |             |  | 615.4 |         |  |  | 79.6    |        
|Liaohe               |       |                                | 16,577 |         |             |  | 587 |             |  |  | 167.9       |         |  |           | 28.2  |         |             |  | 117.6 |         |  |  | 11.1    |        
|Xinjiang             |       |                                | 15,182 |         |             |  | 70  |             |  |  | 317.6       |         |  |           | 39.1  |         |             |  | 53.4  |         |  |  | 8.8     |        
|Jilin                |       |                                | 12,623 |         |             |  | 42  |             |  |  | 267.6       |         |  |           | 19.5  |         |             |  | 248.2 |         |  |  | 25.4    |        
|Changqing            |       |                                | 9,864  |         |             |  | 514 |             |  |  | 271.7       |         |  |           | 632.0 |         |             |  | 386.6 |         |  |  | 2,143.0 |        
|Huabei               |       |                                | 4,833  |         |             |  | 78  |             |  |  | 100.1       |         |  |           | 9.5   |         |             |  | 101.8 |         |  |  | 6.6     |        
|Dagang               |       |                                | 3,181  |         |             |  | 53  |             |  |  | 86.4        |         |  |           | 15.3  |         |             |  | 75.5  |         |  |  | 23.5    |        
|Tuha                 |       |                                | 1,142  |         |             |  | 43  |             |  |  | 33.6        |         |  |           | 11.4  |         |             |  | 19.7  |         |  |  | 16.5    |        
|Tarim                |       |                                | 565    |         |             |  | 79  |             |  |  | 113.1       |         |  |           | 72.2  |         |             |  | 47.3  |         |  |  | 84.8    |        
|Sichuan              |       |                                | 396    |         |             |  | 987 |             |  |  | 324.0       |         |  |           | 372.6 |         |             |  | 8.2   |         |  |  | 87.9    |        
|Other
    regions(2) |       |                                | 2,942  |         |             |  | 167 |             |  |  | 65.8        |         |  |           | 10.9  |         |             |  | 16.1  |         |  |  | 25.4    |        
|                     |       |                                |        |         |             |  |     |             |  |  |             |         |  |           |       |         |             | 
|                     | Total |                                |        | 105,138 |             |  |     | 2,765       |  |  |             | 2,373.5 |  |           |       | 1,251.9 |             |  |       | 1,689.8 |  |  |         | 2,512.6 | 
|                     |       |                                |        |         |             |  |     |             |  |  |             |         |  |           |       |         |             | 






|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes all wells and acreage in which we have an interest. No
    third parties own any interests in any of our wells or acreage.
|   
|(2) | Represents the Qinghai, Jidong and Yumen oil regions.                                                                              



Production




|                                                                              |  |                    |         |  |      |  |       |      |  |  |            |  |  |  |      | 
|----------------------------------------------------------------------------- |  | ------------------ | ------- |  | ---- |  | ----- | ---- |  |  | ---------- |  |  |  | ---- | 
|                                                                              |  | For the year ended |         |  |     
|                                                                              |  | December 31,       |         |  |     
|                                                                              |  |                    |         |  | % of | 
|                                                                              |  | 2002               |         |  | 2003 |  |       | 2004 |  |  | 2004 total | 
|                                                                              |  |                    |         |  |      |  |       |      |  |  |            | 
|Crude oil
    production(1)                                                   |  |                    |         |  |      |  |       |      |  |  |            |  |  |  |      | 
|(thousands of barrels per day, except percentages or otherwise
    indicated) |  |                    |         |  |      |  |       |      |  |  |            |  |  |  |      | 
|Daqing                                                                        |  |                    | 1,020.5 |  |      |  | 985.3 |      |  |  | 942.0      |  |  |  | 44.4 | 
|Liaohe                                                                        |  |                    | 259.1   |  |      |  | 253.6 |      |  |  | 245.4      |  |  |  | 11.6 | 
|Xinjiang                                                                      |  |                    | 206.0   |  |      |  | 217.2 |      |  |  | 227.1      |  |  |  | 10.7 | 
|Changqing                                                                     |  |                    | 124.2   |  |      |  | 142.8 |      |  |  | 164.6      |  |  |  | 7.7  | 
|Tarim                                                                         |  |                    | 102.7   |  |      |  | 107.5 |      |  |  | 109.9      |  |  |  | 5.2  | 
|Huabei                                                                        |  |                    | 89.0    |  |      |  | 88.4  |      |  |  | 87.6       |  |  |  | 4.1  | 

27



---



##### Table of Contents



|                                                                                |                  |                    |       |         |      |  |       |         |  |  |            |         |  |  |      |       |  
|------------------------------------------------------------------------------- | ---------------- | ------------------ | ----- | ------- | ---- |  | ----- | ------- |  |  | ---------- | ------- |  |  | ---- | ----- | -
|                                                                                |                  | For the year ended |       |         |     
|                                                                                |                  | December 31,       |       |         |     
|                                                                                |                  |                    |       |         | % of | 
|                                                                                |                  | 2002               |       |         | 2003 |  |       | 2004    |  |  | 2004 total |        
|                                                                                |                  |                    |       |         |      |  |       |         |  |  |            |        
|Jilin                                                                           |                  |                    | 90.4  |         |      |  | 96.7  |         |  |  | 102.6      |         |  |  | 4.8  |      
|Dagang                                                                          |                  |                    | 79.2  |         |      |  | 84.7  |         |  |  | 97.9       |         |  |  | 4.6  |      
|Tuha                                                                            |                  |                    | 54.1  |         |      |  | 50.7  |         |  |  | 48.4       |         |  |  | 2.3  |      
|Other(2)                                                                        |                  |                    | 83.8  |         |      |  | 92.9  |         |  |  | 98.5       |         |  |  | 4.6  |      
|                                                                                |                  |                    |       |         |      |  |       |         |  |  |            |        
|                                                                                | Total            |                    |       | 2,109.1 |      |  |       | 2,119.8 |  |  |            | 2,124.0 |  |  |      | 100.0 | %
|                                                                                |                  |                    |       |         |      |  |       |         |  |  |            |        
|Annual production (million barrels)                                             |                  |                    | 763.5 |         |      |  | 773.7 |         |  |  | 777.4      |         |  |  |      |      
|Average sales price                                                             |                  |                    |       |         |      |  |       |         |  |  |            |         |  |  |      |      
|                                                                                | (RMB per barrel) |                    |       | 186.08  |      |  |       | 225.2   |  |  |            | 280.4   |  |  |      |       |  
|                                                                                | (US$ per barrel) |                    |       | 22.48   |      |  |       | 27.2    |  |  |            | 33.88   |  |  |      |       |  
|Natural gas
    production(1)(3)                                                |                  |                    |       |         |      |  |       |         |  |  |            |         |  |  |      |      
|(millions of cubic feet per day, except percentages or otherwise
    indicated) |                  |                    |       |         |      |  |       |         |  |  |            |         |  |  |      |      
|Sichuan                                                                         |                  |                    | 808.2 |         |      |  | 849.0 |         |  |  | 905.7      |         |  |  | 39.6 |      
|Changqing                                                                       |                  |                    | 335.7 |         |      |  | 440.3 |         |  |  | 651.4      |         |  |  | 28.5 |      
|Daqing                                                                          |                  |                    | 137.7 |         |      |  | 136.2 |         |  |  | 135.4      |         |  |  | 5.9  |      
|Qinghai                                                                         |                  |                    | 92.3  |         |      |  | 122.5 |         |  |  | 145.5      |         |  |  | 6.4  |      
|Tuha                                                                            |                  |                    | 69.8  |         |      |  | 82.6  |         |  |  | 92.2       |         |  |  | 4.0  |      
|Xinjiang                                                                        |                  |                    | 53.3  |         |      |  | 75.9  |         |  |  | 95.7       |         |  |  | 4.2  |      
|Liaohe                                                                          |                  |                    | 56.0  |         |      |  | 57.6  |         |  |  | 58.7       |         |  |  | 2.6  |      
|Huabei                                                                          |                  |                    | 42.1  |         |      |  | 45.8  |         |  |  | 44.2       |         |  |  | 1.9  |      
|Tarim                                                                           |                  |                    | 24.6  |         |      |  | 34.7  |         |  |  | 89.2       |         |  |  | 3.9  |      
|Dagang                                                                          |                  |                    | 30.6  |         |      |  | 27.8  |         |  |  | 26.5       |         |  |  | 1.1  |      
|Other(4)                                                                        |                  |                    | 7.2   |         |      |  | 18.8  |         |  |  | 43.8       |         |  |  | 1.9  |      
|                                                                                |                  |                    |       |         |      |  |       |         |  |  |            |        
|                                                                                | Total            |                    |       | 1,657.5 |      |  |       | 1,891.2 |  |  |            | 2,288.3 |  |  |      | 100.0 | %
|                                                                                |                  |                    |       |         |      |  |       |         |  |  |            |        
|Annual production (Bcf)                                                         |                  |                    | 605.0 |         |      |  | 690.3 |         |  |  | 837.5      |         |  |  |      |      
|Average sales price                                                             |                  |                    |       |         |      |  |       |         |  |  |            |         |  |  |      |      
|                                                                                | (RMB per Mcf)    |                    |       | 19.20   |      |  |       | 19.37   |  |  |            | 21.11   |  |  |      |       |  
|                                                                                | (US$ per Mcf)    |                    |       | 2.32    |      |  |       | 2.34    |  |  |            | 2.55    |  |  |      |       |  






|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Production volumes for each region include our share of the
    production from all of our cooperative projects with foreign
    companies in that region.                                                                                                   
|   
|(2) | Represents production from the Qinghai, Jidong and Yumen oil
    regions, the Sichuan gas region and our share of production from
    the oil and gas fields in Indonesia as a result of our
    acquisition of Devon Energy Indonesia Limited in April 2002.
|   
|(3) | Represents production of natural gas for sale.                                                                                                                                                                                                               
|   
|(4) | Represents production from the Jilin, Jidong and Yumen oil
    regions and our share of production the oil and gas fields in
    Indonesia as a result of our acquisition of Devon Energy
    Indonesia Limited in April 2002.                               



28



---



##### Table of Contents





Principal Oil and Gas Regions




| |                  
| | -----------------
| | Daqing Oil Region











29



---



##### Table of Contents







| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | terminating unprofitable or marginally profitable exploration
    and production activities;         
|
| |  | reducing expenditures on ancillary ground facilities in the
    outer areas of the Daqing oil region;
|
| |  | increasing preventive maintenance to prolong the useful life of
    our production facilities; and   
|
| |  | applying new technologies to reduce energy consumption.                                              









| |                  
| | -----------------
| | Liaohe Oil Region









| |                    
| | -------------------
| | Xinjiang Oil Region



30



---



##### Table of Contents







| |                   
| | ------------------
| | Sichuan Gas Region











| |                             
| | ----------------------------
| | Changqing Oil and Gas Region





31



---



##### Table of Contents







| |                         
| | ------------------------
| | Tarim Oil and Gas Region





32



---



##### Table of Contents








33



---



##### Table of Contents






Refining and Marketing








| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as of December 31, 2004, our refineries annual
    primary distillation capacity totaled 771.4 million barrels
    of crude oil per year, or 2,113.5 thousand barrels per day;
|
| |  | we processed 697.8 million barrels of crude oil, or
    1.9 million barrels per day;                                                                                           
|
| |  | we produced approximately 60.2 million tons of gasoline,
    diesel and kerosene and sold approximately 67.0 million
    tons of these products;                               
|
| |  | as of December 31, 2004, our retail distribution network
    consisted of:                                                                                                     



| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 14,039 service stations owned and operated by us,                                                                                               
|
| |  | 427 service stations wholly owned by CNPC or jointly owned by
    CNPC and third parties and to which we provide supervisory
    support, and   
|
| |  | 2,937 franchise service stations owned and operated by third
    parties with which we have long-term refined product supply
    agreements; and



| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | in 2004, our service stations, which are located throughout
    China, sold approximately 30.2 million tons of gasoline and
    diesel, representing 46.5% of the total of these products sold
    through our marketing operations.

Refining






| |                 
| | ----------------
| | Refined Products



|           |       |                         |          |          |      |  |          |          |  |  |          |          | 
|---------- | ----- | ----------------------- | -------- | -------- | ---- |  | -------- | -------- |  |  | -------- | -------- | 
|           |       | Year ended December 31, |         
|           |       |                         |         
|Product    |       | 2002                    |          |          | 2003 |  |          | 2004     | 
|           |       |                         |          |          |      |  |          |          | 
|           |       | (in thousands of tons)  |         
|Diesel     |       |                         | 29,229.2 |          |      |  | 32,778.3 |          |  |  | 38,185.6 |         
|Gasoline   |       |                         | 16,646.4 |          |      |  | 18,255.4 |          |  |  | 20,049.8 |         
|Fuel oil   |       |                         | 6,176.8  |          |      |  | 4,546.1  |          |  |  | 4,256.8  |         
|Naphtha    |       |                         | 3,066.0  |          |      |  | 3,602.8  |          |  |  | 4,942.8  |         
|Asphalt    |       |                         | 1,653.5  |          |      |  | 1,870.5  |          |  |  | 1,946.8  |         
|Kerosene   |       |                         | 1,774.7  |          |      |  | 1,759.3  |          |  |  | 1,961.8  |         
|Lubricants |       |                         | 1,358.9  |          |      |  | 1,192.5  |          |  |  | 1,467.8  |         
|Paraffin   |       |                         | 856.4    |          |      |  | 984.9    |          |  |  | 1,140.0  |         
|           |       |                         |          |          |      |  |          |          | 
|           | Total |                         |          | 60,761.9 |      |  |          | 64,989.8 |  |  |          | 73,951.4 | 
|           |       |                         |          |          |      |  |          |          | 

34



---



##### Table of Contents









| |               
| | --------------
| | Our Refineries





|                                                               |       |                    |       |         |      |  |       |         |  |  |       |         | 
|-------------------------------------------------------------- | ----- | ------------------ | ----- | ------- | ---- |  | ----- | ------- |  |  | ----- | ------- | 
|                                                               |       | As of December 31, |      
|                                                               |       |                    |      
|                                                               |       | 2002               |       |         | 2003 |  |       | 2004    | 
|                                                               |       |                    |       |         |      |  |       |         | 
|Primary distillation
    capacity(1)(thousand barrels per day) |       |                    |       |         |      |  |       |         |  |  |       |        
|Lanzhou
    Petrochemical(2)                                   |       |                    | 151.8 |         |      |  | 222.7 |         |  |  | 212.6 |        
|Dalian Petrochemical                                           |       |                    | 212.6 |         |      |  | 212.6 |         |  |  | 212.6 |        
|Fushun Petrochemical                                           |       |                    | 162.0 |         |      |  | 162.0 |         |  |  | 186.2 |        
|Daqing Petrochemical                                           |       |                    | 121.5 |         |      |  | 121.5 |         |  |  | 121.5 |        
|Jinzhou
    Petrochemical(3)                                   |       |                    | 113.3 |         |      |  | 113.3 |         |  |  | 127.5 |        
|Jinxi Petrochemical                                            |       |                    | 111.3 |         |      |  | 111.3 |         |  |  | 131.6 |        
|Jilin
    Petrochemical(4)                                     |       |                    | 101.2 |         |      |  | 101.2 |         |  |  | 107.3 |        
|Urumqi Petrochemical                                           |       |                    | 101.2 |         |      |  | 101.2 |         |  |  | 101.2 |        
|Other refineries                                               |       |                    | 911.1 |         |      |  | 844.1 |         |  |  | 913.0 |        
|                                                               |       |                    |       |         |      |  |       |         | 
|                                                               | Total |                    |       | 1,986.0 |      |  |       | 1,989.9 |  |  |       | 2,113.5 | 
|                                                               |       |                    |       |         |      |  |       |         | 

35



---



##### Table of Contents



|                                              |       |                    |       |         |      |  |       |         |  |  |       |         | 
|--------------------------------------------- | ----- | ------------------ | ----- | ------- | ---- |  | ----- | ------- |  |  | ----- | ------- | 
|                                              |       | As of December 31, |      
|                                              |       |                    |      
|                                              |       | 2002               |       |         | 2003 |  |       | 2004    | 
|                                              |       |                    |       |         |      |  |       |         | 
|Refining throughput(thousand barrels per day) |       |                    |       |         |      |  |       |         |  |  |       |        
|Lanzhou
    Petrochemical(2)                  |       |                    | 128.6 |         |      |  | 140.5 |         |  |  | 166.4 |        
|Dalian Petrochemical                          |       |                    | 136.6 |         |      |  | 187.7 |         |  |  | 242.3 |        
|Fushun Petrochemical                          |       |                    | 166.3 |         |      |  | 172.2 |         |  |  | 181.7 |        
|Daqing Petrochemical                          |       |                    | 108.2 |         |      |  | 115.5 |         |  |  | 119.2 |        
|Jinzhou
    Petrochemical(3)                  |       |                    | 101.3 |         |      |  | 105.7 |         |  |  | 120.8 |        
|Jinxi Petrochemical                           |       |                    | 97.2  |         |      |  | 108.2 |         |  |  | 123.9 |        
|Jilin
    Petrochemical(4)                    |       |                    | 92.3  |         |      |  | 114.6 |         |  |  | 129.6 |        
|Urumqi Petrochemical                          |       |                    | 71.7  |         |      |  | 72.7  |         |  |  | 81.8  |        
|Other refineries                              |       |                    | 656.7 |         |      |  | 685.0 |         |  |  | 740.8 |        
|                                              |       |                    |       |         |      |  |       |         | 
|                                              | Total |                    |       | 1,558.9 |      |  |       | 1,702.1 |  |  |       | 1,906.5 | 
|                                              |       |                    |       |         |      |  |       |         | 
|Conversion
    equivalent(5)(percent)         |       |                    |       |         |      |  |       |         |  |  |       |        
|Lanzhou
    Petrochemical(2)                  |       |                    | 31.3  |         |      |  | 41.9  |         |  |  | 41.9  |        
|Dalian Petrochemical                          |       |                    | 54.3  |         |      |  | 54.3  |         |  |  | 54.3  |        
|Fushun Petrochemical                          |       |                    | 66.9  |         |      |  | 70.7  |         |  |  | 70.7  |        
|Daqing Petrochemical                          |       |                    | 61.0  |         |      |  | 61.0  |         |  |  | 76.7  |        
|Jinzhou
    Petrochemical(3)                  |       |                    | 62.5  |         |      |  | 72.7  |         |  |  | 63.5  |        
|Jinxi Petrochemical                           |       |                    | 67.3  |         |      |  | 70.9  |         |  |  | 60.0  |        
|Jilin
    Petrochemical(4)                    |       |                    | 54.0  |         |      |  | 69.8  |         |  |  | 75.5  |        
|Urumqi Petrochemical                          |       |                    | 50.0  |         |      |  | 50.0  |         |  |  | 62.0  |        
|Average of other refineries                   |       |                    | 43.7  |         |      |  | 39.5  |         |  |  | 62.4  |        




|    |                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the primary distillation capacity of crude oil and
    condensate.                                                                                                                                                                                                                                                                                                                                  
|   
|(2) | Includes Lanzhou Refinery, which was merged into Lanzhou
    Petrochemical in October 2000 as part of our ongoing
    restructuring.                                                                                                                                                                                                                                                                           
|   
|(3) | Includes a 19.05% minority interest held by unrelated third
    parties in Jinzhou Petrochemical Company Limited in the relevant
    periods.                                                                                                                                                                                                                                                                  
|   
|(4) | Includes Jilin Chemical Industrial Company Limited, in which we
    held a 67.29% equity interest in the relevant periods. Data
    regarding the primary distillation capacity, refining throughput
    and conversion equivalent of Jilin Petrochemical includes a
    32.71% minority interest held by unrelated third parties in
    Jilin Chemical Industrial Company Limited in the relevant
    periods.
|   
|(5) | Stated in fluid catalytic cracking, delayed coking and
    hydrocracking equivalent/ topping (percentage by weight), based
    on 100% of balanced distillation capacity.                                                                                                                                                                                                                                      





36



---



##### Table of Contents





Marketing






| |   |                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | approximately 790 regional wholesale distribution outlets
    nationwide. Substantially all of these outlets are located in
    high demand areas such as economic centers across China,
    particularly in the coastal areas, along major railways and
    along the Yangtze River; and                                                                                        
|
| |  | 14,039 service stations owned and operated by us,
    427 service stations wholly owned by CNPC or jointly owned
    by CNPC and third parties that exclusively sell refined products
    produced or supplied by us and to which we provide supervisory
    support under contractual arrangement, and 2,937 franchise
    service stations owned and operated by third parties.





37



---



##### Table of Contents





|           |       |                         |          |          |      |  |          |          |  |  |          |          | 
|---------- | ----- | ----------------------- | -------- | -------- | ---- |  | -------- | -------- |  |  | -------- | -------- | 
|           |       | Year ended December 31, |         
|           |       |                         |         
|Product    |       | 2002                    |          |          | 2003 |  |          | 2004     | 
|           |       |                         |          |          |      |  |          |          | 
|           |       | (in thousands of tons)  |         
|Diesel     |       |                         | 33,167.1 |          |      |  | 36,680.7 |          |  |  | 43,178.3 |         
|Gasoline   |       |                         | 19,001.3 |          |      |  | 19,872.5 |          |  |  | 21,714.2 |         
|Fuel oil   |       |                         | 4,327.8  |          |      |  | 5,748.7  |          |  |  | 5,747.4  |         
|Naphtha    |       |                         | 4,142.5  |          |      |  | 4,836.2  |          |  |  | 5,325.9  |         
|Kerosene   |       |                         | 1,884.5  |          |      |  | 1,789.1  |          |  |  | 2,116.2  |         
|Lubricants |       |                         | 1,997.0  |          |      |  | 1,774.5  |          |  |  | 1,974.0  |         
|Asphalt    |       |                         | 1,344.0  |          |      |  | 1,711.3  |          |  |  | 2,348.7  |         
|Paraffin   |       |                         | 868.7    |          |      |  | 1,055.5  |          |  |  | 1,138.1  |         
|           |       |                         |          |          |      |  |          |          | 
|           | Total |                         |          | 66,732.9 |      |  |          | 73,468.5 |  |  |          | 83,542.8 | 
|           |       |                         |          |          |      |  |          |          | 



| |                    
| | -------------------
| | Wholesale Marketing







| |                 
| | ----------------
| | Retail Marketing








38



---



##### Table of Contents











|                                                                       |       |  |        |        | 
|---------------------------------------------------------------------- | ----- |  | ------ | ------ | 
|Owned and operated by
    us(1)                                        |       |  | 14,039 |       
|Wholly owned by CNPC or jointly owned by CNPC and third
    parties(2) |       |  | 427    |       
|Franchised                                                             |       |  | 2,937  |       
|                                                                       |       |  |       
|                                                                       | Total |  |        | 17,403 | 
|                                                                       |       |  |       






|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 395 service stations owned and operated by
    BP PetroChina Petroleum Company Limited.                                                           
|   
|(2) | These service stations exclusively sell refined products
    produced or supplied by us. We also provide supervisory support
    to these service stations.



39



---



##### Table of Contents










40



---



##### Table of Contents






Chemicals and Marketing






Our Chemical Products




|                          |                  |                                 |  |         |         |  |  |         |         |  |  |         |         | 
|------------------------- | ---------------- | ------------------------------- |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                          |                  | Year ended December 31,         | 
|                          |                  |                                 | 
|                          |                  | 2002                            |  |         | 2003    |  |  | 2004    |        
|                          |                  |                                 |  |         |         |  |  |         |        
|                          |                  | (in thousand tons)              | 
|Basic petrochemicals      |                  |                                 |  |         |         |  |  |         |         |  |  |        
|                          | Propylene        |                                 |  | 1,523.9 |         |  |  | 1,833.7 |         |  |  | 1,969.1 |        
|                          | Ethylene         |                                 |  | 1,582.0 |         |  |  | 1,817.9 |         |  |  | 1,845.6 |        
|                          | Benzene          |                                 |  | 558.7   |         |  |  | 683.8   |         |  |  | 712.7   |        
|Derivative petrochemicals |                  |                                 |  |         |         |  |  |         |         |  |  |        
|                          | Synthetic resin  |                                 |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Polyethylene                    |  |         | 1,014.4 |  |  |         | 1,208.0 |  |  |         | 1,309.5 | 
|                          |                  | Polypropylene                   |  |         | 759.0   |  |  |         | 917.1   |  |  |         | 961.6   | 
|                          |                  | ABS                             |  |         | 166.7   |  |  |         | 208.7   |  |  |         | 228.1   | 
|                          |                  | Other synthetic resin products  |  |         | 27.3    |  |  |         | 35.1    |  |  |         | 27.6    | 
|                          | Synthetic fiber  |                                 |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Polyacrylic fiber               |  |         | 78.6    |  |  |         | 83.7    |  |  |         | 108.1   | 
|                          |                  | Terylene fiber                  |  |         | 173.0   |  |  |         | 116.6   |  |  |         | 94.3    | 
|                          |                  | Other synthetic fiber products  |  |         | 15.5    |  |  |         | 11.4    |  |  |         | 7.4     | 
|                          | Synthetic rubber |                                 |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Butadiene styrene rubber        |  |         | 134.9   |  |  |         | 147.3   |  |  |         | 190.2   | 
|                          |                  | Other synthetic rubber products |  |         | 79.1    |  |  |         | 98.8    |  |  |         | 95.6    | 
|                          | Intermediates    |                                 |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Alkylbenzene                    |  |         | 175.3   |  |  |         | 204.7   |  |  |         | 194.9   | 
|Other chemicals           |                  |                                 |  |         |         |  |  |         |         |  |  |        
|                          | Urea             |                                 |  | 3,411.2 |         |  |  | 3,579.6 |         |  |  | 3,652.3 |        
|                          | Ammonium nitrate |                                 |  | 143.2   |         |  |  | 46.5    |         |  |  | 32.0    |        



41



---



##### Table of Contents











42



---



##### Table of Contents



Sales and Marketing






|                          |                  |                          |  |         |         |  |  |         |         |  |  |         |         | 
|------------------------- | ---------------- | ------------------------ |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                          |                  | Year ended December 31,  | 
|                          |                  |                          | 
|Product                   |                  | 2002                     |  |         | 2003    |  |  | 2004    |        
|                          |                  |                          |  |         |         |  |  |         |        
|                          |                  | (in thousands of tons)   | 
|Derivative petrochemicals |                  |                          |  |         |         |  |  |         |         |  |  |        
|                          | Synthetic resin  |                          |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Polyethylene             |  |         | 1,008.3 |  |  |         | 1,205.0 |  |  |         | 1,423.6 | 
|                          |                  | Polypropylene            |  |         | 589.2   |  |  |         | 717.2   |  |  |         | 793.3   | 
|                          |                  | ABS                      |  |         | 210.5   |  |  |         | 204.5   |  |  |         | 231.8   | 
|                          | Synthetic fiber  |                          |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Terylene fiber           |  |         | 172.2   |  |  |         | 132.9   |  |  |         | 103.6   | 
|                          |                  | Polyacrylic fiber        |  |         | 84.9    |  |  |         | 81.2    |  |  |         | 115.8   | 
|                          | Synthetic rubber |                          |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Butadiene styrene rubber |  |         | 136.5   |  |  |         | 144.7   |  |  |         | 187.8   | 
|                          | Intermediates    |                          |  |         |         |  |  |         |         |  |  |         |        
|                          |                  | Alkylbenzene             |  |         | 135.3   |  |  |         | 110.1   |  |  |         | 110.9   | 
|Other chemicals           |                  |                          |  |         |         |  |  |         |         |  |  |        
|                          | Urea             |                          |  | 2,967.5 |         |  |  | 3,766.8 |         |  |  | 3,662.8 |        
|                          | Ammonium nitrate |                          |  | 145.5   |         |  |  | 51.1    |         |  |  | 32.8    |        

43



---



##### Table of Contents










44



---



##### Table of Contents






Natural Gas and Pipeline






|                                                                         |  |                         |        |  |      |  |        |      |  |  |        | 
|------------------------------------------------------------------------ |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                                         |  | As of December 31 or    |       
|                                                                         |  | year ended December 31, |       
|                                                                         |  |                         |       
|                                                                         |  | 2002                    |        |  | 2003 |  |        | 2004 | 
|                                                                         |  |                         |        |  |      |  |        |      | 
|Length of natural gas pipelines used by our natural gas segment
    (km) |  |                         | 12,299 |  |      |  | 14,017 |      |  |  | 17,868 | 
|Total length of natural gas pipelines (km)                               |  |                         | 13,391 |  |      |  | 15,144 |      |  |  | 18,995 | 
|Volume of natural gas sold by our natural gas segment (Bcf)              |  |                         | 486.3  |  |      |  | 543.4  |      |  |  | 657.3  | 
|Total volume of natural gas
    sold(1)(Bcf)                             |  |                         | 588.4  |  |      |  | 651.0  |      |  |  | 781.4  | 






|    |                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the aggregate volume of natural gas sold by our
    natural gas and pipeline segment and our exploration and
    production segment, including the sales to our natural gas and
    pipeline segment by our exploration and production segment.





Our Principal Markets for Natural Gas








45



---



##### Table of Contents

















Natural Gas Transmission Infrastructure




46



---



##### Table of Contents





Expansion of Our Natural Gas Transmission and Marketing
Business














47



---



##### Table of Contents





Crude Oil and Refined Product Transportation and Storage
Infrastructure










| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | 9,167 kilometers of crude oil pipelines with an average daily
    throughput of approximately 2.0 million barrels; and
|
| |  | crude oil storage facilities with an aggregate storage capacity
    of approximately 13.9 million cubic meters.       







| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | 2,460 kilometers of refined product pipelines with an average
    daily throughput of approximately 28,243 tons; and
|
| |  | refined product storage facilities with a total storage capacity
    of approximately 16.6 million cubic meters.    





48



---



##### Table of Contents








Competition




Exploration and Production Operations




Refining and Marketing and Chemicals and Marketing
Operations






Natural Gas and Pipeline Operations




49



---



##### Table of Contents








Environmental Matters






| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | require an environmental evaluation report to be submitted and
    approved prior to the commencement of exploration, production,
    refining and chemical projects;          
|
| |  | restrict the type, quantities, and concentration of various
    substances that can be released into the environment in
    connection with drilling and production activities;
|
| |  | limit or prohibit drilling activities on certain lands lying
    within protected areas; and                                                                                   
|
| |  | impose criminal and civil liabilities for pollution resulting
    from oil, natural gas and petrochemical operations.                                                          









| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | reducing sulphur levels in heavy fuel oil and diesel fuel;                                                                                           
|
| |  | reducing olefin and benzene content in gasoline and the quantity
    of emissions and effluents from our refineries and petrochemical
    plants; and
|
| |  | developing and installing monitoring systems at our facilities
    and developing environmental impact assessments for major
    projects.           





50



---



##### Table of Contents







| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | providing each household in areas surrounding our production
    facilities with printed materials to explain and illustrate
    safety and protection knowledge and skills; and
|
| |  | enhancing the implementation of various safety production
    measures we have adopted previously.                                                                              






Legal Proceedings







Properties






| |   |                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | CNPC would use its best endeavours to obtain formal land use
    right certificates to replace the entitlement certificates in
    relation to the 28,649 parcels of land, which were leased or
    transferred to us from CNPC, within one year from August,
    September and October 1999 when the relevant entitlement
    certificates were issued;
|
| |  | CNPC would complete, within one year from November 5, 1999,
    the necessary governmental procedures for the requisition of the
    collectively owned land on which 116 service stations owned by
    us are located; and                                                                                                                             
|
| |  | CNPC would obtain individual building ownership certificates in
    our name for all of the 57,482 buildings transferred to the
    Company by CNPC, before November 5, 2000.                                                                                                                                                                           





51



---



##### Table of Contents






Regulatory Matters


Overview






| |   |                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Ministry of Land and Resources has the authority for
    granting, examining and approving oil and gas exploration and
    production licenses, the administration of registration and
    transfer of exploration and production licenses.
|
| |  | The Ministry of Commerce, which was established in March 2003 to
    consolidate the authorities and functions of the former State
    Economic and Trade Commission and the former Ministry of Foreign
    Trade and Economic Cooperation:    



| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | sets the import and export volume quotas for crude oil and
    refined products according to the overall supply and demand for
    crude oil and refined products in China as well as the WTO
    requirements for China;
|
| |  | issues import and export licenses for crude oil and refined
    products to oil and gas companies that have obtained import and
    export quotas; and                                                                   
|
| |  | examines and approves production sharing contracts and
    Sino-foreign equity and cooperative joint venture contracts.                                                                                                  



| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The National Development and Reform Commission, which was
    established in March 2003 to consolidate the authorities and
    functions of the former State Development Planning Commission
    and the former State Economic and Trade Commission:



| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | has the industry administration and policy coordination
    authority over Chinas oil and gas industry;                                                                             
|
| |  | determines mandatory minimum volumes and applicable prices of
    natural gas to be supplied to certain fertilizer producers;                                                        
|
| |  | publishes guidance prices for natural gas and retail median
    guidance prices for certain refined products, including gasoline
    and diesel;                                     
|
| |  | approves significant petroleum, natural gas, oil refinery and
    chemical projects set forth under the Catalogues of Investment
    Projects Approved by the Central Government; and
|
| |  | approves Sino-foreign equity and cooperative projects exceeding
    certain capital amounts.                                                                                         

Exploration Licenses and Production Licenses






52



---



##### Table of Contents









Pricing




| |          
| | ---------
| | Crude Oil





| |                 
| | ----------------
| | Refined Products



53



---



##### Table of Contents











| |                  
| | -----------------
| | Chemical Products





| |            
| | -----------
| | Natural Gas





| |   |                                
| | - | -------------------------------
| |  | ex-factory price; and          
|
| |  | pipeline transportation tariff.











Production and Marketing




| |          
| | ---------
| | Crude Oil



54



---



##### Table of Contents







| |                 
| | ----------------
| | Refined Products





| |            
| | -----------
| | Natural Gas



Foreign Investments




| |                                                                     
| | --------------------------------------------------------------------
| | Cooperation in Exploration and Production with Foreign
    Companies









| |                            
| | ---------------------------
| | Transportation and Refining



55



---



##### Table of Contents





Import and Export






Capital Investment and Financing




56



---



##### Table of Contents



Taxation, Fees and Royalty




|                     |  |                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------------- |  | -------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Tax item             |  | Tax base                               |  | Tax Rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                     |  |                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Corporate income tax |  | Taxable income                         |  | Generally at a rate of 33%. However, our qualified branch
    companies in the west regions of the PRC are entitled to a rate
    of 15%. Tax concession or exemption enjoyed by any subsidiary or
    branch company continues to apply.                                                                                                                                                                                                                                                                                                                                                                                                                       
|Value-added tax      |  | Revenue                                |  | 13% for liquified natural gas, natural gas, agricultural film
    and fertilizers and 17% for other items. PetroChina charges
    value-added tax from its customers at the time of settlement on
    top of the selling prices of its products on behalf of the
    taxation authority. The value-added tax paid by PetroChina for
    purchasing materials to be consumed during the production
    process and for charges paid for drilling and other engineering
    services and labor are deducted from output value-added tax
    payable by PetroChina. 11% of the value-added tax paid in
    connection with export of gasoline is subject to rebate.
|                     |  | Sales volume                           |  | 5% for the Sino-foreign oil and gas exploration and development
    cooperative projects. However input value-added tax cannot be
    deducted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Business tax         |  | Revenue from transportation services   |  | 3%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Consumption tax      |  | Aggregate volume sold or self-consumed |  | RMB 277.6 per ton for gasoline; since January 1, 1999,
    RMB 388.64 per ton for leaded gasoline.
    RMB 117.6 per ton for diesel
    All consumption taxes paid in connection with export of gasoline
    are subject to a full rebate.                                                                                                                                                                                                                                                                                                                                                                                                                      
|Resource tax         |  | Aggregate volume sold or self-consumed |  | RMB 8 to 30 per ton for crude oil
    RMB 2 to 15 per thousand cubic meter for natural gas
    The actual applicable rate for each oil field may differ
    depending on the resource differences, volume of the exploration
    and production activities and costs required for the production
    at the particular oil field.                                                                                                                                                                                                                                                                                                                               

57



---



##### Table of Contents



|                                       |  |                   |  |                                                                       
|-------------------------------------- |  | ----------------- |  | ----------------------------------------------------------------------
|Tax item                               |  | Tax base          |  | Tax Rate                                                              
|                                       |  |                   |  |                                                                       
|Compensatory fee for mineral resources |  | Revenue           |  | 1% for crude oil and natural gas                                      
|Exploration license fee                |  | Area              |  | RMB 100 to 500 per square kilometer per year                          
|Production license fee                 |  | Area              |  | RMB 1,000 per square kilometer per year                               
|Royalty
    fee(1)                     |  | Production volume |  | Progressive rate of 012.5% for crude oil and 03% for
    natural gas






|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Payable only by Sino-foreign oil and gas exploration and
    development cooperative projects. The project entity of those
    cooperative projects is not subject to any other resource tax or
    fee.



Environmental Regulations






58



---



##### Table of Contents






ITEM 5  OPERATING AND FINANCIAL REVIEW AND
PROSPECTS





General






Overview






| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | the exploration, development, production and sale of crude oil
    and natural gas;                                                
|
| |  | the refining, transportation, storage and marketing of crude oil
    and petroleum products;                                       
|
| |  | the production and marketing of basic petrochemical products,
    derivative chemical products and other chemical
    products; and
|
| |  | the transmission and storage of crude oil, refined products and
    natural gas as well as sale of natural gas.                    





Factors Affecting Results of Operations




59



---



##### Table of Contents





| |                 
| | ----------------
| | Crude Oil Prices





|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              |  |  |  |       |  |  |  |       | 
|--------- |  | --------- | ----- | ---------------------------------- | ------- |  | ------------------ | ------- |  | --------- | ------- |  | ---------- | --------- | ----- | ---------- | ------------- |  | ------------- | ------------- |  | ----- | ------------ |  |  |  | ----- |  |  |  | ----- | 
|          |  |           |       | Median prices for principal grades |         |  | Premium/(discount) |        
|          |  |           |       | of crude oil (RMB/barrel)          |         |  | (RMB/barrel)       |        
|          |  |           |       |                                    |         |  |                    |        
|Grade of  |  |           |       | Year 2002                          |         |  | Year 2003          |         |  | Year 2004 |         |  | June 2001- |           |       | July 2002- |               |  | January 2003- |               |  | Since |             
|crude oil |  | Benchmark |       |                                    | average |  |                    | average |  |           | average |  |            | June 2002 |       |            | December 2002 |  |               | December 2003 |  |       | January 2004 | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 
|Daqing    |  |           | Minas |                                    |         |  | 198.7              |         |  |           | 240.8   |  |            |           | 300.7 |            |               |  | 0.9           |               |  |       | 0            |  |  |  | 0.3  |  |  |  | 0     | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 
|Jidong    |  |           | Minas |                                    |         |  | 198.7              |         |  |           | 240.8   |  |            |           | 300.7 |            |               |  | 0.9           |               |  |       | 0            |  |  |  | 0.3  |  |  |  | 0     | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 
|Huabei    |  |           | Minas |                                    |         |  | 198.7              |         |  |           | 240.8   |  |            |           | 300.7 |            |               |  | 1.6           |               |  |       | 1.3          |  |  |  | 1     |  |  |  | 1.3   | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 
|Dagang    |  |           | Cinta |                                    |         |  | 192.6              |         |  |           | 237.0   |  |            |           | 290.5 |            |               |  | 1.7           |               |  |       | 1.4          |  |  |  | 1.4   |  |  |  | 1.4   | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 
|Tarim     |  |           | Minas |                                    |         |  | 198.7              |         |  |           | 240.8   |  |            |           | 300.7 |            |               |  | 30.4         |               |  |       | 34.6        |  |  |  | 33.7 |  |  |  | 34.6 | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 
|Tuha      |  |           | Tapis |                                    |         |  | 203.9              |         |  |           | 247.0   |  |            |           | 329.2 |            |               |  | 25.1         |               |  |       | 25.5        |  |  |  | 25.5 |  |  |  | 25.5 | 
|          |  |           |       |                                    |         |  |                    |         |  |           |         |  |            |           |       |            |               |  |               |               |  |       |              | 







| |                       
| | ----------------------
| | Refined Product Prices



60



---



##### Table of Contents









|                |  |           |       |  |             |  |       | 
|--------------- |  | --------- | ----- |  | ----------- |  | ----- | 
|                |  | 90(#)     |       |  |            
|Date            |  | Gasoline  |       |  | 0(#) Diesel | 
|                |  |           |       |  |             | 
|                |  | (RMB/ton) |       |  | (RMB/ton)   | 
|March 31, 2004  |  |           | 4,032 |  |             |  |      | 
|May 18, 2004    |  |           |      |  |             |  | 3,590 | 
|August 25, 2004 |  |           | 4,272 |  |             |  | 3,810 | 



| |                        
| | -----------------------
| | Chemical Product Prices





| |                   
| | ------------------
| | Natural Gas Prices





| |   |                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ex-factory Price. We set our ex-factory price within a
    10% floating range of the median ex-factory price published by
    the National Development and Reform Commission, except for
    natural gas sold within the PRC governments natural gas
    supply plan, which must be sold at prices determined by the
    National Development and Reform Commission; and
|
| |  | Pipeline Transportation Tariff. The National Development
    and Reform Commission sets the pipeline transportation tariff
    for natural gas transported by pipelines constructed prior to
    1991. For natural gas transported by pipelines constructed after
    1991, we prepare a tariff schedule                                                                 

61



---



##### Table of Contents



| |  |                                                                                                                                
| |  | -------------------------------------------------------------------------------------------------------------------------------
| |  | based on our actual cost plus a profit margin and submit it to
    the National Development and Reform Commission for approval.







| |                          
| | -------------------------
| | Foreign Currency Exposure





| |                       
| | ----------------------
| | Interest Rate Exposure



Critical Accounting Policies






| |                                                                     
| | --------------------------------------------------------------------
| | Accounting of Oil and Gas Exploration and Development
    Activities



62



---



##### Table of Contents





| |                     
| | --------------------
| | Oil and Gas Reserves











63



---



##### Table of Contents





| |                              
| | -----------------------------
| | Property, Plant and Equipment





|                             |  |            
|---------------------------- |  | -----------
|Land and buildings           |  | 25-50 years
|Plant and machinery          |  | 10-15 years
|Equipment and motor vehicles |  | 3-16 years 









64



---



##### Table of Contents





| |                                  
| | ---------------------------------
| | Impairment of Accounts Receivable





| |                    
| | -------------------
| | Deferred Tax Assets







| |                    
| | -------------------
| | Revenue Recognition







65



---



##### Table of Contents







| |                                             
| | --------------------------------------------
| | One-time Remedial Payments for Staff Housing





Acquisitions




| |                                
| | -------------------------------
| | Acquisitions of Overseas Assets







66



---



##### Table of Contents







| |                                                                            
| | ---------------------------------------------------------------------------
| | Acquisition of Certain Refined Products Marketing
    Enterprises from CNPC








Operating Results






|                                               |  |                         |          |   |                |  |          |                |  |  |                |   |  |  |         |  
|---------------------------------------------- |  | ----------------------- | -------- | - | -------------- |  | -------- | -------------- |  |  | -------------- | - |  |  | ------- | -
|                                               |  | Year ended December 31, |         
|                                               |  |                         |         
|                                               |  | 2002                    |          |   | 2003           |  |          | 2004           |  |  | 2004           |  
|                                               |  |                         |          |   |                |  |          |                |  |  |                |  
|                                               |  | in million RMB          |          |   | in million RMB |  |          | in million RMB |  |  | in million US$ |  
|Total revenues                                 |  |                         | 244,424  |   |                |  | 303,779  |                |  |  | 388,633        |   |  |  | 46,956  |  
|                                               |  |                         |          |   |                |  |          |                |  |  |                |  
|Operating expenses                             |  |                         | (172,083 | ) |                |  | (204,593 | )              |  |  | (242,047       | ) |  |  | (29,245 | )
|                                               |  |                         |          |   |                |  |          |                |  |  |                |  
|Income from operations                         |  |                         | 72,341   |   |                |  | 99,186   |                |  |  | 146,586        |   |  |  | 17,711  |  
|                                               |  |                         |          |   |                |  |          |                |  |  |                |  
|Exchange gain (loss), net                      |  |                         | (316     | ) |                |  | (180     | )              |  |  | (73            | ) |  |  | (9      | )
|Interest expense, net                          |  |                         | (3,053   | ) |                |  | (1,669   | )              |  |  | (1,196         | ) |  |  | (144    | )
|Income from equity affiliates                  |  |                         | 268      |   |                |  | 985      |                |  |  | 1,824          |   |  |  | 220     |  
|Income before income taxes                     |  |                         | 69,240   |   |                |  | 98,322   |                |  |  | 147,141        |   |  |  | 17,778  |  
|Taxes                                          |  |                         | (22,231  | ) |                |  | (28,072  | )              |  |  | (42,563        | ) |  |  | (5,143  | )
|(Income) loss applicable to minority interests |  |                         | (99      | ) |                |  | (636     | )              |  |  | (1,651         | ) |  |  | (199    | )
|                                               |  |                         |          |   |                |  |          |                |  |  |                |  
|Net income                                     |  |                         | 46,910   |   |                |  | 69,614   |                |  |  | 102,927        |   |  |  | 12,436  |  
|                                               |  |                         |          |   |                |  |          |                |  |  |                |  

67



---



##### Table of Contents





|                                       |  |                                       |          |   |      |      |          |      |  |  |       |   |  |      |          |   |  |  |      |  
|-------------------------------------- |  | ------------------------------------- | -------- | - | ---- | ---- | -------- | ---- |  |  | ----- | - |  | ---- | -------- | - |  |  | ---- | -
|                                       |  |                                       |          |   |      | 2003 |          |      |  |  | 2004  |  
|                                       |  |                                       |          |   |      | vs.  |          |      |  |  | vs.   |  
|                                       |  | 2002                                  |          |   | 2003 |      |          | 2002 |  |  | 2004  |   |  | 2003 |         
|                                       |  |                                       |          |   |      |      |          |      |  |  |       |   |  |      |         
|                                       |  | (RMB in millions, except percentages) |         
|Sales and other operating revenues     |  |                                       |          |   |      |      |          |      |  |  |       |   |  |      |          |   |  |  |      |  
|Exploration and production             |  |                                       | 147,308  |   |      |      | 177,271  |      |  |  | 20.3  | % |  |      | 222,305  |   |  |  | 25.4 | %
|Refining and marketing                 |  |                                       | 174,621  |   |      |      | 223,584  |      |  |  | 28.0  |   |  |      | 295,598  |   |  |  | 32.2 |  
|Chemicals and marketing                |  |                                       | 29,661   |   |      |      | 39,211   |      |  |  | 32.2  |   |  |      | 57,179   |   |  |  | 45.8 |  
|Natural gas and pipeline               |  |                                       | 12,733   |   |      |      | 15,067   |      |  |  | 18.3  |   |  |      | 18,255   |   |  |  | 21.2 |  
|Total                                  |  |                                       | 364,323  |   |      |      | 455,133  |      |  |  | 24.9  | % |  |      | 593,337  |   |  |  | 30.4 | %
|                                       |  |                                       |          |   |      |      |          |      |  |  |       |   |  |      |         
|Less intersegment sales                |  |                                       | (119,899 | ) |      |      | (151,354 | )    |  |  | (26.2 | ) |  |      | (204,704 | ) |  |  | 35.2 |  
|                                       |  |                                       |          |   |      |      |          |      |  |  |       |   |  |      |         
|Consolidated net sales from operations |  |                                       | 244,424  |   |      |      | 303,779  |      |  |  | 24.3  | % |  |      | 388,633  |   |  |  | 27.9 | %
|                                       |  |                                       |          |   |      |      |          |      |  |  |       |   |  |      |         



|                              |  |                                       |        |   |      |      |        |      |  |  |       |   |  |      |         |   |  |  |       |  
|----------------------------- |  | ------------------------------------- | ------ | - | ---- | ---- | ------ | ---- |  |  | ----- | - |  | ---- | ------- | - |  |  | ----- | -
|                              |  |                                       |        |   |      | 2003 |        |      |  |  | 2004  |  
|                              |  |                                       |        |   |      | vs.  |        |      |  |  | vs.   |  
|                              |  | 2002                                  |        |   | 2003 |      |        | 2002 |  |  | 2004  |   |  | 2003 |        
|                              |  |                                       |        |   |      |      |        |      |  |  |       |   |  |      |        
|                              |  | (RMB in millions, except percentages) |       
|Income (loss) from operations |  |                                       |        |   |      |      |        |      |  |  |       |   |  |      |         |   |  |  |       |  
|Exploration and production    |  |                                       | 72,139 |   |      |      | 92,370 |      |  |  | 28.0  | % |  |      | 125,571 |   |  |  | 35.9  | %
|Refining and marketing        |  |                                       | 2,818  |   |      |      | 5,035  |      |  |  | 78.7  |   |  |      | 11,981  |   |  |  | 138.0 |  
|Chemicals and marketing       |  |                                       | (3,162 | ) |      |      | 1,041  |      |  |  | 132.9 |   |  |      | 7,655   |   |  |  | 635.4 |  
|Natural gas and pipeline      |  |                                       | 1,552  |   |      |      | 1,922  |      |  |  | 23.8  |   |  |      | 2,535   |   |  |  | 31.9  |  
|Other                         |  |                                       | (1,006 | ) |      |      | (1,182 | )    |  |  | (17.5 | ) |  |      | (1,156  | ) |  |  | (2.2  | )
|                              |  |                                       |        |   |      |      |        |      |  |  |       |   |  |      |        
|Total                         |  |                                       | 72,341 |   |      |      | 99,186 |      |  |  | 37.1  | % |  |      | 146,586 |   |  |  | 47.8  | %
|                              |  |                                       |        |   |      |      |        |      |  |  |       |   |  |      |        

Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003




| |                                  
| | ---------------------------------
| | Consolidated Results of Operation



| |         
| | --------
| | Overview



Total Revenue.


68



---



##### Table of Contents





Operating Expenses.


Purchases, Services and Other Expenses.


Employee Compensation Costs.


Depreciation, Depletion and Amortization.


Selling, General and Administrative Expenses.


Exploration Expenses.


Expenses Relating to the Shutting Down of Manufacturing
Facilities and Units.


Taxes Other than Income Taxes.


69



---



##### Table of Contents



Income From Operations.


Net Exchange Loss.


Net Interest Expense.


Income Before Income Taxes.


Income Taxes.


Net Income.




| |                           
| | --------------------------
| | Exploration and Production

Sales and Other Operating Revenue.






Operating Expenses.


Income From Operations.


70



---



##### Table of Contents





| |                       
| | ----------------------
| | Refining and Marketing

Sales and Other Operating Revenue.










Operating Expenses.


Income From Operations.




| |                        
| | -----------------------
| | Chemicals and Marketing

Sales and Other Operating Revenue.


71



---



##### Table of Contents





Operating Expenses.


Income From Operations.




| |                         
| | ------------------------
| | Natural Gas and Pipeline

Sales and Other Operating Revenue.


Operating Expenses.


Income From Operations.


Year Ended December 31, 2003 Compared to Year Ended
December 31, 2002




| |                                  
| | ---------------------------------
| | Consolidated Results of Operation



| |         
| | --------
| | Overview



Total Revenue.


72



---



##### Table of Contents





Operating Expenses.


Purchases, Services and Other Expenses.


Employee Compensation Costs.


Exploration Expenses.


Depreciation, Depletion and Amortization.


Selling, General and Administrative Expenses.


Expenses Relating to Workforce Reduction and the Shutting
Down of Manufacturing Facilities and Units.


Taxes Other than Income Taxes.


73



---



##### Table of Contents





Income From Operations.


Net Exchange Loss.


Net Interest Expense.


Income Before Income Taxes.


Income Taxes.


Net Income.




| |                           
| | --------------------------
| | Exploration and Production

Sales and Other Operating Revenue.






Operating Expenses.


74



---



##### Table of Contents





Income From Operations.




| |                       
| | ----------------------
| | Refining and Marketing

Sales and Other Operating Revenue.










Operating Expenses.


Income From Operations.


75



---



##### Table of Contents





| |                        
| | -----------------------
| | Chemicals and Marketing

Sales and Other Operating Revenue.


Operating Expenses.


Income (Loss) From Operations.




| |                         
| | ------------------------
| | Natural Gas and Pipeline

Sales and Other Operating Revenue.


Operating Expenses.


Income From Operations.





Liquidity and Capital Resources




76



---



##### Table of Contents













77



---



##### Table of Contents





|                                                     |  |                         |         |   |      |  |         |      |  |  |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | -
|                                                     |  | Year ended December 31, |        
|                                                     |  |                         |        
|                                                     |  | 2002                    |         |   | 2003 |  |         | 2004 | 
|                                                     |  |                         |         |   |      |  |         |      | 
|                                                     |  | (RMB in millions)       |        
|Net cash generated by operating activities           |  |                         | 97,290  |   |      |  | 137,236 |      |  |  | 137,299 |  
|Net cash used for investing activities               |  |                         | (70,611 | ) |      |  | (96,213 | )    |  |  | (98,533 | )
|Net cash provided by (used for) financing activities |  |                         | (27,829 | ) |      |  | (39,769 | )    |  |  | (38,693 | )
|Cash and cash equivalents at the end of period       |  |                         | 9,977   |   |      |  | 11,231  |      |  |  | 11,304  |  



Cash Generated by Operating Activities












78



---



##### Table of Contents



Cash Provided by (Used for) Financing Activities




|                                                              |                                                |                   |        |        |        |  |        |        |        |  |        |        |        | 
|------------------------------------------------------------- | ---------------------------------------------- | ----------------- | ------ | ------ | ------ |  | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                                              |                                                | December 31,      |       
|                                                              |                                                |                   |       
|                                                              |                                                | 2002              |        |        | 2003   |  |        | 2004   |       
|                                                              |                                                |                   |        |        |        |  |        |        |       
|                                                              |                                                | (RMB in millions) |       
|Short-term debt (including current portion of long-term debt) |                                                |                   | 20,633 |        |        |  | 28,890 |        |        |  | 27,276 |       
|Long-term debt                                                |                                                |                   | 60,655 |        |        |  | 41,959 |        |        |  | 38,458 |       
|                                                              |                                                |                   |        |        |        |  |        |        |       
|                                                              | Total debt                                     |                   |        | 81,288 |        |  |        | 70,849 |        |  |        | 65,734 |       
|                                                              |                                                |                   |        |        |        |  |        |        |       
|Less:                                                         |                                                |                   |        |        |        |  |        |        |        |  |        |       
|                                                              | Cash and cash equivalents                      |                   |        | 9,977  |        |  |        | 11,231 |        |  |        | 11,304 |       
|                                                              | Time deposits with term exceeding three months |                   |        | 2,612  |        |  |        | 2,640  |        |  |        | 1,400  |       
|                                                              | Receivables under resale agreements            |                   |        | 9,786  |        |  |        | 24,224 |        |  |        | 33,217 |       
|                                                              |                                                |                   |        |        |        |  |        |        |       
|                                                              |                                                | Net debt          |        |        | 58,913 |  |        |        | 32,754 |  |        |        | 19,813 | 
|                                                              |                                                |                   |        |        |        |  |        |        |       













| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | an increase in the repayment of long-term loans leading to an
    increase of RMB 14,832 million in cash outflow;
|
| |  | an increase in the distribution of dividends leading to an
    increase of RMB 4,650 million in cash outflow; and
|
| |  | a decrease in new short-term loans leading to a decrease of
    RMB 1,339 million in cash inflow;                

79



---



##### Table of Contents







| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | an increase in new long-term loans leading to an increase of
    RMB 12,791 million in cash inflow; and        
|
| |  | a decrease in the repayment of short-term loans leading to a
    decrease of RMB 8,673 million in cash outflow.





| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | an increase in the distribution of dividends leading to an
    increase of RMB 12,028 million in cash outflow;
|
| |  | a decrease in new long-term loans leading to a decrease of
    RMB 7,062 million in cash inflow; and          
|
| |  | a decrease in new short-term loans leading to a decrease of
    RMB 3,600 million in cash inflow;             





| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | a decrease in the repayment of long-term loans leading to a
    decrease of RMB 5,993 million in cash outflow; and
|
| |  | a decrease in the repayment of short-term loans leading to a
    decrease of RMB 4,177 million in cash outflow.   





Capital Expenditures and Investments




|                           |       |           |        |        |      |  |         |           |  |  |             |         |  |           |      |       |         |  |        |           |  |  |      |       |  |  |        |         |  |  |      |       | 
|-------------------------- | ----- | --------- | ------ | ------ | ---- |  | ------- | --------- |  |  | ----------- | ------- |  | --------- | ---- | ----- | ------- |  | ------ | --------- |  |  | ---- | ----- |  |  | ------ | ------- |  |  | ---- | ----- | 
|                           |       |           |        |        |      |  |         | 2005      | 
|                           |       | 2002      |        |        | 2003 |  |         | 2004      |  |  | anticipated |        
|                           |       |           |        |        |      |  |         |           |  |  |             |        
|                           |       | (RMB in   |        |        |      |  | (RMB in |           |  |  |             | (RMB in |  |           |      |       | (RMB in |  |        | %         | 
|                           |       | millions) |        |        | %    |  |         | millions) |  |  | %           |         |  | millions) |      |       | %       |  |        | millions) |  |  |     
|Exploration and production |       |           | 50,646 |        |      |  | 65.5    |           |  |  | 58,599      |         |  |           | 66.0 |       |         |  | 66,493 |           |  |  | 65.0 |       |  |  | 66,660 |         |  |  | 64.7 |      
|Refining and marketing     |       |           | 10,503 |        |      |  | 13.6    |           |  |  | 12,650      |         |  |           | 14.2 |       |         |  | 17,467 |           |  |  | 17.0 |       |  |  | 14,590 |         |  |  | 14.2 |      
|Chemicals and marketing    |       |           | 3,140  |        |      |  | 4.0     |           |  |  | 3,898       |         |  |           | 4.4  |       |         |  | 4,319  |           |  |  | 4.2  |       |  |  | 8,350  |         |  |  | 8.1  |      
|Natural gas and pipeline   |       |           | 12,912 |        |      |  | 16.7    |           |  |  | 13,530      |         |  |           | 15.2 |       |         |  | 13,901 |           |  |  | 13.6 |       |  |  | 12,400 |         |  |  | 12.0 |      
|Corporate and other        |       |           | 133    |        |      |  | 0.2     |           |  |  | 138         |         |  |           | 0.2  |       |         |  | 174    |           |  |  | 0.2  |       |  |  | 1,000  |         |  |  | 1.0  |      
|                           |       |           |        |        |      |  |         |           |  |  |             |         |  |           |      |       |         |  |        |           |  |  |      |      
|                           | Total |           |        | 77,334 |      |  |         | 100.0     |  |  |             | 88,815  |  |           |      | 100.0 |         |  |        | 102,354   |  |  |      | 100.0 |  |  |        | 103,000 |  |  |      | 100.0 | 
|                           |       |           |        |        |      |  |         |           |  |  |             |         |  |           |      |       |         |  |        |           |  |  |      |      

80



---



##### Table of Contents









| |                         
| | ------------------------
| | Exploration & Production







| |                       
| | ----------------------
| | Refining and Marketing







| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | approximately RMB 7,340 million for the construction of the
    sales network of refined products; and
|
| |  | approximately RMB 7,250 million for the construction and
    expansion of refining facilities.        



| |                        
| | -----------------------
| | Chemicals and Marketing



81



---



##### Table of Contents









| |                         
| | ------------------------
| | Natural Gas and Pipeline







| |                    
| | -------------------
| | Corporate and Other





The Restructuring of Our Long-Term Investments






82



---



##### Table of Contents







Off-Balance Sheet Arrangements




Long-Term Contractual Obligations and Other Commercial
Commitments


and Payment Obligations




|                                   |  |                       |           |           |        |  |          |           |       |  |           |  |  |         |          |  |  |  |          | 
|---------------------------------- |  | --------------------- | --------- | --------- | ------ |  | -------- | --------- | ----- |  | --------- |  |  | ------- | -------- |  |  |  | -------- | 
|                                   |  | Payment due by period |          
|                                   |  |                       |          
|                                   |  |                       |           | Less than |        |  |          |           | After | 
|Contractual obligations            |  | Total                 |           |           | 1 year |  |          | 1-3 years |       |  | 3-5 years |  |  | 5 years |         
|                                   |  |                       |           |           |        |  |          |           |       |  |           |  |  |         |         
|                                   |  | (RMB in millions)     |          
|Long-term debt                     |  |                       | 54,445    |           |        |  | 15,987   |           |       |  | 24,624    |  |  |         | 6,467    |  |  |  | 7,367    | 
|Capital lease obligations          |  |                       | 21        |           |        |  | 21       |           |       |  | 0         |  |  |         | 0        |  |  |  | 0        | 
|Operating leases                   |  |                       | 95,451    |           |        |  | 2,701    |           |       |  | 4,925     |  |  |         | 4,790    |  |  |  | 83,035   | 
|Capital commitments                |  |                       | 5,370     |           |        |  | 4,398    |           |       |  | 972       |  |  |         | 0        |  |  |  | 0        | 
|Unconditional purchase obligations |  |                       | 5,108.9   |           |        |  | 3,992.8  |           |       |  | 726.4     |  |  |         | 290.3    |  |  |  | 99.4     | 
|Other long-term obligations        |  |                       | 0         |           |        |  | 0        |           |       |  | 0         |  |  |         | 0        |  |  |  | 0        | 
|Total contractual cash obligations |  |                       | 160,395.9 |           |        |  | 27,099.8 |           |       |  | 31,247.4  |  |  |         | 11,547.3 |  |  |  | 90,501.4 | 

|                             |  |                                            |     |  |           |  |    |         |  |  |         |  |  |         |    |  |  |  |    | 
|---------------------------- |  | ------------------------------------------ | --- |  | --------- |  | -- | ------- |  |  | ------- |  |  | ------- | -- |  |  |  | -- | 
|                             |  | Amount of commitment expiration per period |    
|                             |  |                                            |    
|                             |  | Total                                      |     |  |          
|                             |  | amounts                                    |     |  | Less than |  |    | 1-      |  |  | 3-      |  |  | Over    |   
|Other commercial commitments |  | committed                                  |     |  | 1 year    |  |    | 3 years |  |  | 5 years |  |  | 5 years |   
|                             |  |                                            |     |  |           |  |    |         |  |  |         |  |  |         |   
|                             |  | (RMB in millions)                          |    
|Lines of credit              |  |                                            | 0   |  |           |  | 0  |         |  |  | 0       |  |  |         | 0  |  |  |  | 0  | 
|Standby letters of credit    |  |                                            | 0   |  |           |  | 0  |         |  |  | 0       |  |  |         | 0  |  |  |  | 0  | 
|Guarantees                   |  |                                            | 203 |  |           |  | 50 |         |  |  | 3       |  |  |         | 67 |  |  |  | 83 | 
|Total commercial commitments |  |                                            | 203 |  |           |  | 50 |         |  |  | 3       |  |  |         | 67 |  |  |  | 83 | 

83



---



##### Table of Contents





|                    |  |                   |     | 
|------------------- |  | ----------------- | --- | 
|Year                |  | Annual payment    |    
|                    |  |                   |    
|                    |  | (RMB in millions) |    
|2005                |  |                   | 618 | 
|2006                |  |                   | 681 | 
|2007 and thereafter |  |                   | 712 | 





|                    |  |                         |       | 
|------------------- |  | ----------------------- | ----- | 
|                    |  | Quantities              |      
|                    |  |                         |      
|                    |  | (billion of cubic feet) |      
|2005                |  |                         | 229   | 
|2006                |  |                         | 443   | 
|2007                |  |                         | 581   | 
|2008                |  |                         | 637   | 
|2009                |  |                         | 701   | 
|2010 and thereafter |  |                         | 6,111 | 




Research and Development








Exploration and Production






| |   |                                                             
| | - | ------------------------------------------------------------
| |  | geological structures of crude oil and natural gas reserves;
|
| |  | oil and gas exploration and development;                    
|
| |  | oil and gas production and pipeline transportation; and     
|
| |  | monitoring of the environment.                              

84



---



##### Table of Contents



Refining and Chemicals







Trend Information


Streamlining of Production Facilities







Other Information


Inflation




Non-Exchange Traded Contracts




Related Party Transactions




US GAAP Reconciliation




85



---



##### Table of Contents







| |                                             
| | --------------------------------------------
| | Revaluation of Property, Plant and Equipment





















| |                           
| | --------------------------
| | Related Party Transactions



86



---



##### Table of Contents







| |                                             
| | --------------------------------------------
| | One-time Remedial Payments for Staff Housing









| |                                    
| | -----------------------------------
| | Recent US Accounting Pronouncements







87



---



##### Table of Contents







| |                                                         
| | --------------------------------------------------------
| | Quantitative Disclosure Relating to US GAAP and
    IFRS



| |                                                                          
| | -------------------------------------------------------------------------
| | Year Ended December 31, 2004 Compared to Year Ended
    December 31, 2003

Net income.


Shareholders equity.




| |                                                                          
| | -------------------------------------------------------------------------
| | Year Ended December 31, 2003 Compared to Year Ended
    December 31, 2002

Net income.


Shareholders equity.


Environmental Expenses and Capital Expenditures




88



---



##### Table of Contents






ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES





Directors, Senior Management and Supervisors






| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | convening shareholders meetings and reporting its work to
    the shareholders meetings;                          
|
| |  | implementing the resolutions of the shareholders meetings;                                                         
|
| |  | determining our business plans and investment plans;                                                                
|
| |  | formulating our annual budget and final accounts;                                                                   
|
| |  | formulating our proposals for dividend and bonus distributions
    and for the increase or reduction of capital; and
|
| |  | exercising other powers, functions and duties as conferred by
    our articles of association.                      







| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | attending board meetings;                                                                                                                                                                                                           
|
| |  | examining our financial affairs;                                                                                                                                                                                                    
|
| |  | examining balance sheets, profit and loss accounts, business
    reports, dividend distribution proposals and other financial
    information proposed at shareholders general meetings by
    the directors from time to time; and
|
| |  | overseeing the actions of our board of directors and our senior
    management personnel in carrying out their duties.                                                                                                              





89



---



##### Table of Contents





|               |  |     |    |  |          |                                                       |                     |  |                   | 
|-------------- |  | --- | -- |  | -------- | ----------------------------------------------------- | ------------------- |  | ----------------- | 
|Name           |  | Age |    |  | Position |                                                       | Date of election(1) | 
|               |  |     |    |  |          |                                                       |                     | 
|Chen Geng      |  |     | 58 |  |          | Chairman of the board of directors                    |                     |  | May 18, 2004      | 
|Jiang Jiemin   |  |     | 49 |  |          | Vice Chairman of the board of directors and President |                     |  | May 18, 2004      | 
|Ren Chuanjun   |  |     | 60 |  |          | Vice Chairman of the board of directors               |                     |  | November 19, 2002 | 
|Su Shulin      |  |     | 42 |  |          | Director and Senior Vice President                    |                     |  | November 19, 2002 | 
|Duan Wende     |  |     | 53 |  |          | Director and Vice President                           |                     |  | May 18, 2004      | 
|Wang Fucheng   |  |     | 54 |  |          | Director and Vice President                           |                     |  | May 28, 2003      | 
|Zheng Hu       |  |     | 58 |  |          | Director                                              |                     |  | May 28, 2003      | 
|Zhou Jiping    |  |     | 52 |  |          | Director                                              |                     |  | May 18, 2004      | 
|Gong Huazhang  |  |     | 58 |  |          | Director                                              |                     |  | November 19, 2002 | 
|Zou Haifeng    |  |     | 58 |  |          | Director                                              |                     |  | November 19, 2002 | 
|Chee-Chen Tung |  |     | 62 |  |          | Independent non-executive director                    |                     |  | November 19, 2002 | 
|Liu Hongru     |  |     | 74 |  |          | Independent non-executive director                    |                     |  | November 19, 2002 | 
|Franco Bernabè |  |     | 56 |  |          | Independent non-executive director                    |                     |  | May 28, 2003      | 
|Li Huaiqi      |  |     | 55 |  |          | Secretary to the board of directors                   |                     |  |                   | 
|Wang Guoliang  |  |     | 52 |  |          | Chief Financial Officer                               |                     |  |                   | 
|Liu Baohe      |  |     | 58 |  |          | Vice President                                        |                     |  |                   | 
|Jia Chengzao   |  |     | 56 |  |          | Chief Geologist                                       |                     |  |                   | 
|Li Kecheng     |  |     | 61 |  |          | Chairman of Supervisory Committee                     |                     |  |                   | 
|Wen Qingshan   |  |     | 46 |  |          | Supervisor                                            |                     |  |                   | 
|Sun Xianfeng   |  |     | 52 |  |          | Supervisor                                            |                     |  |                   | 
|Xu Fengli      |  |     | 57 |  |          | Supervisor                                            |                     |  |                   | 
|Sun Chongren   |  |     | 54 |  |          | Supervisor                                            |                     |  |                   | 
|Zhang Youcai   |  |     | 63 |  |          | Independent supervisor                                |                     |  |                   | 
|Wu Zhipan      |  |     | 48 |  |          | Independent supervisor                                |                     |  |                   | 






|    |                    
|--- | -------------------
|(1) | For directors only.

Directors


Chen Geng,


Jiang Jiemin,


90



---



##### Table of Contents





Ren Chuanjun,


Su Shulin,


Duan Wende,


Wang Fucheng,


Zheng Hu,


91



---



##### Table of Contents





Zhou Jiping,


Gong Huazhang,


Zou Haifeng, ,


Independent Non-executive Directors


Chee-Chen Tung,


92



---



##### Table of Contents





Liu Hongru,


Franco Bernabè,


Secretary to the Board of Directors


Li Huaiqi,


Other Senior Management Personnel


Wang Guoliang,


93



---



##### Table of Contents



Liu Baohe,


Jia Chengzao,


Supervisors


Li Kecheng,


Wen Qingshan,


Sun Xianfeng,


Xu Fengli,


Sun Chongren,


94



---



##### Table of Contents





Zhang Youcai,


Wu Zhipan,





Compensation


Senior Management Compensation System




|               |  |         |    |         |              |  |    |               |  |  |    | 
|-------------- |  | ------- | -- | ------- | ------------ |  | -- | ------------- |  |  | -- | 
|               |  |         |    | % Stock |              |  |   
|               |  | % Fixed |    |         | appreciation |  |    | % Performance | 
|               |  | salary  |    |         | rights       |  |    | bonus         | 
|               |  |         |    |         |              |  |    |               | 
|Chairman       |  |         | 30 |         |              |  | 70 |               |  |  | 0  | 
|President      |  |         | 25 |         |              |  | 60 |               |  |  | 15 | 
|Vice President |  |         | 25 |         |              |  | 60 |               |  |  | 15 | 
|Department GM  |  |         | 25 |         |              |  | 50 |               |  |  | 25 | 



95



---



##### Table of Contents





Directors and Supervisors Compensation















Board Practices




Audit Committee






| |   |                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | supervising the integrity of financial reporting process to
    ensure fair, transparent and true financial disclosure;                                                                                                                                                                                            
|
| |  | evaluating the effectiveness of the internal control and risk
    management framework;                                                                                                                                                                                                                            
|
| |  | inspecting and supervising the effectiveness of the internal
    audit functions;                                                                                                                                                                                                                                  
|
| |  | reviewing the independent auditing process, evaluating the
    performance of external auditors annually and raising proposals
    together with the supervisory committee to the
    shareholders meetings with respect to the retention of
    external auditors and the compensation of such external auditors;

96



---



##### Table of Contents





| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | receiving and dealing with submissions and complaints by
    employees regarding accounting, internal control or auditing
    matters.

Investment and Development Committee






| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | studying strategic action plans as proposed by our President and
    making recommendations to the board of directors;                                                                                           
|
| |  | studying the annual investment budget as proposed by our
    President and making recommendations to the board of
    directors; and                                                                             
|
| |  | reviewing preliminary feasibility studies and feasibility
    studies for material investment projects requiring approval of
    the board of directors and making recommendations to the board
    of directors.

Evaluation and Remuneration Committee






| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | managing the performance evaluations for our President and
    monitoring performance evaluations led by our President for
    Senior Vice President, Vice Presidents, Chief Financial Officer
    and other senior management personnel;
|
| |  | studying our incentive plan, compensation plan and stock
    appreciation rights plan, supervising and evaluating the
    implementation of these plans and making recommendations for
    improvements to and perfection of such plans. 

Health, Safety and Environment Committee






| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | supervising the effective implementation of our Health, Safety
    and Environmental Protection Plan;                                                      
|
| |  | making recommendations to the board of directors and our
    President for major decisions with respect of health, safety and
    environmental protection;
|
| |  | inquiring the occurrence of and responsibilities for material
    accidents and supervising the remedial measures of material
    accidents.               

97



---



##### Table of Contents






Employees




|                           |       |           |         |         |            |  |      |       |  
|-------------------------- | ----- | --------- | ------- | ------- | ---------- |  | ---- | ----- | -
|                           |       | Employees |         |         | % of total | 
|                           |       |           |         |         |            | 
|Exploration and production |       |           | 236,591 |         |            |  | 55.8 |      
|Refining and marketing     |       |           | 116,813 |         |            |  | 27.5 |      
|Chemicals and marketing    |       |           | 57,765  |         |            |  | 13.6 |      
|Natural gas and pipeline   |       |           | 10,191  |         |            |  | 2.4  |      
|Other(1)                   |       |           | 2,815   |         |            |  | 0.7  |      
|                           |       |           |         |         |            | 
|                           | Total |           |         | 424,175 |            |  |      | 100.0 | %
|                           |       |           |         |         |            | 




|    |                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Including PetroChina Exploration & Development Research
    Institute, PetroChina Plan and Design Institute, PetroChina
    Refining & Chemicals Technology Research Center, and
    the management of our headquarters and specialized companies.








Share Ownership




98



---



##### Table of Contents






ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS





Major Shareholders













Related Party Transactions






Comprehensive Products and Services Agreement






| |                                                           
| | ----------------------------------------------------------
| | Products and Services Provided by Us to the CNPC
    Group



99



---



##### Table of Contents





| |                                                           
| | ----------------------------------------------------------
| | Products and Services Provided by the CNPC Group to
    Us





| |   |                                     
| | - | ------------------------------------
| |  | construction and technical services,
|
| |  | production services,                
|
| |  | supply of material services,        
|
| |  | social services,                    
|
| |  | ancillary services, and             
|
| |  | financial services.                 

Individual Product and Service Implementation Agreement






Land Use Rights Leasing Contract




Buildings Leasing Contract and Supplementary Building Leasing
Agreement










100



---



##### Table of Contents





Intellectual Property Licensing Contracts




Contract for the Transfer of Rights under Production Sharing
Contracts




Guarantee of Debts Contract






Deposits with China Petroleum Finance Company Limited




Related Party Transactions with CNPC (HK)




101



---



##### Table of Contents









| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Production sharing and development cost
    apportionment between CNPC (HK) and us. We and CNPC
    (HK) share the oil and natural gas produced from the
    Karamay Oilfield Area Blocks 9(1)-9(5), as to 46% by us and 54%
    by CNPC (HK), and from the Liaohe Oilfield Leng Jiapu Area, as
    to 30% by us and 70% by CNPC (HK). CNPC (HK) is responsible
    for all of the development costs in respect of the Karamay
    Oilfield Area Blocks 9(1)-9(5). We are responsible for 30% and
    CNPC (HK) is responsible for 70% of the development costs
    in respect of the Liaohe Leng Jiapu Oilfield.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (2) Provision of assistance by us to CNPC
    (HK). We are have agreed to provide assistance to CNPC
    (HK) for, among other things: (i) leasing warehouses,
    terminal facilities, barges, pipelines and land;
    (ii) obtaining approvals necessary for the petroleum
    operations; and (iii) obtaining office space, office
    supplies, transportation and communication facilities.
    CNPC (HK) has agreed to pay us an annual assistance fee in
    the amount of US$50,000 for each of the Karamay Oilfield Area
    Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area. The
    amount of such fee was determined through negotiations by taking
    into account the actual circumstances and conditions, including
    the scope of the projects and the level of demand for such
    assistance. This fee is accounted for as operating costs and
    shared by us and CNPC (HK) in accordance with procedures
    described in the Xinjiang Contract and the Liaohe Contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (3) Payment of training fees. In the course
    of development and operations of each oilfield, CNPC
    (HK) is obligated to pay us an amount of US$50,000 annually
    for training of our personnel for each of the Karamay Oilfield
    Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area.
    The amount of this fee was determined through negotiations by
    taking into account the actual circumstances and conditions,
    including the scope of the projects and the level of demand for
    training.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (4) Sale of crude oil by CNPC (HK) to
    us. CNPC (HK) has the right to deliver its share of
    oil production from each of the Karamay Oilfield Area Blocks
    9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area to a
    destination of its choice, except for destinations which
    infringe on the political interests of the PRC. However, given
    the transportation costs and the prevailing oil prices, the
    purchaser of the oil production attributable to CNPC
    (HK) from each of the Karamay Oilfield Area Blocks
    9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area is likely to
    be CNPC or its affiliates, including us, which will purchase oil
    produced in the Karamay Oilfield Area Blocks 9(1)-9(5) and the
    Liaohe Leng Jiapu Oilfield Area at the market price. Since the
    entering into of the petroleum production sharing contracts,
    CNPC (HK) has sold all of its share of the oil production
    to CNPC or its affiliates, including us. As far as our board of
    directors is aware, CNPC (HK) intends to continue with this
    arrangement. Although there is no contractual obligation on us
    to purchase oil production from the Karamay Oilfield Area Blocks
    9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area, from a
    commercial perspective, we intend to continue to make such
    purchases. The price of various grades of crude oil sold will be
    determined either with reference to the price approved by the
    relevant PRC authorities or with reference to the prevailing
    price in arms length transactions of crude oil of a
    similar quality in the market, adjusted to take into account the
    terms of transportation, payment and other factors.

102



---



##### Table of Contents



Loans or Guarantees with Related Parties







ITEM 8  FINANCIAL INFORMATION


Financial Statements




Dividend Policy








| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | general business conditions;                                                                                    
|
| |  | our financial results;                                                                                          
|
| |  | capital requirements;                                                                                           
|
| |  | contractual restrictions on the payment of dividends by us to
    our shareholders or by our subsidiaries to us;
|
| |  | our shareholders interests;                                                                                    
|
| |  | the effect on our debt ratings; and                                                                             
|
| |  | other factors our board of directors may deem relevant.                                                         





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





103



---



##### Table of Contents







| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | providing our shareholders with a competitive return on
    investment; and                      
|
| |  | assuring sufficient reinvestment of profits to enable us to
    achieve our strategic objectives.



Significant Changes




104



---



##### Table of Contents






ITEM 9  THE OFFER AND LISTING


Nature of the Trading Market and Market Price Information








|     |                |           |  |       |           |  |  |       |  |  |     |       |  |  |  |       | 
|---- | -------------- | --------- |  | ----- | --------- |  |  | ----- |  |  | --- | ----- |  |  |  | ----- | 
|     |                | Price per |  |       | Price per | 
|     |                | H share   |  |       | ADS       | 
|     |                |           |  |       |           | 
|     |                | High      |  |       | Low       |  |  | High  |  |  | Low |      
|     |                |           |  |       |           |  |  |       |  |  |     |      
|     |                | (HK$)     |  |       | (US$)     | 
|2000 |                |           |  |       |           |  |  |       |  |  |     |       |  |  |  |      
|     | Second quarter |           |  | 1.78  |           |  |  | 1.11  |  |  |     | 22.56 |  |  |  | 14.25 | 
|     | Third quarter  |           |  | 2.05  |           |  |  | 1.49  |  |  |     | 26.19 |  |  |  | 19.38 | 
|     | Fourth quarter |           |  | 1.75  |           |  |  | 1.30  |  |  |     | 23.00 |  |  |  | 15.94 | 
|2001 |                |           |  |       |           |  |  |       |  |  |     |       |  |  |  |      
|     | First quarter  |           |  | 1.48  |           |  |  | 1.26  |  |  |     | 18.73 |  |  |  | 16.55 | 
|     | Second quarter |           |  | 1.84  |           |  |  | 1.35  |  |  |     | 23.60 |  |  |  | 17.40 | 
|     | Third quarter  |           |  | 1.67  |           |  |  | 1.43  |  |  |     | 21.15 |  |  |  | 18.43 | 
|     | Fourth quarter |           |  | 1.48  |           |  |  | 1.29  |  |  |     | 19.30 |  |  |  | 16.80 | 
|2002 |                |           |  |       |           |  |  |       |  |  |     |       |  |  |  |      
|     | First quarter  |           |  | 1.62  |           |  |  | 1.39  |  |  |     | 21.07 |  |  |  | 18.03 | 
|     | Second quarter |           |  | 1.75  |           |  |  | 1.52  |  |  |     | 22.40 |  |  |  | 19.23 | 
|     | Third quarter  |           |  | 1.72  |           |  |  | 1.53  |  |  |     | 21.72 |  |  |  | 19.25 | 
|     | Fourth quarter |           |  | 1.57  |           |  |  | 1.44  |  |  |     | 20.75 |  |  |  | 18.40 | 
|2003 |                |           |  |       |           |  |  |       |  |  |     |       |  |  |  |      
|     | First quarter  |           |  | 1.70  |           |  |  | 1.55  |  |  |     | 21.61 |  |  |  | 19.10 | 
|     | Second quarter |           |  | 2.38  |           |  |  | 1.62  |  |  |     | 30.82 |  |  |  | 20.94 | 
|     | Third quarter  |           |  | 2.80  |           |  |  | 2.15  |  |  |     | 35.89 |  |  |  | 27.67 | 
|     | Fourth quarter |           |  | 4.45  |           |  |  | 2.60  |  |  |     | 57.05 |  |  |  | 33.75 | 
|2004 |                |           |  |       |           |  |  |       |  |  |     |       |  |  |  |      
|     | First quarter  |           |  | 4.85  |           |  |  | 3.75  |  |  |     | 63.70 |  |  |  | 47.53 | 
|     | Second quarter |           |  | 4.00  |           |  |  | 3.20  |  |  |     | 50.96 |  |  |  | 41.63 | 
|     | Third quarter  |           |  | 4.175 |           |  |  | 3.60  |  |  |     | 53.76 |  |  |  | 45.98 | 
|     | Fourth quarter |           |  | 4.375 |           |  |  | 4.075 |  |  |     | 56.60 |  |  |  | 52.22 | 

105



---



##### Table of Contents



|     |                              |           |  |       |           |  |  |       |  |  |     |       |  |  |  |       | 
|---- | ---------------------------- | --------- |  | ----- | --------- |  |  | ----- |  |  | --- | ----- |  |  |  | ----- | 
|     |                              | Price per |  |       | Price per | 
|     |                              | H share   |  |       | ADS       | 
|     |                              |           |  |       |           | 
|     |                              | High      |  |       | Low       |  |  | High  |  |  | Low |      
|     |                              |           |  |       |           |  |  |       |  |  |     |      
|     |                              | (HK$)     |  |       | (US$)     | 
|2005 |                              |           |  |       |           |  |  |       |  |  |     |       |  |  |  |      
|     | January                      |           |  | 4.325 |           |  |  | 4.025 |  |  |     | 56.10 |  |  |  | 51.65 | 
|     | February                     |           |  | 4.925 |           |  |  | 4.30  |  |  |     | 62.93 |  |  |  | 55.40 | 
|     | March                        |           |  | 5.10  |           |  |  | 4.70  |  |  |     | 65.36 |  |  |  | 60.76 | 
|     | April                        |           |  | 5.05  |           |  |  | 4.675 |  |  |     | 64.76 |  |  |  | 59.71 | 
|     | May                          |           |  | 4.975 |           |  |  | 4.70  |  |  |     | 64.48 |  |  |  | 60.21 | 
|     | June (through June 24, 2005) |           |  | 5.80  |           |  |  | 4.95  |  |  |     | 73.71 |  |  |  | 64.14 | 



106



---



##### Table of Contents






ITEM 10  ADDITIONAL INFORMATION





Memorandum and Articles of Association


Our Articles of Association Currently in Effect






| |                                       
| | --------------------------------------
| | Enforceability of Shareholders Rights





| |   |                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | between a holder of H shares and us;                                                                                                                                                                                                                                                             
|
| |  | between a holder of H shares and any of our directors,
    supervisors, general managers, deputy general managers or other
    senior officers; or                                                                                                                                               
|
| |  | between a holder of H shares and a holder of State-owned shares,
    arising from any provision of the 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





| |                                                           
| | ----------------------------------------------------------
| | Restrictions on Transferability and the Share
    Register







| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any relevant transfer fee is paid;                                                                                                                                                                                           
|
| |  | 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;
|
| |  | the instrument of transfer is in respect of one class of shares
    only; and                                                                                                                                                
|
| |  | 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.                                                      





| |          
| | ---------
| | Dividends







| |   |                                                  
| | - | -------------------------------------------------
| |  | recovery of losses, if any;                      
|
| |  | allocations to the statutory common reserve fund;

107



---



##### Table of Contents





| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | allocations to the statutory common welfare fund; and                                  
|
| |  | allocations to a discretionary common reserve fund if approved
    by the shareholders.







| |                                         
| | ----------------------------------------
| | Voting Rights and Shareholders Meetings





| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;
|
| |  | where our unrecovered losses reach one-third of the total amount
    of our share capital;                                                                           
|
| |  | where shareholders holding 10% or more of our issued and
    outstanding voting shares request in writing the convening of an
    extraordinary general meeting; or  
|
| |  | where our board deems necessary or our board of supervisors so
    request.                                                                                          







108



---



##### Table of Contents















| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase or reduction of our share capital or the issue of
    shares of any class, warrants and other similar securities;                                                                                                                        
|
| |  | the issue of our debentures;                                                                                                                                                                                                                         
|
| |  | our division, merger, dissolution and liquidation;                                                                                                                                                                                                   
|
| |  | amendments to our articles of association; and                                                                                                                                                                                                       
|
| |  | 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.









| |                   
| | ------------------
| | Board of Directors









| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | (a) be responsible for the convening of shareholders
    meetings and reporting on its work to the shareholders at such
    meetings;

109



---



##### Table of Contents





| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) implement the resolutions passed by the shareholders in
    general meetings;                                                                                                                                                                   
|
| | (c) determine our business plans and investment proposals;                                                                                                                                                                                          
|
| | (d) formulate our annual preliminary and final budgets;                                                                                                                                                                                             
|
| | (e) formulate our profit distribution proposal and loss
    recovery proposals;                                                                                                                                                                     
|
| | (f) formulate proposals for the increase or reduction of
    our registered capital and the issuance of our debentures;                                                                                                                             
|
| | (g) draw up plans for our merger, division or dissolution;                                                                                                                                                                                          
|
| | (h) decide on our internal management structure;                                                                                                                                                                                                    
|
| | (i) appoint or remove our president and to appoint or
    remove the vice presidents and other senior officers, including
    the financial controller, based on the recommendation of the
    general manager, and to decide on their remuneration;
|
| | (j) formulate our basic management system;                                                                                                                                                                                                          
|
| | (k) formulate proposals for any amendment of our articles
    of association; and                                                                                                                                                                   
|
| | (l) exercise any other powers conferred by the shareholders
    in general meetings.                                                                                                                                                                







| |   |                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | not to cause us to exceed the scope of business stipulated in
    our business license;                                                                                                                                                                                                                         
|
| |  | to act honestly in our best interests;                                                                                                                                                                                                                                                                          
|
| |  | not to expropriate our property in any way, including, without
    limitation, usurpation of opportunities which benefit us; and                                                                                                                                                                                
|
| |  | not to expropriate the individual rights of shareholders,
    including, without limitation, rights to distributions and
    voting rights, save and except according to a restructuring
    which has been submitted to the shareholders for their approval
    in accordance with the articles of association.





| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a duty, in the exercise of such persons powers and
    discharge of such persons duties, to exercise the care,
    diligence and skill that a reasonably prudent person would
    exercise in comparable circumstances;                                                                                                                           
|
| |  | a fiduciary obligation, in the exercise of our powers entrusted
    to him or her, not to place himself or herself in a position
    where his or her duty to us and his or her interests may
    conflict; and                                                                                                                                     
|
| |  | a duty not to direct a person or entity related or connected to
    a director, supervisor, president, vice president or senior
    officer in certain relationships enumerated in the articles of
    association to act in a manner which such director, supervisor,
    president, vice president or senior officer is prohibited from
    doing.



110



---



##### Table of Contents







| |                     
| | --------------------
| | Board of Supervisors





| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to verify financial reports and other financial information
    which have been prepared by the board and which are proposed to
    be presented at shareholders meetings, and      
|
| |  | to oversee our directors, president, vice presidents and other
    senior officers in order to prevent such persons from abusing
    their authority or infringing upon our interest.









| |                                                  
| | -------------------------------------------------
| | Restrictions on Large or Controlling Shareholders





| |   |                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to relieve a director or supervisor from his or her duty to act
    honestly in our best interests;                                                                                                                                                                                                                                                                                     
|
| |  | to approve the expropriation by a director or supervisor of our
    assets in any way, including, without limitation, opportunities
    which may benefit us; or                                                                                                                                                                                                                        
|
| |  | to approve the expropriation by a director or supervisor of the
    individual rights of other shareholders, including, without
    limitation, rights to distributions and voting rights, except
    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.







| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | is in a position to elect more than one-half of the board of
    directors;                    
|
| |  | has the power to exercise, or to control the exercise of, 30% or
    more of our voting rights;
|
| |  | holds 30% or more of our issued and outstanding shares; or                                     

111



---



##### Table of Contents





| |   |                                             
| | - | --------------------------------------------
| |  | has de facto control of us in any other way.

Amended Articles of Association Pending for Approval












| |                                                
| | -----------------------------------------------
| | Share Certificates and Register of Shareholders





| |                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  a complete duplicate of the register of shareholders;                                                                                                                                                                                                                               
|
| |  a report showing the status of our issued share
    capital;                                                                                                                                                                                                                        
|
| |  the latest audited financial statements,
    directors report, auditors report, and
    supervisors Reports;                                                                                                                                                                     
|
| |  our special resolutions;                                                                                                                                                                                                                                                            
|
| |  reports showing the number and nominal value of
    securities repurchased by us since the end of the last financial
    year, the aggregate amount paid for such securities and the
    maximum and the minimum prices paid in respect of each class of
    securities repurchased;
|
| |  a copy of the latest annual examination report filed
    with the State Administration of Industry and Commerce of the
    PRC; and                                                                                                                                                 
|
| |  for shareholders only, copies of the shareholder
    meetings minutes.                                                                                                                                                                                                             



| |                               
| | ------------------------------
| | Shareholders General Meetings





| |                   
| | ------------------
| | Board of Directors



112



---



##### Table of Contents





| |                                    
| | -----------------------------------
| | Secretary of the Board of Directors





| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | organize board meetings and general meetings; and                                                                                                                                                                      
|
| |  | circulate minutes of the meetings of the board of directors to
    all directors for their signature and records within
    14 days after the board meeting is held, and make the
    minutes available for inspection.



| |                                                             
| | ------------------------------------------------------------
| | Financial and Accounting Systems and Profit
    Distribution






Material Contracts







Exchange Controls






| |   |                                                              
| | - | -------------------------------------------------------------
| |  | debt service on foreign currency-denominated debt;           
|
| |  | purchases of imported equipment and materials; and           
|
| |  | payment of any dividends declared in respect of the H shares.







113



---



##### Table of Contents










Taxation




Dividends and Individual Investors






Dividends and Foreign Enterprises




Tax Treaties






| |   |                   
| | - | ------------------
| |  | the United States;

114



---



##### Table of Contents





| |   |                        
| | - | -----------------------
| |  | Australia;             
|
| |  | Canada;                
|
| |  | France;                
|
| |  | Germany;               
|
| |  | Japan;                 
|
| |  | Malaysia;              
|
| |  | Singapore;             
|
| |  | the United Kingdom; and
|
| |  | the Netherlands.       



Capital Gains




Additional PRC Tax Considerations







Significant Differences in Corporate Governance Practices


www.petrochina.com.cn




| |    |                                                                 
| | -- | ----------------------------------------------------------------
| | 1. | From our main web page, first click on Investor
    Relations.
|
| | 2. | Next, click on Corporate Governance Structure.                

115



---



##### Table of Contents





| |    |                                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. | Finally, click on Significant Differences In Corporate
    Governance Practices For Purposes Of Section 303A.11 of The
    New York Stock Exchange Listed Company Manual.




Documents on Display






116



---



##### Table of Contents






ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK






Interest Rate Risk




Foreign Exchange Rate Risk






117



---



##### Table of Contents



December 31, 2004


|                             |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |        | 
|---------------------------- | --------------------- | ------------------------------------------------ | ------ | ---------- | --------- |  | ----- | ----- |  |  | ------ | ------ |  | ---- | ----- | ----- | ---------- |  | ----- | ----- |  |  | -------- | ----- |  | ----- | ------ | ------ |  |  | ---- | ------ |  |  | ------ | ------ | 
|                             |                       |                                                  |        | Percentage |           |  |      
|                             |                       | Expected maturity date                           |        |            | to total  |  |       |      
|                             |                       |                                                  |        |            | long-term |  |       | Fair  | 
|                             |                       | 2005                                             |        |            | 2006      |  |       | 2007  |  |  | 2008   |        |  | 2009 |       |       | Thereafter |  |       | Total |  |  | debt (%) |       |  | value |       
|                             |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |       
|                             |                       | (RMB equivalent in millions, except percentages) |       
|Long term debt               |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|Loan in RMB                  |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 260        |           |  |       | 6     |  |  |        | 4      |  |      |       | 200   |            |  |       |      |  |  |          | 1     |  |       |        | 471    |  |  |      | 0.86%  |  |  |        | 457    | 
|                             | Average interest rate |                                                  |        | 5.30%      |           |  |       | 0.03% |  |  |        | 4.72%  |  |      |       | 3.60% |            |  |       |      |  |  |          | 6.10% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable
    rate(1)  |                                                  |        | 12,234     |           |  |       | 6,366 |  |  |        | 13,718 |  |      |       | 4,440 |            |  |       | 100   |  |  |          | 4,500 |  |       |        | 41,358 |  |  |      | 75.97% |  |  |        | 41,358 | 
|                             | Average interest rate |                                                  |        | 5.08%      |           |  |       | 5.12% |  |  |        | 4.85%  |  |      |       | 5.03% |            |  |       | 5.18% |  |  |          | 4.62% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in Euro                 |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 36         |           |  |       | 35    |  |  |        | 17     |  |      |       | 17    |            |  |       | 17    |  |  |          | 238   |  |       |        | 360    |  |  |      | 0.66%  |  |  |        | 302    | 
|                             | Average interest rate |                                                  |        | 5.47%      |           |  |       | 5.42% |  |  |        | 2.13%  |  |      |       | 2.13% |            |  |       | 2.13% |  |  |          | 2.01% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |        |           |           |  |       |      |  |  |        |       |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |       |  |  |      |       |  |  |        |       | 
|                             | Average interest rate |                                                  |        |           |           |  |       |      |  |  |        |       |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in United States Dollar |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 463        |           |  |       | 406   |  |  |        | 255    |  |      |       | 169   |            |  |       | 103   |  |  |          | 693   |  |       |        | 2,089  |  |  |      | 3.84%  |  |  |        | 1,863  | 
|                             | Average interest rate |                                                  |        | 6.38%      |           |  |       | 6.29% |  |  |        | 5.96%  |  |      |       | 5.48% |            |  |       | 4.50% |  |  |          | 1.57% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |        | 2,670      |           |  |       | 1,017 |  |  |        | 1,055  |  |      |       | 71    |            |  |       | 1,318 |  |  |          | 418   |  |       |        | 6,549  |  |  |      | 12.03% |  |  |        | 6,549  | 
|                             | Average interest rate |                                                  |        | 2.78%      |           |  |       | 3.13% |  |  |        | 3.27%  |  |      |       | 1.65% |            |  |       | 3.23% |  |  |          | 1.65% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in British Pound        |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 154        |           |  |       | 133   |  |  |        | 51     |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        | 338    |  |  |      | 0.62%  |  |  |        | 326    | 
|                             | Average interest rate |                                                  |        | 2.85%      |           |  |       | 2.85% |  |  |        | 2.85%  |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in Japanese Yen         |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 170        |           |  |       | 167   |  |  |        | 43     |  |      |       | 24    |            |  |       | 9     |  |  |          | 17    |  |       |        | 430    |  |  |      | 0.79%  |  |  |        | 463    | 
|                             | Average interest rate |                                                  |        | 4.63%      |           |  |       | 4.62% |  |  |        | 4.84%  |  |      |       | 4.45% |            |  |       | 5.02% |  |  |          | 5.02% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |        |           |           |  |       |      |  |  |        |       |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |       |  |  |      |       |  |  |        |       | 
|                             | Average interest rate |                                                  |        |           |           |  |       |      |  |  |        |       |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Debenture in RMB             |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        |           |           |  |       |      |  |  |        | 1,350  |  |      |       |      |            |  |       |      |  |  |          | 1,500 |  |       |        | 2,850  |  |  |      | 5.23%  |  |  |        | 2,632  | 
|                             | Average interest rate |                                                  |        |           |           |  |       |      |  |  |        | 4.50%  |  |      |       |      |            |  |       |      |  |  |          | 4.11% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |       
|Total                        |                       |                                                  | 15,987 |            |           |  | 8,130 |       |  |  | 16,493 |        |  |      | 4,921 |       |            |  | 1,547 |       |  |  | 7,367    |       |  |       | 54,445 |        |  |  | 100% |        |  |  | 53,950 |       
|                             |                       |                                                  |        |            |           |  |       |       |  |  |        |        |  |      |       |       |            |  |       |       |  |  |          |       |  |       |       

118



---



##### Table of Contents



December 31, 2003


|                             |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |        | 
|---------------------------- | --------------------- | ------------------------------------------------ | ------ | ---------- | --------- |  | ------ | ------ |  |  | ----- | ----- |  | ---- | ----- | ----- | ---------- |  | ----- | ----- |  |  | -------- | ----- |  | ----- | ------ | ------ |  |  | ---- | ------ |  |  | ------ | ------ | 
|                             |                       |                                                  |        | Percentage |           |  |       
|                             |                       | Expected maturity date                           |        |            | to total  |  |        |       
|                             |                       |                                                  |        |            | long-term |  |        | Fair   | 
|                             |                       | 2004                                             |        |            | 2005      |  |        | 2006   |  |  | 2007  |       |  | 2008 |       |       | Thereafter |  |       | Total |  |  | debt (%) |       |  | value |       
|                             |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |       
|                             |                       | (RMB equivalent in millions, except percentages) |       
|Long term debt               |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|Loan in RMB                  |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 43         |           |  |        | 39     |  |  |       | 5     |  |      |       |      |            |  |       |      |  |  |          | 3     |  |       |        | 90     |  |  |      | 0.15%  |  |  |        | 88     | 
|                             | Average interest rate |                                                  |        | 2.06%      |           |  |        | 4.81%  |  |  |       | 4.44% |  |      |       |      |            |  |       |      |  |  |          | 2.03% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable
    rate(1)  |                                                  |        | 16,686     |           |  |        | 12,448 |  |  |       | 6,366 |  |      |       | 3,720 |            |  |       | 3,720 |  |  |          | 3,000 |  |       |        | 45,940 |  |  |      | 74.55% |  |  |        | 45,940 | 
|                             | Average interest rate |                                                  |        | 5.05%      |           |  |        | 5.08%  |  |  |       | 5.12% |  |      |       | 5.18% |            |  |       | 5.10% |  |  |          | 4.65% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in Euro                 |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 43         |           |  |        | 39     |  |  |       | 34    |  |      |       | 16    |            |  |       | 16    |  |  |          | 233   |  |       |        | 381    |  |  |      | 0.62%  |  |  |        | 319    | 
|                             | Average interest rate |                                                  |        | 6.08%      |           |  |        | 5.47%  |  |  |       | 5.33% |  |      |       | 2.11% |            |  |       | 2.11% |  |  |          | 2.10% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |        |           |           |  |        |       |  |  |       |      |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |       |  |  |      |       |  |  |        |       | 
|                             | Average interest rate |                                                  |        |           |           |  |        |       |  |  |       |      |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in United States Dollar |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 596        |           |  |        | 582    |  |  |       | 531   |  |      |       | 349   |            |  |       | 257   |  |  |          | 1,152 |  |       |        | 3,467  |  |  |      | 5.62%  |  |  |        | 3,253  | 
|                             | Average interest rate |                                                  |        | 6.05%      |           |  |        | 6.03%  |  |  |       | 5.97% |  |      |       | 5.65% |            |  |       | 5.34% |  |  |          | 3.06% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |        | 1,997      |           |  |        | 4,754  |  |  |       | 111   |  |      |       | 116   |            |  |       | 121   |  |  |          | 755   |  |       |        | 7,854  |  |  |      | 12.75% |  |  |        | 7,854  | 
|                             | Average interest rate |                                                  |        | 1.16%      |           |  |        | 1.45%  |  |  |       | 2.33% |  |      |       | 2.36% |            |  |       | 2.38% |  |  |          | 2.32% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in British Pound        |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 143        |           |  |        | 142    |  |  |       | 122   |  |      |       | 47    |            |  |       |      |  |  |          |      |  |       |        | 454    |  |  |      | 0.74%  |  |  |        | 432    | 
|                             | Average interest rate |                                                  |        | 2.85%      |           |  |        | 2.85%  |  |  |       | 2.85% |  |      |       | 2.85% |            |  |       |      |  |  |          |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in Japanese Yen         |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        | 164        |           |  |        | 162    |  |  |       | 162   |  |      |       | 42    |            |  |       | 23    |  |  |          | 25    |  |       |        | 578    |  |  |      | 0.94%  |  |  |        | 628    | 
|                             | Average interest rate |                                                  |        | 4.50%      |           |  |        | 4.49%  |  |  |       | 4.49% |  |      |       | 4.35% |            |  |       | 3.56% |  |  |          | 2.68% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |        |           |           |  |        |       |  |  |       |      |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |       |  |  |      |       |  |  |        |       | 
|                             | Average interest rate |                                                  |        |           |           |  |        |       |  |  |       |      |  |      |       |      |            |  |       |      |  |  |          |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Debenture in RMB             |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |        |           |           |  |        |       |  |  |       |      |  |      |       | 1,350 |            |  |       |      |  |  |          | 1,500 |  |       |        | 2,850  |  |  |      | 4.63%  |  |  |        | 2,640  | 
|                             | Average interest rate |                                                  |        |           |           |  |        |       |  |  |       |      |  |      |       | 4.50% |            |  |       |      |  |  |          | 4.11% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |       
|Total                        |                       |                                                  | 19,672 |            |           |  | 18,166 |        |  |  | 7,331 |       |  |      | 5,640 |       |            |  | 4,137 |       |  |  | 6,668    |       |  |       | 61,614 |        |  |  | 100% |        |  |  | 61,154 |       
|                             |                       |                                                  |        |            |           |  |        |        |  |  |       |       |  |      |       |       |            |  |       |       |  |  |          |       |  |       |       

119



---



##### Table of Contents



December 31, 2002


|                             |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |        | 
|---------------------------- | --------------------- | ------------------------------------------------ | ----- | ---------- | --------- |  | ------ | ------ |  |  | ------ | ------ |  | ---- | ----- | ----- | ---------- |  | ----- | ----- |  |  | ------ | ----- |  | ----- | ------ | ------ |  |  | ---- | ------ |  |  | ------ | ------ | 
|                             |                       |                                                  |       | Percentage |           |  |       
|                             |                       | Expected maturity date                           |       |            | to total  |  |        |       
|                             |                       |                                                  |       |            | long-term |  |        | Fair   | 
|Long term debt               |                       | 2003                                             |       |            | 2004      |  |        | 2005   |  |  | 2006   |        |  | 2007 |       |       | Thereafter |  |       | Total |  |  | debt % |       |  | value |       
|                             |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |       
|                             |                       | (RMB equivalent in millions, except percentages) |      
|Loan in RMB                  |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |       | 127        |           |  |        | 80     |  |  |        | 1      |  |      |       |      |            |  |       | 1     |  |  |        | 2     |  |       |        | 211    |  |  |      | 0.32%  |  |  |        | 207    | 
|                             | Average interest rate |                                                  |       | 4.71%      |           |  |        | 3.46%  |  |  |        | 6.94%  |  |      |       |      |            |  |       | 7.00% |  |  |        |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable
    rate(1)  |                                                  |       | 3,798      |           |  |        | 16,087 |  |  |        | 13,033 |  |      |       | 6,366 |            |  |       | 3,720 |  |  |        | 6,521 |  |       |        | 49,525 |  |  |      | 74.20% |  |  |        | 49,525 | 
|                             | Average interest rate |                                                  |       | 5.18%      |           |  |        | 5.02%  |  |  |        | 5.15%  |  |      |       | 5.20% |            |  |       | 5.31% |  |  |        | 5.01% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in Euro                 |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |       | 107        |           |  |        | 36     |  |  |        | 30     |  |      |       | 30    |            |  |       | 15    |  |  |        | 201   |  |       |        | 419    |  |  |      | 0.63%  |  |  |        | 328    | 
|                             | Average interest rate |                                                  |       | 3.74%      |           |  |        | 5.80%  |  |  |        | 5.16%  |  |      |       | 5.16% |            |  |       | 2.13% |  |  |        | 2.11% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |       | 22         |           |  |        | 22     |  |  |        |       |  |      |       |      |            |  |       |      |  |  |        |      |  |       |        | 44     |  |  |      | 0.07%  |  |  |        | 44     | 
|                             | Average interest rate |                                                  |       | 1.99%      |           |  |        | 2.01%  |  |  |        |       |  |      |       |      |            |  |       |      |  |  |        |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in United States Dollar |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |       | 1,037      |           |  |        | 873    |  |  |        | 869    |  |      |       | 741   |            |  |       | 496   |  |  |        | 1,403 |  |       |        | 5,419  |  |  |      | 8.12%  |  |  |        | 5,137  | 
|                             | Average interest rate |                                                  |       | 6.51%      |           |  |        | 6.43%  |  |  |        | 6.43%  |  |      |       | 6.23% |            |  |       | 6.01% |  |  |        | 3.39% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |       | 372        |           |  |        | 2,071  |  |  |        | 2,018  |  |      |       | 2,208 |            |  |       | 185   |  |  |        | 575   |  |       |        | 7,429  |  |  |      | 11.13% |  |  |        | 7,429  | 
|                             | Average interest rate |                                                  |       | 4.31%      |           |  |        | 1.61%  |  |  |        | 1.45%  |  |      |       | 2.08% |            |  |       | 3.86% |  |  |        | 2.71% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in British Pound        |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |       | 216        |           |  |        | 210    |  |  |        | 210    |  |      |       | 209   |            |  |       | 129   |  |  |        | 348   |  |       |        | 1,322  |  |  |      | 1.98%  |  |  |        | 1,288  | 
|                             | Average interest rate |                                                  |       | 3.79%      |           |  |        | 3.82%  |  |  |        | 3.82%  |  |      |       | 3.82% |            |  |       | 4.41% |  |  |        | 5.17% |  |       |        |        |  |  |      |        |  |  |        |        | 
|Loan in Japanese Yen         |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |       | 147        |           |  |        | 146    |  |  |        | 146    |  |      |       | 146   |            |  |       | 39    |  |  |        | 51    |  |       |        | 675    |  |  |      | 1.01%  |  |  |        | 743    | 
|                             | Average interest rate |                                                  |       | 4.59%      |           |  |        | 4.59%  |  |  |        | 4.59%  |  |      |       | 4.59% |            |  |       | 4.30% |  |  |        | 3.55% |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             | Variable rate         |                                                  |       | 17         |           |  |        | 16     |  |  |        | 15     |  |      |       |      |            |  |       |      |  |  |        |      |  |       |        | 48     |  |  |      | 0.07%  |  |  |        | 48     | 
|                             | Average interest rate |                                                  |       | 3.61%      |           |  |        | 3.58%  |  |  |        | 1.97%  |  |      |       |      |            |  |       |      |  |  |        |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|Debenture in RMB             |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |        |        |  |  |      |        |  |  |        |       
|                             | Fixed rate            |                                                  |       | 300        |           |  |        |       |  |  |        |       |  |      |       |      |            |  |       | 1,350 |  |  |        |      |  |       |        | 1,650  |  |  |      | 2.47%  |  |  |        | 1,646  | 
|                             | Average interest rate |                                                  |       | 9.00%      |           |  |        |       |  |  |        |       |  |      |       |      |            |  |       | 4.50% |  |  |        |      |  |       |        |        |  |  |      |        |  |  |        |        | 
|                             |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |       
|Total                        |                       |                                                  | 6,143 |            |           |  | 19,541 |        |  |  | 16,322 |        |  |      | 9,700 |       |            |  | 5,935 |       |  |  | 9,101  |       |  |       | 66,742 |        |  |  | 100% |        |  |  | 66,395 |       
|                             |                       |                                                  |       |            |           |  |        |        |  |  |        |        |  |      |       |       |            |  |       |       |  |  |        |       |  |       |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Due to the declining interest rates in recent years in China,
    the PRC government has implemented a program to adjust interest
    rates on certain fixed RMB loans periodically to reflect the
    market rates in effect published by the Peoples Bank of
    China, or the PBOC, from time to time. As a result, these
    previously fixed RMB loans are categorized as variable rate
    loans as of December 31, 2002, 2003 and 2004. The newly
    adjusted rates usually become effective one year after the
    announcement by the PBOC. The average interest rates on these
    loans are calculated based on the then effective rates as of
    December 31, 2002, 2003 and 2004, respectively.

Commodity Price Risk




120



---



##### Table of Contents






ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES







PART II


ITEM 13  DEFAULTS, DIVIDENDS ARREARAGES AND
DELINQUENCIES







ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS


TO SECURITY HOLDERS







ITEM 15  CONTROLS AND PROCEDURES










121



---



##### Table of Contents








ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT







ITEM 16B  CODE OF ETHICS


www.petrochina.com.cn




| |    |                                                                                                                                  
| | -- | ---------------------------------------------------------------------------------------------------------------------------------
| | 1. | From our main web page, first click on Investor
    Relations.                                                                 
|
| | 2. | Next, click on Corporate Governance Structure.                                                                                 
|
| | 3. | Finally, click on Code of Ethics for Senior
    Management or Code of Ethics for Employees of
    PetroChina Company Limited.




ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND
SERVICES








|                   |  |               |    |  |      |  |   |      |  |  |      |  |  |  |   | 
|------------------ |  | ------------- | -- |  | ---- |  | - | ---- |  |  | ---- |  |  |  | - | 
|                   |  | December 31,  |   
|                   |  |               |   
|                   |  | 2003          |    |  | 2003 |  |   | 2004 |  |  | 2004 | 
|                   |  |               |    |  |      |  |   |      |  |  |      | 
|                   |  | RMB           |    |  | US$  |  |   | RMB  |  |  | US$  | 
|                   |  | (in millions) |   
|Audit fees         |  |               | 44 |  |      |  | 5 |      |  |  | 43   |  |  |  | 5 | 
|Audit-related fees |  |               |   |  |      |  |  |      |  |  |     |  |  |  |  | 
|Tax fees           |  |               |   |  |      |  |  |      |  |  |     |  |  |  |  | 
|Other fees         |  |               |   |  |      |  |  |      |  |  | 23   |  |  |  | 3 | 
|                   |  |               |    |  |      |  |   |      |  |  |      | 
|Total              |  |               | 44 |  |      |  | 5 |      |  |  | 66   |  |  |  | 8 | 
|                   |  |               |    |  |      |  |   |      |  |  |      | 



122



---



##### Table of Contents







| |                                                         
| | --------------------------------------------------------
| | Audit Committee Pre-approved Policies and
    Procedures



de minimis





ITEM 16D  EXEMPTIONS FROM LISTING STANDARDS FOR
AUDIT COMMITTEES







ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE
ISSUER AND ITS AFFILIATES







PART III


ITEM 17  FINANCIAL STATEMENTS







ITEM 18  FINANCIAL STATEMENTS







ITEM 19  EXHIBITS






|        |  |                                                                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                    
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                    
|1.1     |  | Articles of Association (as amended) (English translation)
    (1)                                                                                                                                                                                                 
|1.2     |  | Articles of Association (as amended and pending for approval of
    SASAC) (English translation)                                                                                                                                                                   
|4.1     |  | 2005 Management Performance Contract (English Translation)                                                                                                                                                                                                         
|4.2     |  | Crude Oil Mutual Supply Framework Agreement, dated
    December 1, 2004, between China Petroleum and Chemical
    Corporation and PetroChina (English translation)                                                                                                 
|4.3     |  | Capital Contribution Agreement, dated June 9, 2005, among
    China National Oil and Gas Exploration and Development
    Corporation, Central Asia Petroleum Company Limited, Zhong You
    Kan Tan Kai Fa Company Limited and PetroChina (English
    Translation)
|4.4     |  | Transfer Agreement, dated June 9, 2005, between Zhong You
    Kan Tan Kai Fa Company Limited and PetroChina (English
    Translation)                                                                                                                              

123



---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                          
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                          
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                          
|4.5     |  | Supplementary Agreement to Comprehensive Products and Services
    Agreement, dated June 9, 2005, between CNPC and PetroChina
    (English Translation)                                                                                                                  
|4.6     |  | Form of Non-competition Agreement between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                             
|4.7     |  | Form of Comprehensive Products and Services Agreement between
    CNPC and PetroChina (together with English
    translation)(2)                                                                                                                                         
|4.8     |  | Form of Land Use Rights Leasing Contract between CNPC and
    PetroChina (together with English
    translation)(2)                                                                                                                                                      
|4.9     |  | Form of Buildings Leasing Contract between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                            
|4.10    |  | Form of Trademark Licensing Contract between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                          
|4.11    |  | Form of Patent and Know-how Licensing Contract between CNPC and
    PetroChina (together with English
    translation)(2)                                                                                                                                                
|4.12    |  | Form of Computer Software Licensing Contract between CNPC and
    PetroChina (together with English
    translation)(2)                                                                                                                                                  
|4.13    |  | Form of Contract for Transfer of Rights under Production Sharing
    Contracts between CNPC and PetroChina (together with English
    translation)(2)                                                                                                                    
|4.14    |  | Form of Guarantee of Debts Contract between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                           
|4.15    |  | Form of Contract for the Supervision of Certain Sales
    Enterprises between CNPC and PetroChina (together with English
    translation)(2)                                                                                                                             
|4.16    |  | Form of Agreement for Transfer of Rights and Interests under the
    Crude Oil Premium and Discount Calculation Agreement between
    China Petrochemical Corporation, CNPC and PetroChina (together
    with English
    translation)(2)                                
|4.17    |  | Form of Agreement for the Transfer of Rights and Interests under
    the Retainer Contracts relating to Oil Exploration and
    Exploitation in Lengjiapu Area, Liaohe Oil Region and
    No. 9.1-9.5 Areas, Karamay Oil Field (together with English
    translation)(2)
|8.1     |  | List of major subsidiaries                                                                                                                                                                                                                                               
|10.1    |  | Significant Differences in Corporate Governance Practices for
    Purposes of Section 303A.11 of the New York Exchange Listed
    Company Manual                                                                                                                         
|12.1    |  | Certification of Chief Executive Officer required by
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  
|12.2    |  | Certification of Chief Financial Officer required by
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  
|13.1    |  | Certification of Chief Executive Officer required by
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                               
|13.2    |  | Certification of Chief Financial Officer required by
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                               
|16.1    |  | Code of Ethics for Senior Management                                                                                                                                                                                                                                     
|16.2    |  | Code of Ethics for Employees                                                                                                                                                                                                                                             






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to our annual report on Form 20-F
    for the fiscal year ended December 31, 2001
    (File No. 1-15006) filed with the Commission.       
|   
|(2) | Incorporated by reference to our Registration Statement on
    Form F-1 (File No. 333-11566) filed with the
    Commission, as declared effective on March 29, 2000.

124



---



##### Table of Contents



SIGNATURE






| |                                         
| | ----------------------------------------
| | PETROCHINA COMPANY LIMITED              
|
| | /s/ LI HUAIQI                           
| |                                         
| | Name: Li Huaiqi                         
| | Title:   Secretary to Board of Directors



125



---



##### Table of Contents






INDEX OF FINANCIAL STATEMENTS


|                                                |                                                                                                                                      |      |  |      | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | ---- |  | ---- | 
|                                                |                                                                                                                                      | Page | 
|                                                |                                                                                                                                      |      | 
|PetroChina Company Limited and its Subsidiaries |                                                                                                                                      |      |  |     
|                                                | Consolidated Financial Statements                                                                                                    |      |  |      | 
|                                                | Report of Independent Registered Public Accounting Firm                                                                              |      |  | F-2  | 
|                                                | Consolidated Statements of Income for each of the three years in
    the period ended December 31, 2004                              |      |  | F-3  | 
|                                                | Consolidated Balance Sheets as of December 31, 2003 and 2004                                                                         |      |  | F-4  | 
|                                                | Consolidated Statements of Cash Flows for each of the three
    years in the period ended December 31, 2004                          |      |  | F-5  | 
|                                                | Consolidated Statements of Changes in Shareholders Equity
    for each of the three years in the period ended
    December 31, 2004 |      |  | F-7  | 
|                                                | Notes to the Consolidated Financial Statements                                                                                       |      |  | F-8  | 
|                                                | Supplementary Petroleum Data (unaudited)                                                                                             |      |  | F-57 | 

F-1



---



##### Table of Contents



Report of Independent Registered Public Accounting Firm










| |                             
| | ----------------------------
| | PricewaterhouseCoopers      
| | Certified Public Accountants
|
| | Hong Kong, June 28, 2005    

F-2



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


CONSOLIDATED STATEMENTS OF INCOME


For the Years Ended December 31, 2002, 2003 and 2004


(Amounts in millions except for per share data)


|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |          |          |   |  |         |         |  
|--------------------------------------- | ----------------------------------------------------- | ---- | -- | ----------------------- | ---- |  | -------- | ------- | - | --- | -------- | ------- | --- | ---- | -------- | -------- | - |  | ------- | ------- | -
|                                        |                                                       |      |    | Year Ended December 31, |     
|                                        |                                                       |      |    |                         |     
|                                        |                                                       | Note |    |                         | 2002 |  |          | 2003    |   |     | 2004     |         |     | 2004 |         
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|                                        |                                                       |      |    | RMB                     |      |  | RMB      |         |   | RMB |          |         | US$ |     
|REVENUES                                |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |          |          |   |  |         |        
|                                        | Sales and other operating revenues                    |      |    |                         |      |  |          | 244,424 |   |     |          | 303,779 |     |      |          | 388,633  |   |  |         | 46,956  |  
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|OPERATING EXPENSES                      |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |          |          |   |  |         |        
|                                        | Purchases, services and other                         |      |    |                         |      |  |          | (71,690 | ) |     |          | (90,850 | )   |      |          | (116,353 | ) |  |         | (14,058 | )
|                                        | Employee compensation costs                           |      |    | 4                       |      |  |          | (16,248 | ) |     |          | (19,542 | )   |      |          | (22,309  | ) |  |         | (2,695  | )
|                                        | Exploration expenses, including exploratory dry holes |      |    |                         |      |  |          | (8,095  | ) |     |          | (10,577 | )   |      |          | (11,723  | ) |  |         | (1,416  | )
|                                        | Depreciation, depletion and amortization              |      |    |                         |      |  |          | (36,782 | ) |     |          | (40,531 | )   |      |          | (46,411  | ) |  |         | (5,608  | )
|                                        | Selling, general and administrative expenses          |      |    |                         |      |  |          | (22,474 | ) |     |          | (23,930 | )   |      |          | (26,377  | ) |  |         | (3,187  | )
|                                        | Shut down of manufacturing assets                     |      |    | 5                       |      |  |          | (2,121  | ) |     |          | (2,355  | )   |      |          | (220     | ) |  |         | (27     | )
|                                        | Taxes other than income taxes                         |      |    |                         |      |  |          | (14,613 | ) |     |          | (15,879 | )   |      |          | (18,685  | ) |  |         | (2,258  | )
|                                        | Revaluation loss of property, plant and equipment     |      |    | 16                      |      |  |          |        |   |     |          | (391    | )   |      |          |         |   |  |         |        |  
|                                        | Other (expense)/income, net                           |      |    |                         |      |  |          | (60     | ) |     |          | (538    | )   |      |          | 31       |   |  |         | 4       |  
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|TOTAL OPERATING EXPENSES                |                                                       |      |    |                         |      |  | (172,083 | )       |   |     | (204,593 | )       |     |      | (242,047 | )        |   |  | (29,245 | )      
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|INCOME FROM OPERATIONS                  |                                                       |      |    |                         |      |  | 72,341   |         |   |     | 99,186   |         |     |      | 146,586  |          |   |  | 17,711  |        
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|FINANCE COSTS                           |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |          |          |   |  |         |        
|                                        | Exchange gain                                         |      |    |                         |      |  |          | 133     |   |     |          | 53      |     |      |          | 50       |   |  |         | 6       |  
|                                        | Exchange loss                                         |      |    |                         |      |  |          | (449    | ) |     |          | (233    | )   |      |          | (123     | ) |  |         | (15     | )
|                                        | Interest income                                       |      |    |                         |      |  |          | 463     |   |     |          | 677     |     |      |          | 1,107    |   |  |         | 134     |  
|                                        | Interest expense                                      |      |    | 6                       |      |  |          | (3,516  | ) |     |          | (2,346  | )   |      |          | (2,303   | ) |  |         | (278    | )
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|TOTAL FINANCE COSTS                     |                                                       |      |    |                         |      |  | (3,369   | )       |   |     | (1,849   | )       |     |      | (1,269   | )        |   |  | (153    | )      
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|INCOME FROM EQUITY AFFILIATES           |                                                       |      | 17 |                         |      |  | 268      |         |   |     | 985      |         |     |      | 1,824    |          |   |  | 220     |        
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|INCOME BEFORE INCOME TAXES              |                                                       |      |    |                         |      |  | 69,240   |         |   |     | 98,322   |         |     |      | 147,141  |          |   |  | 17,778  |        
|INCOME TAXES                            |                                                       |      | 7  |                         |      |  | (22,231  | )       |   |     | (28,072  | )       |     |      | (42,563  | )        |   |  | (5,143  | )      
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|INCOME BEFORE MINORITY INTERESTS        |                                                       |      |    |                         |      |  | 47,009   |         |   |     | 70,250   |         |     |      | 104,578  |          |   |  | 12,635  |        
|INCOME APPLICABLE TO MINORITY INTERESTS |                                                       |      |    |                         |      |  | (99      | )       |   |     | (636     | )       |     |      | (1,651   | )        |   |  | (199    | )      
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|NET INCOME                              |                                                       |      |    |                         |      |  | 46,910   |         |   |     | 69,614   |         |     |      | 102,927  |          |   |  | 12,436  |        
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|BASIC AND DILUTED NET INCOME PER SHARE  |                                                       |      | 8  |                         |      |  | 0.27     |         |   |     | 0.40     |         |     |      | 0.59     |          |   |  | 0.07    |        
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|NUMBER OF SHARES                        |                                                       |      | 8  |                         |      |  | 175,824  |         |   |     | 175,824  |         |     |      | 175,824  |          |   |  | 175,824 |        
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|DIVIDENDS ATTRIBUTABLE TO:              |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |          |          |   |  |         |        
|                                        | Interim dividend declared during the year             |      |    | 9                       |      |  |          | 8,811   |   |     |          | 17,379  |     |      |          | 20,381   |   |  |         | 2,463   |  
|                                        | Final dividend proposed after the balance sheet date  |      |    | 9                       |      |  |          | 12,299  |   |     |          | 13,947  |     |      |          | 25,936   |   |  |         | 3,134   |  
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         
|                                        |                                                       |      |    |                         |      |  | 21,110   |         |   |     | 31,326   |         |     |      | 46,317   |          |   |  | 5,597   |        
|                                        |                                                       |      |    |                         |      |  |          |         |   |     |          |         |     |      |         



F-3



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


CONSOLIDATED BALANCE SHEETS


As of December 31, 2003 and 2004


(Amounts in millions)


|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |   |  |  |        |  
|-------------------------------------------------------------------------------------------- |  | ---- | -- | --------------- | ---- |  | ------- | ---- |  | --- | ------- | - |  |  | ------ | -
|                                                                                             |  |      |    | At December 31, |     
|                                                                                             |  |      |    |                 |     
|                                                                                             |  | Note |    |                 | 2003 |  |         | 2004 |  |     | 2004    |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|                                                                                             |  |      |    | RMB             |      |  | RMB     |      |  | US$ |        
|ASSETS                                                                                      
|Current assets                                                                               |  |      |    |                 |      |  |         |      |  |     |         |   |  |  |        |  
|Cash and cash equivalents                                                                    |  |      | 10 |                 |      |  | 11,231  |      |  |     | 11,304  |   |  |  | 1,366  |  
|Time deposits with maturities over three months                                              |  |      |    |                 |      |  | 2,640   |      |  |     | 1,400   |   |  |  | 169    |  
|Receivables under resale agreements                                                          |  |      | 11 |                 |      |  | 24,224  |      |  |     | 33,217  |   |  |  | 4,013  |  
|Notes receivable                                                                             |  |      | 12 |                 |      |  | 2,416   |      |  |     | 4,824   |   |  |  | 583    |  
|Accounts receivable, less allowance for impairment of receivables                            |  |      | 13 |                 |      |  | 3,263   |      |  |     | 2,662   |   |  |  | 322    |  
|Inventories                                                                                  |  |      | 14 |                 |      |  | 28,872  |      |  |     | 45,771  |   |  |  | 5,530  |  
|Prepaid expenses and other current assets                                                    |  |      | 15 |                 |      |  | 13,528  |      |  |     | 17,563  |   |  |  | 2,122  |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|TOTAL CURRENT ASSETS                                                                         |  |      |    |                 |      |  | 86,174  |      |  |     | 116,741 |   |  |  | 14,105 |  
|Property, plant and equipment, less accumulated depreciation,
    depletion and amortization |  |      | 16 |                 |      |  | 427,875 |      |  |     | 468,519 |   |  |  | 56,608 |  
|Investments in equity affiliates                                                             |  |      | 17 |                 |      |  | 5,571   |      |  |     | 7,923   |   |  |  | 958    |  
|Available-for-sale investments                                                               |  |      | 18 |                 |      |  | 1,839   |      |  |     | 1,510   |   |  |  | 182    |  
|Advance operating lease payments                                                             |  |      | 19 |                 |      |  | 7,252   |      |  |     | 12,248  |   |  |  | 1,480  |  
|Intangible and other assets                                                                  |  |      | 20 |                 |      |  | 3,024   |      |  |     | 2,987   |   |  |  | 361    |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|TOTAL ASSETS                                                                                 |  |      |    |                 |      |  | 531,735 |      |  |     | 609,928 |   |  |  | 73,694 |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                        
|Current liabilities                                                                          |  |      |    |                 |      |  |         |      |  |     |         |   |  |  |        |  
|Short-term debt                                                                              |  |      | 22 |                 |      |  | 28,890  |      |  |     | 27,276  |   |  |  | 3,296  |  
|Accounts payable and accrued liabilities                                                     |  |      | 21 |                 |      |  | 64,180  |      |  |     | 70,696  |   |  |  | 8,542  |  
|Income tax payable                                                                           |  |      |    |                 |      |  | 12,043  |      |  |     | 17,484  |   |  |  | 2,112  |  
|Other taxes payable                                                                          |  |      |    |                 |      |  | 8,916   |      |  |     | 4,633   |   |  |  | 560    |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|TOTAL CURRENT LIABILITIES                                                                    |  |      |    |                 |      |  | 114,029 |      |  |     | 120,089 |   |  |  | 14,510 |  
|Long-term debt                                                                               |  |      | 22 |                 |      |  | 41,959  |      |  |     | 38,458  |   |  |  | 4,646  |  
|Other long-term obligations                                                                  |  |      |    |                 |      |  | 2,000   |      |  |     | 2,438   |   |  |  | 294    |  
|Deferred income taxes                                                                        |  |      | 23 |                 |      |  | 11,526  |      |  |     | 14,340  |   |  |  | 1,733  |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|TOTAL LIABILITIES                                                                            |  |      |    |                 |      |  | 169,514 |      |  |     | 175,325 |   |  |  | 21,183 |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|MINORITY INTERESTS                                                                           |  |      |    |                 |      |  | 5,608   |      |  |     | 9,391   |   |  |  | 1,135  |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|SHAREHOLDERS EQUITY                                                                         |  |      |    |                 |      |  |         |      |  |     |         |   |  |  |        |  
|State-owned shares                                                                           |  |      | 24 |                 |      |  | 158,242 |      |  |     | 158,242 |   |  |  | 19,120 |  
|H shares                                                                                     |  |      | 24 |                 |      |  | 17,582  |      |  |     | 17,582  |   |  |  | 2,124  |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|Share capital, issued and outstanding, RMB 1.00 par value                                    |  |      |    |                 |      |  | 175,824 |      |  |     | 175,824 |   |  |  | 21,244 |  
|Retained earnings                                                                            |  |      |    |                 |      |  | 89,577  |      |  |     | 143,624 |   |  |  | 17,353 |  
|Capital reserve                                                                              |  |      | 25 |                 |      |  | (28,557 | )    |  |     | (28,557 | ) |  |  | (3,450 | )
|Revaluation reserve                                                                          |  |      | 25 |                 |      |  | 79,946  |      |  |     | 79,946  |   |  |  | 9,660  |  
|Statutory common reserve fund                                                                |  |      | 25 |                 |      |  | 26,370  |      |  |     | 36,071  |   |  |  | 4,358  |  
|Statutory common welfare fund                                                                |  |      | 25 |                 |      |  | 16,653  |      |  |     | 21,504  |   |  |  | 2,598  |  
|Other reserves                                                                               |  |      | 25 |                 |      |  | (3,200  | )    |  |     | (3,200  | ) |  |  | (387   | )
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|SHAREHOLDERS EQUITY                                                                         |  |      |    |                 |      |  | 356,613 |      |  |     | 425,212 |   |  |  | 51,376 |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                   |  |      |    |                 |      |  | 531,735 |      |  |     | 609,928 |   |  |  | 73,694 |  
|                                                                                             |  |      |    |                 |      |  |         |      |  |     |         |  



F-4



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Years Ended December 31, 2002, 2003 and 2004


(Amounts in millions)


|                                          |                                                |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |         |         |         |   |        |        |        |  
|----------------------------------------- | ---------------------------------------------- | ----------------------------------------------------------------------- |  | ----------------------- | ------ |  | ------- | ------- | ------ | --- | ------- | ------- | ------ | ---- | ------- | ------- | ------- | - | ------ | ------ | ------ | -
|                                          |                                                |                                                                         |  | Year Ended December 31, |       
|                                          |                                                |                                                                         |  |                         |       
|                                          |                                                | Note                                                                    |  |                         | 2002   |  |         | 2003    |        |     | 2004    |         |        | 2004 |        
|                                          |                                                |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |        
|                                          |                                                |                                                                         |  | RMB                     |        |  | RMB     |         |        | RMB |         |         | US$    |     
|CASH FLOWS FROM OPERATING ACTIVITIES      |                                                |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |         |         |         |   |        |       
|                                          | Net income                                     |                                                                         |  |                         |        |  |         | 46,910  |        |     |         | 69,614  |        |      |         | 102,927 |         |   |        | 12,436 |       
|                                          | Adjustments for:                               |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |         |         |         |   |        |        |       
|                                          |                                                | Income applicable to minority interests                                 |  |                         |        |  |         |         | 99     |     |         |         | 636    |      |         |         | 1,651   |   |        |        | 199    |  
|                                          |                                                | Income taxes                                                            |  |                         | 7      |  |         |         | 22,231 |     |         |         | 28,072 |      |         |         | 42,563  |   |        |        | 5,143  |  
|                                          |                                                | Depreciation, depletion and amortization                                |  |                         |        |  |         |         | 36,782 |     |         |         | 40,531 |      |         |         | 46,411  |   |        |        | 5,608  |  
|                                          |                                                | Provision for shut down of manufacturing assets                         |  |                         | 5      |  |         |         | 2,121  |     |         |         | 2,355  |      |         |         | 220     |   |        |        | 27     |  
|                                          |                                                | Dry hole cost                                                           |  |                         |        |  |         |         | 3,527  |     |         |         | 4,691  |      |         |         | 4,718   |   |        |        | 570    |  
|                                          |                                                | Income from equity affiliates                                           |  |                         | 17     |  |         |         | (268   | )   |         |         | (985   | )    |         |         | (1,824  | ) |        |        | (220   | )
|                                          |                                                | Impairment of receivables, net                                          |  |                         | 13, 15 |  |         |         | 284    |     |         |         | 1,434  |      |         |         | 480     |   |        |        | 58     |  
|                                          |                                                | Write down in inventories, net                                          |  |                         | 14     |  |         |         | (122   | )   |         |         | 136    |      |         |         | 146     |   |        |        | 17     |  
|                                          |                                                | Impairment of available-for-sale investments, net                       |  |                         | 18     |  |         |         | 4      |     |         |         | 158    |      |         |         | 26      |   |        |        | 3      |  
|                                          |                                                | Loss on disposal of property, plant and equipment                       |  |                         |        |  |         |         | 647    |     |         |         | 1,048  |      |         |         | 2,806   |   |        |        | 339    |  
|                                          |                                                | Loss on disposal of equity affiliates                                   |  |                         |        |  |         |         |       |     |         |         |       |      |         |         | 33      |   |        |        | 4      |  
|                                          |                                                | Loss on disposal of available-for-sale investments                      |  |                         |        |  |         |         | 21     |     |         |         | 21     |      |         |         | 6       |   |        |        | 1      |  
|                                          |                                                | Loss on disposal of intangible and other assets                         |  |                         |        |  |         |         | 17     |     |         |         | 143    |      |         |         | 50      |   |        |        | 6      |  
|                                          |                                                | Revaluation loss of property, plant and equipment                       |  |                         | 16     |  |         |         |       |     |         |         | 391    |      |         |         |        |   |        |        |       |  
|                                          |                                                | Dividend income                                                         |  |                         | 18     |  |         |         | (60    | )   |         |         | (69    | )    |         |         | (90     | ) |        |        | (11    | )
|                                          |                                                | Interest income                                                         |  |                         |        |  |         |         | (463   | )   |         |         | (677   | )    |         |         | (1,107  | ) |        |        | (134   | )
|                                          |                                                | Interest expense                                                        |  |                         | 6      |  |         |         | 3,516  |     |         |         | 2,346  |      |         |         | 2,303   |   |        |        | 278    |  
|                                          | Advance payments on long-term operating leases |                                                                         |  |                         |        |  |         | (1,051  | )      |     |         | (1,584  | )      |      |         | (5,598  | )       |   |        | (676   | )     
|                                          | Changes in working capital:                    |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |         |         |         |   |        |        |       
|                                          |                                                |  accounts receivable and prepaid expenses and other
    current assets |  |                         |        |  |         |         | 4,554  |     |         |         | 3,612  |      |         |         | (5,649  | ) |        |        | (683   | )
|                                          |                                                |  inventories                                                           |  |                         |        |  |         |         | 157    |     |         |         | (567   | )    |         |         | (17,045 | ) |        |        | (2,059 | )
|                                          |                                                |  accounts payable and accrued liabilities                              |  |                         |        |  |         |         | 2,047  |     |         |         | 8,738  |      |         |         | 533     |   |        |        | 64     |  
|                                          |                                                |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |        
|CASH GENERATED FROM OPERATIONS            |                                                |                                                                         |  |                         |        |  | 120,953 |         |        |     | 160,044 |         |        |      | 173,560 |         |         |   | 20,970 |       
|                                          | Interest received                              |                                                                         |  |                         |        |  |         | 463     |        |     |         | 677     |        |      |         | 1,107   |         |   |        | 134    |       
|                                          | Interest paid                                  |                                                                         |  |                         |        |  |         | (4,564  | )      |     |         | (3,769  | )      |      |         | (3,405  | )       |   |        | (411   | )     
|                                          | Income taxes paid                              |                                                                         |  |                         |        |  |         | (19,562 | )      |     |         | (19,716 | )      |      |         | (33,963 | )       |   |        | (4,104 | )     
|                                          |                                                |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |        
|NET CASH PROVIDED BY OPERATING ACTIVITIES |                                                |                                                                         |  |                         |        |  | 97,290  |         |        |     | 137,236 |         |        |      | 137,299 |         |         |   | 16,589 |       
|                                          |                                                |                                                                         |  |                         |        |  |         |         |        |     |         |         |        |      |        



F-5



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)


For the Years Ended December 31, 2002, 2003 and 2004


(Amounts in millions)


|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |         |         |   |  |         |         |  
|-------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---- |  | ----------------------- | ---- |  | ------- | ------- | - | --- | ------- | ------- | --- | ---- | ------- | ------- | - |  | ------- | ------- | -
|                                       |                                                                                                          |      |  | Year Ended December 31, |     
|                                       |                                                                                                          |      |  |                         |     
|                                       |                                                                                                          | Note |  |                         | 2002 |  |         | 2003    |   |     | 2004    |         |     | 2004 |        
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        
|                                       |                                                                                                          |      |  | RMB                     |      |  | RMB     |         |   | RMB |         |         | US$ |     
|CASH FLOWS FROM INVESTING ACTIVITIES   |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |         |         |   |  |         |        
|                                       | Capital expenditures                                                                                     |      |  |                         |      |  |         | (69,739 | ) |     |         | (79,739 | )   |      |         | (90,448 | ) |  |         | (10,928 | )
|                                       | Acquisition of subsidiaries                                                                              |      |  | 30                      |      |  |         | (2,150  | ) |     |         |        |     |      |         |        |   |  |         |        |  
|                                       | Acquisition of equity affiliates                                                                         |      |  |                         |      |  |         | (1,119  | ) |     |         | (1,044  | )   |      |         | (485    | ) |  |         | (59     | )
|                                       | Acquisition of available-for-sale investments                                                            |      |  |                         |      |  |         | (231    | ) |     |         | (722    | )   |      |         | (476    | ) |  |         | (58     | )
|                                       | Net acquisition of receivables under resale agreements with
    maturities not greater than three months |      |  |                         |      |  |         | (497    | ) |     |         | (10,182 | )   |      |         | (8,049  | ) |  |         | (972    | )
|                                       | Acquisition of receivables under resale agreements with
    maturities over three months                 |      |  |                         |      |  |         | (420    | ) |     |         | (4,676  | )   |      |         | (8,301  | ) |  |         | (1,003  | )
|                                       | Acquisition of intangible assets                                                                         |      |  |                         |      |  |         | (666    | ) |     |         | (473    | )   |      |         | (531    | ) |  |         | (64     | )
|                                       | Acquisition of other non-current assets                                                                  |      |  |                         |      |  |         | (295    | ) |     |         | (569    | )   |      |         | (280    | ) |  |         | (34     | )
|                                       | Proceeds from receivables under resale agreements with
    maturities over three months                  |      |  |                         |      |  |         | 2,636   |   |     |         | 420     |     |      |         | 7,357   |   |  |         | 889     |  
|                                       | Repayment of capital by equity affiliates                                                                |      |  |                         |      |  |         | 301     |   |     |         | 336     |     |      |         | 206     |   |  |         | 25      |  
|                                       | Proceeds from disposal of property, plant and equipment                                                  |      |  |                         |      |  |         | 497     |   |     |         | 202     |     |      |         | 778     |   |  |         | 94      |  
|                                       | Proceeds from disposal of equity affiliates                                                              |      |  |                         |      |  |         | 243     |   |     |         | 23      |     |      |         | 27      |   |  |         | 3       |  
|                                       | Proceeds from disposal of available-for-sale investments                                                 |      |  |                         |      |  |         | 97      |   |     |         | 87      |     |      |         | 83      |   |  |         | 10      |  
|                                       | Proceeds from disposal of intangible and other non-current assets                                        |      |  |                         |      |  |         |        |   |     |         |        |     |      |         | 37      |   |  |         | 5       |  
|                                       | Dividends received                                                                                       |      |  |                         |      |  |         | 91      |   |     |         | 152     |     |      |         | 309     |   |  |         | 37      |  
|                                       | Decrease/(Increase) in time deposits with maturities over three
    months                               |      |  |                         |      |  |         | 641     |   |     |         | (28     | )   |      |         | 1,240   |   |  |         | 150     |  
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        
|NET CASH USED FOR INVESTING ACTIVITIES |                                                                                                          |      |  |                         |      |  | (70,611 | )       |   |     | (96,213 | )       |     |      | (98,533 | )       |   |  | (11,905 | )      
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        
|CASH FLOWS FROM FINANCING ACTIVITIES   |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |         |         |   |  |         |        
|                                       | Repayments of short-term debt                                                                            |      |  |                         |      |  |         | (34,550 | ) |     |         | (30,373 | )   |      |         | (21,700 | ) |  |         | (2,622  | )
|                                       | Repayments of long-term debt                                                                             |      |  |                         |      |  |         | (13,944 | ) |     |         | (7,951  | )   |      |         | (22,783 | ) |  |         | (2,753  | )
|                                       | Principal payment on capital lease obligations                                                           |      |  |                         |      |  |         | (104    | ) |     |         | (66     | )   |      |         | (35     | ) |  |         | (4      | )
|                                       | Dividends paid to minority interests                                                                     |      |  |                         |      |  |         | (135    | ) |     |         | (85     | )   |      |         | (357    | ) |  |         | (43     | )
|                                       | Cash payment for acquisition of CNPC marketing enterprises                                               |      |  | 2                       |      |  |         | (430    | ) |     |         | (170    | )   |      |         | (1,476  | ) |  |         | (178    | )
|                                       | Dividends paid                                                                                           |      |  | 9                       |      |  |         | (17,650 | ) |     |         | (29,678 | )   |      |         | (34,328 | ) |  |         | (4,148  | )
|                                       | Increase in short-term debt                                                                              |      |  |                         |      |  |         | 28,728  |   |     |         | 25,128  |     |      |         | 23,789  |   |  |         | 2,874   |  
|                                       | Increase in long-term debt                                                                               |      |  |                         |      |  |         | 9,885   |   |     |         | 2,823   |     |      |         | 15,614  |   |  |         | 1,887   |  
|                                       | Capital contribution from minority interests                                                             |      |  |                         |      |  |         | 57      |   |     |         | 287     |     |      |         | 2,145   |   |  |         | 259     |  
|                                       | Change in other long-term obligations                                                                    |      |  |                         |      |  |         | 304     |   |     |         | 316     |     |      |         | 438     |   |  |         | 53      |  
|                                       | Contribution from CNPC to marketing enterprises                                                          |      |  |                         |      |  |         | 10      |   |     |         |        |     |      |         |        |   |  |         |        |  
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        
|NET CASH USED FOR FINANCING ACTIVITIES |                                                                                                          |      |  |                         |      |  | (27,829 | )       |   |     | (39,769 | )       |     |      | (38,693 | )       |   |  | (4,675  | )      
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        
|                                       | (Decrease)/Increase in cash and cash equivalents                                                         |      |  |                         |      |  |         | (1,150  | ) |     |         | 1,254   |     |      |         | 73      |   |  |         | 9       |  
|                                       | Cash and cash equivalents at beginning of year                                                           |      |  | 10                      |      |  |         | 11,127  |   |     |         | 9,977   |     |      |         | 11,231  |   |  |         | 1,357   |  
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        
|                                       | Cash and cash equivalents at end of year                                                                 |      |  | 10                      |      |  |         | 9,977   |   |     |         | 11,231  |     |      |         | 11,304  |   |  |         | 1,366   |  
|                                       |                                                                                                          |      |  |                         |      |  |         |         |   |     |         |         |     |      |        



F-6



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY


For the Years Ended December 31, 2002, 2003 and 2004


(Amounts in millions)


|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |   |  |  |         |  
|------------------------------------------------------------------------------------------------------------- |  | --------- | ------- |  | -------- |  | ------- | --------- |  |  | ------- | - |  |  | ------- | -
|                                                                                                              |  | Share     |         |  |          |  |         |           | 
|                                                                                                              |  | Capital   |         |  | Retained |  |         | Reserves  |  |  |        
|                                                                                                              |  | (Note 24) |         |  | Earnings |  |         | (Note 25) |  |  | Total   |  
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|                                                                                                              |  | RMB       |         |  | RMB      |  |         | RMB       |  |  | RMB     |  
|Balance at January 1, 2002                                                                                    |  |           | 175,824 |  |          |  | 35,607  |           |  |  | 79,175  |   |  |  | 290,606 |  
|Net income for the year ended December 31, 2002                                                               |  |           |        |  |          |  | 46,910  |           |  |  |        |   |  |  | 46,910  |  
|Transfer to reserves (Note 25)                                                                                |  |           |        |  |          |  | (5,863  | )         |  |  | 5,863   |   |  |  |        |  
|Final dividend for 2001 (Note 9)                                                                              |  |           |        |  |          |  | (8,839  | )         |  |  |        |   |  |  | (8,839  | )
|Interim dividend for 2002 (Note 9)                                                                            |  |           |        |  |          |  | (8,811  | )         |  |  |        |   |  |  | (8,811  | )
|Contribution from CNPC to marketing enterprises (Note 2)                                                      |  |           |        |  |          |  |        |           |  |  | 10      |   |  |  | 10      |  
|Payment to CNPC for acquisition of marketing enterprises
    (Note 2)                                         |  |           |        |  |          |  |        |           |  |  | (3,200  | ) |  |  | (3,200  | )
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|Balance at December 31, 2002                                                                                  |  |           | 175,824 |  |          |  | 59,004  |           |  |  | 81,848  |   |  |  | 316,676 |  
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|Net income for the year ended December 31, 2003                                                               |  |           |        |  |          |  | 69,614  |           |  |  |        |   |  |  | 69,614  |  
|Revaluation surplus of property, plant and equipment, net of tax                                              |  |           |        |  |          |  |        |           |  |  | 527     |   |  |  | 527     |  
|Revaluation loss offset against previous revaluation surplus of
    property, plant and equipment, net of tax |  |           |        |  |          |  |        |           |  |  | (526    | ) |  |  | (526    | )
|Transfer to reserves (Note 25)                                                                                |  |           |        |  |          |  | (9,363  | )         |  |  | 9,363   |   |  |  |        |  
|Final dividend for 2002 (Note 9)                                                                              |  |           |        |  |          |  | (12,299 | )         |  |  |        |   |  |  | (12,299 | )
|Interim dividend for 2003 (Note 9)                                                                            |  |           |        |  |          |  | (17,379 | )         |  |  |        |   |  |  | (17,379 | )
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|Balance at December 31, 2003                                                                                  |  |           | 175,824 |  |          |  | 89,577  |           |  |  | 91,212  |   |  |  | 356,613 |  
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|Net income for the year ended December 31, 2004                                                               |  |           |        |  |          |  | 102,927 |           |  |  |        |   |  |  | 102,927 |  
|Transfer to reserves (Note 25)                                                                                |  |           |        |  |          |  | (14,552 | )         |  |  | 14,552  |   |  |  |        |  
|Final dividend for 2003 (Note 9)                                                                              |  |           |        |  |          |  | (13,947 | )         |  |  |        |   |  |  | (13,947 | )
|Interim dividend for 2004 (Note 9)                                                                            |  |           |        |  |          |  | (20,381 | )         |  |  |        |   |  |  | (20,381 | )
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|Balance at December 31, 2004                                                                                  |  |           | 175,824 |  |          |  | 143,624 |           |  |  | 105,764 |   |  |  | 425,212 |  
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  
|Balance at December 31, 2004 in US$                                                                           |  |           | 21,244  |  |          |  | 17,353  |           |  |  | 12,779  |   |  |  | 51,376  |  
|                                                                                                              |  |           |         |  |          |  |         |           |  |  |         |  



F-7



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Amounts in millions except for per share data or unless
otherwise stated)




|  |                                      
|- | -------------------------------------
|1 | ORGANIZATION AND PRINCIPAL ACTIVITIES







|  |                     
|- | --------------------
|2 | BASIS OF PREPARATION









F-8



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|  |                                         
|- | ----------------------------------------
|3 | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES



| |                           
| | --------------------------
| | (a) Basis of consolidation









| |                                     
| | ------------------------------------
| | (b) Investments in equity affiliates







| |                       
| | ----------------------
| | (c) Foreign currencies



F-9



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)










| |                          
| | -------------------------
| | (d) Financial instruments







| |                
| | ---------------
| | (e) Investments







| |                                  
| | ---------------------------------
| | (f) Property, plant and equipment



F-10



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)












|                             |  |  |             | 
|---------------------------- |  |  | ----------- | 
|Buildings                    |  |  | 25-40 years | 
|Plant and machinery          |  |  | 10-15 years | 
|Equipment and motor vehicles |  |  | 3-16 years  | 











| |                           
| | --------------------------
| | (g) Oil and gas properties



F-11



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)








| |                      
| | ---------------------
| | (h) Intangible assets



F-12



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


(i) Leases






(j) Related
parties




(k) Inventories




(l) Trade
receivables




(m) Cash and cash
equivalents




(n) Debts




F-13



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


(o) Taxation










(p) Revenue
recognition












F-14



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




(q) Provisions




(r) Research and
development expenses




(s) Retirement benefit
plans




(t) Share appreciation
rights




(u) Reclassification




(v) New accounting
developments




F-15



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)








|  |                            
|- | ---------------------------
|4 | EMPLOYEE COMPENSATION COSTS

|                             |  |                         |        |  |      |  |        |      |  |  |        | 
|---------------------------- |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                             |  | Year Ended December 31, |       
|                             |  |                         |       
|                             |  | 2002                    |        |  | 2003 |  |        | 2004 | 
|                             |  |                         |        |  |      |  |        |      | 
|                             |  | RMB                     |        |  | RMB  |  |        | RMB  | 
|Wages and salaries           |  |                         | 10,631 |  |      |  | 12,893 |      |  |  | 14,926 | 
|Social security
    costs(i) |  |                         | 5,617  |  |      |  | 6,649  |      |  |  | 7,383  | 
|                             |  |                         |        |  |      |  |        |      | 
|                             |  |                         | 16,248 |  |      |  | 19,542 |      |  |  | 22,309 | 
|                             |  |                         |        |  |      |  |        |      | 






| |     |                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | Social security costs represent contributions to funds for staff
    welfare organized by the municipal and provincial governments
    including contribution to the retirement benefit plans
    (Note 26).

5     SHUT DOWN OF MANUFACTURING
ASSETS




|                    |  |                         |       |  |      |  |       |      |  |  |     | 
|------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | --- | 
|                    |  | Year Ended December 31, |      
|                    |  |                         |      
|                    |  | 2002                    |       |  | 2003 |  |       | 2004 | 
|                    |  |                         |       |  |      |  |       |      | 
|                    |  | RMB                     |       |  | RMB  |  |       | RMB  | 
|Refining facilities |  |                         | 1,179 |  |      |  | 1,596 |      |  |  | 192 | 
|Chemical facilities |  |                         | 942   |  |      |  | 759   |      |  |  | 28  | 
|                    |  |                         |       |  |      |  |       |      | 
|                    |  |                         | 2,121 |  |      |  | 2,355 |      |  |  | 220 | 
|                    |  |                         |       |  |      |  |       |      | 



F-16



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


6     INTEREST EXPENSE


|                          |                  |                         |       |       |      |  |        |       |  |  |        |       | 
|------------------------- | ---------------- | ----------------------- | ----- | ----- | ---- |  | ------ | ----- |  |  | ------ | ----- | 
|                          |                  | Year Ended December 31, |      
|                          |                  |                         |      
|                          |                  | 2002                    |       |       | 2003 |  |        | 2004  | 
|                          |                  |                         |       |       |      |  |        |       | 
|                          |                  | RMB                     |       |       | RMB  |  |        | RMB   | 
|Interest on               |                  |                         |       |       |      |  |        |       |  |  |        |      
|                          |  loans          |                         |       | 4,402 |      |  |        | 3,662 |  |  |        | 3,306 | 
|                          |  capital leases |                         |       | 10    |      |  |        | 4     |  |  |        | 2     | 
|Less: amounts capitalized |                  |                         | (896  | )     |      |  | (1,320 | )     |  |  | (1,005 | )    
|                          |                  |                         |       |       |      |  |        |       | 
|                          |                  |                         | 3,516 |       |      |  | 2,346  |       |  |  | 2,303  |      
|                          |                  |                         |       |       |      |  |        |       | 



7     INCOME TAXES


|                                  |  |                         |        |  |      |  |        |      |  |  |        | 
|--------------------------------- |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                  |  | Year Ended December 31, |       
|                                  |  |                         |       
|                                  |  | 2002                    |        |  | 2003 |  |        | 2004 | 
|                                  |  |                         |        |  |      |  |        |      | 
|                                  |  | RMB                     |        |  | RMB  |  |        | RMB  | 
|Current tax                       |  |                         | 19,289 |  |      |  | 26,347 |      |  |  | 39,404 | 
|Deferred income tax (Note 23)     |  |                         | 2,897  |  |      |  | 1,594  |      |  |  | 2,814  | 
|Share of tax of equity affiliates |  |                         | 45     |  |      |  | 131    |      |  |  | 345    | 
|                                  |  |                         |        |  |      |  |        |      | 
|                                  |  |                         | 22,231 |  |      |  | 28,072 |      |  |  | 42,563 | 
|                                  |  |                         |        |  |      |  |        |      | 





|                                                                |  |                         |        |   |      |  |        |      |  |  |         |  
|--------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- |  | ------ | ---- |  |  | ------- | -
|                                                                |  | Year Ended December 31, |       
|                                                                |  |                         |       
|                                                                |  | 2002                    |        |   | 2003 |  |        | 2004 | 
|                                                                |  |                         |        |   |      |  |        |      | 
|                                                                |  | RMB                     |        |   | RMB  |  |        | RMB  | 
|Income before income taxes                                      |  |                         | 69,240 |   |      |  | 98,322 |      |  |  | 147,141 |  
|                                                                |  |                         |        |   |      |  |        |      | 
|Tax calculated at a tax rate of 33%                             |  |                         | 22,849 |   |      |  | 32,446 |      |  |  | 48,556  |  
|Prior year tax return adjustment                                |  |                         | 618    |   |      |  | 419    |      |  |  | 27      |  
|Effect of preferential tax rate                                 |  |                         | (2,377 | ) |      |  | (5,190 | )    |  |  | (6,886  | )
|Utilization of previously unrecognized tax loss of subsidiaries |  |                         |       |   |      |  |       |      |  |  | (832    | )
|Income not subject to tax                                       |  |                         | (93    | ) |      |  | (566   | )    |  |  | (605    | )
|Expenses not deductible for tax purposes                        |  |                         | 1,234  |   |      |  | 963    |      |  |  | 2,303   |  
|                                                                |  |                         |        |   |      |  |        |      | 
|Tax charge                                                      |  |                         | 22,231 |   |      |  | 28,072 |      |  |  | 42,563  |  
|                                                                |  |                         |        |   |      |  |        |      | 

F-17



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


8     BASIC AND DILUTED NET INCOME
PER SHARE






9     DIVIDENDS


|                                      |  |                         |        |  |      |  |        |      |  |  |        | 
|------------------------------------- |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                      |  | Year Ended December 31, |       
|                                      |  |                         |       
|                                      |  | 2002                    |        |  | 2003 |  |        | 2004 | 
|                                      |  |                         |        |  |      |  |        |      | 
|                                      |  | RMB                     |        |  | RMB  |  |        | RMB  | 
|Final dividend for 2001 (Note (i))    |  |                         | 8,839  |  |      |  |       |      |  |  |       | 
|Interim dividend for 2002 (Note (ii)) |  |                         | 8,811  |  |      |  |       |      |  |  |       | 
|Final dividend for 2002 (Note (iii))  |  |                         |       |  |      |  | 12,299 |      |  |  |       | 
|Interim dividend for 2003 (Note (iv)) |  |                         |       |  |      |  | 17,379 |      |  |  |       | 
|Final dividend for 2003 (Note (v))    |  |                         |       |  |      |  |       |      |  |  | 13,947 | 
|Interim dividend for 2004 (Note (vi)) |  |                         |       |  |      |  |       |      |  |  | 20,381 | 
|                                      |  |                         |        |  |      |  |        |      | 
|                                      |  |                         | 17,650 |  |      |  | 29,678 |      |  |  | 34,328 | 
|                                      |  |                         |        |  |      |  |        |      | 




|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)   | A final dividend in respect of 2001 of
    RMB 0.050272 per share amounting to a total of
    RMB 8,839 was paid on June 21, 2002, and was accounted
    for in shareholders equity as an appropriation of retained
    earnings in the year ended December 31, 2002.                                                                                                                                                                                                         
|     
|(ii)  | An interim dividend in respect of 2002 of
    RMB 0.050113 per share amounting to RMB 8,811 was
    paid on October 8, 2002, and was accounted for in
    shareholders equity as an appropriation of retained
    earnings in the year ended December 31, 2002.                                                                                                                                                                                                               
|     
|(iii) | A final dividend in respect of 2002 of
    RMB 0.069951 per share amounting to a total of
    RMB 12,299 was paid on June 12, 2003, and was
    accounted for in shareholders equity as an appropriation
    of retained earnings in the year ended December 31, 2003.                                                                                                                                                                                                        
|     
|(iv)  | An interim dividend in respect of 2003 of
    RMB 0.098841 per share amounting to a total of
    RMB 17,379 was paid on October 8, 2003, and was
    accounted for in shareholders equity as an appropriation
    of retained earnings in the year ended December 31, 2003.                                                                                                                                                                                                   
|     
|(v)   | A final dividend in respect of 2003 of
    RMB 0.079324 per share amounting to a total of
    RMB 13,947 was paid on June 2, 2004, and was accounted
    for in shareholders equity as an appropriation of retained
    earnings in the year ended December 31, 2004.                                                                                                                                                                                                         
|     
|(vi)  | As authorized by shareholders in the Annual General Meeting on
    May 18, 2004, the Board of Directors, in a meeting held on
    August 26, 2004, resolved to distribute an interim dividend
    in respect of 2004 of RMB 0.115919 per share amounting
    to a total of RMB 20,381.The interim dividend was paid on
    October 8, 2004, and was accounted for in
    shareholders equity as an appropriation of retained
    earnings in the year ended December 31, 2004.
|     
|(vii) | At the meeting on March 16, 2005, the Board of Directors
    proposed a final dividend in respect of 2004 of
    RMB 0.147511 per share amounting to a total of
    RMB 25,936. These financial statements do not reflect this
    dividend payable, which will be accounted for in
    shareholders equity as an appropriation of retained
    earnings in the year ended December 31, 2005.                                                                                 

F-18



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|   |                          
|-- | -------------------------
|10 | CASH AND CASH EQUIVALENTS

|                         |  |                 |        |  |      |  |        | 
|------------------------ |  | --------------- | ------ |  | ---- |  | ------ | 
|                         |  | At December 31, |       
|                         |  |                 |       
|                         |  | 2003            |        |  | 2004 | 
|                         |  |                 |        |  |      | 
|                         |  | RMB             |        |  | RMB  | 
|Cash at bank and in hand |  |                 | 11,231 |  |      |  | 11,304 | 
|                         |  |                 |        |  |      | 



11     RECEIVABLES UNDER RESALE
AGREEMENTS








|   |                 
|-- | ----------------
|12 | NOTES RECEIVABLE



13     ACCOUNTS RECEIVABLE


|                                             |                            |                 |        |     |      |  |        |     | 
|-------------------------------------------- | -------------------------- | --------------- | ------ | --- | ---- |  | ------ | --- | 
|                                             |                            | At December 31, |       
|                                             |                            |                 |       
|                                             |                            | 2003            |        |     | 2004 | 
|                                             |                            |                 |        |     |      | 
|                                             |                            | RMB             |        |     | RMB  | 
|Accounts receivable due from third parties   |                            |                 | 8,263  |     |      |  | 6,905  |    
|Less: Impairment provision                   |                            |                 | (5,872 | )   |      |  | (4,740 | )  
|                                             |                            |                 |        |     |      | 
|                                             |                            |                 | 2,391  |     |      |  | 2,165  |    
|Accounts receivable due from related parties |                            |                 |        |     |      |  |        |    
|                                             |  Fellow CNPC subsidiaries |                 |        | 592 |      |  |        | 482 | 
|                                             |  Equity affiliates        |                 |        | 280 |      |  |        | 15  | 
|                                             |                            |                 |        |     |      | 
|                                             |                            |                 | 3,263  |     |      |  | 2,662  |    
|                                             |                            |                 |        |     |      | 



|                                     |  |                         |       |   |      |  |       |      |  |  |       |  
|------------------------------------ |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                     |  | Year Ended December 31, |      
|                                     |  |                         |      
|                                     |  | 2002                    |       |   | 2003 |  |       | 2004 | 
|                                     |  |                         |       |   |      |  |       |      | 
|                                     |  | RMB                     |       |   | RMB  |  |       | RMB  | 
|Balance at beginning of year         |  |                         | 6,663 |   |      |  | 6,356 |      |  |  | 5,872 |  
|(Write back)/Provision               |  |                         | (45   | ) |      |  | 210   |      |  |  | (442  | )
|Amount written off against provision |  |                         | (262  | ) |      |  | (694  | )    |  |  | (690  | )
|                                     |  |                         |       |   |      |  |       |      | 
|Balance at end of year               |  |                         | 6,356 |   |      |  | 5,872 |      |  |  | 4,740 |  
|                                     |  |                         |       |   |      |  |       |      | 



F-19



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


14     INVENTORIES


|                                  |  |                 |        |   |      |  |        |  
|--------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                  |  | At December 31, |       
|                                  |  |                 |       
|                                  |  | 2003            |        |   | 2004 | 
|                                  |  |                 |        |   |      | 
|                                  |  | RMB             |        |   | RMB  | 
|Crude oil and other raw materials |  |                 | 9,553  |   |      |  | 13,895 |  
|Work in progress                  |  |                 | 3,652  |   |      |  | 5,320  |  
|Finished goods                    |  |                 | 16,367 |   |      |  | 27,394 |  
|Spare parts and consumables       |  |                 | 66     |   |      |  | 59     |  
|                                  |  |                 |        |   |      | 
|                                  |  |                 | 29,638 |   |      |  | 46,668 |  
|Less: Write down in inventories   |  |                 | (766   | ) |      |  | (897   | )
|                                  |  |                 |        |   |      | 
|                                  |  |                 | 28,872 |   |      |  | 45,771 |  
|                                  |  |                 |        |   |      | 



|                                     |  |              |      |   |      |  |     |      |  |  |     |  
|------------------------------------ |  | ------------ | ---- | - | ---- |  | --- | ---- |  |  | --- | -
|                                     |  | Year Ended   |     
|                                     |  | December 31, |     
|                                     |  |              |     
|                                     |  | 2002         |      |   | 2003 |  |     | 2004 | 
|                                     |  |              |      |   |      |  |     |      | 
|                                     |  | RMB          |      |   | RMB  |  |     | RMB  | 
|Balance at beginning of year         |  |              | 800  |   |      |  | 653 |      |  |  | 766 |  
|(Write back)/Provision               |  |              | (122 | ) |      |  | 136 |      |  |  | 146 |  
|Amount written off against provision |  |              | (25  | ) |      |  | (23 | )    |  |  | (15 | )
|                                     |  |              |      |   |      |  |     |      | 
|Balance at end of year               |  |              | 653  |   |      |  | 766 |      |  |  | 897 |  
|                                     |  |              |      |   |      |  |     |      | 







|   |                                          
|-- | -----------------------------------------
|15 | PREPAID EXPENSES AND OTHER CURRENT ASSETS

|                                          |  |                 |        |   |      |  |        |  
|----------------------------------------- |  | --------------- | ------ | - | ---- |  | ------ | -
|                                          |  | At December 31, |       
|                                          |  |                 |       
|                                          |  | 2003            |        |   | 2004 | 
|                                          |  |                 |        |   |      | 
|                                          |  | RMB             |        |   | RMB  | 
|Other receivables                         |  |                 | 10,173 |   |      |  | 8,948  |  
|Less: Impairment provision                |  |                 | (6,283 | ) |      |  | (7,046 | )
|                                          |  |                 |        |   |      | 
|                                          |  |                 | 3,890  |   |      |  | 1,902  |  
|Amounts due from CNPC                     |  |                 | 2,038  |   |      |  | 3,385  |  
|Amounts due from fellow CNPC subsidiaries |  |                 | 2,705  |   |      |  | 4,397  |  
|Advances to suppliers                     |  |                 | 4,105  |   |      |  | 7,539  |  
|Prepaid expenses                          |  |                 | 103    |   |      |  | 230    |  
|Other current assets                      |  |                 | 687    |   |      |  | 110    |  
|                                          |  |                 |        |   |      | 
|                                          |  |                 | 13,528 |   |      |  | 17,563 |  
|                                          |  |                 |        |   |      | 

F-20



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)








|                                     |  |                         |       |   |      |  |       |      |  |  |       |  
|------------------------------------ |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                     |  | Year Ended December 31, |      
|                                     |  |                         |      
|                                     |  | 2002                    |       |   | 2003 |  |       | 2004 | 
|                                     |  |                         |       |   |      |  |       |      | 
|                                     |  | RMB                     |       |   | RMB  |  |       | RMB  | 
|Balance at beginning of year         |  |                         | 5,074 |   |      |  | 5,313 |      |  |  | 6,283 |  
|Provision                            |  |                         | 329   |   |      |  | 1,224 |      |  |  | 922   |  
|Amount written off against provision |  |                         | (90   | ) |      |  | (254  | )    |  |  | (159  | )
|                                     |  |                         |       |   |      |  |       |      | 
|Balance at end of year               |  |                         | 5,313 |   |      |  | 6,283 |      |  |  | 7,046 |  
|                                     |  |                         |       |   |      |  |       |      | 



|   |                              
|-- | -----------------------------
|16 | PROPERTY, PLANT AND EQUIPMENT

|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|------------------------------------------------------------------------------------------------------------------ |  | --------- | ------- | ----------- | -------- |  | --------- | --------- |  | ----- | -------- | - |  | ----- | ------------ | - | ----------- |  | ------ | ----- |  |  | ------- | - |  |  | -------- | -
|Year Ended                                                                                                         |  |           |         | Oil and Gas |          |  | Plant and |           |  | Motor |          |   |  |       | Construction |   |             | 
|December 31, 2003                                                                                                  |  | Buildings |         |             | Property |  |           | Equipment |  |       | Vehicles |   |  | Other |              |   | in Progress |  |        | Total | 
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|                                                                                                                   |  | RMB       |         |             | RMB      |  |           | RMB       |  |       | RMB      |   |  | RMB   |              |   | RMB         |  |        | RMB   | 
|Cost or valuation                                                                                                  |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|At beginning of the year                                                                                           |  |           | 50,539  |             |          |  | 337,998   |           |  |       | 205,921  |   |  |       | 7,384        |   |             |  | 5,272  |       |  |  | 30,594  |   |  |  | 637,708  |  
|Additions                                                                                                          |  |           | 243     |             |          |  | 289       |           |  |       | 952      |   |  |       | 946          |   |             |  | 73     |       |  |  | 80,426  |   |  |  | 82,929   |  
|Revaluation surplus                                                                                                |  |           |        |             |          |  |          |           |  |       | (1,568   | ) |  |       |             |   |             |  |       |       |  |  |        |   |  |  | (1,568   | )
|Revaluation loss                                                                                                   |  |           |        |             |          |  |          |           |  |       | (2,133   | ) |  |       |             |   |             |  |       |       |  |  |        |   |  |  | (2,133   | )
|Transfers                                                                                                          |  |           | 6,263   |             |          |  | 43,308    |           |  |       | 27,834   |   |  |       |             |   |             |  | 354    |       |  |  | (77,759 | ) |  |  |         |  
|Disposals or write off                                                                                             |  |           | (1,738  | )           |          |  | (12,785   | )         |  |       | (8,285   | ) |  |       | (537         | ) |             |  | (249   | )     |  |  |        |   |  |  | (23,594  | )
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|At end of the year                                                                                                 |  |           | 55,307  |             |          |  | 368,810   |           |  |       | 222,721  |   |  |       | 7,793        |   |             |  | 5,450  |       |  |  | 33,261  |   |  |  | 693,342  |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|Accumulated depreciation and impairment                                                                            |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|At beginning of the year                                                                                           |  |           | (10,866 | )           |          |  | (137,653  | )         |  |       | (90,462  | ) |  |       | (3,649       | ) |             |  | (1,783 | )     |  |  |        |   |  |  | (244,413 | )
|Charge for the year                                                                                                |  |           | (1,817  | )           |          |  | (21,060   | )         |  |       | (15,120  | ) |  |       | (731         | ) |             |  | (586   | )     |  |  |        |   |  |  | (39,314  | )
|Revaluation surplus                                                                                                |  |           |        |             |          |  |          |           |  |       | 2,440    |   |  |       |             |   |             |  |       |       |  |  |        |   |  |  | 2,440    |  
|Revaluation loss                                                                                                   |  |           |        |             |          |  |          |           |  |       | 876      |   |  |       |             |   |             |  |       |       |  |  |        |   |  |  | 876      |  
|Disposals or write off                                                                                             |  |           | 1,474   |             |          |  | 7,871     |           |  |       | 5,007    |   |  |       | 416          |   |             |  | 176    |       |  |  |        |   |  |  | 14,944   |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|At end of the year                                                                                                 |  |           | (11,209 | )           |          |  | (150,842  | )         |  |       | (97,259  | ) |  |       | (3,964       | ) |             |  | (2,193 | )     |  |  |        |   |  |  | (265,467 | )
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|Net book value                                                                                                     |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|At end of the year                                                                                                 |  |           | 44,098  |             |          |  | 217,968   |           |  |       | 125,462  |   |  |       | 3,829        |   |             |  | 3,257  |       |  |  | 33,261  |   |  |  | 427,875  |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|Carrying value of the property, plant and equipment had they
    been stated at cost less accumulated depreciation |  |           | 39,229  |             |          |  | 203,025   |           |  |       | 104,976  |   |  |       | 3,304        |   |             |  | 2,622  |       |  |  | 33,261  |   |  |  | 386,417  |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 

F-21



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|------------------------------------------------------------------------------------------------------------------ |  | --------- | ------- | ----------- | -------- |  | --------- | --------- |  | ----- | -------- | - |  | ----- | ------------ | - | ----------- |  | ------ | ----- |  |  | ------- | - |  |  | -------- | -
|Year Ended                                                                                                         |  |           |         | Oil and Gas |          |  | Plant and |           |  | Motor |          |   |  |       | Construction |   |             | 
|December 31, 2004                                                                                                  |  | Buildings |         |             | Property |  |           | Equipment |  |       | Vehicles |   |  | Other |              |   | in Progress |  |        | Total | 
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|                                                                                                                   |  | RMB       |         |             | RMB      |  |           | RMB       |  |       | RMB      |   |  | RMB   |              |   | RMB         |  |        | RMB   | 
|Cost or valuation                                                                                                  |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|At beginning of the year                                                                                           |  |           | 55,307  |             |          |  | 368,810   |           |  |       | 222,721  |   |  |       | 7,793        |   |             |  | 5,450  |       |  |  | 33,261  |   |  |  | 693,342  |  
|Additions                                                                                                          |  |           | 940     |             |          |  | 203       |           |  |       | 2,130    |   |  |       | 1,227        |   |             |  | 76     |       |  |  | 90,773  |   |  |  | 95,349   |  
|Transfers                                                                                                          |  |           | 9,327   |             |          |  | 48,240    |           |  |       | 28,865   |   |  |       |             |   |             |  | 370    |       |  |  | (86,802 | ) |  |  |         |  
|Disposals or write off                                                                                             |  |           | (2,142  | )           |          |  | (8,703    | )         |  |       | (5,508   | ) |  |       | (241         | ) |             |  | (61    | )     |  |  |        |   |  |  | (16,655  | )
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|At end of the year                                                                                                 |  |           | 63,432  |             |          |  | 408,550   |           |  |       | 248,208  |   |  |       | 8,779        |   |             |  | 5,835  |       |  |  | 37,232  |   |  |  | 772,036  |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|Accumulated depreciation and impairment                                                                            |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|At beginning of the year                                                                                           |  |           | (11,209 | )           |          |  | (150,842  | )         |  |       | (97,259  | ) |  |       | (3,964       | ) |             |  | (2,193 | )     |  |  |        |   |  |  | (265,467 | )
|Charge for the year                                                                                                |  |           | (2,049  | )           |          |  | (24,839   | )         |  |       | (16,569  | ) |  |       | (794         | ) |             |  | (610   | )     |  |  | (202    | ) |  |  | (45,063  | )
|Disposals or write off                                                                                             |  |           | 843     |             |          |  | 2,985     |           |  |       | 2,931    |   |  |       | 208          |   |             |  | 46     |       |  |  |        |   |  |  | 7,013    |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|At end of the year                                                                                                 |  |           | (12,415 | )           |          |  | (172,696  | )         |  |       | (110,897 | ) |  |       | (4,550       | ) |             |  | (2,757 | )     |  |  | (202    | ) |  |  | (303,517 | )
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|Net book value                                                                                                     |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       |  |  |         |   |  |  |          |  
|At end of the year                                                                                                 |  |           | 51,017  |             |          |  | 235,854   |           |  |       | 137,311  |   |  |       | 4,229        |   |             |  | 3,078  |       |  |  | 37,030  |   |  |  | 468,519  |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 
|Carrying value of the property, plant and equipment had they
    been stated at cost less accumulated depreciation |  |           | 46,520  |             |          |  | 226,567   |           |  |       | 118,590  |   |  |       | 3,711        |   |             |  | 2,506  |       |  |  | 37,030  |   |  |  | 434,924  |  
|                                                                                                                   |  |           |         |             |          |  |           |           |  |       |          |   |  |       |              |   |             |  |        |       | 



|                                                                                                   |  |                         |        |   |      |  |        |      |  |  |        |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                                                                                   |  | Year Ended December 31, |       
|                                                                                                   |  |                         |       
|                                                                                                   |  | 2002                    |        |   | 2003 |  |        | 2004 | 
|                                                                                                   |  |                         |        |   |      |  |        |      | 
|                                                                                                   |  | RMB                     |        |   | RMB  |  |        | RMB  | 
|Beginning balance at January 1                                                                     |  |                         | 4,880  |   |      |  | 3,764  |      |  |  | 4,255  |  
|Additions to capitalized exploratory well costs pending the
    determination of proved reserves   |  |                         | 5,813  |   |      |  | 9,232  |      |  |  | 10,908 |  
|Reclassified to wells, facilities, and equipment based on the
    determination of proved reserves |  |                         | (3,402 | ) |      |  | (4,050 | )    |  |  | (4,756 | )
|Capitalized exploratory well costs charged to expense                                              |  |                         | (3,527 | ) |      |  | (4,691 | )    |  |  | (4,718 | )
|                                                                                                   |  |                         |        |   |      |  |        |      | 
|Ending balance at December 31                                                                      |  |                         | 3,764  |   |      |  | 4,255  |      |  |  | 5,689  |  
|                                                                                                   |  |                         |        |   |      |  |        |      | 
|Number of wells at year end                                                                        |  |                         | 476    |   |      |  | 636    |      |  |  | 782    |  
|                                                                                                   |  |                         |        |   |      |  |        |      | 



|                       |  |                 |       |  |      |  |       | 
|---------------------- |  | --------------- | ----- |  | ---- |  | ----- | 
|                       |  | At December 31, |      
|                       |  |                 |      
|                       |  | 2003            |       |  | 2004 | 
|                       |  |                 |       |  |      | 
|                       |  | RMB             |       |  | RMB  | 
|One year or less       |  |                 | 3,988 |  |      |  | 5,278 | 
|Over one year          |  |                 | 267   |  |      |  | 411   | 
|                       |  |                 |       |  |      | 
|Balance at December 31 |  |                 | 4,255 |  |      |  | 5,689 | 
|                       |  |                 |       |  |      | 

F-22



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)






|                                      |  |                 |        |  |      |  |        | 
|------------------------------------- |  | --------------- | ------ |  | ---- |  | ------ | 
|                                      |  | At December 31, |       
|                                      |  |                 |       
|                                      |  | 2003            |        |  | 2004 | 
|                                      |  |                 |        |  |      | 
|                                      |  | RMB             |        |  | RMB  | 
|Short-term lease (less than 10 years) |  |                 | 1,125  |  |      |  | 335    | 
|Medium-term lease (10 to 50 years)    |  |                 | 42,973 |  |      |  | 50,682 | 
|                                      |  |                 |        |  |      | 
|                                      |  |                 | 44,098 |  |      |  | 51,017 | 
|                                      |  |                 |        |  |      | 





|                           |  |                 |     |   |      |  |     |  
|-------------------------- |  | --------------- | --- | - | ---- |  | --- | -
|                           |  | At December 31, |    
|                           |  |                 |    
|                           |  | 2003            |     |   | 2004 | 
|                           |  |                 |     |   |      | 
|                           |  | RMB             |     |   | RMB  | 
|Exploration and Production |  |                 |    |   |      |  | 45  |  
|Refining and Marketing     |  |                 | 94  |   |      |  | 94  |  
|Chemicals and Marketing    |  |                 | 221 |   |      |  | 110 |  
|Accumulated depreciation   |  |                 | (75 | ) |      |  | (74 | )
|                           |  |                 |     |   |      | 
|                           |  |                 | 240 |   |      |  | 175 |  
|                           |  |                 |     |   |      | 





|                           |  |                         |        |  |      |  |        |      |  |  |        | 
|-------------------------- |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                           |  | Year Ended December 31, |       
|                           |  |                         |       
|                           |  | 2002                    |        |  | 2003 |  |        | 2004 | 
|                           |  |                         |        |  |      |  |        |      | 
|                           |  | RMB                     |        |  | RMB  |  |        | RMB  | 
|Owned assets               |  |                         | 36,018 |  |      |  | 39,293 |      |  |  | 45,040 | 
|Assets under capital lease |  |                         | 27     |  |      |  | 21     |      |  |  | 23     | 







F-23



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)
















|   |                                 
|-- | --------------------------------
|17 | INVESTMENTS IN EQUITY AFFILIATES



|                                            |  |                |     |  |            |              |           |          |  |  |                      |  |  |                                                                                                                                                                           
|------------------------------------------- |  | -------------- | --- |  | ---------- | ------------ | --------- | -------- |  |  | -------------------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                            |  |                |     |  |            | Attributable |           |          | 
|                                            |  | Country of     |     |  | Paid-up/   |              |           | Equity   |  |  |                     
|                                            |  | Incorporation  |     |  | Registered |              |           | Interest |  |  |                     
|Company Name                                |  | and Operations |     |  | Capital    |              |           | Held (%) |  |  | Principal Activities
|                                            |  |                |     |  |            |              |           |          |  |  |                     
|Dalian West Pacific Petrochemical Co., Ltd. |  |                | PRC |  |            |              | USD258    |          |  |  | 28.4                 |  |  | Production and sale of refined and petrochemical products                                                                                                                 
|China Marine Bunker (PetroChina) Co., Ltd.  |  |                | PRC |  |            |              | RMB 1,000 |          |  |  | 50                   |  |  | Supplying bunker oils, marine lubricant and fresh water to
    foreign trading vessels and coastal vessels, transportation,
    storage, import and export of oil products



F-24



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)






|   |                               
|-- | ------------------------------
|18 | AVAILABLE-FOR-SALE INVESTMENTS

|                                        |  |                 |       |   |      |  |       |  
|--------------------------------------- |  | --------------- | ----- | - | ---- |  | ----- | -
|                                        |  | At December 31, |      
|                                        |  |                 |      
|                                        |  | 2003            |       |   | 2004 | 
|                                        |  |                 |       |   |      | 
|                                        |  | RMB             |       |   | RMB  | 
|Unlisted available-for-sale investments |  |                 | 2,652 |   |      |  | 2,265 |  
|Less: Impairment provision              |  |                 | (813  | ) |      |  | (755  | )
|                                        |  |                 |       |   |      | 
|                                        |  |                 | 1,839 |   |      |  | 1,510 |  
|                                        |  |                 |       |   |      | 







|                                     |  |                         |     |   |      |  |     |      |  |  |     |  
|------------------------------------ |  | ----------------------- | --- | - | ---- |  | --- | ---- |  |  | --- | -
|                                     |  | Year Ended December 31, |    
|                                     |  |                         |    
|                                     |  | 2002                    |     |   | 2003 |  |     | 2004 | 
|                                     |  |                         |     |   |      |  |     |      | 
|                                     |  | RMB                     |     |   | RMB  |  |     | RMB  | 
|Balance at beginning of year         |  |                         | 665 |   |      |  | 660 |      |  |  | 813 |  
|Provision                            |  |                         | 4   |   |      |  | 158 |      |  |  | 26  |  
|Amount written off against provision |  |                         | (9  | ) |      |  | (5  | )    |  |  | (84 | )
|                                     |  |                         |     |   |      |  |     |      | 
|Balance at end of year               |  |                         | 660 |   |      |  | 813 |      |  |  | 755 |  
|                                     |  |                         |     |   |      |  |     |      | 



|   |                                 
|-- | --------------------------------
|19 | ADVANCE OPERATING LEASE PAYMENTS

|                       |  |                 |       |  |      |  |        | 
|---------------------- |  | --------------- | ----- |  | ---- |  | ------ | 
|                       |  | At December 31, |      
|                       |  |                 |      
|                       |  | 2003            |       |  | 2004 | 
|                       |  |                 |       |  |      | 
|                       |  | RMB             |       |  | RMB  | 
|Land use rights        |  |                 | 5,544 |  |      |  | 7,952  | 
|Advance lease payments |  |                 | 1,708 |  |      |  | 4,296  | 
|                       |  |                 |       |  |      | 
|                       |  |                 | 7,252 |  |      |  | 12,248 | 
|                       |  |                 |       |  |      | 



F-25



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|   |                            
|-- | ---------------------------
|20 | INTANGIBLE AND OTHER ASSETS



|                   |  |                 |       |             |              |  |        |     |  |  |             |  |  |              |       |  |     |  |        |   |  |  |       | 
|------------------ |  | --------------- | ----- | ----------- | ------------ |  | ------ | --- |  |  | ----------- |  |  | ------------ | ----- |  | --- |  | ------ | - |  |  | ----- | 
|                   |  | At December 31, |      
|                   |  |                 |      
|                   |  | 2003            |       |             | 2004         | 
|                   |  |                 |       |             |              | 
|                   |  |                 |       | Accumulated |              |  |        |     |  |  | Accumulated |  |  |             
|                   |  | Cost            |       |             | Amortization |  |        | Net |  |  | Cost        |  |  | Amortization |       |  | Net | 
|                   |  |                 |       |             |              |  |        |     |  |  |             |  |  |              |       |  |     | 
|                   |  | RMB             |       |             | RMB          |  |        | RMB |  |  | RMB         |  |  | RMB          |       |  | RMB | 
|Patents            |  |                 | 1,721 |             |              |  | (769   | )   |  |  | 952         |  |  |              | 1,873 |  |     |  | (958   | ) |  |  | 915   | 
|Technical know-how |  |                 | 239   |             |              |  | (155   | )   |  |  | 84          |  |  |              | 248   |  |     |  | (181   | ) |  |  | 67    | 
|Other              |  |                 | 1,300 |             |              |  | (348   | )   |  |  | 952         |  |  |              | 1,421 |  |     |  | (395   | ) |  |  | 1,026 | 
|                   |  |                 |       |             |              |  |        |     |  |  |             |  |  |              |       |  |     | 
|Intangible assets  |  |                 | 3,260 |             |              |  | (1,272 | )   |  |  | 1,988       |  |  |              | 3,542 |  |     |  | (1,534 | ) |  |  | 2,008 | 
|                   |  |                 |       |             |              |  |        |     |  |  |             |  |  |              |       |  |     | 
|Other assets       |  |                 |       |             |              |  |        |     |  |  | 1,036       |  |  |              |       |  |     |  |        |   |  |  | 979   | 
|                   |  |                 |       |             |              |  |        |     |  |  |             |  |  |              |       |  |     | 
|                   |  |                 |       |             |              |  |        |     |  |  | 3,024       |  |  |              |       |  |     |  |        |   |  |  | 2,987 | 
|                   |  |                 |       |             |              |  |        |     |  |  |             |  |  |              |       |  |     | 







F-26



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|   |                                         
|-- | ----------------------------------------
|21 | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                                           |                            |                 |        |        |      |  |        |        | 
|---------------------------------------------------------- | -------------------------- | --------------- | ------ | ------ | ---- |  | ------ | ------ | 
|                                                           |                            | At December 31, |       
|                                                           |                            |                 |       
|                                                           |                            | 2003            |        |        | 2004 | 
|                                                           |                            |                 |        |        |      | 
|                                                           |                            | RMB             |        |        | RMB  | 
|Trade payables                                             |                            |                 | 10,150 |        |      |  | 11,802 |       
|Advances from customers                                    |                            |                 | 6,861  |        |      |  | 6,950  |       
|Salaries and welfare payable                               |                            |                 | 5,413  |        |      |  | 5,869  |       
|Accrued expenses                                           |                            |                 | 5      |        |      |  | 7      |       
|Dividends payable by subsidiaries to minority shareholders |                            |                 | 118    |        |      |  | 38     |       
|Interest payable                                           |                            |                 | 130    |        |      |  | 33     |       
|Construction fee and equipment cost payables               |                            |                 | 13,760 |        |      |  | 17,113 |       
|Payable to Sinopec                                         |                            |                 | 610    |        |      |  | 663    |       
|Advances from Sinopec                                      |                            |                 | 233    |        |      |  | 42     |       
|One-time employee housing remedial payment payable         |                            |                 | 2,270  |        |      |  | 1,740  |       
|Other payables                                             |                            |                 | 10,628 |        |      |  | 10,986 |       
|Amounts due to related parties                             |                            |                 |        |        |      |  |        |       
|                                                           |  CNPC                     |                 |        | 1,531  |      |  |        | 2,681  | 
|                                                           |  Fellow CNPC subsidiaries |                 |        | 11,880 |      |  |        | 12,202 | 
|                                                           |  Equity affiliates        |                 |        | 591    |      |  |        | 570    | 
|                                                           |                            |                 |        |        |      | 
|                                                           |                            |                 | 64,180 |        |      |  | 70,696 |       
|                                                           |                            |                 |        |        |      | 







|   |     
|-- | ----
|22 | DEBT

(a) Short-term
debt


|                                    |             |                 |        |       |      |  |        |        | 
|----------------------------------- | ----------- | --------------- | ------ | ----- | ---- |  | ------ | ------ | 
|                                    |             | At December 31, |       
|                                    |             |                 |       
|                                    |             | 2003            |        |       | 2004 | 
|                                    |             |                 |        |       |      | 
|                                    |             | RMB             |        |       | RMB  | 
|Bank loans                          |             |                 |        |       |      |  |        |       
|                                    |  secured   |                 |        | 114   |      |  |        | 29     | 
|                                    |  unsecured |                 |        | 8,450 |      |  |        | 10,631 | 
|Loans from fellow CNPC subsidiaries |             |                 | 610    |       |      |  | 600    |       
|Other                               |             |                 | 5      |       |      |  | 8      |       
|                                    |             |                 |        |       |      | 
|                                    |             |                 | 9,179  |       |      |  | 11,268 |       
|Current portion of long-term debt   |             |                 | 19,711 |       |      |  | 16,008 |       
|                                    |             |                 |        |       |      | 
|                                    |             |                 | 28,890 |       |      |  | 27,276 |       
|                                    |             |                 |        |       |      | 

F-27



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


(b) Long-term debt


|                                                                                                     |  |                                                                                                                                                   |  |                 |  |       
|---------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- |  | ------
|                                                                                                     |  |                                                                                                                                                   |  | At December 31,
|                                                                                                     |  |                                                                                                                                                   |  |                
|                                                                                                     |  | Interest Rate and Final Maturity                                                                                                                  |  | 2003            |  | 2004  
|                                                                                                     |  |                                                                                                                                                   |  |                 |  |       
|                                                                                                     |  |                                                                                                                                                   |  | RMB             |  | RMB   
|Renminbi-denominated loans:                                                                          |  |                                                                                                                                                   |  |                
|Bank loans for the development of oil fields and construction of
    refining plants                 |  | Majority variable interest rates ranging from 4.94% to
    5.85% per annum as of December 31, 2004, with maturities
    through 2010              |  | 20,327          |  | 16,195
|Bank loans for working capital                                                                       |  | Majority variable interest rate at 4.94% per annum as of
    December 31, 2004, with maturities through 2007                                      |  | 6,073           |  | 6,016 
|Loans from related parties for the development of oil fields and
    construction of refining plants |  | Floating interest rate ranging from 4.46% to 5.18% per
    annum as of December 31, 2004, with maturities through 2032                            |  | 15,620          |  | 15,610
|Working capital loans from related parties                                                           |  | Floating interest rate at 4.39% per annum as of
    December 31, 2004, with maturity through 2007                                                 |  | 4,000           |  | 4,000 
|Working capital loans                                                                                |  | Fixed interest rates at 6.32% per annum with no fixed repayment
    term                                                                          |  | 10              |  | 8     
|Corporate debenture for the development of oil fields and
    construction of refining plants        |  | Fixed interest rate at 4.50% per annum with maturities through
    2007                                                                           |  | 1,350           |  | 1,350 
|Corporate debenture for the development of oil and gas properties                                    |  | Fixed interest rate at 4.11% per annum with maturities through
    2013                                                                           |  | 1,500           |  | 1,500 
|US Dollar-denominated loans:                                                                         |  |                                                                                                                                                   |  |                
|Bank loans for the development of oil fields and construction of
    refining plants                 |  | Fixed interest rates ranging from free to 8.66% per annum
    with maturities through 2038                                                        |  | 2,881           |  | 1,535 
|Bank loans for the development of oil fields and construction of
    refining plants                 |  | Floating interest rates ranging from 1.65% to 3.43% per
    annum as of December 31, 2004, with maturities through 2014                           |  | 1,403           |  | 1,609 
|Bank loans for working capital                                                                       |  | Floating interest rate at LIBOR plus 0.60% per annum as of
    December 31, 2004 with maturities through 2006                                     |  |                |  | 492   
|Bank loans for acquisition of overseas oil and gas properties                                        |  | Floating interest rates ranging from LIBOR plus 0.55% to LIBOR
    plus 0.60% per annum as of December 31, 2004, with
    maturities through 2009 |  | 1,493           |  | 1,490 
|Loans from related parties for the development of oil fields and
    construction of refining plants |  | Floating interest rate at LIBOR minus 0.25% per annum as of
    December 31, 2004, with maturities through 2005                                   |  | 3,633           |  | 1,633 
|Loans from related parties for acquisition of overseas oil and
    gas properties                    |  | Floating interest rate at LIBOR plus 0.40% per annum as of
    December 31, 2004, with maturities through 2006                                    |  | 608             |  | 608   

F-28



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


|                                                                                     |  |                                                                                                                |  |                 |  |         
|------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------- |  | --------------- |  | --------
|                                                                                     |  |                                                                                                                |  | At December 31,
|                                                                                     |  |                                                                                                                |  |                
|                                                                                     |  | Interest Rate and Final Maturity                                                                               |  | 2003            |  | 2004    
|                                                                                     |  |                                                                                                                |  |                 |  |         
|                                                                                     |  |                                                                                                                |  | RMB             |  | RMB     
|Loans from related parties for working capital                                       |  | Floating interest rate at LIBOR plus 0.40% per annum as of
    December 31, 2004, with maturities through 2006 |  | 717             |  | 717     
|Loans for the development of oil fields and construction of
    refining plants      |  | Fixed interest rate at 1.55% per annum with maturities through
    2022                                        |  | 586             |  | 554     
|Japanese Yen-denominated
    loans:                                                  |  |                                                                                                                |  |                
|Bank loans for the development of oil fields and construction of
    refining plants |  | Fixed interest rates ranging from 4.10% to 5.30% per annum
    with maturities through 2010                    |  | 578             |  | 430     
|Euro-denominated loans:                                                              |  |                                                                                                                |  |                
|Bank loans for the development of oil fields and construction of
    refining plants |  | Fixed interest rates ranging from 2.00% to 8.30% per annum
    with maturities through 2023                    |  | 381             |  | 360     
|British Pound-denominated
    loans:                                                 |  |                                                                                                                |  |                
|Bank loans for the development of oil fields and construction of
    refining plants |  | Fixed interest rate at 2.85% per annum with maturities through
    2007                                        |  | 454             |  | 338     
|                                                                                     |  |                                                                                                                |  |                 |  |         
|                                                                                     |  |                                                                                                                |  | 61,614          |  | 54,445  
|Capital lease obligations                                                            |  |                                                                                                                |  | 56              |  | 21      
|                                                                                     |  |                                                                                                                |  |                 |  |         
|Total long-term debt                                                                 |  |                                                                                                                |  | 61,670          |  | 54,466  
|Less: Current portion of long-term debt                                              |  |                                                                                                                |  | (19,711)        |  | (16,008)
|                                                                                     |  |                                                                                                                |  |                 |  |         
|                                                                                     |  |                                                                                                                |  | 41,959          |  | 38,458  
|                                                                                     |  |                                                                                                                |  |                 |  |         







F-29



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


|                                           |                              |                 |        |        |      |  |        |        |  
|------------------------------------------ | ---------------------------- | --------------- | ------ | ------ | ---- |  | ------ | ------ | -
|                                           |                              | At December 31, |       
|                                           |                              |                 |       
|                                           |                              | 2003            |        |        | 2004 | 
|                                           |                              |                 |        |        |      | 
|                                           |                              | RMB             |        |        | RMB  | 
|Total debt:                                |                              |                 |        |        |      |  |        |       
|                                           |  at fixed rates             |                 |        | 17,024 |      |  |        | 17,790 |  
|                                           |  at variable rates          |                 |        | 53,825 |      |  |        | 47,944 |  
|                                           |                              |                 |        |        |      | 
|                                           |                              |                 | 70,849 |        |      |  | 65,734 |       
|                                           |                              |                 |        |        |      | 
|Weighted average effective interest rates: |                              |                 |        |        |      |  |        |       
|                                           |  bank loans                 |                 |        | 4.77   | %    |  |        | 4.73   | %
|                                           |  loans from related parties |                 |        | 4.23   | %    |  |        | 4.55   | %
|                                           |  loans from third parties   |                 |        | 1.64   | %    |  |        | 1.68   | %
|                                           |  corporate debentures       |                 |        | 4.30   | %    |  |        | 4.30   | %
|                                           |  capital lease obligations  |                 |        | 3.22   | %    |  |        | 4.78   | %



|                           |  |                  |        |  |      |  |        | 
|-------------------------- |  | ---------------- | ------ |  | ---- |  | ------ | 
|                           |  | Carrying amounts |       
|                           |  | At December 31,  |       
|                           |  |                  |       
|                           |  | 2003             |        |  | 2004 | 
|                           |  |                  |        |  |      | 
|                           |  | RMB              |        |  | RMB  | 
|Bank loans                 |  |                  | 33,590 |  |      |  | 28,465 | 
|Loans from related parties |  |                  | 24,578 |  |      |  | 22,568 | 
|Corporate debentures       |  |                  | 2,850  |  |      |  | 2,850  | 
|Other                      |  |                  | 596    |  |      |  | 562    | 
|                           |  |                  |        |  |      | 
|                           |  |                  | 61,614 |  |      |  | 54,445 | 
|                           |  |                  |        |  |      | 

|                           |  |                 |        |  |      |  |        | 
|-------------------------- |  | --------------- | ------ |  | ---- |  | ------ | 
|                           |  | Fair values     |       
|                           |  | At December 31, |       
|                           |  |                 |       
|                           |  | 2003            |        |  | 2004 | 
|                           |  |                 |        |  |      | 
|                           |  | RMB             |        |  | RMB  | 
|Bank loans                 |  |                 | 33,514 |  |      |  | 28,346 | 
|Loans from related parties |  |                 | 24,578 |  |      |  | 22,568 | 
|Corporate debentures       |  |                 | 2,640  |  |      |  | 2,632  | 
|Other                      |  |                 | 422    |  |      |  | 404    | 
|                           |  |                 |        |  |      | 
|                           |  |                 | 61,154 |  |      |  | 53,950 | 
|                           |  |                 |        |  |      | 



F-30



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|            |  |                 |        |  |      |  |        | 
|----------- |  | --------------- | ------ |  | ---- |  | ------ | 
|            |  | At December 31, |       
|            |  |                 |       
|            |  | 2003            |        |  | 2004 | 
|            |  |                 |        |  |      | 
|            |  | RMB             |        |  | RMB  | 
|First year  |  |                 | 19,672 |  |      |  | 15,987 | 
|Second year |  |                 | 18,166 |  |      |  | 8,130  | 
|Third year  |  |                 | 7,331  |  |      |  | 16,493 | 
|Fourth year |  |                 | 5,640  |  |      |  | 4,921  | 
|Fifth year  |  |                 | 4,137  |  |      |  | 1,547  | 
|Thereafter  |  |                 | 6,668  |  |      |  | 7,367  | 
|            |  |                 |        |  |      | 
|            |  |                 | 61,614 |  |      |  | 54,445 | 
|            |  |                 |        |  |      | 



|                                                                               |  |                 |    |   |      |  |    |  
|------------------------------------------------------------------------------ |  | --------------- | -- | - | ---- |  | -- | -
|                                                                               |  | At December 31, |   
|                                                                               |  |                 |   
|                                                                               |  | 2003            |    |   | 2004 | 
|                                                                               |  |                 |    |   |      | 
|                                                                               |  | RMB             |    |   | RMB  | 
|First year                                                                     |  |                 | 41 |   |      |  | 22 |  
|Second year                                                                    |  |                 | 17 |   |      |  |   |  
|                                                                               |  |                 |    |   |      | 
|                                                                               |  |                 | 58 |   |      |  | 22 |  
|Future finance charges on capital lease obligations                            |  |                 | (2 | ) |      |  | (1 | )
|                                                                               |  |                 |    |   |      | 
|Present value of capital lease obligations                                     |  |                 | 56 |   |      |  | 21 |  
|                                                                               |  |                 |    |   |      | 
|The present value of capital lease obligations can be analyzed
    as follows: |  |                 |    |   |      |  |    |  
|First year                                                                     |  |                 | 39 |   |      |  | 21 |  
|Second year                                                                    |  |                 | 17 |   |      |  |   |  
|                                                                               |  |                 |    |   |      | 
|                                                                               |  |                 | 56 |   |      |  | 21 |  
|                                                                               |  |                 |    |   |      | 

23     DEFERRED INCOME TAXES






|                                 |                              |                         |       |   |      |  |        |      |  |  |        |   | 
|-------------------------------- | ---------------------------- | ----------------------- | ----- | - | ---- |  | ------ | ---- |  |  | ------ | - | 
|                                 |                              | Year Ended December 31, |      
|                                 |                              |                         |      
|                                 |                              | 2002                    |       |   | 2003 |  |        | 2004 | 
|                                 |                              |                         |       |   |      |  |        |      | 
|                                 |                              | RMB                     |       |   | RMB  |  |        | RMB  | 
|At beginning of year             |                              |                         | 7,030 |   |      |  | 9,927  |      |  |  | 11,526 |  
|Income statement charge (Note 7) |                              |                         | 2,897 |   |      |  | 1,594  |      |  |  | 2,814  |  
|Charged to equity                |                              |                         |       |   |      |  |        |      |  |  |        |  
|                                 |  net surplus on revaluation |                         |       |  |      |  |        | 5    |  |  |        |  | 
|                                 |                              |                         |       |   |      |  |        |      | 
|At end of year                   |                              |                         | 9,927 |   |      |  | 11,526 |      |  |  | 14,340 |  
|                                 |                              |                         |       |   |      |  |        |      | 

F-31



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|                               |             |                                                                          |        |  |        |  |        |  |        | 
|------------------------------ | ----------- | ------------------------------------------------------------------------ | ------ |  | ------ |  | ------ |  | ------ | 
|                               |             | At December 31,                                                          |       
|                               |             |                                                                          |       
|                               |             | 2003                                                                     |        |  | 2004   | 
|                               |             |                                                                          |        |  |        | 
|                               |             | RMB                                                                      |        |  | RMB    | 
|Deferred tax assets            |             |                                                                          |        |  |        |  |        | 
|                               | Current     |                                                                          |        |  |        |  |        |  |       
|                               |             | Provisions, primarily for receivables and inventories                    |        |  | 4,015  |  |        |  | 4,549  | 
|                               |             | Tax losses of subsidiaries                                               |        |  | 39     |  |        |  |       | 
|                               | Non current |                                                                          |        |  |        |  |        |  |       
|                               |             | Shut down of manufacturing assets and impairment of long-term
    assets |        |  | 1,039  |  |        |  | 2,454  | 
|                               |             | Other                                                                    |        |  | 579    |  |        |  | 538    | 
|                               |             |                                                                          |        |  |        | 
|Total deferred tax assets      |             |                                                                          | 5,672  |  |        |  | 7,541  | 
|                               |             |                                                                          |        |  |        | 
|Deferred tax liabilities       |             |                                                                          |        |  |        |  |        | 
|                               | Current     |                                                                          |        |  |        |  |        |  |       
|                               |             | Sales (Note(i))                                                          |        |  | 4,401  |  |        |  | 4,401  | 
|                               | Non current |                                                                          |        |  |        |  |        |  |       
|                               |             | Accelerated tax depreciation                                             |        |  | 12,519 |  |        |  | 17,230 | 
|                               |             | Other                                                                    |        |  | 278    |  |        |  | 250    | 
|                               |             |                                                                          |        |  |        | 
|Total deferred tax liabilities |             |                                                                          | 17,198 |  |        |  | 21,881 | 
|                               |             |                                                                          |        |  |        | 
|Net deferred tax liabilities   |             |                                                                          | 11,526 |  |        |  | 14,340 | 
|                               |             |                                                                          |        |  |        | 




|     |                                                                                                                                                                                                                                                                                                                                                          
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)  | Prior to the formation of the Company in November 1999, certain
    crude oil sales were exempted from income tax. Upon formation of
    the Company, such exemption ceased to be available. A portion of
    the previously exempted items may become taxable at a later date
    in certain circumstances at the discretion of the tax
    authorities.
|    
|(ii) | There were no material unrecognized tax losses at
    December 31, 2004.                                                                                                                                                                                                                                                                                 

24     SHARE CAPITAL


|                                   |                    |                 |         |         |      |  |         |         | 
|---------------------------------- | ------------------ | --------------- | ------- | ------- | ---- |  | ------- | ------- | 
|                                   |                    | At December 31, |        
|                                   |                    |                 |        
|                                   |                    | 2003            |         |         | 2004 | 
|                                   |                    |                 |         |         |      | 
|                                   |                    | RMB             |         |         | RMB  | 
|Registered, issued and fully paid: |                    |                 |         |         |      |  |         |        
|                                   | State-owned shares |                 |         | 158,242 |      |  |         | 158,242 | 
|                                   | H shares           |                 |         | 17,582  |      |  |         | 17,582  | 
|                                   |                    |                 |         |         |      | 
|                                   |                    |                 | 175,824 |         |      |  | 175,824 |        
|                                   |                    |                 |         |         |      | 



F-32



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)








F-33



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


25     RESERVES


|                                                                                                  |         |              |         |      |      |  |         |   | 
|------------------------------------------------------------------------------------------------- | ------- | ------------ | ------- | ---- | ---- |  | ------- | - | 
|                                                                                                  |         | Year Ended   |        
|                                                                                                  |         | December 31, |        
|                                                                                                  |         |              |        
|                                                                                                  |         | 2003         |         |      | 2004 | 
|                                                                                                  |         |              |         |      |      | 
|                                                                                                  |         | RMB          |         |      | RMB  | 
|Revaluation Reserve                                                                               |         |              |         |      |      |  |         |  
|Beginning balance                                                                                 |         |              | 79,945  |      |      |  | 79,946  |  
|Revaluation surplus of property, plant and equipment (Note
    e)                                 |         |              |         |      |      |  |         |  
|                                                                                                  |  gross |              |         | 774  |      |  |         |  | 
|                                                                                                  |  tax   |              |         | (247 | )    |  |         |  | 
|Revaluation loss offset against previous revaluation surplus of
    property, plant and equipment |         |              |         |      |      |  |         |  
|                                                                                                  |  gross |              |         | (768 | )    |  |         |  | 
|                                                                                                  |  tax   |              |         | 242  |      |  |         |  | 
|                                                                                                  |         |              |         |      |      | 
|Ending balance                                                                                    |         |              | 79,946  |      |      |  | 79,946  |  
|Capital Reserve                                                                                   |         |              |         |      |      |  |         |  
|Beginning balance                                                                                 |         |              | (28,557 | )    |      |  | (28,557 | )
|                                                                                                  |         |              |         |      |      | 
|Ending balance                                                                                    |         |              | (28,557 | )    |      |  | (28,557 | )
|Statutory Common Reserve Fund(Note a)                                                             |         |              |         |      |      |  |         |  
|Beginning balance                                                                                 |         |              | 20,128  |      |      |  | 26,370  |  
|Transfer from retained earnings                                                                   |         |              | 6,242   |      |      |  | 9,701   |  
|                                                                                                  |         |              |         |      |      | 
|Ending balance                                                                                    |         |              | 26,370  |      |      |  | 36,071  |  
|Statutory Common Welfare Fund(Note b)                                                             |         |              |         |      |      |  |         |  
|Beginning balance                                                                                 |         |              | 13,532  |      |      |  | 16,653  |  
|Transfer from retained earnings                                                                   |         |              | 3,121   |      |      |  | 4,851   |  
|                                                                                                  |         |              |         |      |      | 
|Ending balance                                                                                    |         |              | 16,653  |      |      |  | 21,504  |  
|Other Reserves                                                                                    |         |              |         |      |      |  |         |  
|Beginning balance                                                                                 |         |              | (3,200  | )    |      |  | (3,200  | )
|                                                                                                  |         |              |         |      |      | 
|Ending balance                                                                                    |         |              | (3,200  | )    |      |  | (3,200  | )
|                                                                                                  |         |              |         |      |      | 
|                                                                                                  |         |              | 91,212  |      |      |  | 105,764 |  
|                                                                                                  |         |              |         |      |      | 




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Pursuant to PRC regulations and the Companys Articles of
    Association, the Company is required to transfer 10% of its net
    profit, as determined under the PRC accounting regulations, to
    statutory common reserve fund until the fund aggregates to 50%
    of the Companys registered capital. The transfer to this
    reserve must be made before distribution of dividends to
    shareholders.                                                                                                                                                                                                                                            
|   
|    |  | The statutory common reserve fund shall only be used to make
    good previous years losses, to expand the Companys
    production operations, or to increase the capital of the
    Company. Upon approval by a resolution of shareholders
    general meeting, the Company may convert its statutory common
    reserve fund into share capital and issue bonus shares to
    existing shareholders in proportion to their original
    shareholdings or to increase the nominal value of each share
    currently held by them, provided that the balance of the reserve
    fund after such issue is not less than 25% of the registered
    capital.

F-34



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Pursuant to the PRC regulations and the Companys Articles
    of Association, the Company is required to transfer 5% to 10% of
    its net income, as determined under the PRC accounting
    regulations, to the statutory common welfare fund. This fund can
    only be used to provide common facilities, of which the Group
    retains the titles, and other collective benefits to the
    Companys employees. This fund is non-distributable other
    than in liquidation. The directors have proposed to transfer 5%
    (2003: 5%) of the net income, as determined under the PRC
    accounting regulations, for the year ended December 31,
    2004 to the statutory common welfare fund.
|   
|(c) |  | The Companys distributable reserve is the retained
    earnings computed under the PRC accounting regulations, which
    amounted to RMB 59,104 and RMB 95,248 as of December 31,
    2003 and 2004, respectively. The distributable reserve computed
    under the PRC accounting regulations at December 31, 2004
    has been arrived at after the accrual for the proposed final
    dividend in respect of year 2004 of RMB 25,936 (Note 9
    (vii)).                                                                                                                                                                                                                                             
|   
|(d) |  | As of December 31, 2004, Revaluation surplus relating to
    depreciation and disposals amounted to approximately RMB 38,064
    and RMB 46,757 as of December 31, 2003 and 2004,
    respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(e) |  | The revaluation surplus recognized during the formation of the
    Group in 1999 was partially utilized to offset against the
    revaluation loss on the same assets arising in 2003
    (Note 16). Additional valuation surplus arising in 2003 was
    credited to the revaluation reserve.                                                                                                                                                                                                                                                                                                                                                                                                           



|   |         
|-- | --------
|26 | PENSIONS





|   |                      
|-- | ---------------------
|27 | FINANCIAL INSTRUMENTS





| |                
| | ---------------
| | (a) Credit risk





F-35



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




| |                       
| | ----------------------
| | (b) Interest rate risk





|    |                           
|--- | --------------------------
|(c) | Foreign exchange rate risk





|    |                     
|--- | --------------------
|(d) | Commodity price risk





|    |            
|--- | -----------
|(e) | Fair values



F-36



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|   |                       
|-- | ----------------------
|28 | CONTINGENT LIABILITIES

(a) Bank and other
guarantees




|                                        |  |                 |     |  |      |  |     | 
|--------------------------------------- |  | --------------- | --- |  | ---- |  | --- | 
|                                        |  | At December 31, |    
|                                        |  |                 |    
|                                        |  | 2003            |     |  | 2004 | 
|                                        |  |                 |     |  |      | 
|                                        |  | RMB             |     |  | RMB  | 
|Guarantee of debts of equity affiliates |  |                 | 448 |  |      |  | 203 | 
|                                        |  |                 |     |  |      | 

(b) Environmental
liabilities




(c) Legal
contingencies




(d) Leasing of roads,
land and buildings






| |   |                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | CNPC will use its best endeavors to obtain formal land use right
    certificates to replace the entitlement certificates in relation
    to the 28,649 parcels of land which were leased or transferred
    to the Company from CNPC, within one year from August, September
    and October 1999 when the relevant entitlement certificates were
    issued;
|
| |  | CNPC will complete, within one year from November 5, 1999,
    the necessary governmental procedures for the requisition of the
    collectively-owned land on which 116 service stations owned by
    the Company are located; and                                                                                                                           
|
| |  | CNPC will obtain individual building ownership certificates in
    the name of the Company for all of the 57,482 buildings
    transferred to the Company by CNPC, before November 5, 2000.                                                                                                                                                                   



F-37



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




(e) Group
insurance




(f) Cost reduction
measures




(g) Other




29     COMMITMENTS


(a) Operating lease
commitments




F-38



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|            |  |                 |        |  |      |  |        | 
|----------- |  | --------------- | ------ |  | ---- |  | ------ | 
|            |  | At December 31, |       
|            |  |                 |       
|            |  | 2003            |        |  | 2004 | 
|            |  |                 |        |  |      | 
|            |  | RMB             |        |  | RMB  | 
|First year  |  |                 | 2,552  |  |      |  | 2,701  | 
|Second year |  |                 | 2,433  |  |      |  | 2,473  | 
|Third year  |  |                 | 2,409  |  |      |  | 2,452  | 
|Fourth year |  |                 | 2,391  |  |      |  | 2,434  | 
|Fifth year  |  |                 | 2,380  |  |      |  | 2,356  | 
|Thereafter  |  |                 | 84,776 |  |      |  | 83,035 | 
|            |  |                 |        |  |      | 
|            |  |                 | 96,941 |  |      |  | 95,451 | 
|            |  |                 |        |  |      | 



(b) Capital
commitments


|                                                                                                                               |                        |                 |        |        |      |  |       |       | 
|------------------------------------------------------------------------------------------------------------------------------ | ---------------------- | --------------- | ------ | ------ | ---- |  | ----- | ----- | 
|                                                                                                                               |                        | At December 31, |       
|                                                                                                                               |                        |                 |       
|                                                                                                                               |                        | 2003            |        |        | 2004 | 
|                                                                                                                               |                        |                 |        |        |      | 
|                                                                                                                               |                        | RMB             |        |        | RMB  | 
|Capital expenditure contracted for at the balance sheet date but
    not recognized in the financial statements is as follows: |                        |                 |        |        |      |  |       |      
|                                                                                                                               | Oil and gas properties |                 |        | 896    |      |  |       | 645   | 
|                                                                                                                               | Plant and equipment    |                 |        | 10,055 |      |  |       | 4,614 | 
|                                                                                                                               | Other                  |                 |        | 194    |      |  |       | 111   | 
|                                                                                                                               |                        |                 |        |        |      | 
|                                                                                                                               |                        |                 | 11,145 |        |      |  | 5,370 |      
|                                                                                                                               |                        |                 |        |        |      | 

(c) Long-term natural
gas supply commitments




F-39



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|                    |  |                         |       | 
|------------------- |  | ----------------------- | ----- | 
|                    |  | Quantities              |      
|                    |  |                         |      
|                    |  | (billion of cubic feet) |      
|2005                |  |                         | 229   | 
|2006                |  |                         | 443   | 
|2007                |  |                         | 581   | 
|2008                |  |                         | 637   | 
|2009                |  |                         | 701   | 
|2010 and thereafter |  |                         | 6,111 | 
|                    |  |                         |      
|                    |  |                         | 8,702 | 
|                    |  |                         |      

(d) Exploration and
production licenses






|     |  |     |     | 
|---- |  | --- | --- | 
|     |  | RMB |    
|     |  |     |    
|2005 |  |     | 618 | 
|2006 |  |     | 681 | 
|2007 |  |     | 712 | 
|2008 |  |     | 712 | 
|2009 |  |     | 712 | 

(e) Dividends




30     ACQUISITION






F-40



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)








|                                         |  |       |        |   |        |  |       |       |  |  |       |   |  |  |        |  
|---------------------------------------- |  | ----- | ------ | - | ------ |  | ----- | ----- |  |  | ----- | - |  |  | ------ | -
|                                         |  | Devon |        |   | Jilian |  |       | Tashu |  |  | Total |  
|                                         |  |       |        |   |        |  |       |       |  |  |       |  
|                                         |  | RMB   |        |   | RMB    |  |       | RMB   |  |  | RMB   |  
|Assets                                   |  |       | 2,145  |   |        |  | 1,050 |       |  |  | 897   |   |  |  | 4,092  |  
|Liabilities                              |  |       | (77    | ) |        |  | (664  | )     |  |  | (262  | ) |  |  | (1,003 | )
|                                         |  |       |        |   |        |  |       |       |  |  |       |  
|                                         |  |       | 2,068  |   |        |  | 386   |       |  |  | 635   |   |  |  | 3,089  |  
|Equity interest acquired                 |  |       | 100.0% |   |        |  | 35.0% |       |  |  | 53.1% |   |  |  |        |  
|Fair value of net assets acquired        |  |       | 2,068  |   |        |  | 135   |       |  |  | 337   |   |  |  | 2,540  |  
|Less: Cash and cash equivalents acquired |  |       | (64    | ) |        |  | (8    | )     |  |  | (264  | ) |  |  | (336   | )
|Consideration not yet settled            |  |       |       |   |        |  | (54   | )     |  |  |      |   |  |  | (54    | )
|                                         |  |       |        |   |        |  |       |       |  |  |       |  
|Cash outflow on acquisition              |  |       | 2,004  |   |        |  | 73    |       |  |  | 73    |   |  |  | 2,150  |  
|                                         |  |       |        |   |        |  |       |       |  |  |       |  

31     MAJOR CUSTOMERS




|        |  |                         |        |       |         |  |    |         |       |  |         |  |  |         |    |  |         |  |        |  |  |  |    | 
|------- |  | ----------------------- | ------ | ----- | ------- |  | -- | ------- | ----- |  | ------- |  |  | ------- | -- |  | ------- |  | ------ |  |  |  | -- | 
|        |  | Year Ended December 31, |       
|        |  |                         |       
|        |  | 2002                    |        |       | 2003    |  |    | 2004    |      
|        |  |                         |        |       |         |  |    |         |      
|        |  |                         |        | % to  |         |  |    |         | % to  |  |         |  |  | % to    |   
|        |  |                         |        | Total |         |  |    |         | Total |  |         |  |  | Total   |   
|        |  | Revenue                 |        |       | Revenue |  |    | Revenue |       |  | Revenue |  |  | Revenue |    |  | Revenue | 
|        |  |                         |        |       |         |  |    |         |       |  |         |  |  |         |    |  |         | 
|        |  | RMB                     |        |       | %       |  |    | RMB     |       |  | %       |  |  | RMB     |    |  | %       | 
|Sinopec |  |                         | 26,497 |       |         |  | 11 |         |       |  | 35,932  |  |  |         | 12 |  |         |  | 36,977 |  |  |  | 9  | 
|CNPC    |  |                         | 7,772  |       |         |  | 3  |         |       |  | 9,323   |  |  |         | 3  |  |         |  | 14,516 |  |  |  | 4  | 
|        |  |                         |        |       |         |  |    |         |       |  |         |  |  |         |    |  |         | 
|        |  |                         | 34,269 |       |         |  | 14 |         |       |  | 45,255  |  |  |         | 15 |  |         |  | 51,493 |  |  |  | 13 | 
|        |  |                         |        |       |         |  |    |         |       |  |         |  |  |         |    |  |         | 

32     RELATED PARTY TRANSACTIONS






F-41



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)














F-42



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|                                                  |                                             |       |    |      |                         |  |        |        |  |      |        |        |  |  |        |        | 
|------------------------------------------------- | ------------------------------------------- | ----- | -- | ---- | ----------------------- |  | ------ | ------ |  | ---- | ------ | ------ |  |  | ------ | ------ | 
|                                                  |                                             | Notes |    |      | Year Ended December 31, | 
|                                                  |                                             |       |    |      |                         | 
|                                                  |                                             |       |    | 2002 |                         |  | 2003   |        |  | 2004 |       
|                                                  |                                             |       |    |      |                         |  |        |        |  |      |       
|                                                  |                                             |       |    | RMB  |                         |  | RMB    |        |  | RMB  |       
|Sale of goods                                     |                                             |       | (a | )    |                         |  | 7,772  |        |  |      | 9,323  |        |  |  | 14,516 |       
|Fees paid for construction and technical services |                                             |       | (b | )    |                         |  |        |        |  |      |        |        |  |  |        |       
|                                                  |  Exploration and development services      |       |    | (c   | )                       |  |        | 21,781 |  |      |        | 25,180 |  |  |        | 29,030 | 
|                                                  |  Other construction and technical services |       |    | (d   | )                       |  |        | 16,324 |  |      |        | 15,688 |  |  |        | 18,469 | 
|Fees for production services                      |                                             |       | (e | )    |                         |  | 15,743 |        |  |      | 16,042 |        |  |  | 16,313 |       
|Social services charge                            |                                             |       | (f | )    |                         |  | 1,243  |        |  |      | 1,326  |        |  |  | 1,289  |       
|Ancillary service charges                         |                                             |       | (g | )    |                         |  | 1,713  |        |  |      | 1,683  |        |  |  | 1,717  |       
|Interest income                                   |                                             |       | (h | )    |                         |  | 25     |        |  |      | 30     |        |  |  | 25     |       
|Interest expense                                  |                                             |       | (i | )    |                         |  | 1,086  |        |  |      | 1,052  |        |  |  | 1,097  |       
|Rental expense                                    |                                             |       | (j | )    |                         |  | 1,916  |        |  |      | 2,001  |        |  |  | 2,106  |       
|Commission expense and other charges              |                                             |       | (k | )    |                         |  | 936    |        |  |      | 971    |        |  |  | 884    |       






|    |                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Represents sale of crude oil, refined and chemical products
    conducted principally at market prices.                                                                                                                                                                                                                                                                                  
|   
|(b) | Under the Comprehensive Products and Services Agreement entered
    into between CNPC and the Company, certain construction and
    technical services provided by CNPC are charged at cost plus an
    additional cost of no more than 15%, including exploration and
    development services and oilfield construction services.                                                      
|   
|(c) | Direct costs for exploration and development services comprise
    geophysical survey, drilling, well cementing, logging, and well
    testing.                                                                                                                                                                                                                                          
|   
|(d) | The fees paid for other construction and technical services
    comprise fees for construction of refineries and chemical plants
    and technical services in connection with oil and gas
    exploration and production activities such as oilfield
    construction, technology research, engineering and design, etc.                                                                
|   
|(e) | The fees paid for production services comprise fees for the
    repair of machinery, supply of water, electricity and gas,
    provision of services such as communications, transportation,
    fire fighting, asset leasing, environmental protection and
    sanitation, maintenance of roads, manufacture of replacement
    parts and machinery.                                    
|   
|(f) | These represent expenditures for social welfare and support
    services which are charged at cost.                                                                                                                                                                                                                                                                                      
|   
|(g) | Ancillary service charges represent mainly fees for property
    management, the provision of training centers, guesthouses,
    canteens, public shower rooms, etc.                                                                                                                                                                                                                     
|   
|(h) | The Group had deposits placed with China Petroleum Finance
    Company Limited (CP Finance), a subsidiary of CNPC
    and a non-bank financial institution approved by the
    Peoples Bank of China, amounting to RMB 2,861, RMB 2,331
    and RMB 1,782 as of December 31, 2002, 2003 and 2004
    respectively. The deposits yield interest at prevailing saving
    deposit rates.

F-43



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|    |                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | The Group had unsecured short-term and long-term loans from CP
    Finance amounting to RMB 24,702, RMB 25,188 and RMB 23,168 as of
    December 31, 2002, 2003 and 2004 respectively, included
    under loans from related parties. The loans were interest
    bearing at market rates.
|   
|(j) | Rental expenses are calculated in accordance with the lease
    agreements entered into between the Company and CNPC.                                                                                                                                                                     
|   
|(k) | CNPC purchases materials on behalf of the Company and charges
    commission thereon. The commission is calculated at rates
    ranging from 1% to 5% of the goods purchased.                                                                                                             
|   
|(l) | The Group had a 4.73%, 7.5% and 7.5% equity interest in CP
    Finance at a book value of RMB 94, RMB 299 and RMB 299 as of
    December 31, 2002, 2003 and 2004 respectively.                                                                                                            

33     EMOLUMENTS OF DIRECTORS,
SUPERVISORS AND SENIOR MANAGEMENT




|                                          |  |                         |       |  |         |  |       |         |  |  |       | 
|----------------------------------------- |  | ----------------------- | ----- |  | ------- |  | ----- | ------- |  |  | ----- | 
|                                          |  | Year Ended December 31, |      
|                                          |  |                         |      
|                                          |  | 2002                    |       |  | 2003    |  |       | 2004    | 
|                                          |  |                         |       |  |         |  |       |         | 
|                                          |  | RMB000                 |       |  | RMB000 |  |       | RMB000 | 
|Fee for directors and supervisors         |  |                         | 128   |  |         |  | 83    |         |  |  | 120   | 
|Salaries, allowances and other benefits   |  |                         | 1,042 |  |         |  | 1,377 |         |  |  | 2,012 | 
|Contribution to retirement benefit scheme |  |                         | 25    |  |         |  | 34    |         |  |  | 43    | 
|                                          |  |                         |       |  |         |  |       |         | 
|                                          |  |                         | 1,195 |  |         |  | 1,494 |         |  |  | 2,175 | 
|                                          |  |                         |       |  |         |  |       |         | 



|            |  |                         |    |  |        |  |    |        |  |  |    | 
|----------- |  | ----------------------- | -- |  | ------ |  | -- | ------ |  |  | -- | 
|            |  | Year Ended December 31, |   
|            |  |                         |   
|            |  | 2002                    |    |  | 2003   |  |    | 2004   | 
|            |  |                         |    |  |        |  |    |        | 
|            |  | Number                  |    |  | Number |  |    | Number | 
|Nil  RMB 1 |  |                         | 23 |  |        |  | 19 |        |  |  | 24 | 
|            |  |                         |    |  |        |  |    |        | 









F-44



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)






34     SEGMENT INFORMATION


















F-45



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




Primary reporting format  business segments


|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  |          |  
|------------------------------------------------------------------------ |  | ----------- | -------- | - | --------- |  | ------- | --------- |  |  | ----------- | - |  | ----- | ------ | - | ----- |  | ------- | - |  |  | -------- | -
|                                                                         |  | Exploration |          |   | Refining  |  |         | Chemicals |  |  | Natural Gas |   |  |       |        |  
|                                                                         |  | and         |          |   | and       |  |         | and       |  |  | and         |   |  |       |        |  
|Year Ended December 31, 2002                                             |  | Production  |          |   | Marketing |  |         | Marketing |  |  | Pipeline    |   |  | Other |        |   | Total | 
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|                                                                         |  | RMB         |          |   | RMB       |  |         | RMB       |  |  | RMB         |   |  | RMB   |        |   | RMB   | 
|Sales and other operating revenues (including intersegment)              |  |             | 147,308  |   |           |  | 174,621 |           |  |  | 29,661      |   |  |       | 12,733 |   |       |  |        |   |  |  | 364,323  |  
|Less: Intersegment sales                                                 |  |             | (106,266 | ) |           |  | (9,988  | )         |  |  | (1,093      | ) |  |       | (2,552 | ) |       |  |        |   |  |  | (119,899 | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Total sales and other operating revenues from external customers         |  |             | 41,042   |   |           |  | 164,633 |           |  |  | 28,568      |   |  |       | 10,181 |   |       |  |        |   |  |  | 244,424  |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Depreciation, depletion and amortization                                 |  |             | (21,972  | ) |           |  | (7,144  | )         |  |  | (6,336      | ) |  |       | (1,213 | ) |       |  | (117    | ) |  |  | (36,782  | )
|Segment result                                                           |  |             | 76,943   |   |           |  | 17,815  |           |  |  | (1,217      | ) |  |       | 1,796  |   |       |  | (462    | ) |  |  | 94,875   |  
|Other costs                                                              |  |             | (4,804   | ) |           |  | (14,997 | )         |  |  | (1,945      | ) |  |       | (244   | ) |       |  | (544    | ) |  |  | (22,534  | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Income/(loss) from operations                                            |  |             | 72,139   |   |           |  | 2,818   |           |  |  | (3,162      | ) |  |       | 1,552  |   |       |  | (1,006  | ) |  |  | 72,341   |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Finance costs                                                            |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (3,369   | )
|Equity in (loss)/income of affiliates accounted for by equity
    method |  |             | (38      | ) |           |  | 12      |           |  |  | (8          | ) |  |       | 71     |   |       |  | 231     |   |  |  | 268      |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Income before income taxes                                               |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 69,240   |  
|Income taxes                                                             |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (22,231  | )
|Minority interests                                                       |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (99      | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Net income                                                               |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 46,910   |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest income (including inter-segment)                                |  |             | 1,942    |   |           |  | 1,061   |           |  |  | 1,136       |   |  |       | 109    |   |       |  | 4,499   |   |  |  | 8,747    |  
|Less: Intersegment interest income                                       |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (8,284   | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest income from external sources                                    |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 463      |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest expense (including intersegment)                                |  |             | (2,979   | ) |           |  | (2,516  | )         |  |  | (1,810      | ) |  |       | (263   | ) |       |  | (4,232  | ) |  |  | (11,800  | )
|Less: Intersegment interest expense                                      |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 8,284    |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest expense to external sources                                     |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (3,516   | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Segment assets                                                           |  |             | 289,277  |   |           |  | 113,751 |           |  |  | 64,169      |   |  |       | 33,740 |   |       |  | 427,709 |   |  |  | 928,646  |  
|Elimination of intersegment balances                                     |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (449,642 | )
|Investments in equity affiliates                                         |  |             | 1,422    |   |           |  | 1,774   |           |  |  | 178         |   |  |       | 6      |   |       |  | 765     |   |  |  | 4,145    |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Total assets                                                             |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 483,149  |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 

F-46



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


|                                                                    |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  |          |  
|------------------------------------------------------------------- |  | ----------- | ------ |  | --------- |  | ------ | --------- |  |  | ----------- |  |  | ----- | ------ |  | ----- |  | ------- |  |  |  | -------- | -
|                                                                    |  | Exploration |        |  | Refining  |  |        | Chemicals |  |  | Natural Gas |  |  |       |        | 
|                                                                    |  | and         |        |  | and       |  |        | and       |  |  | and         |  |  |       |        | 
|Year Ended December 31, 2002                                        |  | Production  |        |  | Marketing |  |        | Marketing |  |  | Pipeline    |  |  | Other |        |  | Total | 
|                                                                    |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       | 
|                                                                    |  | RMB         |        |  | RMB       |  |        | RMB       |  |  | RMB         |  |  | RMB   |        |  | RMB   | 
|Segment capital expenditure  for property, plant and
    equipment |  |             | 46,078 |  |           |  | 10,503 |           |  |  | 3,140       |  |  |       | 12,912 |  |       |  | 133     |  |  |  | 72,766   |  
|Segment liabilities                                                 |  |             | 89,663 |  |           |  | 68,701 |           |  |  | 44,318      |  |  |       | 22,488 |  |       |  | 113,236 |  |  |  | 338,406  |  
|Other liabilities                                                   |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | 20,927   |  
|Elimination of intersegment balances                                |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | (197,714 | )
|                                                                    |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       | 
|Total liabilities                                                   |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | 161,619  |  
|                                                                    |  |             |        |  |           |  |        |           |  |  |             |  |  |       |        |  |       | 

|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  |          |  
|------------------------------------------------------------------------ |  | ----------- | -------- | - | --------- |  | ------- | --------- |  |  | ----------- | - |  | ----- | ------ | - | ----- |  | ------ | - |  |  | -------- | -
|                                                                         |  | Exploration |          |   | Refining  |  |         | Chemicals |  |  | Natural Gas |   |  |       |        |  
|                                                                         |  | and         |          |   | and       |  |         | and       |  |  | and         |   |  |       |        |  
|Year Ended December 31, 2003                                             |  | Production  |          |   | Marketing |  |         | Marketing |  |  | Pipeline    |   |  | Other |        |   | Total | 
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|                                                                         |  | RMB         |          |   | RMB       |  |         | RMB       |  |  | RMB         |   |  | RMB   |        |   | RMB   | 
|Sales and other operating revenues (including intersegment)              |  |             | 177,271  |   |           |  | 223,584 |           |  |  | 39,211      |   |  |       | 15,067 |   |       |  |       |   |  |  | 455,133  |  
|Less: Intersegment sales                                                 |  |             | (128,963 | ) |           |  | (16,867 | )         |  |  | (2,263      | ) |  |       | (3,261 | ) |       |  |       |   |  |  | (151,354 | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Total sales and other operating revenues from external customers         |  |             | 48,308   |   |           |  | 206,717 |           |  |  | 36,948      |   |  |       | 11,806 |   |       |  |       |   |  |  | 303,779  |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Depreciation, depletion and amortization                                 |  |             | (25,486  | ) |           |  | (7,601  | )         |  |  | (5,795      | ) |  |       | (1,543 | ) |       |  | (106   | ) |  |  | (40,531  | )
|Segment result                                                           |  |             | 98,819   |   |           |  | 20,679  |           |  |  | 2,621       |   |  |       | 2,248  |   |       |  | (713   | ) |  |  | 123,654  |  
|Other costs                                                              |  |             | (6,449   | ) |           |  | (15,644 | )         |  |  | (1,580      | ) |  |       | (326   | ) |       |  | (469   | ) |  |  | (24,468  | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Income/(loss) from operations                                            |  |             | 92,370   |   |           |  | 5,035   |           |  |  | 1,041       |   |  |       | 1,922  |   |       |  | (1,182 | ) |  |  | 99,186   |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Finance costs                                                            |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (1,849   | )
|Equity in (loss)/income of affiliates accounted for by equity
    method |  |             | (33      | ) |           |  | 104     |           |  |  | 42          |   |  |       | 13     |   |       |  | 859    |   |  |  | 985      |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Income before income taxes                                               |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 98,322   |  
|Income taxes                                                             |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (28,072  | )
|Minority interests                                                       |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (636     | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Net income                                                               |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 69,614   |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest income (including intersegment)                                 |  |             | 2,222    |   |           |  | 552     |           |  |  | 446         |   |  |       | 117    |   |       |  | 4,403  |   |  |  | 7,740    |  
|Less: Intersegment interest income                                       |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (7,063   | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest income from external sources                                    |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 677      |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest expense (including intersegment)                                |  |             | (2,537   | ) |           |  | (1,686  | )         |  |  | (843        | ) |  |       | (356   | ) |       |  | (3,987 | ) |  |  | (9,409   | )
|Less: Intersegment interest expense                                      |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 7,063    |  
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest expense to external sources                                     |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (2,346   | )
|                                                                         |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 

F-47



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


|                                                                    |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  |          |  
|------------------------------------------------------------------- |  | ----------- | ------- |  | --------- |  | ------- | --------- |  |  | ----------- |  |  | ----- | ------ |  | ----- |  | ------- |  |  |  | -------- | -
|                                                                    |  | Exploration |         |  | Refining  |  |         | Chemicals |  |  | Natural Gas |  |  |       |        | 
|                                                                    |  | and         |         |  | and       |  |         | and       |  |  | and         |  |  |       |        | 
|Year Ended December 31, 2003                                        |  | Production  |         |  | Marketing |  |         | Marketing |  |  | Pipeline    |  |  | Other |        |  | Total | 
|                                                                    |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       | 
|                                                                    |  | RMB         |         |  | RMB       |  |         | RMB       |  |  | RMB         |  |  | RMB   |        |  | RMB   | 
|Segment assets                                                      |  |             | 310,431 |  |           |  | 117,652 |           |  |  | 55,595      |  |  |       | 46,450 |  |       |  | 451,949 |  |  |  | 982,077  |  
|Elimination of intersegment balances                                |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | (455,913 | )
|Investments in equity affiliates                                    |  |             | 1,184   |  |           |  | 1,889   |           |  |  | 232         |  |  |       | 41     |  |       |  | 2,225   |  |  |  | 5,571    |  
|                                                                    |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       | 
|Total assets                                                        |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | 531,735  |  
|                                                                    |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       | 
|Segment capital expenditure  for property, plant and
    equipment |  |             | 52,713  |  |           |  | 12,650  |           |  |  | 3,898       |  |  |       | 13,530 |  |       |  | 138     |  |  |  | 82,929   |  
|Segment liabilities                                                 |  |             | 86,050  |  |           |  | 58,372  |           |  |  | 17,634      |  |  |       | 33,535 |  |       |  | 104,326 |  |  |  | 299,917  |  
|Other liabilities                                                   |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | 32,548   |  
|Elimination of intersegment balances                                |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | (162,951 | )
|                                                                    |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       | 
|Total liabilities                                                   |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       |  |         |  |  |  | 169,514  |  
|                                                                    |  |             |         |  |           |  |         |           |  |  |             |  |  |       |        |  |       | 

|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  |          |  
|---------------------------------------------------------------- |  | ----------- | -------- | - | --------- |  | ------- | --------- |  |  | ----------- | - |  | ----- | ------ | - | ----- |  | ------ | - |  |  | -------- | -
|                                                                 |  | Exploration |          |   | Refining  |  |         | Chemicals |  |  | Natural Gas |   |  |       |        |  
|                                                                 |  | and         |          |   | and       |  |         | and       |  |  | and         |   |  |       |        |  
|Year Ended December 31, 2004                                     |  | Production  |          |   | Marketing |  |         | Marketing |  |  | Pipeline    |   |  | Other |        |   | Total | 
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|                                                                 |  | RMB         |          |   | RMB       |  |         | RMB       |  |  | RMB         |   |  | RMB   |        |   | RMB   | 
|Sales and other operating revenues (including intersegment)      |  |             | 222,305  |   |           |  | 295,598 |           |  |  | 57,179      |   |  |       | 18,255 |   |       |  |       |   |  |  | 593,337  |  
|Less: Intersegment sales                                         |  |             | (176,458 | ) |           |  | (21,862 | )         |  |  | (2,679      | ) |  |       | (3,705 | ) |       |  |       |   |  |  | (204,704 | )
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Total sales and other operating revenues from external customers |  |             | 45,847   |   |           |  | 273,736 |           |  |  | 54,500      |   |  |       | 14,550 |   |       |  |       |   |  |  | 388,633  |  
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Depreciation, depletion and amortization                         |  |             | (29,092  | ) |           |  | (8,829  | )         |  |  | (5,741      | ) |  |       | (2,645 | ) |       |  | (104   | ) |  |  | (46,411  | )
|Segment result                                                   |  |             | 131,448  |   |           |  | 28,502  |           |  |  | 11,025      |   |  |       | 2,475  |   |       |  | (518   | ) |  |  | 172,932  |  
|Other costs                                                      |  |             | (5,877   | ) |           |  | (16,521 | )         |  |  | (3,370      | ) |  |       | 60     |   |       |  | (638   | ) |  |  | (26,346  | )
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Income/(loss) from operations                                    |  |             | 125,571  |   |           |  | 11,981  |           |  |  | 7,655       |   |  |       | 2,535  |   |       |  | (1,156 | ) |  |  | 146,586  |  
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Finance costs                                                    |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (1,269   | )
|Equity in income of affiliates accounted for by equity method    |  |             | 99       |   |           |  | 108     |           |  |  | 214         |   |  |       | 24     |   |       |  | 1,379  |   |  |  | 1,824    |  
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Income before income taxes                                       |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 147,141  |  
|Income taxes                                                     |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (42,563  | )
|Minority interests                                               |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (1,651   | )
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Net income                                                       |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 102,927  |  
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest income (including intersegment)                         |  |             | 2,336    |   |           |  | 891     |           |  |  | 205         |   |  |       | 27     |   |       |  | 4,723  |   |  |  | 8,182    |  
|Less: Intersegment interest income                               |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | (7,075   | )
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest income from external sources                            |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |        |   |  |  | 1,107    |  
|                                                                 |  |             |          |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 

F-48



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  |           |  
|------------------------------------------------------------------- |  | ----------- | ------- | - | --------- |  | ------- | --------- |  |  | ----------- | - |  | ----- | ------ | - | ----- |  | ------- | - |  |  | --------- | -
|                                                                    |  | Exploration |         |   | Refining  |  |         | Chemicals |  |  | Natural Gas |   |  |       |        |  
|                                                                    |  | and         |         |   | and       |  |         | and       |  |  | and         |   |  |       |        |  
|Year Ended December 31, 2004                                        |  | Production  |         |   | Marketing |  |         | Marketing |  |  | Pipeline    |   |  | Other |        |   | Total | 
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|                                                                    |  | RMB         |         |   | RMB       |  |         | RMB       |  |  | RMB         |   |  | RMB   |        |   | RMB   | 
|Interest expense (including intersegment)                           |  |             | (2,559  | ) |           |  | (1,721  | )         |  |  | (502        | ) |  |       | (693   | ) |       |  | (3,903  | ) |  |  | (9,378    | )
|Less: Intersegment interest expense                                 |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 7,075     |  
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Interest expense to external sources                                |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (2,303    | )
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Segment assets                                                      |  |             | 339,322 |   |           |  | 140,405 |           |  |  | 55,568      |   |  |       | 61,631 |   |       |  | 507,164 |   |  |  | 1,104,090 |  
|Elimination of intersegment balances                                |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (502,085  | )
|Investments in equity affiliates                                    |  |             | 1,407   |   |           |  | 2,832   |           |  |  | 280         |   |  |       | 192    |   |       |  | 3,212   |   |  |  | 7,923     |  
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Total assets                                                        |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 609,928   |  
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Segment capital expenditure  for property, plant and
    equipment |  |             | 59,488  |   |           |  | 17,467  |           |  |  | 4,319       |   |  |       | 13,901 |   |       |  | 174     |   |  |  | 95,349    |  
|Segment liabilities                                                 |  |             | 93,871  |   |           |  | 73,529  |           |  |  | 18,484      |   |  |       | 35,385 |   |       |  | 99,711  |   |  |  | 320,980   |  
|Other liabilities                                                   |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 36,470    |  
|Elimination of intersegment balances                                |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | (182,125  | )
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 
|Total liabilities                                                   |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       |  |         |   |  |  | 175,325   |  
|                                                                    |  |             |         |   |           |  |         |           |  |  |             |   |  |       |        |   |       | 




|           |                                                                                                                                                                      
|---------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note (a)  | Intersegment sales are conducted principally at market price.                                                                                                        
|          
|Note (b)  | Segment result is income from operations before other costs.
    Other costs include selling, general and administrative expenses
    and other net (expense)/income.



|           |                                                                                                                                                                                                           
|---------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note (c)  | Segment results for the years ended December 31, 2002, 2003
    and 2004 included impairment provision for property, plant and
    equipment (Note 16) and shut down of manufacturing assets
    (Note 5).



|           |                                                                                                                  
|---------- | -----------------------------------------------------------------------------------------------------------------
|Note (d)  | Other liabilities mainly include income tax payable, other taxes
    payable and deferred taxation.              
|          
|Note (e)  | Elimination of intersegment balances represents elimination of
    intersegment current accounts and investments.

Secondary reporting format  geographical
segments


|                                   |  |         |         |  |              |         |         |             |  |  |         |  |  |      |         |  |      |  |        |  |  |  |        | 
|---------------------------------- |  | ------- | ------- |  | ------------ | ------- | ------- | ----------- |  |  | ------- |  |  | ---- | ------- |  | ---- |  | ------ |  |  |  | ------ | 
|                                   |  |         |         |  |              | Capital |        
|                                   |  | Revenue |         |  | Total assets |         |         | expenditure | 
|                                   |  |         |         |  |              |         |         |             | 
|Year Ended December 31,            |  | 2003    |         |  | 2004         |         |         | 2003        |  |  | 2004    |  |  | 2003 |         |  | 2004 | 
|                                   |  |         |         |  |              |         |         |             |  |  |         |  |  |      |         |  |      | 
|                                   |  | RMB     |         |  | RMB          |         |         | RMB         |  |  | RMB     |  |  | RMB  |         |  | RMB  | 
|PRC                                |  |         | 302,854 |  |              |         | 387,639 |             |  |  | 529,209 |  |  |      | 606,147 |  |      |  | 82,275 |  |  |  | 94,235 | 
|Other (Exploration and Production) |  |         | 925     |  |              |         | 994     |             |  |  | 2,526   |  |  |      | 3,781   |  |      |  | 654    |  |  |  | 1,114  | 
|                                   |  |         |         |  |              |         |         |             |  |  |         |  |  |      |         |  |      | 
|                                   |  |         | 303,779 |  |              |         | 388,633 |             |  |  | 531,735 |  |  |      | 609,928 |  |      |  | 82,929 |  |  |  | 95,349 | 
|                                   |  |         |         |  |              |         |         |             |  |  |         |  |  |      |         |  |      | 

F-49



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


35     SIGNIFICANT DIFFERENCES
BETWEEN IFRS AND US GAAP






|                                                           |                                                                            |                         |        |        |      |  |        |        |   |  |         |        |   |  |        |      |  
|---------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------- | ------ | ------ | ---- |  | ------ | ------ | - |  | ------- | ------ | - |  | ------ | ---- | -
|                                                           |                                                                            | Year Ended December 31, |       
|                                                           |                                                                            |                         |       
|                                                           |                                                                            | 2002                    |        |        | 2003 |  |        | 2004   |   |  | 2004    |       
|                                                           |                                                                            |                         |        |        |      |  |        |        |   |  |         |       
|                                                           |                                                                            | RMB                     |        |        | RMB  |  |        | RMB    |   |  | US$     |       
|Net income under IFRS                                      |                                                                            |                         | 46,910 |        |      |  | 69,614 |        |   |  | 102,927 |        |   |  | 12,436 |     
|US GAAP adjustments:                                       |                                                                            |                         |        |        |      |  |        |        |   |  |         |        |   |  |        |     
|                                                           | Reversal of revaluation loss of property, plant and equipment              |                         |        |       |      |  |        | 391    |   |  |         |       |   |  |        |     |  
|                                                           | Depreciation charges on property, plant and equipment
    revaluation gain |                         |        | 8,157  |      |  |        | 8,053  |   |  |         | 8,170  |   |  |        | 987  |  
|                                                           | Depreciation charges on property, plant and equipment
    revaluation loss |                         |        | (112   | )    |  |        | (144   | ) |  |         | (830   | ) |  |        | (100 | )
|                                                           | Loss on disposal of revalued property, plant and equipment                 |                         |        | 224    |      |  |        | 451    |   |  |         | 523    |   |  |        | 63   |  
|                                                           | Income tax effect                                                          |                         |        | (2,729 | )    |  |        | (2,886 | ) |  |         | (2,595 | ) |  |        | (314 | )
|                                                           | Minority interests                                                         |                         |        | (60    | )    |  |        | (60    | ) |  |         | (60    | ) |  |        | (7   | )
|                                                           | One-time remedial payments for staff housing                               |                         |        | (2,553 | )    |  |        |       |   |  |         |       |   |  |        |     |  
|                                                           |                                                                            |                         |        |        |      |  |        |        |   |  |         |       
|Net income under US GAAP                                   |                                                                            |                         | 49,837 |        |      |  | 75,419 |        |   |  | 108,135 |        |   |  | 13,065 |     
|                                                           |                                                                            |                         |        |        |      |  |        |        |   |  |         |       
|Basic and diluted net income per share under US GAAP (RMB) |                                                                            |                         | 0.28   |        |      |  | 0.43   |        |   |  | 0.62    |        |   |  | 0.07   |     
|                                                           |                                                                            |                         |        |        |      |  |        |        |   |  |         |       

F-50



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|                                   |                                                                                                                                                                      |                 |         |         |      |  |         |         |   |  |        |        |  
|---------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------- | ------- | ------- | ---- |  | ------- | ------- | - |  | ------ | ------ | -
|                                   |                                                                                                                                                                      | At December 31, |        
|                                   |                                                                                                                                                                      |                 |        
|                                   |                                                                                                                                                                      | 2003            |         |         | 2004 |  |         | 2004    |  
|                                   |                                                                                                                                                                      |                 |         |         |      |  |         |         |  
|                                   |                                                                                                                                                                      | RMB             |         |         | RMB  |  |         | US$     |  
|Shareholders equity under IFRS    |                                                                                                                                                                      |                 | 356,613 |         |      |  | 425,212 |         |   |  | 51,376 |       
|US GAAP adjustments:               |                                                                                                                                                                      |                 |         |         |      |  |         |         |   |  |        |       
|                                   | Reversal of property, plant and equipment revaluation gain                                                                                                           |                 |         | (80,555 | )    |  |         | (80,555 | ) |  |        | (9,733 | )
|                                   | Depreciation charges on property, plant and equipment
    revaluation gain                                                                                           |                 |         | 37,273  |      |  |         | 45,443  |   |  |        | 5,490  |  
|                                   | Reversal of property, plant and equipment revaluation loss                                                                                                           |                 |         | 1,513   |      |  |         | 1,513   |   |  |        | 183    |  
|                                   | Depreciation charges on property, plant and equipment
    revaluation loss                                                                                           |                 |         | (480    | )    |  |         | (1,310  | ) |  |        | (158   | )
|                                   | Loss on disposal of revalued property, plant and equipment                                                                                                           |                 |         | 791     |      |  |         | 1,314   |   |  |        | 159    |  
|                                   | Deferred tax assets on revaluation                                                                                                                                   |                 |         | 13,686  |      |  |         | 11,091  |   |  |        | 1,340  |  
|                                   | Minority interests                                                                                                                                                   |                 |         | 364     |      |  |         | 304     |   |  |        | 36     |  
|                                   | Effect on the retained earnings from the one-time remedial
    payments for staff housing borne by the state shareholder of the
    Company                          |                 |         | (2,553  | )    |  |         | (2,553  | ) |  |        | (308   | )
|                                   | Effect on the other reserves of the shareholders equity
    from the one-time remedial payments for staff housing borne by
    the state shareholder of the Company |                 |         | 2,553   |      |  |         | 2,553   |   |  |        | 308    |  
|                                   |                                                                                                                                                                      |                 |         |         |      |  |         |         |  
|Shareholders equity under US GAAP |                                                                                                                                                                      |                 | 329,205 |         |      |  | 403,012 |         |   |  | 48,693 |       
|                                   |                                                                                                                                                                      |                 |         |         |      |  |         |         |  

F-51



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




|                                                              |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |        |  
|------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | - |  |  | ------ | -
|                                                              |  | Year Ended December 31, |        
|                                                              |  |                         |        
|                                                              |  | 2002                    |         |   | 2003 |  |         | 2004 |  |  | 2004    |  
|                                                              |  |                         |         |   |      |  |         |      |  |  |         |  
|                                                              |  | RMB                     |         |   | RMB  |  |         | RMB  |  |  | US$     |  
|Balance at beginning of year                                  |  |                         | 251,914 |   |      |  | 283,464 |      |  |  | 329,205 |   |  |  | 39,776 |  
|Net profit for the year                                       |  |                         | 49,837  |   |      |  | 75,419  |      |  |  | 108,135 |   |  |  | 13,065 |  
|Contribution from CNPC to marketing enterprises               |  |                         | 10      |   |      |  |        |      |  |  |        |   |  |  |       |  
|Final dividend for year 2001                                  |  |                         | (8,839  | ) |      |  |        |      |  |  |        |   |  |  |       |  
|Interim dividend for year 2002                                |  |                         | (8,811  | ) |      |  |        |      |  |  |        |   |  |  |       |  
|Final dividend for year 2002                                  |  |                         |        |   |      |  | (12,299 | )    |  |  |        |   |  |  |       |  
|Interim dividend for year 2003                                |  |                         |        |   |      |  | (17,379 | )    |  |  |        |   |  |  |       |  
|Final dividend for year 2003                                  |  |                         |        |   |      |  |        |      |  |  | (13,947 | ) |  |  | (1,685 | )
|Interim dividend for year 2004                                |  |                         |        |   |      |  |        |      |  |  | (20,381 | ) |  |  | (2,463 | )
|Payment to CNPC for acquisition of marketing enterprises      |  |                         | (3,200  | ) |      |  |        |      |  |  |        |   |  |  |       |  
|Contribution from CNPC for one-time remedial staffing housing |  |                         | 2,553   |   |      |  |        |      |  |  |        |   |  |  |       |  
|                                                              |  |                         |         |   |      |  |         |      |  |  |         |  
|Balance at end of year                                        |  |                         | 283,464 |   |      |  | 329,205 |      |  |  | 403,012 |   |  |  | 48,693 |  
|                                                              |  |                         |         |   |      |  |         |      |  |  |         |  





(a) Revaluation
of property, plant and equipment




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As described in Note 16, the property, plant and equipment,
    excluding oil and gas reserves, transferred to the Company by
    CNPC were appraised as of June 30, 1999, as required by the
    relevant PRC regulations, by a firm of independent valuers
    registered in the PRC, China Enterprise Appraisal. As at
    September 30, 2003, a revaluation of the Groups
    refining and chemical production equipment was undertaken by a
    firm of independent valuers registered in the PRC, China United
    Assets Appraiser Co., Ltd, on a depreciated replacement
    cost basis.
|
| | The June 1999 revaluation resulted in RMB 80,549 in excess
    of the prior carrying value and a revaluation loss of
    RMB 1,122 on certain property, plant and equipment.                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | The September 2003 revaluation resulted in RMB 872 in
    excess of the carrying value of certain property, plant and
    equipment immediately prior to the revaluation and a revaluation
    loss of RMB 1,257.                                                                                                                                                                                                                                                                                                                                                                                
|
| | With respect to the RMB 872 revaluation gain resulting from
    the 2003 revaluation, RMB 98 were related to property,
    plant and equipment that in 1999 experienced revaluation loss,
    and                                                                                                                                                                                                                                                                                                                                                                                                

F-52



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | were credited to the income statement. The remaining
    RMB 774 was credited to the revaluation reserve in the
    shareholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | With respect to the RMB 1,257 revaluation loss resulting
    from the 2003 revaluation, RMB 768 were related to
    property, plant and equipment that in 1999 experienced
    revaluation gain. The remaining RMB 489 were charged to the
    income statement.                                                                                                                                                                                                                                                                                               
|
| | The depreciation charge, which includes impairment charge, on
    the revaluation surplus from January 1, 2002 to
    December 31, 2002 was RMB 8,157, from January 1,
    2003 to December 31, 2003 was RMB 8,053, and from
    January 1, 2004 to December 31, 2004 was
    RMB 8,170.                                                                                                                                                                                                                                                                       
|
| | The depreciation charge, which includes impairment charge, on
    the revaluation loss from January 1, 2002 to
    December 31, 2002 was RMB 112, from January 1,
    2003 to December 31, 2003 was RMB 144, and from
    January 1, 2004 to December 31, 2004 was RMB 830.                                                                                                                                                                                                                                                                                    
|
| | The loss on disposal of revalued property, plant and equipment,
    which includes shut down of manufacturing assets, from
    January 1, 2002 to December 31, 2002 was RMB 224,
    from January 1, 2003 to December 31, 2003 was
    RMB 451, and from January 1, 2004 to December 31,
    2004 was RMB 523.                                                                                                                                                                                                                                                 
|
| | For purposes of reconciling to the US GAAP financial data,
    the effect of the revaluation, the related depreciation charges
    and loss on disposal is reversed. A deferred tax asset relating
    to the reversal of the effect of revaluation in 1999 is
    established, together with a corresponding increase in the
    shareholders equity. Under a special approval granted by
    the Ministry of Finance, the effect of the revaluation in 1999
    is available as additional depreciation base for purposes of
    determining taxable income.

(b) Related
party transactions




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Group has disclosed in Note 31, transactions with
    significant customers and in Notes 13, 15, 21, 22 and
    32 transactions and balances with its immediate parent, CNPC,
    and related companies. CNPC is owned by the PRC government,
    which also owns a significant portion of the productive assets
    in the PRC. IFRS exempts state controlled enterprises from
    disclosing transactions with other state controlled enterprises.
    IFRS also excludes from related parties government departments
    and agencies to the extent that such dealings are in the normal
    course of business. US GAAP contains no similar exemptions but
    requires disclosure of material related party transactions. The
    Group believes that it has provided meaningful disclosures of
    related party transactions through the major customer
    disclosures in Note 31 and the transactions with the CNPC
    Group disclosed in Note 32. Although the majority of the
    Groups activities are conducted with the PRC government
    and its affiliates and other state controlled enterprises, none
    individually constitutes a major customer or supplier other than
    those disclosed.

(c) One-time
remedial payments for staff housing




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Ministry of Finance of the PRC issued several public notices
    and regulations during the year ended December 31, 2000 and
    2001 with respect to the one-time remedial payments for staff
    housing payable to certain employees who joined the workforce
    prior to December 31, 1998 and have housing conditions
    below local standards as determined in accordance with
    government regulations and guidelines. These Ministry of Finance
    notices and regulations also provided that the portion of
    remedial payments attributable to the periods prior to a
    restructuring

F-53



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | of the employer enterprise from a wholly state-owned status to a
    less than wholly state-owned status is to be borne by the state
    shareholder of the enterprise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | The restructuring that resulted in the formation of the Group
    took place in November 1999. As such, the one-time remedial
    housing payments payable to the eligible employees of the Group
    are to be borne by the state shareholder of the Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Under IFRS, such direct payments to employees or reimbursements
    will not be recorded through the consolidated income statement
    of the Group. US GAAP contains no such exemption but
    requires this principal shareholders action on behalf of
    the Company to be recorded in the consolidated income statement.
    In the last quarter of year 2002, the Group and CNPC completed
    the process of estimating the amount payable to qualified
    employees of the Group. This amount, RMB 2,553, was
    reflected in determining net income of the Group for the year
    ended December 31, 2002, under US GAAP. Since this
    amount is borne by CNPC, a corresponding amount has been
    included as an addition to the other reserves in the
    shareholders equity of the Group. There are no significant
    changes in this estimates during 2003 and 2004.

(d) Recent
US accounting pronouncements




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In December 2004, the FASB revised FAS No. 123
    (FAS 123(R)). FAS 123(R), Share-based
    Payment, requires all share-based payments to employees,
    including grants of employee stock options, to be recognized in
    the financial statements based on their fair values. Pro forma
    disclosure is no longer an alternative to financial statement
    recognition. FAS 123(R) is effective as of the beginning of
    the Companys first fiscal year that begins after
    June 15, 2005. The Group is evaluating the transition
    provisions allowed by FAS 123(R). The Group does not expect
    the adoption of FAS 123(R) to have a material impact on the
    Groups financial position or operational results.              
|
| | On November 24, 2004, the FASB issued Statement
    No. 151, Inventory Costs, an amendment of ARB
    No. 43, Chapter 4 (FAS 151). FAS 151
    requires that abnormal amounts of idle capacity and spoilage
    costs be excluded from the cost of inventory and expensed when
    incurred. The provisions of FAS 151 are applicable to
    inventory costs incurred during fiscal years beginning after
    June 15, 2005. The Group does not expect the adoption of
    FAS 151 to have a material impact on the Groups
    financial position or results of operation.                                                                                                                                                                        
|
| | On December 15, 2004, the FASB issued Statement
    No. 153, Exchanges of Nonmonetary Assets, an
    amendment of APB Opinion No. 29 (FAS 153).
    FAS 153 requires exchanges of productive assets to be
    accounted for at fair value, rather than at carryover basis,
    unless (1) neither the asset received nor the asset
    surrendered has a fair value that is determinable within
    reasonable limits or (2) the transactions lack commercial
    substance. FAS 153 is effective for nonmonetary asset
    exchanges occurring in fiscal periods beginning after
    June 15, 2005. The Group does not expect the adoption of
    FAS 153 to have a material impact on the Groups
    financial position or results of operation.

F-54



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)


36     PRINCIPAL SUBSIDIARIES


|                                           |  |                        |         |     |         |  |          |        |     |              |          |  |        |                      |        |                                                                            |  |                                                                                                               
|------------------------------------------ |  | ---------------------- | ------- | --- | ------- |  | -------- | ------ | --- | ------------ | -------- |  | ------ | -------------------- | ------ | -------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------
|                                           |  | Country                |         |     |         |  | Type of  |        |     | Attributable |          |  |       
|                                           |  | of Incorporation       |         |     | Paid-up |  |          | Legal  |     |              | Equity   |  |        |                     
|Company Name                               |  | and Operations         |         |     | Capital |  |          | Entity |     |              | Interest |  |        | Principal Activities
|                                           |  |                        |         |     |         |  |          |        |     |              |          |  |        |                     
|                                           |  |                        |         | RMB |         |  |          |        | %   |              |          | 
|*Daqing Oilfield Company Limited           |  |                        | PRC     |     |         |  | 47,500   |        |     |              | phi      |  |        |                      | 100.00 |                                                                            |  | Exploration, production and the sale of crude oil and natural
    gas; production and sale of refined products
|                                          
|*Jinzhou Petrochemical Company Limited     |  |                        | PRC     |     |         |  | 788      |        |     |              | psi      |  |        |                      | 80.95  |                                                                            |  | Production and sale of oil and chemical products                                                              
|                                          
|*Jilin Chemical Industrial Company Limited |  |                        | PRC     |     |         |  | 3,561    |        |     |              | psi      |  |        |                      | 67.29  |                                                                            |  | Production and sale of chemical products                                                                      
|                                          
|Daqing Yu Shu Lin Oilfield Company Limited |  |                        | PRC     |     |         |  | 1,272    |        |     |              | phi      |  |        |                      | 88.16  |                                                                            |  | Exploration and production of crude oil and natural gas                                                       
|                                          
|*Liaohe Jinma Oilfield Company Limited     |  |                        | PRC     |     |         |  | 1,100    |        |     |              | psi      |  |        |                      | 81.82  |                                                                            |  | Exploration, production, transportation and sale of crude oil
    and natural gas                             
|                                          
|*PetroChina International Limited          |  | British Virgin Islands |         |     | USD 0.9 |  |          |        | phi |              |          |  | 100.00 |                      |        | Exploration and production of crude oil and natural gas outside
    of PRC
|                                          
|PetroChina International Indonesia Limited |  |                        | Bahamas |     |         |  | USD0.005 |        |     |              | phi      |  |        |                      | 100.00 |                                                                            |  | Exploration and production of crude oil and natural gas in
    Indonesia                                      




|      |                                            
|----- | -------------------------------------------
|phi  | Limited liability company.                 
|     
|psi  | Joint stock company with limited liability.



|    |                                                                       
|--- | ----------------------------------------------------------------------
|*  | Subsidiaries directly held by the Company as of
    December 31, 2004.

37     EVENTS AFTER BALANCE SHEET
DATE




F-55



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(Amounts in millions except for per share data or unless
otherwise stated)








|                      |                     |     |  |       |  
|--------------------- | ------------------- | --- |  | ----- | -
|                      |                     | RMB | 
|                      |                     |     | 
|Results of operations |                     |     |  |      
|                      | Turnover            |     |  | 4,582 |  
|                      | Net loss            |     |  | (148  | )
|Financial position:   |                     |     |  |      
|                      | Current assets      |     |  | 822   |  
|                      | Total assets        |     |  | 2,077 |  
|                      | Current liabilities |     |  | 1,237 |  
|                      | Total liabilities   |     |  | 2,314 |  
|                      | Net liabilities     |     |  | (237  | )







38     APPROVAL OF FINANCIAL
STATEMENTS




F-56



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION


AND PRODUCTION ACTIVITIES (UNAUDITED)


(Amounts in millions unless otherwise stated)


Results of Operations


|                                                                                   |                        |                         |         |         |      |  |         |         |  |  |         |         | 
|---------------------------------------------------------------------------------- | ---------------------- | ----------------------- | ------- | ------- | ---- |  | ------- | ------- |  |  | ------- | ------- | 
|                                                                                   |                        | Year Ended December 31, |        
|                                                                                   |                        |                         |        
|                                                                                   |                        | 2002                    |         |         | 2003 |  |         | 2004    | 
|                                                                                   |                        |                         |         |         |      |  |         |         | 
|                                                                                   |                        | RMB                     |         |         | RMB  |  |         | RMB     | 
|Sales and other operating revenues                                                 |                        |                         |         |         |      |  |         |         |  |  |         |        
|                                                                                   | Sales to third parties |                         |         | 41,042  |      |  |         | 48,308  |  |  |         | 45,847  | 
|                                                                                   | Intersegment sales     |                         |         | 106,266 |      |  |         | 128,963 |  |  |         | 173,223 | 
|                                                                                   |                        |                         |         |         |      |  |         |         | 
|                                                                                   |                        |                         | 147,308 |         |      |  | 177,271 |         |  |  | 219,070 |        
|Production costs excluding taxes                                                   |                        |                         | (29,913 | )       |      |  | (30,691 | )       |  |  | (32,863 | )      
|Exploration expenses                                                               |                        |                         | (8,095  | )       |      |  | (10,577 | )       |  |  | (11,723 | )      
|Depreciation, depletion and amortization                                           |                        |                         | (18,302 | )       |      |  | (21,060 | )       |  |  | (24,839 | )      
|Taxes other than income taxes                                                      |                        |                         | (5,299  | )       |      |  | (5,524  | )       |  |  | (6,729  | )      
|                                                                                   |                        |                         |         |         |      |  |         |         | 
|Income before income taxes                                                         |                        |                         | 85,699  |         |      |  | 109,419 |         |  |  | 142,916 |        
|Income taxes                                                                       |                        |                         | (25,958 | )       |      |  | (32,376 | )       |  |  | (40,014 | )      
|                                                                                   |                        |                         |         |         |      |  |         |         | 
|Results of operations from producing activities                                    |                        |                         | 59,741  |         |      |  | 77,043  |         |  |  | 102,902 |        
|                                                                                   |                        |                         |         |         |      |  |         |         | 
|Income from equity affiliates results of operations from
    producing activities |                        |                         | 132     |         |      |  | 324     |         |  |  | 471     |        
|                                                                                   |                        |                         |         |         |      |  |         |         | 

Capitalized Costs


|                                                     |  |                         |          |   |      |  |          |      |  |  |          |  
|---------------------------------------------------- |  | ----------------------- | -------- | - | ---- |  | -------- | ---- |  |  | -------- | -
|                                                     |  | Year Ended December 31, |         
|                                                     |  |                         |         
|                                                     |  | 2002                    |          |   | 2003 |  |          | 2004 | 
|                                                     |  |                         |          |   |      |  |          |      | 
|                                                     |  | RMB                     |          |   | RMB  |  |          | RMB  | 
|Property costs                                       |  |                         |         |   |      |  |         |      |  |  |         |  
|Producing assets                                     |  |                         | 236,856  |   |      |  | 262,638  |      |  |  | 291,910  |  
|Support facilities                                   |  |                         | 101,142  |   |      |  | 106,172  |      |  |  | 116,640  |  
|Construction-in-progress                             |  |                         | 7,895    |   |      |  | 10,485   |      |  |  | 14,114   |  
|                                                     |  |                         |          |   |      |  |          |      | 
|Total capitalized costs                              |  |                         | 345,893  |   |      |  | 379,295  |      |  |  | 422,664  |  
|Accumulated depreciation, depletion and amortization |  |                         | (137,653 | ) |      |  | (150,842 | )    |  |  | (172,696 | )
|                                                     |  |                         |          |   |      |  |          |      | 
|Net capitalized costs                                |  |                         | 208,240  |   |      |  | 228,453  |      |  |  | 249,968  |  
|                                                     |  |                         |          |   |      |  |          |      | 
|Share of equity affiliates net capitalized costs    |  |                         | 815      |   |      |  | 1,604    |      |  |  | 777      |  
|                                                     |  |                         |          |   |      |  |          |      | 

F-57



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION


AND PRODUCTION ACTIVITIES (UNAUDITED) 
(Continued)


(Amounts in millions unless otherwise stated)


Costs Incurred in Property Acquisitions, Exploration and
Development Activities


|                                                                                            |  |                         |        |  |      |  |        |      |  |  |        | 
|------------------------------------------------------------------------------------------- |  | ----------------------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                                                            |  | Year Ended December 31, |       
|                                                                                            |  |                         |       
|                                                                                            |  | 2002                    |        |  | 2003 |  |        | 2004 | 
|                                                                                            |  |                         |        |  |      |  |        |      | 
|                                                                                            |  | RMB                     |        |  | RMB  |  |        | RMB  | 
|Property acquisition costs                                                                  |  |                         |       |  |      |  |       |      |  |  |       | 
|Exploration costs                                                                           |  |                         | 10,704 |  |      |  | 15,137 |      |  |  | 18,160 | 
|Development costs                                                                           |  |                         | 35,558 |  |      |  | 39,587 |      |  |  | 43,712 | 
|                                                                                            |  |                         |        |  |      |  |        |      | 
|Total                                                                                       |  |                         | 46,262 |  |      |  | 54,724 |      |  |  | 61,872 | 
|                                                                                            |  |                         |        |  |      |  |        |      | 
|Share of equity affiliates costs of property acquisition,
    exploration, and development |  |                         | 228    |  |      |  | 592    |      |  |  | 274    | 
|                                                                                            |  |                         |        |  |      |  |        |      | 

Proved Reserve Estimates








F-58



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION


AND PRODUCTION ACTIVITIES (UNAUDITED) 
(Continued)


(Amounts in millions unless otherwise stated)






F-59



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION


AND PRODUCTION ACTIVITIES (UNAUDITED) 
(Continued)


(Amounts in millions unless otherwise stated)




|                                 |                                                               |                         |                                 |        |              |      |   |        |        |        |  
|-------------------------------- | ------------------------------------------------------------- | ----------------------- | ------------------------------- | ------ | ------------ | ---- | - | ------ | ------ | ------ | -
|                                 |                                                               | Crude Oil and           |                                 |        |             
|                                 |                                                               | Condensate              |                                 |        | Natural Gas  |     
|                                 |                                                               |                         |                                 |        |              |     
|                                 |                                                               | (millions of            |                                 |        | (billions of |     
|                                 |                                                               | barrels)                |                                 |        | cubic feet)  |     
|Proved developed and undeveloped |                                                               |                         |                                 |        |              |      |   |       
|                                 | Reserves at January 1, 2002                                   |                         |                                 | 10,959 |              |      |   | 36,103 |       
|                                 |                                                               | Changes resulting from: |                                 |        |              |      |   |        |        |       
|                                 |                                                               |                         | Revisions of previous estimates |        |              | 349  |   |        |        | (225   | )
|                                 |                                                               |                         | Improved recovery               |        |              | 31   |   |        |        |       |  
|                                 |                                                               |                         | Extensions and discoveries      |        |              | 330  |   |        |        | 3,540  |  
|                                 |                                                               |                         | Purchases of Minerals in Place  |        |              | 38   |   |        |        | 193    |  
|                                 |                                                               |                         | Production                      |        |              | (770 | ) |        |        | (794   | )
|                                 |                                                               |                         |                                 |        |              |     
|                                 | Reserves at December 31, 2002                                 |                         |                                 | 10,937 |              |      |   | 38,817 |       
|                                 |                                                               |                         |                                 |        |              |     
|                                 |                                                               | Changes resulting from: |                                 |        |              |      |   |        |        |       
|                                 |                                                               |                         | Revisions of previous estimates |        |              | 199  |   |        |        | 278    |  
|                                 |                                                               |                         | Improved recovery               |        |              | 81   |   |        |        |       |  
|                                 |                                                               |                         | Extensions and discoveries      |        |              | 476  |   |        |        | 2,853  |  
|                                 |                                                               |                         | Production                      |        |              | (774 | ) |        |        | (879   | )
|                                 |                                                               |                         |                                 |        |              |     
|                                 | Reserves at December 31, 2003                                 |                         |                                 | 10,919 |              |      |   | 41,069 |       
|                                 |                                                               |                         |                                 |        |              |     
|                                 |                                                               | Changes resulting from: |                                 |        |              |      |   |        |        |       
|                                 |                                                               |                         | Revisions of previous estimates |        |              | 148  |   |        |        | 56     |  
|                                 |                                                               |                         | Improved recovery               |        |              | 109  |   |        |        | 43     |  
|                                 |                                                               |                         | Extensions and discoveries      |        |              | 542  |   |        |        | 4,405  |  
|                                 |                                                               |                         | Production                      |        |              | (777 | ) |        |        | (1,019 | )
|                                 |                                                               |                         |                                 |        |              |     
|                                 | Reserves at December 31, 2004                                 |                         |                                 | 10,941 |              |      |   | 44,554 |       
|                                 |                                                               |                         |                                 |        |              |     
|                                 | Proved developed reserves at:                                 |                         |                                 |        |              |      |   |        |       
|                                 |                                                               | December 31, 2002       |                                 |        | 9,198        |      |   |        | 11,921 |       
|                                 |                                                               | December 31, 2003       |                                 |        | 8,885        |      |   |        | 13,374 |       
|                                 |                                                               | December 31, 2004       |                                 |        | 8,748        |      |   |        | 16,787 |       
|                                 | Proportional interest in proved reserves of equity affiliates |                         |                                 |        |              |      |   |        |       
|                                 |                                                               | December 31, 2002       |                                 |        | 62           |      |   |        | 2      |       
|                                 |                                                               | December 31, 2003       |                                 |        | 78           |      |   |        | 78     |       
|                                 |                                                               | December 31, 2004       |                                 |        | 78           |      |   |        | 91     |       



F-60



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION


AND PRODUCTION ACTIVITIES (UNAUDITED) 
(Continued)


(Amounts in millions unless otherwise stated)


Standardized Measure






|                                                         |  |  |            |  
|-------------------------------------------------------- |  |  | ---------- | -
|At December 31, 2002                                     |  |  |            |  
|Future cash inflows                                      |  |  | 2,710,152  |  
|Future production costs                                  |  |  | (745,866   | )
|Future development costs                                 |  |  | (73,344    | )
|Future income tax expense                                |  |  | (562,289   | )
|                                                         |  |  |           
|Future net cash flows                                    |  |  | 1,328,653  |  
|Discount at 10% for estimated timing of cash flows       |  |  | (713,267   | )
|                                                         |  |  |           
|Standardized measure of discounted future net cash flows |  |  | 615,386    |  
|                                                         |  |  |           
|At December 31, 2003                                     |  |  |            |  
|Future cash inflows                                      |  |  | 2,991,193  |  
|Future production costs                                  |  |  | (765,111   | )
|Future development costs                                 |  |  | (88,556    | )
|Future income tax expense                                |  |  | (635,169   | )
|                                                         |  |  |           
|Future net cash flows                                    |  |  | 1,502,357  |  
|Discount at 10% for estimated timing of cash flows       |  |  | (807,037   | )
|                                                         |  |  |           
|Standardized measure of discounted future net cash flows |  |  | 695,320    |  
|                                                         |  |  |           
|At December 31, 2004                                     |  |  |            |  
|Future cash inflows                                      |  |  | 3,894,766  |  
|Future production costs                                  |  |  | (865,257   | )
|Future development costs                                 |  |  | (90,938    | )
|Future income tax expense                                |  |  | (906,035   | )
|                                                         |  |  |           
|Future net cash flows                                    |  |  | 2,032,536  |  
|Discount at 10% for estimated timing of cash flows       |  |  | (1,061,260 | )
|                                                         |  |  |           
|Standardized measure of discounted future net cash flows |  |  | 971,276    |  
|                                                         |  |  |           

F-61



---



##### Table of Contents



PETROCHINA COMPANY LIMITED


SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION


AND PRODUCTION ACTIVITIES (UNAUDITED) 
(Continued)


(Amounts in millions unless otherwise stated)


|                                                                                         |                      |  |  |       | 
|---------------------------------------------------------------------------------------- | -------------------- |  |  | ----- | 
|Share of equity affiliates standardized measure of
    discounted future net cash flows |                      |  |  |      
|                                                                                         | At December 31, 2002 |  |  | 2,612 | 
|                                                                                         | At December 31, 2003 |  |  | 3,744 | 
|                                                                                         | At December 31, 2004 |  |  | 5,371 | 





|                                                                    |                                                                          |                         |  |          |      |  |  |          |   |  |  |          |  
|------------------------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------- |  | -------- | ---- |  |  | -------- | - |  |  | -------- | -
|                                                                    |                                                                          | Year Ended December 31, | 
|                                                                    |                                                                          |                         | 
|                                                                    |                                                                          | 2002                    |  |          | 2003 |  |  | 2004     |  
|                                                                    |                                                                          |                         |  |          |      |  |  |          |  
|                                                                    |                                                                          | RMB                     |  |          | RMB  |  |  | RMB      |  
|CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE CASH
    FLOWS |                                                                          |                         |  |          |      |  |  |          |   |  |  |         
|                                                                    | Beginning of year                                                        |                         |  | 405,999  |      |  |  | 615,386  |   |  |  | 695,320  |  
|                                                                    | Sales and transfers of oil and gas produced, net of production
    costs |                         |  | (116,977 | )    |  |  | (146,580 | ) |  |  | (179,478 | )
|                                                                    | Net changes in prices and production costs and other                     |                         |  | 259,016  |      |  |  | 90,150   |   |  |  | 355,109  |  
|                                                                    | Extensions, discoveries and improved recovery                            |                         |  | 53,024   |      |  |  | 65,150   |   |  |  | 117,560  |  
|                                                                    | Development costs incurred                                               |                         |  | (1,983   | )    |  |  | 1,730    |   |  |  | 9,693    |  
|                                                                    | Revisions of previous quantity estimates                                 |                         |  | 17,364   |      |  |  | 15,520   |   |  |  | 13,236   |  
|                                                                    | Accretion of discount                                                    |                         |  | 60,095   |      |  |  | 87,580   |   |  |  | 98,935   |  
|                                                                    | Purchases of minerals in place                                           |                         |  | 2,351    |      |  |  |         |   |  |  |         |  
|                                                                    | Net change in income taxes                                               |                         |  | (63,503  | )    |  |  | (33,616  | ) |  |  | (139,099 | )
|                                                                    |                                                                          |                         |  |          |      |  |  |          |  
|                                                                    | End of year                                                              |                         |  | 615,386  |      |  |  | 695,320  |   |  |  | 971,276  |  
|                                                                    |                                                                          |                         |  |          |      |  |  |          |  

F-62



---



##### Table of Contents



EXHIBIT INDEX


|        |  |                                                                                                                                                                                                                                                                          
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                          
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                          
|1.1     |  | Articles of Association (as amended) (English translation)
    (1)                                                                                                                                                                                                       
|1.2     |  | Articles of Association (as amended and pending for approval of
    SASAC) (English translation)                                                                                                                                                                         
|4.1     |  | 2005 Management Performance Contract (English Translation)                                                                                                                                                                                                               
|4.2     |  | Crude Oil Mutual Supply Framework Agreement, dated
    December 1, 2004, between China Petroleum and Chemical
    Corporation and PetroChina (English translation)                                                                                                       
|4.3     |  | Capital Contribution Agreement, dated June 9, 2005, among
    China National Oil and Gas Exploration and Development
    Corporation, Central Asia Petroleum Company Limited, Zhong You
    Kan Tan Kai Fa Company Limited and PetroChina (English
    Translation)      
|4.4     |  | Transfer Agreement, dated June 9, 2005, between Zhong You
    Kan Tan Kai Fa Company Limited and PetroChina (English
    Translation)                                                                                                                                    
|4.5     |  | Supplementary Agreement to Comprehensive Products and Services
    Agreement, dated June 9, 2005, between CNPC and PetroChina
    (English Translation)                                                                                                                  
|4.6     |  | Form of Non-competition Agreement between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                             
|4.7     |  | Form of Comprehensive Products and Services Agreement between
    CNPC and PetroChina (together with English
    translation)(2)                                                                                                                                         
|4.8     |  | Form of Land Use Rights Leasing Contract between CNPC and
    PetroChina (together with English
    translation)(2)                                                                                                                                                      
|4.9     |  | Form of Buildings Leasing Contract between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                            
|4.10    |  | Form of Trademark Licensing Contract between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                          
|4.11    |  | Form of Patent and Know-how Licensing Contract between CNPC and
    PetroChina (together with English
    translation)(2)                                                                                                                                                
|4.12    |  | Form of Computer Software Licensing Contract between CNPC and
    PetroChina (together with English
    translation)(2)                                                                                                                                                  
|4.13    |  | Form of Contract for Transfer of Rights under Production Sharing
    Contracts between CNPC and PetroChina (together with English
    translation)(2)                                                                                                                    
|4.14    |  | Form of Guarantee of Debts Contract between CNPC and PetroChina
    (together with English
    translation)(2)                                                                                                                                                           
|4.15    |  | Form of Contract for the Supervision of Certain Sales
    Enterprises between CNPC and PetroChina (together with English
    translation)(2)                                                                                                                             
|4.16    |  | Form of Agreement for Transfer of Rights and Interests under the
    Crude Oil Premium and Discount Calculation Agreement between
    China Petrochemical Corporation, CNPC and PetroChina (together
    with English
    translation)(2)                                
|4.17    |  | Form of Agreement for the Transfer of Rights and Interests under
    the Retainer Contracts relating to Oil Exploration and
    Exploitation in Lengjiapu Area, Liaohe Oil Region and
    No. 9.1-9.5 Areas, Karamay Oil Field (together with English
    translation)(2)
|8.1     |  | List of major subsidiaries                                                                                                                                                                                                                                               
|10.1    |  | Significant Differences in Corporate Governance Practices for
    Purposes of Section 303A.11 of the New York Exchange Listed
    Company Manual                                                                                                                         
|12.1    |  | Certification of Chief Executive Officer required by
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  
|12.2    |  | Certification of Chief Financial Officer required by
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  



---



##### Table of Contents



|        |  |                                                                                                                                                           
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                           
|Number  |  | Description of Exhibits                                                                                                                                   
|        |  |                                                                                                                                                           
|13.1    |  | Certification of Chief Executive Officer required by
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
|13.2    |  | Certification of Chief Financial Officer required by
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
|16.1    |  | Code of Ethics for Senior Management                                                                                                                      
|16.2    |  | Code of Ethics for Employees                                                                                                                              






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to our annual report on Form 20-F
    for the fiscal year ended December 31, 2001 (File
    No. 1-15006) filed with the Commission.       
|   
|(2) | Incorporated by reference to our Registration Statement on
    Form F-1 (File No. 333-11566) filed with the
    Commission, as declared effective on March 29, 2000.