##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
 or
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 or
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 Commission File Number [1-15006]
 
 (PETROCHINA COMPANY LIMITED LOGO)
  PetroChina Company Limited
  
 The Peoples Republic of China
 
 16 Andelu
Dongcheng District, Beijing, 100011
The Peoples Republic of China
 
 Li Huaiqi
Telephone number: 8610 84886270
Facsimile number: 8610 84886260
Email address: xwzou@petrochina.com.cn
Address: 16 Andelu, Dongcheng District, Beijing, 100011,The
Peoples Republic of China
  
  Title of
    
    Name of each exchangeEach class
    
    on which registeredAmerican 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.**
  
  
  A Shares, par value RMB 1.00 per share***
    
    
    161,922,077,818
    (1)H Shares, par value RMB 1.00 per share
    
    
    21,098,900,000
    ****
 
 (1):
    
    Includes the 157,922,077,818 A Shares held by CNPC and the 4,000,000,000 A Shares held
by the public shareholders.  þ o
  o þ
   þ o
  þ o o
  o þ o
  o o
  o þ
 
 *
    
    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.***
    
    PetroChinas A Shares were became listed on the Shanghai Stock Exchange on November 5, 2007.****
    
    Includes 19,004,728,000 H Shares represented by American Depositary Shares.




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##### Table of Contents



Table of Contents
 PageCertain Terms and Conventions
    
    
    4Forward-Looking Statements
    
    
    6Part I
    
    Item 1
    
    
    
    Identity of Directors, Senior Management and Advisors
    
    
    7Item 2
    
    
    
    Offer Statistics and Expected Timetable
    
    
    7Item 3
    
    
    
    Key Information
    
    
    7Exchange Rates
    
    
    7Selected Financial Data
    
    
    8Risk Factors
    
    
    12Item 4
    
    
    
    Information on the Company
    
    
    15Introduction
    
    
    15Exploration and Production
    
    
    20Refining and Marketing
    
    
    28Chemicals and Marketing
    
    
    34Natural Gas and Pipeline
    
    
    38Competition
    
    
    40Environmental Matters
    
    
    41Legal Proceedings
    
    
    42Properties
    
    
    42Regulatory Matters
    
    
    42Item 4A
    
    
    
    Unresolved Staff Comments
    
    
    48Item 5
    
    
    
    Operating and Financial Review and Prospects
    
    
    48General
    
    
    48Operating Results
    
    
    55Liquidity and Capital Resources
    
    
    63Off-Balance Sheet Arrangements
    
    
    68Long-Term Contractual Obligations and Other
Commercial Commitments and Payment Obligations
    
    
    68Research and Development
    
    
    69Trend Information
    
    
    70Other Information
    
    
    70Item 6
    
    
    
    Directors, Senior Management and Employees
    
    
    71Directors, Senior Management and Supervisors
    
    
    71Compensation
    
    
    77Board Practices
    
    
    78Employees
    
    
    80Share Ownership
    
    
    80Item 7
    
    
    
    Major Shareholders and Related Party Transactions
    
    
    80Major Shareholders
    
    
    80Related Party Transactions
    
    
    81Loans or Guarantees with Related Parties
    
    
    87
 2




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PageItem 8
    
    
    
    Financial Information
    
    
    87Financial Statements
    
    
    87Significant Changes
    
    
    88Item 9
    
    
    
    The Offer and Listing
    
    
    88Nature of the Trading Market and Market Price Information
    
    
    88Item 10
    
    
    
    Additional Information
    
    
    89Memorandum and Articles of Association
    
    
    89Material Contracts
    
    
    96Exchange Controls
    
    
    96Taxation
    
    
    97Significant Differences in Corporate Governance Practices
    
    
    101Documents on Display
    
    
    101Item 11
    
    
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    102Item 12
    
    
    
    Description of Securities Other Than Equity Securities
    
    
    104Part II
    
    Item 13
    
    
    
    Defaults, Dividends Arrearages and Delinquencies
    
    
    105Item 14
    
    
    
    Material Modifications to the Rights to Security Holders
    
    
    105Item 15
    
    
    
    Controls and Procedures
    
    
    105Item 16A
    
    
    
    Audit Committee Financial Expert
    
    
    105Item 16B
    
    
    
    Code of Ethics
    
    
    105Item 16C
    
    
    
    Principal Accountant Fees and Services
    
    
    106Item 16D
    
    
    
    Exemptions from Listing Standards for Audit Committees
    
    
    106Item 16E
    
    
    
    Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
    
    
    106Part III
    
    Item 17
    
    
    
    Financial Statements
    
    
    106Item 18
    
    
    
    Financial Statements
    
    
    106Item 19
    
    
    
    Exhibits
    
    
    107EX-1.1 ARTICLES OF ASSOCIATIONEX-1.2 ARTICLES OF ASSOCIATIONEX-4.1 FORM OF 2008 MANAGEMENT PERFORMANCE CONTRACTEX-4.2 RISK OPERATION SERVICE BUSINESS ASSETS TRANSFER AGREEMENTEX-4.3 CAPITAL INJECTION AGREEMENT CONCERNING CNPC EXPLORATION AND DEVELOPMENT COMPANY LIMITEDEX-4.4 CRUDE OIL MUTUAL SUPPLY FRAMEWORK AGREEMENTEX-8.1 LIST OF MAJOR SUBSIDIARIESEX-12.1 CERTIFICATION OF CEO REQUIRED BY SECTION 302EX-12.2 CERTIFICATION OF CFO REQUIRED BY SECTION 302EX-13.1 CERTIFCATION OF CEO REQUIRED BY SECTION 906EX-13.2 CERTIFCATION OF CFO REQUIRED BY SECTION 906
  3




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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 gas1 cubic meter
    
    = 35.315 cubic feet1 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.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
 4




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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 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 is to barrels-of-oil equivalent,
    
    Mcf is to thousand cubic feet, and
    
    Bcf is to billion cubic feet.
 5




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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 the acquisition of certain overseas assets from CNPC, our parent company;
    
    the plan to continue to pursue attractive business opportunities outside China;
    
    our future overall business development and economic performance;
    
    our anticipated financial and operating information regarding, and the future development and economic performance of our business;
    
    our anticipated market risk exposure arising from future changes in interest rates, foreign exchange rates and commodity prices; and
    
    other prospects of our business and operations.
   
    
    fluctuations in crude oil and natural gas prices;
    
    failure to achieve continued exploration success;
    
    failures or delays in achieving production from development projects;
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
    
    continued availability of capital and financing;
    
    acquisitions and other business opportunities that we may pursue;
    
    general economic, market and business conditions, including volatility in interest rates,
changes in foreign exchange rates and volatility in commodity markets;
    
    liability for remedial actions under environmental regulations;
    
    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, including changes in applicable tax rates;
    
    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.
  
 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 rateHigh
    
    Low(RMB per US$)December 2007
    
    
    7.4120
    
    
    
    7.2946January 2008
    
    
    7.2946
    
    
    
    7.1818February 2008
    
    
    7.1973
    
    
    
    7.1100March 2008
    
    
    7.1110
    
    
    
    7.0105April 2008
    
    
    7.0185
    
    
    
    6.9840May 2008 (ending as of May 16)
    
    
    7.0000
    
    
    
    6.9860
 7




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Average noon buying rate(RMB per US$)2003
    
    
    8.27722004
    
    
    8.27682005
    
    
    8.18262006
    
    
    7.95792007
    
    
    7.5806
 
 Selected Financial Data
 Historical Financial Information
  8




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Year ended December 31,2003 (1)
    
    2004 (1)
    
    2005
    
    2006
    
    2007RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB(in millions, except for per shareand per ADS data)Income Statement DataRevenuesSales and other operating revenues
    
    
    310,431
    
    
    
    397,354
    
    
    
    552,229
    
    
    
    688,978
    
    
    
    835,037Operating expensesPurchases, services and other
    
    
    (89,741
    )
    
    
    (114,249
    )
    
    
    (200,321
    )
    
    
    (271,123
    )
    
    
    (370,740
    )Employee compensation costs
    
    
    (20,044
    )
    
    
    (22,934
    )
    
    
    (29,675
    )
    
    
    (39,161
    )
    
    
    (50,616
    )Exploration expenses, including exploratory dry holes
    
    
    (10,624
    )
    
    
    (12,090
    )
    
    
    (15,566
    )
    
    
    (18,822
    )
    
    
    (20,648
    )Depreciation, depletion and amortization
    
    
    (42,163
    )
    
    
    (48,362
    )
    
    
    (51,305
    )
    
    
    (61,388
    )
    
    
    (66,625
    )Selling, general and administrative expenses
    
    
    (25,982
    )
    
    
    (28,302
    )
    
    
    (36,538
    )
    
    
    (43,235
    )
    
    
    (51,576
    )Employee separation costs and shutting down of
manufacturing assets
    
    
    (2,355
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    Taxes other than income taxes
    
    
    (16,821
    )
    
    
    (19,943
    )
    
    
    (23,616
    )
    
    
    (56,666
    )
    
    
    (73,712
    )Revaluation loss of property, plant and equipment
    
    
    (391
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other expenses, net
    
    
    (598
    )
    
    
    (116
    )
    
    
    (3,037
    )
    
    
    (607
    )
    
    
    (1,265
    )Total operating expenses
    
    
    (208,719
    )
    
    
    (246,216
    )
    
    
    (360,058
    )
    
    
    (491,002
    )
    
    
    (635,182
    )Income from operations
    
    
    101,712
    
    
    
    151,138
    
    
    
    192,171
    
    
    
    197,976
    
    
    
    199,855Income from equity affiliates and jointly controlled entities
    
    
    933
    
    
    
    1,621
    
    
    
    2,401
    
    
    
    2,277
    
    
    
    6,997Exchange gain (loss), net
    
    
    (36
    )
    
    
    8
    
    
    
    88
    
    
    
    74
    
    
    
    (866
    )Interest income
    
    
    973
    
    
    
    1,373
    
    
    
    1,924
    
    
    
    2,066
    
    
    
    1,990Interest expense
    
    
    (2,889
    )
    
    
    (2,896
    )
    
    
    (2,762
    )
    
    
    (3,220
    )
    
    
    (3,595
    )Income before taxes
    
    
    100,693
    
    
    
    151,244
    
    
    
    193,822
    
    
    
    199,173
    
    
    
    204,381Income taxes
    
    
    (28,796
    )
    
    
    (43,598
    )
    
    
    (54,180
    )
    
    
    (49,776
    )
    
    
    (49,152
    )Income for this year
    
    
    71,897
    
    
    
    107,646
    
    
    
    139,642
    
    
    
    149,397
    
    
    
    155,229Attributable to:Shareholders
    
    
    69,835
    
    
    
    103,843
    
    
    
    133,362
    
    
    
    142,224
    
    
    
    145,625Minority shareholders
    
    
    2,062
    
    
    
    3,803
    
    
    
    6,280
    
    
    
    7,173
    
    
    
    9,60471,897
    
    
    
    107,646
    
    
    
    139,642
    
    
    
    149,397
    
    
    
    155,229Basic and diluted net income per shareAttributable to shareholders for this year (2)
    
    
    0.40
    
    
    
    0.59
    
    
    
    0.75
    
    
    
    0.79
    
    
    
    0.81Basic and diluted net income per ADS (3)
    
    
    39.72
    
    
    
    59.06
    
    
    
    75.44
    
    
    
    79.45
    
    
    
    81.04
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As of December 31,2003 (1)
    
    2004 (1)
    
    2005
    
    2006
    
    2007RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB(in millions, except for per share andper ADS data)Balance Sheet DataAssetsCurrent assetsCash and cash equivalents
    
    
    11,613
    
    
    
    11,688
    
    
    
    80,905
    
    
    
    48,559
    
    
    
    65,494Time deposits with maturities after three months but
within 12 months
    
    
    2,648
    
    
    
    1,425
    
    
    
    1,691
    
    
    
    3,012
    
    
    
    18,042Investments in collateralized loans
    
    
    24,224
    
    
    
    33,217
    
    
    
    235
    
    
    
    
    
    
    
    Accounts receivable
    
    
    4,115
    
    
    
    3,842
    
    
    
    4,630
    
    
    
    8,488
    
    
    
    18,419Inventories, at net book value
    
    
    30,064
    
    
    
    47,377
    
    
    
    62,733
    
    
    
    76,038
    
    
    
    88,467Prepaid expenses and other current assets
    
    
    18,845
    
    
    
    24,704
    
    
    
    25,701
    
    
    
    26,125
    
    
    
    40,753Total current assets
    
    
    91,509
    
    
    
    122,253
    
    
    
    175,895
    
    
    
    162,222
    
    
    
    231,175Non-current assetsProperty, plant and equipment, less accumulated
depreciation, depletion and amortization
    
    
    442,311
    
    
    
    485,612
    
    
    
    563,890
    
    
    
    645,337
    
    
    
    762,882Long-term investments, at net book value
    
    
    9,405
    
    
    
    11,504
    
    
    
    13,608
    
    
    
    35,010
    
    
    
    29,116Prepaid operating lease rentals
    
    
    7,286
    
    
    
    12,307
    
    
    
    16,235
    
    
    
    20,468
    
    
    
    23,417Intangible and other assets
    
    
    3,027
    
    
    
    3,020
    
    
    
    5,011
    
    
    
    6,627
    
    
    
    8,488Time deposits mature after one year
    
    
    3,485
    
    
    
    3,751
    
    
    
    3,428
    
    
    
    2,499
    
    
    
    5,053Total non-current assets
    
    
    465,514
    
    
    
    516,194
    
    
    
    602,172
    
    
    
    709,941
    
    
    
    828,956Total assets
    
    
    557,023
    
    
    
    638,447
    
    
    
    778,067
    
    
    
    872,163
    
    
    
    1,060,131Liabilities and shareholders equityCurrent liabilitiesShort-term debt
    
    
    34,328
    
    
    
    34,937
    
    
    
    28,689
    
    
    
    35,763
    
    
    
    30,934Accounts payable and accrued liabilities
    
    
    66,700
    
    
    
    73,072
    
    
    
    99,758
    
    
    
    120,182
    
    
    
    144,353Income tax payable
    
    
    12,068
    
    
    
    17,484
    
    
    
    20,567
    
    
    
    17,744
    
    
    
    11,709Other taxes payable
    
    
    9,251
    
    
    
    5,032
    
    
    
    4,824
    
    
    
    6,190
    
    
    
    11,099Total current liabilities
    
    
    122,347
    
    
    
    130,525
    
    
    
    153,838
    
    
    
    179,879
    
    
    
    198,095Non-current liabilitiesLong-term debt
    
    
    51,601
    
    
    
    44,648
    
    
    
    44,570
    
    
    
    35,634
    
    
    
    39,688Other long-term obligations
    
    
    2,010
    
    
    
    2,481
    
    
    
    1,046
    
    
    
    995
    
    
    
    1,035Assets retirement obligations
    
    
    735
    
    
    
    919
    
    
    
    14,187
    
    
    
    18,481
    
    
    
    24,761
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As of December 31,2003 (1)
    
    2004 (1)
    
    2005
    
    2006
    
    2007RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB(in millions, except for per share andper ADS data)Deferred taxes
    
    
    13,436
    
    
    
    16,902
    
    
    
    20,759
    
    
    
    19,583
    
    
    
    20,205Total non-current liabilities
    
    
    67,782
    
    
    
    64,950
    
    
    
    80,562
    
    
    
    74,693
    
    
    
    85,689Total liabilities
    
    
    190,129
    
    
    
    195,475
    
    
    
    234,400
    
    
    
    254,572
    
    
    
    283,784EquityShareholders equity
Share capital
    
    
    175,824
    
    
    
    175,824
    
    
    
    179,021
    
    
    
    179,021
    
    
    
    183,021Retained income
    
    
    88,152
    
    
    
    143,115
    
    
    
    203,812
    
    
    
    264,092
    
    
    
    332,432Reserves
    
    
    93,952
    
    
    
    108,834
    
    
    
    132,556
    
    
    
    143,564
    
    
    
    217,952357,928
    
    
    
    427,773
    
    
    
    515,389
    
    
    
    586,677
    
    
    
    733,405Minority interest
    
    
    8,966
    
    
    
    15,199
    
    
    
    28,278
    
    
    
    30,914
    
    
    
    42,942Total equity
    
    
    366,894
    
    
    
    442,972
    
    
    
    543,667
    
    
    
    617,591
    
    
    
    776,347Total liabilities and equity
    
    
    557,023
    
    
    
    638,447
    
    
    
    778,067
    
    
    
    872,163
    
    
    
    1,060,131Share capital, issued and outstanding, RMB 1.00 par value
State-owned shares
    
    
    158,242
    
    
    
    158,242
    
    
    
    157,922
    
    
    
    157,922
    
    
    
    A Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,922H Shares and ADSs
    
    
    17,582
    
    
    
    17,582
    
    
    
    21,099
    
    
    
    21,099
    
    
    
    21,099
 As of December 31,2003 (1)
    
    2004 (1)
    
    2005
    
    2006
    
    2007RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB(in millions)Other Financial DataDividend per share
    
    
    0.18
    
    
    
    0.26
    
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.36Dividend per ADS
    
    
    17.82
    
    
    
    26.34
    
    
    
    33.80
    
    
    
    35.75
    
    
    
    36.25Capital expenditures
    
    
    (86,373
    )
    
    
    (98,946
    )
    
    
    (124,801
    )
    
    
    (148,746
    )
    
    
    (181,583
    )Cash Flow DataNet cash provided by operating activities
    
    
    139,570
    
    
    
    141,691
    
    
    
    203,885
    
    
    
    198,102
    
    
    
    203,748Net cash used for investing activities
    
    
    (102,549
    )
    
    
    (102,276
    )
    
    
    (91,576
    )
    
    
    (158,451
    )
    
    
    (184,205
    )Net cash used for financing activities
    
    
    (35,593
    )
    
    
    (39,586
    )
    
    
    (42,634
    )
    
    
    (71,739
    )
    
    
    (2,648
    )
 
 Notes:(1)
    
    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
2005, we retroactively restated our prior years consolidated
financial statements to reflect the effect as if the refinery and
petrochemical operations of Ningxia Dayuan Refinery and Petrochemical
Company Limited, or Dayuan, Qingyang Refinery and Petrochemical
Company Limited, or Qingyang, both of which we acquired from CNPC, and
the operations of CNPC Exploration and Development Company Limited, or
CNPC E&D, of which we acquired a 50% interest from China National Oil
and Gas Exploration and Development Corporation, or CNODC, a
wholly owned subsidiary of CNPC, had always been combined since
inception.(2)
    
    The basic and diluted income per share for the years ended December
31, 2003 and 2004 has been calculated by dividing the net income by
the 11




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##### Table of Contents



number of 175,824 million shares issued and outstanding for the
corresponding years. The basic and diluted income per share for the
year ended December 31, 2005 was calculated by dividing the net
income
by the weighted average number of 176,770 million shares issued and
outstanding for the year presented. The basic and diluted income per
share for the year ended December 31, 2006 was calculated by dividing
the net income by the number of 179,021 million shares issued and
outstanding for the year presented. The basic and diluted income per
share for the year ended December 31, 2007 was calculated by dividing
the net income by the number of 179,700 million shares issued and
outstanding for the year presented.(3)
    
    The basic and diluted income per ADS for the years ended December 31,
2003 and 2004 has been calculated by dividing the net income by the
number of 175,824 million shares issued and outstanding for the
corresponding years, each ADS representing 100 H Shares. The basic and
diluted income per ADS for the year ended December 31, 2005 has been
calculated by dividing the net income by the weighted average number
of 176,770 million shares issued and outstanding for the year
presented, each ADS representing 100 H Shares. The basic and diluted
income per ADS for the year ended December 31, 2006 has been
calculated by dividing the net income by the number of 179,021 million
shares issued and outstanding for the year presented, each ADS
representing 100 H Shares. The basic and diluted income per ADS for
the year ended December 31, 2007 was calculated by dividing the net
income by the number of 179,700 million shares issued and outstanding
for the year presented, each ADS representing 100 H Shares. 
 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. In 2006, the
PRC government, under its macroeconomic
controls, introduced a new mechanism for
determining the prices of refined products.
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. A decline in crude oil
prices will reduce our crude oil revenues
derived from external customers. If crude oil
prices remain at a low level for a prolonged
period, our company has to determine and
estimate whether our oil and gas assets may
suffer impairment losses and, if so, the
amount of the impairment losses. An increase
in crude oil prices may, however, increase
the production costs of refined products. In
addition, a decline in refined products
prices will reduce our revenue derived from
refining operations. An increase in the
refined products prices, however, will
increase the production costs of chemical
products which use refined products as raw
materials.
    
    The crude oil and natural gas reserve data in
this annual report are only estimates. The
reliability of reserve estimates depends on a
number of factors, assumptions and variables,
such as the quality and quantity of our
technical and economic data and the
prevailing oil and gas prices applicable to
our production, some of which are beyond our
control and may prove to be incorrect over
time. Results of drilling, testing and
production after the date of 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, 2005, 2006 and 2007 compared to prior
years, 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, we acquired 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.
 12




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##### Table of Contents




    
    The United States Securities and Exchange
Commission, or the SEC, 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
control over financial reporting in its
annual report, which contains managements
assessment of the effectiveness of the
companys internal control over financial
reporting. Although our management concluded
that our internal control over our financial
reporting for the fiscal year ended December
31, 2007 was effective, we may discover other
deficiencies in the course of our future
evaluation of our internal control over our
financial reporting and may be unable to
remediate such deficiencies in a timely
manner. If we fail to maintain the adequacy
of our internal control over financial
reporting, we may not be able to conclude
that we have effective internal control over
financial reporting on an ongoing basis, in
accordance with the Sarbanes-Oxley Act.
Moreover, effective internal control is
necessary for us to produce reliable
financial reports and is important to prevent
fraud. As a result, our failure to achieve
and maintain effective internal control over
financial reporting could result in the loss
of investor confidence in the reliability of
our financial statements, which in turn could
harm our business and negatively impact the
trading prices of our ADSs, H Shares or A
Shares.
    
    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 for 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.
    
    CNPC owns approximately 86.29% 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, affect 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.
 13




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##### Table of Contents




    
    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 future 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. We incur
relatively higher transportation costs for delivery of our refined products and chemical products to certain areas of the eastern
and southern regions from our refineries and chemical plants in western and northern China. While we continue to expand the sales
of these products in the eastern and southern regions of China, we face strong competition from Sinopec and China National Offshore
Oil Corp, or CNOOC. 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 new and expanding some existing refinery and petrochemical facilities and constructing several
natural gas pipelines, 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 and product-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 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. For example, since March 26,
2006, we have been subject to a crude oil special gain levy imposed by
the PRC government. As a result, we recorded an aggregate of RMB
28,914 million and an aggregate of RMB44,582 million as such levy to
the PRC government in relation to our domestic sales of crude oil in
2006 and in 2007, respectively.
    
    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.
    
    Prior to 2005, our company performed capping or plugging on wellheads
and surface facilities that could be salvaged for alternative use. For
safety reasons, our company also performed capping or plugging on
certain wells that were considered to be in areas with extensive human
use at the time of the abandonment. Our company, however, did not
perform capping or plugging on wells that were neither considered to
be in areas with extensive human use nor could be salvaged for
alternative use. Consequently, such wellheads and surface facilities
were left at their original sites after the wells were retired.
 The Environmental Protection Regulation for Oil and Gas Exploration and
Production Activities in Heilongjiang Province The Environmental Protection
Regulation for Oil and Gas Exploration and Production Activities in Gansu
Province
 14




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| |  |  | subsidiary
companies recognize asset retirement provisions for their currently used oil
and gas properties.
| |  |  | -----------------------------------------------------------------------------------------------------------

| |  |  | 
| |  |  | 

Our company believes it had no obligation to adopt such abandonment procedures
prior to the issuance of the new regulations in 2005. For the oil and gas
properties that were retired prior to the issuance of such regulations, the
activities required to retire these assets, at a level that would be in
compliance with the regulations and our internal policy, have not been
performed. The costs associated with these activities have not been included in
the asset retirement obligations accrued during 2005. However, Heilongjiang
Province and Gansu Province could enact new regulations, amend the current
regulations or retroactively apply the relevant requirements. If any of these
regulations is determined to be applicable to assets other than those that were
retired subsequent to the dates that these regulations were issued in 2005, we
could be required to incur substantial costs associated with such asset
retirement obligations. In addition, we cannot assure you that the provincial
governments other than Heilongjiang Province and Gansu Province will not enact
new regulations which will require our company to perform additional asset
retirement activities related to the assets retired before the establishment of
our companys internal policy and areas in which these assets were or continue
to be located.






    
    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.







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 the sale of natural gas.






15



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16




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Acquisitions
        Disposal
  17




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##### Table of Contents



Our Corporate Organization and Shareholding Structure
   
 
 (1)
    
    Indicates approximate shareholding.(2)
    
    Includes subsidiary companies and those 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, CNPC E&D, PetroChina Foreign Cooperation
Administration Department, Beijing Oil and Gas Pipeline Network Dispatching Center, IT Service Center, PetroChina International Co., Ltd., and
Petrochemical Research Institute. 18




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##### Table of Contents



(1)
    
    Includes subsidiary companies and those branches without legal person status.(2)
    
    Represents enterprises directly administered and operated by such segment. General Information
 
 Launch of New Logo
 
 19




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##### Table of Contents



Exploration and Production
    Reserves
   Crude oil
    
    Natural gas (1)
    
    Combined (1)(millions of barrels)
    
    (Bcf)
    
    (BOE, in millions)Proved developed and undeveloped reservesReserves as of December 31, 2005
    
    
    11,536.2
    
    
    
    48,123.1
    
    
    
    19,556.7Revisions of previous estimates
    
    
    196.1
    
    
    
    685.9
    
    
    
    310.4Extensions and discoveries
    
    
    635.3
    
    
    
    6,247.7
    
    
    
    1,676.5Improved recovery
    
    
    81.1
    
    
    
    
    
    
    
    81.1Production for the year
    
    
    (830.7
    )
    
    
    (1,587.5
    )
    
    
    (1,095.3
    )Reserves as of December 31, 2006
    
    
    11,618.0
    
    
    
    53,469.2
    
    
    
    20,529.4Revisions of previous estimates
    
    
    83.7
    
    
    
    (1,063.0
    )
    
    
    (93.4
    )Extensions and discoveries
    
    
    763.9
    
    
    
    6,331.4
    
    
    
    1,819.1Improved recovery
    
    
    78.8
    
    
    
    0
    
    
    
    78.8Production for the year
    
    
    (838.8
    )
    
    
    (1,627.0
    )
    
    
    (1,110.0
    )
 20




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##### Table of Contents



Crude oil
    
    Natural gas (1)
    
    Combined (1)(millions of barrels)
    
    (Bcf)
    
    (BOE, in millions)Reserves as of December 31, 2007
    
    
    11,705.6
    
    
    
    57,110.6
    
    
    
    21,223.9Proved developed reservesAs of December 31, 2005
    
    
    9,194.8
    
    
    
    19,857.8
    
    
    
    12,504.4As of December 31, 2006
    
    
    9,185.2
    
    
    
    22,563.9
    
    
    
    12,945.8As of December 31, 2007
    
    
    9,047.1
    
    
    
    26,047.1
    
    
    
    13,388.3
 
 (1)
    
    Represents natural gas remaining after field separation for condensate removal and reduction for flared gas.  As of December 31,2005
    
    2006
    
    2007Proved
    
    
    
    
    
    Proved
    
    
    
    
    
    Proveddeveloped
    
    
    
    
    
    Developed
    
    
    
    
    
    developedand
    
    Proved
    
    And
    
    Proved
    
    and
    
    Provedundeveloped
    
    developed
    
    Undeveloped
    
    developed
    
    undeveloped
    
    developed(millions of barrels)Crude oil reservesDaqing
    
    
    4,396.9
    
    
    
    3,863.9
    
    
    
    4,200.3
    
    
    
    3,516.0
    
    
    
    3,856.1
    
    
    
    3,324.3Liaohe
    
    
    1,114.6
    
    
    
    937.5
    
    
    
    1,067.5
    
    
    
    845.8
    
    
    
    1,121.0
    
    
    
    888.1Xinjiang
    
    
    1,261.8
    
    
    
    1,010.8
    
    
    
    1,306.6
    
    
    
    1,077.0
    
    
    
    1,354.9
    
    
    
    1,198.9Changqing
    
    
    1,267.0
    
    
    
    840.6
    
    
    
    1,450.6
    
    
    
    1,182.9
    
    
    
    1,488.9
    
    
    
    1,194.8Jilin
    
    
    675.0
    
    
    
    472.2
    
    
    
    775.5
    
    
    
    501.8
    
    
    
    784.2
    
    
    
    463.4Dagang
    
    
    516.1
    
    
    
    426.7
    
    
    
    482.1
    
    
    
    400.0
    
    
    
    523.2
    
    
    
    346.7Tarim
    
    
    543.8
    
    
    
    418.1
    
    
    
    523.9
    
    
    
    370.4
    
    
    
    590.3
    
    
    
    379.7Huabei
    
    
    536.2
    
    
    
    381.5
    
    
    
    500.9
    
    
    
    388.4
    
    
    
    448.0
    
    
    
    307.0Qinghai
    
    
    243.0
    
    
    
    185.5
    
    
    
    227.9
    
    
    
    187.2
    
    
    
    200.1
    
    
    
    186.3Tuha
    
    
    165.0
    
    
    
    110.8
    
    
    
    156.5
    
    
    
    104.9
    
    
    
    164.7
    
    
    
    91.7Sichuan
    
    
    8.0
    
    
    
    5.5
    
    
    
    11.7
    
    
    
    5.4
    
    
    
    9.5
    
    
    
    4.4Jidong
    
    
    122.7
    
    
    
    73.6
    
    
    
    180.4
    
    
    
    98.3
    
    
    
    413.1
    
    
    
    126.0Other regions (1)
    
    
    686.1
    
    
    
    468.1
    
    
    
    734.1
    
    
    
    507.1
    
    
    
    751.5
    
    
    
    535.8Total
    
    
    11,536.2
    
    
    
    9,194.8
    
    
    
    11,618.0
    
    
    
    9,185.2
    
    
    
    11,705.6
    
    
    
    9,047.1
 As of December 31,2005
    
    2006
    
    2007Proved
    
    
    
    
    
    Proved
    
    
    
    
    
    Proveddeveloped
    
    
    
    
    
    developed
    
    
    
    
    
    developedand
    
    Proved
    
    and
    
    Proved
    
    and
    
    Provedundeveloped
    
    developed
    
    undeveloped
    
    developed
    
    undeveloped
    
    Developed(Bcf)Natural gas reserves (2)Sichuan
    
    
    9,211.2
    
    
    
    5,063.5
    
    
    
    10,362.8
    
    
    
    4,867.3
    
    
    
    10,400.5
    
    
    
    4,365.5Changqing
    
    
    15,765.6
    
    
    
    4,089.8
    
    
    
    17,846.1
    
    
    
    4,559.7
    
    
    
    19,105.0
    
    
    
    6,943.9Xinjiang
    
    
    1,686.8
    
    
    
    1,120.4
    
    
    
    1,723.0
    
    
    
    1,047.0
    
    
    
    1,537.1
    
    
    
    999.3Daqing
    
    
    1,936.8
    
    
    
    813.3
    
    
    
    1,894.6
    
    
    
    740.2
    
    
    
    3,039.7
    
    
    
    1,046.2Qinghai
    
    
    4,534.1
    
    
    
    1,528.0
    
    
    
    4,467.0
    
    
    
    1,584.0
    
    
    
    4,352.8
    
    
    
    3,003.5Tarim
    
    
    11,838.8
    
    
    
    5,347.9
    
    
    
    14,443.6
    
    
    
    7,818.4
    
    
    
    15,114.3
    
    
    
    7,918.8Liaohe
    
    
    489.8
    
    
    
    417.6
    
    
    
    429.3
    
    
    
    338.8
    
    
    
    386.4
    
    
    
    296.2Tuha
    
    
    677.4
    
    
    
    367.8
    
    
    
    640.5
    
    
    
    401.8
    
    
    
    581.6
    
    
    
    350.4Huabei
    
    
    369.3
    
    
    
    211.8
    
    
    
    340.3
    
    
    
    264.6
    
    
    
    193.1
    
    
    
    119.2
 21




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##### Table of Contents



As of December 31,2005
    
    2006
    
    2007Proved
    
    
    
    
    
    Proved
    
    
    
    
    
    Proveddeveloped
    
    
    
    
    
    developed
    
    
    
    
    
    developedand
    
    Proved
    
    and
    
    Proved
    
    and
    
    Provedundeveloped
    
    developed
    
    undeveloped
    
    developed
    
    undeveloped
    
    Developed(Bcf)Dagang
    
    
    586.9
    
    
    
    207.8
    
    
    
    275.0
    
    
    
    189.7
    
    
    
    347.4
    
    
    
    197.1Jilin
    
    
    187.8
    
    
    
    132.7
    
    
    
    198.6
    
    
    
    113.7
    
    
    
    1,169.9
    
    
    
    104.1Jidong
    
    
    38.9
    
    
    
    27.2
    
    
    
    52.7
    
    
    
    31.5
    
    
    
    191.4
    
    
    
    40.4Other regions (1)
    
    
    799.7
    
    
    
    530.0
    
    
    
    795.7
    
    
    
    607.2
    
    
    
    691.4
    
    
    
    662.5Total
    
    
    48,123.1
    
    
    
    19,857.8
    
    
    
    53,469.2
    
    
    
    22,563.9
    
    
    
    57,110.6
    
    
    
    26,047.1
 
 (1)
    
    Represents Yumen oil regions, oil regions in South China, and our overseas oil and gas fields as a result
of our acquisition of overseas assets.(2)
    
    Represents natural gas remaining after field separation for condensate removal and reduction for flared gas. Exploration and Development
   Year
    
    
    
    Daqing
    
    Xinjiang
    
    Liaohe
    
    Changqing
    
    Huabei
    
    Dagang
    
    Sichuan
    
    Others (1)
    
    Total2005
    
    
    Net exploratory
wells drilled(2)
    
    
    250
    
    
    
    191
    
    
    
    71
    
    
    
    456
    
    
    
    83
    
    
    
    39
    
    
    
    58
    
    
    
    360
    
    
    
    1,508Crude oil
    
    
    78
    
    
    
    92
    
    
    
    47
    
    
    
    200
    
    
    
    53
    
    
    
    22
    
    
    
    0
    
    
    
    152
    
    
    
    644Natural gas
    
    
    6
    
    
    
    1
    
    
    
    0
    
    
    
    24
    
    
    
    0
    
    
    
    0
    
    
    
    30
    
    
    
    15
    
    
    
    76Dry (3)
    
    
    166
    
    
    
    98
    
    
    
    24
    
    
    
    232
    
    
    
    30
    
    
    
    17
    
    
    
    28
    
    
    
    193
    
    
    
    788Net development
wells drilled(2)
    
    
    3,722
    
    
    
    1,608
    
    
    
    563
    
    
    
    2,608
    
    
    
    250
    
    
    
    192
    
    
    
    101
    
    
    
    2,587
    
    
    
    11,631Crude oil
    
    
    3,712
    
    
    
    1,604
    
    
    
    549
    
    
    
    2,364
    
    
    
    248
    
    
    
    188
    
    
    
    6
    
    
    
    2,495
    
    
    
    11,166Natural gas
    
    
    10
    
    
    
    4
    
    
    
    12
    
    
    
    195
    
    
    
    2
    
    
    
    4
    
    
    
    83
    
    
    
    88
    
    
    
    398Dry (3)
    
    
    0
    
    
    
    0
    
    
    
    2
    
    
    
    49
    
    
    
    0
    
    
    
    0
    
    
    
    12
    
    
    
    4
    
    
    
    672006
    
    
    Net exploratory
wells drilled(2)
    
    
    250
    
    
    
    180
    
    
    
    64
    
    
    
    466
    
    
    
    83
    
    
    
    50
    
    
    
    62
    
    
    
    390
    
    
    
    1,545Crude oil
    
    
    73
    
    
    
    88
    
    
    
    35
    
    
    
    203
    
    
    
    49
    
    
    
    21
    
    
    
    
    
    
    
    114
    
    
    
    583Natural gas
    
    
    7
    
    
    
    21
    
    
    
    1
    
    
    
    37
    
    
    
    
    
    
    
    7
    
    
    
    31
    
    
    
    6
    
    
    
    110Dry (3)
    
    
    170
    
    
    
    71
    
    
    
    28
    
    
    
    226
    
    
    
    34
    
    
    
    22
    
    
    
    31
    
    
    
    270
    
    
    
    852Net development
wells drilled(2)
    
    
    4,183
    
    
    
    1,605
    
    
    
    713
    
    
    
    2,023
    
    
    
    330
    
    
    
    179
    
    
    
    57
    
    
    
    2,361
    
    
    
    11,451Crude oil
    
    
    4,160
    
    
    
    1,586
    
    
    
    688
    
    
    
    1,772
    
    
    
    225
    
    
    
    173
    
    
    
    9
    
    
    
    2,235
    
    
    
    10,848Natural gas
    
    
    23
    
    
    
    8
    
    
    
    14
    
    
    
    216
    
    
    
    105
    
    
    
    6
    
    
    
    40
    
    
    
    123
    
    
    
    535Dry (3)
    
    
    0
    
    
    
    11
    
    
    
    11
    
    
    
    35
    
    
    
    0
    
    
    
    0
    
    
    
    8
    
    
    
    3
    
    
    
    682007
    
    
    Net exploratory
wells drilled(2)
    
    
    294
    
    
    
    183
    
    
    
    68
    
    
    
    447
    
    
    
    104
    
    
    
    70
    
    
    
    48
    
    
    
    415
    
    
    
    1,629Crude oil
    
    
    103
    
    
    
    103
    
    
    
    49
    
    
    
    186
    
    
    
    47
    
    
    
    59
    
    
    
    3
    
    
    
    141
    
    
    
    691Natural gas
    
    
    12
    
    
    
    15
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    16
    
    
    
    114Dry (3)
    
    
    179
    
    
    
    65
    
    
    
    19
    
    
    
    220
    
    
    
    57
    
    
    
    11
    
    
    
    15
    
    
    
    258
    
    
    
    824Net development
wells drilled(2)
    
    
    4,670
    
    
    
    1,350
    
    
    
    529
    
    
    
    3,087
    
    
    
    528
    
    
    
    260
    
    
    
    83
    
    
    
    2,377
    
    
    
    12,884Crude oil
    
    
    4,643
    
    
    
    1,346
    
    
    
    515
    
    
    
    2,652
    
    
    
    259
    
    
    
    252
    
    
    
    8
    
    
    
    2,208
    
    
    
    11,883Natural gas
    
    
    17
    
    
    
    4
    
    
    
    11
    
    
    
    384
    
    
    
    269
    
    
    
    8
    
    
    
    75
    
    
    
    163
    
    
    
    931Dry (3)
    
    
    10
    
    
    
    
    
    
    
    3
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    70
 
 (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. 22




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##### Table of Contents



(3)
    
    Dry wells are wells with insufficient reserves to sustain commercial production. Oil-and-Gas Properties
  Acreage (1) (thousands of acres)Productive wells (1)
    
    Developed
    
    UndevelopedOil region
    
    Crude oil
    
    Natural gas
    
    Crude oil
    
    Natural gas
    
    Crude oil
    
    Natural gasDaqing
    
    
    71,314
    
    
    
    196
    
    
    
    762.5
    
    
    
    83.4
    
    
    
    788.8
    
    
    
    113.2Liaohe
    
    
    20,608
    
    
    
    627
    
    
    
    190.9
    
    
    
    35.8
    
    
    
    91.3
    
    
    
    6.5Xinjiang
    
    
    23,293
    
    
    
    98
    
    
    
    299.7
    
    
    
    37.1
    
    
    
    152.4
    
    
    
    20.3Jilin
    
    
    23,883
    
    
    
    112
    
    
    
    292.2
    
    
    
    28.4
    
    
    
    309.3
    
    
    
    22.6Changqing
    
    
    21,957
    
    
    
    1,725
    
    
    
    470.4
    
    
    
    2,191.9
    
    
    
    335.2
    
    
    
    1,730.8Huabei
    
    
    7,383
    
    
    
    105
    
    
    
    140.3
    
    
    
    12.3
    
    
    
    60.0
    
    
    
    2.9Dagang
    
    
    4,959
    
    
    
    63
    
    
    
    104.6
    
    
    
    24.5
    
    
    
    62.2
    
    
    
    20.7Tuha
    
    
    2,301
    
    
    
    90
    
    
    
    40.8
    
    
    
    21.2
    
    
    
    27.2
    
    
    
    8.3Tarim
    
    
    937
    
    
    
    167
    
    
    
    105.9
    
    
    
    66.2
    
    
    
    49.1
    
    
    
    190.6Sichuan
    
    
    425
    
    
    
    1,409
    
    
    
    335.5
    
    
    
    377.7
    
    
    
    
    
    
    
    329.1Other regions (2)
    
    
    5,517
    
    
    
    322
    
    
    
    68.3
    
    
    
    32.5
    
    
    
    48.3
    
    
    
    25.2Total
    
    
    182,577
    
    
    
    4,914
    
    
    
    2,811.2
    
    
    
    2,910.9
    
    
    
    1,923.7
    
    
    
    2,470.1
 
 (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 endedDecember 31,
    
    % of2005
    
    2006
    
    2007
    
    2007 TotalCrude oil production (1)(thousands of barrels per day, except
percentages or otherwise indicated)Daqing
    
    
    915.1
    
    
    
    883.1
    
    
    
    847.3
    
    
    
    36.9Liaohe
    
    
    238.2
    
    
    
    230.4
    
    
    
    231.3
    
    
    
    10.1Xinjiang
    
    
    238.8
    
    
    
    244.2
    
    
    
    249.4
    
    
    
    10.9Changqing
    
    
    191.4
    
    
    
    215.6
    
    
    
    246.9
    
    
    
    10.7
 23




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##### Table of Contents



For the year endedDecember 31,
    
    % of2005
    
    2006
    
    2007
    
    2007 TotalTarim
    
    
    122.8
    
    
    
    123.9
    
    
    
    131.6
    
    
    
    5.7Huabei
    
    
    88.4
    
    
    
    89.4
    
    
    
    90.8
    
    
    
    4.0Jilin
    
    
    112.1
    
    
    
    115.6
    
    
    
    120.0
    
    
    
    5.0Dagang
    
    
    102.6
    
    
    
    93.6
    
    
    
    91.2
    
    
    
    4.0Tuha
    
    
    45.2
    
    
    
    44.4
    
    
    
    44.8
    
    
    
    2.0Other (2)
    
    
    200.0
    
    
    
    235.7
    
    
    
    244.8
    
    
    
    10.7Total
    
    
    2,254.5
    
    
    
    2,275.9
    
    
    
    2,298.1
    
    
    
    100.0Annual production (million barrels)
    
    
    822.9
    
    
    
    830.7
    
    
    
    838.8Average sales price(RMB per barrel)
    
    
    396.2
    
    
    
    476.8
    
    
    
    496.3(US$  per barrel)
    
    
    48.37
    
    
    
    59.81
    
    
    
    65.27Natural gas production (1)(3)(millions of cubic feet per day, except
percentages or otherwise indicated)Sichuan
    
    
    1,107.9
    
    
    
    1,233.9
    
    
    
    1,329.8
    
    
    
    29.8Changqing
    
    
    640.7
    
    
    
    650.4
    
    
    
    838.4
    
    
    
    18.8Daqing
    
    
    133.8
    
    
    
    138.0
    
    
    
    123.7
    
    
    
    2.8Qinghai
    
    
    172.8
    
    
    
    200.7
    
    
    
    286.0
    
    
    
    6.4Tuha
    
    
    121.1
    
    
    
    133.4
    
    
    
    111.5
    
    
    
    2.5Xinjiang
    
    
    109.8
    
    
    
    114.2
    
    
    
    102.3
    
    
    
    2.3Liaohe
    
    
    56.0
    
    
    
    52.8
    
    
    
    43.9
    
    
    
    1.0Huabei
    
    
    43.5
    
    
    
    41.3
    
    
    
    39.1
    
    
    
    0.9Tarim
    
    
    479.5
    
    
    
    1,015.7
    
    
    
    1,383.1
    
    
    
    31.0Dagang
    
    
    26.2
    
    
    
    28.7
    
    
    
    43.0
    
    
    
    1.0Other (4)
    
    
    175.9
    
    
    
    149.6
    
    
    
    156.7
    
    
    
    3.5Total
    
    
    3,067.2
    
    
    
    3,758.7
    
    
    
    4,457.5
    
    
    
    100.0
    %Annual production (Bcf)
    
    
    1,119.5
    
    
    
    1,371.9
    
    
    
    1,627.0Average sales price(RMB per Mcf)
    
    
    23.35
    
    
    
    27.6
    
    
    
    29.0(US$  per Mcf)
    
    
    2.85
    
    
    
    3.46
    
    
    
    3.81
 
 (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 overseas production as a
result of our acquisition of overseas assets.(3)
    
    Represents production of natural gas for sale.(4)
    
    Represents production from the Jilin, Jidong and Yumen oil regions and
our share of overseas production as a result of our acquisition of
overseas assets.  24




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##### Table of Contents



Principal Oil and Gas Regions
 Daqing Oil Region
      
    
    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.
    25




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##### Table of Contents



Liaohe Oil Region
    Xinjiang Oil Region
   Sichuan Gas Region
     Changqing Oil and Gas Region
 26




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##### Table of Contents



Tarim Oil and Gas Region
   27




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##### Table of Contents



28




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##### Table of Contents



Refining and Marketing
    
    
    as of December 31, 2007, our refineries annual primary distillation capacity
totaled 941.7 million barrels of crude oil per year, or 2,580.1 thousand
barrels per day;
    
    we processed 823.6 million barrels of crude oil, or 2.3 million barrels per day;
    
    we produced approximately 71.38 million tons of gasoline, diesel and kerosene
and sold approximately 85.74 million tons of these products;
    
    as of December 31, 2007, our retail distribution network consisted of:
 
    
    17,070 service stations owned and operated by us,
    
    282 service stations either wholly owned by CNPC or jointly owned by
CNPC and third parties and to which we provide supervisory support,
representing a significant decrease from last year, as a result of our
taking ownership of or operating certain service stations previously
owned by CNPC or jointly owned by CNPC and third parties, and
    
    1,296 franchise service stations owned and operated by third parties
with which we have long-term refined product supply agreements,
representing a significant decrease from last year, as a result of our
termination of cooperation arrangements with certain franchise service
stations that had demonstrated deficiencies in image, service or oil
quality; and
 
    
    in 2007, our service stations, which are located throughout China,
sold approximately 54.8 million tons of gasoline and diesel,
representing 66.9% of the total of these products sold through our
marketing operations.
 Refining
  Refined Products
  Year ended December 31,Product
    
    2005
    
    2006
    
    2007(in thousands of tons)Diesel
    
    
    43,000.7
    
    
    
    44,226.5
    
    
    
    47,345.4Gasoline
    
    
    21,414.6
    
    
    
    22,027.2
    
    
    
    22,018.7Fuel oil
    
    
    3,816.3
    
    
    
    3,491.4
    
    
    
    4,162.0Naphtha
    
    
    4,872.8
    
    
    
    6,317.9
    
    
    
    7,491.9Asphalt
    
    
    1,484.7
    
    
    
    1,605.7
    
    
    
    1,563.4Kerosene
    
    
    1,970.3
    
    
    
    2,063.7
    
    
    
    2,017.2Lubricants
    
    
    1,528.6
    
    
    
    1,488.4
    
    
    
    1,760.4Paraffin
    
    
    1,139.3
    
    
    
    1,051.8
    
    
    
    1,003.0Total
    
    
    79,227.3
    
    
    
    82,272.6
    
    
    
    87,362.0
   Our Refineries
   As of December 31,2005
    
    2006
    
    2007Primary distillation capacity(1) (thousand barrels per day)Lanzhou Petrochemical
    
    
    212.6
    
    
    
    212.6
    
    
    
    212.6Dalian Petrochemical
    
    
    212.6
    
    
    
    415.0
    
    
    
    415.0Fushun Petrochemical
    
    
    186.2
    
    
    
    186.2
    
    
    
    186.2Daqing Petrochemical
    
    
    121.5
    
    
    
    121.5
    
    
    
    121.5Jinzhou Petrochemical
    
    
    131.6
    
    
    
    131.6
    
    
    
    131.6
 29




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##### Table of Contents



As of December 31,2005
    
    2006
    
    2007Jinxi Petrochemical
    
    
    131.6
    
    
    
    131.6
    
    
    
    131.6Jilin Petrochemical
    
    
    141.7
    
    
    
    141.7
    
    
    
    141.7Urumqi Petrochemical
    
    
    101.2
    
    
    
    101.2
    
    
    
    121.5Other refineries
    
    
    1,098.2
    
    
    
    1,122.5
    
    
    
    1,118.4Total
    
    
    2,337.2
    
    
    
    2,563.9
    
    
    
    2,580.1Refining throughput(thousand barrels per day)Lanzhou Petrochemical
    
    
    178.7
    
    
    
    191.4
    
    
    
    213.9Dalian Petrochemical
    
    
    223.7
    
    
    
    244.7
    
    
    
    233.5Fushun Petrochemical
    
    
    194.4
    
    
    
    196.4
    
    
    
    196.6Daqing Petrochemical
    
    
    125.5
    
    
    
    128.5
    
    
    
    124.3Jinzhou Petrochemical
    
    
    127.9
    
    
    
    137.8
    
    
    
    133.6Jinxi Petrochemical
    
    
    129.2
    
    
    
    132.1
    
    
    
    133.6Jilin Petrochemical
    
    
    138.0
    
    
    
    146.5
    
    
    
    146.1Urumqi Petrochemical
    
    
    85.3
    
    
    
    98.0
    
    
    
    106.1Other refineries
    
    
    858.4
    
    
    
    875.3
    
    
    
    968.8Total
    
    
    2,061.1
    
    
    
    2,150.8
    
    
    
    2,256.5Conversion equivalent(2) (percent)Lanzhou Petrochemical
    
    
    53.3
    
    
    
    53.3
    
    
    
    53.3Dalian Petrochemical
    
    
    54.3
    
    
    
    27.8
    
    
    
    27.8Fushun Petrochemical
    
    
    68.5
    
    
    
    70.7
    
    
    
    70.7Daqing Petrochemical
    
    
    76.7
    
    
    
    76.7
    
    
    
    76.7Jinzhou Petrochemical
    
    
    84.6
    
    
    
    84.6
    
    
    
    84.6Jinxi Petrochemical
    
    
    66.2
    
    
    
    66.2
    
    
    
    66.2Jilin Petrochemical
    
    
    61.4
    
    
    
    61.4
    
    
    
    61.4Urumqi Petrochemical
    
    
    62.0
    
    
    
    62.0
    
    
    
    51.7Average of other refineries
    
    
    50.5
    
    
    
    51.8
    
    
    
    51.9
 
 (1)
    
    Represents the primary distillation capacity of crude oil and condensate.(2)
    
    Stated in fluid catalytic cracking, delayed coking and hydrocracking
equivalent/ topping (percentage by weight), based on 100% of balanced
distillation capacity.   30




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##### Table of Contents



Marketing
  
    
    approximately 802 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
    
    17,070 service stations owned and operated by us, 282 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 1,296 franchise service stations owned and operated by third
parties.
   Year ended December 31,Product
    
    2005
    
    2006
    
    2007(in thousands of tons)Diesel
    
    
    47,811.0
    
    
    
    48,863.9
    
    
    
    54,844.3Gasoline
    
    
    26,161.6
    
    
    
    23,993.2
    
    
    
    27,115.7Fuel oil
    
    
    6,409.6
    
    
    
    8,711.2
    
    
    
    9,656.2Naphtha
    
    
    5,574.1
    
    
    
    6,887.6
    
    
    
    8,347.6Kerosene
    
    
    2,008.0
    
    
    
    2,047.4
    
    
    
    3,782.2Lubricants
    
    
    2,181.6
    
    
    
    2,044.4
    
    
    
    2,348.5Asphalt
    
    
    2,475.6
    
    
    
    3,321.2
    
    
    
    4,387.1Paraffin
    
    
    1,160.3
    
    
    
    1,104.3
    
    
    
    1,021.8Total
    
    
    93,781.8
    
    
    
    96,973.2
    
    
    
    111,503.4
 Wholesale Marketing
  Retail Marketing
  31




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##### Table of Contents



Owned and operated by us (1)
    
    
    17,070Wholly owned by CNPC or jointly owned by CNPC and third parties (2)
    
    
    282Franchised
    
    
    1,296Total
    
    
    18,648
 
 Note:(1)
    
    Includes 461 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.  32




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33




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##### Table of Contents



Chemicals and Marketing
   Our Chemical Products
  Year ended December 31,2005
    
    2006
    
    2007(in thousand tons)Basic petrochemicalsPropylene
    
    
    2,493.5
    
    
    
    2,671.2
    
    
    
    3,083.2Ethylene
    
    
    1,887.9
    
    
    
    2,067.9
    
    
    
    2,581.5Benzene
    
    
    707.9
    
    
    
    749.6
    
    
    
    827.8Derivative petrochemicalsSynthetic resinPolyethylene
    
    
    1,355.9
    
    
    
    1,531.3
    
    
    
    2,101.2Polypropylene
    
    
    1,142.8
    
    
    
    1,291.0
    
    
    
    1,630.2ABS
    
    
    223.0
    
    
    
    223.0
    
    
    
    215.0Other synthetic resin products
    
    
    35.2
    
    
    
    15.8
    
    
    
    16.1Synthetic fiberPolyacrylic fiber
    
    
    97.1
    
    
    
    81.0
    
    
    
    79.3Terylene fiber
    
    
    86.2
    
    
    
    53.3
    
    
    
    48.1Other synthetic fiber products
    
    
    6.3
    
    
    
    6.4
    
    
    
    9.3Synthetic rubberStyrene butadiene rubber
    
    
    194.4
    
    
    
    212.9
    
    
    
    210.6Other synthetic rubber products
    
    
    87.0
    
    
    
    99.1
    
    
    
    100.0IntermediatesAlkylbenzene
    
    
    205.7
    
    
    
    207.9
    
    
    
    197.5Other chemicalsUrea
    
    
    3,577.6
    
    
    
    3,576.3
    
    
    
    3,634.5
  34




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##### Table of Contents



Sales and Marketing
   Year ended December 31,Product
    
    2005
    
    2006
    
    2007(in thousands of tons)Derivative petrochemicalsSynthetic resinPolyethylene
    
    
    1,477.0
    
    
    
    1,594.8
    
    
    
    2,102.4Polypropylene
    
    
    972.3
    
    
    
    1,069.6
    
    
    
    1,434.8ABS
    
    
    232.0
    
    
    
    233.4
    
    
    
    216.7
 35




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##### Table of Contents



Year ended December 31,Product
    
    2005
    
    2006
    
    2007(in thousands of tons)Synthetic fiberTerylene fiber
    
    
    103.3
    
    
    
    59.4
    
    
    
    56.6Polyacrylic fiber
    
    
    95.5
    
    
    
    91.2
    
    
    
    71.6Synthetic rubberButadiene styrene rubber
    
    
    202.2
    
    
    
    203.4
    
    
    
    219.0IntermediatesAlkylbenzene
    
    
    112.3
    
    
    
    127.9
    
    
    
    156.6Other chemicalsUrea
    
    
    3,413.8
    
    
    
    3,570.6
    
    
    
    3,662.2
 36




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37




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##### Table of Contents



Natural Gas and Pipeline
   As of December 31 or yearended December 31,2005
    
    2006
    
    2007Length of natural gas pipelines used by our natural gas segment (km)
    
    
    19,212
    
    
    
    19,662
    
    
    
    19,792Total length of natural gas pipelines (km)
    
    
    20,340
    
    
    
    20,590
    
    
    
    22,043Volume of natural gas sold by our natural gas segment (Bcf)
    
    
    888.8
    
    
    
    1,200.5
    
    
    
    1,502.0Total volume of natural gas sold(1)(Bcf)
    
    
    1,052.2
    
    
    
    1,357.0
    
    
    
    1,647.8
 (1)
    
    Including both the natural gas sold to third parties and the natural gas sold within our company for the production of other products.  Our Principal Markets for
Natural Gas
 38




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##### Table of Contents



Natural Gas Transmission Infrastructure
  Expansion of Our Natural Gas Transmission and Marketing Business
    Crude Oil and Refined Product Transportation and Storage Infrastructure
 39




---



##### Table of Contents




    
    10,559 kilometers of crude oil pipelines with an average daily throughput of approximately 3.13 million barrels; and
    
    crude oil storage facilities with an aggregate storage capacity of approximately 18.1 million cubic meters.
   
    
    2,669 kilometers of refined product pipelines with an average daily throughput of approximately 39,525 tons; and
    
    refined product storage facilities with a total storage capacity of approximately 19.2 million cubic meters.
   
 Competition
  Exploration and Production Operations
  Refining and Marketing and Chemicals and Marketing Operations
  40




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##### Table of Contents



Natural Gas and Pipeline Operations
  
 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 within protected areas and certain other areas; and
    
    impose penalties for pollution resulting from oil, natural gas and petrochemical
operations, including criminal and civil liabilities for serious pollution.
    
    
    building environment-friendly projects;
 41




---



##### Table of Contents




    
    reducing sulphur levels in heavy fuel oil and diesel fuel;
    
    reducing olefin and benzene content in gasoline, and continuously
reducing the quantity of emissions and effluents from our refineries
and petrochemical plants; and
    
    developing and installing monitoring systems at our pollutant
discharge openings and developing environmental impact assessments for
construction projects.
   
    
    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 endeavors to obtain formal land use right
licenses 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 us by CNPC, before
November 5, 2000.
   
 Regulatory Matters
 42




---



##### Table of Contents



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:
 
    
    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:
 
    
    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
   43




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##### Table of Contents



Pricing
 Crude Oil
  Refined Products
    Chemical Products
  Natural Gas
    44




---



##### Table of Contents



Production and Marketing
 Crude Oil
  Refined Products
  Natural Gas
  Foreign Investments
 Cooperation in Exploration and Production with Foreign Companies
   45




---



##### Table of Contents



Transportation and Refining
  Import and Export
  Capital Investment and Financing
         Taxation, Fees and Royalty
  Tax item
    
    Tax base
    
    Tax RateEnterprise income tax
    
    Taxable income
    
    Since January 1, 2008,
applicable to the legal rate of
25%. However, our qualified
branch companies in the
 46




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##### Table of Contents



Tax item
    
    Tax base
    
    Tax Ratewest
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, liquified
petroleum 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
is deducted from output
value-added tax payable by
PetroChina. Since March 14,
2006, the rebate of the
value-added tax paid in
connection with export of
gasoline has been suspended.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 leadless
gasoline; RMB 388.64 per ton
for leaded gasoline.RMB 117.6 per ton for diesel.Since April 1, 2006, RMB 277
per ton for naphtha and levied
at the rate of 30% of the
taxable amount for the time
being.Since April 1, 2006, RMB 256.4
per ton for solvent naphtha and
levied at the rate of 30% of
the taxable amount for the time
being.Since April 1, 2006, RMB 225.2
per ton for lubricants and
levied at the rate of 30% of
the taxable amount for the time
being.Since April 1, 2006, RMB 101.5
per ton for fuel oil and levied
at the rate of 30% of the
taxable amount for the time
being.Since April 1, 2006, RMB 124.6
per ton for aviation kerosene
and not levied for the time
being.Resource tax
    
    Aggregate volume sold or self-consumed
    
    Since July 1, 2005, resource
tax applicable to crude oil of
our company was adjusted upward
from the original RMB 8 to 30
per ton to RMB 14 to 30 per
ton, and the resource tax for
natural gas was adjusted from
the original RMB 2 to 15 per
thousand cubic meter to RMB 7
to 15 per thousand cubic meter.The actual applicable rate for
each oil field may differ
 47




---



##### Table of Contents



Tax item
    
    Tax base
    
    Tax Ratedepending on the resource
differences, volume of the
exploration and production
activities and costs required
for the production at the
particular oil field.Compensatory fee for 
mineral resources
    
    Revenue
    
    1% for crude oil and natural gasCrude oil special 
gain levy
    
    Sales amount above certain threshold
    
    Effective March 26, 2006,
levied on the domestic crude
oil sold at or above US$40/barrel, with a five-level
progressive tax rates, varying
from 20% to 40%
 Tax item
    
    Tax base
    
    Tax RateExploration license fee
    
    Area
    
    RMB 100 to 500 per square kilometer per yearProduction license fee
    
    Area
    
    RMB 1,000 per square kilometer per yearRoyalty 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
   
 ITEM 4A  UNRESOLVED STAFF COMMENTS
  
 48




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##### 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 oil products and natural gas as well as the sale of natural gas.
  Factors Affecting Results of Operations
  Crude Oil Prices
   Median prices for principal grades of
    
    Premium/(discount)crude oil (RMB/barrel)
    
    (RMB/barrel)Year 2005
    
    Year 2006
    
    Year 2007Grade of crude oil
    
    Benchmark
    
    average
    
    average
    
    average
    
    2005
    
    2006
    
    2007Daqing
    
    Minas
    
    
    430
    
    
    
    513
    
    
    
    536
    
    
    
    (4.4
    )
    
    
    (3.8
    )
    
    
    (3.8
    )Jidong
    
    Minas
    
    
    430
    
    
    
    513
    
    
    
    536
    
    
    
    (4.4
    )
    
    
    (3.8
    )
    
    
    (3.8
    )Huabei
    
    Minas
    
    
    430
    
    
    
    513
    
    
    
    536
    
    
    
    (3.0
    )
    
    
    (2.4
    )
    
    
    (3.9
    )Dagang
    
    Cinta
    
    
    412
    
    
    
    494
    
    
    
    512
    
    
    
    (1.8
    )
    
    
    (2.5
    )
    
    
    (4
    )Tarim
    
    Minas
    
    
    430
    
    
    
    513
    
    
    
    536
    
    
    
    (34.9
    )
    
    
    (34.6
    )
    
    
    (51
    )Tuha
    
    Tapis
    
    
    457
    
    
    
    554
    
    
    
    571
    
    
    
    
    
    
    
    (29.0
    )
    
    
    (36
    )
 49




---



##### Table of Contents



Refined Product Prices
    90(#)
    
    0(#)Date
    
    Gasoline
    
    Diesel(RMB/ton)
    
    (RMB/ton)January 14, 2007
    
    
    5,452
    
    
    
    November 1, 2007
    
    
    5,980
    
    
    
    5,520
 Chemical Product Prices
  Natural Gas Prices
   50




---



##### Table of Contents



Foreign Currency Exposure
  Interest Rate Exposure
  Critical Accounting Policies
  Accounting of Oil and Gas Exploration and Production Activities
  51




---



##### Table of Contents



Oil and Gas Reserves
     Property, Plant and Equipment
   Buildings and plant
    
    8-40 yearsEquipment and machinery
    
    4-30 yearsMotor vehicles
    
    7-14 yearsOther
    
    5-12 years
 52




---



##### Table of Contents



Provision for Asset Decommissioning
  Impairment of Accounts Receivable
  Deferred Tax Assets
   53




---



##### Table of Contents



Revenue Recognition
    Acquisitions
        54




---



##### Table of Contents



Operating Results
   Year ended December 31,2005
    
    2006
    
    2007in million RMB
    
    in million RMB
    
    In million RMBTotal revenues
    
    
    552,229
    
    
    
    688,978
    
    
    
    835,037Operating expenses
    
    
    (360,058
    )
    
    
    (491,002
    )
    
    
    (635,182
    )Income from operations
    
    
    192,171
    
    
    
    197,976
    
    
    
    199,855Exchange gain (loss), net
    
    
    88
    
    
    
    74
    
    
    
    (866
    )Interest expense, net
    
    
    (838
    )
    
    
    (1,154
    )
    
    
    (1,605
    )Income from equity affiliates and jointly
controlled entities
    
    
    2,401
    
    
    
    2,277
    
    
    
    6,997
 55




---



##### Table of Contents



Year ended December 31,2005
    
    2006
    
    2007in million RMB
    
    in million RMB
    
    In million RMBIncome before income taxes
    
    
    193,822
    
    
    
    199,173
    
    
    
    204,381Income taxes
    
    
    (54,180
    )
    
    
    (49,776
    )
    
    
    (49,152
    )(Income) loss attributable to minority interest
    
    
    (6,280
    )
    
    
    (7,173
    )
    
    
    (9,604
    )Net income
    
    
    133,362
    
    
    
    142,224
    
    
    
    145,625
  2006
    
    
    
    
    
    2007vs.
    
    
    
    
    
    vs.2005
    
    2006
    
    2005
    
    2007
    
    2006(RMB in millions, except percentages)Sales and other operating revenuesExploration and production
    
    
    337,208
    
    
    
    421,340
    
    
    
    24.9
    %
    
    
    468,175
    
    
    
    11.1
    %Refining and marketing
    
    
    428,494
    
    
    
    543,299
    
    
    
    26.8
    %
    
    
    670,844
    
    
    
    23.5
    %Chemicals and marketing
    
    
    73,978
    
    
    
    82,791
    
    
    
    11.9
    %
    
    
    102,718
    
    
    
    24.1
    %Natural gas and pipeline
    
    
    26,214
    
    
    
    38,917
    
    
    
    48.5
    %
    
    
    50,066
    
    
    
    28.6
    %Other
    
    
    
    
    
    
    1,080
    
    
    
    
    
    
    
    1,718
    
    
    
    59.1
    %Total
    
    
    865,894
    
    
    
    1,087,427
    
    
    
    25.6
    %
    
    
    1,293,521
    
    
    
    19.0
    %Less intersegment sales
    
    
    (313,665
    )
    
    
    (398,449
    )
    
    
    27.0
    %
    
    
    (458,484
    )
    
    
    15.1
    %Consolidated net sales from operations
    
    
    552,229
    
    
    
    688,978
    
    
    
    24.8
    %
    
    
    835,037
    
    
    
    21.2
    %
  2006
    
    
    
    
    
    2007vs.
    
    
    
    
    
    vs.2005
    
    2006
    
    2005
    
    2007
    
    2006(RMB in millions, except percentages)Income (loss) from operationsExploration and production
    
    
    208,080
    
    
    
    219,860
    
    
    
    5.7
    %
    
    
    206,587
    
    
    
    (6.0
    )%Refining and marketing
    
    
    (19,810
    )
    
    
    (29,164
    )
    
    
    
    
    
    
    (20,680
    )
    
    
    
    %Chemicals and marketing
    
    
    3,276
    
    
    
    5,058
    
    
    
    54.4
    %
    
    
    7,831
    
    
    
    54.8
    %Natural gas and pipeline
    
    
    3,183
    
    
    
    8,986
    
    
    
    182.3
    %
    
    
    12,495
    
    
    
    39.0
    %Other
    
    
    (2,558
    )
    
    
    (6,764
    )
    
    
    
    
    
    
    (6,738
    )
    
    
    
    %Total
    
    
    192,171
    
    
    
    197,976
    
    
    
    3.0
    %
    
    
    199,855
    
    
    
    0.9
    %
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Consolidated Results of Operation
 Overview
 56




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##### Table of Contents



Total Revenue.
  Sales
Volume (000 ton)
    
    Average Realized Price (RMB/ton)Percentage of
    
    
    
    
    
    
    
    
    
    
    Percentage of2007
    
    
    2006
    
    
    Change (%)
    
    
    2007
    
    
    2006
    
    
    Change (%)Crude oil*
    
    
    18,730
    
    
    
    20,066
    
    
    
    (6.7
    )
    
    
    3,594
    
    
    
    3,487
    
    
    
    3.1Natural gas
(million cubic
meter, RMB/000
cubic meter)
    
    
    435.70
    
    
    
    357.15
    
    
    
    22.0
    
    
    
    693
    
    
    
    678
    
    
    
    2.2Gasoline
    
    
    27,003
    
    
    
    23,899
    
    
    
    13.0
    
    
    
    5,168
    
    
    
    5,035
    
    
    
    2.6Diesel
    
    
    54,377
    
    
    
    48,516
    
    
    
    12.1
    
    
    
    4,668
    
    
    
    4,411
    
    
    
    5.8Kerosene
    
    
    3,782
    
    
    
    2,054
    
    
    
    84.1
    
    
    
    4,684
    
    
    
    4,502
    
    
    
    4.0Heavy oil
    
    
    8,772
    
    
    
    8,009
    
    
    
    9.5
    
    
    
    2,519
    
    
    
    2,482
    
    
    
    1.5Polyethylene
    
    
    2,102
    
    
    
    1,590
    
    
    
    32.2
    
    
    
    10,497
    
    
    
    10,299
    
    
    
    1.9Lubricant
    
    
    2,378
    
    
    
    2,059
    
    
    
    15.5
    
    
    
    6,420
    
    
    
    6,433
    
    
    
    (0.2
    )
 *
    
    The external sales volume of crude listed above is the crude
oil produced by our company. Operating Expenses.
 Purchases, Services and Other Expenses.
 Employee Compensation Costs .
 57




---



##### Table of Contents



Exploration Expenses.
 Depreciation, Depletion and Amortization.
 Selling, General and Administrative Expenses.
 Taxes other than Income Taxes.
 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.
  58




---



##### Table of Contents



Operating Expenses.
 Income
from Operations.
 Refining and Marketing
 Sales and Other Operating Revenue.
     Operating Expenses.
 Loss from Operations.
 Chemicals and Marketing
 Sales and Other Operating Revenue.
 59




---



##### 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, 2006 Compared to Year Ended December 31, 2005
 Consolidated Results of Operation
 Overview
  Sales and Other Operating Revenue.
 Operating Expenses.
 Purchases, Services and Other Expenses.
 60




---



##### Table of Contents



Employee Compensation Costs.
 Depreciation, Depletion and Amortization.
 Selling, General and Administrative Expenses.
 Exploration Expenses.
 Taxes other than Income Taxes.
 Income from Operations.
 Net Exchange Gain.
 Net Interest Expense.
 Income before Income Taxes.
 Income Taxes.
 Net Income.
 Exploration and Production
 61




---



##### Table of Contents



Sales and Other Operating Revenue.
   Operating Expenses.
 Income from Operations.
 Refining and Marketing
 Sales and Other Operating Revenue.
     Operating Expenses.
 Loss From Operations.
 Chemicals and Marketing
 62




---



##### Table of Contents



Sales and Other Operating Revenue.
 Operating Expenses.
 Income from Operations.
 Natural Gas and Pipeline
 Sales and Other Operating Revenue.
 Operating Expenses.
 Income from Operations.
 
 Liquidity and Capital Resources
    63




---



##### Table of Contents



Year Ended December 31,2005
    
    2006
    
    2007(RMB in millions)Net cash generated by operating activities
    
    
    203,885
    
    
    
    198,102
    
    
    
    203,748Net cash used for investing activities
    
    
    (91,576
    )
    
    
    (158,451
    )
    
    
    (184,205
    )Net cash used for financing activities
    
    
    (42,634
    )
    
    
    (71,739
    )
    
    
    (2,648
    )Currency translation difference
    
    
    (458
    )
    
    
    (258
    )
    
    
    40Cash and cash equivalents at the end of period
    
    
    80,905
    
    
    
    48,559
    
    
    
    65,494
  Cash Generated by Operating Activities
   64




---



##### Table of Contents



Cash Used for Financing Activities
  December 31,2005
    
    2006
    
    2007Short-term debt (including current portion of long-term debt)
    
    
    28,689
    
    
    
    35,763
    
    
    
    30,934Long-term debt
    
    
    44,570
    
    
    
    35,634
    
    
    
    39,688Total debt
    
    
    73,259
    
    
    
    71,397
    
    
    
    70,622Less:Cash and cash equivalents
    
    
    80,905
    
    
    
    48,559
    
    
    
    65,494Time deposits with term exceeding three months within one year
    
    
    1,691
    
    
    
    3,012
    
    
    
    18,042Investments in Collateralized Loans
    
    
    235
    
    
    
    
    
    
    
    Time deposits exceeding one year
    
    
    3,428
    
    
    
    2,499
    
    
    
    5,053Net debt
    
    
    (13,000
    )
    
    
    17,327
    
    
    
    (17,967
    )
     65




---



##### Table of Contents




    
    an increase in repayment of short-term debts leading to a increase of RMB 4,678 million in cash outflow;
    
    an increase in the repayment of long-term debts leading to an increase of RMB 6,484 million in cash outflow; and
    
    an increase in the distribution of dividends to minority shareholders leading to an increase of RMB 3,117 million in cash outflow;
  
    
    an increase in new short-term debts leading to an increase of RMB 6,659 million in cash inflow;
    
    an increase in new long-term debts leading to an increase of RMB 6,455 million in cash inflow; and
    
    our offering of A Shares leading to an increase of RMB 66,243 million in cash inflow.
  
    
    an increase in the distribution of dividends leading to an increase of RMB 14,922 million in cash outflow; and
    
    our follow-on offering of H Shares in 2005 leading to an increase of RMB 19,692 million in cash inflow while
no such financing activity occurred in 2006.
   Capital Expenditures and Investments
  20082005
    
    2006
    
    2007
    
    anticipated(RMB in
    
    
    
    
    
    (RMB in
    
    
    
    
    
    (RMB in
    
    
    
    
    
    (RMB inmillions)
    
    %
    
    millions)
    
    %
    
    millions)
    
    %
    
    millions)
    
    %Exploration and production
    
    
    92,233
    
    
    
    68.92
    
    
    
    114,520
    
    
    
    72.44
    
    
    
    145,743
    
    
    
    75.49
    
    
    
    143,200
    
    
    
    65.45Refining and marketing
    
    
    16,454
    
    
    
    12.30
    
    
    
    19,206
    
    
    
    12.15
    
    
    
    26,546
    
    
    
    13.75
    
    
    
    23,000
    
    
    
    10.51Chemicals and marketing
    
    
    13,569
    
    
    
    10.14
    
    
    
    10,681
    
    
    
    6.76
    
    
    
    8,165
    
    
    
    4.23
    
    
    
    13,200
    
    
    
    6.03Natural gas and pipeline
    
    
    11,137
    
    
    
    8.32
    
    
    
    11,309
    
    
    
    7.15
    
    
    
    11,003
    
    
    
    5.70
    
    
    
    37,700
    
    
    
    17.23Corporate and other
    
    
    427
    
    
    
    0.32
    
    
    
    2,358
    
    
    
    1.50
    
    
    
    1,613
    
    
    
    0.83
    
    
    
    1,700
    
    
    
    0.78Total
    
    
    133,820
    
    
    
    100.0
    
    
    
    158,074
    
    
    
    100.0
    
    
    
    193,070
    
    
    
    100.00
    
    
    
    218,800
    
    
    
    100.00
 66




---



##### Table of Contents



Exploration and Production
   Refining and Marketing
   
    
    approximately RMB 16,100 million for the construction and expansion of our refining facilities; and
    
    approximately RMB 6,900 million for the construction of our distribution networks and storage facilities for oil products.
 Chemicals and Marketing
   Natural Gas and Pipeline
 67




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##### Table of Contents



Others
   
 Off-Balance Sheet Arrangements
   
 Long-Term Contractual Obligations and Other Commercial
Commitments and Payment Obligations
  Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    AfterContractual obligations
    
    Total
    
    1 year
    
    1-3 years
    
    3-5 years
    
    5 years(RMB in millions)Long-term debt
    
    
    51,888
    
    
    
    12,200
    
    
    
    19,819
    
    
    
    5,833
    
    
    
    14,036Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    94,395
    
    
    
    3,394
    
    
    
    6,004
    
    
    
    5,972
    
    
    
    79,025Capital commitments
    
    
    11,621
    
    
    
    5,003
    
    
    
    6,402
    
    
    
    55
    
    
    
    161Unconditional purchase obligations
    
    
    3,061
    
    
    
    1,474
    
    
    
    1,549
    
    
    
    17
    
    
    
    20Other long-term obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    160,965
    
    
    
    22,071
    
    
    
    33,774
    
    
    
    11,877
    
    
    
    93,242
 Amount of commitment expiration per periodTotalamounts
    
    Less than
    
    
    
    
    
    
    
    
    
    OverOther commercial commitments
    
    committed
    
    1 year
    
    1-3 years
    
    3-5 years
    
    5 years(RMB in millions)Lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Guarantees
    
    
    77
    
    
    
    18
    
    
    
    22
    
    
    
    37
    
    
    
    Total commercial commitments
    
    
    77
    
    
    
    18
    
    
    
    22
    
    
    
    37
    
    
    
    
 68




---



##### Table of Contents



Year
    
    Annual payment(RMB in millions)2008
    
    
    9062009
    
    
    9062010
    
    
    9062011
    
    
    9062012
    
    
    906
 Assets Retirement Obligation
 The Environmental Protection Regulation for
Oil and Gas Exploration and Production Activities in Heilongjiang Province The Environmental
Protection Regulation for Oil and Gas Exploration and Production Activities in Gansu Province,
 
 Research and Development
    Exploration and Production
  
    
    theories and technologies of crude oil and natural gas exploration;
    
    oil and gas development and surface engineering technology;
    
    oil and gas production and pipeline transportation; and
    
    security, energy conservation and environment protection.
 Refining and Chemicals
  69




---



##### Table of Contents



Trend Information
 Streamlining of Production Facilities
  
 Other Information
 Inflation
  Non-Exchange Traded Contracts
  Related Party Transactions
  Recent IFRS
      70




---



##### Table of Contents



Environmental Expenses and Capital Expenditures
  
 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;
 71




---



##### Table of Contents




    
    examining balance sheets, profit and loss accounts, business reports, dividend distribution proposals and other
financial information proposed at shareholders 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.
   Name
    
    Age
    
    Position
    
    Date of election (1)Jiang Jiemin
    
    
    52
    
    
    Chairman of the board of directors
    
    May 15, 2008Zhou Jiping
    
    
    55
    
    
    Vice Chairman of the board of
directors and president
    
    May 15, 2008Wang Yilin
    
    
    51
    
    
    Director
    
    May 15, 2008Zeng Yukang
    
    
    57
    
    
    Director
    
    May 15, 2008Wang Fucheng
    
    
    57
    
    
    Director
    
    May 15, 2008Li Xinhua
    
    
    55
    
    
    Director
    
    May 15, 2008Liao Yongyuan
    
    
    45
    
    
    Director and vice president
    
    May 15, 2008Wang Guoliang
    
    
    55
    
    
    Director
    
    May 15, 2008Jiang Fan
    
    
    44
    
    
    Director
    
    May 15, 2008Chee-Chen Tung
    
    
    65
    
    
    Independent non-executive director
    
    May 15, 2008Liu Hongru
    
    
    77
    
    
    Independent non-executive director
    
    May 15, 2008Franco Bernabè
    
    
    59
    
    
    Independent non-executive director
    
    May 15, 2008Li Yongwu
    
    
    63
    
    
    Independent non-executive director
    
    May 15, 2008Cui Junhui
    
    
    62
    
    
    Independent non-executive director
    
    May 15, 2008Li Huaiqi
    
    
    58
    
    
    Secretary to the board of directorsSun
Longde
    
    
    45
    
    
    Vice presidentShen Diancheng
    
    
    48
    
    
    Vice presidentLiu Hongbin
    
    
    44
    
    
    Vice presidentZhou Mingchun
    
    
    40
    
    
    Chief financial officerLi Hualin
    
    
    45
    
    
    Vice presidentZhao Zhengzhang
    
    
    51
    
    
    Vice presidentLin Aiguo
    
    
    49
    
    
    Chief engineerWang Daofu
    
    
    52
    
    
    Chief geologistHuang Weihe
    
    
    50
    
    
    Chief engineerChen Ming
    
    
    57
    
    
    Chairman of the supervisory boardWen Qingshan
    
    
    49
    
    
    SupervisorSun Xianfeng
    
    
    55
    
    
    SupervisorYu Yibo
    
    
    44
    
    
    SupervisorWang Yawei
    
    
    53
    
    
    SupervisorQin Gang
    
    
    54
    
    
    SupervisorWang Shali
    
    
    53
    
    
    SupervisorWu Zhipan
    
    
    51
    
    
    Independent supervisorLi Yuan
    
    
    61
    
    
    Independent supervisor
 
 (1)
    
    For directors only. Directors
 Jiang
Jiemin,
 72




---



##### Table of Contents



Zhou Jiping,
 Wang Yilin,
 Zeng Yukang,
 Wang Fucheng,
 Li Xinhua,
 Liao Yongyuan,
 73




---



##### Table of Contents



Wang Guoliang,
 Jiang Fan,
 Independent Non-executive Directors
 Chee-Chen Tung,
 Liu Hongru,
 Franco Bernabè
 Li Yongwu,
 74




---



##### Table of Contents



Cui Junhui, th
 Secretary to the Board of Directors
 Li Huaiqi,
 Other Senior Management Personnel
 Sun Longde,
 Shen Diancheng
 Liu Hongbin ,
 Zhou Mingchun
 75




---



##### Table of Contents



Li Hualin
 Zhao
Zhengzhang,
 Lin Aiguo
 Wang Daofu, th
 Huang
Weihe,
 Supervisors
 Chen Ming,
 Wen Qingshan,
 76




---



##### Table of Contents



Sun Xianfeng,
 Yu Yibo
 Wang Yawei,
 Qin Gang,
 Wang Shali,
 Wu Zhipan,
 Li Yuan th
 
 77




---



##### Table of Contents



Compensation
 Senior Management Compensation System
  % Stock% Fixed
    
    appreciation
    
    % Performancesalary
    
    rights
    
    bonusChairman
    
    
    30
    
    
    
    70
    
    
    
    0President
    
    
    25
    
    
    
    60
    
    
    
    15Vice President
    
    
    25
    
    
    
    60
    
    
    
    15Department GM
    
    
    25
    
    
    
    50
    
    
    
    25
  Directors and Supervisors Compensation
      
 Board Practices
  Audit Committee
 78




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##### Table of Contents




    
    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 and supervising the engagement and work of external auditors, including evaluating the performance of
external auditors annually and raising proposals together with the supervisory board to the shareholders meetings
with respect to the engagement, re-engagement and dismissal of external auditors and the compensation of such
external auditors;
    
    receiving, keeping and dealing with complaints regarding
accounting, internal control or auditing matters; and
    
    receiving and dealing with anonymous submissions and complaints by employees regarding accounting or auditing
matters, and keeping such submission and complaints confidential, and other duties from time to time provided by
applicable laws and regulations and Listing Rules of the market where the securities of our company listed.
 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 and the adjustment proposal regarding the investment plan 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 submitting
report to our board and monitoring performance evaluations led by our
President for Senior Vice President, Vice Presidents, Chief Financial
Officer and other senior management personnel; and
    
    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; and
 79




---



##### Table of Contents




    
    inquiring the occurrence of and responsibilities for material accidents and supervising the remedial measures of material accidents.
 
 Employees
  Employees
    
    % of totalExploration and production
    
    
    261,802
    
    
    
    56.12Refining and marketing
    
    
    122,593
    
    
    
    26.28Chemicals and marketing
    
    
    61,635
    
    
    
    13.21Natural gas and pipeline
    
    
    15,706
    
    
    
    3.37Other (1)
    
    
    4,766
    
    
    
    1.02Total
    
    
    466,502
    
    
    
    100.0
    %
 
 (1)
    
    Including the numbers of employees of the management of our
headquarters, specialized companies, PetroChina Exploration &
Development Research Institute, PetroChina Planning & Engineering
Institute, Petrochemical Research Institute and other units.   
 Share Ownership
  
 ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 Major Shareholders
    80




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##### Table of Contents



Percentage of theissued share
    
    Percentage ofNumber of shares
    
    capital of the same
    
    the total shareName of shareholders
    
    held
    
    class of shares (%)
    
    capital (%)UBS AG1
    
    
    1,089,453,631
    (L)
    
    
    5.16
    (L)
    
    
    0.60414,468,390
    (S)
    
    
    1.96
    (S)
    
    
    0.23
 
 1
    
    UBS AG owns 1,089,453,631 H Shares in our company in
the aggregate through its several wholly owned subsidiaries.  Percentage of theissued share
    
    Percentage ofNumber of shares
    
    capital of the same
    
    the total shareName of shareholders
    
    held
    
    class of shares (%)
    
    capital (%)CNPC
    
    
    157,922,077,818
    
    
    
    97.53
    
    
    
    86.29
  
 Related Party Transactions
  One-off Related Party Transactions
 1. Disposal of Equity Interests in China National United Oil Corporation
  2. Acquisition of Assets of the Risk Operation Service Business from CNPC
  81




---



##### Table of Contents



3. Acquisition of Northeastern Inspection, Maintenance and Repair Business Division of CNPC
   4. Capital Injection concerning CNPC Exploration and Development Company Limited
   Continuing Related Party Transactions
 (I) Continuing Related Party Transactions with CNPC
   1. Comprehensive Products and Services Agreement, First Supplemental Comprehensive Agreement
and Second Supplemental Comprehensive Agreement
    82




---



##### Table of Contents




    
    Construction and technical services, including but not limited to exploration
technology service, downhole operation service, oilfield construction service, oil
refinery construction service and engineering and design service;
    
    Production services, including but not limited to water supply, electricity
generation and supply, gas supply and communications;
    
    Supply of materials services, including but not limited to purchase of materials,
quality control, storage of materials and delivery of materials
    
    Social services, including but not limited to security services, education and
hospitals;
    
    Ancillary services, including but not limited to property
management, training centers and guesthouses; and
    
    Financial services, including but not limited to loans and deposits services.
              83




---



##### Table of Contents




    
    both CNPC and our company shall provide and shall procure their respective entities
including their subsidiaries, branches and other relevant units to provide products and
services in accordance with the terms and principles of the Comprehensive Agreement;
    
    the CNPC Group will provide certain risk operation services as part of the construction
and technical services to PetroChina, and these include the provision of exploration,
production and other relevant services within certain and specific reserves of our company
with exploration and exploitation difficulties;
    
    PetroChina will provide certain financial assistance to the Jointly-owned Companies
including entrustment loans and guarantees; and
    
    the Jointly-owned Companies will provide certain financial assistance to PetroChina
including entrustment loans and guarantees.
   2. Product and Service Implementation Agreements
    3. Land Use Rights Leasing Contract
  4. Buildings Leasing Contract and Buildings Supplementary Leasing Agreement
   84




---



##### Table of Contents



5. Intellectual Property Licensing Contracts
  6. Contract for the Transfer of Rights under Production Sharing Contracts
   7. Guarantee of Debts Contract
    (II) Continuing Related Party Transactions with CNPC E&D
  
    
    the provision of production services by CNPC to PetroChina;
    
    the provision of construction and technical services by CNPC
to PetroChina; and
    
    the provision of material supply services by CNPC to PetroChina.
  (III) Continuing Related party transactions with CNPC (HK)
  85




---



##### Table of Contents



(IV) Continuing Related Party Transactions with CRMSC and Beijing Gas
   86




---



##### Table of Contents



Independent Non-Executive Directors Confirmation
      
 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;
 87




---



##### Table of Contents




    
    our shareholders interests;
    
    the effect on our debt ratings; and
    
    other factors our board of directors may deem relevant.We may only distribute dividends after we have made allowance for:
    
    recovery of losses, if any;
    
    allocations to the statutory common reserve fund; and
    
    allocations to a discretionary common reserve fund if approved by our shareholders.
   
    
    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
  
 ITEM 9  THE OFFER AND LISTING
 
 Nature of the Trading Market and Market Price Information
    88




---



##### Table of Contents



Price Per H Share
    
    Price Per ADS
    
    Price Per A ShareHK$
    
    US$
    
    RMBHigh
    
    Low
    
    High
    
    Low
    
    High
    
    Low2003First 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
    
    
    
    
    
    
    
    2004First 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
    
    
    
    
    
    
    
    2005First quarter
    
    
    5.10
    
    
    
    4.025
    
    
    
    65.36
    
    
    
    51.65
    
    
    
    
    
    
    
    Second quarter
    
    
    5.85
    
    
    
    4.675
    
    
    
    74.65
    
    
    
    59.71
    
    
    
    
    
    
    
    Third quarter
    
    
    7.35
    
    
    
    5.90
    
    
    
    94.50
    
    
    
    74.95
    
    
    
    
    
    
    
    Fourth quarter
    
    
    6.50
    
    
    
    5.65
    
    
    
    83.70
    
    
    
    72.70
    
    
    
    
    
    
    
    2006First quarter
    
    
    8.10
    
    
    
    6.35
    
    
    
    104.95
    
    
    
    83.50
    
    
    
    
    
    
    
    Second quarter
    
    
    9.55
    
    
    
    7.10
    
    
    
    122.75
    
    
    
    90.63
    
    
    
    
    
    
    
    Third quarter
    
    
    9.09
    
    
    
    8.17
    
    
    
    117.20
    
    
    
    104.60
    
    
    
    
    
    
    
    Fourth quarter
    
    
    11.12
    
    
    
    8.12
    
    
    
    142.12
    
    
    
    104.95
    
    
    
    
    
    
    
    2007First quarter
    
    
    11.08
    
    
    
    8.57
    
    
    
    137.90
    
    
    
    109.55
    
    
    
    
    
    
    
    Second quarter
    
    
    11.90
    
    
    
    8.89
    
    
    
    152.05
    
    
    
    112.14
    
    
    
    
    
    
    
    Third quarter
    
    
    14.74
    
    
    
    9.83
    
    
    
    185.58
    
    
    
    125.92
    
    
    
    
    
    
    
    Fourth quarter
    
    
    19.90
    
    
    
    13.46
    
    
    
    263.70
    
    
    
    172.43
    
    
    
    43.96
    
    
    
    29.242007November
    
    
    19.90
    
    
    
    14.12
    
    
    
    255.06
    
    
    
    180.52
    
    
    
    43.96
    
    
    
    31.52December
    
    
    15.88
    
    
    
    13.50
    
    
    
    205.60
    
    
    
    172.43
    
    
    
    31.96
    
    
    
    29.242008January
    
    
    14.24
    
    
    
    9.62
    
    
    
    182.12
    
    
    
    140.70
    
    
    
    31.31
    
    
    
    24.02February
    
    
    12.22
    
    
    
    10.64
    
    
    
    155.50
    
    
    
    140.57
    
    
    
    26.39
    
    
    
    21.91March
    
    
    11.26
    
    
    
    9.17
    
    
    
    144.44
    
    
    
    120.63
    
    
    
    23.03
    
    
    
    16.99April
    
    
    11.84
    
    
    
    9.77
    
    
    
    151.14
    
    
    
    125.92
    
    
    
    18.35
    
    
    
    16.01May (through
    
    
    11.12
    
    
    
    10.90
    
    
    
    156.97
    
    
    
    140.21
    
    
    
    18.35
    
    
    
    17,39May 16,
2008)
  
 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 domestic 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
must, with certain exceptions,
 89




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be referred to arbitration at either the China International Economic and Trade Arbitration
Commission in the PRC or the Hong Kong International Arbitration Center. Our articles of
association provide that such arbitration will be final and conclusive.
    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.
     90




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Dividends
   
    
    recovery of losses, if any and the statutory common reserve fund is not enough to recover such losses;
    
    allocations to the statutory common reserve 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 individually or in the aggregate holding 10% or more of our issued and outstanding voting shares request
in writing the convening of an extraordinary general meeting;
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
    
    where our board deems necessary or our supervisory board so request; or
    
    any other events provided by applicable laws, administrative regulations, rules or the articles of association of our company.
         
    
    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;
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
    
    any purchase or sale of significant assets or any guarantee provided by our company within one year exceeding 30% of our
most recent audited aggregate assets;
    
    stock incentive plans; and
    
    any other matters required by applicable laws, administrative regulations or our articles of association, or 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
                93




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
    
    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.
  Supervisory Board
  
    
    to review the periodic reports prepared by the board of
directors and issue written opinions in connection with such review;
    
    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;
    
    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; and
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
    
    to contact with the directors on behalf of our company, or bring lawsuits against the directors, president, senior vice
president, vice president, chief financial officer or any other executive officers pursuant to Article 152 of the PRC
Company Law.
    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
    
    has de facto control of us in any other way.
 Amended Articles of Association Pending for Approval
   95




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Share Capital Structure
    
 Material Contracts
  
    
    Share Purchase Agreement in respect of the shares of PetroKazakhstan,
dated August 23, 2006, between Pervinage Holding B.V. (a wholly owned
subsidiary of CNPC E&D) and 819 Luxembourg S. a r. l. (an indirect
wholly owned subsidiary of CNPC);
 
    
    Capital Injection Agreement Concerning CNPC
Exploration and Development Company Limited, dated
December 27, 2007, among CNODC, CNPC E&D and
PetroChina (English Translation); and
    
    Risk Operation Service Business Assets Transfer
Agreement, dated August 23, 2007, between CNPC and
PetroChina.
  
    
    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.
  96




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Taxation
  PRC Taxation
 Dividends and Individual Investors
   Dividends and Foreign Enterprises
  Tax Treaties
  
    
    the United States;
    
    Australia;
 97




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
    
    Canada;
    
    France;
    
    Germany;
    
    Japan;
    
    Malaysia;
    
    Singapore;
    
    the United Kingdom; and
    
    the Netherlands.
  Capital Gains
  Additional PRC Tax Considerations
  United States Federal Income Taxation
  
    
    tax-exempt entities;
    
    certain insurance companies;
 98




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
    
    broker-dealers;
    
    traders in securities that elect to mark to market;
    
    U.S. holders liable for alternative minimum tax;
    
    U.S. holders that own 10% or more of our voting stock;
    
    U.S. holders that hold the H Shares or ADSs as part of a straddle or a hedging or conversion transaction; or
    
    U.S. holders whose functional currency is not the U.S. dollar.
   
    
    a citizen or resident of the United States for United States federal income tax purposes;
    
    a corporation, or other entity treated as a corporation for United States federal income tax purposes,
created or organized under the laws of the United States or any political subdivision thereof;
    
    an estate the income of which is subject to United States federal income tax without regard to its source; or
    
    a trust:
 
    
    subject to the primary supervision of a United States court and the control of one or more United States persons; or
    
    that has elected to be treated as a United States person under applicable United States Treasury regulations.
   We urge you to consult your tax advisors regarding the United States federal, state, local and
non-United States tax consequences of the purchase, ownership and disposition of the H Shares or
ADSs.
  Distributions on the H Shares or ADSs
  
    
    a foreign corporation that is eligible for the benefits of a
comprehensive income tax treaty with the United States that includes
an
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exchange of information program; or
    
    a foreign corporation if its stock with respect to which a dividend is
paid (or ADSs backed by such stock) is readily tradable on an
established securities market within the United States,
     Sale, Exchange or Other Disposition
   PFIC Rules
  
    
    75% or more of its gross income consists of passive income, such as dividends, interest, rents and royalties; or
    
    50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the
production of, passive income.
   100




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Backup Withholding and Information Reporting
  
    
    are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or
    
    provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form,
certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the
backup withholding rules.
  
 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.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
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ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Interest Rate Risk
  Foreign Exchange Rate Risk
   December 31, 2007
 Percentageto totalExpected maturity date
    
    
    long-term
    
    
    Fair2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    debt (%)
    
    
    value(RMB equivalent in millions, except percentages)Long term debtLoan in RMBFixed rate
    
    
    272
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    275
    
    
    
    0.53
    %
    
    
    254Average interest rate
    
    
    3.83
    %
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable rate (1)
    
    
    7,280
    
    
    
    5,220
    
    
    
    11,182
    
    
    
    10
    
    
    
    20
    
    
    
    8,700
    
    
    
    32,412
    
    
    
    62.45
    %
    
    
    32,412Average interest rate
    
    
    5.49
    %
    
    
    5.07
    %
    
    
    5.46
    %
    
    
    6.89
    %
    
    
    6.89
    %
    
    
    5.84
    %
    
    
    
    
    
    
    
    
    
    
    Loan in EuroFixed rate
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    167
    
    
    
    247
    
    
    
    0.48
    %
    
    
    163Average interest rate
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.10
    %
    
    
    
    
    
    
    
    
    
    
    
 102




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##### Table of Contents



Percentageto totalExpected maturity date
    
    
    long-term
    
    
    Fair2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    debt (%)
    
    
    value(RMB equivalent in millions, except percentages)Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan in United States DollarFixed rate
    
    
    137
    
    
    
    79
    
    
    
    45
    
    
    
    39
    
    
    
    39
    
    
    
    468
    
    
    
    807
    
    
    
    1.56
    %
    
    
    539Average interest rate
    
    
    5.25
    %
    
    
    3.62
    %
    
    
    1.44
    %
    
    
    1.43
    %
    
    
    1.43
    %
    
    
    1.38
    %
    
    
    
    
    
    
    
    
    
    
    Variable rate
    
    
    4,234
    
    
    
    249
    
    
    
    2,629
    
    
    
    77
    
    
    
    3,431
    
    
    
    2,867
    
    
    
    13,487
    
    
    
    25.99
    %
    
    
    13,487Average interest rate
    
    
    4.92
    %
    
    
    5.33
    %
    
    
    5.07
    %
    
    
    5.50
    %
    
    
    7.40
    %
    
    
    5.12
    %
    
    
    
    
    
    
    
    
    
    
    Loan in Japanese YenFixed rate
    
    
    20
    
    
    
    9
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    0.07
    %
    
    
    36Average interest rate
    
    
    3.40
    %
    
    
    2.42
    %
    
    
    2.42
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debenture in United States DollarFixed rate
    
    
    241
    
    
    
    181
    
    
    
    184
    
    
    
    183
    
    
    
    
    
    
    
    334
    
    
    
    1,123
    
    
    
    2.17
    %
    
    
    1,123Average interest rate
    
    
    10.83
    %
    
    
    9.50
    %
    
    
    9.50
    %
    
    
    9.50
    %
    
    
    
    
    
    
    3.30
    %
    
    
    
    
    
    
    
    
    
    
    Debenture in RMBFixed rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    1,500
    
    
    
    3,500
    
    
    
    6.75
    %
    
    
    2,981Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.76
    %
    
    
    
    
    
    
    4.11
    %
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    12,200
    
    
    
    5,754
    
    
    
    14,066
    
    
    
    2,325
    
    
    
    3,507
    
    
    
    14,036
    
    
    
    51,888
    
    
    
    100.00
    %
    
    
    50,995
 December 31, 2006
 Percentageto totalExpected maturity date
    
    
    long-term
    
    
    Fair2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total
    
    
    debt (%)
    
    
    value(RMB equivalent in millions, except percentages)Long term debtLoan in RMBFixed rate
    
    
    62
    
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    335
    
    
    
    0.60
    %
    
    
    320Average interest rate
    
    
    4.45
    %
    
    
    3.83
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable rate (1)
    
    
    13,740
    
    
    
    7,280
    
    
    
    5,220
    
    
    
    1,142
    
    
    
    
    
    
    
    7,590
    
    
    
    34,972
    
    
    
    62.17
    %
    
    
    34,972Average interest rate
    
    
    5.21
    %
    
    
    5.35
    %
    
    
    4.64
    %
    
    
    5.01
    %
    
    
    
    
    
    
    5.07
    %
    
    
    
    
    
    
    
    
    
    
    Loan in EuroFixed rate
    
    
    17
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    176
    
    
    
    257
    
    
    
    0.46
    %
    
    
    214Average interest rate
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.12
    %
    
    
    2.11
    %
    
    
    
    
    
    
    
    
    
    
    Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan in United States DollarFixed rate
    
    
    568
    
    
    
    146
    
    
    
    73
    
    
    
    41
    
    
    
    41
    
    
    
    562
    
    
    
    1,431
    
    
    
    2.55
    %
    
    
    1,200Average interest rate
    
    
    7.69
    %
    
    
    5.12
    %
    
    
    3.96
    %
    
    
    1.43
    %
    
    
    1.43
    %
    
    
    1.39
    %
    
    
    
    
    
    
    
    
    
    
    Variable rate
    
    
    4,541
    
    
    
    4,042
    
    
    
    706
    
    
    
    297
    
    
    
    82
    
    
    
    3,217
    
    
    
    12,885
    
    
    
    22.91
    %
    
    
    12,885Average interest rate
    
    
    5.68
    %
    
    
    6.81
    %
    
    
    5.95
    %
    
    
    5.79
    %
    
    
    4.72
    %
    
    
    5.77
    %
    
    
    
    
    
    
    
    
    
    
    Loan in British PoundFixed rate
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    0.09
    %
    
    
    47Average interest rate
    
    
    2.85
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan in Japanese YenFixed rate
    
    
    37
    
    
    
    21
    
    
    
    9
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    0.13
    %
    
    
    78Average interest rate
    
    
    4.25
    %
    
    
    3.40
    %
    
    
    2.42
    %
    
    
    2.42
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debenture in United States DollarFixed Rate
    
    
    205
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    781
    
    
    
    343
    
    
    
    1,349
    
    
    
    2.40
    %
    
    
    1,403Average interest rate
    
    
    13.48
    %
    
    
    15.00
    %
    
    
    
    
    
    
    
    
    
    
    9.50
    %
    
    
    3.00
    %
    
    
    
    
    
    
    
    
    
    
    Debenture in RMBFixed rate
    
    
    1,388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    1,500
    
    
    
    4,888
    
    
    
    8.69
    %
    
    
    4,449Average interest rate
    
    
    4.49
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.76
    %
    
    
    4.11
    %
    
    
    
    
    
    
    
    
    
    
    
 103




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##### Table of Contents



Percentageto totalExpected maturity date
    
    
    long-term
    
    
    Fair2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total
    
    
    debt (%)
    
    
    value(RMB equivalent in millions, except percentages)Total
    
    
    20,607
    
    
    
    11,797
    
    
    
    6,024
    
    
    
    1,504
    
    
    
    2,921
    
    
    
    13,388
    
    
    
    56,241
    
    
    
    100.00
    %
    
    
    55,568
 December 31, 2005
 Percentageto totalExpected maturity date
    
    
    long-term
    
    
    Fair2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    debt (%)
    
    
    value(RMB equivalent in millions, except percentages)Long term debtLoan in RMBFixed rate
    
    
    
    
    
    
    66
    
    
    
    274
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    341
    
    
    
    0.57
    %
    
    
    323Average interest rate
    
    
    1.53
    %
    
    
    4.18
    %
    
    
    3.80
    %
    
    
    
    
    
    
    
    
    
    
    Variable rate (1)
    
    
    9,128
    
    
    
    13,740
    
    
    
    6,390
    
    
    
    100
    
    
    
    911
    
    
    
    6,000
    
    
    
    36,269
    
    
    
    60.54
    %
    
    
    36,269Average interest rate
    
    
    5.18
    %
    
    
    5.08
    %
    
    
    5.12
    %
    
    
    5.51
    %
    
    
    4.77
    %
    
    
    4.90
    %Loan in EuroFixed rate
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    15
    
    
    
    177
    
    
    
    256
    
    
    
    0.43
    %
    
    
    221Average interest rate
    
    
    2.11
    %
    
    
    2.11
    %
    
    
    2.11
    %
    
    
    2.11
    %
    
    
    2.11
    %
    
    
    2.11
    %Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan in United States DollarFixed rate
    
    
    409
    
    
    
    621
    
    
    
    142
    
    
    
    74
    
    
    
    43
    
    
    
    624
    
    
    
    1,913
    
    
    
    3.19
    %
    
    
    1,633Average interest rate
    
    
    6.26
    %
    
    
    7.56
    %
    
    
    5.02
    %
    
    
    3.92
    %
    
    
    1.43
    %
    
    
    1.39
    %Variable rate
    
    
    5,508
    
    
    
    2,497
    
    
    
    4,371
    
    
    
    2,293
    
    
    
    79
    
    
    
    1,649
    
    
    
    16,397
    
    
    
    27.38
    %
    
    
    16,397Average interest rate
    
    
    5.60
    %
    
    
    5.42
    %
    
    
    5.99
    %
    
    
    5.37
    %
    
    
    2.69
    %
    
    
    4.69
    %Loan in British PoundFixed rate
    
    
    116
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    0.27
    %
    
    
    156Average interest rate
    
    
    2.85
    %
    
    
    2.85
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan in Japanese YenFixed rate
    
    
    148
    
    
    
    39
    
    
    
    21
    
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    226
    
    
    
    0.38
    %
    
    
    242Average interest rate
    
    
    4.74
    %
    
    
    4.84
    %
    
    
    4.48
    %
    
    
    5.02
    %
    
    
    5.02
    %
    
    
    Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debenture in United States DollarFixed rate
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    1,304
    
    
    
    1,483
    
    
    
    2.48
    %
    
    
    1,509Average interest rate
    
    
    
    
    
    
    
    
    
    
    15
    %
    
    
    
    
    
    
    
    
    
    
    8.25
    %Debenture in RMBFixed rate
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    2,850
    
    
    
    4.76
    %
    
    
    2,664Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.11
    %Total
    
    
    15,325
    
    
    
    18,373
    
    
    
    11,393
    
    
    
    2,492
    
    
    
    1,057
    
    
    
    11,255
    
    
    
    59,895
    
    
    
    100
    %
    
    
    59,414
 
 (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, 2005, 2006 and 2007. 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,
2005, 2006 and 2007, respectively. Commodity Price Risk
  
 ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  104




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##### Table of Contents



PART II
 
 ITEM 13  DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES
  
 ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS
TO SECURITY HOLDERS
  
 ITEM 15  CONTROLS AND PROCEDURES
 Evaluation of the Management on Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework
   Changes in Internal Control over Financial Reporting
  
 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.
 105




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##### Table of Contents



ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
    December 31,2006
    
    
    2007RMB
    
    
    RMB(in millions)Audit fees
    
    
    140
    
    
    
    119Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    *
    
    
    
    *All other fees
    
    
    25
    
    
    
    Total
    
    
    165
    
    
    
    119
    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 AFFILIATED PURCHASERS
  
 PART III
 
 ITEM 17  FINANCIAL STATEMENTS
  
 ITEM 18  FINANCIAL STATEMENTS
  106




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##### Table of Contents



ITEM 19  EXHIBITS
 (a)
    
    See Item 18 for a list of the financial statements as part of this annual report.(b)
    
    Exhibits to this annual report.
 ExhibitNumber
    
    Description of Exhibits1.1
    
    Articles of Association (as amended) (English translation)1.2
    
    Articles of Association (as amended and pending for approval of SASAC) (English translation)4.1
    
    Form of 2008 Management Performance Contract (English Translation)4.2
    
    Risk Operation Service Business Assets Transfer Agreement, dated August 23, 2007, between
CNPC and PetroChina (English Translation)4.3
    
    Capital Injection Agreement Concerning CNPC Exploration and Development Company Limited,
dated December 27, 2007, among CNODC, CNPC E&D and PetroChina (English Translation)4.4
    
    Crude Oil Mutual Supply Framework
Agreement, dated January 8, 2008, between China
Petroleum and Chemical Corporation and PetroChina (English translation)4.5
    
    Second Supplemental Agreement to Comprehensive products and Services Agreement, dated
September 1, 2005, between CNPC and PetroChina (English
translation) (2)
 107




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits4.6
    
    Supplementary Agreement to Comprehensive Products and Services Agreement, dated June 9, 2005, between
CNPC and PetroChina (English Translation) (3)4.7
    
    Form of Non-competition Agreement between CNPC and PetroChina (together with English translation) (4)4.8
    
    Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (together with
English translation) (4)4.9
    
    Form of Land Use Rights Leasing Contract between CNPC and PetroChina (together with English
translation) (4)4.10
    
    Form of Buildings Leasing Contract between CNPC and PetroChina (together with English translation) (4)4.11
    
    Form of Trademark Licensing Contract between CNPC and PetroChina (together with English translation)
(4)4.12
    
    Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (together with English
translation) (4)4.13
    
    Form of Computer Software Licensing Contract between CNPC and PetroChina (together with English
translation) (4)4.14
    
    Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina
(together with English translation) (4)4.15
    
    Form of Guarantee of Debts Contract between CNPC and PetroChina (together with English translation) (4)4.16
    
    Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina
(together with English translation) (4)4.17
    
    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) (4)4.18
    
    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) (4)4.19
    
    Share Purchase Agreement in respect of the shares of PetroKazakhstan, dated August 23, 2006, between
Pervinage Holding B.V. (a wholly owned subsidiary of CNPC E&D) and 819 Luxembourg S. a r. l. (an
indirect wholly owned subsidiary of CNPC) (1)8.1
    
    List of major subsidiaries10.1
    
    Significant Differences in Corporate Governance Practices for Purposes of Section 303A.11 of the New
York Exchange Listed Company Manual (3)12.1
    
    Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 200212.2
    
    Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 200213.1
    
    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 200213.2
    
    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 200216.1
    
    Code of Ethics for Senior Management (3)16.2
    
    Code of Ethics for Employees (3)
 
 (1)
    
    Incorporated by reference to our annual report on Form 20-F for the
fiscal year ended December 31, 2006 (File No. 1-15006) filed with the
Commission.(2)
    
    Incorporated by reference to our annual report on Form 20-F for the
fiscal year ended December 31, 2005 (File No. 1-15006) filed with the
Commission.(3)
    
    Incorporated by reference to our annual report on Form 20-F for the
fiscal year ended December 31, 2004 (File No. 1-15006) filed with the
Commission.(4)
    
    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.
 108




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##### Table of Contents



SIGNATURE
  PETROCHINA COMPANY LIMITED/s/ Li HuaiqiName:
    Li HuaiqiTitle:
    Secretary to Board of Directors  109




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##### Table of Contents



INDEX OF FINANCIAL STATEMENTS
 PagePetroChina Company Limited and its Subsidiaries
Consolidated Financial StatementsManagements Report on Internal Control Over Financial Reporting
    
    F-2Report of Independent Registered Public Accounting Firm
    
    F-3Consolidated Statements of Income for each of the three years in the period ended
December 31, 2007
    
    F-4Consolidated
Balance Sheets as of December 31, 2006 and 2007
    
    F-5Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2007
    
    F-6Consolidated Statements of Changes in Equity for each of the three years in the period
ended December 31, 2007
    
    F-8Notes to the Consolidated Financial Statements
    
    F-9Supplementary Information on Oil and Gas Producing Activities (unaudited)
    
    F-60
 F-1




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework
   F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal Control  Integrated Framework
   
  F-3




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 
 CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
 Year Ended December 31,Notes
    
    
    2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBREVENUESSales and other operating revenues
    
    
    
    
    
    
    552,229
    
    
    
    688,978
    
    
    
    835,037OPERATING EXPENSESPurchases, services and other
    
    
    
    
    
    
    (200,321
    )
    
    
    (271,123
    )
    
    
    (370,740
    )Employee compensation costs
    
    
    6
    
    
    
    (29,675
    )
    
    
    (39,161
    )
    
    
    (50,616
    )Exploration expenses, including
exploratory dry holes
    
    
    
    
    
    
    (15,566
    )
    
    
    (18,822
    )
    
    
    (20,648
    )Depreciation, depletion and amortization
    
    
    
    
    
    
    (51,305
    )
    
    
    (61,388
    )
    
    
    (66,625
    )Selling, general and administrative
expenses
    
    
    
    
    
    
    (36,538
    )
    
    
    (43,235
    )
    
    
    (51,576
    )Taxes other than income taxes
    
    
    7
    
    
    
    (23,616
    )
    
    
    (56,666
    )
    
    
    (73,712
    )Other expense, net
    
    
    
    
    
    
    (3,037
    )
    
    
    (607
    )
    
    
    (1,265
    )TOTAL OPERATING EXPENSES
    
    
    
    
    
    
    (360,058
    )
    
    
    (491,002
    )
    
    
    (635,182
    )INCOME FROM OPERATIONS
    
    
    
    
    
    
    192,171
    
    
    
    197,976
    
    
    
    199,855FINANCE COSTSExchange gain
    
    
    
    
    
    
    942
    
    
    
    1,830
    
    
    
    1,693Exchange loss
    
    
    
    
    
    
    (854
    )
    
    
    (1,756
    )
    
    
    (2,559
    )Interest income
    
    
    
    
    
    
    1,924
    
    
    
    2,066
    
    
    
    1,990Interest expense
    
    
    8
    
    
    
    (2,762
    )
    
    
    (3,220
    )
    
    
    (3,595
    )TOTAL NET FINANCE COSTS
    
    
    
    
    
    
    (750
    )
    
    
    (1,080
    )
    
    
    (2,471
    )INCOME FROM EQUITY AFFILIATES AND
JOINTLY CONTROLLED ENTITIES
    
    
    18
    
    
    
    2,401
    
    
    
    2,277
    
    
    
    6,997INCOME BEFORE INCOME TAXES
    
    
    
    
    
    
    193,822
    
    
    
    199,173
    
    
    
    204,381INCOME TAXES
    
    
    9
    
    
    
    (54,180
    )
    
    
    (49,776
    )
    
    
    (49,152
    )INCOME FOR THE YEAR
    
    
    
    
    
    
    139,642
    
    
    
    149,397
    
    
    
    155,229ATTRIBUTABLE TO:EQUITY HOLDERS OF THE COMPANY
    
    
    
    
    
    
    133,362
    
    
    
    142,224
    
    
    
    145,625MINORITY INTEREST
    
    
    
    
    
    
    6,280
    
    
    
    7,173
    
    
    
    9,604139,642
    
    
    
    149,397
    
    
    
    155,229BASIC AND DILUTED NET INCOME PER SHARE
FOR INCOME ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY DURING THE YEAR
(RMByuan)
    
    
    10
    
    
    
    0.75
    
    
    
    0.79
    
    
    
    0.81NUMBER OF SHARES
    
    
    10
    
    
    
    179,021
    
    
    
    179,021
    
    
    
    183,021DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS
OF THE COMPANY
    
    
    11
    
    
    
    53,667
    
    
    
    68,589
    
    
    
    64,517
  F-4




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 
 CONSOLIDATED
BALANCE SHEETS
As of December 31, 2006 and 2007
(Amounts in millions)
 At December 31,Notes
    
    
    2006
    
    
    2007RMB
    
    
    RMBASSETSCurrent assetsCash and cash equivalents
    
    
    12
    
    
    
    48,559
    
    
    
    65,494Time deposits with maturities over three months but within one
year
    
    
    
    
    
    
    3,012
    
    
    
    18,042Notes receivable
    
    
    13
    
    
    
    2,844
    
    
    
    4,735Accounts receivable, less allowance for doubtful
accounts receivable
    
    
    14
    
    
    
    8,488
    
    
    
    18,419Inventories
    
    
    15
    
    
    
    76,038
    
    
    
    88,467Prepaid expenses and other current assets
    
    
    16
    
    
    
    23,281
    
    
    
    36,018TOTAL CURRENT ASSETS
    
    
    
    
    
    
    162,222
    
    
    
    231,175Property, plant and equipment, less accumulated
depreciation, depletion and amortization
    
    
    17
    
    
    
    645,337
    
    
    
    762,882Investments in equity affiliates and jointly controlled entities
    
    
    18
    
    
    
    32,956
    
    
    
    26,535Available-for-sale financial assets
    
    
    19
    
    
    
    2,054
    
    
    
    2,581Advance operating lease payments
    
    
    20
    
    
    
    20,468
    
    
    
    23,417Intangible and other assets
    
    
    21
    
    
    
    6,627
    
    
    
    8,488Time deposits with maturities over one year
    
    
    
    
    
    
    2,499
    
    
    
    5,053TOTAL ASSETS
    
    
    
    
    
    
    872,163
    
    
    
    1,060,131LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesShort-term debts
    
    
    23
    
    
    
    35,763
    
    
    
    30,934Accounts payable and accrued liabilities
    
    
    22
    
    
    
    120,182
    
    
    
    144,353Income tax payable
    
    
    9
    
    
    
    17,744
    
    
    
    11,709Other taxes payable
    
    
    
    
    
    
    6,190
    
    
    
    11,099TOTAL CURRENT LIABILITIES
    
    
    
    
    
    
    179,879
    
    
    
    198,095Long-term debts
    
    
    23
    
    
    
    35,634
    
    
    
    39,688Other long-term obligations
    
    
    
    
    
    
    995
    
    
    
    1,035Asset retirement obligations
    
    
    24
    
    
    
    18,481
    
    
    
    24,761Deferred taxes
    
    
    25
    
    
    
    19,583
    
    
    
    20,205TOTAL LIABILITIES
    
    
    
    
    
    
    254,572
    
    
    
    283,784EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANYState-owned shares
    
    
    26
    
    
    
    157,922
    
    
    
    A shares
    
    
    26
    
    
    
    
    
    
    
    161,922H shares
    
    
    26
    
    
    
    21,099
    
    
    
    21,099Share capital, issued and outstanding, RMB1.00 Par value
    
    
    26
    
    
    
    179,021
    
    
    
    183,021Retained earnings
    
    
    
    
    
    
    264,092
    
    
    
    332,432Capital reserve
    
    
    27
    
    
    
    (8,881
    )
    
    
    53,362Revaluation reserve
    
    
    27
    
    
    
    79,946
    
    
    
    79,946Statutory common reserve fund
    
    
    27
    
    
    
    89,928
    
    
    
    102,696Currency translation differences
    
    
    27
    
    
    
    (570
    )
    
    
    (1,341
    )Other reserves
    
    
    27
    
    
    
    (16,859
    )
    
    
    (16,711
    )MINORITY INTEREST
    
    
    
    
    
    
    30,914
    
    
    
    42,942TOTAL EQUITY
    
    
    
    
    
    
    617,591
    
    
    
    776,347TOTAL LIABILITIES AND EQUITY
    
    
    
    
    
    
    872,163
    
    
    
    1,060,131
  F-5




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
 Year Ended December 31,Notes
    
    
    2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBCASH FLOWS FROM OPERATING ACTIVITIESIncome for the year
    
    
    
    
    
    
    139,642
    
    
    
    149,397
    
    
    
    155,229Adjustments for:Income taxes
    
    
    9
    
    
    
    54,180
    
    
    
    49,776
    
    
    
    49,152Depreciation, depletion and amortization
    
    
    
    
    
    
    51,305
    
    
    
    61,388
    
    
    
    66,625Capitalized exploratory costs charged to
expense
    
    
    
    
    
    
    6,547
    
    
    
    9,494
    
    
    
    9,161Income from equity affiliates and jointly
controlled entities
    
    
    18
    
    
    
    (2,401
    )
    
    
    (2,277
    )
    
    
    (6,997
    )Allowance for doubtful receivables, net
    
    
    14, 16
    
    
    
    (455
    )
    
    
    (316
    )
    
    
    (2,353
    )Write down in inventories, net
    
    
    15
    
    
    
    (139
    )
    
    
    140
    
    
    
    55Impairment of available-for-sale financial
assets, net
    
    
    19
    
    
    
    (23
    )
    
    
    32
    
    
    
    Impairment of investments in equity affiliates
and jointly controlled entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Loss on disposal of property, plant and
equipment
    
    
    
    
    
    
    2,026
    
    
    
    1,753
    
    
    
    1,808Loss/(Income) on disposal of intangible and
other assets
    
    
    
    
    
    
    106
    
    
    
    192
    
    
    
    (2
    )Loss/(Income) on disposal of equity affiliates
and jointly controlled entities
    
    
    
    
    
    
    2
    
    
    
    (10
    )
    
    
    (320
    )Loss/(Income) on disposal of
available-for-sale financial assets
    
    
    19
    
    
    
    27
    
    
    
    (3
    )
    
    
    (142
    )Dividend income
    
    
    
    
    
    
    (109
    )
    
    
    (208
    )
    
    
    (111
    )Interest income
    
    
    
    
    
    
    (1,924
    )
    
    
    (2,066
    )
    
    
    (1,990
    )Interest expense
    
    
    8
    
    
    
    2,762
    
    
    
    3,220
    
    
    
    3,595Advance payments on long-term operating leases
    
    
    
    
    
    
    (5,170
    )
    
    
    (5,694
    )
    
    
    (4,803
    )Changes in working capital:- accounts receivable and prepaid expenses
and other current assets
    
    
    
    
    
    
    165
    
    
    
    (3,115
    )
    
    
    (16,498
    )- inventories
    
    
    
    
    
    
    (15,896
    )
    
    
    (13,445
    )
    
    
    (12,042
    )- accounts payable and accrued liabilities
    
    
    
    
    
    
    22,089
    
    
    
    5,346
    
    
    
    19,935CASH GENERATED FROM OPERATIONS
    
    
    
    
    
    
    252,734
    
    
    
    253,604
    
    
    
    260,307Interest received
    
    
    
    
    
    
    1,917
    
    
    
    1,993
    
    
    
    1,962Interest paid
    
    
    
    
    
    
    (3,628
    )
    
    
    (3,700
    )
    
    
    (4,154
    )Income taxes paid
    
    
    
    
    
    
    (47,138
    )
    
    
    (53,795
    )
    
    
    (54,367
    )NET CASH PROVIDED BY OPERATING
ACTIVITIES
    
    
    
    
    
    
    203,885
    
    
    
    198,102
    
    
    
    203,748
  F-6




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 CONSOLIDATED
STATEMENTS OF CASH FLOWS(Continued)
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
 Year Ended December 31,Notes
    
    
    2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBCASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    
    
    
    
    (119,227
    )
    
    
    (130,409
    )
    
    
    (172,511
    )Acquisition of equity affiliates and jointly
controlled entities
    
    
    
    
    
    
    (2,334
    )
    
    
    (1,173
    )
    
    
    (1,903
    )Acquisition of available-for-sale financial assets
    
    
    
    
    
    
    (782
    )
    
    
    (62
    )
    
    
    (324
    )(Acquisition) /Consolidation of PetroKazakhstan Inc.
    
    
    
    
    
    
    
    
    
    
    (21,376
    )
    
    
    1,542Net proceeds of investments in collateralized loans
with maturities not greater than three months
    
    
    
    
    
    
    26,896
    
    
    
    235
    
    
    
    Acquisition of investments in collateralized loans
with maturities over three months
    
    
    
    
    
    
    (443
    )
    
    
    
    
    
    
    Acquisition of intangible assets
    
    
    
    
    
    
    (1,600
    )
    
    
    (1,358
    )
    
    
    (2,521
    )Acquisition of other non-current assets
    
    
    
    
    
    
    (1,133
    )
    
    
    (1,706
    )
    
    
    (857
    )Return of capital to minority interest due to
liquidation of subsidiaries
    
    
    
    
    
    
    (935
    )
    
    
    
    
    
    
    Purchase from minority interest in listed subsidiaries
    
    
    35
    
    
    
    (2,019
    )
    
    
    (4,095
    )
    
    
    (149
    )Other purchase from minority interest
    
    
    
    
    
    
    (376
    )
    
    
    (640
    )
    
    
    (29
    )Proceeds from investments in collateralized loans
with maturities over three months
    
    
    
    
    
    
    6,529
    
    
    
    
    
    
    
    Repayment of capital by equity affiliates
and jointly controlled entities
    
    
    
    
    
    
    115
    
    
    
    99
    
    
    
    6,618Proceeds from disposal of property, plant and
equipment
    
    
    
    
    
    
    898
    
    
    
    346
    
    
    
    1,014Proceeds from disposal of equity affiliates
and jointly controlled entities
    
    
    
    
    
    
    1,102
    
    
    
    69
    
    
    
    1,033Proceeds from disposal of available-for-sale
financial assets
    
    
    
    
    
    
    976
    
    
    
    4
    
    
    
    276Proceeds from disposal of intangible and other
non-current assets
    
    
    
    
    
    
    22
    
    
    
    2
    
    
    
    Dividends received
    
    
    
    
    
    
    678
    
    
    
    2,099
    
    
    
    1,463Decrease/(Increase) in time deposits with maturities
over three months
    
    
    
    
    
    
    57
    
    
    
    (486
    )
    
    
    (17,857
    )NET CASH USED FOR INVESTING ACTIVITIES
    
    
    
    
    
    
    (91,576
    )
    
    
    (158,451
    )
    
    
    (184,205
    )CASH FLOWS FROM FINANCING ACTIVITIESRepayments of short-term debts
    
    
    
    
    
    
    (34,529
    )
    
    
    (28,349
    )
    
    
    (33,027
    )Repayments of long-term debts
    
    
    
    
    
    
    (19,175
    )
    
    
    (17,587
    )
    
    
    (24,071
    )Principal payment on capital lease obligations
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    Dividends paid to minority interest
    
    
    
    
    
    
    (1,486
    )
    
    
    (3,033
    )
    
    
    (6,150
    )Dividends paid to equity holders of the Company
    
    
    11
    
    
    
    (53,667
    )
    
    
    (68,589
    )
    
    
    (64,517
    )Issuance of A shares
    
    
    26,27
    
    
    
    
    
    
    
    
    
    
    
    66,243Increase in short-term debts
    
    
    
    
    
    
    32,019
    
    
    
    30,183
    
    
    
    36,842Increase in long-term debts
    
    
    
    
    
    
    15,514
    
    
    
    14,195
    
    
    
    20,650Capital contribution from minority interest
    
    
    
    
    
    
    454
    
    
    
    1,492
    
    
    
    1,349Change in other long-term obligations
    
    
    
    
    
    
    (1,435
    )
    
    
    (51
    )
    
    
    33Issuance of H shares
    
    
    26,27
    
    
    
    19,692
    
    
    
    
    
    
    
    NET CASH USED FOR
FINANCING ACTIVITIES
    
    
    
    
    
    
    (42,634
    )
    
    
    (71,739
    )
    
    
    (2,648
    )TRANSLATION OF FOREIGN CURRENCY
    
    
    
    
    
    
    (458
    )
    
    
    (258
    )
    
    
    40Increase/(Decrease) in cash and cash equivalents
    
    
    
    
    
    
    69,217
    
    
    
    (32,346
    )
    
    
    16,935Cash and cash equivalents at beginning of the year
    
    
    12
    
    
    
    11,688
    
    
    
    80,905
    
    
    
    48,559Cash and cash equivalents at end of the year
    
    
    12
    
    
    
    80,905
    
    
    
    48,559
    
    
    
    65,494
  F-7




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
 Minority
    
    

TotalAttributable to equity holders of the Company
    


interest
    
    
EquityShare
    
    
    RetainedCapital
    
    
    Earnings
    
    
    Reserves
    
    
    SubtotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBBalance at January 1, 2005
    
    
    175,824
    
    
    
    143,115
    
    
    
    108,834
    
    
    
    427,773
    
    
    
    15,199
    
    
    
    442,972Currency translation differences
    
    
    
    
    
    
    
    
    
    
    (268
    )
    
    
    (268
    )
    
    
    (465
    )
    
    
    (733
    )Net loss recognized directly in equity
    
    
    
    
    
    
    
    
    
    
    (268
    )
    
    
    (268
    )
    
    
    (465
    )
    
    
    (733
    )Net income for the year ended December
31, 2005
    
    
    
    
    
    
    133,362
    
    
    
    
    
    
    
    133,362
    
    
    
    6,280
    
    
    
    139,642Total recognized income/(loss) for 2005
    
    
    
    
    
    
    133,362
    
    
    
    (268
    )
    
    
    133,094
    
    
    
    5,815
    
    
    
    138,909Issuance of
H shares (Note 26 and 27)
    
    
    3,197
    
    
    
    
    
    
    
    16,495
    
    
    
    19,692
    
    
    
    
    
    
    
    19,692Transfer to
reserves (Note 27)
    
    
    
    
    
    
    (18,998
    )
    
    
    18,998
    
    
    
    
    
    
    
    
    
    
    
    Final
dividends for 2004 (Note 11)
    
    
    
    
    
    
    (25,936
    )
    
    
    
    
    
    
    (25,936
    )
    
    
    
    
    
    
    (25,936
    )Interim
dividends for 2005 (Note 11)
    
    
    
    
    
    
    (27,731
    )
    
    
    
    
    
    
    (27,731
    )
    
    
    
    
    
    
    (27,731
    )Payment to CNPC for the acquisition of
the refinery and petrochemical
business (Note 2)
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Dividends to minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,568
    )
    
    
    (1,568
    )Return of capital to minority interest
due to liquidations of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (935
    )
    
    
    (935
    )Purchase from minority interest of
listed subsidiaries (Note 35)
    
    
    
    
    
    
    
    
    
    
    (1,438
    )
    
    
    (1,438
    )
    
    
    (581
    )
    
    
    (2,019
    )Other movement in minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    242
    
    
    
    242Capital contribution to CNPC
Exploration and Development Company
Limited (Note 2)
    
    
    
    
    
    
    
    
    
    
    (10,056
    )
    
    
    (10,056
    )
    
    
    10,106
    
    
    
    50Balance at December 31, 2005
    
    
    179,021
    
    
    
    203,812
    
    
    
    132,556
    
    
    
    515,389
    
    
    
    28,278
    
    
    
    543,667Currency translation differences
    
    
    
    
    
    
    
    
    
    
    (191
    )
    
    
    (191
    )
    
    
    (204
    )
    
    
    (395
    )Net loss recognized directly in equity
    
    
    
    
    
    
    
    
    
    
    (191
    )
    
    
    (191
    )
    
    
    (204
    )
    
    
    (395
    )Net income for the year ended December
31, 2006
    
    
    
    
    
    
    142,224
    
    
    
    
    
    
    
    142,224
    
    
    
    7,173
    
    
    
    149,397Total
recognized income/(loss) for 2006
    
    
    
    
    
    
    142,224
    
    
    
    (191
    )
    
    
    142,033
    
    
    
    6,969
    
    
    
    149,002Transfer to
reserves (Note 27)
    
    
    
    
    
    
    (13,355
    )
    
    
    13,355
    
    
    
    
    
    
    
    
    
    
    
    Final
dividend for 2005 (Note 11)
    
    
    
    
    
    
    (32,282
    )
    
    
    
    
    
    
    (32,282
    )
    
    
    
    
    
    
    (32,282
    )Interim
dividend for 2006 (Note 11)
    
    
    
    
    
    
    (36,307
    )
    
    
    
    
    
    
    (36,307
    )
    
    
    
    
    
    
    (36,307
    )Dividends to minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,000
    )
    
    
    (3,000
    )Purchase from minority interest of
subsidiaries (Note 35)
    
    
    
    
    
    
    
    
    
    
    (2,156
    )
    
    
    (2,156
    )
    
    
    (2,579
    )
    
    
    (4,735
    )Capital contribution from minority
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,492
    
    
    
    1,492Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )
    
    
    (246
    )Balance at December 31, 2006
    
    
    179,021
    
    
    
    264,092
    
    
    
    143,564
    
    
    
    586,677
    
    
    
    30,914
    
    
    
    617,591Currency translation differences
    
    
    
    
    
    
    
    
    
    
    (771
    )
    
    
    (771
    )
    
    
    (798
    )
    
    
    (1,569
    )Net loss
recognized directly in equity
    
    
    
    
    
    
    
    
    
    
    (771
    )
    
    
    (771
    )
    
    
    (798
    )
    
    
    (1,569
    )Net income for the year ended
December 31, 2007
    
    
    
    
    
    
    145,625
    
    
    
    
    
    
    
    145,625
    
    
    
    9,604
    
    
    
    155,229Total
recognized income/(loss) for 2007
    
    
    
    
    
    
    145,625
    
    
    
    (771
    )
    
    
    144,854
    
    
    
    8,806
    
    
    
    153,660Transfer to
reserves (Note 27)
    
    
    
    
    
    
    (12,768
    )
    
    
    12,768
    
    
    
    
    
    
    
    
    
    
    
    Final
dividends for 2006 (Note 11)
    
    
    
    
    
    
    (27,694
    )
    
    
    
    
    
    
    (27,694
    )
    
    
    
    
    
    
    (27,694
    )Interim
dividends for 2007 (Note 11)
    
    
    
    
    
    
    (36,823
    )
    
    
    
    
    
    
    (36,823
    )
    
    
    
    
    
    
    (36,823
    )Dividends to minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,144
    )
    
    
    (6,144
    )Purchase of minority interest
in subsidiaries (Note 35)
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    (113
    )
    
    
    (65
    )
    
    
    (178
    )Issuance of
A shares (Note 26 and 27)
    
    
    4,000
    
    
    
    
    
    
    
    62,243
    
    
    
    66,243
    
    
    
    
    
    
    
    66,243Consolidation of PetroKazakhstan Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,101
    
    
    
    8,101Capital contribution from
minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,349
    
    
    
    1,349Fair value gain from available-for-
sale financial assets
    
    
    
    
    
    
    
    
    
    
    261
    
    
    
    261
    
    
    
    
    
    
    
    261Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Balance at December 31, 2007
    
    
    183,021
    
    
    
    332,432
    
    
    
    217,952
    
    
    
    733,405
    
    
    
    42,942
    
    
    
    776,347
  F-8




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 1 ORGANIZATION AND PRINCIPAL ACTIVITIES
   2 BASIS OF PREPARATION
       F-9




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
   3 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
 (a) Basis of consolidation
      (b) Investments in equity affiliates
   F-10




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (c) Investments in jointly controlled entities
   (d) Transactions with minority interest
  (e) Foreign currencies
     (f) Property, plant and equipment
    F-11




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
    Buildings and Plant
    
    8  40 yearsEquipment and Machinery
    
    4  30 yearsMotor vehicles
    
    7  14 yearsOther
    
    5  12 years
      (g) Oil and gas properties
   F-12




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  (h) Intangible assets
  (i) Financial assets
  (i) Loans and receivables
  (ii) Available-for-sale financial assets
   F-13




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (j) Leases
   (k) Related parties
   (l) Inventories
  (m) Accounts receivable
  (n) Cash and cash equivalents
  (o) Accounts payable
  (p) Debts
    F-14




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (q) Taxation
     (r) Revenue recognition
   (s) Provisions
   (t) Research and development
  (u) Retirement benefit plans
  F-15




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  (v) Share-based compensation  Share appreciation rights
  (w) New accounting developments
       F-16




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 4 FINANCIAL RISK MANAGEMENT
 4.1 Financial risk factors
   (i) Foreign exchange rate risk
  (ii) Cash flow and fair value interest rate risk
  (iii) Price risk
        4.2 Capital risk management
  F-17




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 4.3 Fair value estimation
   5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
   (a) Estimation of oil and natural gas reserves
  (b) Estimation of impairment of property, plant and equipment
  (c) Estimation of asset retirement obligations
  F-18




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 6 EMPLOYEE COMPENSATION COSTS
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBWages and salaries
    
    
    19,351
    
    
    
    26,629
    
    
    
    32,562Social security costs (i)
    
    
    10,324
    
    
    
    12,532
    
    
    
    18,05429,675
    
    
    
    39,161
    
    
    
    50,616
 
 (i)
    
    Social security costs mainly represent contributions to funds for staff welfare organized by
the PRC municipal and provincial governments and others including contribution to the retirement
benefit plans. (Note 28). 7 TAXES OTHER THAN INCOME TAXES
  8 INTEREST EXPENSE
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBInterest on- loans
    
    
    3,766
    
    
    
    3,739
    
    
    
    4,127- capital leases
    
    
    1
    
    
    
    
    
    
    
    Accretion expense (Note 24)
    
    
    60
    
    
    
    796
    
    
    
    1,202Less: amounts capitalized
    
    
    (1,065
    )
    
    
    (1,315
    )
    
    
    (1,734
    )2,762
    
    
    
    3,220
    
    
    
    3,595
  F-19




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 9 INCOME TAXES
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBCurrent taxes
    
    
    50,221
    
    
    
    50,972
    
    
    
    48,332Deferred taxes (Note 25)
    
    
    3,959
    
    
    
    (1,196
    )
    
    
    82054,180
    
    
    
    49,776
    
    
    
    49,152
   Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBIncome before income taxes
    
    
    193,822
    
    
    
    199,173
    
    
    
    204,381Tax calculated at a tax rate of 33%
    
    
    63,961
    
    
    
    65,727
    
    
    
    67,446Prior year tax return adjustment
    
    
    364
    
    
    
    243
    
    
    
    451Effect of income taxes from international operations
in excess of taxes at the PRC statutory tax rate
    
    
    
    
    
    
    1,512
    
    
    
    644Effect of preferential tax rate
    
    
    (10,744
    )
    
    
    (14,169
    )
    
    
    (16,930
    )Effect of changes in PRC corporate income tax rate
    
    
    
    
    
    
    
    
    
    
    (3,758
    )Tax effect of income not subject to tax
    
    
    (427
    )
    
    
    (1,602
    )
    
    
    (3,138
    )Tax effect of taxable items deductible not expensed
    
    
    
    
    
    
    
    
    
    
    (2,365
    )Tax effect of expenses not deductible for tax purposes
    
    
    1,026
    
    
    
    2,466
    
    
    
    3,884Tax effect of unused tax losses which had expired
    
    
    
    
    
    
    
    
    
    
    2,918Tax effect of temporary differences in relation to certain
crude oil sales which no longer existed at year end
    
    
    
    
    
    
    (4,401
    )
    
    
    Income taxes
    
    
    54,180
    
    
    
    49,776
    
    
    
    49,152
   10 BASIC AND DILUTED NET INCOME PER SHARE
     F-20




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 11 DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBFinal dividends attributable to
equity holders of the Company for
2004 (Note (i))
    
    
    25,936
    
    
    
    
    
    
    
    Interim dividends attributable to
equity holders of the Company for
2005 (Note (ii))
    
    
    27,731
    
    
    
    
    
    
    
    Final dividends attributable to
equity holders of the Company for
2005 (Note (iii))
    
    
    
    
    
    
    32,282
    
    
    
    Interim dividends attributable to
equity holders of the Company for
2006 (Note (iv))
    
    
    
    
    
    
    36,307
    
    
    
    Final dividends attributable to
equity holders of the Company for
2006 (Note (v))
    
    
    
    
    
    
    
    
    
    
    27,694Interim dividends attributable to
equity holders of the Company for
2007 (Note (vi))
    
    
    
    
    
    
    
    
    
    
    36,82353,667
    
    
    
    68,589
    
    
    
    64,517
 
 (i)
    
    Final dividends attributable to equity holders of the Company in respect of 2004 of
RMB 0.147511 yuan per share amounting to a total of RMB 25,936 were approved by the
shareholders in the Annual General Meeting on May 26, 2005 and accounted for in equity as
an appropriation of retained earnings in the year ended December 31, 2005, and were paid
on June 10, 2005.(ii)
    
    Interim dividends attributable to equity holders of the Company in respect of 2005 of
RMB 0.157719 yuan per share amounting to a total of RMB 27,731 were accounted for in
equity as an appropriation of retained earnings in the year ended December 31, 2005, and
were paid on September 30, 2005.(iii)
    
    Final dividends attributable to equity holders of the Company in respect of 2005 of
RMB 0.180325 yuan per share amounting to a total of RMB 32,282 were approved by the
shareholders in the Annual General Meeting on May 26, 2006 and accounted for in equity as
an appropriation of retained earnings in the year ended December 31, 2006, and were paid
on June 9, 2006.(iv)
    
    Interim dividends attributable to equity holders of the Company in respect of 2006 of
RMB 0.202806 yuan per share amounting to a total of RMB 36,307 were accounted for in
equity as an appropriation of retained earnings in the year ended December 31, 2006, and
were paid on September 26, 2006.(v)
    
    Final dividends attributable to equity holders of the Company in respect of 2006 of
RMB 0.154699 yuan per share amounting to a total of RMB 27,694 were approved by the
shareholders in the Annual General Meeting on May 16, 2007 and accounted for in equity as
an appropriation of retained earnings in the year ended December 31, 2007, and were paid
on June 1, 2007.(vi)
    
    Interim dividends attributable to equity holders of the Company in respect of 2007 of
RMB 0.205690 yuan per share amounting to a total of RMB 36,823 were accounted for in
equity as an appropriation of retained earnings in the year ended December 31, 2007, and
were paid on September 28, 2007.(vii)
    
    At the meeting on March 19, 2008, the Board of Directors proposed final dividends
attributable to equity holders of the Company in respect of 2007 of RMB 0.156859 yuan per
share amounting to a total
of RMB 28,708. These consolidated financial statements do not reflect this dividend payable
as the final dividends were proposed after the balance sheet date and will be accounted for
in equity as an appropriation of retained earnings in the year ending December 31, 2008
when approved at the forthcoming Annual General Meeting. 
 F-21




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 12 CASH AND CASH EQUIVALENTS
  13 NOTES RECEIVABLE
  14 ACCOUNTS RECEIVABLE
 At December 31,2006
    
    
    2007RMB
    
    
    RMBAccounts receivable due from third parties
    
    
    9,498
    
    
    
    15,296Accounts receivable due from related parties
    
    
    2,247
    
    
    
    6,002Less: allowance for doubtful accounts receivable
    
    
    (3,257
    )
    
    
    (2,879
    )8,488
    
    
    
    18,419
  Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBBalance at beginning of the year
    
    
    4,848
    
    
    
    3,998
    
    
    
    3,257Write back
    
    
    (333
    )
    
    
    (126
    )
    
    
    (90
    )Amount written off against allowance
    
    
    (517
    )
    
    
    (615
    )
    
    
    (288
    )Balance at end of the year
    
    
    3,998
    
    
    
    3,257
    
    
    
    2,879
   At December 31,2006
    
    
    2007RMB
    
    
    RMBWithin 1 year
    
    
    8,299
    
    
    
    18,260Between 1 to 2 years
    
    
    33
    
    
    
    39Between 2 to 3 years
    
    
    59
    
    
    
    32Over 3 years
    
    
    3,354
    
    
    
    2,96711,745
    
    
    
    21,298
 F-22




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 15 INVENTORIES
 At December 31,2006
    
    
    2007RMB
    
    
    RMBCrude oil and other raw materials
    
    
    24,143
    
    
    
    30,308Work in progress
    
    
    5,493
    
    
    
    6,083Finished goods
    
    
    47,263
    
    
    
    52,791Spare parts and consumables
    
    
    41
    
    
    
    3276,940
    
    
    
    89,214Less: Write down in inventories
    
    
    (902
    )
    
    
    (747
    )76,038
    
    
    
    88,467
  Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBBalance at beginning of the year
    
    
    926
    
    
    
    770
    
    
    
    902(Write back)/Provision
    
    
    (139
    )
    
    
    140
    
    
    
    55Amount written off against allowance
    
    
    (17
    )
    
    
    (8
    )
    
    
    (210
    )Balance at end of the year
    
    
    770
    
    
    
    902
    
    
    
    747
   16 PREPAID EXPENSES AND OTHER CURRENT ASSETS
 At December 31,2006
    
    
    2007RMB
    
    
    RMBOther receivables
    
    
    7,083
    
    
    
    9,329Amounts due from related parties
    
    
    15,925
    
    
    
    19,556Advances to suppliers
    
    
    6,087
    
    
    
    10,72029,095
    
    
    
    39,605Less: Allowance for doubtful receivables
    
    
    (6,506
    )
    
    
    (4,079
    )22,589
    
    
    
    35,526Prepaid expenses
    
    
    326
    
    
    
    304Other current assets
    
    
    366
    
    
    
    18823,281
    
    
    
    36,018
   F-23




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBBalance at beginning of the year
    
    
    7,255
    
    
    
    6,814
    
    
    
    6,506Write back
    
    
    (122
    )
    
    
    (190
    )
    
    
    (2,263
    )Amount written off against allowance
    
    
    (319
    )
    
    
    (118
    )
    
    
    (164
    )Balance at end of the year
    
    
    6,814
    
    
    
    6,506
    
    
    
    4,079
 17 PROPERTY, PLANT AND EQUIPMENT
 EquipmentYear Ended
    
    
    
    
    
    Oil and Gas
    
    
    and
    
    
    Motor
    
    
    
    
    
    
    ConstructionDecember 31, 2006
    
    Buildings
    
    
    Properties
    
    
    Machinery
    
    
    vehicles
    
    
    Other
    
    
    in Progress
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBCost or valuationAt beginning of the year
    
    
    73,133
    
    
    
    497,632
    
    
    
    277,364
    
    
    
    10,829
    
    
    
    7,051
    
    
    
    55,597
    
    
    
    921,606Additions
    
    
    516
    
    
    
    4,080
    
    
    
    656
    
    
    
    1,597
    
    
    
    20
    
    
    
    145,361
    
    
    
    152,230Transfers
    
    
    7,156
    
    
    
    85,178
    
    
    
    33,621
    
    
    
    
    
    
    
    989
    
    
    
    (126,944
    )
    
    
    Disposals or write off
    
    
    (723
    )
    
    
    (11,420
    )
    
    
    (3,756
    )
    
    
    (297
    )
    
    
    (102
    )
    
    
    
    
    
    
    (16,298
    )Currency translation
differences
    
    
    61
    
    
    
    (149
    )
    
    
    (50
    )
    
    
    (17
    )
    
    
    18
    
    
    
    (122
    )
    
    
    (259
    )At end of the year
    
    
    80,143
    
    
    
    575,321
    
    
    
    307,835
    
    
    
    12,112
    
    
    
    7,976
    
    
    
    73,892
    
    
    
    1,057,279Accumulated
depreciation and
impairmentAt beginning of the year
    
    
    (16,029
    )
    
    
    (203,416
    )
    
    
    (128,932
    )
    
    
    (5,555
    )
    
    
    (3,686
    )
    
    
    (98
    )
    
    
    (357,716
    )Charge for the year
    
    
    (3,643
    )
    
    
    (31,540
    )
    
    
    (21,431
    )
    
    
    (1,107
    )
    
    
    (755
    )
    
    
    (199
    )
    
    
    (58,675
    )Disposals or write off
    
    
    418
    
    
    
    1,186
    
    
    
    2,544
    
    
    
    126
    
    
    
    67
    
    
    
    
    
    
    
    4,341Currency translation
differences
    
    
    (19
    )
    
    
    93
    
    
    
    (35
    )
    
    
    6
    
    
    
    (7
    )
    
    
    
    
    
    
    108At end of the year
    
    
    (19,273
    )
    
    
    (233,677
    )
    
    
    (147,784
    )
    
    
    (6,530
    )
    
    
    (4,381
    )
    
    
    (297
    )
    
    
    (411,942
    )Net book valueAt end of the year
    
    
    60,870
    
    
    
    341,644
    
    
    
    160,051
    
    
    
    5,582
    
    
    
    3,595
    
    
    
    73,595
    
    
    
    645,337Carrying value of the
property, plant and
equipment had they been
stated at cost less
accumulated
depreciation
    
    
    57,204
    
    
    
    338,007
    
    
    
    145,571
    
    
    
    5,171
    
    
    
    3,120
    
    
    
    73,595
    
    
    
    622,668
 F-24




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 EquipmentYear Ended
    
    
    
    
    
    Oil and Gas
    
    
    and
    
    
    Motor
    
    
    
    
    
    
    ConstructionDecember 31, 2007
    
    Buildings
    
    
    Properties
    
    
    Machinery
    
    
    vehicles
    
    
    Other
    
    
    in Progress
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBCost or valuationAt beginning of the year
    
    
    80,143
    
    
    
    575,321
    
    
    
    307,835
    
    
    
    12,112
    
    
    
    7,976
    
    
    
    73,892
    
    
    
    1,057,279Additions
    
    
    2,928
    
    
    
    7,513
    
    
    
    2,296
    
    
    
    3,237
    
    
    
    293
    
    
    
    170,031
    
    
    
    186,298Transfers
    
    
    8,778
    
    
    
    96,332
    
    
    
    25,916
    
    
    
    
    
    
    
    885
    
    
    
    (131,911
    )
    
    
    Consolidation of
PetroKazakhstan Inc.
    
    
    184
    
    
    
    8,119
    
    
    
    247
    
    
    
    170
    
    
    
    136
    
    
    
    1,310
    
    
    
    10,166Disposals or write off
    
    
    (1,585
    )
    
    
    (17,700
    )
    
    
    (2,443
    )
    
    
    (423
    )
    
    
    (265
    )
    
    
    
    
    
    
    (22,416
    )Currency translation
differences
    
    
    (52
    )
    
    
    (878
    )
    
    
    (133
    )
    
    
    (10
    )
    
    
    (19
    )
    
    
    (189
    )
    
    
    (1,281
    )At end of the year
    
    
    90,396
    
    
    
    668,707
    
    
    
    333,718
    
    
    
    15,086
    
    
    
    9,006
    
    
    
    113,133
    
    
    
    1,230,046Accumulated
depreciation and
impairmentAt beginning of the year
    
    
    (19,273
    )
    
    
    (233,677
    )
    
    
    (147,784
    )
    
    
    (6,530
    )
    
    
    (4,381
    )
    
    
    (297
    )
    
    
    (411,942
    )Charge for the year
    
    
    (5,023
    )
    
    
    (36,400
    )
    
    
    (19,939
    )
    
    
    (1,213
    )
    
    
    (775
    )
    
    
    (5
    )
    
    
    (63,355
    )Disposals or write off
    
    
    1,459
    
    
    
    4,687
    
    
    
    1,073
    
    
    
    344
    
    
    
    102
    
    
    
    17
    
    
    
    7,682Currency translation
differences
    
    
    8
    
    
    
    398
    
    
    
    25
    
    
    
    6
    
    
    
    14
    
    
    
    
    
    
    
    451At end of the year
    
    
    (22,829
    )
    
    
    (264,992
    )
    
    
    (166,625
    )
    
    
    (7,393
    )
    
    
    (5,040
    )
    
    
    (285
    )
    
    
    (467,164
    )Net book valueAt end of the year
    
    
    67,567
    
    
    
    403,715
    
    
    
    167,093
    
    
    
    7,693
    
    
    
    3,966
    
    
    
    112,848
    
    
    
    762,882Carrying value of the
property, plant and
equipment had they been
stated at cost less
accumulated
depreciation
    
    
    64,439
    
    
    
    400,611
    
    
    
    154,734
    
    
    
    7,342
    
    
    
    3,557
    
    
    
    112,848
    
    
    
    743,531
  Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBBeginning balance at January 1
    
    
    5,751
    
    
    
    8,296
    
    
    
    8,998Additions to capitalized exploratory well costs
pending the determination of proved reserves
    
    
    16,181
    
    
    
    19,076
    
    
    
    22,649Reclassified to wells, facilities, and equipment
based on the determination of proved reserves
    
    
    (7,089
    )
    
    
    (8,880
    )
    
    
    (10,534
    )Capitalized exploratory well costs charged to expense
    
    
    (6,547
    )
    
    
    (9,494
    )
    
    
    (9,161
    )Ending balance at December 31
    
    
    8,296
    
    
    
    8,998
    
    
    
    11,952Number of wells at year end
    
    
    993
    
    
    
    869
    
    
    
    928
 F-25




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  At December 31,2006
    
    
    2007RMB
    
    
    RMBOne year or less
    
    
    8,359
    
    
    
    10,981Over one year
    
    
    639
    
    
    
    971Balance at December 31
    
    
    8,998
    
    
    
    11,952
   At December 31,2006
    
    
    2007RMB
    
    
    RMBShort-term lease (less than 10 years)
    
    
    363
    
    
    
    764Medium-term lease (10 to 50 years)
    
    
    60,507
    
    
    
    66,80360,870
    
    
    
    67,567
   At December 31,2006
    
    
    2007RMB
    
    
    RMBExploration and Production
    
    
    45
    
    
    
    45Refining and Marketing
    
    
    
    
    
    
    7Accumulated depreciation
    
    
    (18
    )
    
    
    (24
    )27
    
    
    
    28
   Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBOwned assets
    
    
    49,198
    
    
    
    58,669
    
    
    
    63,349Assets under capital lease
    
    
    13
    
    
    
    6
    
    
    
    649,211
    
    
    
    58,675
    
    
    
    63,355
  F-26




---



##### Table of Contents



PETROCHINA COMPANY LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)        F-27




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 18
    
    INVESTMENTS IN EQUITY AFFILIATES AND JOINTLY CONTROLLED ENTITIES
  Country of
    
    Assets
    
    
    Liabilities
    
    
    Revenues
    
    
    Net income
    
    
    Interest
    
    
    Type ofName
    
    Incorporation
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    Held %
    
    
    ShareAs of or for the
year ended
December 31, 2007:Dalian West Pacific
Petrochemical
Co., Ltd.
    
    PRC
    
    
    4,044
    
    
    
    3,097
    
    
    
    10,116
    
    
    
    174
    
    
    
    28.44
    
    
    ordinaryChina Marine Bunker
(PetroChina) Co.,
Ltd.
    
    PRC
    
    
    3,128
    
    
    
    2,006
    
    
    
    17,030
    
    
    
    137
    
    
    
    50.00
    
    
    ordinaryPetroKazakhstan Inc.
    
    Canada
    
    
    
    
    
    
    
    
    
    
    12,361
    
    
    
    4,498
    
    
    
    67.00
    
    
    ordinaryOther
    
    
    
    
    34,929
    
    
    
    10,463
    
    
    
    38,549
    
    
    
    2,188
    
    
    
    20.00-50.00
    
    
    ordinary42,101
    
    
    
    15,566
    
    
    
    78,056
    
    
    
    6,997As of or for the
year ended December
31, 2006:Dalian West Pacific
Petrochemical Co.,
Ltd.
    
    PRC
    
    
    3,410
    
    
    
    2,608
    
    
    
    10,188
    
    
    
    6
    
    
    
    28.44
    
    
    ordinaryChina Marine Bunker
(PetroChina) Co.,
Ltd.
    
    PRC
    
    
    3,388
    
    
    
    2,098
    
    
    
    19,003
    
    
    
    139
    
    
    
    50.00
    
    
    ordinaryPetroKazakhstan Inc.
    
    Canada
    
    
    22,642
    
    
    
    1,240
    
    
    
    144
    
    
    
    43
    
    
    
    67.00
    
    
    ordinaryOther
    
    
    
    
    26,995
    
    
    
    17,533
    
    
    
    40,903
    
    
    
    2,089
    
    
    
    20.00-70.00
    
    
    ordinary56,435
    
    
    
    23,479
    
    
    
    70,238
    
    
    
    2,277
      F-28




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 RMBCurrent assets
    
    
    6,587Non-current assets
    
    
    20,456Current liabilities
    
    
    (1,732
    )Non-current liabilities
    
    
    (762
    )
 19
    
    AVAILABLE-FOR-SALE FINANCIAL ASSETS
 At December 31,2006
    
    
    2007RMB
    
    
    RMBUnlisted available-for-sale financial assets
    
    
    2,562
    
    
    
    3,068Less: Impairment provision
    
    
    (508
    )
    
    
    (487
    )2,054
    
    
    
    2,581
     Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBBalance at beginning of year
    
    
    755
    
    
    
    677
    
    
    
    508(Write back)/Provision
    
    
    (23
    )
    
    
    32
    
    
    
    Amount written off against provision
    
    
    (55
    )
    
    
    (201
    )
    
    
    (21
    )Balance at end of year
    
    
    677
    
    
    
    508
    
    
    
    487
 20
    
    ADVANCE OPERATING LEASE PAYMENTS
 At December 31,2006
    
    
    2007RMB
    
    
    RMBLand use rights
    
    
    12,184
    
    
    
    14,411Advance lease payments
    
    
    8,284
    
    
    
    9,00620,468
    
    
    
    23,417
  F-29




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 21
    
    INTANGIBLE AND OTHER ASSETS
 At December 31,2006
    
    
    2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Net
    
    
    Cost
    
    
    Amortization
    
    
    NetRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBPatents
    
    
    2,325
    
    
    
    (1,109
    )
    
    
    1,216
    
    
    
    2,621
    
    
    
    (1,343
    )
    
    
    1,278Technical know-how
    
    
    276
    
    
    
    (103
    )
    
    
    173
    
    
    
    281
    
    
    
    (124
    )
    
    
    157Other
    
    
    3,369
    
    
    
    (1,041
    )
    
    
    2,328
    
    
    
    5,273
    
    
    
    (1,242
    )
    
    
    4,031Intangible assets
    
    
    5,970
    
    
    
    (2,253
    )
    
    
    3,717
    
    
    
    8,175
    
    
    
    (2,709
    )
    
    
    5,466Other assets
    
    
    
    
    
    
    
    
    
    
    2,910
    
    
    
    
    
    
    
    
    
    
    
    3,0226,627
    
    
    
    
    
    
    
    
    
    
    
    8,488
   22
    
    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 At December 31,2006
    
    
    2007RMB
    
    
    RMBTrade payables
    
    
    22,490
    
    
    
    40,447Advances from customers
    
    
    9,310
    
    
    
    9,846Salaries and welfare payable
    
    
    8,844
    
    
    
    11,585Accrued expenses
    
    
    10
    
    
    
    5Dividends payable by subsidiaries to minority shareholders
    
    
    60
    
    
    
    67Interest payable
    
    
    3
    
    
    
    65Construction fee and equipment cost payables
    
    
    28,349
    
    
    
    30,784One-time employee housing remedial payment payable
    
    
    933
    
    
    
    221Other payables
    
    
    14,910
    
    
    
    10,999Amounts due to related parties
    
    
    35,273
    
    
    
    40,334120,182
    
    
    
    144,353
    At December 31,2006
    
    
    2007RMB
    
    
    RMBWithin 1 year
    
    
    19,994
    
    
    
    39,005Between 1 to 2 years
    
    
    1,966
    
    
    
    819Between 2 to 3 years
    
    
    196
    
    
    
    307Over 3 years
    
    
    334
    
    
    
    31622,490
    
    
    
    40,447
 F-30




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 23
    
    DEBTS
 (a)
    
    Short-term debts
 At December 31,2006
    
    
    2007RMB
    
    
    RMBBank loans- secured
    
    
    23
    
    
    
    320- unsecured
    
    
    14,812
    
    
    
    18,363Loans from a fellow CNPC subsidiary
    
    
    320
    
    
    
    50Other
    
    
    1
    
    
    
    115,156
    
    
    
    18,734Current portion of long-term debts
    
    
    20,607
    
    
    
    12,20035,763
    
    
    
    30,934
 F-31




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (b) Long-term debts
 At December 31,Interest Rate and Final Maturity
    
    2006
    
    
    2007RMB
    
    
    RMBRenminbi  denominated debts:Bank loans for the
development of oil fields and
construction of refining
plants
    
    Majority floating interest
rates ranging from 6.16% to
6.80% per annum as of December
31, 2007, with maturities
through 2022
    
    
    8,390
    
    
    
    6,720Bank loans for working capital
    
    Floating interest rates ranging
from 5.67% to 6.89% per annum
as of December 31, 2007, with
maturities through 2012
    
    
    6,000
    
    
    
    6,030Loans from a fellow CNPC
subsidiary for the development
of oil fields and construction
of refining plants
    
    Floating interest rates ranging
from 4.46% to 5.76% per annum
as of December 31, 2007, with
maturities through 2032
    
    
    16,782
    
    
    
    19,862Working capital loans from a fellow CNPC subsidiary
    
    Fixed interest rate at 4.61%
per annum as of December 31,
2007, with maturities through
2008
    
    
    4,130
    
    
    
    70Working capital loans
    
    Fixed interest rate at 6.32%
per annum as of December 31,
2007, with no fixed repayment
terms
    
    
    5
    
    
    
    5Corporate debenture for the
development of oil fields and
construction of refining
plants
    
    Fixed interest rate at 4.50%
per annum as of December 31,
2007, with maturities through
2007
    
    
    1,365
    
    
    Corporate debenture for the
development of oil and gas
properties
    
    Fixed interest rates ranging
from 3.76% to 4.11% per annum
as of December 31, 2007, with
maturities through 2013
    
    
    3,523
    
    
    
    3,500US Dollar  denominated debts:Bank loans for the development
of oil fields and construction
of refining plants
    
    Fixed interest rates ranging
from zero to 8.66% per annum as
of December 31, 2007, with
maturities through 2038
    
    
    969
    
    
    
    403Bank loans for the development
of oil fields and construction
of refining plants
    
    Floating interest rates ranging
from 5.10% to 7.50% per annum
as of December 31, 2007, with
maturities through 2014
    
    
    3,589
    
    
    
    4,927Bank loans for working capital
    
    Floating interest rates ranging
from LIBOR plus 0.30% to LIBOR
plus 2.50% per annum as of
December 31, 2007, with
maturities through 2010
    
    
    1,326
    
    
    
    2,630Bank loans for acquisition of
overseas oil and gas
properties
    
    Floating interest rate at LIBOR
plus 0.55% per annum as of
December 31, 2007, with
maturities through 2009
    
    
    1,368
    
    
    
    821Loans from a fellow CNPC
subsidiary for the development
of oil fields and construction
of refining plants
    
    Floating interest rates ranging
from LIBOR minus 0.25% to LIBOR
plus 0.50% per annum as of
December 31, 2007, with
maturities through 2020
    
    
    4,481
    
    
    
    4,171
 F-32




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 At December 31,Interest Rate and Final Maturity
    
    2006
    
    
    2007RMB
    
    
    RMBLoans from a fellow CNPC
subsidiary for working capital
    
    Floating interest rate at LIBOR
plus 0.60% per annum as of
December 31, 2007, with
maturities through 2008
    
    
    1,471
    
    
    
    329Loans for the development of oil
fields and construction of
refining plants
    
    Fixed interest rate at 1.55%
per annum as of December 31,
2007, with maturities through
2022
    
    
    462
    
    
    
    404Loans for working capital
    
    Majority floating interest rate
at LIBOR plus 0.35% per annum
as of December 31, 2007, with
maturities through 2008
    
    
    650
    
    
    
    609Corporate debenture for the
development of oil fields and
construction of refining plants
    
    Fixed interest rate at 3.00%
per annum as of December 31,
2007, with maturities through
2019
    
    
    353
    
    
    
    335Corporate debenture for the
development of oil and gas
properties
    
    Fixed interest rate at 9.50%
per annum as of December 31,
2007, with maturities through
2011
    
    
    817
    
    
    
    730Corporate debenture for the
development of oil and gas
properties
    
    Fixed interest rate at 15.00%
per annum as of December 31,
2007, with maturities through
2008
    
    
    179
    
    
    
    58Japanese Yen  denominated debts:Bank loans for the development of
oil fields and construction of
refining plants
    
    Fixed interest rates ranging
from 2.42% to 4.10% per annum
as of December 31, 2007, with
maturities through 2010
    
    
    75
    
    
    
    37Euro  denominated debts:Bank loans for the development of
oil fields and construction of
refining plants
    
    Fixed interest rates ranging
from 2.00% to 2.30% per annum
as of December 31, 2007, with
maturities through 2023
    
    
    257
    
    
    
    247British Pound  denominated
debts:Bank loans for the development of
oil fields and construction of
refining plants
    
    Fixed interest rate at 2.85%
per annum as of December 31,
2007 with maturities through
2007
    
    
    49
    
    
    Total long-term debts
    
    
    
    
    56,241
    
    
    
    51,888Less: Current portion of
long-term debts
    
    
    
    
    (20,607
    )
    
    
    (12,200
    )35,634
    
    
    
    39,688
 F-33




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
    At December 31,2006
    
    
    2007RMB
    
    
    RMBTotal debts:- interest free
    
    
    68
    
    
    
    60- at fixed rates
    
    
    20,850
    
    
    
    11,940- at floating rates
    
    
    50,479
    
    
    
    58,62271,397
    
    
    
    70,622Weighted average effective interest rates:- bank loans
    
    
    5.51
    %
    
    
    5.54
    %- loans from a fellow CNPC subsidiary
    
    
    4.98
    %
    
    
    5.17
    %- other loans
    
    
    3.93
    %
    
    
    3.64
    %- corporate debentures
    
    
    5.04
    %
    
    
    4.87
    %
  Carrying AmountsAt December 31,2006
    
    
    2007RMB
    
    
    RMBBank loans
    
    
    22,023
    
    
    
    21,815Loans from a fellow CNPC subsidiary
    
    
    26,864
    
    
    
    24,432Corporate debentures
    
    
    6,237
    
    
    
    4,623Other
    
    
    1,117
    
    
    
    1,01856,241
    
    
    
    51,888
 Fair ValuesAt December 31,2006
    
    
    2007RMB
    
    
    RMBBank loans
    
    
    21,858
    
    
    
    21,580Loans from a fellow CNPC subsidiary
    
    
    26,861
    
    
    
    24,428Corporate debentures
    
    
    5,852
    
    
    
    4,104Other
    
    
    997
    
    
    
    88355,568
    
    
    
    50,995
  F-34




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  At December 31,2006
    
    
    2007RMB
    
    
    RMBFirst year
    
    
    20,607
    
    
    
    12,200Second year
    
    
    11,797
    
    
    
    5,754Third year
    
    
    6,024
    
    
    
    14,065Fourth year
    
    
    1,504
    
    
    
    2,325Fifth year
    
    
    2,921
    
    
    
    3,508Thereafter
    
    
    13,388
    
    
    
    14,03656,241
    
    
    
    51,888
 24 ASSET RETIREMENT OBLIGATIONS
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBAt beginning of the year
    
    
    919
    
    
    
    14,187
    
    
    
    18,481Liabilities incurred
    
    
    13,258
    
    
    
    3,589
    
    
    
    4,818Consolidation of PetroKazakhstan Inc.
    
    
    
    
    
    
    
    
    
    
    385Liabilities settled
    
    
    (1
    )
    
    
    (105
    )
    
    
    (110
    )Accretion expense (Note 8)
    
    
    60
    
    
    
    796
    
    
    
    1,202Currency translation differences
    
    
    (49
    )
    
    
    14
    
    
    
    (15
    )At end of the year
    
    
    14,187
    
    
    
    18,481
    
    
    
    24,761
   F-35




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 25 DEFERRED TAXES
   Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBAt beginning of the year
    
    
    16,902
    
    
    
    20,759
    
    
    
    19,583Transfer to income statement (Note 9)
    
    
    3,959
    
    
    
    (1,196
    )
    
    
    820Charge to equity
    
    
    
    
    
    
    
    
    
    
    87Consolidation of PetroKazakhstan Inc.
    
    
    
    
    
    
    
    
    
    
    (174
    )Currency translation differences
    
    
    (102
    )
    
    
    20
    
    
    
    (111
    )At end of the year
    
    
    20,759
    
    
    
    19,583
    
    
    
    20,205
  At December 31,2006
    
    
    2007RMB
    
    
    RMBDeferred tax
assetsCurrent:Provisions, primarily for receivables and inventories
    
    
    7,107
    
    
    
    5,391Tax losses of subsidiaries
    
    
    2,175
    
    
    
    95Non current:Shut down of manufacturing assets and impairment of long-term assets
    
    
    4,342
    
    
    
    3,172Other
    
    
    457
    
    
    
    1,635Total deferred tax assets
    
    
    14,081
    
    
    
    10,293Deferred tax liabilitiesNon current:Accelerated tax depreciation
    
    
    33,398
    
    
    
    30,435Other
    
    
    266
    
    
    
    63Total deferred tax liabilities
    
    
    33,664
    
    
    
    30,498Net deferred tax liabilities
    
    
    19,583
    
    
    
    20,205
  F-36




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 26 SHARE CAPITAL
 At December 31,2006
    
    
    2007RMB
    
    
    RMBRegistered, issued and fully paid:State-owned shares
    
    
    157,922
    
    
    
    A shares
    
    
    
    
    
    
    161,922H shares
    
    
    21,099
    
    
    
    21,099179,021
    
    
    
    183,021
 Year Ended December 31,Number of Shares of the Company (millions)
    
    2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBBeginning balance
    
    
    175,824
    
    
    
    179,021
    
    
    
    179,021Issuance of shares
    
    
    3,197
    
    
    
    
    
    
    
    4,000Ending balance
    
    
    179,021
    
    
    
    179,021
    
    
    
    183,021
        F-37




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 27 RESERVES
 Year Ended December 31,2006
    
    
    2007RMB
    
    
    RMBRevaluation ReserveBeginning balance
    
    
    79,946
    
    
    
    79,946Ending balance
    
    
    79,946
    
    
    
    79,946Capital ReserveBeginning balance
    
    
    (8,881
    )
    
    
    (8,881
    )Issuance of A shares (Note 26)
    
    
    
    
    
    
    66,243Ending balance
    
    
    (8,881
    )
    
    
    53,362Statutory Common Reserve Fund(Note a)Beginning balance
    
    
    48,736
    
    
    
    89,928Transfer from retained earnings
    
    
    13,355
    
    
    
    12,768Transfer from Statutory Common Welfare Fund
    
    
    27,837
    
    
    
    Ending balance
    
    
    89,928
    
    
    
    102,696Statutory Common Welfare Fund(Note b)Beginning balance
    
    
    27,837
    
    
    
    Transfer from retained earnings
    
    
    
    
    
    
    Transfer to Statutory Common Reserve Fund
    
    
    (27,837
    )
    
    
    Ending balance
    
    
    
    
    
    
    Currency translation differencesBeginning balance
    
    
    (379
    )
    
    
    (570
    )Currency translation differences
    
    
    (191
    )
    
    
    (771
    )Ending balance
    
    
    (570
    )
    
    
    (1,341
    )Other reservesBeginning balance
    
    
    (14,703
    )
    
    
    (16,859
    )Purchase from minority interest in subsidiaries (Note 35)
    
    
    (2,156
    )
    
    
    (113
    )Fair value gain of available-for-sale financial assets
    
    
    
    
    
    
    261Ending balance
    
    
    (16,859
    )
    
    
    (16,711
    )143,564
    
    
    
    217,952
 
 (a)
    
    Pursuant to the PRC regulations and the Companys Articles of Association, the Company is
required to transfer 10% of its net income, as determined under the PRC accounting
regulations, to a Statutory Common Reserve Fund (Reserve Fund). Appropriation to the
Reserve Fund may be ceased when 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 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 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 Companys registered capital.(b)
    
    Pursuant to the Company Law of the PRC revised on October 27, 2005 and carried out as of
January 1,
2006, the Company is no longer required to allocate its net income to the Statutory Common
Welfare Fund from January 1, 2006. In accordance with the Circular on Accounting Treatment
Following the F-38




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 
 Implementation of Company Law issued by the Ministry of Finance of the PRC on
March 15, 2006, the Company transferred the Statutory Common Welfare Fund balance as at
December 31, 2005 to the Statutory Common Reserve Fund.(c)
    
    According to the relevant PRC regulations, the distributable reserve is the lower of the
retained earnings computed under PRC accounting regulations and IFRS. As of December 31, 2006
and 2007, the Companys distributable reserve amounted to RMB 205,379 and RMB 228,016 which
was computed under IFRS and under PRC accounting regulations, respectively.(d)
    
    As of December 31, 2006 and 2007, revaluation surpluses realized through the depreciation or
disposal of revalued assets amounted to approximately RMB 57,832 and RMB 61,121, respectively. 28 PENSIONS
  29 CONTINGENT LIABILITIES
 (a) Bank and other guarantees
  At December 31,2006
    
    
    2007RMB
    
    
    RMBGuarantee of debts of equity affiliates from
CP Finance
    
    
    162
    
    
    
    77Guarantee of debts of third party from
a State-controlled bank
    
    
    41
    
    
    
    203
    
    
    
    77
 (b) Environmental liabilities
  (c) Legal contingencies
  F-39




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (d) Leasing of roads, land and buildings
  
    
    CNPC will 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 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.
  (e) Group insurance
  F-40




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 30 COMMITMENTS
 (a) Operating lease commitments
  At December 31,2006
    
    
    2007RMB
    
    
    RMBFirst year
    
    
    3,099
    
    
    
    3,394Second year
    
    
    2,749
    
    
    
    3,077Third year
    
    
    2,714
    
    
    
    2,927Fourth year
    
    
    3,040
    
    
    
    3,322Fifth year
    
    
    3,102
    
    
    
    2,650Thereafter
    
    
    80,076
    
    
    
    79,02594,780
    
    
    
    94,395
  (b) Capital commitments
 At December 31,2006
    
    
    2007RMB
    
    
    RMBContracted but not provided forOil and gas properties
    
    
    273
    
    
    
    26Equipment and Machinery
    
    
    8,658
    
    
    
    11,345Other
    
    
    262
    
    
    
    2509,193
    
    
    
    11,621
 (c) Exploration and production licenses
   RMB2008
    
    
    9062009
    
    
    9062010
    
    
    9062011
    
    
    9062012
    
    
    906
 F-41




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 31 MAJOR CUSTOMERS
  Year Ended December 31,2005
    
    
    2006
    
    
    2007% to Total
    
    
    
    
    
    
    % to Total
    
    
    
    
    
    
    % to TotalRevenue
    
    
    Revenue
    
    
    Revenue
    
    
    Revenue
    
    
    Revenue
    
    
    RevenueRMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    %China Petroleum &
ChemicalCorporation
    
    
    35,848
    
    
    
    6
    
    
    
    44,028
    
    
    
    6
    
    
    
    50,292
    
    
    
    6CNPC
    
    
    19,823
    
    
    
    4
    
    
    
    27,714
    
    
    
    4
    
    
    
    31,325
    
    
    
    455,671
    
    
    
    10
    
    
    
    71,742
    
    
    
    10
    
    
    
    81,617
    
    
    
    10
 32 RELATED PARTY TRANSACTIONS
       F-42




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  (a) Bank deposits
 Note
    
    
    At December 31,2006
    
    
    2007RMB
    
    
    RMBBank depositsCP Finance
    
    
    (i
    )
    
    
    8,937
    
    
    
    8,393State-controlled banks and other financial institutions
    
    
    
    
    
    
    37,744
    
    
    
    66,61146,681
    
    
    
    75,004
 Note
    
    
    Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBInterest income from bank depositsCP Finance
    
    
    (i
    )
    
    
    33
    
    
    
    81
    
    
    
    159State-controlled banks and other financial institutions
    
    
    
    
    
    
    1,582
    
    
    
    1,804
    
    
    
    1,0241,615
    
    
    
    1,885
    
    
    
    1,183
  (b) Sales of goods and services
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBSales of goodsEquity affiliates and jointly controlled entities- Crude Oil
    
    
    883
    
    
    
    5,023
    
    
    
    2,374- Refined Products
    
    
    9,766
    
    
    
    19,779
    
    
    
    18,628- Chemical Products
    
    
    308
    
    
    
    90
    
    
    
    753CNPC and its subsidiaries- Crude Oil
    
    
    155
    
    
    
    1,546
    
    
    
    1,766- Refined Products
    
    
    12,364
    
    
    
    16,847
    
    
    
    16,806- Chemical Products
    
    
    4,805
    
    
    
    5,691
    
    
    
    7,161- Natural Gas
    
    
    820
    
    
    
    1,346
    
    
    
    1,835- Other
    
    
    650
    
    
    
    277
    
    
    
    339Other state-controlled enterprises- Crude Oil
    
    
    37,168
    
    
    
    39,632
    
    
    
    47,597- Refined Products
    
    
    86,505
    
    
    
    68,370
    
    
    
    58,903- Chemical Products
    
    
    18,275
    
    
    
    8,979
    
    
    
    10,849- Natural Gas
    
    
    8,127
    
    
    
    7,713
    
    
    
    9,882179,826
    
    
    
    175,293
    
    
    
    176,893
  F-43




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBSales of servicesCNPC and its subsidiaries
    
    
    1,029
    
    
    
    2,007
    
    
    
    3,418Other state-controlled enterprises
    
    
    3,592
    
    
    
    7,761
    
    
    
    8,4974,621
    
    
    
    9,768
    
    
    
    11,915
  (c) Purchases of goods and services
 Year Ended December 31,Notes
    
    
    2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBPurchases of goods
    
    
    (i)Equity affiliates and jointly controlled entities
    
    
    
    
    
    
    4,220
    
    
    
    9,868
    
    
    
    29,239Other state-controlled enterprises
    
    
    
    
    
    
    59,719
    
    
    
    50,995
    
    
    
    58,726Purchases of servicesEquity affiliates and jointly controlled entities
    
    
    
    
    
    
    43
    
    
    
    126
    
    
    
    136CNPC and its subsidiaries- Fees paid for construction and technical services
    
    (ii)- exploration and development services
    
    (iii)
    
    
    39,653
    
    
    
    50,485
    
    
    
    60,194- other construction and technical services
    
    (iv)
    
    
    25,010
    
    
    
    32,256
    
    
    
    37,063- Fees for production services
    
    
    (v)
    
    
    
    23,344
    
    
    
    32,730
    
    
    
    38,395- Social services charges
    
    (vi)
    
    
    2,153
    
    
    
    2,301
    
    
    
    2,229- Ancillary services charges
    
    (vii)
    
    
    2,345
    
    
    
    2,458
    
    
    
    2,635- Commission expense and other charges
    
    (viii)
    
    
    1,612
    
    
    
    1,241
    
    
    
    1,178Other state-controlled enterprises
    
    (ix)
    
    
    6,390
    
    
    
    7,703
    
    
    
    3,546164,489
    
    
    
    190,163
    
    
    
    233,341
 
 (i)
    
    Purchases of goods principally represent the purchases of raw materials, spare parts
and low cost consumables at market prices.(ii)
    
    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 margin of not more than 15%, including exploration and development
services and oilfield construction services.(iii)
    
    Direct costs for exploration and development services comprise geophysical survey,
drilling, well cementing, logging and well testing.(iv)
    
    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..(v)
    
    The fees paid for production services comprise fees for the repair of machinery,
supply of water, electricity and gas at the state-prescribed prices, provision of services
such as communications, transportation, fire fighting, asset leasing, environmental
protection and sanitation, maintenance of roads, manufacture of replacement parts and
machinery at cost or market prices. F-44




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (vi)
    
    These represent expenditures for social welfare and support services which are
charged at cost.(vii)
    
    Ancillary service charges represent mainly fees for property management, the
provision of training centers, guesthouses, canteens, public shower rooms, etc., at market
prices.(viii)
    
    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.(ix)
    
    Purchases of services from other state-controlled enterprises principally represent
the purchases of the construction and technical services at market prices.
 (d) Purchases of assets
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBPurchases of assetsEquity affiliates and jointly controlled entities
    
    
    11
    
    
    
    2
    
    
    
    CNPC and its subsidiaries
    
    
    5,870
    
    
    
    1,795
    
    
    
    2,395Other state-controlled enterprises
    
    
    6,813
    
    
    
    6,617
    
    
    
    5,84012,694
    
    
    
    8,414
    
    
    
    8,235
  (e) Year-end balances arising from sales/purchases of goods/services/assets
 F-45




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 At December 31,2006
    
    
    2007RMB
    
    
    RMBAccounts receivable from related parties at the end of the yearEquity affiliates and jointly controlled entities
    
    
    82
    
    
    
    296Fellow subsidiaries (CNPC Group)
    
    
    599
    
    
    
    3,796Other state-controlled enterprises
    
    
    1,566
    
    
    
    1,9102,247
    
    
    
    6,002Less: Allowance for doubtful accounts receivableEquity affiliates and jointly controlled entities
    
    
    (5
    )
    
    
    Fellow subsidiaries (CNPC Group)
    
    
    (232
    )
    
    
    (189
    )Other state-controlled enterprises
    
    
    (861
    )
    
    
    (708
    )(1,098
    )
    
    
    (897
    )1,149
    
    
    
    5,105Prepayments and other receivables from related parties at the end of the yearEquity affiliates and jointly controlled entities
    
    
    4,307
    
    
    
    2,412Parent (CNPC)
    
    
    196
    
    
    
    Fellow subsidiaries (CNPC Group)
    
    
    7,220
    
    
    
    10,335Other state-controlled enterprises
    
    
    4,202
    
    
    
    6,80915,925
    
    
    
    19,556Less: Allowance for doubtful receivablesEquity affiliates and jointly controlled entities
    
    
    (212
    )
    
    
    (39
    )Fellow subsidiaries (CNPC Group)
    
    
    (4
    )
    
    
    (22
    )Other state-controlled enterprises
    
    
    (299
    )
    
    
    (79
    )(515
    )
    
    
    (140
    )15,410
    
    
    
    19,416Accounts payable and accrued liabilities to related parties at the end of the yearEquity affiliates and jointly controlled entities
    
    
    1,444
    
    
    
    117Parent (CNPC)
    
    
    2,321
    
    
    
    922Fellow subsidiaries (CNPC Group)
    
    
    26,046
    
    
    
    32,154Other state-controlled enterprises
    
    
    5,462
    
    
    
    7,14135,273
    
    
    
    40,334
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBNet changes in allowance for doubtful accounts receivable
from related
parties charged to the consolidated statements of incomeEquity affiliates and jointly controlled entities
    
    
    
    
    
    
    5
    
    
    
    (5
    )Fellow subsidiaries (CNPC Group)
    
    
    24
    
    
    
    (11
    )
    
    
    (32
    )Other state-controlled enterprises
    
    
    (62
    )
    
    
    (52
    )
    
    
    (38
    )
    
    
    (58
    )
    
    
    (37
    )Net changes in allowance for doubtful receivables
from related parties charged to the consolidated
statements of incomeEquity affiliates and jointly controlled entities
    
    
    (55
    )
    
    
    (20
    )
    
    
    (173
    )Fellow subsidiaries (CNPC Group)
    
    
    55
    
    
    
    (32
    )
    
    
    18Other state-controlled enterprises
    
    
    (35
    )
    
    
    12
    
    
    
    (218
    )(35
    )
    
    
    (40
    )
    
    
    (373
    )
 F-46




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (f) Leases
 Year Ended December 31,Notes
    
    
    2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBAdvance operating lease payments paid to related
parties:
    
    
    (i)Parent (CNPC)
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    Other state-controlled enterprises
    
    
    
    
    
    
    33
    
    
    
    49
    
    
    
    88265
    
    
    
    49
    
    
    
    88Other
operating lease payments paid to related parties:
    
    (ii)Parent (CNPC)
     
    
     
     
     
     
    2,192
    
    
    
    2,276
    
    
    
    2,292Other state-controlled enterprises
    
    
    
    
    
    
    5
    
    
    
    16
    
    
    
    21
    
    
    
    
    
    
    2,197
    
    
    
    2,292
    
    
    
    2,313
 
 (i)
    
    Advance operating lease payments principally represent the advance payment paid for the
long-term operating lease of land and gas stations at prices prescribed by local
governments or market prices.(ii)
    
    Other operating lease payments to CNPC principally represent the rental paid for the
operating lease of land and buildings at the prices prescribed in the Land Use Rights
Leasing Contract, the Buildings Leasing Contract and Supplemental Buildings Leasing
Agreement with CNPC. At December 31,2006
    
    
    2007RMB
    
    
    RMBOperating lease payable to related partiesParent (CNPC)
    
    
    
    
    
    
    16Other state-controlled enterprises
    
    
    7
    
    
    
    7
    
    
    
    16
 (g) Loans
 Year Ended December 31,2005
    
    
    2006
    
    
    2007Loans to related parties
    
    RMB
    
    
    RMB
    
    
    RMBLoans to equity affiliates:Beginning of the year
    
    
    569
    
    
    
    1,640
    
    
    
    1,800Loans advanced during year
    
    
    1,392
    
    
    
    1,034
    
    
    
    366Loans repayments received
    
    
    (321
    )
    
    
    (884
    )
    
    
    (322
    )Interest charged
    
    
    29
    
    
    
    154
    
    
    
    129Interest received
    
    
    (29
    )
    
    
    (144
    )
    
    
    (120
    )End of the year
    
    
    1,640
    
    
    
    1,800
    
    
    
    1,853
  F-47




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  Year Ended December 31,Notes
    
    
    2005
    
    
    2006
    
    
    2007Loans from related parties
    
    
    
    
    
    RMB
    
    
    RMB
    
    
    RMBLoans from CP Finance:
    
    
    (i)Beginning of the year
    
    
    
    
    
    
    29,932
    
    
    
    27,319
    
    
    
    27,184Loan received during year
    
    
    
    
    
    
    10,187
    
    
    
    7,408
    
    
    
    7,238Loan repayments paid
    
    
    
    
    
    
    (12,706
    )
    
    
    (7,350
    )
    
    
    (9,575
    )Interest charged
    
    
    
    
    
    
    1,297
    
    
    
    1,327
    
    
    
    1,377Interest paid
    
    
    
    
    
    
    (1,294
    )
    
    
    (1,305
    )
    
    
    (1,388
    )Currency translation differences
    
    
    
    
    
    
    (97
    )
    
    
    (215
    )
    
    
    (343
    )End of the year
    
    
    
    
    
    
    27,319
    
    
    
    27,184
    
    
    
    24,493Loans from state-controlled banks
and other financial institutions:
    
    (ii)Beginning of the year
    
    
    
    
    
    
    36,562
    
    
    
    31,178
    
    
    
    32,810Loan received during year
    
    
    
    
    
    
    24,715
    
    
    
    28,457
    
    
    
    38,320Loan repayments paid
    
    
    
    
    
    
    (29,976
    )
    
    
    (26,576
    )
    
    
    (36,335
    )Interest charged
    
    
    
    
    
    
    1,670
    
    
    
    1,598
    
    
    
    1,869Interest paid
    
    
    
    
    
    
    (1,664
    )
    
    
    (1,626
    )
    
    
    (1,875
    )Currency translation differences
    
    
    
    
    
    
    (129
    )
    
    
    (221
    )
    
    
    (526
    )End of the year
    
    
    
    
    
    
    31,178
    
    
    
    32,810
    
    
    
    34,263Loans from other related parties:
    
    (iii)Beginning of the year
    
    
    
    
    
    
    16
    
    
    
    62
    
    
    
    5Loan received during year
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    Loan repayments paid
    
    
    
    
    
    
    (5
    )
    
    
    (57
    )
    
    
    Interest charged
    
    
    
    
    
    
    1
    
    
    
    2
    
    
    
    Interest paid
    
    
    
    
    
    
    (1
    )
    
    
    (2
    )
    
    
    End of the year
    
    
    
    
    
    
    62
    
    
    
    5
    
    
    
    5
 
 (i)
    
    The loans from CP Finance are mainly with interest rates ranging from 4.46% to 6.06% and
4.46% to 7.47% per annum as of December 31, 2006 and 2007, respectively with maturities through
2032.(ii)
    
    The loans from state-controlled banks and other financial institutions are mainly with
interest rates ranging from zero to 8.66% and zero to 8.66% per annum as of December 31, 2006 and
2007, respectively with maturities through 2038.(iii)
    
    The loans from other related parties are mainly with interest rate at 6.32% and 6.32%
per annum as of December 31, 2006 and 2007 respectively, and with no fixed repayment terms.    F-48




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 (h) Key management compensation
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB000
    
    
    RMB000
    
    
    RMB000Fee for key management personnel- Directors and supervisors
    
    
    897
    
    
    
    1,473
    
    
    
    1,504Salaries, allowances and other benefits(i)-Directors and supervisors
    
    
    4,031
    
    
    
    3,937
    
    
    
    3,767-Other key management
    
    
    2,207
    
    
    
    2,447
    
    
    
    5,002Contribution to retirement benefit scheme- Directors and supervisors
    
    
    57
    
    
    
    165
    
    
    
    136- Other key management
    
    
    37
    
    
    
    133
    
    
    
    2097,229
    
    
    
    8,155
    
    
    
    10,618
 
 (i)
    
    Salaries, allowances and other benefits do not include deferred payments made to directors
and other key management in accordance with the relevant PRC government regulations, in respect of
2004 to 2006 in the amount of RMB 5,143 thousand.  (i) Contingent liabilities
  (j) Collateral for debts
   F-49




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 33 EMOLUMENTS OF DIRECTORS AND SUPERVISORS
  2007
    
    
    2006
    
    
    2005Fee for
    
    
    Salaries,directors
    
    
    allowances
    
    
    Contributionand
    
    
    and other
    
    
    to retirementName
    
    supervisors
    
    
    benefits
    
    
    benefit scheme
    
    
    Total
    
    
    Total
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Chairman:Mr. Chen Geng (iii), (iv)
    
    
    
    
    
    
    586
    
    
    
    12
    
    
    
    598
    
    
    
    797
    
    
    
    790Mr. Jiang Jiemin (iv)
    
    
    
    
    
    
    886
    
    
    
    30
    
    
    
    916
    
    
    
    722
    
    
    
    625
    
    
    
    1,472
    
    
    
    42
    
    
    
    1,514
    
    
    
    1,519
    
    
    
    1,415Executive directors:Mr. Su Shulin (ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684
    
    
    
    686Mr. Duan Wende (iv)
    
    
    
    
    
    
    794
    
    
    
    30
    
    
    
    824
    
    
    
    684
    
    
    
    686
    
    
    
    794
    
    
    
    30
    
    
    
    824
    
    
    
    1,368
    
    
    
    1,372Non-executive directors:Mr. Zheng Hu
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Zhou Jiping
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Wang Yilin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Zeng Yukang
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Gong Huazhang
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Jiang Fan
    
    
    
    
    
    
    480
    
    
    
    19
    
    
    
    499
    
    
    
    461
    
    
    
    33Mr. Chee-chen Tung
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    275
    
    
    
    275Mr. Liu Hongru
    
    
    349
    
    
    
    
    
    
    
    
    
    
    
    349
    
    
    
    279
    
    
    
    274Mr. Franco Bernabè
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    257
    
    
    
    259
    
    
    
    279Mr. Zou Haifeng (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283870
    
    
    
    480
    
    
    
    19
    
    
    
    1,369
    
    
    
    1,274
    
    
    
    1,144Supervisors:Mr. Wang Fucheng
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    530Mr. Wen Qingshan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Sun Xianfeng
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Xu Fengli (iii)
    
    
    
    
    
    
    252
    
    
    
    12
    
    
    
    264
    
    
    
    459
    
    
    
    374Mr. Qin Gang
    
    
    
    
    
    
    454
    
    
    
    15
    
    
    
    469
    
    
    
    295
    
    
    
    Mr. Li Yongwu
    
    
    315
    
    
    
    
    
    
    
    
    
    
    
    315
    
    
    
    330
    
    
    
    12Mr. Wu Zhipan
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    319
    
    
    
    330
    
    
    
    57Mr. Sun Chongren (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81Mr. Zhang Jinzhu
    
    
    
    
    
    
    315
    
    
    
    18
    
    
    
    333
    
    
    
    
    
    
    
    634
    
    
    
    1,021
    
    
    
    45
    
    
    
    1,700
    
    
    
    1,414
    
    
    
    1,0541,504
    
    
    
    3,767
    
    
    
    136
    
    
    
    5,407
    
    
    
    5,575
    
    
    
    4,985
 
 (i)
    
    No longer a director or supervisor since November 8, 2005.(ii)
    
    No longer a director since November 24, 2006.(iii)
    
    No longer a director or supervisor since May 16, 2007.(iv)
    
    Salaries, allowances and other benefits do not include deferred payments made to
directors in accordance with the relevant PRC government regulations, in respect of 2004
to 2006 in the amount of RMB 2,402 thousand. F-50




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  
 2007
    
    
    2006
    
    
    2005Number
    
    
    Number
    
    
    NumberRMB Nil  RMB 1 million
    
    
    20
    
    
    
    20
    
    
    
    25
















F-51



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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 34 SEGMENT INFORMATION
          F-52




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 Primary reporting format business segments
 Exploration
    
    
    Refiningand
    
    
    and
    
    
    Chemicals and
    
    
    NaturalYear Ended December 31, 2005
    
    Production
    
    
    Marketing
    
    
    Marketing
    
    
    Gas and Pipeline
    
    
    Other
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBSales and other operating
revenues (including
intersegment)
    
    
    337,208
    
    
    
    428,494
    
    
    
    73,978
    
    
    
    26,214
    
    
    
    
    
    
    
    865,894Less: Intersegment sales
    
    
    (270,943
    )
    
    
    (33,019
    )
    
    
    (4,754
    )
    
    
    (4,949
    )
    
    
    
    
    
    
    (313,665
    )Total sales and other
operating revenues from
external customers
    
    
    66,265
    
    
    
    395,475
    
    
    
    69,224
    
    
    
    21,265
    
    
    
    
    
    
    
    552,229Depreciation, depletion and
amortization
    
    
    (30,896
    )
    
    
    (8,964
    )
    
    
    (6,869
    )
    
    
    (4,478
    )
    
    
    (98
    )
    
    
    (51,305
    )Segment result
    
    
    220,452
    
    
    
    2,116
    
    
    
    6,896
    
    
    
    3,639
    
    
    
    (1,357
    )
    
    
    231,746Other costs
    
    
    (12,372
    )
    
    
    (21,926
    )
    
    
    (3,620
    )
    
    
    (456
    )
    
    
    (1,201
    )
    
    
    (39,575
    )Income/(loss) from operations
    
    
    208,080
    
    
    
    (19,810
    )
    
    
    3,276
    
    
    
    3,183
    
    
    
    (2,558
    )
    
    
    192,171Finance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750
    )Income from equity
affiliates and jointly controlled
entities
    
    
    1,851
    
    
    
    522
    
    
    
    15
    
    
    
    
    
    
    
    13
    
    
    
    2,401Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193,822Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,180
    )Income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,642Interest income(including
intersegment)
    
    
    3,912
    
    
    
    998
    
    
    
    387
    
    
    
    100
    
    
    
    5,763
    
    
    
    11,160Less: Intersegment
interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,236
    )Interest income from external
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,924Interest expense(including
intersegment)
    
    
    (3,631
    )
    
    
    (2,659
    )
    
    
    (636
    )
    
    
    (1,105
    )
    
    
    (3,967
    )
    
    
    (11,998
    )Less: Intersegment
interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,236Interest expense to external
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,762
    )Segment assets
    
    
    460,814
    
    
    
    207,168
    
    
    
    76,414
    
    
    
    69,229
    
    
    
    543,894
    
    
    
    1,357,519Elimination of
intersegment balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (591,830
    )Investments in equity affiliates
and jointly controlled entities
    
    
    5,470
    
    
    
    6,605
    
    
    
    250
    
    
    
    
    
    
    
    53
    
    
    
    12,378Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    778,067Segment capital expenditure
 for property, plant and
equipment
    
    
    83,214
    
    
    
    16,454
    
    
    
    13,569
    
    
    
    11,137
    
    
    
    427
    
    
    
    124,801Segment liabilities
    
    
    147,610
    
    
    
    97,918
    
    
    
    30,559
    
    
    
    40,847
    
    
    
    161,755
    
    
    
    478,689Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,735Elimination of
intersegment balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291,024
    )Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,400
 F-53




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 Exploration
    
    
    Refiningand
    
    
    and
    
    
    Chemicals and
    
    
    NaturalYear Ended December 31, 2006
    
    Production
    
    
    Marketing
    
    
    Marketing
    
    
    Gas and Pipeline
    
    
    Other
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBSales and other operating
revenues (including
intersegment)
    
    
    421,340
    
    
    
    543,299
    
    
    
    82,791
    
    
    
    38,917
    
    
    
    1,080
    
    
    
    1,087,427Less: Intersegment sales
    
    
    (339,619
    )
    
    
    (44,806
    )
    
    
    (7,983
    )
    
    
    (5,617
    )
    
    
    (424
    )
    
    
    (398,449
    )Total sales and other
operating revenues from
external customers
    
    
    81,721
    
    
    
    498,493
    
    
    
    74,808
    
    
    
    33,300
    
    
    
    656
    
    
    
    688,978Depreciation, depletion and
amortization
    
    
    (37,080
    )
    
    
    (12,080
    )
    
    
    (6,417
    )
    
    
    (5,263
    )
    
    
    (548
    )
    
    
    (61,388
    )Segment result
    
    
    232,404
    
    
    
    (5,206
    )
    
    
    8,208
    
    
    
    9,470
    
    
    
    (3,058
    )
    
    
    241,818Other costs
    
    
    (12,544
    )
    
    
    (23,958
    )
    
    
    (3,150
    )
    
    
    (484
    )
    
    
    (3,706
    )
    
    
    (43,842
    )Income/(loss) from operations
    
    
    219,860
    
    
    
    (29,164
    )
    
    
    5,058
    
    
    
    8,986
    
    
    
    (6,764
    )
    
    
    197,976Finance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,080
    )Income from equity
affiliates and jointly controlled
entities
    
    
    1,889
    
    
    
    333
    
    
    
    38
    
    
    
    1
    
    
    
    16
    
    
    
    2,277Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,173Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,776
    )Income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149,397Interest income(including
intersegment)
    
    
    4,853
    
    
    
    1,471
    
    
    
    634
    
    
    
    157
    
    
    
    7,171
    
    
    
    14,286Less: Intersegment interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,220
    )Interest income from external
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,066Interest expense(including
intersegment)
    
    
    (5,043
    )
    
    
    (3,790
    )
    
    
    (679
    )
    
    
    (1,614
    )
    
    
    (4,314
    )
    
    
    (15,440
    )Less: Intersegment interest
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,220Interest expense to external
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,220
    )Segment assets
    
    
    484,547
    
    
    
    246,828
    
    
    
    79,964
    
    
    
    75,432
    
    
    
    638,616
    
    
    
    1,525,387Elimination of intersegment
balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (686,180
    )Investments in equity affiliates
and jointly controlled entity
    
    
    27,127
    
    
    
    5,587
    
    
    
    153
    
    
    
    20
    
    
    
    69
    
    
    
    32,956Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872,163Segment capital expenditure
 for property, plant and
equipment
    
    
    105,192
    
    
    
    19,206
    
    
    
    10,681
    
    
    
    11,309
    
    
    
    2,358
    
    
    
    148,746Segment liabilities
    
    
    181,542
    
    
    
    116,002
    
    
    
    27,092
    
    
    
    43,616
    
    
    
    170,152
    
    
    
    538,404Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,517Elimination of intersegment
balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (327,349
    )Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254,572
 F-54




---



##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 Exploration
    
    
    Refiningand
    
    
    and
    
    
    Chemicals and
    
    
    NaturalYear Ended December 31, 2007
    
    Production
    
    
    Marketing
    
    
    Marketing
    
    
    Gas and Pipeline
    
    
    Other
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBSales and other operating
revenues (including
intersegment)
    
    
    468,175
    
    
    
    670,844
    
    
    
    102,718
    
    
    
    50,066
    
    
    
    1,718
    
    
    
    1,293,521Less: Intersegment sales
    
    
    (376,451
    )
    
    
    (63,766
    )
    
    
    (11,009
    )
    
    
    (6,610
    )
    
    
    (648
    )
    
    
    (458,484
    )Total sales and other
operating revenues from
external customers
    
    
    91,724
    
    
    
    607,078
    
    
    
    91,709
    
    
    
    43,456
    
    
    
    1,070
    
    
    
    835,037Depreciation, depletion and
amortization
    
    
    (42,945
    )
    
    
    (11,184
    )
    
    
    (5,923
    )
    
    
    (5,926
    )
    
    
    (647
    )
    
    
    (66,625
    )Segment result
    
    
    220,430
    
    
    
    9,341
    
    
    
    13,256
    
    
    
    13,057
    
    
    
    (3,388
    )
    
    
    252,696Other costs
    
    
    (13,843
    )
    
    
    (30,021
    )
    
    
    (5,425
    )
    
    
    (562
    )
    
    
    (2,990
    )
    
    
    (52,841
    )Income/(loss) from operations
    
    
    206,587
    
    
    
    (20,680
    )
    
    
    7,831
    
    
    
    12,495
    
    
    
    (6,378
    )
    
    
    199,855Finance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,471
    )Income from equity
affiliates and jointly controlled
entities
    
    
    6,460
    
    
    
    477
    
    
    
    41
    
    
    
    2
    
    
    
    17
    
    
    
    6,997Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204,381Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,152
    )Income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155,229Interest income(including
intersegment)
    
    
    7,346
    
    
    
    2,021
    
    
    
    804
    
    
    
    122
    
    
    
    8,846
    
    
    
    19,139Less: Intersegment interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,149
    )Interest income from external
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,990Interest expense(including
intersegment)
    
    
    (7,492
    )
    
    
    (4,695
    )
    
    
    (901
    )
    
    
    (1,720
    )
    
    
    (5,936
    )
    
    
    (20,744
    )Less: Intersegment interest
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,149Interest expense to external
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,595
    )Segment assets
    
    
    548,895
    
    
    
    274,435
    
    
    
    94,976
    
    
    
    80,252
    
    
    
    819,153
    
    
    
    1,817,711Elimination of intersegment
balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (784,115
    )Investments in equity affiliates
and jointly controlled entities
    
    
    21,339
    
    
    
    4,973
    
    
    
    138
    
    
    
    17
    
    
    
    68
    
    
    
    26,535Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,060,131Segment capital expenditure- for
property, plant and equipment
    
    
    134,256
    
    
    
    26,546
    
    
    
    8,165
    
    
    
    11,003
    
    
    
    1,613
    
    
    
    181,583Segment liabilities
    
    
    225,483
    
    
    
    145,263
    
    
    
    33,389
    
    
    
    39,790
    
    
    
    188,774
    
    
    
    632,699Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,013Elimination of intersegment
balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,928
    )Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283,784
 F-55




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 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.Note (c)
    
    Segment results for the years ended December 31, 2005, 2006 and 2007 include
impairment provision for property, plant and equipment (Note 17).Note (d)
    
    Other liabilities mainly include income tax payable, other taxes payable and deferred
income taxes.Note (e)
    
    Elimination of intersegment balances represents elimination of intersegment accounts
and investments.Note (f)
    
    Effective January 1, 2006, the results of operations, together with the corresponding
assets and liabilities, of certain research and development activities of the Group are
reclassified from the Exploration and Production segment, the Refining and Marketing segment,
the Chemicals and Marketing segment and the Natural Gas and Pipeline segment to the Other
segment to reflect the changes in the manner under which these activities are managed. The
results of operations, together with the corresponding assets and liabilities, of these
research and development activities were included in the previously reported segments in the
segment information for the year ended December 31, 2005. Selected financial data of these
research and development activities as of December 31, 2005 and for the year ended December
31, 2005 are as follows:
 Exploration
    
    
    Refining
    
    
    Chemicals
    
    
    Naturaland
    
    
    and
    
    
    and
    
    
    Gas andYear
ended December 31, 2005
    
    Production
    
    
    Marketing
    
    
    Marketing
    
    
    Pipeline
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBTurnover (including intersegment)
    
    
    543
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    582Turnover from external customers
    
    
    21
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    50Depreciation, depletion and
amortization
    
    
    (295
    )
    
    
    (26
    )
    
    
    (64
    )
    
    
    (6
    )
    
    
    (391
    )Segment result
    
    
    (714
    )
    
    
    (88
    )
    
    
    (162
    )
    
    
    (21
    )
    
    
    (985
    )Other costs
    
    
    (664
    )
    
    
    (96
    )
    
    
    (81
    )
    
    
    (42
    )
    
    
    (883
    )Loss from operations
    
    
    (1,378
    )
    
    
    (184
    )
    
    
    (243
    )
    
    
    (63
    )
    
    
    (1,868
    )Income from equity affiliates and
jointly controlled entities
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Segment assets
    
    
    2,163
    
    
    
    272
    
    
    
    374
    
    
    
    52
    
    
    
    2,861Segment liabilities
    
    
    1,183
    
    
    
    320
    
    
    
    164
    
    
    
    21
    
    
    
    1,688
 Secondary reporting format  geographical segments
 Revenue
    
    
    Total assets
    
    
    Capital expenditureYear Ended December 31,
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBPRC
    
    
    665,267
    
    
    
    807,706
    
    
    
    811,919
    
    
    
    979,124
    
    
    
    142,371
    
    
    
    171,510Other (Exploration and Production)
    
    
    23,711
    
    
    
    27,331
    
    
    
    60,244
    
    
    
    81,007
    
    
    
    6,375
    
    
    
    10,073688,978
    
    
    
    835,037
    
    
    
    872,163
    
    
    
    1,060,131
    
    
    
    148,746
    
    
    
    181,583
 F-56




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 35 PRINCIPAL SUBSIDIARIES
   AttributableCountry of
    
    Paid-up
    
    Type of
    
    EquityCompany Name
    
    Incorporation
    
    Capital RMB
    
    Legal Entity
    
    Interest %
    
    Principal ActivitiesDaqing Oilfield 
Company 
Limited
    
    PRC
    

    47,500

    
    Limited liability
company
    

    100.00

    
    Exploration,
production and sale
of crude oil and
natural gas;
production and sale
of refined productsDaqing Yu Shu Lin 
Oilfield Company 
Limited
    
    PRC
    

    1,272

    
    Limited liability
company
    

    88.16

    
    Exploration,
production and sale
of crude oil and
natural gasCNPC Exploration
and Development
Company Limited
    
    PRC
    
100

    
    Limited liability
company
    
50.00

    
    Exploration,
production and sale
of crude oil and
natural gas outside
of the PRCPetroKazakhstan
Inc. (Note 18)
    
    Canada
    
    US Dollar
2,465 million
    
    Joint stock company
with limited
liability
    
67.00

    
    Exploration,
production and sale
of crude oil and
natural gas outside
of the PRC
  F-57




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
  EquityNumber of
    
    Purchase
    
    
    
    Total cash
    
    interest heldEntity
    
    outstanding
    
    price per
    
    Number of shares
    
    consideration
    
    after thename
    
    shares
    
    share
    
    acquired
    
    paid
    
    acquisition %Jinzhou
PetroChemical
Company Limited
(JCPL)
    
    150,000,000 A shares
    
    RMB 4.25 yuan per A
share
    
    150,000,000 A
shares as of June
30, 2007
    
    RMB 638 as of
December 31, 2007
    

100.00

    
    JCPL was delisted
from the Shenzhen
Stock Exchange on
January 4, 2006.In November 2007,
the Liaoning
Administration for
Industry and
Commerce approved
JCPLs
deregistration as
an incorporated
company.Jilin Chemical
Industrial Company
Limited (JCIC)
    
    200,000,000 A shares
    
    RMB 5.25 yuan per A
share
    
    200,000,000 A
shares as of
December 31, 2007
    
    RMB 3,862 as of
December 31, 2007
    
    100.00

    
    JCIC was delisted
from the Shenzhen
Stock Exchange on
February 20, 2006.964,778,000 H
shares (including
American Depositary
Shares) (ADS)
    
    HK$2.80 per H share
    
    964,778,000 H
shares (including
ADS) as of December
31, 2007
    
    
    
    
    
    
    
    JCIC was delisted
from the Stock
Exchange of Hong
Kong Limited and
the New York Stock
Exchange on January
23, 2006 and
February 15, 2006,
respectively.In December 2007,
the Jilin
Administration for
Industry and
Commerce approved
JCICs
deregistration as
an incorporated
company.Liaohe Jinma
Oilfield Company
Limited (LJOCL)
    
    200,000,000 A shares
    
    RMB 8.80 yuan per A
share
    
    200,000,000 A
shares as of June
30, 2007
    
    RMB 1,763 as of
December 31, 2007
    

    100.00

    
    LJOCL was delisted
from the Shenzhen
Stock Exchange on
January 4, 2006.In May 2007, the
Liaoning
Administration for
Industry and
Commerce approved
LJOCLs
deregistration as
an incorporated
company.
  F-58




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
 36 EVENTS AFTER BALANCE SHEET DATE
  37 APPROVAL OF FINANCIAL STATEMENTS
  F-59




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
 Disclosures about Oil
and Gas Producing Activities
 Results of Operations
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBSales and other operating revenuesSales to third parties
    
    
    66,265
    
    
    
    81,721
    
    
    
    91,724Intersegment sales
    
    
    261,558
    
    
    
    313,654
    
    
    
    336,999327,823
    
    
    
    395,375
    
    
    
    428,723Production costs excluding taxes
    
    
    (41,713
    )
    
    
    (54,800
    )
    
    
    (63,118
    )Exploration expenses
    
    
    (15,566
    )
    
    
    (18,822
    )
    
    
    (20,648
    )Depreciation, depletion and amortization
    
    
    (25,819
    )
    
    
    (31,540
    )
    
    
    (36,400
    )Taxes other than income taxes
    
    
    (10,239
    )
    
    
    (41,354
    )
    
    
    (56,474
    )Accretion expense
    
    
    (60
    )
    
    
    (796
    )
    
    
    (1,202
    )Income before income taxes
    
    
    234,426
    
    
    
    248,063
    
    
    
    250,881Income taxes
    
    
    (64,816
    )
    
    
    (65,554
    )
    
    
    (57,386
    )Results of operations from producing activities
    
    
    169,610
    
    
    
    182,509
    
    
    
    193,495Income from
producing activities of equity affiliates and jointly controlled
entities
    
    
    1,880
    
    
    
    4,424
    
    
    
    5,293
 Capitalised Costs
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBProperty costs
    
    
    
    
    
    
    
    
    
    
    Producing assets
    
    
    359,539
    
    
    
    425,172
    
    
    
    497,117Support facilities
    
    
    138,093
    
    
    
    150,149
    
    
    
    171,590Construction-in-progress
    
    
    19,394
    
    
    
    25,461
    
    
    
    43,070Total capitalized costs
    
    
    517,026
    
    
    
    600,782
    
    
    
    711,777Accumulated depreciation, depletion
and amortization
    
    
    (203,416
    )
    
    
    (233,677
    )
    
    
    (264,992
    )Net capitalized costs
    
    
    313,610
    
    
    
    367,105
    
    
    
    446,785Share of net
capitalized costs of equity affiliates and jointly controlled entities
    
    
    20,597
    
    
    
    25,136
    
    
    
    14,252
 Costs Incurred in Property Acquisitions, Exploration and Development Activities
 Year Ended December 31,2005
    
    
    2006
    
    
    2007RMB
    
    
    RMB
    
    
    RMBProperty acquisition costs
    
    
    
    
    
    
    
    
    
    
    Exploration costs
    
    
    25,335
    
    
    
    30,567
    
    
    
    36,046Development costs
    
    
    72,551
    
    
    
    79,902
    
    
    
    96,449Total
    
    
    97,886
    
    
    
    110,469
    
    
    
    132,495Share of
costs of property acquisition, exploration, and development of equity
affiliates and jointly controlled entities
    
    
    2,590
    
    
    
    4,371
    
    
    
    2,911
 F-60




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
 Proved Reserve Estimates
      F-61




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
 Crude Oil andCondensate
    
    
    Natural Gas(millions of barrels)
    
    
    (billions of cubic feet)Proved developed and undevelopedReserves at January 1, 2005
    
    
    11,501
    
    
    
    45,249Changes resulting from:Revisions of previous estimates
    
    
    157
    
    
    
    213Improved recovery
    
    
    101
    
    
    
    Extensions and discoveries
    
    
    606
    
    
    
    4,005Production
    
    
    (829
    )
    
    
    (1,344
    )Reserves at December 31, 2005
    
    
    11,536
    
    
    
    48,123Changes resulting from:Revisions of previous estimates
    
    
    197
    
    
    
    686Improved recovery
    
    
    81
    
    
    
    Extensions and discoveries
    
    
    635
    
    
    
    6,248Production
    
    
    (831
    )
    
    
    (1,588
    )Reserves at December 31, 2006
    
    
    11,618
    
    
    
    53,469Changes resulting from:Revisions of previous estimates
    
    
    84
    
    
    
    (1,062
    )Improved recovery
    
    
    79
    
    
    
    Extensions and discoveries
    
    
    764
    
    
    
    6,331Production
    
    
    (839
    )
    
    
    (1,627
    )Reserves at December 31, 2007
    
    
    11,706
    
    
    
    57,111Proved developed reserves at:December 31, 2005
    
    
    9,195
    
    
    
    19,858December 31, 2006
    
    
    9,185
    
    
    
    22,564December 31, 2007
    
    
    9,047
    
    
    
    26,047Proportional interest in proved reserves of equity
affiliates
and jointly controlled entities at:December 31, 2005
    
    
    631
    
    
    
    145December 31, 2006
    
    
    543
    
    
    
    105December 31, 2007
    
    
    141
    
    
    
    79
  F-62




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
 Standardized Measure
 Disclosures about Oil and Gas Producing Activities
  At December 31, 2005Future cash
inflows from sales of oil and gas
    
    
    5,337,329Future production costs
    
    
    (1,043,358
    )Future development costs
    
    
    (156,575
    )Future income tax expense
    
    
    (1,279,133
    )Future net cash flows
    
    
    2,858,263Discount at 10% for estimated timing of cash flows
    
    
    (1,472,069
    )Standardized measure of discounted future net cash flows
    
    
    1,386,194At December 31, 2006Future cash
inflows from sales of oil and gas
    
    
    5,611,306Future production costs
    
    
    (1,620,761
    )Future development costs
    
    
    (296,175
    )Future income tax expense
    
    
    (1,202,980
    )Future net cash flows
    
    
    2,491,390Discount at 10% for estimated timing of cash flows
    
    
    (1,336,045
    )Standardized measure of discounted future net cash flows
    
    
    1,155,345At December 31, 2007Future cash
inflows from sales of oil and gas
    
    
    8,714,483Future production costs
    
    
    (3,049,226
    )Future development costs
    
    
    (437,946
    )Future income tax expense
    
    
    (1,569,898
    )Future net cash flows
    
    
    3,657,413Discount at 10% for estimated timing of cash flows
    
    
    (1,835,343
    )Standardized measure of discounted future net cash flows
    
    
    1,822,070Share of
standardized measure of discounted future net cash flows of equity
affiliates and jointly controlled entitiesAt December 31, 2005
    
    
    31,703At December 31, 2006
    
    
    59,825At December 31, 2007
    
    
    33,543
  F-63




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##### Table of Contents



PETROCHINA COMPANY LIMITED
 SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
  Year Ended December 31,2005
    
    
    2006
    
    
    2006RMB
    
    
    RMB
    
    
    RMBCHANGES IN STANDARDISED MEASURE OF DISCOUNTED FUTURE
CASH FLOWSBeginning of the year
    
    
    1,000,458
    
    
    
    1,386,194
    
    
    
    1,155,345Sales and transfers of oil and gas produced, net of
production costs
    
    
    (274,921
    )
    
    
    (328,001
    )
    
    
    (309,269
    )Net changes in prices and production costs and other
    
    
    523,089
    
    
    
    (317,593
    )
    
    
    804,330Extensions, discoveries and improved recovery
    
    
    157,343
    
    
    
    166,249
    
    
    
    256,476Development costs incurred
    
    
    (11,282
    )
    
    
    (47,551
    )
    
    
    (39,031
    )Revisions of previous quantity estimates
    
    
    21,678
    
    
    
    32,306
    
    
    
    (3,567
    )Accretion of discount
    
    
    144,709
    
    
    
    200,771
    
    
    
    171,389Net change in income taxes
    
    
    (174,880
    )
    
    
    62,970
    
    
    
    (213,603
    )End of the year
    
    
    1,386,194
    
    
    
    1,155,345
    
    
    
    1,822,070
 F-64