CNOOC LIMITED Annual Report 2003
Financial Summary
(Amounts expressed in millions of RMB)
Consolidated Income Statement
Year ended 31 December
1999 2000 2001 2002 2003
--------------------------------------------------------------
Total revenue 15,311 24,224 20,820 26,374 40,950
Total expenses (9,490) (12,166) (10,596) (13,626) (25,267)
Interest income (expenses), net (568) (238) 201 (147) (171)
Exchange gain/(loss), net (432) 381 235 (114) (7)
Share of profit of an associate 13 218 90 165 220
Short term investment income - - 221 193 123
Non-operating income (expenses), net (1) (196) 35 (71) 315
-------- -------- -------- -------- --------
Profit before taxation 4,833 12,223 11,006 12,774 16,163
Provision for taxation (722) (1,926) (3,048) (3,541) (4,628)
-------- -------- -------- -------- --------
Net profit 4,111 10,297 7,958 9,233 11,535
======== ======== ======== ======== ========
Consolidated Balance Sheet
As at 31 December
1999 2000 2001 2002 2003
--------------------------------------------------------------
Current assets 4,987 9,472 20,030 24,486 29,263
Property, plant and equipment, net 20,908 22,654 23,828 36,072 43,124
Investment in associates 274 471 462 537 1,117
-------- -------- -------- -------- --------
Total assets 26,169 32,597 44,320 61,095 73,504
-------- -------- -------- -------- --------
Current liabilities (9,177) (8,768) (4,392) (7,134) (9,307)
Non-current liabilities (8,608) (7,707) (6,617) (13,393) (17,461)
-------- -------- -------- -------- --------
Total Liabilities (17,785) (16,475) (11,009) (20,527) (26,768)
-------- -------- -------- -------- --------
Shareholders' Equity 8,384 16,122 33,311 40,568 46,736
======== ======== ======== ======== ========
|
Note:
Prior to the Reorganisation, the Company and its subsidiaries (the "Group")
did not exist as separate legal entities and their business operations were
conducted by CNOOC and its various affiliates. In connection with the
Reorganisation, CNOOC's oil and gas exploration, development, production and
sales businesses and operations conducted both inside and outside of the PRC
were transferred to the Group.
As CNOOC controlled the businesses and operations transferred to the Group
before the Reorganisation and continues to control the Group after the
Reorganisation, accordingly, the transfer of the businesses and operations has
been accounted for as reorganisation of companies under common control in a
manner similar to a pooling of interests.
On the basis described above, the financial statements have been prepared to
present results of operations of the Group for the years ended 31 December
1999 to 2003 and the financial positions of the Group as at 31 December 1999
as if the businesses and operations had been transferred to the Group at the
beginning of the period presented.
2
CNOOC LIMITED Annual Report 2003
Operating Summary
Year ended 31 December
Production 1999 2000 2001 2002 2003
-----------------------------------------------------------
Net production of crude and liquids (barrels/day)
Bohai Bay 45,205 63,797 99,978 127,756 129,506
Western South China Sea 35,163 46,434 41,277 56,910 60,944
Eastern South China Sea 88,052 90,097 81,404 73,792 72,981
East China Sea 3,249 3,557 3,967 3,223 2,536
Overseas 3,077 2,462 2,247 36,944 40,497
Total 174,745 206,347 228,873 298,625 306,464
======= ======= ======= ======= =======
Net production of natural gas (mmcf/day)
Bohai Bay 43.1 45.8 46.2 47.1 47.1
Western South China Sea 156.8 144.3 139.0 142.3 127.8
Eastern South China Sea 0 0 0 0 0
East China Sea 4.5 7.8 9.8 12.4 14.2
Overseas 0 0 0 70.8 101.9
Total 204.4 197.9 195.0 272.6 291.0
Total net production (BOE/day) 208,815 239,337 261,379 346,639 356,729
======= ======= ======= ======= =======
Reserves at year end
Net proved crude and liquids reserves (mm barrels)
Bohai Bay 915.5 923.9 961.3 992.5 990.4
Western South China Sea 190.4 141.1 131.6 160.4 173.7
Eastern South China Sea 117.4 136.8 132.2 120.3 154.7
East China Sea 8.2 4.5 12.4 12.5 13.9
Overseas 10.1 9.5 8.4 138.7 103.4
Total 1,241.6 1,215.8 1,245.9 1,424.4 1,436.1
======= ======= ======= ======= =======
Net proved natural gas reserves (bcf)
Bohai Bay 605.7 591.4 629.1 598.6 566.6
Western South China Sea 2,647.8 2,593.0 2,421.5 2,511.2 2,564.0
Eastern South China Sea 0 0 0 42.8 548.2
East China Sea 67.2 65.3 197.0 179.4 275.3
Overseas 0 0 0 215.9 200.3
Total 3,320.6 3,249.7 3,247.6 3,547.9 4,154.4
======= ======= ======= ======= =======
Total net proved reserves (million BOE)
Bohai Bay 1,016.5 1,022.4 1,066.2 1,092.3 1,084.8
Western South China Sea 631.7 573.3 535.1 578.9 601.0
Eastern South China Sea 117.4 136.8 132.2 127.5 246.1
East China Sea 19.4 15.4 45.2 42.4 59.8
Overseas 10.1 9.5 8.4 174.7 136.8
Total 1,795.1 1,757.4 1,787.1 2,015.8 2,128.5
======= ======= ======= ======= =======
Others
Reserve life (years) 23.6 20.1 18.7 15.9 16.3
Reserve replacement ratio (%) 170 104 131 281 187
======= ======= ======= ======= =======
Average realised price
Crude oil (US$/barrel) 18.91 28.21 23.34 24.35 28.11
Natural gas (US$/mcf) 2.88 3.09 3.08 2.98 2.87
======= ======= ======= ======= =======
3
CNOOC LIMITED Annual Report 2003
Corporate Milestones
[PICTURE OMITTED]
8 February
The Company completed the acquisition of equity interest in the Tangguh LNG
project.
7 March
The Company signed an agreement for the acquisition of a partial interest of
the Kashagan Oilfield in North Caspian Sea. The acquisition was however
withdrawn on May 12 as existing owners exercised their pre-emption rights.
[PICTURE OMITTED]
15 May
The Company issued 10 year and 30 year global bonds totaling US$500 million
and reached an agreement for the acquisition of the Northwest Shelf Gas
Project in Australia.
16 June
The Company's partner ConocoPhillips made two exploration discoveries in Bohai
Bay: Penglai 19-9-1 and Penglai 13-1-1.
28 July
The Company announced major natural gas discoveries in Panyu 30-1/34-1 of the
Eastern South China Sea.
[PICTURE OMITTED]
19 August
CNOOC reached an agreement with Sinopec, Shell and Unocal to explore and
develop the Xihu Trough.
4
CNOOC LIMITED Annual Report 2003
[PICTURE OMITTED]
16 September
Appointed Mr Evert Henkes, the former CEO of Shell's global chemical business,
as the Company's independent non-executive director. Mr Chak Kwong So resigned
from the Board.
[PICTURE OMITTED]
23 September
Phase 1 of the Company's largest independent gas field Dongfang 1-1 commenced
production.
[PICTURE OMITTED]
8 October
Panyu 4-2 and Panyu 5-1 oilfields commenced production.
16 October
Mr Chengyu Fu was appointed as the Company's Chairman and Chief Executive
Officer.
Moody's elevated the Company's credit rating to A2.
24 October
CNOOC signed an agreement on the Gorgon LNG project. The Company is studying
the viability of investing in the project.
31 October
The Company announced its long-term strategy.
[PICTURE OMITTED]
December
The Company received The Best Corporate Governance Company
in China for two consecutive years in "The Asset" poll. Euromoney named CNOOC
Ltd the "Best Oil & Gas Company in Asia", and the "Best Managed Company in
China".
5
CNOOC LIMITED Annual Report 2003
[PICTURE OMITTED]
6
CNOOC LIMITED Annual Report 2003
Chairman's Statement
[PICTURE OMITTED]
Through our exploration efforts, the Company achieved significant increases in
its oil and gas reserves. The Company's net profit for the year also reached a
historical high of RMB11,535.5 million due to the continued production
commencement of new projects, stable production growth and effective cost
control. Return on equity reached 26.4%.
7
CNOOC LIMITED Annual Report 2003
Chairman's Statement
I will continue to work with the management team to pursue the established
goals of the Company: Maintaining our development strategies to achieve
sustainable, long-term growth and shareholders' value maximization.
[PICTURE OMITTED]
FU CHENGYU
Chairman and
Chief Executive Officer
8
CNOOC LIMITED Annual Report 2003
Thanks to the trust and support of our shareholders, the Company has developed
rapidly since its listing three years ago, achieving enviable results. In
October 2003, our former Chairman and Chief Executive Officer Mr Wei Liucheng
left the Company to assume a senior government position. I wish to take this
opportunity to express our sincere gratitude to Mr Wei for his invaluable
contributions to the Company.
I will continue to work with the management team to pursue the established
goals of the Company: maintaining our development strategies to achieve
sustainable long-term growth and shareholders' value maximization.
2003 was a politically and economically turbulent year. The operating
environment of the industry was presented with many challenges; however, due
to strong oil demand and persistent strength in international oil prices, the
Company has continued to achieve satisfactory results. Through our exploration
efforts, the Company achieved significant increases in our oil and gas
reserves. The Company's net profit for the year also reached a historical high
of RMB11,535.5 million, due to the continued production commencement of new
projects, stable production growth and effective cost management. Return on
equity hit 26.4%.
In view of the Company's prudent financial policies and strong financial
position, Moody's investors service has upgraded the Company's credit rating
from Baa1 to A2, creating a new ground for the Company's low cost funding in
the future.
During the year under review, the Company capitalized on the low interest rate
environment of the international market and successfully issued a tranche of
USD200 million 10 year bonds and a tranche of USD300 million 30 year bonds,
improving the Company's capital structure.
Looking forward, the Company's core strategies will remain unchanged in the
future. Working with the management, we will continue to maintain production
and reserves growth, further develop our natural gas business, maintain
prudent financial management policies and competitive cost structure and
ensure the Company's long-term growth in order to maximize shareholder's
returns.
Being an upstream E&P company, it is very important for us to find more oil
and gas reserves through exploration activities. As such, the Company intends
to apply the latest technology offshore China, with Bohai Bay and various high
potential areas being the Company's major exploration focus. We will continue
to strengthen cooperation with foreign oil companies offshore China and
advance exploration into deep-water area. While we focus our reserve and
production growth offshore China, we will continue to seize new opportunities
to acquire quality oil and gas assets overseas.
[PICTURE OMITTED]
IN VIEW OF THE COMPANY'S PRUDENT FINANCIAL POLICIES AND STRONG FINANCIAL
POSITION, MOODY'S INVESTORS SERVICE HAS UPGRADED THE COMPANY'S CREDIT RATING
FROM BAA1 TO A2, CREATING A NEW GROUND FOR THE COMPANY'S LOW COST FUNDING IN
THE FUTURE.
[PICTURE OMITTED]
9
CNOOC LIMITED Annual Report 2003
Chairman's Statement
[Graph Omitted] With a large base of proved undeveloped reserves, the
Total Revenue Company has already lined up a pipeline of development
and Net Profit projects. We expect this pipeline of development projects
1999-2003 will continue to bring stable production growth for the
Company beyond 2005.
Natural gas (including LNG) will become a major driving
force for the Company's growth. In 2003, we made two other
natural gas discoveries in Liuhua 19-5 and Panyu 35-1 in
Eastern South China Sea, following significant gas
discoveries of the Panyu 30-1 and Panyu 34-1 in South
China Sea, laying a solid foundation for the supply of
natural gas to the booming Pearl River Delta region. We
will also capitalize on the vast opportunities arising
from our parent company's LNG projects in South Eastern
China coastal areas region. Following the acquisition of
interests in the Indonesian Tangguh Project and the
Northwest Shelf Project in Australia, we have also signed
an agreement with the participants of the Australian
Gorgon project to explore the opportunity to cooperate in
the project. In 2003, offshore China's second largest gas
field, Dongfang 1-1 (phase I), commenced production
earlier than expected, and started to supply gas to Hainan
Province. This marks a new milestone for the Company's
natural gas strategy.
[Graph Omitted] In comparison with our peers, we continue to have an edge
Total Production in terms of our cost structure. Nevertheless, we will
Cost continue to strengthen our management and improve
1999-2003 operating efficiencies. We will also look for
breakthroughs in certain crucial technological fields. We
expect to reduce our cost through management and
technological innovation so as to maintain our competitive
cost structure.
The Company will continue to maintain its prudent
financial policies and investment strategies to maintain
the Company's competitive cost structure as well as its
healthy financial position.
People are our most important assets. Strengthening our
human resources development and creating a highly
efficient executive team has been a major focus of the
management over the years. In 2003, we successfully
carried out reforms in employment and remuneration
systems. This will help advocate friendly competition,
encourage creativity, and provide a solid platform for the
intellectual development of each of our staff. As a
people-oriented and caring company, we aim to create a
conducive environment whereby everyone's hard work and
creativity can be fully developed and realized so that the
operating goals of the Company can be best achieved.
|
[PICTURE OMITTED]
10
CNOOC LIMITED Annual Report 2003
[Graph Omitted] Protection and improvement of health, safety and the
Total Return environment has always been among the Company's
(from 1-1-03 established objectives. During 2003, we were able to
to 31-12-03) maintain our excellent record in these areas with zero
CNOOC Ltd (ADR) records in both "number of days away" and casualty rates.
During the SARS-affected period, the Company's management
placed great emphasis on combating the disease with
appropriate and effective measures. Our comprehensive
health, safety and environment systems helped to
successfully control the spread of the disease with not a
single case of infection recorded among our staff and
their families. We have been encouraged to continue and
improve on our established HSE policies.
The Company has built up quality assets, a tremendous team
of staff and excellent development potential. However, we
should not be complacent. While maintaining our growth
record, we will embark on a new development platform,
accelerate the pace of our development, increase our
earning potential and improve the quality of our projects
in order to create even better value for our shareholders.
These are the operational concepts which the management
and I are committed to implement and we shall work hard to
realize such goals.
[Graph Omitted] In appreciation of the support of our shareholders, the
Total Return Board of Directors has recommended a final dividend of
(from 1-1-03 HK$0.12 and a special dividend of HK$0.18 in view of the
to 31-12-03) year's remarkable performance and the Company's healthy
CNOOC Ltd. (HK) financial position. During 2003, we distributed a total of
HK$0.62 to our shareholders in the form of interim, final
and special dividends.
After more than a century of fabulous growth, the world
petroleum industry is experiencing some far-reaching
changes. As one bright spot in the world economy, China
has continued to maintain its growth momentum, triggering
an increase in the global demand for oil. According to
statistics, China is now the second largest country in
terms of oil consumption, offering ample development
opportunities for oil companies in China.
2003 was a year of change and remarkable performance for
CNOOC Ltd. The year 2004 continues to present challenges,
but we are confident that, through implementation of our
established strategies, we will be able to fulfill the
Company's stated objectives, creating healthy returns and
increased value for our shareholders, and harmonizing the
development of our shareholders, staff and the community.
FU CHENGYU
Chairman and Chief Executive Officer
Hong Kong, 15 March 2004
[PICTURE OMITTED]
11
CNOOC LIMITED Annual Report 2003
[PICTURE OMITTED]
12
CNOOC LIMITED Annual Report 2003
Operations Overview
[PICTURE OMITTED]
Adhering to its objective of maximizing shareholder's
value, the Company met all operating targets set at the
beginning of 2003 through continuous reserve and
production growth, maintaining cost efficiency and
improving profitability.
13
CNOOC LIMITED Annual Report 2003
Operations Overview
[Graph Omitted] 2003: Steady growth and record profit
Historical Reserve Adhering to its objective of maximizing shareholder's value,
Growth the Company met all operating targets set at the beginning
1999-2003 of 2003 through continuous reserve and production growth,
maintaining cost efficiency and improving profitability.
In 2003, the Company's oil and gas production was 356,729
boe per day, representing a 3% increase over the previous
year. Of this, crude oil production reached 306,464
barrels per day while natural gas production amounted to
291.0 Mmcf per day, representing an increase of 2.6% and
6.7% over last year respectively. Oil and gas production
in offshore China was 265,967 barrels per day and 189.1
Mmcf per day respectively. Total oil and gas production
reached 299,252 boe per day; In Indonesia, oil and gas
production was 40,497 barrels and 101.9 Mmcf per day.
Total oil and gas production was 57,477 boe per day.
[Graph Omitted] In 2003, realized oil price was US$28.11 per barrel, 15.4%
Historical increase over 2002. Realized natural gas price was US$2.87
Production per thousand cubic feet. Total oil and gas sales amounted
Growth to RMB28,116.8 million, a year-on-year increase of 18.2%;
1999-2003 the Company realised a net profit of RMB11,535.5 million,
up 24.9% over last year and reached a record high in the
Company's history. Per share earning reached RMB1.40 and
ROE was 26.4%. Sharing its success with the shareholders,
the Company recommended a final dividend of HK$0.12 and a
special final dividend of HK$0.18.
The successful commencement of production of the three
major oil and gas fields - Dongfang 1-1 (Phase I), Panyu
4-2, Panyu 5-1, made active contributions to the Company's
production growth.
The Company also increased its interests in the
Qinhuangdao 32-6 and Liuhua 11-1 oilfields.
Remarkable exploration success with 12 new oil and gas
discoveries further strengthen the Company's reserve
organic growth
In 2003, the Company recorded remarkable exploration
results, with 12 new oil and gas discoveries. Among
14
CNOOC LIMITED Annual Report 2003
them, nine are located offshore China and three are
located in Indonesia. Of the 12 discoveries, six are
independent discoveries.
The Company's reserves also grew significantly. In 2003,
the proved reserves increased by 242.9 million boe,
realizing a reserve replacement rate of 187%.
In 2003, the Company achieved major breakthroughs in the
research on new exploration areas and efforts in risk
exploration work, opening a new horizon for oil and gas
exploration. Meanwhile, the Company has closely followed
the "value emphasis exploration" strategy in its
exploration activities. Based on the past exploration
drilling results and geological features, the Company has
introduced innovative technology to effectively reduce the
finding cost of exploration, achieving a competitive
finding cost of around US$1 per barrel.
Satisfactory progress in various projects
Three oilfields commenced production in 2003, namely
Dongfang 1-1 (Phase I), Panyu 4-2 and Panyu 5-1. In
addition, the Pinghu oil & gas field expansion program and
the Jinzhou 9-3 natural gas project also successfully
completed and commenced operation.
During the year, the Company has built 21 jackets and
installed nine offshore jackets; constructed 17 platform
modules, installed five offshore platforms modules and
laid 205km undersea pipelines. The construction of one
onshore terminal has been completed while five others are
under construction.
In 2004, the Company will continue to proceed with its
engineering and construction projects in full speed. 6
projects are expected to commence operations.
Achieving solid growth in natural gas business
The Company is well positioned in developing natural gas
resources and this side of the business has become a new
growth engine for the Company's production and
profitability. During the year, the Company achieved
significant growth in its natural gas exploration and
market expansion.
[PICTURE OMITTED]
The Company has achieved major breakthroughs in natural
gas exploration in the Pearl River mouth Basin. Two other
natural gas discoveries in Liuhua 19-5 and Panyu 35-1 were
made following major natural gas discoveries in Panyu 30-1
and Panyu 34-1. This demonstrated the promising natural
gas exploration prospects in this area. With such
discoveries, the Company has entered into a new natural
gas exploration area offshore China.
Phase 1 of Dongfang 1-1, the second-largest gas field
offshore China, commenced operation successfully ahead of
schedule, and started to supply gas to end-users in Hainan
Province.
With breakthroughs in natural gas exploration and
successful expansion of marketing, the Company's leading
position in the natural gas market in the Pearl River
Delta region is further strengthened.
Innovative management and improving productivity
The Company has made constant efforts to improve the
management procedure and efficiency. In 2003, the Company
introduced reforms to its employment and remuneration
systems, as well as management systems
[PICTURE OMITTED]
15
CNOOC LIMITED Annual Report 2003
OPERATIONS OVERVIEW
[PICTURE OMITTED]
and procedures. As a result of the reform, we have
developed an entirely new employment and remuneration
system, accommodating the competitive environment in China
and the rest of the world and the Company's long-term
development strategies. As a result, the Company's
management and decision-making ability, as well as
operation efficiency, has significantly improved. In
addition, while the Company has devoted a great deal of
effort in the fundamentals of management, it has also paid
close attention to controlling costs through the promotion
in ERP system and facilitating a modern-management style.
The Company has firmly established the concept of cost
control in every segment.
The Company's operating capacity has also recorded
satisfactory growth. In July 2003 and early 2004, the
Company took over the operatorship of the Liuhua 11-1
oilfield and the Yacheng 13-1 gas field from its partner.
The successful takeover of operations of the latter and
its steady development, in particular, marked a new
milestone in the Company's operation standard.
Increasing production and reserves through overseas
opportunistic acquisitions
In 2003, CNOOC Ltd continued to cautiously identify
attractive overseas oil and gas assets and acquire
interests to strengthen the Company's production and
reserves base to further enhance the Company's long-term
and stable growth, and to maximize shareholder's value.
The Company completed the acquisition of the Tangguh
project in Indonesia on 8 February 2003. The Company's
investments in the Northwest Shelf Gas Project have also
come to fruition. An agreement was reached on 15 May,
2003, to acquire 5.3% of the project as well as a 25%
interest of the China LNG Joint Venture ("CLNG joint
venture"). The Company was also given participating rights
in future exploration undertaken over and above the
current proved reserves.
On 24 October 2003, the Company reached a new agreement
with the venture participants of the Australia Gorgon gas
development project and studied the viability of investing
in the project.
Prudent financial management and healthy financial
conditions gain market recognition
During the year, the Company's credit rating was elevated
to A2 (Positive) by renowned rating agency Moody's, on par
with China's sovereign rating. This will help the Company
to gain access to low cost financing in the future,
reinforcing the market's endorsement of the Company's
strategies and future development.
In 2003, after its successful bond issuance in 2002, the
Company once again tapped the international debt markets
and launched a 10 and 30-year bond issue with a total
value of US$500 million, which received an overwhelming
response from the market, further demonstrating the
market's recognition of the Company's encouraging business
fundamentals, healthy financial conditions and
credibility.
[PICTURE OMITTED]
16
CNOOC LIMITED Annual Report 2003
MAJOR PROPERTIES UNDER PRODUCTION AND DEVELOPMENT
Block/Property Operator Partner The Company's 2003 Actual Production Net Reserve as of
interests Net Production commencement December 31, 2003
(BOE/day) year (MMBOE)
Oil (BBL/day) Oil (MMBBL)
Gas (MMcf/day) Gas (BCF/day)
Offshore China
----------------------------------------------------------------------------------------------------------------------------------
Bohai Bay
----------------------------------------------------------------------------------------------------------------------------------
Production
----------------------------------------------------------------------------------------------------------------------------------
Liaoxi
Jinzhou 20-2 CNOOC Ltd. 100% 8,079 BOE 1992 45.20 MMBOE
2,816 BBL 13.99 MMBBL
32 MMcf 187.25 BCF
Jinzhou 9-3 CNOOC Ltd. 100% 13,679 BOE 1999 32.27 MMBOE
12,773 BBL 28.71 MMBBL
5 MMcf 21.37 BCF
Suizhong 36-1 CNOOC Ltd. 100% 64,203 1993 196.41
----------------------------------------------------------------------------------------------------------------------------------
Boxi
Boxi Oil fields CNOOC Ltd. 100% 14,020 BOE 1997 11.32MMBOE
12,342 BBL 9.42 MMBBL
10 MMcf 11.45 BCF
Chengbei Oil fields CNOOC Ltd. 100% 4,358 1985 9.14
----------------------------------------------------------------------------------------------------------------------------------
Qinhuangdao
Qinhuangdao 32-6 CNOOC Ltd. Chevron/Texaco 75.5% 22,444 BOE 2001 104.07
----------------------------------------------------------------------------------------------------------------------------------
11/05
Penglai 19-3 ConocoPhillips Phillips Bohai 51% 8,272 2002 136.18
----------------------------------------------------------------------------------------------------------------------------------
Bonan
Bozhong 34-2/4 CNOOC Ltd. 100% 2,298 1990 4.34
----------------------------------------------------------------------------------------------------------------------------------
Development
----------------------------------------------------------------------------------------------------------------------------------
Liaoxi
Jinzhou 21-1 CNOOC Ltd. 100% 13.82 MMBOE
5.73 MMBBL
48.51 BCF
Luda 4-2/5-2/10-1 CNOOC Ltd. 100% 76.46
----------------------------------------------------------------------------------------------------------------------------------
Bozhong
Nanbao 35-2 CNOOC Ltd. 100% 75.73
----------------------------------------------------------------------------------------------------------------------------------
Boxi
Qikou 18-9/18-2 CNOOC Ltd. 100% 9.62 MMBOE
8.46 MMBBL
6.99 BCF
----------------------------------------------------------------------------------------------------------------------------------
Bonan
Bonan Oil fields CNOOC Ltd. 100% 67.95 MMBOE
31.90 MMBBL
216.34 BCF
Bozhong 25-1/25-1S CNOOC Ltd. Chevron/Texaco 83.8% 230.21 MMBOE
217.76 MMBBL
74.65 BCF
Bozhong 34-1/34-1S CNOOC Ltd. 100% 12.30
----------------------------------------------------------------------------------------------------------------------------------
11/05
Penglai 25-6 ConocoPhillips Phillips Bohai 51% 10.70
----------------------------------------------------------------------------------------------------------------------------------
04/36
Caofeidian 11-1/11-2 Kerr-McGee Sino-American Energy 51% 47.36
Caofeidian 18-1 Kerr-McGee Sino-American Energy 51% 1.73
----------------------------------------------------------------------------------------------------------------------------------
Bohai Bay Total 137,353 BOE 1,084.81MMBOE
129,506 BBL 990.39 MMBBL
47 MMcf 566.56 BCF
----------------------------------------------------------------------------------------------------------------------------------
Eastern South China Sea
----------------------------------------------------------------------------------------------------------------------------------
Production
----------------------------------------------------------------------------------------------------------------------------------
16/08
Huizhou Oil fields CACT 51% 24,551 1990 25.01 MMBOE
18.14 MMBBLS
41.21 BCF
----------------------------------------------------------------------------------------------------------------------------------
15/11
Xijiang 24-3 ConocoPhillips, Shell 51% 16,095 1994 11.84 MMBBL
CNOOC Ltd.
----------------------------------------------------------------------------------------------------------------------------------
15/22 ConocoPhillips, Shell 40% 12,775 1995 6.72 MMBBL
Xijiang 30-2 CNOOC Ltd.
----------------------------------------------------------------------------------------------------------------------------------
29/04
Liuhua 11-1 CNOOC Ltd. 100% 13,708 1996 13.54 MMBBL
----------------------------------------------------------------------------------------------------------------------------------
16/06
Lufeng 13-1 JHN 25% 2,931 1993 1.88 MMBBL
----------------------------------------------------------------------------------------------------------------------------------
17/22
Lufeng 22-1 Statoil, CNOOC Statoil 25% 1,312 1997 0.52 MMBBL
Ltd.
----------------------------------------------------------------------------------------------------------------------------------
15/34
Panyu 4-2/5-1 Devon Burlington 51% 1,609 2003 33.41 MMBBL
----------------------------------------------------------------------------------------------------------------------------------
Development
----------------------------------------------------------------------------------------------------------------------------------
16/19
Huizhou 19-3/19-2/19-1 CACT 51% 25.59 MMBBL
----------------------------------------------------------------------------------------------------------------------------------
Liuhua 07
Panyu 30-1 CNOOC Ltd. 100% 87.16 MMBOE
2.67 MMBBL
506.94 BCF
----------------------------------------------------------------------------------------------------------------------------------
[PICTURE OMITTED]
17
CNOOC LIMITED Annual Report 2003
MAJOR PROPERTIES UNDER PRODUCTION AND DEVELOPMENT
Block/Property Operator Partner The Company's 2003 Actual Production Net Reserve as of
interests Net Production commencement December 31, 2003
(BOE/day) year (MMBOE)
Oil (BBL/day) Oil (MMBBL)
Gas (MMcf/day) Gas (BCF/day)
Xijiang 04
Xijiang 23-1 CNOOC Ltd. 100% 40.44
----------------------------------------------------------------------------------------------------------------------------------
Eastern South China Sea 72,981 246.11 MMBOE
154.75 MMBBLS
548.15 BCF
----------------------------------------------------------------------------------------------------------------------------------
Western South China Sea
----------------------------------------------------------------------------------------------------------------------------------
Production
Yulin 35
Weizhou Oil fields CNOOC Ltd. 100% 28,462 BOE 1993 55.20 MMBOE
27,494 BBL 52.62 MMBBL
6 MMcf 15.50 BCF
----------------------------------------------------------------------------------------------------------------------------------
Wenchang 13-1/13-2
Wenchang 13-1/13-2 CNOOC Ltd. Husky 60% 32,572 2002 33.44
----------------------------------------------------------------------------------------------------------------------------------
Yinggehai
Yacheng 13-1 CNOOC Ltd. (1) Kufpec BPCEPC 51% 19,047 BOE 1995 90.87 MMBOE
825 BBL 5.08 MMBBL
99 MMcf 514.73 BCF
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Changjiang 25
Dongfang 1-1 CNOOC Ltd. 100% 3,929 BOE 2003 234.67 MMBOE
54 BBL 1,407.99 BCF
23 MMcf
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Development
----------------------------------------------------------------------------------------------------------------------------------
Yangjiang 31/32
Wenchang 8-3 CNOOC Ltd. 100% 11.58
Wenchang 19-1 CNOOC Ltd. 100% 26.09
Wenchang 15-1 CNOOC Ltd. 100% 22.94
----------------------------------------------------------------------------------------------------------------------------------
Yinggehai
Yacheng 13-4 CNOOC Ltd. 100% 22.40 MMBOE
1.30 MMBBL
126.62 BCF
----------------------------------------------------------------------------------------------------------------------------------
Ledong 01
Ledong CNOOC Ltd. 100% 83.20 MMBOE
499.18 BCF
----------------------------------------------------------------------------------------------------------------------------------
Yulin 35
Weizhou 11-1 CNOOC Ltd. 100% 9.46
----------------------------------------------------------------------------------------------------------------------------------
39/05
Wenchang 14-3 CNOOC Ltd. 100% 11.17
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Western South China
Sea Total 84,010 BOE 601.02 MMBOE
60,945 BBL 173.68 MMBBL
128 MMcf 2,564.02 BCF
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East China Sea
----------------------------------------------------------------------------------------------------------------------------------
Production
----------------------------------------------------------------------------------------------------------------------------------
Luihua 07
Pinghu Gas field CNOOC Ltd. 30% 4,908 BOE 1998 12.74 MMBOE
2,536 BBLS 4.64 MMBBLS
14 MMcf 48.66 BCF
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Development
----------------------------------------------------------------------------------------------------------------------------------
Xihu Trough
Canxue CNOOC Ltd. Sinopec, Shell,
Unocal 30% 6.81 MMBOE
1.82 MMBBL
29.93 BCF
Duanqiao CNOOC Ltd. Sinopec, Shell,
Unocal 30% 4.71 MMBOE
1.36 MMBBL
20.12 BCF
Chunxiao CNOOC Ltd. Sinopec, Shell,
Unocal 30% 18.32 MMBOE
2.22 MMBBL
96.56 BCF
Tianwaitian CNOOC Ltd. Sinopec, Shell,
Unocal 30% 3.21 MMBOE
0.07 MMBBL
18.82 BCF
Baoyunting CNOOC Ltd. Sinopec, Shell,
Unocal 30% 11.25 MMBOE
2.69 MMBBL
51.36 BCF
Wuyunting CNOOC Ltd. Sinopec, Shell,
Unocal 30% 2.76 MMBOE
1.12 MMBBL
9.85 BCF
----------------------------------------------------------------------------------------------------------------------------------
East China Sea Total 4,908 BOE 59.80 MMBOE
2,536 BBL 13.92 MMBBL
14 MMcf 275.30 BCF
----------------------------------------------------------------------------------------------------------------------------------
Offshore China Total 299,252 BOE 1,991.74 MMBOE
265,968 BBL 1,332.74 MMBBL
189 MMcf 3,954.03 BCF
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Indonesia
Malacca Oil field 2,236 1994 7.06 MMBOE
----------------------------------------------------------------------------------------------------------------------------------
Indonesia SES.B.V 55,241 BOE 129.68 MMBOE
38,260 BBL 96.29 MMBBL
102 MMcf 200.32 BCF
Total 356,729 BOE 2,128.48 MMBOE
----------------------------------------------------------------------------------------------------------------------------------
306,464 BBL 1,436.09 MMBBL
291 MMcf 4,154.35 BCF
Note(1) On January 1 2004, CNOOC limited took over the Operatorship of Yacheng 13-1 from BP.
[PICTURE OMITTED]
18
CNOOC LIMITED Annual Report 2003
The 30-year tranche bond offering marked the first ever 30-year offering by
Chinese corporates, coupon rates for both the 10-year and the 30-year tranches
were the lowest among comparable offerings by Chinese corporates.
Health, Safety and Environmental Protection
In 2003, CNOOC Ltd continued to emphasize and strengthen its Health, Safety
and Environmental ("HSE") protection. With continuing improvements in HSE
activities, the Company reached a new milestone in this area.
During 2003, CNOOC Ltd recorded no major fatality, no incident of oil spillage
and no single incident that resulted in an economic loss in excess of
US$120,000.
According to the Company's OSHA statistical results, CNOOC Ltd achieved an
above-average rating as compared with major international oil companies.
Review by Area
Today, the Group has five major exploration and production areas, including
four offshore China areas, namely, the Bohai Bay, Western South China Sea,
Eastern South China Sea and the East China Sea as well as Indonesia.
In 2003, together with our foreign partners, the Company made a total of 12
discoveries. Of these, six oil discoveries were made in Bohai Bay, while two
natural gas discoveries and one oil discovery were made in South China Sea.
Three oil and gas discoveries were made overseas. These discoveries have
helped increase reserves for the Company's sustainable development.
[PICTURE OMITTED]
Bohai Bay
Bohai Bay holds the core assets of our portfolio and consists of crude oil and
natural gas fields such as Suizhong 36-1, Qinhuangdao 32-6 and many other oil
discoveries and development projects that are under development. This area
holds the largest amount of reserves and production among our five major
operating areas.
As at 31 December 2003, the Company had net proved reserves of 1,084.81 Mmboe
in this area, accounting for 50.9% of the total net proved reserves.
In 2003, daily average net production was 137,353 boe, accounting for
approximately 38.5% of our total net daily production. We currently hold
exploration licenses for nine blocks in this area while our foreign partners
have exploration licenses for six other blocks.
In 2003, the Company made six oil and gas discoveries in the area; of these,
three were independent discoveries, including Bozhong 34-1S, Bozhong 34-1 and
Bozhong 3-2. Our partner Kerr-McGee has made discoveries at Caofeidian 11-5
and Caofeidian 11-6; ConocoPhillips has made discoveries in Penglai 19-9. In
addition, the Company has successfully appraised seven hydrocarbon-bearing
structures.
During the period, the Company has increased its interests in Qinhuangdao 32-6
from 51% to 75.5%.
In 2003, 29 wells were drilled in the Bohai Bay and 2,074.5 square kilometers
of 3D seismic data were acquired. Of these, 16 were drilled by CNOOC Ltd (11
wildcat wells and five appraisal wells with 1,763.7 square kilometers of 3D
seismic data acquired). Through co-operation with our partners, 13 wells were
drilled (eight wildcat wells and five appraisal wells with 310.8 square
kilometers of 3D seismic data acquired).
In Bozhong area, the Company drilled two wildcat wells, one appraisal well,
and made one oil and gas discovery in Bozhong 3-2.
[PICTURE OMITTED]
19
CNOOC LIMITED Annual Report 2003
OPERATIONS OVERVIEW
The Company drilled six wildcat wells and two appraisal wells in the Bonan
block, with two oil and gas discoveries at Bozhong 34-1S and Bozhong 34-1,
which were successfully appraised. They are located near producing oilfield
Bozhong 34-2/4, presenting excellent commercial potential.
The Company drilled three wildcat wells and two appraisal wells in the
Liaodong block, and successfully appraised the hydrocarbon-bearing structure
in Jinzhou 25-1S.
Our partner ConocoPhillips drilled two wildcat wells in the 11/05 area and
made one oil and gas discovery in Penglai 19-9. The Company plans to drill one
appraisal well in the area in 2004.
Another partner, Kerr-McGee, drilled a total of six wildcat wells and five
appraisal wells in the blocks of 04/36, 05/36 and 09/18. It has also made two
oil discoveries in the 04/36 block, namely Caofeidian 11-5 and Caofeidian
11-6, and successfully appraised two hydrocarbon-bearing structures in
Caofeidian 11-3 and Caofeidian 11-6. Two wildcat wells were successfully
drilled in the 05/36 block, two appraisal wells, namely Caofeidian 12-1 and
Caofeidian 12-1S, were also completed successfully by Kerr-McGee.
Western South China Sea
Western South China Sea, one of our most important natural gas exploration
areas, consists of Beibu Gulf, Yinggehai and the Qiongdongnan basins. As at 31
December 2003, the Company had net proved reserves of 601.0 Mmboe in the area,
accounting for approximately 28.2% of the Company's total net proved reserves.
The average daily production in the area was 84,010 boe, or 23.6% of our total
production. At present, the Company and its partners possess twenty eight and
five exploration licenses in this area, respectively.
In 2003, we drilled six wildcat wells, two appraisal wells and acquired
7,460.8 square kilometers of 2D seismic data. Our partners drilled one wildcat
well, one appraisal well and acquired 983.2 square kilometers of 3D seismic
data.
During the year, there was one oil discovery at Weizhou 11-1N and two
hydrocarbon-bearing structures in Weizhou 11-1 and Wenchang 15-1 were
successfully appraised.
In the area of Yinggehai, preparation work for taking over the operatorship of
the Yacheng 13-1 gas field continued in 2003 and was successfully completed on
1 January 2004. This demonstrated that the Company has the ability to operate
under internationally recognized standards.
Located in Changjiang 25 block, Dongfang 1-1 gas field is the Company's
largest independent gas field. Phase 1 of the field commenced production ahead
of schedule, supplying natural gas to Hainan Province, and marking a new
milestone in the development of the Company's natural gas business.
In 2003, the Company drilled one wildcat well and one appraisal well in the
Yulin 35 block of Beibu Gulf, with a new discovery in Weizhou 11-1N, and
successfully appraised a hydrocarbon-bearing structure in Weizhou 11-1. The
Company is planning to drill two wildcat wells in the area in 2004.
During the year, the Company drilled one wildcat well in the Wenchang 20 block
of the Zhu III Sag and successfully appraised a hydrocarbon-bearing structure
in the Wenchang 15-1 area.
Eastern South China Sea
Eastern South China Sea has always been an important crude oil production area
for the Company. In 2003, major natural gas discoveries were made in Liuhua
19-5 and Panyu 35-1, opening up a new natural gas
[PICTURE OMITTED]
20
CNOOC LIMITED Annual Report 2003
[PICTURE OMITTED]
exploration area for the Company. As at 31 December 2003, the Company had net
proved reserves of 246.1 MMboe in the area, accounting for 11.6% of the
Company's total net proved reserves.
The average daily production in the area was 72,981 boe, or 20.5% of our total
production. We currently hold exploration licenses for thirty six blocks and
our partners have licenses for two blocks.
In 2003, the Company drilled eight wells (including five wildcat wells and
three appraisal wells) in Eastern South China Sea, 4,144 kilometers 2D seismic
data was collected. Our partners drilled three wildcat wells, collected 1,562
kilometers 2D seismic data and 345 kilometers 3D seismic data.
During the period, the Company made two natural gas discoveries, Liuhua 19-5
and Panyu 35-1, and successfully appraised a hydrocarbon-bearing structure,
Panyu 30-1, confirming the gas generation of Baiyun Trough and verifying the
exploration potential with its adjacent deep water area.
Initial assessments made in 2003 have confirmed that discoveries of natural
gas reserves at Panyu 30-1 and Panyu 34-1 will reach a total of 1.5 trillion
cubic feet, indicating promising natural gas exploration prospects in the
area. The discovery represented the Company's first natural gas discovery in
the Pearl River Mouth basin and the largest natural gas discovery over the
past three years.
Panyu 4-2 and Panyu 5-1 commenced production on schedule during the year. Peak
production is expected to hit in 2004 with a daily crude oil production of
60,000 barrels. The Company holds a 51% interest in both oilfield.
Taking advantage of our partners' asset restructuring program during the year,
CNOOC Ltd increased its interest in the Liuhua 11-1 oilfield and now has 100%
interests in the oilfield.
In 2003, the Company drilled one wildcat well and three appraisal wells in the
Liuhua 07 block, made one oil and gas discovery in Liuhua 19-5 and
successfully appraised the hydrocarbon-bearing structure at Panyu 30-1.
At Panyu 33 block, the Company drilled one wildcat well, and made one natural
gas discovery at Panyu 35-1.
East China Sea
As at 31 December 2003, the company had net proved reserves of 59.8 MMboe in
the area, accounting for 2.8% of the Company's total net proved reserves. The
average daily production in the area was 4,908 boe, or 1.4% of our total
production. The Company holds licenses for 56 blocks while its partners hold
exploration licenses for one block.
In 2003, the Company achieved two significant milestones in its East China Sea
operation.
In September, our parent company entered a new era with the signing of five
oil exploration and development contracts with Sinopec, Pecten Orient Company
of the United States (subsidiary company of Shell) and Unocal. The first
development under the contracts will be the Chunxiao development area which is
expected to come on stream in mid 2005.
In October, phase one of the Pinghu oil and gas field expansion project, in
which CNOOC Ltd holds a 30% interest, commenced operation as scheduled. The
project increased the daily gas supply to Shanghai by 20.8 mmcf per day,
reaching a total of 62.3 mmcf per day.
[PICTURE OMITTED]
21
CNOOC LIMITED Annual Report 2003
OPERATIONS OVERVIEW
[PICTURE OMITTED]
We are carrying out joint exploration work in the Xihu Trough with Sinopec. In
2003, the Company acquired 1,976 kilometers of 2D seismic data and drilled one
wildcat well in the Lishui Trough. In 2003, the Company acquired 2,525
kilometers of 2D seismic data in the South Huanghai area.
Overseas Operation
As at 31 December 2003, the Company had net proved reserves of 136.7 MMboe in
Indonesia, accounting for 6.4% of the Company's total net proved reserves. The
average daily production in the area was 57,477 boe, or 16.1% of our total
production.
In 2003, our partner KODECO made three oil and gas discoveries in the West
Madura PSC area in the East Java Sea of Indonesia.
Since 1 January 2003, the Company effectively acquired a 12.5% interest in the
Tangguh LNG Project in Indonesia. As a result of our partner's continuous
efforts, a series of agreements have been signed for the Tangguh LNG project
for the supply of gas to Korea and the North American markets.
New Contracts and Agreements Signed in 2003
In 2003, our parent company announced a total of 10 foreign cooperation blocks
and two new cooperation blocks, covering an area of more than 30,388 square
kilometers.
During the year, the Company signed a total of seven petroleum contracts with
international oil companies.
New Petroleum Contracts Signed in 2003
Signing Commencement Current stage/
Contract date date Block area
No. Area area (yy/mm/dd) (yy/mm/dd) Partners Interest Operator (km2)
<C> <C> <C> <C> <C> <C> <C> <C>
1 Bohai 09/06 03.06.17 03.08.01 Kerr-McGee 100% Kerr-McGee 1,788
2 East China Sea Chunxiao 03.08.19 03.10.01 Shell 20% CNOOC Ltd. 1,225
Unocal 20%
Sinopec (consignor) 30%
3 East China Sea Baoyunting 03.08.19 03.10.01 Shell 20% CNOOC Ltd. 987
Unocal 20%
Sinopec (consignor) 30%
4 East China Sea 12/21 03.08.19 03.10.01 Shell 50% CNOOC Ltd. 10,175
Unocal 50%
Sinopec (consignor)
5 East China Sea 27/05 03.08.19 03.10.01 Shell 50% CNOOC Ltd. 5,349
Unocal 50%
Sinopec (consignor)
6 East China Sea 20/14 03.08.19 03.10.01 Shell 50% CNOOC Ltd. 4,372
Unocal 50%
Sinopec (consignor)
7 East China Sea 04/35 03.10.27 03.12.01 Husky 100% Husky 4,835
[PICTURE OMITTED]
22
CNOOC LIMITED Annual Report 2003
MAJOR EXPLORATION BLOCKS
Block Block Area Partner Exploration License
(km2) Commencement - Expiration
--------------------------------------------------------------------------------------------------------------------
Middle of Bohai Bay 5,310 08/16/02 - 08/16/04
Southern Bohai Bay 3,799 10/31/02 - 10/31/04
Western Bohai Bay 1,907 5/29/03 - 5/29/05
Western Liaodong Bay 3,344 3/31/00 - 04/08/06
Eastern Liaodong Bay 2,829 07/02/01 - 07/02/06
Eastern Bozhong 1,861 05/30/02 - 05/30/04
Bohai 09/11 843 04/05/02 - 04/05/04
Bohai 06/17 2,586 02/20/03 - 02/20/05
Bohai 02/31 4,990 05/29/03 - 05/29/05
--------------------------------------------------------------------------------------------------------------------
Independent Total 27,469
--------------------------------------------------------------------------------------------------------------------
Eastern Bohai 11/05 (East China Sea) 3,601 Conocophillips 08/16/02 - 02/10/04
Western Bohai 11/05 (East China Sea) 4,076 Conocophillips 02/10/02 -02/10/04
Bohai 11/19 (East China Sea) 3,185 Chevron/Texaco 05/29/03 - 05/29/05
Bohai 09/18 (East China Sea) 2,226 Kerr-McGee 04/04/01 - 04/04/04
Bohai 04/36 (East China Sea) 1,694 Kerr-McGee, Sino-American Energy 12/31/01 - 12/31/03
Bohai 05/36 (East China Sea) 1,250 Kerr-McGee, Newfield, Sino-American Energy 02/10/02 - 02/10/04
PSC Total 16,032
--------------------------------------------------------------------------------------------------------------------
Bohai Total 43,501
--------------------------------------------------------------------------------------------------------------------
Xihu Tiantai 02 (East China Sea) 4,528 06/05/03 - 06/05/05
Xihu Hangzhou 26 (East China Sea) 3,642 03/31/03 - 03/31/05
Xihu Huangyan 04 (East China Sea) 2,848 08/28/01 - 08/28/08
Xihu Hangzhou 17 (East China Sea) 4,227 08/28/01 - 08/28/08
Xihu Zhenhai 01 (East China Sea) 1,536 08/28/01 - 08/28/08
Xihu Fuyang 27 (East China Sea) 2,526 08/28/01 - 08/28/08
Lishui-Jiaojiang (East China Sea) 6,767 03/31/00 - 11/28/05
Kunshan 02 (East China Sea) 2,628 05/11/01 - 05/11/06
Jinhua 12 (East China Sea) 6,931 05/11/01 - 05/11/06
Taibei 27 (East China Sea) 7,379 07/09/01 - 07/09/06
Tiantai 32 (East China Sea) 5,400 07/17/01 - 07/17/06
Lishui 30 (East China Sea) 4,085 07/01/02 - 07/01/09
Jiangning 32 (East China Sea) 7,136 11/05/03 - 12/30/04
Western Wunansha (South Yellow Sea) 242 03/31/00 - 12/16/05
Zhucheng 14 (South Yellow Sea) 5,659 05/11/01 - 05/11/06
Qingdao 34 (South Yellow Sea) 5,745 12/07/01 - 12/07/06
North Yellow Sea 6,471 05/25/01 - 05/25/06
Changshan 01 (North Yellow Sea) 6,449 07/03/01- 07/03/06
--------------------------------------------------------------------------------------------------------------------
Independent Total 84,199
--------------------------------------------------------------------------------------------------------------------
East China Sea 32/32 513 Prime Line Petroleum 07/11/02 - 07/11/04
--------------------------------------------------------------------------------------------------------------------
PSC Total 513
--------------------------------------------------------------------------------------------------------------------
East China Sea Total 84,712
--------------------------------------------------------------------------------------------------------------------
Xijiang 04 (Pearl River Mouth) 7,969 05/11/01 - 05/11/06
Lufeng 06 (Pearl River Mouth) 4,457 05/11/01 - 05/11/06
Lufeng 08 (Pearl River Mouth) 4,723 05/11/01 - 05/11/06
Huizhou 30 (Pearl River Mouth) 5,862 05/11/01 - 05/11/06
Huizhou 31 (Pearl River Mouth) 3,074 05/11/01 - 05/11/06
Enping 15 (Pearl River Mouth) 5,833 05/11/01 - 05/11/06
Enping 10 (Pearl River Mouth) 6,547 05/11/01 - 05/11/06
Panyu 33 (Pearl River Mouth) 4,830 05/11/01 - 05/11/06
Liuhua 07 (Pearl River Mouth) 4,172 05/11/01 - 05/11/06
Chaozhou 03 (Pearl River Mouth) 4,490 05/11/01 - 05/11/06
Shantou 29 (Pearl River Mouth) 6,407 05/11/01 - 05/11/06
Kaiping 14 (Pearl River Mouth) 7,753 05/11/01 - 05/11/06
Huizhou 14 (Pearl River Mouth) 882 05/29/03 - 05/29/05
16/02 (Pearl River Mouth) 3,498 31/03/00 - 31/03/07
15/35 (Pearl River Mouth) 1,411 20/02/03 - 20/02/05
15/12 (Pearl River Mouth) 1,895 16/10/00 - 16/10/06
Nanhaichao 7,834 05/14/02 - 05/14/07
--------------------------------------------------------------------------------------------------------------------
Independent Total 81,637
--------------------------------------------------------------------------------------------------------------------
[PICTURE OMITTED]
23
CNOOC LIMITED Annual Report 2003
OPERATIONS OVERVIEW
MAJOR EXPLORATION BLOCKS
Block Block Area Partner Exploration License
(km2) Commencement - Expiration
--------------------------------------------------------------------------------------------------------------------
16/19 (Pearl River Mouth) 415 Agip, Chevron/Texaco 04/05/02 - 04/05/04
15/34 (Pearl River Mouth) 4,984 Devon, Burlington 12/24/03 - 12/24/05
--------------------------------------------------------------------------------------------------------------------
PSC Total 5,399
--------------------------------------------------------------------------------------------------------------------
Eastern South China Sea Total 87,036
--------------------------------------------------------------------------------------------------------------------
Yulin 35 6,050 05/11/01 - 05/11/06
Weizhou 12 6,980 11/05/01 - 11/05/06
Weizhou 26 4,358 11/05/03 - 05/11/06
Changjiang 25 7,434 11/05/03 - 11/05/05
Ledong 01 6,543 12/03/03 - 12/03/05
Lingao 15 6,583 11/05/03 - 05/11/06
Ledong 17 3,971 05/11/01 - 05/11/06
Songtao 18 2,566 03/31/00 - 12/16/05
Yangjiang 31 6,003 12/03/03 - 12/03/05
Qionghai 28 5,208 05/11/01 - 05/11/06
Wenchang 20 4,979 05/11/01 - 05/11/06
Yangjiang 32 3,962 12/03/01 - 05/11/06
--------------------------------------------------------------------------------------------------------------------
Independent Total 64,637
--------------------------------------------------------------------------------------------------------------------
Wanan North 21A 6,801 Benton Offshore China Company 09/30/03 - 09/30/05
Wanan North 21B 6,118 Benton Offshore China Company 09/30/03 - 09/30/05
Wanan North 21C 6,372 Benton Offshore China Company 09/30/03 - 09/30/05
Wanan North 21D 6,126 Benton Offshore China Company 09/30/03 - 09/30/05
--------------------------------------------------------------------------------------------------------------------
PSC Total 25,417
--------------------------------------------------------------------------------------------------------------------
Western South China Sea Total 90,054
--------------------------------------------------------------------------------------------------------------------
Total 305,303
--------------------------------------------------------------------------------------------------------------------
[PICTURE OMITTED]
24
CNOOC LIMITED Annual Report 2003
CORPORATE GOVERNANCE
Maximising shareholder's value has been a priority of the Company since its
listing. In 2003, we strictly complied with our corporate governance policy,
and made sure that all decisions were based on trust, fairness, compliance and
transparency, so as to protect the interest of all our shareholders.
To better serve our shareholders and to achieve good corporate governance
standards, the Company has identified Board and committee members who are
dedicated, professional and accountable. In addition, world-renowned
professional external auditors were employed and internationally recognized
figures were invited to serve on our international advisory board to further
enhance our corporate governance standards.
Board of directors
The Company's board of directors consists of eight members, four of them are
independent non-executive directors. These four non-executive directors come
from other areas outside of China, and are all professionals or scholars with
backgrounds in legal, economics, financial and investment fields. They also
have extensive experience and knowledge in corporate management, making
significant contributions to the Company's strategic decisions. The diverse
background of the board members ensures that they fully represent the
interests of all our shareholders.
The board holds three regular annual meetings per year, and extraordinary
meetings will be held if required. Events that require all board members to
vote include conflict of interest on any matter that involves a major
shareholder or a director, major asset acquisition or disposal, investments,
capital expenditure items, determination of authority, treasury policy, risk
management and important personnel changes to the management.
In 2003, Mr. Evert Henkes was appointed as a non-executive independent
director of the Company. Mr. Jack So Chak Kwong on the other hand left the
board following his appointment as Deputy Chairman and Group Managing Director
of PCCW Limited. While we appreciated Mr. So's invaluable contributions to the
Company, we believe that Mr. Henkes' extensive experience with Shell would
help enhance our corporate governance standard.
During the year, the Company's independent directors attended all board
meetings.
Besides the existing audit committee and remuneration committee, the Company
has established a nomination committee to further strengthen its corporate
governance structure.
Audit Committee
The committee consists of two independent non-executive directors, with Dr
Kenneth Courtis designated as the audit committee financial expert under the
U.S. securities laws. The committee meets at least twice a year and is
responsible for reviewing the completeness, accuracy and fairness of the
Company's accounts, evaluating the Company's auditing scope and procedures,
and evaluating internal control systems. The committee is also responsible for
setting up internal monitoring systems so as to allow the Board to monitor the
Company's entire financial position, protect the Company's assets, and prevent
major errors resulting from financial reporting or loss. The Board is
responsible for these systems and appropriate delegations and guidance have
been made. In addition, the chairman of the audit committee will each year
present a report to the Board describing the committees' major activities
during the year.
[PICTURE OMITTED]
25
CNOOC LIMITED Annual Report 2003
CORPORATE GOVERNANCE
Remuneration Committee
With three independent non-executive directors, the remuneration committee is
responsible for reviewing information pertaining to all executives' salaries,
bonuses, share options packages, performance appraisal systems and retirement
plans.
Nomination Committee
To establish proper procedures for the selection of the Company's leadership
positions, upgrade the quality of board members and perfect the Company's
corporate governance structure, the Company has established a nomination
committee in accordance with related laws and requirements. Formed by an
executive director and two independent non-executive directors, the
committee's major authority and responsibilities are: to nominate and affirm
directors candidates approved by the Board; to review the structure and
composition of the board on a regular basis and to evaluate the leadership
abilities of executive and non-executive directors to ensure the competitive
position of the organization.
Striving for better transparency and communication with investors
With a long-term strategy of being transparent, strengthening investor
relations, and providing consistent, stable and extraordinary returns to
shareholders, the Company actively ensures that information is transparent to
our investors. We have established a professionally run investor relations
department to serve as a communication channel between the Company and its
shareholders and investors, ensuring that timely information is received by
them. Besides announcing its interim and annual results to shareholders and
investors according to regulations, the Company also publicized its major
business developments through press releases, announcements and the company
website. The Company also distributed its material information and statistics
on a timely basis. During the year, we have also revamped our website to
enrich information content for investors.
[PICTURE OMITTED]
Code of Ethics
The board of directors has adopted a Code of Ethics on 28 August 2003 to
provide guidelines to the senior management in legal and ethical matters as
well as the sensitivities involved in reporting illegal and unethical matters.
The Code of Ethics covers such areas as supervisory rules, insider trading,
market malpractices, conflict of interests, company opportunities, protection
and proper use of the Company's assets as well as reporting requirements for
listed companies.
All our senior management members are required to familiarize and follow the
code of ethics in the guide book to ensure that the Company's operations are
honest and legal. Violations of the rules will be penalized and serious
offences will result in dismissals.
[PICTURE OMITTED]
26
CNOOC LIMITED Annual Report 2003
Attendance at full board meetings in 2003
Executive Directors No. of meetings attended
(3 meetings in total)
Wei Liucheng (resigned on 16 October 2003) 2
Fu Chengyu 3
Jiang Longsheng 3
Zhou Shouwei 3
Luo Han 2
Independent Non-executive Directors
So Chak Kwong (resigned on 15 September 2003) 2
Chiu Sung Hong 3
Kenneth S. Courtis 3
Erwin Schurtenberger 3
Evert Henkes (appointed on 15 September 2003) 1
[PICTURE OMITTED]
27
CNOOC LIMITED Annual Report 2003
HEALTH, SAFETY AND ENVIRONMENT
We placed great emphasis on participating in HSE training programs organized
by professional training institutions. Together with business partners, the
Company also organized exchange activities that were related to international
safety management, oil spillage crisis management and oilfield abandonment
management.
[PICTURE OMITTED]
28
CNOOC LIMITED Annual Report 2003
In 2003, the Company continued to emphasize and strengthen its Health, Safety
and Environment ("HSE"). Being responsible to staff members, the society and
the environment as a whole, the Company regards HSE as a top priority of its
daily operation and production, promoting strict management control, and pays
great attention to details in order to further improve the Company's HSE
performance.
During 2003, the Company recorded no major fatalities, contaminations or any
safety related liabilities that exceeded USD120,000 per incident.
According to the Company's OSHA statistical results, we achieved an
above-average rating as compared with major international oil companies,
marking a new milestone in the company's HSE standards.
Promote Systematic Management
In 2003, the Company further refined management requirements in order to
further enhance its HSE system. The Company completed its senior management
review of all branches in China and CNOOC SES LTD., established health
management systems for its offshore crew members and set out crisis management
procedures. Such procedures were proved highly effective in withstanding the
challenges during the SARS period.
During the year, the Company further strengthened safety management procedures
for high-risk activities such as those involving helicopter and diving
operations. The launch of the International Association of Oil & Gas producers
(OGP) HSE management system has also fully demonstrated our deep concern for
the safety requirements of its contractors. In addition, the application for
the ISO14000 environmental management qualification for the Company's offshore
oil and gas fields has achieved significant progress during 2003. Qinhuangdao
32-6 oilfield and Wencheng oilfields have already began operating under a
standardised system with proper documentation.
[PICTURE OMITTED]
In order to promote Bohai Bay Oil Spillage Awareness, support the
establishment of the Bohai Oil Spillage Awareness Centre and strengthen crisis
awareness capabilities in offshore work sites, CNOOC Ltd took part in the
"National Offshore Oil Spillage Awareness Plan" seminar organized by the State
Oceanic Administration, and discussed with participating oil and gas companies
issues relating to resources sharing and risk assessment in case of oil
spillage in Bohai Bay.
In accordance with changes to OSHA's statistical mechanism, the Company has
revised its internal documentation methods to keep abreast with OSHA's
standard, which uses OGP reporting methods to record the differences and
standards of particular incidents. CNOOC Ltd also formulated new OSHA and
incident reporting forms in order to better meet the requirements of
international associations such as OGP and API.
The Company has been able to deliver working hour statistics and incident
reports to investors and API on a quarterly basis.
[PICTURE OMITTED]
29
CNOOC LIMITED Annual Report 2003
HEALTH, SAFETY AND ENVIRONMENT
HSE Training and Information Exchange
During 2003, the Company organized a series of seminars covering the areas of
HSE regulations and standards, special operations and offshore life-saving
techniques in order to reinforce staff members' HSE concepts, enrich their HSE
knowledge and raise their practical skills on HSE matters.
We placed great emphasis on participating in HSE training programs organized
by professional training institutions. Together with business partners, the
Company also organized exchange activities that were related to international
safety management, oil spillage crisis management and oilfield disposal
management.
The Company has continuously studied the HSE work of other international
companies including contractors and business associates, reviewing their
experience in order to further improve on the Company's regulations and
systems. In addition, the Company has taken the initiative to study the
incident cases of its peers and analyzed their situations in order to prevent
encountering the same problems in future.
In 2003, the Company also assisted the nation's respective government
departments to speed up the formulation of HSE standards.
Employee Health and Safety
The Company spares no effort in protecting health and safety of its employees.
Apart from monitoring and guiding employees' work safety awareness during the
course of production, the Company also paid special attention to the health
and safety conditions of their employees outside of work.
The month of June is China's national safety production month. During this
period, CNOOC Ltd launched a signature campaign entitled" Treasure Your Life,
Fasten Your Belt". The campaign included road safety seminars, quiz programs
as well as the publication of a "Road Safety Tips" CD-ROM. The campaign was
intended to build up a safety culture in both work and daily life through the
relatively small act of "Fastening a Seat Belt".
During the SARS outbreak, the Company took active steps to help employees and
their families to combat the disease, established SARS Sterilized Scheme and
advocated a "zero case" system. All employees working offshore and employees
who were returning to the country from infected areas were closely monitored.
As a result of the effective implementation of such preventive measures, not a
single SARS or suspected SARS case was recorded during the period.
During the year, the Company organized various medical seminars including the
prevention of cerebrovascular disease, cardiovascular disease, cancer and
diabetes to promote healthcare knowledge among employees. The Company also
published a healthcare guidebook for its employees.
CNOOC Ltd. OSHA occupational injury & occupational disease statistics of 2003
----------------------------------------------------------------------------------------------------------------------
Incident Rate Work Delay Rate
----------------------------------------------------------------------------------------------------------------------
Man-hour Recordable Number of days Death Number of days
(In thousand) cases away & working away & working
Scope bounds bounds
----------------------------------------------------------------------------------------------------------------------
Permanent worker 2370 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------
Permanent worker, & other 14133 0.06 0.06 0.00 1.27
worker & direct contractor
[PICTURE OMITTED]
30
CNOOC LIMITED Annual Report 2003
COMMUNITY CONTRIBUTIONS
[PICTURE OMITTED]
While striving to improve the Company's cost efficiency and increasing
shareholder returns, we are also very happy to share its success with the
community.
In 2003, the Company continued to engage in a development project in Nima
County in the Tibet Autonomous Region. The Company also encourages its
employees to take part in welfare activities such as Lifeline Express and Help
the Needy.
CNOOC China Ltd's Shanghai Branch has taken an active part in the social
welfare activities of the city and its achievements, and has gained positive
recognition from the community. In May 2003, the Company received a "help
students in need" award from the community Xu Jiahui.
As we continue to expand our overseas operations, we will continue to follow
our social responsibility practice in these areas.
For example, CNOOC Southeast Sumatra Ltd has taken an active part in
cultivating a cordial, harmonious and mutual care relationship with the local
community in Indonesia. Apart from subsidizing the construction of a mosque
and sports facilities in the neighborhood and promoting environmental related
activities, the Company has assisted in renovating schools, ferry piers and
roads for the community.
[PICTURE OMITTED]
31
CNOOC LIMITED Annual Report 2003
HUMAN RESOURCES DEVELOPMENT
Looking forward, we will continue our commitment to perfecting our corporate
culture of "people-oriented and employee focus". The concept will also become
part of our core development strategies.
[PICTURE OMITTED]
32
CNOOC LIMITED Annual Report 2003
[PICTURE OMITTED]
"Employees are always the foundation for a company. Without the dedication and
contributions of our employees, CNOOC Ltd would never have been able to
achieve the remarkable performance today and the rosy prospects for tomorrow.
Looking forward, we will continue our commitment to perfecting our corporate
culture of "people-oriented and employee focus". The concept will also become
part of our core development strategies."
Mr. Fu Chengyu, Chairman and Chief Executive Officer
To ensure healthy and stable development of the company, we place strong
emphasis on human resources development and management to realize the
capabilities, enthusiasm and creativity of our employees.
Employment and remuneration systems reform completed
The Company's rapid development has resulted in new requirements towards our
corporate structure, job positioning and management process. The establishment
of an effective, competitive and practical job delegation and remuneration
system has become one of the top priorities of the Company to attract and
retain high calibre employees.
In 2003, we undertook a systematic and in-depth reform of our job delegation
and remuneration system, which focused on the Company's overall performance
and future development. We invited a group of external and internal
consultants to analyze and restructure the Company's management process, which
included the clarification of the authorities and responsibilities of
different departments. Based on the restructuring, we also reviewed the
functions of each department and job descriptions, and carried out a
recruitment campaign.
[PICTURE OMITTED]
33
CNOOC LIMITED Annual Report 2003
HUMAN RESOURCES DEVELOPMENT
This revolutionary reform has restructured the Company's management process,
aligning organization of all departments and subsidiaries with the Company's
overall strategy and positioning. With a more linear corporate structure, our
operating efficiency is enhanced through the streamlining of the management
chain. The creation and ranking of positions have also become more objective,
logical and systematic. We have also developed a more open recruitment
procedure, which allows the Company to absorb real talents and optimize the
location of its manpower. The implementation of such competitive mechanism has
effectively implanted a competitive mindset among the employees. The newly
established "market-oriented" remuneration system not only lays a concrete
foundation to attract, retain and motivate our people, but also enables the
flexibility in taking rewards and penalizing actions.
[PICTURE OMITTED]
Establishment of overseas human resources system
To ensure smooth implementation of our overseas development strategies, we
have established an international human resources and remuneration system to
attract and retain our management and technical talents. This system
consolidates the best practices of other international oil companies, covering
remuneration, annual leave, overseas medical policy, relocation, emergency
retreat and service process.
Establishment and improvement on appraisal systems
We have also strengthened our internal human resources system to evaluate the
results of the reform. During the year, we introduced a simple and practical
appraisal system focusing on the harmonization of individual and company
development. With reference to international standards, we have included goal
setting, individual development plan, performance tracking and reward,
[PICTURE OMITTED]
34
CNOOC LIMITED Annual Report 2003
results assessment and employees' potential and value identification in the
system. An effective appraisal system can help enhance employees' performance
while improving the overall performance and management of the Company. The
system can also identify and retain talents, help formulate reward and
training system. We believe the new system would further strengthen a
results-oriented and learning culture, which is essential in attaining the
Company's strategic targets.
Strengthening human resources development
Through the establishment and implementation of an individual development
system, we are able to organize specific trainings on various technical or
general topics. During the year, a total of 325 training workshops were held
with 6,980 participants.
Training for senior and mid-level executives on management skills has been a
key focus in our training system. Last year, three groups of senior executives
attended a seminar jointly held with the China Europe International Business
School . Among these executives, some were also selected to join the overseas
exchange program in association with our business partner. The participants
were invited to attend the management training organized by a tertiary
institution and a world renowned company, visit several prominent
international companies and our foreign partner's headquarters in the U.S.
During the tour, the executives were able to learn the latest management
theories and production techniques.
[PICTURE OMITTED]
In addition, the Company has organized a "Carnegie Leadership Training
Program" for managers in order to strengthen their management skills and
internal management quality. This program mainly focused on leadership,
planning, communication, team building, innovation, motivation, delegation and
effective decision-making skills.
[PICTURE OMITTED]
35
CNOOC LIMITED Annual Report 2003
DIRECTORS AND SENIOR MANAGEMENT
[PICTURE OMITTED]
36
CNOOC LIMITED Annual Report 2003
Executive Directors
Chengyu FU, aged 52. Mr. Fu received a B.S. degree in geology from the
Northeast Petroleum Institute in China and a Master's degree in petroleum
engineering from the University of Southern California in the United States.
He has over 29 years of experience in the oil industry in the PRC. He
previously worked in China's Daqing, Liaohe and Huabei oilfields. He joined
CNOOC in 1982 and has since been appointed as the Chairman of the Management
Committee formed through a joint venture between CNOOC, BP Amoco, Chevron,
Texaco, Phillips Petroleum, Shell and Agip. From 1994 to 1995, Mr. Fu was the
Deputy General Manager of China Offshore Oil Eastern South China Sea
Corporation, a subsidiary of CNOOC. In December 1995, he was appointed as Vice
President of Phillips China Inc. and the General Manager of the Xijiang
Development Project. In 1999, Mr. Fu was the General Manager of China Offshore
Oil Eastern South China Sea Corporation.
In 2000, Mr. Fu was appointed as Deputy General Manager of CNOOC.
Subsequently, he was appointed as a Director, Executive Vice President,
President and Chief Operating Officer of the Company in 2001. In August 2002
he became the Chairman and Chief Executive Officer of our affiliate, China
Oilfield Services Ltd.
In October 2003, Mr. Fu was appointed as President of CNOOC. He was also
appointed as the Chairman of the Board of Directors and Chief Executive
Officer of the Company, effective 16 October 2003. In November 2003, Mr. Fu
resigned his Chief Executive Officer position from China Oilfield Services
Ltd.
Longsheng JIANG, aged 58. Mr. Jiang received a B.S. degree from the Beijing
Petroleum Institute in China. He has over 34 years' experience in the oil
industry in the PRC. He was appointed as a Director of the Company in December
2000 and has been the Vice President of CNOOC since 1998. From 1994 to 1998,
he was the General Manager of China Offshore Oil Southern Drilling Company.
From 1991 to 1994, Mr. Jiang served as the Deputy Chief Drilling Engineer and
was later appointed as the Chief Drilling Engineer of China Offshore Oil
Western South China Sea Corporation. He joined CNOOC in 1982.
Shouwei ZHOU, aged 52. Mr. Zhou received a doctorate degree from the Southwest
China Petroleum Institute and is a senior engineer. He was appointed as a
Director and Executive Vice President of the Company in September 1999 and is
responsible for the management and operation of CNOOC China Limited. Mr. Zhou
was appointed the President of the Company in August 2002. Mr. Zhou is also a
Vice President of CNOOC. Mr. Zhou was the Deputy General Manager and later
promoted to General Manager of China Offshore Oil Bohai Corporation, a
subsidiary of CNOOC. He joined CNOOC in 1982.
Han LUO, aged 50. Mr. Luo received a doctorate degree from the China Petroleum
University. He has over 29 years of experience in the oil industry in the PRC.
He was appointed as a Director of the Company in December 2000. From 1993 to
1999, Mr. Luo served as the Vice President of China Offshore Oil Eastern South
China Sea Corporation and concurrently as the Chief Representative of CNOOC in
the CACT operators group, and the Executive Vice President of China Offshore
Oil East China Sea Corporation, a subsidiary of CNOOC. In 1999, he served as
the General Manager of CNOOC China Limited's Shanghai Branch. Mr. Luo is a
Vice President of CNOOC, a position he has held since 2000. He joined CNOOC in
1982.
37
CNOOC LIMITED Annual Report 2003
DIRECTORS AND SENIOR MANAGEMENT
Independent Non-executive Directors
Sung Hong CHIU, aged 57. Mr. Chiu received an LL.B. degree from the University
of Sydney. He is admitted as a solicitor of the Supreme Court of New South
Wales and the High Court of Australia. He has over 29 years' experience in
legal practice and is a director of a listed company in Australia. Mr. Chiu is
the founding member of the Board of Trustees of the Australian Nursing Home
Foundation and served as the General Secretary of Australian Chinese Community
Association of New South Wales. Mr. Chiu was appointed as an Independent
Non-executive Director of the Company in September 1999.
Dr Kenneth S. COURTIS, aged 58, is Managing Director of Goldman Sachs and Vice
Chairman of Goldman Sachs Asia. He advises the firm on economics and strategy
throughout the Asia-Pacific region as well as in Europe and North America. Dr.
Courtis has won numerous prizes and distinctions for his research and is a
valued advisor on international economic, financial and investment matters. He
has lectured and written widely on the related fields of international
finance, macro-economic policy, global capital markets and strategy. He is a
prominently quoted commentator on global economic, financial and political
developments.
He serves on the international advisory boards of a variety of leading
international firms, public policy organizations and universities. After
graduating with honors from Glendon College in Toronto, Dr. Courtis received a
M.A. in international economics from Sussex University, England, a M.B.A. in
finance and strategy from INSEAD (European Institute of Business
Administration), and a Doctorate, with honors and the highest distinction,
from the Institute of Economic and Political Studies in Paris. Prior to
joining Goldman Sachs, he served as Chief Asia Economist and Strategist for
Deutsche Bank.
Dr. Courtis was previously a member of the Company's International Advisory
Board ("IAB").
Dr Erwin SCHURTENBERGER, aged 64, was the Ambassador of Switzerland to the
People's Republic of China, the Democratic People's Republic of Korea, the
Republic of Mongolia. He joined the Swiss Foreign Services in 1969. Over the
years, he held various diplomatic positions in Bangkok, Hong Kong, Beijing and
Tokyo. He also served as the Ambassador of Switzerland to Iraq. He has been an
independent business advisor to various European multinationals, American
groups and humanitarian aid organizations. He was the President of the
Swiss-Asia Foundation. He serves on the Boards of ROBERT BOSCH RBint., BUHLER
GROUP Switzerland, FIRMENICH, SIRE Holding (China Infrastructure Fund),
TAIKANG Life Insurance, WINTERTHUR Insurances (Asia). Dr. Schurtenberger is
also a senior advisor to the China Training Center for Senior Personnel
Management Officials. He received a Ph.D. Degree in Economics and was trained
in political science and philosophy. Dr. Schurtenberger is presently Chairman
of the Company's IAB.
Evert HENKES, aged 60, was the CEO of Shell's global chemical business during
1998-2003. Since joining Shell in 1973, he served on various executive
positions worldwide, including Managing Director of Shell Chemicals UK Ltd and
a Managing Director of Shell UK, President of Billiton Metals and Shell's
Metals Co-ordinator, Shell's Chemicals Co-ordinator and Director of Strategy &
Business Services Shell International Chemicals Ltd. He also had directorships
in regional and global industry bodies, including i.e. CEFIC and ICCA.
He is also a director of Tate & Lyle Plc, BPB Plc and Outokumpu Oy.
38
CNOOC LIMITED Annual Report 2003
Company Secretary
Yunshi CAO, aged 58. Mr. Cao is the Company Secretary, the General Counsel and
a Senior Vice President of the Company. From 1992 to 1999, he was the Director
of the Legal Department of CNOOC. He has been the General Counsel of CNOOC
since 1999. Mr. Cao is a senior economist and licensed lawyer in the PRC. He
has extensive experience in production sharing contracts and over 33 years'
experience in the oil industry. He received a B.S. degree from the Beijing
Petroleum Institute and studied law at the Law School of Columbia University.
Mr. Cao joined CNOOC in 1982.
Senior Management
Yunshi CAO (Please refer to "Company Secretary")
Mark QIU, aged 40. Dr. Qiu is the Chief Financial Officer and Senior Vice
President of the Company. He worked for the investment bank Salomon Smith
Barney before CNOOC Ltd., last as the head of its Asia Oil & Gas Investment
Banking group. He previously held several management positions at Atlantic
Richfield Corporation (ARCO) of United States. He was the Federal Government
Relations Director of ARCO in Washington, D.C. Prior to that, he was a Vice
President of ARCO China Ltd., ARCO's subsidiary in China. He was a consultant
with the leadership succession planning consulting firm of RHR International.
Mr. Qiu received a MBA degree from the Sloan School of Management at
Massachusetts Institute of Technology as a Sloan Fellow. He also has a Master
degree and a Ph.D. degree in Decision Sciences from the University of Texas at
Arlington.
Hua YANG, aged 42. Mr. Yang is a Senior Vice President of the Company and
President of CNOOC International Limited. He is a senior engineer. He received
his B.S. degree from China Petroleum Institute. He has over 21 years'
experience in petroleum exploration and production. Mr. Yang joined CNOOC in
1982 and was an Acting Director of the Overseas Development Department of
CNOOC.
Wei CHEN, aged 46. Mr. Chen is a Senior Vice President and Director of the
Research Centre. A senior engineer, he received his B.S. degree from China
Petroleum University and holds an MBA degree of Tsinghua University. He has
over 21 years' experience in petroleum exploration and production. Mr. Chen
joined CNOOC in 1984 and was the Deputy Manager for the exploration and
development department of CNOOC Research Center, Deputy Manager of the
Overseas Research department, the Manager of the Information Department, the
Deputy Director of the Research Center, the General Manager of the Human
Resources Department of CNOOC and General Manager of the Administration
Department of the Company.
Guohua ZHANG, aged 42. A Senior Vice President of the Company and General
Manager of Exploration Department. Mr. Zhang is a senior engineer, responsible
for the exploration work offshore China as well as the reserve management. He
is a geologist, and received his B.S. degree from Ocean Institute of Qingdao.
He also studied in the Business Institute of University of Alberta in 2001.
Mr. Zhang joined CNOOC in 1982 and worked as Exploration Manager of China
Offshore Oil Western South China Sea Corporation, a Chief Geologist of CNOOC
Research Center and the Assistant to General Manager of CNOOC China Limited.
39
CNOOC LIMITED Annual Report 2003
DIRECTORS AND SENIOR MANAGEMENT
Jian LIU, aged 46. A Senior Vice President of the Company and General Manager
of Development and Production Department. He is a senior engineer and is
responsible for the development and production of oil & gas of the Company. He
received his B.S. degree from Huazhong Institute of Technology and MBA degree
from Tianjin University in 2000. Mr. Liu joined CNOOC in 1982 and was the
Manager of CNOOC Bohai Corporation, the Vice President of Tianjin branch
office and the President of Zhanjiang branch office.
Ning LI, aged 40. A Senior Vice President of the Company and General Manager
of Engineering and Project Department. He is a senior engineer and is
responsible for the project management of oil and gas development of the
Company. He received his B.S. degree from Petroleum University of China in
1983 and MBA degree from Tianjin University in 2000. Mr. Li joined CNOOC Bohai
Corporation in 1983, responsible for the design and engineering of oil and gas
fields in Bohai Bay, East China Sea and South China Sea. He was the Vice
President of Design & Engineering Corporation of CNOOC since 1994, and was
appointed Deputy manager of Engineering Department of CNOOC in 1998. He was
also the General Manager of the Dongfang 1-1 gas development project and the
Deputy Manager of the Zhanjiang branch office.
Changes In Directors and Senior Management
* Mr. Guohua Zhang was appointed the Senior Vice President of the Company
and ceased to be the Assistant to General Manager of CNOOC China
Limited as of March 2003. He was
also named the General Manager of Exploration Department as of April
2003.
* As of May 2003, Mr. Jian Liu and Mr. Ning Li were appointed the Senior
Vice President. They were also named the General Manager of Development
and Production Department, and Engineering and Project Department
respectively.
* In October 2003, Mr. Chengyu Fu was appointed by the Board of Directors
as the Company's Chairman and Chief Executive Officer.
* Mr. Evert Henkes has been appointed as a non-executive independent
director of the Company in September 2003. Mr. Chak Kwong So resigned
from the board of the Company following his appointment as Deputy
Chairman and Group Managing Director of PCCW Limited.
40
CNOOC LIMITED Annual Report 2003
REPORT OF THE DIRECTORS
The directors (the "Directors") of CNOOC Limited (the "Company") are pleased
to present their report together with the audited financial statements for the
year ended 31 December 2003.
Principal Activities and Operating Results
The principal activity of the Company is investment holding of its
subsidiaries (which together with the Company shall be known as the "Group"),
which are principally engaged in the exploration, development, production and
sales of crude oil and natural gas and other petroleum products.
Summary of Financial Information
Please refer to the financial statements for a summary of the assets and
liabilities of the Group as at 31 December 2003 on page 54 and the operating
results for the year then ended on page 53.
Loans
Please refer to note 26 to the financial statements on pages 84 to 85 for
details of the long-term bank loans of the Group for the year ended 31
December 2003.
Property, Plant and Equipment, net
Please refer to note 18 to the financial statements on pages 78 to 79 for
movements in property, plant and equipment, net of the Group for the year
ended 31 December 2003.
Reserves
Please refer to the statement of changes in equity on page 55 and note 32 to
the financial statements on page 91 for movements in the reserves of the Group
and the Company, respectively, for the year ended 31 December 2003.
Subsidiaries and Associated Companies
Particulars of the Company's subsidiaries and associated companies as at 31
December 2003 are set out in notes 19 and 20 to the financial statements on
pages 80 to 82.
Dividends
The Directors recommend the payment of a final dividend of HK$0.12 per share
for the year ended 31 December 2003 and a special final dividend of HK$0.18
per share.
Retirement Benefits
Please refer to note 33 to the financial statements on page 91 to 93 for
details of the retirement benefits of the Group for the year ended 31 December
2003.
Major Suppliers and Customers
Purchases from the largest supplier of the Group for the year ended 31
December 2003 represented approximately 13.0% of the Group's total purchases.
The total purchases attributable to the five largest suppliers of the Group
accounted for approximately 29.4% of the total purchases of the Group for the
year then ended.
Sales to the largest customer for the year ended 31 December 2003 represented
approximately 24.8% of the Group's total oil and gas sales. The total sales
attributable to the five largest customers of the Group accounted for
approximately 49.2% of the total oil and gas sales of the Group for the year
then ended.
None of the Directors or their respective associates (as defined in the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
(the "Listing Rules")) or any shareholder of the Company (which to the
knowledge of the Directors owns more than 5% of the Company's share capital)
had any interests in the five largest suppliers or customers of the Group for
the year ended 31 December 2003.
Connected Transactions
The Independent Non-executive Directors confirmed that the following connected
transactions for the year ended 31 December 2003 to which the Group was a
party and the agreements governing those transactions were entered into by the
Group:
1 in the ordinary and usual course of its business;
2 either (a) on normal commercial terms, or (b) where there was no
available comparison, on terms no less favourable than those available
to independent third parties; and
3 on terms that were fair and reasonable so far as the shareholders of the
Company were concerned.
41
CNOOC LIMITED Annual Report 2003
REPORT OF THE DIRECTORS
The Independent Non-executive Directors further confirmed that:
1 the aggregate annual volume of transactions under the materials,
utilities and ancillary services supply agreements has not exceeded 10%
of the audited consolidated total revenues of the Group in the
immediate preceding financial year;
2 the aggregate annual volume of transactions in relation to technical
services has not exceeded RMB5,853 million;
3 the aggregate annual volume of transactions in relation to research
and development services for particular projects has not exceeded
RMB141 million;
4 the aggregate annual volume of transactions in relation to sales of
crude oil, condensate oil and liquefied petroleum gas has not exceeded
42% of the audited consolidated total revenues of the Group in the
immediate preceding financial year;
5 the amount paid under the general research and development services
agreement has not exceeded RMB110 million; and
6 the aggregate amounts paid under the lease and management agreements
have not exceeded RMB78 million.
The auditors of the Group have reviewed the transactions referred to in the
above paragraph 1 to paragraph 6 and confirmed to the Directors that:
1 the transactions have received the approval of the Directors;
2 the transactions were in accordance with the pricing policies as stated
in the Company's financial statements; and
3 the transactions were entered into in accordance with the terms of the
agreements governing the transactions.
Please refer to note 29 to the financial statements on pages 86 to 88 for a
summary of the related party transactions which include the Group's connected
transactions.
Share Capital
Please refer to note 31 to the financial statements on pages 88 to 90 for
details of movements in the Company's share capital for the year ended 31
December 2003.
Issue of Bonds
In May 2003, the Company successfully issued 10-year and 30-year bonds with a
total amount of US$500 million which included US$200 million 4.125% guaranteed
notes due 2013 and US$300 million 5.50% guaranteed notes due 2033. The Company
intends to use the net proceeds of the bond offerings for general corporate
purposes.
Share Option Schemes
The Company has adopted share option schemes which provide for the grant of
options to the Company's senior management. Under these share option schemes,
the remuneration committee of the Company's board of directors will from time
to time propose for the board's approval for the recipient of and the number
of shares underlying each option. These schemes provide for issuance of
options exercisable for shares granted under these schemes as described below
not exceeding 10% of the total number of the Company's outstanding shares,
excluding shares issued upon exercise of options granted under the schemes
from time to time.
On 4 February 2001, the Company adopted a pre-global offering share option
scheme (the "Pre-Global Offering Share Option Scheme"). Pursuant to the
Pre-Global Offering Share Option Scheme:
1 options for an aggregate of 4,620,000 shares have been granted;
2 the subscription price per share i