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Transcript of CNPC Annual Report
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China National Petroleum Corporation
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China National Petroleum Corporation (CNPC) is an integrated international
energy company, with businesses covering oil and gas operations, oilfield
services, engineering and construction, equipment manufacturing, financial
services and new energy development.
Energize Harmonize Realize
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Contents
Message from the Chairman
Report of the President
Top Management and Organization
2013 Industry Review
Safety, Environment, Quality and Energy Conservation
Human Resources
Technology
Annual Business Overview
Financial Statements
Major Events
Glossary
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02
2013 Annual Report
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03
2013 Annual Report
Technological innovation is the driving force behind CNPCs sustained
growth. Adhering to an innovation-driven approach and putting
innovation at the core of the companys strategy, CNPC has benefited
from technological progress in its business growth through ongoing
efforts to bolster innovation management, talent cultivation and
technological cooperation. In 2013, an integrated solution for shale gas
development was applied in Sichuan and Yunnan, exhibiting promising
results. Together with Shell, we established a shale oil joint research
center as part of the initiative to step up efforts in unconventional
oil and gas technology research. In the refining sector, we upgraded
the quality of gasoline by commercially applying our proprietary
hydrodesulphurization technologies for FCC gasoline.
CNPC has significantly enhanced its strength through years of efforts.
We realized that a transition from a development mode focused on
scale to one which focuses on quality and efficiency is a must to achieve
sustainable business growth and build a major energy company. To this
end, we continue to optimize our investment portfolio and business
layout while maintaining a focus on oil and gas operations, improving
asset quality and delivering premium engineering solutions, products and
customer services. In response to the Chinese Governments air pollution
control plan, we have accelerated oil products upgrading and natural
gas development in order to boost our clean fuel supply. Meanwhile, we
have been following the market rules in improving corporate governance
and internal control to ensure regulatory compliance and responsible
operation. Our HSE performance has been constantly improved as we
regard safety and environmental protection as our fundamental principles.
We are determined to foster safety awareness and an attitude that all
accidents are preventable throughout the company, in order to achieve an
industry-leading HSE record.
The global economy is expected to pick up slowly and the Chinese
economy will continue to grow steadily in 2014. To ease air pollution,
there will be an increasing demand for clean fuels including natural gas.
Following the guideline of pursuing quality, efficient and sustainable
development, we will continue to push ahead with our strategies for
resources, market and internationalization, and strive to achieve the
objectives set for 2014 by deepening reform, enhancing corporate
governance, optimizing our business structure, promoting technological
innovation and strengthening cooperation, in order to better serve socio-
economic development.
The year 2013 witnessed a faltering global economic recovery, and increasing
operational risks and cost pressures in the oil and gas industry. Stabilizing
energy supply and minimizing environmental impact still remain the greatest
challenges faced by the company. With the goal of building a major integrated
international energy company, we are committed to promoting technological
progress and international cooperation, and developing and utilizing energy
in a more efficient and environmentally-friendly way. We are well positioned
to achieve industry-leading operational performance with enhanced
competitiveness and profitability by 2020 through strategic development
initiatives, technological innovation, and an accelerated shift to a new
development mode highlighting quality and efficiency.
In the past year, we were steadfast in implementing our strategies for
resources, markets and internationalization. In addition to conventional
onshore oil and gas, we put a new premium on the exploration and
development of unconventional and offshore resources. In China, our
newly added proven oil and gas reserves exceeded 1 billion tons of oil
equivalent for the seventh consecutive year, with the reserve replacement
ratio staying above 100%. Delivering more than 60% of Chinas total oil
and gas, we did a good job in meeting the burgeoning demand in the
domestic market through our nationwide distribution network. Meanwhile,
we started to partner with private, social and international investors in
pipeline construction and operation, nonproducing reserves, and shale gas
exploration and development. We entered a number of oil and gas projects
in Central Asia, Russia, offshore East Africa, Latin America and the Middle
East, consolidating the foundation for the scale and quality development
of our overseas business.
Message from the Chairman
Message from the Chairman
Zhou Jiping, Chairman
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04
2013 Annual Report
In 2013, amid a range of risks and challenges both inside and outside
the company, CNPC continued its strategies for resources, market and
internationalization and capitalized on both domestic and international
resources and markets. Maintaining a focus on oil and gas operations
and emphasizing the quality and efficiency of our business growth, we
achieved operating results better than the industry average. The company
recorded a full-year operating income of RMB 2.76 trillion, total profits of
RMB 188 billion, and tax payable of RMB 407.8 billion, up 2.8%, 2.2% and
3.8% year-on-year, respectively.
Steady growth in domestic oil and gas operations
We achieved favorable exploration results by prioritizing high-quality
producing reserves in major petroliferous basins as our exploration
targets. In 2013, newly added proven oil in place and gas in place were
670 million tons and 492.3 billion cubic meters respectively, exceeding
1 billion tons of oil equivalent for the seventh consecutive year. The
reserve replacement ratio remained over 100%. We identified Chinas
largest monomer uncompartmentalized gas reservoir at Longwangmiao
Formation of Moxi block in the Sichuan Basin, proved several large-scale
uncompartmentalized blocks with considerable oil reserves in the Ordos
and Tarim basins, and made significant progress in tight oil exploration in
the Songliao and Ordos basins.
To increase daily output per well and enhance profitability of oil and
gas production, we optimized technologies and implemented fine
management in project design, production organization, field operation,
and follow-up analysis. In 2013, we produced 112.6 million tons of crude
oil, 2 million tons more than the previous year. Our natural gas output
rose to 88.8 billion cubic meters, accounting for 75% of the nations total.
In particular, Daqing Oilfield continued to produce at the 40 million tons
level for the eleventh consecutive year. Changqing Oilfield produced
51.95 million tons of oil equivalent, becoming the most productive
onshore oil-gas field in China.
In 2013, we improved resource allocation, optimized process routes and
streamlined product offerings in the refining and chemicals sector. Our
crude runs and the output of refined products totaled 146.02 million tons
and 97.9 million tons, respectively. High efficiency products proportion
reached 35%. We continued to improve product quality to boost the
supply of clean oil products. Our 14 gasoline upgrading projects became
operational, adding 14.05 million tons to our clean gasoline production
capacity. All of our motor gasoline products have met National IV standards.
With regard to oil products marketing, given frequent price adjustment and
easing market supply, we focused on developing the distribution network
and retail business in key markets in order to increase profitability. In 2013,
the company sold 118.33 million tons of oil products in domestic market, up
1.5% year-on-year, with retail sales reaching 87.3 million tons and high-grade
gasoline sales increasing by 30%. We have set up an integrated marketing
model comprising retail, fuel cards and non-fuel businesses. Meanwhile, in
view of the strong demand for natural gas, we managed to allocate various
gas sources including self-produced, imported and SNG, and leveraged the
peak-shaving capabilities of our LNG terminals, underground gas storage
and pipeline storage, ensuring stable market supply. The company sold
110.6 billion cubic meters of natural gas in 2013, up 13.6% year-on-year. A
number of key projects went on stream, including the Myanmar-China Gas
Pipeline, Zhongwei-Guiyang Gas Pipeline, Lanzhou-Chengdu Crude Pipeline,
Lanzhou-Zhengzhou-Changsha Refined Products Pipeline and Tangshan LNG
Terminals, bolstering our oil and gas supply capacity and extending our gas
supply network to 29 provinces, municipalities and autonomous regions as
well as Hong Kong SAR throughout the country.
Major breakthroughs in international operations In 2013, we picked up pace in implementing our internationalization
strategy and continued to optimize our overseas business structure,
Report of the President
Report of the President
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05
2013 Annual Report
achieving fruitful results in international cooperation. We signed
agreements on oil and gas development and LNG projects with Russia,
Kazakhstan and some other Central Asian countries. We also acquired a
number of offshore projects in Brazil, Mozambique, Australia and the United
Arab Emirates, in cooperation with some IOCs. In addition, cooperation was
expanded between CNPC and its counterparts in Latin American countries
such as Peru and Ecuador.
We made significant discoveries in the Bongo Basin in Chad, the Agadem
Block in Niger and the right bank of the Amu Darya in Turkmenistan, by
drawing on domestic expertise and experience and focusing on new
zones, new strata and new types of reservoirs. In 2013, our overseas
operating production amounted to 123 million tons of oil equivalent,
of which CNPCs equity was 59.2 million tons. Thanks to our overseas oil
and gas operation centers in Asia, Europe and the Americas and a global
marketing network, our international trade business continued to grow
both in terms of scale and performance. The full-year trade volume stood
at 350 million tons, up 15.6% year-on-year.
Consolidated comprehensive and integrated strength Oilfield services, engineering & construction, and equipment
manufacturing are essential parts of CNPCs comprehensive and integrated
strength. In 2013, we maintained our focus on intensive and specialized
development, and saw continuous improvement in service capabilities.
We pushed ahead with R&D and application of key techniques, equipment
and software in oilfield services. Horizontal and underbalanced drilling
techniques were widely applied and we have secured a leading position
in the global onshore geophysical prospecting market for 10 consecutive
years. The proportion of EPC and PMC contracting and engineering design
in our engineering & construction business rose steadily as we further
promoted the application of new technologies, processes and materials
to improve project quality and construction efficiency. Our equipment
manufacturing sector optimized product offerings and further improved
its product and service quality, despite sluggish market demand. Our
petroleum equipment marketing network covers all major oil and gas
producing areas worldwide. We also further improved the settlement
and financing platforms in our financial services, to support the sustained
growth of our core businesses.
Enhanced sustainabilityThe company partnered with private capital, social and international
capital to make headway in the construction and operation of key projects.
We set up the PetroChina United Pipelines Company Limited joint venture
with social investors from the insurance and banking sectors, and became
the first State-owned enterprise to issue preference shares through China
Reform Holdings Corporations platform.
Technological progress is playing an increasingly important role in driving
the companys business growth. ASP flooding contributed remarkably
in stabilizing production at Daqing Oilfield. Horizontal well drilling
and completion and SRV fracturing in a factory-like operation mode
enabled efficient development of the ultra-low permeability reservoirs
at Changqing Oilfield. Progress in the R&D of technologies for large-scale
shale gas development, integral development of giant carbonate reservoirs,
full-range refining catalysts, and natural gas liquefaction equipment
underpinned the sustainable growth of corresponding businesses.
We give top priority to operational safety, environmental protection, energy
efficiency, and emission reduction. In 2013, we achieved a satisfactory HSE
performance by improving the HSE management system, reinforcing risk
identification and control, and enhancing pollution control and treatment
measures. By launching a number of key energy efficiency projects and
promoting the use of resource-saving technologies, we cut our energy use
by 1.18 million tons of standard coal and fresh water use by 24.4 million
cubic meters throughout the year.
2014 is a critical year for us to achieve the objectives of the 12th Five-Year
Plan. We will adhere to the development guideline of quality, efficiency
and sustainability, while pressing ahead with our strategies for resources,
market and internationalization. Emphasis will be given to oil and gas
operations, the building of innovative capabilities, strategic business
adjustment, a shift in our development mode, and the improvement of
profitability, in order to build CNPC into a major integrated international
energy company. We remain committed to safeguarding national energy
security and fueling sound and sustained socio-economic development.
Report of the President
Liao Yongyuan, President
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06
2013 Annual Report
2011 2012 2013
Financial Index
Operating income (billion RMB yuan) 2,381.3 2,683.5 2,759.3
Total profit (billion RMB yuan) 181.7 183.9 188.0
Net profit (billion RMB yuan) 130.5 139.2 140.8
Tax payable (billion RMB yuan) 401.5 393.0 407.8
Oil and Gas Production
Oil production (mmt)
Domestic
Overseas (CNPC's share)
149.27
107.54
41.73
151.88
110.33
41.55
159.81
112.60
47.21
Gas production (bcm)
Domestic
Overseas (CNPC's share)
88.19
75.62
12.57
93.52
79.86
13.66
103.89
88.84
15.05
Refining, Chemicals and Sales
Crude runs (mmt)
Domestic
Overseas
179.62
144.84
34.78
191.45
147.16
44.29
188.55
146.02
42.53
Domestic refined products output (mmt) 93.00 96.38 97.90
Domestic lube oil output (mmt) 1.57 1.84 1.89
Domestic ethylene output (mmt) 3.47 3.69 3.98
Domestic refined products sales (mmt) 114.98 116.62 118.33
Domestic service stations 19,323 19,840 20,272
Pipeline
Domestic pipeline mileage(km)
Crude oil
Natural gas
Oil products
60,257
14,807
36,116
9,334
66,801
16,369
40,995
9,437
72,878
17,640
45,704
9,534
Overseas pipeline mileage(km)
Crude oil
Natural gas
10,494
6,672
3,822
10,494
6,672
3,822
13,257
6,671
6,586
Operation Highlights
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07
2013 Annual Report
Liao YongyuanPresident
Yu Baocai Vice President
Shen Diancheng Vice President,
Chief Safety Officer
Liu Yuezhen Chief Financial
Officer
Wang Lixin Chief of Discipline &
Inspection Group
Liu HongbinVice President
Wang Dongjin Vice President
Top Management and Organization
Top Management and Organization
Zhou Jiping Chairman
China National Petroleum Corporation
Retiree Affairs D
epartment
Corporate C
ulture Departm
ent
Logistics Departm
ent
Corporate M
anagement
Departm
ent
Auditing D
epartment
Supervision Departm
ent
International Departm
ent
Procurement D
epartment
IT Departm
ent
R&D
Departm
ent
Quality and Standard
Managem
ent Departm
ent
HSE and Energy C
onservationD
epartment
Legal Departm
ent
M &
A D
epartment
Production & O
peration M
anagement D
epartment
Hum
an Resources Departm
ent
Tax Departm
ent
Treasury Departm
ent
Finance Departm
ent
Planning Departm
ent
Policy Research Offi
ce
General O
ffice
CN
PC M
anufacturingC
ompany
CN
PC Engineering &
Construction C
ompany
CN
PC O
ilfield Service C
ompany
Holding C
ompanies
Research Institutions
Refining and Chem
icalC
ompanies
Others
Overseas C
ompanies
Manufacturing C
ompanies
Engineering & C
onstructionC
ompanies
Oilfield Service C
ompanies
Oil and G
as Fields
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08
2013 Annual Report
In 2013, the world economy recovered slowly from slump. The petroleum
industry maintained steady growth, along with ample oil supply and
volatile oil prices at high level. As China accelerated its economic structural
adjustment, the Chinese economy grew at a slightly slower but stable pace,
leading to a declining growth rate of oil consumption but rising demand
for natural gas.
Under the influence of long-term structural adjustment and economic
stimulus policies, 2013 saw signs of global economic revival. The
economies of the US, Europe and Japan improved to varying degrees while
the emerging economies experienced slower growth rate. Global primary
energy consumption increased 1.5% year-on-year, with energy demand
shifting towards the emerging markets in the east. China consumed 3.8%
more energy than in 2012, registering a slower increase, attributable to the
country's transitioning economy.
Despite ample supply, 2013 witnessed oil price volatility as a result
of geopolitical influences and economic stimulus. Global oil demand
and supply were 91.17 million bbl/day and 91.65 million bbl/day, up
1.2 million bbl/day and 0.7 million bbl/day year-on-year, respectively.
However, oil prices fluctuated by USD 20/bbl due to a number of
political and economic factors such as the ongoing Syria crisis, the
bleak prospects of Iran's nuclear crisis, disturbances in Libya and South
Sudan, and the currency stimulus policies launched by the European
Union and Japan. The Brent spot price fluctuated between USD100-
120/bbl, averaging USD108.66/bbl in 2013, down USD2.92/bbl from
2012. The growth rate of Chinas oil consumption slowed as a result of
the transition and adjustment of its economic structure. The country's
apparent oil consumption increased 1.7% year-on-year, 2.8% lower than
the rate in 2012. Around 58% of domestic consumption was dependent
on imported oil. With further changes to the economic development
mode, oil consumption in China will grow more rationally.
The world petroleum industry kept investing more in the upstream,
focusing on deepwater and unconventional resources. Oil production
increased significantly in the US, thanks to the massive development
of shale oil. Global E&P investment in 2013 increased 10% year-on-year,
with new hotspots such as deepwater resources in East Africa, Brazil, and
the Gulf of Mexico, as well as shale oil and gas in North America. Driven
by strong investment, the world saw a steady increase in remaining
proven reserves and continued growth in the production of oil and gas.
In particular, the US has enhanced investment in shale oil to raise the
daily output by 800,000 barrels from 2012, bringing its total daily crude
production to 7.5 million barrels. As the US increases investment and
production of shale oil and gas, the country is catalyzing a significant
change in the supply-demand pattern, prices, and the global trade flow
of oil and gas. In fact, the oil originally exported from the Middle East and
2013 Industry Review
WTIBrent
USD / bbl Oil Prices in 2013
701 2 3 4 5 6 7 8 9 10 11 12
80
90
100
110
120
130
2013 Industry Review
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09
2013 Annual Report
Africa to the US, as well as the natural gas from the US, Russia, Canada, and
Australia, will be transferred to the Asia-Pacific market.
China has sustained a high reserve growth by exploring oilfields in central,
western and offshore regions. An intensified degree of development has
helped stabilize production in major fields and yielded 2% more oil than in
2012. Gas output registered an increase of 8.6% year-on-year, as production
capacity building for conventional gas proceeded smoothly with increasing
output from major gas fields, and breakthroughs were made in tapping
unconventional gases.
In 2013, global refining capacity totaled 4,588 million tons, up 10.1 million
tons year-on-year, with per refinery capacity at 7 million tons per annum.
Daily crude runs totaled 75.96 million barrels, the highest since the
outbreak of the global financial crisis. But the overall refining margin was
weaker than in 2012. The Asia-Pacific contributed 32% of the global refining
capacity. Revamping/upgrading existing refineries and building a number
of joint venture refineries led to squeezed margins in local refineries. In Europe,
refineries made a meager profit due to high oil prices and declining demand.
North America became the most competitive region, thanks to accessible
cheap refinery feedstocks from shale oil and gas development. Global ethylene
capacity totaled 149 million tons per annum, up 2.3% year-on-year, with newly
added capacity mainly from Singapore, Iran and China.
Chinas primary crude processing capacity reached 627 million tons in
2013, up 5.6% year-on-year, and the crude runs was 484 million tons. The
average utilization rate of refineries declined to 83% from 85% in 2012. With
processing capacity growing at a faster pace than demand, there was an
ever increasing surplus supply of refined products in the past three years.
Chinas ethylene capacity totaled 17.88 million tons, up 9.8% year-on-year,
featuring diversified feedstock and a higher proportion of domestically
developed equipment and technology.
In 2013, the world saw an overall ample supply of major oil products.
Specifically, the supply and demand for gasoline was generally
balanced, while diesel and jet fuel were over supplied. Global demand
for gasoline, diesel and kerosene increased by 1.5%, 1.5% and 0.8%
year-on-year, and supply increased by 1.7%, 2.3% and 0.8%, respectively.
The supply-demand pattern varied significantly by region, with surplus
supply in Central Asia, Russia, North America, and the Middle East,
but tight markets in Latin America, the Asia-Pacific, and Africa. China
saw product-specific demand growth, year-round ample supply, and a
significant increase in net exports of refined products. The ample supply
was reflected by 296 million tons of production, up 5.2% year-on-year,
compared with 286 million tons of apparent consumption, up 3.5%
year-on-year, which was 1.8% lower than the increase in 2012. While
passenger cars and aviation transport pushed up demand for gasoline
and kerosene, diesel consumption was slightly sluggish. The countrys
net exports of refined products increased 98.7% year-on-year.
As China continues its economic transition and attaches more importance
to environmental protection, natural gas and other cleaner energy
products will be more recognized in the domestic market. In 2013,
China became the worlds third-largest gas consumer, with apparent
consumption reaching 167.6 billion cubic meters, up 13.9% year-on-year,
and the proportion of gas in primary energy consumption increasing by
0.5% year-on-year. As much as 31.6% of the countrys gas consumption
depended on imports of LNG and pipeline gas, totaling 53 billion cubic
meters. The Chinese Government will enforce the National IV standard for
gasoline beginning in 2014, the National IV standard for diesel in 2015, and
the National V standard for both gasoline and diesel in 2018.
In 2014, the global economic recovery is expected to continue. The Chinese
economy will grow steadily, with more focus on balance and quality. Driven
by the economic recovery, global oil demand will keep increasing although
the ample supply may suppress oil prices. In China, the growth rate of oil
demand may rise again, and gas consumption will maintain rapid growth.
Oil companies will continuously increase their global upstream investment
to stabilize oil and gas supply.
2013 Industry Review
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Safety, Environment, Quality and Energy Conservation
94%1.18
24.4 92%
mmt of standard coal equivalent
million cubic meters
Employee occupational health check
Workplace occupational hazard detection
Energy saved
Water saved
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11
2013 Annual Report
In 2013, CNPC further promoted safe, environmentally friendly and
resource-saving development, and continued to improve its HSE system
focused on risk assessment and control. With enhanced management
of hidden risks and strict control of pollutant emissions, we maintained
satisfactory HSE performance.
Faced with challenges such as unpredictable social insecurity, we managed
to address various risks by intensifying security and HSE management in
overseas projects, with zero reporting of major security and HSE incidents
in our international operations.
Operational SafetyIn 2013, we developed and implemented management rules on
operational safety, and witnessed improvements in the companys HSE
responsibility system. One of these rules was Management Procedures
of Operational Safety and Environment Accountability , which specifies
the fundamental principles, formulation procedures, responsibilities, and
performance evaluation of safety and environment accountability.
To improve prevention and control of safety and environmental risks, we
continued building a multi-level risk control mechanism and emergency
response system. Subsidiaries were organized to identify and evaluate
hidden safety and environmental risks, and work out level/discipline-
specific risk management measures. As a result of emergency drills
featuring major road transport accidents involving hazardous chemicals,
we enhanced a joint response mechanism with local governments and
improved our emergency response capacities. In addition, we allocated
dedicated funds to identifying and correcting hidden safety risks related
to pipelines intersecting with each other or subject to surface load, and
facilities subject to corrosion and aging. Through our operational accident
investigation center, we shared experiences and best practices in accident
precaution and prevention, launching three such campaigns throughout
the year, covering 150,000 employees.
Environmental ProtectionWith continuing socio-economic development and industrialization,
people are increasingly demanding a healthier and low-carbon living
environment. As an energy company, CNPC is always committed to
promoting environmentally friendly development and clean operations to
minimize pollutant emissions.
In 2013, we pushed ahead with our emission reduction projects. Nine
projects for the desulfurization of flue gas generated from catalytic
cracking units and 11 refining wastewater treatment projects became
operational. Emission reduction practices at our affiliates were more
closely supervised through an improved network for online monitoring
of pollution sources, in which 71 monitoring stations for wastewater
and 101 monitoring stations for flue gas were equipped with online Afforestation for emission reduction at Xinjiang Oilfield
monitoring devices and data network connectivity. We also formulated
the Procedures for Evaluating Total Reduction of Major Pollutant
Emissions , which specifies stricter and more detailed objectives and
requirements for our affiliates, in order to ensure minimal emissions.
Occupational HealthIn view of the long industrial chain and widespread geographic distribution
of our operations, we adopt and implement an integrated, prevention-
oriented approach which strictly abides by the Law of the People's
Republic of China on Prevention and Control of Occupational Diseases , to
continuously improve staff occupational health management and services.
Occupational health checks are the key measures for staff health monitoring.
In 2013, more than 94% of our employees received occupational health
checks and 92% of the specific workplaces received occupational disease
hazards detection. We regularly dispatched medical professionals to work
sites for health hazard and hidden risk screening and treatment, to safeguard
the occupational health of our frontline workers, especially those in remote
locations. We intensified management of food and drinking water hygiene, and
took effective measures to prevent the occurrence of occupational poisoning,
heat stroke, food poisoning, and epidemics.
At our overseas projects, giving consideration to the living, working and
sanitary conditions in host countries, we provide employees with targeted
medical care and mental counseling services through well-equipped
medical facilities and the employee assistance program (EAP). In 2013, we
sent medical teams to Chad, providing employees with health checks for
342 person-times and one-to-one psychological counseling for 73 person-
times, and holding seven mental health lectures. In Niger, the incidence
of malaria among our employees declined substantially as we provided
training on the prevention and treatment of malaria and other tropical
diseases, and prepared test kits and anti-malaria drugs in advance.
Safety, Environment, Quality and Energy Conservation
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12
2013 Annual Report
and addressed hidden quality risks, and specified the quality control
behavior of the parties responsible for these projects. As a result, risks in
engineering quality were significantly eliminated.
In 2013, we further improved our corporate standard system by
developing 173 enterprise standards, and formulated or amended
137 national and industrial standards. Commissioned by the National
Energy Administration, we set up the Shale Gas Standard Committee of
China's energy industry, established a technical standard organization
based in CNPC, and developed a standard system for unconventional
hydrocarbon. In addition, the company deepened its cooperation
with the American Petroleum Institute (API) on quality standards, and
undertook the job as the secretariat of the ISO Upstream Natural Gas
Technical Committee (ISO/TC193/SC3).
Energy EfficiencyWe constantly promote major energy conservation projects and
demonstration technologies, and perform evaluation and monitoring
of energy conservation practices, as we strive to enhance energy
efficiency, realize resource-saving development, and build a resource-
efficient enterprise.
We have adopted a quarterly reporting system to monitor the progress
of major energy conservation projects, and evaluate and examine the
results. In 2013, we launched 64 energy efficiency projects, mainly focusing
on mechanical lifting systems, surface systems and steam systems in our
oilfields. Upon completion, these projects are expected to save energy
equivalent to 335,300 tons of standard coal every year.
We collected relevant data by monitoring and evaluating major
energy and water consuming equipment and systems such as heating
furnaces, oil transfer pumps, gas compressors and diesel generators, to
facilitate the planning of targeted and workable energy-conservation
programs. We also promoted the application of demonstration energy-
efficiency technologies, took measures to enhance the efficiency of
heating furnaces in oilfields, and validated and applied energy system
optimization proposals. In 2013, the companys energy use and water
use were reduced by 1.18 million tons of standard coal equivalent and
22.4 million cubic meters, respectively.
Quality ControlWith a firm commitment to honesty, trustworthiness and quality,
we provide society with products and services of high standard and
quality. In 2013, we issued the Implementation Plan of the State
Council's Quality Development Outline (2011-2020) , which specifies the
objectives and measures in quality control of our products, engineering
projects and services by 2020. We developed a quality index system
and improved the quality statistics and assessment system, making our
quality management more scientific and standardized. Our 103 affiliates
obtained third-party certificates for quality management system (QMS)
and QMS promotion reviews were initiated at major operating units and
research institutes.
We continued to strengthen the supervision of product quality. To
ensure the maximum protection of consumers' rights and interests,
we carried out spot checks of 2,140 batches of products in 2013, most
of which were consumer-interfacing products such as gasoline and
diesel for automobiles and LPG, or purchased products related to safety
and environmental protection, such as valves, pipes and chemicals.
Supervision of engineering quality was also enhanced. We supervised
2,674 ongoing engineering projects throughout the year, identified
Safety, Environment, Quality and Energy Conservation
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13
2013 Annual Report
Environment protection during the drilling operation in Sichuan Basin
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100
433
322
Senior technical experts
Senior skilled experts Management experts
Human Resources
19Academicians of the CAS and CAE
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15
2013 Annual Report
At CNPC, we pay a great deal of attention to talent cultivation. We are
committed to building good career development platforms for our
employees and creating a fair, equitable, honest and trusting working
environment. We are trying to develop a human resource development
and management system serving the companys goal of building a major
integrated international energy company.
We maintain the principles of openness, fairness and competitiveness in
selecting and recruiting technical professionals and management personnel
from inside and outside the company. In 2013, we recruited 10,752 college
graduates and 95 overseas students. A total of 211 new senior technical
experts were added to the existing list and two senior experts were
elected academicians of the Chinese Academy of Engineering. We had a
performance-focused and skill/integrity-based evaluation system in place
to inspire our technical professionals. Under this system, 200,000 employees
were evaluated in terms of professional skills in 2013 and 129,000 were
promoted to a higher level of professional qualification, including
2,438 technicians and 608 senior technicians. As of the end of 2013,
CNPC had 19 academicians of the Chinese Academy of Sciences or
the Chinese Academy of Engineering, 433 senior technical experts,
100 management experts, 322 senior skilled experts, 4,069 senior
technicians and 24,268 technicians.
We provide a wide range of career development and training opportunities
for employees and launch training programs periodically to build their
professional skills. In 2013, 166 training programs were conducted by the
headquarters for around 20,000 person-times. In addition, 16 technician
training courses were arranged, covering 562 technical talents. In
cooperation with the German Welding Society, 35 of our skilled welders
were trained to serve as full-time or part-time welding instructors for the
company. Meanwhile, we sent some selected senior technical experts to
Tsinghua University and China University of Petroleum for advanced studies.
We organize skill competitions every year covering a wide range of
occupations to recognize and inspire skilled workers. In 2013, skill
competitions were held for gathering and transportation workers, well
drillers, well control crews, logging operators, foremen at 5Mt/a refineries
and catalytic reforming unit operators, and pump maintenance fitters. Five
CNPC employees attended an international welding contest in Germany,
ranking first in TIG welding and CO2 welding, second in arc welding and
third in gas welding.
Overseas HR Management and LocalizationWe continue to build a strong workforce and promote workplace diversity
in our overseas operations through international talent management and
local employment.
In 2013, the company worked with industry peers and research
institutions to launch training programs for senior managers and technical
professionals at our overseas projects. These include the EMBA program
at the University of Houston, the visiting scholar program at Stanford
University, quality management training at Siemens, advanced technology
training in Canada, and an internship program at Baker Hughes.
We value the contributions of local employees and attach great
importance to local talent cultivation. We continue to promote local
hiring and encourage our overseas project companies and oilfield service
companies to offer more jobs to surrounding communities. Meanwhile,
we provide local employees with training in engineering, business
management and HSE, in order to enhance their skills and competence.
In Iraq, the company has set up training centers and works with local
colleges as part of its ongoing efforts for employee development. At the
training center of the CNPC-affiliated China Petroleum Engineering and
Construction Corp (CPECC) in Iraq, more than 110 local workers have
mastered welding skills. In 2013, this training center was authorized by
South Oil Company (SOC) to provide training services on petroleum
engineering for SOC employees. In addition, CPECC signed a MOU with
the University of Basrah to recruit 40-50 college students annually over the
next four years to work in the companys local projects.
During the second CNPC excellent Iraqi employee commendation activity
in 2013, 10 Iraqi employees were named Outstanding Employees and
58 were named Excellent Employees. Asmaa Nasef Jasim Mohammed, a
representative of the excellent employees, said that the company regarded
the local employees as important members of this big family and she
would make more efforts to do her job well.
CNPC Bohai Drilling Engineering Company has been operating in
Venezuela for over a decade, with local employees accounting for more
than 90% of its workforce. The company adopts a three-stage approach to
skill training, i.e. induction training in the first stage, on-site training in the
second stage, and advanced training for outstanding employees in China
in the third stage. Those who have received the three-stage training are
then able to train other local employees. This enables a training cycle that
is more targeted and efficient. Meanwhile, the Chinese employees can also
learn from experienced local employees in terms of improved management
practices and techniques, thus creating a positive atmosphere in the
workplace for the Chinese and Venezuelan employees to grow together.
Human Resources
-
4,481Second-class National Technical Invention Award
Second-class National Scientific and Technological Advancement Award
3,639Patents granted
Construction of CNPC's technological innovation system
Development and application of the GeoEast ultra-large integrated seismic data processing and interpretation system
Patents applied
Diverting acid fracturing for carbonate reservoirs and its industrial application
Technology
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17
2013 Annual Report
In 2013, CNPC continued to improve its technological innovation system
and deepen communication and cooperation in technology R&D.
Research work and field tests were enhanced for solutions to key technical
bottlenecks constraining the development of our core businesses. Progress
in the exploration and development of conventional and unconventional
oil and gas resources, refining and chemicals, oilfield services, storage and
transportation, and cutting-edge technologies strongly supported the
companys sustained growth.
Construction of Technological Innovation SystemIn 2013, CNPC further improved the technological innovation system to
reallocate and optimize R&D resources in its affiliated research institutes,
technology centers and enterprises, in order to leverage the companys
overall R&D strength.
We also pushed ahead with the construction of technology enablement
platforms, resulting in enhanced lab/testing capabilities. Backed by our
Southwest Oil and Gas Field Company, we set up a national R&D center
to facilitate the development of high-sulfur-content gas reservoirs.
Construction of our Houston research center proceeded well as planned,
which will attract excellent international talents and further facilitate
international cooperation in technology R&D.
Major R&D AdvancementsExploration and Production: We took an innovative approach to studying the geology of deep natural gas resources, and made
breakthroughs in exploration depth and engineering technologies
of extremely-thick salt layers. This has supported the exploration and
development of the Kelasu gas field.
Better understanding of the reservoir-forming theory of large, ancient-
carbonate gas fields guided the discovery and resource evaluation of the
Gaoshiti-Moxi giant gas field.
New understanding on the composite reservoir-forming pattern at the edge
of the Qaidam Basin guided gas exploration at the piedmont of the Altun
Mountains, identifying a gas reserve volume of 100 billion cubic meters.
Streamlined ASP flooding with diverse surfactant series enabled Daqing
Oilfield to stabilize its oil output at 40 million tons per year.
Large-scale SRV fracturing of horizontal wells has been worked out in
addition to a series of development technologies for ultra-low-permeability
reservoirs, boosting Changqing Oilfields annual production capacity to
50 million tons.
An optimal development program and tailored waterflood techniques for
giant carbonate fields greatly facilitated production capacity building at
the Al-Ahdab, Halfaya and Rumaila oilfields in Iraq.
Refining and Chemicals: We made breakthroughs in the R&D and application of a complete set of refining catalysts. Our FCC catalysts have
been sold on a large scale to the US and Singapore. The hydrocracking
catalysts were successfully put into industrial application at Daqing
Petrochemical.
Our independently developed catalysts for slurry polyethylene and co-
polypropylene have been used industrially for a long period. Industrial
tests of ethylene propylene rubber, polyisoprene rubber, and rare earth
butadiene rubber have proceeded smoothly.
Production technologies for National IV and National V standard diesel fuel
have passed industrial application tests at Liaoyang Petrochemical's
1.2Mt/a diesel hydrogenation unit and Changqing Petrochemical's
600kt/a diesel hydrogenation unit.
The technical package for 10Mt/a atmospheric-vacuum distillation units
has been successfully applied at Sichuan Petrochemical, with the main
technical and economic indicators achieving the globally-advanced level.
Core technical packages for 2Mt/a catalytic cracking, 4Mt/a delayed coking,
and 3Mt/a wax oil hydrocracking units were developing smoothly, and will
provide effective support for the construction of our refining bases.
Oilfield Services: Regarding geophysical prospecting, GeoEast integrated processing and interpretation software was upgraded and massively
deployed; the matching technologies for wide-azimuth, broadband and
high-density seismic prospecting with our independent intellectual
property rights were put into commercial application; the G3i full-digital
seismic acquisition system was improved to have a channel capacity of
more than 100,000; and the KLSeis ll new-generation seismic acquisition
software system was upgraded.
Technology
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18
2013 Annual Report
In terms of logging, our newly developed formation element logging unit
provided important technical support for evaluating unconventional oil
and gas; digital core imaging technologies enabled accurate, efficient, and
integrated reservoir logging evaluation; and logging-based identification
of effective inhomogeneous carbonate reservoirs yielded favorable results
in the Tarim and Changqing oilfields.
In well drilling and completion, technologies for factory-like drilling,
completion, and reservoir stimulation proved successful; improved
technologies for fast drilling and completion of deep and ultra-deep wells
helped to speed up the penetration rate and enhance efficiency at the
Kuqa Mountain Front and Anyue area; and breakthroughs in nitrogen-
based underbalanced drilling and drill pipe completion contributed
significantly to the discovery and protection of reservoirs in the Tarim Basin.
Oil & Gas Storage and Transportation: The 20MW electric compressor units passed a 4,000-hour industrial test at Gaoling Compressor Station
of the Second West-East Gas Pipeline, and will be deployed on the Third
West-East Gas Pipeline; and domestically manufactured 30MW fuel-driven
compressor units were ready for field testing.
CNPC is capable of building LNG tanks of 180,000 cubic meters in volume
and manufacturing four categories of key equipment, namely, large-scale
LNG refrigerant compressors, steam turbines, cold boxes, and LNG Boil Off
Gas (BOG) compressors. Our liquefaction techniques and equipment have
been successfully applied at LNG projects in Ansai City in Shaanxi Province,
Taian City in Shandong Province, and Huanggang City in Hubei Province.
X80 steel pipes of 1,422 mm in diameter and X90 steel pipes of 1,219 mm
in diameter have been in short run production. We also designed heavy
duty oil transfer pumps and mission-critical valves, some of which have
been ready for leave-factory check and acceptance.
HSE and Energy Conservation: Successful application of optimization technologies and matching devices for tertiary recovery improved the
efficiency of our mechanical extraction system for polymer flooding in
high-water-cut oilfields, and saved electricity by more than 40 million kWh
and reduced CO2 emissions by more than 83,000 tons per year. A technique
based on pre-combustion desulfurization increased the efficiency of
refining furnaces from 90% to 93%.
Cutting-edge Technology Research CNPC pays great attention to basic research and advanced research of the
industrys cutting-edge technologies in order to meet the ever increasing
energy demand. In 2013, we made remarkable progress in the research of
EOR technologies, state-of-the-art refining and petrochemical techniques, and
unconventional hydrocarbon exploration and development technologies.
To tap unconventional hydrocarbon, we developed a series of innovative
technologies for CBM exploration and development and formed a
preliminary standard system for Chinas CBM industry, which have greatly
facilitated our demonstration projects in the Qinshui and Edong CBM fields.
In addition, a technical series for shale gas "sweet point" prediction was
developed, promoting the establishment of a field test block at Changning
in Sichuan Province. Regarding the development of conventional oilfields,
we have initially grasped the mechanisms of intelligent nanometer oil
displacement and underground crude oil upgrading, and developed
indoor samples of oil displacement agents to provide new solutions
for future development and EOR of oil and gas fields. In refining and
chemicals, we developed a high-performance crystallization-based Na-Y
synthesis technique that will serve as an important platform for preparing
catalytic cracking catalysts and other essential materials. We also made
available a new catalytic cracking process featuring coordinated multi-
zone control with our independent intellectual property rights, which can
reduce energy consumption by 15% and increase the yield of light oil by 2%.
In drilling engineering, based on bionics techniques, we created a drilling
system featuring wall consolidation, which succeeded in the field test of
horizontal wells at Sulige Gas Field.
Technological CooperationIn 2013, CNPC became a Contracting Party in the Enhanced Oil Recovery
IA (EOR IA) of the International Energy Agency (IEA), and will build a liaison
and information sharing mechanism to facilitate international cooperation
for faster and better development of EOR technologies in China. CNPC also
worked with peer companies and research institutions at home and abroad
on technological cooperation and joint research. Progress was made in
joint technology R&D with Exxon Mobile and Shell in terms of exploration
and development, refining and chemicals, and oilfield services. A CNPC-
Shell joint shale oil research center was established for research on the
theory, methodology, and frontier technologies for shale oil development.
We set up a technical committee together with the Chinese Academy
of Sciences (CAS), and have initiated six cooperative research projects,
including the "R&D of high precision digital geophones (MEMS)". We also
participated in the communication activities of international and industrial
organizations to extend our scientific and technological cooperation.
Technology
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19
2013 Annual Report
In China, acidizing and fracturing is a prerequisite to discover
and effectively extract oil and gas from carbonate reservoirs,
which feature inferior physical properties of matrix and
discontinuously developed oil/gas bearing fracture-caves.
However, conventional acid fracturing cannot generate enough
interconnected fracture-caves, resulting in small swept volume
by acid fluid, and a limited yield increase.
After years of research, we have developed the diverting acid
fracturing technology for carbonate reservoirs, which combines
fluid diversion and fracture reorientation. By temporarily blocking
exited fractures with our independently developed fracture
diverting materials, more fractures are induced in new places
and new directions to link up more fracture-cave spaces and
maximize the oil and gas flow channels. We invented two self-
viscosifying acidizing fluid diverting systems to allow in-depth fluid
diversion and intelligent fluid diversion, resulting in enlarged swept
volumes and acid etching networks 3.1-7.2 times bigger than
those by the conventional acid fluid system. We also developed
design optimization software and matching equipment and tools
for diverting acid fracturing to ensure safe operations at high
temperatures and under high pressure.
Diverting acid fracturing has been applied 921 well-times at
major carbonate fields in China as well as at some overseas
oilfields in Kazakhstan, Turkmenistan, Iraq, Iran and Syria. Field
application has proven fruitful, as evidenced by a cumulative
oil production increment of 2.842 million tons and a gas output
increment of 1.49 billion cubic meters over the past three years.
In 2013, the technology won the Second-class National Technical
Invention Award.
Diverting Acid Fracturing for Carbonate Reservoirs and Its Industrial Application
Carbonate reservoir description
Technology
-
Focusing on oil and gas operations, the company made great efforts to
improve the quality and efficiency of its business growth in 2013, with
production and revenue being steady, key business indicators continuing to
grow year on year, and operating results were better than expected.
Annual Business Overview
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21
2013 Annual Report
Exploration and Production
In 2013, we made a number of important discoveries in Chinas major
petroliferous basins, maintaining a boom period of reserve growth. We
stepped up the construction of major projects and enhanced oilfield
management, resulting in steady growth in oil and gas production.
ExplorationIn 2013, our domestic exploration resulted in newly proven oil and gas
in place of 670 million tons and 492.3 billion cubic meters respectively,
and proven oil and gas reserves exceeding 1 billion tons of oil
equivalent for the seventh consecutive year. A large part of the newly
proven reserves are entrapped in low-permeability, lithologic, and
deep reservoirs, which are massive in scale and relatively producible.
The reserve replacement ratio remained above 100%, providing a solid
resource base for oil and gas production.
2011 2012 2013
Newly proven oil in place (mmt) 715.12 711.00 670.13
Newly proven gas in place (bcm) 487.90 450.40 492.30
2D seismic (kilometers) 33,912 23,987 27,089
3D seismic (square kilometers) 12,954 16,105 12,477
Exploration wells 1,794 1,898 1,746
Preliminary prospecting wells 1,020 1,190 1,006
Appraisal wells 774 708 740
492.30
2011 2012 2013
670.13
2011 2012 2013
715.12 711.00487.90
450.40
Major DiscoveriesWe obtained 24 important exploration achievements in the Sichuan, Ordos,
Tarim, Junggar, Songliao, and Bohai Bay basins throughout the year.
A giant uncompartmentalized marine-facies carbonate gas reservoir was
discovered in the Longwangmiao formation of Moxi Block in the Sichuan
Basin, where high-yield gas flow was obtained during production test of the
exploration wells. Massive reserves were identified in Keshen tectonic zone in
the Tarim Basin, enlarging the gas-bearing area. A number of oil enrichment
zones were proven in Jiyuan and Longdong of the Ordos Basin. Proven oil in
place in Tabei and Hadexun regions of the Tarim Basin continued to increase.
New discoveries were made in Mahu region of the Junggar Basin and Yubei
region of the Tuha Basin, respectively. We also made progress in tight oil
exploration, including the discovery of massive reserves in the Ordos Basin,
high-yield flow from several wells in Fuyu Field of the Songliao Basin, and a
new breakthrough in Jimusaer sag of the Junggar Basin.
75%
54%
Natural Gas Production of the Nations Total
Crude Production of the Nations Total
Annual Business Overview
Reserves and operating data (Domestic)
Newly proven gas in place (Domestic)
Newly proven oil in place (Domestic)
(mmt) (bcm)
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22
2013 Annual Report
Development and ProductionIn 2013, our domestic oil production was steady and gas production
maintained rapid growth. The economic benefits of oil and gas field
development were boosted by the continued application of waterflooding,
promoting mature field redevelopment and major development tests, and
rolling out proven techniques such as horizontal drilling and underbalanced
drilling. We achieved production capacity increments of 15.12 million tons for
crude oil and 23.1 billion cubic meters for natural gas. Throughout the year, we
produced 183.39 million tons of oil equivalent, up 5.4% year-on-year.
Crude OilIn 2013, focusing on boosting per-well output and economic benefits, we
optimized technical solutions, implemented fine management throughout
the production process and further tapped the potential of domestic
oilfields to address the harsh reality that most of our mature fields are in
the late high-water-cut development period. We produced 112.6 million
tons of crude throughout the year, maintaining an increment of more than
2 million tons for the fourth consecutive year.
Daqing Oilfield stabilized its production at more than 40 million tons for
11 consecutive years through continued waterflooding and efficient
polymer flooding. Both the natural decline rate and composite decline
rate were effectively controlled. In particular, production by tertiary
recovery, mainly polymer flooding, maintained a steady growth to reach
13.84 million tons, with the average incremental oil per ton of polymer
rising by 2.8 tons year-on-year. Changqing, Chinas most promising and by
far the largest onshore oilfield in terms of production, produced 51.95 million
tons of oil equivalent by promoting the model of development management
for ultra-low-permeability oil reservoirs, and deploying a series of unique
technologies suitable to local reservoirs.
Waterflooding
To enhance the oil recovery of mature fields, CNPC has continued to
implement a comprehensive development approach since 2009 based
on finely controlled water injection. Adjusting the development well
pattern and introducing separate layer water injection have become the
normal method for mature fields in order to increase the rate of producible
reserves and per-well output. In 2013, we completed water injection
operations 18,462 well-times, with the natural decline rate and composite
decline rate being well controlled, and the rise in water cut being less than
0.5% for the fourth consecutive year.
The natural decline rate and composite decline rate of waterflooding
were controlled at 6.85% and 4.19% respectively at Daqing Oilfield, thanks
to precise geological study, adjustment of the injection/production
system, and finely categorized quantitative injection standards. In fact,
waterflooding accounted for 64% of the total output of the field. Similarly,
Tuha Oilfield reduced the natural decline rate of its mature wells by 1.2%
year-on-year, by improving the water injection well pattern, optimizing the
injection/production system, and developing a specific injection plan for
individual oil layers.
Development of Ultra-low Permeability Reservoirs
Low and ultra-low permeability reservoirs account for a large proportion
of our newly proven reserves. In Changqing Oilfield, we have realized the
efficient development of ultra-low permeability reservoirs by using six
series of technologies, including quick reservoir evaluation, well pattern
optimization, and multi-stage fracturing in horizontal wells. In 2013,
Changqing produced 8 million tons of oil from ultra-low permeability
reservoirs, accounting for one-third of its total crude output. As for its
Huaqing Oilfield, daily output from horizontal wells is four times as much
as that from conventional ones, thanks to the use of SRV-based horizontal
fracturing. At Jilin Oilfields Hei-168 block, in-casing multi-stage and multi-
cluster fracturing techniques were applied in 58 horizontal wells, resulting
in an average daily output per well of 6.5 tons.
Pilot Development
In 2013, we pushed forward with research programs and pilot tests
targeting heavy oil, high-water-cut and unconventional reservoirs. ASP
flooding was tested at four pilot blocks at Daqing Oilfield, enhancing
recovery efficiency by 18-28%. Polymer-surfactant flooding was tested
at block Jin-16 of Liaohe Oilfield, increasing the daily output 5.5 times
and reducing the composite water cut by 13%; and steam flooding was
deployed in 150 well groups at block Qi-40, increasing the daily output
of medium-to-deep heavy oil by 18.9%. A fire flooding pilot test was
deployed at Hongqian-1 block in Xinjiang Oilfield for four years, increasing
oil production by 38,300 tons and recovery efficiency by 9.1%. Faced with
the challenge that a majority of our new proven reserves are from low-
permeability reservoirs, we conducted pilot tests for EOR by gas medium
injection. In Jilins Daqingzijing Oilfield, a 500kt/a pilot development with
CO2 flooding has covered 135 steam injection wells and 683 producing
wells. In addition, we made progress in air/foam flooding tests at Dagang
and Changqing oilfields.
88.84
2011 2012 2013
112.60
2011 2012 2013
107.54110.33
75.62
79.86
Annual Business Overview
Natural gas production (Domestic)
Crude production (Domestic)
(mmt) (bcm)
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23
2013 Annual Report
Natural GasIn 2013, we produced 88.84 billion cubic meters of natural gas domestically,
up 11.2% year-on-year. Gas output from Changqing Oilfield maintained its
rapid growth, reaching 34.68 billion cubic meters. Tarim Oilfield produced
22.28 billion cubic meters, ensuring reliable gas supply to the West-East
Gas Pipelines. Southwest Oil and Gas Field accelerated the building of new
fields, yielding 12.61 billion cubic meters throughout the year.
Sulige Gas Field
Sulige, located in the Ordos Basin, is a tight sandstone gas field featuring
low permeability, low pressure, and low abundance. CNPC has been
scientifically organizing production and rolling out a series of technologies
since 2008, such as multi-layer fracturing in vertical wells and staged
fracturing in horizontal wells, enabling the large-scale and effective
development of this field. In 2013, Sulige produced 21.18 billion cubic
meters of natural gas, with its annual capacity reaching 24 billion cubic
meters. In March 2013, Sulige was chosen as one of the three finalists
for the Excellence in Project Integration Award by the 6th International
Petroleum Technology Conference (IPTC).
Hetianhe Gas Field
Hetianhe Gas Field is located at the southern edge of the Taklamakan
Desert in the Tarim Basin. The field was put into production in 2004 and
is one of the major gas sources for the southern part of the Xinjiang
Uygur Autonomous Region. In May 2012, we started to build a new gas
processing plant with a daily capacity of 5 million cubic meters and its
auxiliary facilities. In November 2013, the new plant became operational,
boosting the fields daily processing capacity to 6 million cubic meters.
Exploration and Development of Unconventional Oil and Gas CNPC attaches great importance to the exploration and development of
CBM, shale gas and other unconventional hydrocarbon resources. We have
conducted pioneering work and technological innovation in this field, and
made progress in CBM industrial bases and shale gas demonstration projects.
CBMWe continuously promoted CBM exploration and development in the
Qinshui Basin and the eastern edge of the Ordos Basin. In 2013, we built an
additional 1.02bcm/a CBM in production capacity, and supplied 870 million
cubic meters of commercial CBM, an increase of 44.1% year-on-year. At the
eastern edge of the Ordos Basin, the 800Mcm/a capacity building project
in Baode block proceeded smoothly, with its daily output continuing to
rise. At Hancheng block, the production plan was optimized to increase the
average daily output per well by 44.3% year-on-year. In the Qinshui Basin,
the daily output from Fanzhuang block reached 1.6 million cubic meters.
Shale GasIn 2013, we drilled 16 shale gas exploration and production wells, including
six vertical and 10 horizontal wells. Application of SRV fracturing technologies
and tools in horizontal wells facilitated the building of our two state-level shale
gas demonstration zones at Weiyuan-Changning in Sichuan and Zhaotong
in Yunnan, respectively. Shale gas development at Weiyuan-Changning zone
was accelerated. Well Wei-204H was fractured on eleven stages using our
independently developed staged fracturing techniques with composite bridge
plugs, achieving a daily output of 160,000 cubic meters of gas at the initial
stage. This laid a basis for the industrial application of the techniques.
We began to build a trunk pipeline for the trial production in the
Changning block in June 2013. This 93.7km-long pipeline is designed to
transport 4.5 million cubic meters of shale gas per day. It will run from the
gathering station at well Ning-201-H1 to Shuanghe terminal station, where
it will be connected to the gas pipeline from Naxi in Sichuan Province to
Anbian in Yunnan Province. The pipeline will begin exporting shale gas
from Weiyuan-Changning block in 2014.
Hetianhe Gas Field in Tarim Basin
Annual Business Overview
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24
2013 Annual Report
Joint Exploration and Development in ChinaAs authorized by the Chinese government, CNPC works with international
partners to explore and develop oil and gas resources in China. Most of
the joint projects concern low-permeability reservoirs, heavy oil, tidal and
shallow water zones, sour gas, high-temperature and high-pressure gas
reservoirs, and CBM and shale gas.
By the end of 2013, we had 37 joint exploration and development projects
in operation, including 16 conventional crude oil projects, 10 conventional
natural gas projects, 10 CBM projects and one shale gas project. In 2013,
these projects produced 3.95 million tons of crude oil and 5.43 billion cubic
meters of natural gas, which totaled 8.28 million tons of oil equivalent, up
10.8% year-on-year.
Newly Agreed ProjectsCNPC signed four documents in 2013 to cooperate with overseas partners.
These include a contract on Malang block with Hess Corporation, and
three joint research agreements on Neijiang-Dazu shale gas block and
Rongchangbei shale gas block in the Sichuan Basin, and Changdong block
in the Ordos Basin with Conoco-Phillips, Eni, and Exxon Mobil, respectively.
Malang Tight Oil Project
In July 2013, CNPC and Hess signed a contract on tight oil development at
Malang Block, an area of 833 square kilometers in the Santanghu Basin. This
is CNPCs first joint tight oil project, in which Hess serves as the operator.
Executive Summary of Major Projects
Changbei Natural Gas Project
Changbei Block is located in the Ordos Basin, covering an area of 1,691 square
kilometers. Shell Group is our partner and the operator of the project.
In 2013, the block produced 3.62 billion cubic meters of natural
gas, with annual commercial gas output exceeding 3.4 billion cubic
meters for the fourth consecutive year. With matching technologies
being improved, 39 bilateral horizontal wells have been put into
production, and 24 of them yielded a daily output of more than 1 million
cubic meters at the initial stage. The second phase of the Changbei
Project has been launched, and the drilling of appraisal wells is
proceeding smoothly.
Zhaodong Oil Production Project
Zhaodong Block is located in the tidal and shallow water zone of the
Bohai Bay Basin, covering an area of 77 square kilometers. Australias Roc
Oil (Bohai) is our partner and operator of the project. In 2013, the block
produced 953,000 tons of crude oil and 53.76 million cubic meters of
natural gas.
South Sulige Natural Gas Project
South Sulige Block is located in the Ordos Basin, covering an area of
2,392 square kilometers. Total is our partner in the project and CNPC is
the operator. In 2013, the South Sulige Project enjoyed a much reduced
average drilling cycle and satisfactory per-well output during production
tests, thanks to cluster well arrangement and factory-like drilling and
completion technologies.
Fushun-Yongchuan Shale Gas Project
Fushun-Yongchuan Block is located in the Sichuan Basin, covering an area
of 3,503 square kilometers. Shell group is our partner and the operator
of the project. In 2013, 12 wells were drilled at this block, four of which
underwent production tests, yielding approximately 42 million cubic
meters of shale gas.
Staff inspection at the South Sulige Gas Project
Annual Business Overview
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25
2013 Annual Report
Natural Gas and Pipelines
2013 saw continued high-speed momentum in our natural gas business.
Gas production from Changqing, Tarim and other major producing regions
experienced steady growth. Construction of trunk pipeline networks
connecting gas sources with major consumer markets was sped up, and
a centralized controlled nationwide gas supply grid took shape. All of this
contributed to the rapid growth of both gas production and sales, and
significantly enhanced our market deliverability.
By the end of 2013, we operated 72,878 kilometers of pipelines in China,
including 17,640 kilometers for crude oil, 45,704 kilometers for natural gas,
and 9,534 kilometers for refined products, around 70%, 80%, and 47% of
Chinas total respectively.
Operation and ControlIn 2013, relying on centralized management, an optimized supply chain,
coordinated resource configuration, and balanced allocation between
domestic and foreign supplies, our nationwide pipeline networks operated
in a safe, reliable and controlled manner.
Collective measures were taken to satisfy the ever-increasing domestic
gas market demand, especially in key regions and during peak seasons,
including tapping the production potential of major gas fields, giving
full play to the peak shaving capacity of our gas pipeline networks, LNG
facilities, and underground gas storage. The Second West-East Gas Pipeline
has delivered more than 70 billion cubic meters of natural gas since it
became operational, making it one of the major pipelines for domestic gas
supply. The volume of crude oil and refined products delivered through
pipelines continued to increase. With improved capacity in multiphase
transportation, the Lanzhou-Chengdu-Chongqing Products Pipeline has
delivered more than 55 million tons of various kinds of refined products to
southwestern China since becoming operational in 2002.
Underground Gas StoragesIn 2013, our underground gas storages in Jintan, Liuzhuang, Dagang
and Huabei performed effectively in terms of seasonal peak shaving and
emergent supply. Hutubi gas storage became operational to meet peak gas
demand in northern Xinjiang and stabilize gas supply to the West-East gas
pipeline network. In addition, our storage built at Xiangguosi and Suqiao
began receiving gas to shave the peak of gas supply to the Southwest and
North China markets.
Storage and Transportation FacilitiesIn 2013, a number of trunk lines and branches were completed and
became operational as planned, including the Horgos-Lianmuqin section
of the Third West-East Gas Pipeline, the Zhongwei-Guiyang Gas Pipeline,
the Lanzhou-Chengdu Crude Pipeline, the Rizhao-Dongming Crude
Pipeline, the southern section of the Lanzhou-Zhengzhou-Changsha
Products Pipeline, and Yining-Horgos SNG Pipeline. Progress was made in
the construction of the Shandong natural gas pipeline network and the
Jinzhou-Zhengzhou Products Pipeline.
The Third West-East Gas PipelineThe Third West-East Gas Pipeline, including one trunk and eight branches, runs
from Horgos in Xinjiang to Fuzhou in Fujian, with a total length of 7,378 kilometers.
The 5,220km-long trunk line has a designed pipe diameter of 1,016-1,219 mm,
transport pressure of 10-12 MPa and an annual delivery capacity of 30 billion cubic
meters. Its construction is divided into three sections.
Construction of the 817km-long Ji'an-Fuzhou section (eastern trunk)
commenced in May 2013 and is expected to be completed in 2014. In
December 2013, the 875km-long Horgos-Lianmuqin section, as part of the
western trunk, became operational and began to supply gas to Urumqi and
other markets along its route.
Zhongwei-Guiyang Gas PipelineThe pipeline, consisting of one trunk and three branches, runs through Gansu,
Shaanxi, Sichuan and Chongqing. With a total length of 1,613 kilometers and a
pipe diameter of 1,016 mm, it is capable of delivering 15 billion cubic meters of
natural gas at a designed pressure of 10 MPa.
The project was launched in March 2011 and became operational in
November 2013. As a connector between the West-East pipeline network
and the Southwest China gas pipeline network, the pipeline enables
flexible dispatch and allocation of gas supplies from the Central Asia Gas
Pipeline, the Myanmar-China Gas Pipeline, and the West-East gas pipelines,
and helps to mitigate the tight gas supply in Southwest China.
80%
70%
Natural Gas Pipeline Mileage in the Nations Total
Crude Pipeline Mileage in the Nations Total
Annual Business Overview
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2013 Annual Report
Lanzhou-Chengdu Crude PipelineThe pipeline starts at Lanzhou Terminal of the Western Crude Pipeline,
passing through Gansu and Shaanxi provinces, before ending at Pengzhou,
Sichuan Province. The 878km-long and 610mm-thick pipeline is designed
to transport 10 million tons of crude oil annually at a designed pressure of
8-13.4 MPa. Construction of the pipeline commenced in March 2011, and
it started supplying crude oil to refineries in Sichuan and Chongqing in
November 2013.
Lanzhou-Zhengzhou-Changsha Refined Products PipelineThe pipeline starts at Lanzhou in Gansu Province and ends at Changsha in
Hunan Province, passing through Shaanxi, Henan and Hubei provinces. Its
2,080km-long trunk is designed to deliver up to 15 million tons annually
at a designed pressure of 8-14 MPa. The project was launched in August
2007. Its north and south sections, with the Yangtze River as the dividing
line, became operational in 2009 and November 2013 respectively, greatly
easing the pressure on refined product transportation from Western China
to the Central China market.
Natural Gas Utilization and MarketingCNPC has built a nationwide natural gas pipeline network centered on the
West-East and the Shaanxi-Beijing gas pipelines covering 29 provinces,
municipalities, and autonomous regions as well as Hong Kong SAR in
China. In 2013, we sold 110.6 billion cubic meters of natural gas, up 13.6%
year-on-year, by fully utilizing our advantages in resources and pipeline
networks, optimizing our marketing structure, and prudently developing
the downstream markets of new pipelines.
Our urban gas and CNG business enjoyed rapid growth in scale, focusing
on economic benefits. We signed 12 cooperation framework agreements
with local governments on building distribution branches to expand the
urban gas market. Our urban gas users of various kinds reached 4.1 million
in 2013. New progress was made in the development and construction of
our CNG sales terminal network, with 12 primary and 39 secondary filling
stations commissioned in 2013.
Liquefied Natural Gas (LNG)In 2013, we promoted LNG applications, set up a LNG marketing network,
and built LNG facilities to support the "substitution of natural gas for oil"
program. A 5mcm/d LNG plant was almost ready in Hubei Province and is
expected to be an LNG supply base in Central China. Working with local
governments and enterprises, we made progress in promoting LNG-fueled
vehicles and vessels, as well as LNG filling stations.
Our LNG projects in Jiangsu and Dalian did a good job in peak shaving
since they became operational in 2011. In 2013, the Jiangsu terminal
unloaded 3.03 million tons of LNG, and delivered 4.19 billion cubic meters
of gas through the West-East gas pipeline network and LNG tanker
trucks. The Dalian terminal unloaded 1.86 million tons of LNG, and
delivered 2.57 billion cubic meters of gas through the Northeast China
and North China gas pipeline networks.
Phase I of the Tangshan LNG project was put into operation in
December 2013, and began to supply gas to North China through the
Yongqing-Tangshan-Qinhuangdao Pipeline and LNG tanker trucks.
The Phase I project, capable of delivering 8.7 billion cubic meters of
natural gas annually, includes three LNG storage tanks, each with a
volume of 160,000 cubic meters, a dedicated unloading dock for LNG
carriers with capacities of 80,000-270,000 cubic meters, and auxiliary
facilities for the terminals.
Tangshan LNG Terminals
Annual Business Overview
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2013 Annual Report
Refining and Chemicals
In 2013, in response to market change and in line with the growth
efficiency principle, we further improved the operation of facilities and
business profitability by reasonably arranging the load of refining units and
optimizing resource allocation and the product portfolio.
A total of 19 major technical and economic indicators had improved
compared to 2012, with light oil yield and ethylene and propylene
yields leading in China. Domestically, we processed 146.02 million
tons of crude, produced 97.9 million tons of refined products, up 1.6%
year-on-year, and produced 3.98 million tons of ethylene. Our refining
technologies were further upgraded to supply cleaner and more
efficient oil products to the market.
In addition, we optimized chemical production programs, improved the
connection between production and marketing, and sold 7.8% more
chemical products year-on-year.
Construction and Operation of Large Refining BasesOur major large petrochemical facilities in China operated smoothly
in 2013. Dushanzi Petrochemical improved its technical and economic
indicators, including industry-leading fuel and electricity consumption of
ethylene units of 518.7 kg standard oil/ton. Tarim Fertilizer Plant increased
its output of major chemical products and maintained a more than 99%
premium rate of urea through delicacy management.
Construction of major refining and chemicals projects proceeded steadily.
Sichuan Petrochemical's refining and ethylene units as part of its integrated
refining/petrochemical project, and Urumqi Petrochemicals' 6Mt/a
atmospheric-vacuum distillation unit became operational. A number of
oil product quality upgrading projects went on stream, including Guangxi
Petrochemical's 1Mt/a gasoline hydro-desulphurization and 800kt/a kerosene
2011 2012 2013
Crude runs (mmt) 144.84 147.16 146.02
Utilization rate of refining units (%) 91.3 89.5 86.9
Refine products output (mmt) 93.00 96.38 97.90
Gasoline 28.89 31.00 32.97
Kerosene 3.68 4.78 6.06
Diesel 60.43 60.61 58.87
Lubricating oil output (mmt) 1.57 1.84 1.89
Ethylene output (mmt) 3.47 3.69 3.98
Synthetic resin output (mmt) 5.78 6.18 6.64
Synthetic fiber output (mmt) 0.09 0.09 0.07
Synthetic rubber output (mmt) 0.61 0.63 0.67
Urea output (mmt) 4.48 4.41 3.77
Synthetic ammonia output (mmt) 3.03 2.97 2.58
146.02
2011 2012 2013
97.90
2011 2012 2013
hydrofining units, Dalian Petrochemical's 2.25Mt/a FCC hydrogenation
and 1Mt/a light gasoline etherification units, Fushun Petrochemical's
1.2Mt/a gasoline hydrogenation unit, Hohhot Petrochemical's 1.2Mt/a
gasoline hydrodesulfurization installation, and Daqing Petrochemical's
1.3Mt/a gasoline desulfurization unit. Construction of Guangdong
Petrochemicals 20Mt/a heavy oil processing project was well underway.
Urumqi Petrochemicals Refining Upgrading and Reconstruction ProjectThe project includes the construction of a 6Mt/a atmospheric-vacuum
distillation unit, a 1.5Mt/a wax oil hydrogenation unit, a 1.2Mt/a delayed
coking unit, a 2Mt/a diesel hydrogenation unit, and a 40kt/a sulfur recovery
unit. The 1.2Mt/a delayed coking unit and the 2Mt/a diesel hydrogenation
unit were put into operation in 2011. The 6Mt/a atmospheric-vacuum
distillation unit became operational in October 2013.
144.84
147.16
93.00
96.38
14Oil products upgrading projects put into operation
Annual Business Overview
Refining and chemicals operating data (Domestic)
Crude runs (Domestic)
(mmt)
Refined products output (Domestic)
(mmt)
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2013 Annual Report
Upgrading of Refined Products and New Product Development Since 2013, widespread and long-lasting smog has frequently shrouded
central and eastern China, bringing about serious air pollution and
triggering discussion on environmental issues. As one of Chinas major
producers and suppliers of oil products, CNPC has taken the initiative to
develop and apply new technologies to constantly upgrade the quality of
its gasoline and diesel products. We have completed oil products quality
upgrading at our 14 refining enterprises, and will supply a large amount
of National IV vehicle gasoline to the public in 2014. In addition, Dalian
Petrochemical, Jinzhou Petrochemical, Huabei Petrochemical, and Guangxi
Petrochemical are already capable of producing National V gasoline (with
sulfur content of no more than 10ppm). In 2013, we produced 1.4 million
tons of National V standard compliant gasoline.
In 2013, we launched 55 new petrochemical products with a total output
of 670,000 tons. A shock-absorbing SBR for high-speed trains developed by
Lanzhou Petrochemical demonstrated proven and excellent performance
in users' large-scale application. Chlorinated polyethylene base resins
offered by Daqing Petrochemical are widely applied in cables and
automobile components, and highly recognized in markets in Northeast
and North China.
Guangxi Petrochemical's 10Mt/a refining project is the first one that
CNPC has built and operated in southern China. JEC, JPM and JCM
models were adopted in project design, engineering construction and
commissioning to combine external resources and techniques with
CNPC's experience in large refinery construction. This has dramatically
improved engineering quality and efficiency, with engineering safety,
quality, and the schedule well under control. Becoming operational
in 2010, the refinery adopts a matrix-based production model, which
enables labor and equipment resources to be configured more
flexibly, and operations to be efficient in the long term. Meanwhile,
the company has introduced advanced techniques and equipment to
reduce emissions, treat and recycle wastewater, and enhance energy
efficiency, in order to minimize the environmental impact.
Guangxi Petrochemical's excellent management and operation was
highly recognized by the International Project Management Association
(IPMA) and won the Gold Award of Project Excellence in Mega-Sized
Projects at the 27th IPMA World Congress in October 2013. According
to the IPMA, the company has achieved excellence in nine indexes of
its 10Mt/a refinery project, including project objectives, leadership and
execution, people, resources, and