President’s Address

Year 2010 presented us a complicated and changing business environment. Against this background, Sinopec continued to forge ahead pragmatically and progressively. The Company increased resources, expanded market, optimized operation, and cut costs. As a result, we further grew both in operational scale and quality, with revenue reached RMB1,913.2 billion (ASBE), up by 42.2% over 2009, and net profit attributable to equity shareholders of the Company at RMB70.713 billion, up by 12.8% year on year.

We continued to focus on market and business return, aggressively implemented growth strategy, strengthened internal management, and recorded remarkable growth across all business segments. We deliberately pursued resource strategy in E&P, intensified exploration and development efforts, and achieved stable increase in production. Our domestic production hit 42.56 million tonnes in crude oil and 12.5 billion cubic meters in natural gas, up by 0.3% and 47.6% respectively. Our overseas equity oil production was 3.97 million tonnes. In Refining, we kept facilities at high utilization rate to maintain crude run as high as 211 million tonnes, up by 13.2%, and produced 124 million tonnes of refined products, up by 9.4%. In addition, gasoline specs upgrading programme to meet the Chinese GB III emission standard were completed. Chemicals segment delivered strong contribution due to enhanced supply chain management, new product development and product mix adjustment. We produced 9.06 million tonnes of ethylene, up by 34.9%, and marketed 43.5 million tonnes of chemical products, up by 15.1%. In Refined Products Marketing and Distribution segment, specific emphasis was put on market study and forecast, so as to fine tune marketing plan. Domestic marketing volume was up by 13.3% to 140 million tonnes. The Company played an important role in securing fuels supply in disaster relief, agricultural consumption peaks in the Summer and Autumn, and for events like Shanghai World Expo and Guangzhou 2010 Asian Games, etc.

Drawing lessons from major safety and environmental accidents that occurred inside and outside China, we stringently carried out risk control and HSE checks on working procedures for offshore, oil depots, terminals and pipelines operations, and put in place programmes to prevent unplanned shutdown of facilities and major equipment failures. As a result, clean and safe production was achieved. The endeavour to maximize use of energy and other resources, cut costs and reduce emission proved effective. The Company reduced energy consumption per RMB10,000 of output by 0.24%, total COD by 2.1%, and SO2 emission by 6.9%.

Disciplined investment and key project execution remained our priority in pursuing our growth targets. The Sichuan to East China Gas Transmission project started commercial operation while the Yulin-Jinan Gas Pipeline was completed and operational, and the LNG receiving terminal in Shandong started construction. Ethylene crackers in Tianjin and Zhenhai started production, and Wuhan Ethylene and BYC II progressed as scheduled. Chemicals marketing branches addition accelerated while more than 1,500 service stations were added to further extend the marketing network of refined products. The construction of a series of transportation and storage facilities was also well underway.

Our longstanding commitment to technology innovation and management innovation is essential to sharpening our core competitiveness. We continuously improved R&D system and mechanism, elevated ability for innovation, balanced basic research and applied research, and achieved a number of breakthroughs. The Company filed 2,499 patent applications in China, of which 771 were granted, and 114 applications overseas, of which 72 were granted. We stepped up amendments of regulations and procedures and related documentation. We implemented corporate wide campaign of benchmarking among employees to improve and optimize working standards and processes. Quality control was further strengthened through setting up Quality Commitment Day and quality assurance targets, and promoting corporate social responsibility.

Year 2011 will present more challenges and difficulties. However, we also see opportunities ahead. Led by the Board of Directors, the Company and all the staff will stick to the scientific outlook on development, accelerate the transformation of the pattern of development, make concerted efforts to deliver even more outstanding performance, generate stronger shareholder return, better service our society and benefit our employees.