The year 2014 saw a more complicated international economic environment and increasing downward pressure on the domestic economy, resulting in slower growth in demand in the oil and gas market. In particular, the international oil price has seen a big drop since July 2014, resulting in a sharp rise in the difficulties faced by production and operations, and posing increasing risks to our international businesses. In the face of growing pressures and challenges, we sought to identify opportunities and challenges, and made progress in adversity. We continued to adhere to our principle of steady growth and our guidelines of quality, profitability and sustainable development. We accelerated our strategic transition from focusing on large-scale development to quality and profitability enhancement, thereby maintaining sound and stable development.

We optimized our business structure and delivered more green and low-carbon products and high-quality services to the community.

With a focus on restructuring, maintaining growth and enhancing profitability, we prioritized the development of our core oil and gas business, and improved and optimized our value chain. The proportion of upstream investment climbed to over 75%, with domestic oil and gas reserves continued to grow, and oil and gas output hit a record high. The proportion of natural gas in total oil and gas equivalent rose to 35%. We intensified the restructuring of our refining business and gradually optimized our processing resources, operation processes and product mix. A number of major pipelines and storage facilities were completed and put into operation, and our sales services network was further improved. The proportion of revenue and profit from overseas operations continued to increase.

We steadily promoted reform and innovation and boosted growth momentum and vitality.

We expanded pilot projects to give greater operating autonomy to oilfield companies, and launched and implemented reform of our natural gas marketing system and the integration of downstream businesses. We continued to improve our systems and mechanisms for corporate and business development. We implemented a performance-based compensation scheme, reviewing employee remuneration in accordance with corporate profitability to provide incentives through performance appraisals. Through the active introduction of social capital, we ensured the orderly development of joint venture and cooperation projects. By implementing the innovation-driven development strategy, we made significant achievements in our major technology projects and field tests. We made relentless efforts to increase revenues, lower costs and improve profitability, and launched campaigns to strengthen our management. As a result, we have enhanced the level of lean management. Through reform, innovation and strengthened management, we have achieved a better-than-expected business performance in spite of a significant reduction in investment scale and declining oil prices.

We fully implemented three fundamental projects to lay a stronger foundation for sustainable development.

At PetroChina, we have taken concrete steps to implement three fundamental projects in safety and environmental protection, harmony and stability, and anti-corruption. We strengthened the foundations for safety and environmental protection and ensured the effective enforcement of our systems and accountability. We continued to carry out the HSE system audit, and strengthened the risk prevention and control system and our emergency response capability. In addition, we accelerated the implementation of projects for energy conservation and emissions reduction. As a result, our HSE performance is generally stable and controllable. We made great efforts to develop a harmonious enterprise, giving top priority to the overall development of our employees. To this end, we built platforms for employee development, promoted local recruitment, safeguarded employee rights and interests, protected their physical and mental health, strengthened the protection of staff working overseas, and actively improved their living conditions. We strengthened corporate governance and compliance management in accordance with the law and explored an approach to anti-corruption work using a mix of systems plus technology. We cracked down on commercial bribery and strictly followed the relevant laws and regulations on commercial competition to maintain a fair and open market order and establish PetroChina as a model enterprise of transparency and integrity.

Today, the world’s political and economic landscape is undergoing a profound readjustment, the relationship between global energy supply and demand is experiencing rapid change, and China is actively pushing forward energy reform. The quick establishment of a clean, efficient, safe and sustainable modern energy system will have a great and dramatic impact on economic development, social progress and even human civilization. As one of the major oil and gas producers and suppliers in China, PetroChina shoulders great responsibilities and has a mission to advance energy reform. Facing this new situation and our new role, we will make every effort to grasp important strategic opportunities for development, tackle the challenges in an innovative manner, and strive for business restructuring, fostering new growth drivers and low-cost development. We will accelerate business transformation amid China’s economic “new normal”, and shift our development model from rapid development to sustainable and steady development. Furthermore, we will shift our focus from incremental investment to adjusting existing investments, optimizing new projects, promoting innovation-driven development and improving the quality of staff. We will benefit from the coordinated development of the upstream, midstream and downstream sectors, instead of relying on the upstream sector. We will better fulfill our economic, environmental and social responsibilities and continue to offer environmentallyfriendly and low-carbon energy, allowing us to contribute to national energy security and socio-economic development.

We would like to express our heartfelt gratitude for your continuing interest in and support for PetroChina over the years. We welcome your valuable comments on this report.