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 Chairman's Address
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Dear Shareholders:

Capitalizing on China’s steady economic growth, Sinopec Corp. achieved remarkable performance across all businesses and recorded a historical high in operational results despite a challenging operating environment. In 2010, we expanded our resources and markets, optimized operations and enhanced management. In Exploration & Production (“E&P”) business, we accelerated the implementation of our resource strategy, devoted greater efforts in exploration and development and realized continuous increase in reserves and production. Since the official launch of the Sichuan-East China Gas project, our natural gas business has achieved robust growth. In Refining business, we maintained high-load operation, upgraded oil products quality and met the increasing demands from the marketplace. Our Chemicals business took a faster pace to adjust product mix and develop new products and through introducing new capacities and reaping benefits from our centralized sales system, the segment recorded satisfying profit. In Marketing business, we further developed our business by entering new geographic areas, consolidating our existing networks and connections, and rapidly expanding the non-fuel business. We enhanced our ability in global sourcing to ensure crude supply and made a breakthrough in overseas oil and gas business. Our debt structure has also been optimized, thus improving the financial position and asset quality.

In 2010, the Company’s total turnover, other operating income and other revenues increased by 42.2% year-on-year to approximately RMB1,913.182 billion. In accordance with the Chinese Accounting Standards for Business Enterprises, net profit attributable to equity shareholders of the Company was RMB70.71 billion, a year-on-year growth of 12.8%. Under the International Financial Reporting Standards, profit attributable to equity shareholders of the Company was RMB71.8 billion, up 13.7% compared to 2009. The Board of Directors recommended a full year dividend of RMB0.21 per share for 2010. The final dividend for 2010 was RMB0.13 per share after deducting the interim dividend of RMB0.08 per share.

In 2010, the Company adjusted the composition of the Board of Directors. Mr. Liu Zhongli and Mr. Ye Qing, the independent directors of the Board were succeeded by Mr. Ma Weihua and Mr. Wu Xiaogen. We would like to extend our heart-felt gratitude to Mr. Liu and Mr. Ye for their diligent work and contributions, and at the same time, welcome Mr. Ma and Mr. Wu, who have brought great vitality to the Board as esteemed specialists in finance and accounting in China. In line with our consistent efforts to enhance management, a comprehensive plan to shape Sinopec’s management model was developed. We optimized internal control system with clearly set internal roles and responsibilities, and carried out standardization and IT upgrading programs for the system. The Company enhanced comprehensive budget management, the centralized treasury management, and the Company-wide cost management involving all employees to ensure efficient management results. Moreover, the Company attached great importance to investor relations and information disclosure, and has maintained effective communications with our shareholders.

In 2010, the Company promoted innovation in science and technology to support its core business, putting in place a system designed to incentivize creativity of our R&D staff. As a result, a series of important research goals were reached. These technological advancements were instrumental to an increase in our production and reserves of oil and gas, and helped improve our refinery processing technology standards. Applications of alternative energy also made progress. The Company was awarded 771 domestic patents out of 2,499 applications, and 72 international patents out of 114 applications. We also won 12 national awards in science and technology progress and invention, with one First Prize of National Science and Technology Progress Awards granted.

In 2010, the Company took solid steps in its corporate social responsibility and established good corporate image. In alignment with our CSR slogan “Making Every Drop Count”, our CSR program spanned from ensuring energy supply, premium services to green and safe operations, low carbon development, staff care and rewarding society. The Company supplied 149 million tonnes of oil products and 43.5 million tonnes of petrochemical products throughout the year to support national economic development and meet consumer demands. In addition, the Company took various measures to ensure fuel supply for disaster relief, Shanghai World Expo, Guangzhou Asian Games, and the agricultural peak seasons in the summer and autumn (referred to as “Three-Summers” and “Three-Autumns”). We also effectively relieved market tension for diesel and natural gas in some domestic regions in the fourth quarter of 2010. We actively participated in public welfare activities, including poverty alleviation and Tibet aid programs, sponsorship of “Lifeline Express”, donation to education and disaster relief programs, all of which yielded positive responses from the public.

All the aforementioned achievements in 2010 showcased the Company’s accomplishment of all targets set for the 11th Five-Year Plan. The company’s total turnover, other operating income and other revenues, reached approximately RMB1,913.182 billion, representing an increase of 129.8% against RMB832.532 billion recorded in 2005; total assets increased by 85.2% to RMB995.154 billion from RMB537.321 billion in 2005; equity attributable to equity shareholders of the Company increased by 87.45% to RMB419.047 billion from RMB223.556 billion in 2005. Over the five year span, crude production increased to 328 million barrels from 279 million barrels, up 17.6%; natural gas production increased by 98.9% from 221.9 billion cubic feet to 441.4 billion cubic feet; refinery throughput jumped from 140 million tonnes to 211 million tonnes, becoming the 2nd largest refiner globally; total sales of oil products went up 41.9% from 105 million tonnes to 149 million tonnes with company-operated service stations increasing to 29,601 from 27,367, thus positioning us as the world’s 2nd largest gas station network. Ethylene production went up 70.3% from 5.319 million tonnes to 9.059 million tonnes, ranking us fourth across the globe. Cumulative corporate tax amounted to RMB705.7 billion, and our cumulative dividend to our shareholders reached RMB72.0 billion. In short, Sinopec achieved multiple corporate development targets, contributed to the country, created value to shareholders, fulfilled social responsibilities and benefited staff.

We attribute the above achievements to the trust and support of all our shareholders and all walks of society, as well as the hard work and concerted efforts of the Board of Directors, the Board of Supervisors, the management team and all employees. Therefore, on behalf of the Board of directors, I would like to express my sincere gratitude for the support and perseverance of all parties involved.

Looking into the 12th Five-Year Plan, the Chinese government will look to sustain steady economic growth as a long term goal, but in the mean time, there are opportunities globally for China to take. We believe the next five years is a period for Sinopec to step up to the next level, to accelerate growth by means of alternative development channels and to further enhance quality and profitability. We will grasp these opportunities, speed up our development in order to establish ourselves as an international energy and chemicals group with a globally strong and competitive positioning. Taking into consideration the nature and maturity of our business in the context of the 12th Five-Year Plan announced by the government, we are determined to transform our business under the guiding principles that emphasis stronger business fundamentals alongside pursuit for larger scale. We shall continue to leverage our strengths while minimizing and addressing our weaknesses when implementing the integration and globalization strategy linking resources with end market. We aim to move forward by improving our strategic structure adjustment including oil and gas reserves, refineries, petrochemical feedstock and products. The Company will place great emphasis on the strategic development of new energy and alternative material, strengthening our marketing and sales networks for oil and chemical products, and development of the natural gas business to create further value. We will continue to focus on resource optimization, energy conservation and emissions reduction, and on improving our energy utilization in order to preserve the environment. The Company will increase its efforts to build a stronger position in international trade and overseas development. We will take concrete steps toward technological and management innovation, and the attraction and retention of talent, such efforts will pave the way for sustainable development of the Company in the future.

Our primary targets to achieve by 2015, the end of the 12th Five-Year Plan include the following: domestic crude production of 43.5 to 45 million tonnes, gas production of 20 to 24 billion cubic meters, refinery throughput of 255 million tonnes, domestic oil product sales over 170 million tonnes with direct sales and retail accounting for over 80%, production of oil products reaching 156 million tonnes, ethylene production capacity reaching 12.5 to 13.5 million tonnes per year and total sales of chemical products reaching 55 to 60 million tonnes.

2011 is the first year of the “12th Five-Year” Plan, and the Company plans to execute its annual development plans in accordance with the overall five year targets. Our capital expenditure for the year is expected to reach approximately RMB124.1 billion, primarily for our E&P and LNG projects in Shandong province, refinery business optimization and upgrading of oil and diesel products, the building, acquisition and renovation of service stations, and logistics projects including crude and oil product pipelines, etc.

My fellow members of the Board of Directors and I believe that, with the support of all our shareholders and the concerted efforts of the Board of Directors, the Board of Supervisors, the management team and all staff members, the Company will achieve greater development, create new value for shareholders, and contribute to the building of a harmonious society during the 12th Five-Year Plan.


Fu Chengyu
Chairman

Beijing, China
March 26, 2010


 

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