REG - China Pet &Chem Corp - Annual Financial Report-2
28/03/2022 07:00
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RNS Number : 1489G China Petroleum & Chemical Corp 28 March 2022
REPORT OF THE PRC AUDITOR
KPMG Huazhen LLP 畢馬威華振會計師事務所
8th Floor, KPMG Tower （特殊普通合夥）
Oriental Plaza 中國北京
1 East Chang An Avenue 東長安街1號
Beijing 100738 東方廣場畢馬威大樓8層
China 郵政編碼：100738
Telephone +86 (10) 8508 5000 電話 +86 (10) 8508 5000
Fax +86 (10) 8518 5111 傳真 +86 (10) 8518 5111
Internet kpmg.com/cn 網址 kpmg.com/cn
AUDITOR'S REPORT
畢馬威華振審字第2202273號
The Shareholders of China Petroleum & Chemical Corporation:
Opinion
We have audited the accompanying financial statements of China Petroleum &
Chemical Corporation ("the Company"), which comprise the consolidated and
company balance sheets as at 31 December 2021, the consolidated and company
income statements, the consolidated and company cash flow statements, the
consolidated and company statements of changes in shareholders' equity for the
year then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the consolidated and company financial position of the
Company as at 31 December 2021, and the consolidated and company financial
performance and cash flows of the Company for the year then ended in
accordance with Accounting Standards for Business Enterprises issued by the
Ministry of Finance of the People's Republic of China.
Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing for
Certified Public Accountants ("CSAs"). Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of
the Company in accordance with the China Code of Ethics for Certified Public
Accountants ("the Code"), and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Assessment of impairment of fixed assets relating to oil and gas producing
activities
Refer to Note 3 (8) Oil and gas properties, (12) Impairment of other
non-financial long-term assets, Note 13 Fixed assets, and Note 58 Principal
accounting estimates and judgements to the financial statements
The Key Audit Matter How the matter was addressed in our audit
The Company reported fixed assets of Renminbi ("RMB") 598,932 million as at 31 The following are the primary procedures we performed to address this key
December 2021, a portion of which related to oil and gas producing activities. audit matter:
The Company reported impairment losses of RMB2,467 million for the fixed
assets relating to oil and gas producing activities for the year ended 31
December 2021.
‧ we evaluated the design and tested the operating effectiveness of
certain internal controls related to the process for impairment assessment of
fixed assets relating to oil and gas producing activities;
The Company groups fixed assets relating to oil and gas producing activities
into cash-generating units ("CGUs") for impairment assessment. The Company
compares the carrying amount of individual CGU with its value in use, using a
discounted cash flow forecast, which was prepared based on the future ‧ we assessed the competence, capabilities and objectivity of the
production profiles included in the oil and gas reserves reports, to determine Company's reserves specialists and evaluated the methodology adopted by them
the impairment loss to be recognised. in estimating the oil and gas reserves against the recognised industry
standards;
We identified assessment of impairment of fixed assets relating to oil and gas
producing activities as a key audit matter. The value in use amounts of these ‧ we compared future selling prices for crude oil and natural gas used
CGUs are sensitive to the changes to future selling prices and production in the discounted cash flow forecasts with the Company's business plans and
costs for crude oil and natural gas, future production profiles, and discount forecasts by external analysts;
rates. Therefore a higher degree of subjective auditor judgment was required
to evaluate the Company's impairment assessment of fixed assets relating to
oil and gas producing activities.
‧ we compared future production costs and future production profiles
used in the discounted cash flow forecasts with oil and gas reserves reports
issued by the reserves specialists; and
‧ we involved valuation professionals with specialised skills and
knowledge, who assisted in assessing the discount rates applied in the
discounted cash flow forecasts against a discount rate range that was
independently developed using publicly available market data for comparable
companies in the same industry.
Other Information
The Company's management is responsible for the other information. The other
information comprises all the information included in 2021 annual report of
the Company, other than the financial statements and our auditor's report
thereon.
Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the
financial statements in accordance with the Accounting Standards for Business
Enterprises, and for the design, implementation and maintenance of such
internal control necessary to enable that the financial statements are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing
the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's
financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with CSAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with CSAs, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
‧ Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
‧ Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances.
‧ Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
‧ Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause the Company
to cease to continue as a going concern.
‧ Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
‧ Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Company to
express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
Auditor's Responsibilities for the Audit of the Financial Statements
(Continued)
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence and, where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
KPMG Huazhen LLP Certified Public Accountants
Beijing, China Registered in the People's
Republic of China
Yang Jie (Engagement Partner)
He Shu
25 March 2022
(A) FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR
BUSINESS ENTERPRISES CONSOLIDATED BALANCE SHEET
As at 31 December 2021
Notes At 31 December At 31 December
2021 2020
RMB million RMB million
Assets
Current assets
Cash at bank and on hand 5 221,989 184,412
Financial assets held for trading - 1
Derivative financial assets 6 18,371 12,528
Accounts receivable 7 34,861 35,439
Receivables financing 8 5,939 8,735
Prepayments 9 9,267 4,857
Other receivables 10 35,664 33,724
Inventories 11 207,433 152,191
Other current assets 24,500 23,773
Total current assets 558,024 455,660
Non-current assets
Long-term equity investments 12 209,179 188,342
Other equity instrument investments 767 1,525
Fixed assets 13 598,932 593,653
Construction in progress 14 155,939 125,525
Right-of-use assets 15 184,974 189,018
Intangible assets 16 119,210 114,280
Goodwill 17 8,594 8,620
Long-term deferred expenses 18 10,007 9,584
Deferred tax assets 19 19,389 25,054
Other non-current assets 20 24,240 27,635
Total non-current assets 1,331,231 1,283,236
Total assets 1,889,255 1,738,896
Liabilities and shareholders' equity
Current liabilities
Short-term loans 22 27,366 20,756
Derivative financial liabilities 6 3,223 4,826
Bills payable 23 11,721 10,394
Accounts payable 24 203,919 151,514
Contract liabilities 25 124,622 126,241
Employee benefits payable 26 14,048 7,129
Taxes payable 27 81,267 76,848
Other payables 28 114,701 85,012
Non-current liabilities due within one year 29 28,651 22,494
Other current liabilities 30 31,762 17,781
Total current liabilities 641,280 522,995
Non-current liabilities
Long-term loans 31 49,341 45,459
Debentures payable 32 42,649 38,356
Lease liabilities 33 170,233 171,740
Provisions 34 43,525 45,552
Deferred tax liabilities 19 7,910 8,124
Other non-current liabilities 35 18,276 17,950
Total non-current liabilities 331,934 327,181
Total liabilities 973,214 850,176
Shareholders' equity
Share capital 36 121,071 121,071
Capital reserve 37 120,188 127,389
Other comprehensive income 38 (690) 1,038
Specific reserve 2,664 1,941
Surplus reserves 39 213,224 209,280
Retained earnings 318,645 286,575
Total equity attributable to shareholders of the Company 775,102 747,294
Minority interests 140,939 141,426
Total shareholders' equity 916,041 888,720
Total liabilities and shareholders' equity 1,889,255 1,738,896
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
BALANCE SHEET
As at 31 December 2021
Notes At 31 December At 31 December
2021 2020
RMB million RMB million
Assets
Current assets
Cash at bank and on hand 110,691 99,188
Derivative financial assets 4,503 7,776
Accounts receivable 7 21,146 21,763
Receivables financing 227 707
Prepayments 9 4,540 2,626
Other receivables 10 46,929 37,938
Inventories 63,661 39,034
Other current assets 23,408 14,048
Total current assets 275,105 223,080
Non-current assets
Long-term equity investments 12 360,847 343,356
Other equity instrument investments 201 428
Fixed assets 13 284,622 283,695
Construction in progress 14 66,146 59,880
Right-of-use assets 15 105,712 108,737
Intangible assets 9,334 8,779
Long-term deferred expenses 2,875 2,499
Deferred tax assets 8,715 12,661
Other non-current assets 34,227 26,828
Total non-current assets 872,679 846,863
Total assets 1,147,784 1,069,943
Liabilities and shareholders' equity
Current liabilities
Short-term loans 16,550 20,669
Derivative financial liabilities 1,121 362
Bills payable 6,058 6,061
Accounts payable 85,307 65,779
Contract liabilities 7,505 5,840
Employee benefits payable 8,398 1,673
Taxes payable 46,333 43,500
Other payables 211,179 188,568
Non-current liabilities due within one year 16,737 12,026
Other current liabilities 13,702 439
Total current liabilities 412,890 344,917
Non-current liabilities
Long-term loans 34,258 30,413
Debentures payable 31,522 26,977
Lease liabilities 104,426 105,691
Provisions 35,271 36,089
Other non-current liabilities 3,103 3,581
Total non-current liabilities 208,580 202,751
Total liabilities 621,470 547,668
Shareholders' equity
Share capital 121,071 121,071
Capital reserve 67,897 68,976
Other comprehensive income 6,024 5,910
Specific reserve 1,658 1,189
Surplus reserves 213,224 209,280
Retained earnings 116,440 115,849
Total shareholders' equity 526,314 522,275
Total liabilities and shareholders' equity 1,147,784 1,069,943
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
Notes 2021 2020
RMB million RMB million
Operating income 40 2,740,884 2,104,724
Less: Operating costs 40 2,216,551 1,685,674
Taxes and surcharges 41 259,032 235,018
Selling and distribution expenses 44 57,891 64,495
General and administrative expenses 45 62,535 67,082
Research and development expenses 46 11,481 10,087
Financial expenses 42 9,010 9,510
Including: Interest expenses 15,018 15,198
Interest income 5,732 4,803
Exploration expenses, including dry holes 47 12,382 9,716
Add: Other income 48 5,850 7,514
Investment income 49 6,032 47,486
Including: Income from investment in associates and joint ventures 23,253 6,712
Losses from changes in fair value 50 3,341 (1,253)
Credit impairment losses (2,311) (2,066)
Impairment losses 51 (13,165) (26,087)
Asset disposal gains 665 2,067
Operating profit 112,414 50,803
Add: Non-operating income 52 3,516 2,370
Less: Non-operating expenses 53 7,582 4,732
Profit before taxation 108,348 48,441
Less: Income tax expense 54 23,318 6,344
Net profit 85,030 42,097
Including: Net (loss)/profit of acquiree before business combination under (200) 347
common control
Classification by going concern:
Continuous operating net profit 85,030 42,097
Termination of net profit - -
Classification by ownership:
Equity shareholders of the Company 71,208 33,271
Minority interests 13,822 8,826
Basic earnings per share 65 0.588 0.275
Diluted earnings per share 65 0.588 0.275
Other comprehensive income 38
Items that may not be reclassified subsequently to profit or loss (4) (22)
Changes in fair value of other equity instrument investments (4) (22)
Items that may be reclassified subsequently to profit or loss 17,511 337
Other comprehensive income that can be converted into profit under the equity 441 (2,441)
method
Cost of hedging reserve (220) 162
Cash flow hedges 19,018 7,073
Foreign currency translation differences (1,728) (4,457)
Total other comprehensive income 17,507 315
Total comprehensive income 102,537 42,412
Attributable to:
Equity shareholders of the Company 88,782 34,665
Minority interests 13,755 7,747
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
INCOME STATEMENT
For the year ended 31 December 2021
Notes 2021 2020
RMB million RMB million
Operating income 40 1,045,000 770,321
Less: Operating costs 40 808,540 584,315
Taxes and surcharges 156,174 148,350
Selling and distribution expenses 1,774 3,256
General and administrative expenses 30,551 29,868
Research and development expenses 10,102 9,098
Financial expenses 10,644 8,749
Including: Interest expenses 13,602 11,892
Interest income 2,953 3,181
Exploration expenses, including dry holes 10,502 8,297
Add: Other income 4,045 4,922
Investment income 49 30,881 43,356
Including: Income from investment in associates and joint ventures 8,151 3,637
Gains from changes in fair value 644 350
Credit impairment reversal 1 71
Impairment losses (7,192) (16,374)
Asset disposal gains 58 261
Operating profit 45,150 10,974
Add: Non-operating income 776 900
Less: Non-operating expenses 2,209 1,319
Profit before taxation 43,717 10,555
Less: Income tax expense 4,273 (8,017)
Net profit 39,444 18,572
Classification by going concern:
Continuous operating net profit 39,444 18,572
Termination of net profit - -
Other comprehensive income
Items that may be reclassified subsequently to profit or loss 13,612 4,766
Other comprehensive income that can be converted into profit or loss under the 12 (182)
equity method
Cash flow hedges reserve 13,600 4,948
Total other comprehensive income 13,612 4,766
Total comprehensive income 53,056 23,338
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2021
Notes 2021 2020
RMB million RMB million
Cash flows from operating activities:
Cash received from sale of goods and rendering of services 2,980,918 2,295,665
Refund of taxes and levies 4,641 2,985
Other cash received relating to operating activities 158,049 212,918
Sub-total of cash inflows 3,143,608 2,511,568
Cash paid for goods and services (2,317,629) (1,749,873)
Cash paid to and for employees (95,778) (85,481)
Payments of taxes and levies (325,348) (282,390)
Other cash paid relating to operating activities (179,679) (225,304)
Sub-total of cash outflows (2,918,434) (2,343,048)
Net cash flow from operating activities 56(a) 225,174 168,520
Cash flows from investing activities:
Cash received from disposal of investments 9,812 11,651
Cash received from returns on investments 10,134 11,510
Net cash received from disposal of fixed assets, intangible assets and other 1,478 2,656
long-term assets
Net cash received from disposal of subsidiaries and other business entities 56(d) 5,205 49,869
Other cash received relating to investing activities 38,208 58,669
Sub-total of cash inflows 64,837 134,355
Cash paid for acquisition of fixed assets, intangible assets and other (144,921) (131,636)
long-term assets
Cash paid for acquisition of investments (13,085) (12,740)
Net cash paid for the acquisition of subsidiaries and other business entities (1,106) (340)
Other cash paid relating to investing activities (50,923) (92,289)
Sub-total of cash outflows (210,035) (237,005)
Net cash flow from investing activities (145,198) (102,650)
Cash flows from financing activities:
Cash received from capital contributions 1,001 4,219
Including: Cash received from minority shareholders' capital contributions to 1,001 4,219
subsidiaries
Cash received from borrowings 356,459 558,680
Other cash received relating to financing activities 133 700
Sub-total of cash inflows 357,593 563,599
Cash repayments of borrowings (338,232) (540,015)
Cash paid for dividends, profits distribution or interest (49,027) (43,812)
Including: Subsidiaries' cash payments for distribution of dividends or (8,068) (4,821)
profits to
minority shareholders
Other cash paid relating to financing activities 56(e) (28,276) (17,282)
Sub-total of cash outflows (415,535) (601,109)
Net cash flow from financing activities (57,942) (37,510)
Effects of changes in foreign exchange rate (1,003) (1,239)
Net increase in cash and cash equivalents 56(b) 21,031 27,121
Add: Cash and cash equivalents at the beginning of the year 87,559 60,438
Cash and cash equivalents at the end of the period 108,590 87,559
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
CASH FLOW STATEMENT
For the year ended 31 December 2021
Notes 2021 2020
RMB million RMB million
Cash flows from operating activities:
Cash received from sale of goods and rendering of services 1,155,516 862,093
Refund of taxes and levies 2,959 2,796
Other cash received relating to operating activities 13,868 9,407
Sub-total of cash inflows 1,172,343 874,296
Cash paid for goods and services (823,402) (606,295)
Cash paid to and for employees (49,784) (44,139)
Payments of taxes and levies (181,187) (164,635)
Other cash paid relating to operating activities (25,895) (19,239)
Sub-total of cash outflows (1,080,268) (834,308)
Net cash flow from operating activities 92,075 39,988
Cash flows from investing activities:
Cash received from disposal of investments 32,738 12,157
Cash received from returns on investments 22,712 18,805
Net cash received from disposal of fixed assets, intangible assets and other 72 6,579
long-term assets
Other cash received relating to investing activities 136,276 78,751
Sub-total of cash inflows 191,798 116,292
Cash paid for acquisition of fixed assets, intangible assets and other (70,578) (59,216)
long-term assets
Cash paid for acquisition of investments (52,212) (41,066)
Other cash paid relating to investing activities (134,009) (66,408)
Sub-total of cash outflows (256,799) (166,690)
Net cash flow from investing activities (65,001) (50,398)
Cash flows from financing activities:
Cash received from borrowings 159,879 195,770
Other cash received relating to financing activities 298,755 70,516
Sub-total of cash inflows 458,634 266,286
Cash repayments of borrowings (151,310) (199,727)
Cash paid for dividends or interest (42,933) (36,973)
Other cash paid relating to financing activities (284,979) (7,074)
Sub-total of cash outflows (479,222) (243,774)
Net cash flow from financing activities (20,588) 22,512
Effects of changes in foreign exchange rate 8 (5)
Net increase in cash and cash equivalents 6,494 12,097
Add: Cash and cash equivalents at the beginning of the year 28,081 15,984
Cash and cash equivalents at the end of the period 34,575 28,081
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share Capital Other Specific Surplus Retained Total Minority Total
capital reserve comprehensive reserve reserves earnings shareholders' interests shareholders'
income equity equity
attributable
to equity
shareholders of
the Company
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Balance at 31 December 2019 121,071 122,864 (321) 1,741 207,423 287,187 739,965 138,409 878,374
Adjustment for business combination of entities under - 4,773 - - - - 4,773 1 4,774
common control (Note 60)
Balance at 1 January 2020 121,071 127,637 (321) 1,741 207,423 287,187 744,738 138,410 883,148
Change for the year
1. Net profit - - - - - 33,271 33,271 8,826 42,097
2. Other comprehensive income (Note 38) - - 1,406 - - (12) 1,394 (1,079) 315
Total comprehensive income - - 1,406 - - 33,259 34,665 7,747 42,412
Amounts transferred to initial carrying amount of hedged items - - (47) - - - (47) 48 1
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:
- Appropriations for surplus reserves - - - - 1,857 (1,857) - - -
- Distributions to shareholders (Note 55) - - - - - (31,479) (31,479) - (31,479)
4. Contributions to subsidiaries from minority interests - - - - - - - 3,325 3,325
5. Transaction with minority interests - (138) - - - - (138) 13 (125)
6. Distributions to minority interests - - - - - - - (6,726) (6,726)
7. Adjustment for business combination of entities under - (972) - - - - (972) 972 -
common control
Total transactions with owners, recorded directly in shareholders' equity - (1,110) - - 1,857 (33,336) (32,589) (2,416) (35,005)
8. Net increase in specific reserve for the year - - - 200 - - 200 37 237
9. Others - 862 - - - (535) 327 (2,400) (2,073)
Balance at 31 December 2020 121,071 127,389 1,038 1,941 209,280 286,575 747,294 141,426 888,720
Balance at 1 January 2021 121,071 127,389 1,038 1,941 209,280 286,575 747,294 141,426 888,720
Change for the year
1. Net profit - - - - - 71,208 71,208 13,822 85,030
2. Other comprehensive income (Note 38) - - 17,574 - - - 17,574 (67) 17,507
Total comprehensive income - - 17,574 - - 71,208 88,782 13,755 102,537
Amounts transferred to initial carrying amount of hedged items - - (19,302) - - - (19,302) (648) (19,950)
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:
- Appropriations for surplus reserves (Note 39) - - - - 3,944 (3,944) - - -
- Distributions to shareholders (Note 55) - - - - - (35,110) (35,110) - (35,110)
4. Contributions to subsidiaries from minority interests - - - - - - - 1,973 1,973
5. Transaction with minority interests - (1,396) - - - - (1,396) (6,796) (8,192)
6. Distributions to minority interests - - - - - - - (8,982) (8,982)
7. Adjustment for business combination of entities under - (6,124) - - - - (6,124) - (6,124)
common control (Note 60)
Total transactions with owners, recorded directly in shareholders' equity - (7,520) - - 3,944 (39,054) (42,630) (13,805) (56,435)
8. Net increase in specific reserve for the year - - - 723 - - 723 52 775
9. Others - 319 - - - (84) 235 159 394
Balance at 31 December 2021 121,071 120,188 (690) 2,664 213,224 318,645 775,102 140,939 916,041
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share Capital Other Specific Surplus Retained Total
capital reserve comprehensive reserve reserves earnings shareholders'
income equity
RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Balance at 1 January 2020 121,071 68,841 1,181 949 207,423 130,645 530,110
Change for the year
1. Net profit - - - - - 18,572 18,572
2. Other comprehensive income - - 4,766 - - - 4,766
Total comprehensive income - - 4,766 - - 18,572 23,338
Amounts transferred to initial carrying amount of hedged items - - (37) - - - (37)
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:
－Appropriations for surplus reserves - - - - 1,857 (1,857) -
－Distributions to shareholders (Note 55) - - - - - (31,479) (31,479)
Total transactions with owners, recorded directly in shareholders' equity - - - - 1,857 (33,336) (31,479)
4. Net increase in specific reserve for the year - - - 240 - - 240
5. Others - 135 - - - (32) 103
Balance at 31 December 2020 121,071 68,976 5,910 1,189 209,280 115,849 522,275
Balance at 1 January 2021 121,071 68,976 5,910 1,189 209,280 115,849 522,275
Change for the year
1. Net profit - - - - - 39,444 39,444
2. Other comprehensive income - - 13,612 - - - 13,612
Total comprehensive income - - 13,612 - - 39,444 53,056
Amounts transferred to initial carrying amount of hedged items - - (13,498) - - - (13,498)
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits: - - - - - - -
－Appropriations for surplus reserves (Note 39) - - - - 3,944 (3,944) -
－Distributions to shareholders (Note 55) - - - - - (35,110) (35,110)
Total transactions with owners, recorded directly in shareholders' equity - - - - 3,944 (39,054) (35,110)
4. Net increase in specific reserve for the year - - - 469 - - 469
5. Others - (1,079) - - - 201 (878)
Balance at 31 December 2021 121,071 67,897 6,024 1,658 213,224 116,440 526,314
These financial statements have been approved for issue by the board of
directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2021
1 STATUS OF THE COMPANY
China Petroleum & Chemical Corporation (the "Company") was established on
25 February 2000 as a joint stock limited company. The company is registered
in Beijing, the People's Republic of China, and the headquarter is located in
Beijing, the People's Republic of China. The approval date of the financial
report is 25 March 2022.
According to the State Council's approval to the "Preliminary Plan for the
Reorganisation of China Petrochemical Corporation" (the "Reorganisation"), the
Company was established by China Petrochemical Corporation, which transferred
its core businesses together with the related assets and liabilities at 30
September 1999 to the Company. Such assets and liabilities had been valued
jointly by China United Assets Appraisal Corporation, Beijing Zhong Zheng
Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa
International Properties Valuation Corporation. The net asset value was
determined at RMB98,249,084,000. The valuation was reviewed and approved by
the Ministry of Finance (the "MOF") (Cai Ping Zi 2000 No. 20 "Comments on
the Review of the Valuation Regarding the Formation of a Joint Stock Limited
Company by China Petrochemical Corporation").
In addition, pursuant to the notice Cai Guan Zi 2000 No. 34 "Reply to the
Issue Regarding Management of State-Owned Equity by China Petroleum and
Chemical Corporation" issued by the MOF, 68.8 billion domestic state-owned
shares with a par value of RMB1.00 each were issued to Sinopec Group Company,
the amount of which is equivalent to 70% of the above net asset value
transferred from Sinopec Group Company to the Company in connection with the
Reorganisation.
Pursuant to the notice Guo Jing Mao Qi Gai 2000 No. 154 "Reply on the
Formation of China Petroleum and Chemical Corporation", the Company obtained
the approval from the State Economic and Trade Commission on 21 February 2000
for the formation of a joint stock limited company.
The Company took over the exploration, development and production of crude oil
and natural gas, refining, chemicals and related sales and marketing business
of Sinopec Group Company after the establishment of the Company.
The Company and its subsidiaries (the "Group") engage in the oil and gas and
chemical operations and businesses, including:
(1) the exploration, development and production of crude oil and natural
gas;
(2) the refining, transportation, storage and marketing of crude oil and
petroleum product; and
(3) the production and sale of chemical.
Details of the Company's principal subsidiaries are set out in Note 59.
2 BASIS OF PREPARATION
(1) Statement of compliance of China Accounting Standards for Business
Enterprises ("CASs")
The financial statements have been prepared in accordance with the
requirements of Accounting Standards for Business Enterprises - Basic
Standards, specific standards and relevant regulations (hereafter referred as
CASs collectively) issued by the MOF on or after 15 February 2006. These
financial statements also comply with the disclosure requirements of
"Regulation on the Preparation of Information Disclosures of Companies Issuing
Public Shares, No.15: General Requirements for Financial Reports" issued by
the China Securities Regulatory Commission ("CSRC"). These financial
statements present truly and completely the consolidated and company financial
position as at 31 December 2021, and the consolidated and company financial
performance and the consolidated and company cash flows for the year ended 31
December 2021.
These financial statements are prepared on a basis of going concern.
(2) Accounting period
The accounting year of the Group is from 1 January to 31 December.
(3) Measurement basis
The financial statements of the Group have been prepared under the historical
cost convention, except for the assets and liabilities set out below:
- Financial assets held for trading (see Note 3(11))
- Other equity instrument investments (see Note 3(11))
- Derivative financial instruments (see Note 3(11))
- Receivables financing (see Note 3(11))
(4) Functional currency and presentation currency
The functional currency of the Company's and most of its subsidiaries are
Renminbi. The Company and its subsidiaries determine their functional currency
according to the main economic environment in where they operate. The Group's
consolidated financial statements are presented in Renminbi. Some of
subsidiaries use other currency as the functional currency. The Company
translates the financial statements of subsidiaries from their respective
functional currencies into Renminbi (see Note 3(2)) if the subsidiaries'
functional currencies are not Renminbi.
3 SIGNIFICANT ACCOUNTING POLICIES
The Group determines specific accounting policies and accounting estimates
based on the characteristics of production and operational activities, mainly
reflected in the accounting for allowance for financial assets (Note 3(11)),
valuation of inventories (Note 3(4)), depreciation of fixed assets and
depletion of oil and gas properties (Note 3(7), (8)), measurement of
provisions (Note 3(16)), etc.
Principal accounting estimates and judgements of the Group are set out in Note
58.
(1) Accounting treatment of business combination involving entities under
common control and not under common control
(a) Business combination involving entities under common control
A business combination involving entities or businesses under common control
is a business combination in which all of the combining entities or businesses
are ultimately controlled by the same party or parties both before and after
the business combination, and that control is not transitory. The assets and
liabilities that the acquirer receives in the acquisition are accounted for at
the acquiree's carrying amount on the acquisition date. The difference between
the carrying amount of the acquired net assets and the carrying amount of the
consideration paid for the acquisition (or the total nominal value of shares
issued) is recognised in the share premium of capital reserve, or the retained
earnings in case of any shortfall in the share premium of capital reserve. Any
costs directly attributable to the combination shall be recognised in profit
or loss for the current period when occurred. The expense incurred for equity
securities and debt securities issued as the consideration of the combination
is recognised in the initial cost of the securities. The combination date is
the date on which the acquirer effectively obtains control of the acquiree.
(b) Business combination involving entities not under common control
A business combination involving entities or businesses not under common
control is a business combination in which all of the combining entities or
businesses are not ultimately controlled by the same party or parties both
before and after the business combination. Difference between the
consideration paid by the Group as the acquirer, comprises of the aggregate of
the fair value at the acquisition date of assets given, liabilities incurred
or assumed, and equity securities issued by the acquirer in exchange for
control of the acquiree, and the Group's interest in the fair value of the
identifiable net assets of the acquiree, is recognised as goodwill (Note
3(10)) if it is an excess, otherwise in the profit or loss. The expense
incurred for equity securities and debt securities issued as the consideration
of the combination is recognised in the initial cost of the securities. Any
other expense directly attributable to the business combination is recognised
in the profit or loss for the year. The difference between the fair value and
the book value of the assets given is recognised in profit or loss. The
acquiree's identifiable assets, liabilities and contingent liabilities, if
satisfying the recognition criteria, are recognised by the Group at their fair
value at the acquisition date. The acquisition date is the date on which the
acquirer effectively obtains control of the acquiree.
(c) Method for preparation of consolidated financial statements
The scope of consolidated financial statements is based on control and the
consolidated financial statements comprise the Company and its subsidiaries.
Control means an entity is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases.
Where the Company combines a subsidiary during the reporting period through a
business combination involving entities under common control, the financial
statements of the subsidiary are included in the consolidated financial
statements as if the combination had occurred at the beginning of the earliest
comparative year presented or, if later, at the date that common control was
established. Therefore the opening balances and the comparative figures of the
consolidated financial statements are restated. In the preparation of the
consolidated financial statements, the subsidiary's assets, liabilities and
results of operations are included in the consolidated balance sheet and the
consolidated income statement, respectively, based on their carrying amounts
in the subsidiary's financial statements, from the date that common control
was established.
Where the Company acquires a subsidiary during the reporting year through a
business combination involving entities not under common control, the
identifiable assets, liabilities and results of operations of the subsidiaries
are consolidated into consolidated financial statements from the date that
control commences, based on the fair value of those identifiable assets and
liabilities at the acquisition date.
Where the Company acquired a minority interest from a subsidiary's minority
shareholders, the difference between the investment cost and the newly
acquired interest into the subsidiary's identifiable net assets at the
acquisition date is adjusted to the capital reserve (capital surplus) in the
consolidated balance sheet. Where the Company partially disposed an investment
of a subsidiary that do not result in a loss of control, the difference
between the proceeds and the corresponding share of the interest into the
subsidiary is adjusted to the capital reserve (capital surplus) in the
consolidated balance sheet. If the credit balance of capital reserve (capital
surplus) is insufficient, any excess is adjusted to retained profits.
In a business combination involving entities not under common control achieved
in stages, the Group remeasures its previously held equity interest in the
acquiree on the acquisition date. The difference between the fair value and
the net book value is recognised as investment income for the year. If other
comprehensive income was recognised regarding the equity interest previously
held in the acquiree before the acquisition date, the relevant other
comprehensive income is transferred to investment income in the period in
which the acquisition occurs.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(1) Accounting treatment of business combination involving entities under
common control and not under common control (Continued)
(c) Method for preparation of consolidated financial statements (Continued)
Where control of a subsidiary is lost due to partial disposal of the equity
investment held in a subsidiary, or any other reasons, the Group derecognises
assets, liabilities, minority interests and other equity items related to the
subsidiary. The remaining equity investment is remeasured to fair value at the
date in which control is lost. The sum of consideration received from disposal
of equity investment and the fair value of the remaining equity investment,
net of the fair value of the Group's previous share of the subsidiary's
identifiable net assets recorded from the acquisition date, is recognised in
investment income in the period in which control is lost. Other comprehensive
income related to the previous equity investment in the subsidiary, is
transferred to investment income when control is lost. Other comprehensive
income related to the equity investment of the original subsidiary shall be
converted into the current investment income in the event of loss of control.
Minority interest is presented separately in the consolidated balance sheet
within shareholders' equity. Net profit or loss attributable to minority
shareholders is presented separately in the consolidated income statement
below the net profit line item.
The excess of the loss attributable to the minority interests during the
period over the minority interests' share of the equity at the beginning of
the reporting period is deducted from minority interests.
Where the accounting policies and accounting period adopted by the
subsidiaries are different from those adopted by the Company, adjustments are
made to the subsidiaries' financial statements according to the Company's
accounting policies and accounting period. Intra-group balances and
transactions, and any unrealised profit or loss arising from intra-group
transactions, are eliminated in preparing the consolidated financial
statements. Unrealised losses resulting from intra-group transactions are
eliminated in the same way as unrealised gains but only to the extent that
there is no evidence of impairment.
The unrealised profit or loss arising from the sale of assets by the Company
to its subsidiaries is eliminated in full against the net profit attributed to
shareholders; the unrealised profit or loss from the sale of assets by
subsidiaries to the Company is eliminated according to the distribution ratio
between shareholders of the parent company and minority interests. For sale of
assets that occurred between subsidiaries, the unrealised gains and losses is
eliminated according to the distribution ratio for its subsidiaries seller
between net profit attributable to shareholders of the parent company and
minority interests.
(2) Transactions in foreign currencies and translation of financial
statements in foreign currencies
Foreign currency transactions are, on initial recognition, translated into
Renminbi at the spot exchange rates quoted by the People's Bank of China
("PBOC rates") at the transaction dates.
Foreign currency monetary items are translated at the PBOC rates at the
balance sheet date. Exchange differences, except for those directly related to
the acquisition, construction or production of qualified assets, are
recognised as income or expenses in the income statement. Non-monetary items
denominated in foreign currency measured at historical cost are not
translated. Non-monetary items denominated in foreign currency that are
measured at fair value are translated using the exchange rates at the date
when the fair value was determined. The difference between the translated
amount and the original currency amount is recognised as other comprehensive
income, if it is classified as other equity instrument investments; or charged
to the income statement if it is measured at fair value through profit or
loss.
The assets and liabilities of foreign operation are translated into Renminbi
at the spot exchange rates at the balance sheet date. The equity items,
excluding "Retained earnings", are translated into Renminbi at the spot
exchange rates at the transaction dates. The income and expenses of foreign
operation are translated into Renminbi at the spot exchange rates or an
exchange rate that approximates the spot exchange rates on the transaction
dates. The resulting exchange differences are separately presented as other
comprehensive income in the balance sheet within equity. Upon disposal of a
foreign operation, the cumulative amount of the exchange differences
recognised in which relate to that foreign operation is transferred to profit
or loss in the year in which the disposal occurs.
(3) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits, short-term
and highly liquid investments which are readily convertible into known amounts
of cash and are subject to an insignificant risk of change in value.
(4) Inventories
Inventories are initially measured at cost. Cost includes the cost of purchase
and processing, and other expenditures incurred in bringing the inventories to
their present location and condition. The cost of inventories is mainly
calculated using the weighted average method. In addition to the cost of
purchase of raw material, work in progress and finished goods include direct
labour and an appropriate allocation of manufacturing overhead costs.
At the balance sheet date, inventories are stated at the lower of cost and net
realisable value.
Any excess of the cost over the net realisable value of each item of
inventories is recognised as a provision for diminution in the value of
inventories. Net realisable value is the estimated selling price in the normal
course of business less the estimated costs of completion and the estimated
costs necessary to make the sale and relevant taxes. The net realisable value
of materials held for use in the production is measured based on the net
realisable value of the finished goods in which they will be incorporated. The
net realisable value of the quantity of inventory held to satisfy sales or
service contracts is measured based on the contract price. If the quantities
held by the Group are more than the quantities of inventories specified in
sales contracts, the net realisable value of the excess portion of inventories
is measured based on general selling prices.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Inventories (Continued)
Inventories include raw materials, work in progress, semi-finished goods,
finished goods and reusable materials. Reusable materials include low-value
consumables, packaging materials and other materials, which can be used
repeatedly but do not meet the definition of fixed assets. Reusable materials
are amortised in full when received for use. The amounts of the amortisation
are included in the cost of the related assets or profit or loss.
Inventories are recorded by perpetual method.
(5) Long-term equity investments
(a) Investment in subsidiaries
In the Company's separate financial statements, long-term equity investments
in subsidiaries are accounted for using the cost method. Except for cash
dividends or profits distributions declared but not yet distributed that have
been included in the price or consideration paid in obtaining the investments,
the Company recognises its share of the cash dividends or profit distributions
declared by the investee as investment income irrespective of whether these
represent the net profit realised by the investee before or after the
investment. Investments in subsidiaries are stated at cost less impairment
losses (see Note 3(12)) in the balance sheet. At initial recognition, such
investments are measured as follows:
The initial investment cost of a long-term equity investment obtained through
a business combination involving entities under common control is the
Company's share of the carrying amount of the subsidiary's equity at the
combination date. The difference between the initial investment cost and the
carrying amounts of the consideration given is adjusted to share premium in
capital reserve. If the balance of the share premium is insufficient, any
excess is adjusted to retained earnings.
For a long-term equity investment obtained through a business combination not
involving enterprises under common control, the initial investment cost
comprises the aggregate of the fair values of assets transferred, liabilities
incurred or assumed, and equity securities issued by the Company, in exchange
for control of the acquiree. For a long-term equity investment obtained
through a business combination not involving enterprises under common control,
if it is achieved in stages, the initial cost comprises the carrying value of
previously-held equity investment in the acquiree immediately before the
acquisition date, and the additional investment cost at the acquisition date.
An investment in a subsidiary acquired otherwise than through a business
combination is initially recognised at actual purchase cost if the Group
acquires the investment by cash, or at the fair value of the equity securities
issued if an investment is acquired by issuing equity securities, or at the
value stipulated in the investment contract or agreement if an investment is
contributed by investors.
(b) Investment in joint ventures and associates
A joint venture is an incorporated entity over which the Group, based on legal
form, contractual terms and other facts and circumstances, has joint control
with the other parties to the joint venture and rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the Group and the parties sharing
control.
An associate is the investee that the Group has significant influence on their
financial and operating policies. Significant influence represents the right
to participate in the financial and operating policy decisions of the investee
but is not control or joint control over the establishment of these policies.
The Group generally considers the following circumstances in determining
whether it can exercise significant influence over the investee: whether there
is representative appointed to the board of directors or equivalent governing
body of the investee; whether to participate in the investee's policy-making
process; whether there are significant transactions with the investees;
whether there is management personnel sent to the investee; whether to provide
critical technical information to the investee.
An investment in a joint ventures or an associate is accounted for using the
equity method, unless the investment is classified as held for sale.
The initial cost of investment in joint ventures and associates is stated at
the consideration paid except for cash dividends or profits distributions
declared but unpaid at the time of acquisition and therefore included in the
consideration paid should be deducted if the investment is made in cash. Under
the circumstances that the long-term investment is obtained through
non-monetary asset exchange, the initial cost of the investment is stated at
the fair value of the assets exchanged if the transaction has commercial
substance, the difference between the fair value of the assets exchanged and
its carrying amount is charged to profit or loss; or stated at the carrying
amount of the assets exchanged if the transaction lacks commercial substance.
The Group's accounting treatments when adopting the equity method include:
Where the initial investment cost of a long-term equity investment exceeds the
Group's interest in the fair value of the investee's identifiable net assets
at the date of acquisition, the investment is initially recognised at the
initial investment cost. Where the initial investment cost is less than the
Group's interest in the fair value of the investee's identifiable net assets
at the time of acquisition, the investment is initially recognised at the
investor's share of the fair value of the investee's identifiable net assets,
and the difference is charged to profit or loss.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(5) Long-term equity investments (Continued)
(b) Investment in joint ventures and associates (Continued)
After the acquisition of the investment, the Group recognises its share of the
investee's net profits or losses and other comprehensive income as investment
income or losses and other comprehensive income, and adjusts the carrying
amount of the investment accordingly. Once the investee declares any cash
dividends or profits distributions, the carrying amount of the investment is
reduced by that attributable to the Group.
The Group recognises its share of the investee's net profits or losses after
making appropriate adjustments to align the accounting policies or accounting
periods with those of the Group based on the fair values of the investee's net
identifiable assets at the time of acquisition. Under the equity accounting
method, unrealised profits and losses resulting from transactions between the
Group and its associates or joint ventures are eliminated to the extent of the
Group's interest in the associates or joint ventures. Unrealised losses
resulting from transactions between the Group and its associates or joint
ventures are fully recognised in the event that there is an evidence of
impairment.
The Group discontinues recognising its share of net losses of the investee
after the carrying amount of the long-term equity investment and any long-term
interest that is in substance forms part of the Group's net investment in the
associate or the joint venture is reduced to zero, except to the extent that
the Group has an obligation to assume additional losses. However, if the Group
has incurred obligations for additional losses and the conditions on
recognition of provision are satisfied in accordance with the accounting
standard on contingencies, the Group continues recognising the investment
losses and the provision. Where net profits are subsequently made by the
associate or joint venture, the Group resumes recognising its share of those
profits only after its share of the profits equals the share of losses not
recognised.
The Group adjusts the carrying amount of the long-term equity investment for
changes in owners' equity of the investee other than those arising from net
profits or losses and other comprehensive income, and recognises the
corresponding adjustment in capital reserve.
(c) The impairment assessment method and provision accrual on investment
The impairment assessment and provision accrual on investments in
subsidiaries, associates and joint ventures are stated in Note 3(12).
(6) Leases
A lease is a contract that a lessor transfers the right to use an identified
asset for a period of time to a lessee in exchange for consideration.
(a) As Lessee
The Group recognises a right-of-use asset at the commencement date, and
recognises the lease liability at the present value of the lease payments that
are not paid at that date. The lease payments include fixed payments, the
exercise price of a purchase option if the Group is reasonably certain to
exercise that option, and payments of penalties for terminating the lease if
the lease term reflects the Group exercising that option, etc. Variable
payments that are based on a percentage of sales are not included in the lease
payments, and should be recognised in profit or loss when incurred. Lease
liabilities to be paid within one year (including one year) from balance sheet
date is presented in non-current liabilities due within one year.
Right-of-use assets of the Group mainly comprise land. Right-of-use assets are
measured at cost which comprises the amount of the initial measurement of the
lease liability, any lease payments made at or before the commencement date,
any initial direct costs incurred by the lessee, less any lease incentives
received. The Group depreciates the right-of-use assets over the shorter of
the asset's useful life and the lease term on a straight-line basis. When the
recoverable amount of a right-of-use asset is less than its carrying amount,
the carrying amount is reduced to the recoverable amount.
Payments associated with short-term leases with lease terms within 12 months
and leases for which the underlying assets are individually of low value when
it is new are recognised on a straight-line basis over the lease term as an
expense in profit or loss or as cost of relevant assets, instead of
recognising right-of-use assets and lease liabilities.
(b) As Lessor
A lease that transfers substantially all the risks and rewards incidental to
ownership of an asset is a finance lease. An operating lease is a lease other
than a finance lease.
When the Group leases self-owned plants and buildings, equipment and
machinery, lease income from an operating lease is recognised on a
straight-line basis over the period of the lease. The Group recognises
variable lease income which is based on a certain percentage of sales as
rental income when occurred.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(7) Fixed assets and construction in progress
Fixed assets represent the tangible assets held by the Group using in the
production of goods, rendering of services and for operation and
administrative purposes with useful life over one year.
Fixed assets are stated in the balance sheet at cost less accumulated
depreciation and impairment losses (see Note 3(12)). Construction in progress
is stated in the balance sheet at cost less impairment losses (see Note
3(12)).
The cost of a purchased fixed asset comprises the purchase price, related
taxes, and any directly attributable expenditure for bringing the asset to
working condition for its intended use. The cost of self-constructed assets
includes the cost of materials, direct labour, capitalised borrowing costs
(see Note 3(19)), and any other costs directly attributable to bringing the
asset to working condition for its intended use. According to legal or
contractual obligations, costs of dismantling and removing the items and
restoring the site on which the related assets located are included in the
initial cost.
Construction in progress is transferred to fixed assets when the asset is
ready for its intended use. No depreciation is provided against construction
in progress.
Where the individual component parts of an item of fixed asset have different
useful lives or provide benefits to the Group in different patterns thus
necessitating use of different depreciation rates or methods, each part is
recognised as a separate fixed asset.
The subsequent costs including the cost of replacing part of an item of fixed
assets are recognised in the carrying amount of the item if the recognition
criteria are satisfied, and the carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of fixed assets are
recognised in profit or loss as incurred.
The Group terminates the recognition of an item of fixed asset when it is in a
state of disposal or it is estimated that it is unable to generate any
economic benefits through use or disposal. Gains or losses arising from the
retirement or disposal of an item of fixed asset are determined as the
difference between the net disposal proceeds and the carrying amount of the
item and are recognised in profit or loss on the date of retirement or
disposal.
Other than oil and gas properties, the cost of fixed assets less residual
value and accumulated impairment losses is depreciated using the straight-line
method over their estimated useful lives, unless the fixed asset is classified
as held for sale. The estimated useful lives and the estimated rate of
residual values adopted for respective classes of fixed assets are as follows:
Estimated Estimated rate
useful life of residual value
Plants and buildings 12-50 years 3%
Equipment, machinery and others 4-30 years 3%
Useful lives, residual values and depreciation methods are reviewed at least
each year end.
(8) Oil and gas properties
Oil and gas properties include the mineral interests in properties, wells and
related support equipment arising from oil and gas exploration and production
activities.
The acquisition cost of mineral interest is capitalised as oil and gas
properties. Costs of development wells and related support equipment are
capitalised. The cost of exploratory wells is initially capitalised as
construction in progress pending determination of whether the well has found
proved reserves. Exploratory well costs are charged to expenses upon the
determination that the well has not found proved reserves. However, in the
absence of a determination of the discovery of proved reserves, exploratory
well costs are not carried as an asset for more than one year following
completion of drilling. If, after one year has passed, a determination of the
discovery of proved reserves cannot be made, the exploratory well costs are
impaired and charged to expense. All other exploration costs, including
geological and geophysical costs, are charged to profit or loss in the year as
incurred.
The Group estimates future dismantlement costs for oil and gas properties with
reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with the industry
practices. These estimated future dismantlement costs are discounted at
credit-adjusted risk-free rate and are capitalised as oil and gas properties,
which are subsequently amortised as part of the costs of the oil and gas
properties.
Capitalised costs of proved oil and gas properties are amortised on a
unit-of-production method based on volumes produced and reserves.
(9) Intangible assets
Intangible assets, where the estimated useful life is finite, are stated in
the balance sheet at cost less accumulated amortisation and provision for
impairment losses (see Note 3(12)). For an intangible asset with finite useful
life, its cost less estimated residual value and accumulated impairment losses
is amortised on a straight-line basis over the expected useful lives, unless
the intangible assets are classified as held for sale.
An intangible asset is regarded as having an indefinite useful life and is not
amortised when there is no foreseeable limit to the year over which the asset
is expected to generate economic benefits for the Group.
Useful lives and amortisation methods are reviewed at least each year end.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(10) Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over
the acquirer's interest in the fair value of the identifiable net assets of
the acquiree under the business combination involving entities not under
common control.
Goodwill is not amortised and is stated at cost less accumulated impairment
losses (see Note 3(12)). On disposal of an asset group or a set of asset
groups, any attributable amount of purchased goodwill is written off and
included in the calculation of the profit or loss on disposal.
(11) Financial Instruments
Financial instruments, refer to the contracts that form one party's financial
assets and form the financial liabilities or equity instruments of the other
party. The Group recognises a financial asset or a financial liability when
the Group enters into and becomes a party to the underlining contract of the
financial instrument.
(a) Financial assets
(i) Classification and measurement
The Group classifies financial assets into different categories depending on
the business model for managing the financial assets and the contractual terms
of cash flows of the financial assets: (1) financial assets measured at
amortised cost, (2) financial assets measured at fair value through other
comprehensive income, (3) financial assets measured at fair value through
profit or loss. A contractual cash flow characteristic which could have only a
de minimis effect, or could have an effect that is more than de minimis but is
not genuine, does not affect the classification of the financial asset.
Financial assets are initially recognised at fair value. For financial assets
measured at fair value through profit or loss, the relevant transaction costs
are recognised in profit or loss. The transaction costs for other financial
assets are included in the initially recognised amount. However, accounts
receivable arising from sales of goods or rendering services, without
significant financing component, are initially recognised based on the
transaction price expected to be entitled by the Group.
Debt instruments
The debt instruments held by the Group refer to the instruments that meet the
definition of financial liabilities from the perspective of the issuer, and
are measured in the following ways:
- Measured at amortised cost:
The business model for managing such financial assets by the Group are held
for collection of contractual cash flows. The contractual cash flow
characteristics are to give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
Interest income from these financial assets is recognised using the effective
interest rate method. The financial assets include cash at bank and on hand
and receivables.
- Measured at fair value through other comprehensive income:
The business model for managing such financial assets by the Group are held
for collection of contractual cash flows and for selling the financial assets,
the contractual cash flow characteristics of such financial assets are
consistent with the basic lending arrangements. Movements in the carrying
amount are taken through other comprehensive income, except for the
recognition of impairment gains or losses, foreign exchange gains and losses
and interest income calculated using the effective interest rate method, which
are recognised in profit or loss. The financial assets include receivables
financing.
Equity instruments
Equity instruments that the Group has no power to control, jointly control or
exercise significant influence over, are measured at fair value through profit
or loss and presented as financial assets held for trading.
In addition, the Group designates some equity instruments that are not held
for trading as financial assets at fair value through other comprehensive
income, and presented in other equity instrument investments. The relevant
dividends of these financial assets are recognised in profit or loss. When
derecognised, the cumulative gain or loss previously recognised in other
comprehensive income is transferred to retained earnings.
(ii) Impairment
The Group recognises a loss allowance for expected credit losses on financial
assets measured at amortised cost and receivables financing measured at fair
value through other comprehensive income.
The Group measures and recognises expected credit losses, considering
reasonable and supportable information about the relevant past events, current
conditions and forecasts of future economic conditions.
The Group measures the expected credit losses of financial instruments on
different stages at each balance sheet date. For financial instruments that
have no significant increase in credit risk since the initial recognition, on
first stage, the Group measures the loss allowance at an amount equal to
12-month expected credit losses. If there has been a significant increase in
credit risk since the initial recognition of a financial instrument but credit
impairment has not occurred, on second stage, the Group recognises a loss
allowance at an amount equal to lifetime expected credit losses. If credit
impairment has occurred since the initial recognition of a financial
instrument, on third stage, the Group recognises a loss allowance at an amount
equal to lifetime expected credit losses.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(a) Financial assets (Continued)
(ii) Impairment (Continued)
For financial instruments that have low credit risk at the balance sheet date,
the Group assumes that there is no significant increase in credit risk since
the initial recognition, and measures the loss allowance at an amount equal to
12-month expected credit losses.
For financial instruments on the first stage and the second stage, and that
have low credit risk, the Group calculates interest income according to
carrying amount without deducting the impairment allowance and effective
interest rate. For financial instruments on the third stage, interest income
is calculated according to the carrying amount minus amortised cost after the
provision of impairment allowance and effective interest rate.
For accounts receivable and receivables financing related to revenue, the
Group measures the loss allowance at an amount equal to lifetime expected
credit losses.
The Group recognises the loss allowance accrued or written back in profit or
loss.
(iii) Derecognition
The Group derecognises a financial asset when a) the contractual right to
receive cash flows from the financial asset expires; b) the Group transfers
the financial asset and substantially all the risks and rewards of ownership
of the financial asset; c) the financial assets have been transferred and the
Group neither transfers nor retains substantially all the risks and rewards of
ownership of the financial asset, but the Group has not retained control.
On derecognition of other equity instrument investments, the difference
between the carrying amounts and the sum of the consideration received and any
cumulative gain or loss previously recognised in other comprehensive income,
is recognised in retained earnings. While on derecognition of other financial
assets, this difference is recognised in profit or loss.
(b) Financial liabilities
The Group, at initial recognition, classifies financial liabilities as either
financial liabilities subsequently measured at amortised cost or financial
liabilities at fair value through profit or loss.
The Group's financial liabilities are mainly financial liabilities measured at
amortised cost, including bills payable, accounts payable, other payables,
loans and debentures payable, etc. These financial liabilities are initially
measured at the amount of their fair value after deducting transaction costs
and use the effective interest rate method for subsequent measurement.
Where the present obligations of financial liabilities are completely or
partially discharged, the Group derecognises these financial liabilities or
discharged parts of obligations. The differences between the carrying amounts
and the consideration received are recognised in profit or loss.
Financial guarantee liabilities
Financial guarantees are contracts that requires the Group to make specified
payments to reimburse the holder for a loss it incurs because a specified
debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument.
Financial guarantees issued are initially recognised at fair value, which is
determined by reference to fees charged in an arm's length transaction for
similar services, when such information is obtainable, or to interest rate
differentials, by comparing the actual rates charged by lenders when the
guarantee is made available with the estimated rates that lenders would have
charged, had the guarantees not been available, where reliable estimates of
such information can be made. Where consideration is received or receivable
for the issuance of the guarantee, the consideration is recognised in
accordance with the Group's policies applicable to that category of asset.
Where no such consideration is received or receivable, an immediate expense is
recognised in profit or loss.
Subsequent to initial recognition, the amount initially recognised as deferred
income is amortised in profit or loss over the term of the guarantee as income
from financial guarantees issued.
(c) Determination of fair value
If there is an active market for financial instruments, the quoted price in
the active market is used to measure fair values of the financial instruments.
If no active market exists for financial instruments, valuation techniques are
used to measure fair values. In valuation, the Group adopts valuation
techniques that are applicable in the current situation and have sufficient
available data and other information to support it, and selects input values
that are consistent with the asset or liability characteristics considered by
market participants in the transaction of relevant assets or liabilities, and
gives priority to relevant observable input values. Use of unobservable input
values where relevant observable input values cannot be obtained or are not
practicable.
(d) Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised initially at fair value. At
each balance sheet date, the fair value is remeasured. The gain or loss on
remeasurement to fair value is recognised immediately in profit or loss,
except where the derivatives qualify for hedge accounting.
Hedge accounting is a method which recognises the offsetting effects on profit
or loss of changes in the fair values of the hedging instrument and the hedged
item in the same accounting period, to represent the effect of risk management
activities.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(d) Derivative financial instruments and hedge accounting (Continued)
Hedged items are the items that expose the Group to risks of changes in future
cash flows and that are designated as being hedged and that must be reliably
measurable. The Group's hedged items include a forecast transaction that is
settled with an undetermined future market price and exposes the Group to risk
of variability in cash flows, etc.
A hedging instrument is a designated derivative whose changes in cash flows
are expected to offset changes in the cash flows of the hedged item.
The hedging relationship meets all of the following hedge effectiveness
requirements:
(1) There is an economic relationship between the hedged item and the
hedging instrument, which share a risk and that gives rise to opposite changes
in fair value that tend to offset each other.
(2) The effect of credit risk does not dominate the value changes that
result from that economic relationship.
(3) The hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the entity actually hedges
and the quantity of the hedging instrument that the entity actually uses to
hedge that quantity of hedged item. However, that designation shall not
reflect an imbalance between the weightings of the hedged item and the hedging
instrument.
- Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that
is attributable to a particular risk associated with all, or a component of, a
recognised asset or liability (such as all or some future interest payments on
variable-rate debt) or a highly probable forecast transaction, and could
affect profit or loss. As long as a cash flow hedge meets the qualifying
criteria for hedge accounting, the hedging relationship shall be accounted for
as follows:
- The cumulative gain or loss on the hedging instrument from inception
of the hedge;
- The cumulative change in present value of the expected future cash
flows on the hedged item from inception of the hedge.
The gain or loss on the hedging instrument that is determined to be an
effective hedge is recognised in other comprehensive income.
The portion of the gain or loss on the hedging instrument that is determined
to be an ineffective hedge is recognised in profit or loss.
If a hedged forecast transaction subsequently results in the recognition of a
non-financial asset or non-financial liability, or a hedged forecast
transaction for a non-financial asset or a non-financial liability becomes a
firm commitment for which fair value hedge accounting is applied, the entity
shall remove that amount from the cash flow hedge reserve and include it
directly in the initial cost or other carrying amount of the asset or the
liability. This is not a reclassification adjustment and hence it does not
affect other comprehensive income.
For cash flow hedges, other than those covered by the preceding two policy
statements, that amount shall be reclassified from the cash flow hedge reserve
to profit or loss as a reclassification adjustment in the same period or
periods during which the hedged expected future cash flows affect profit or
loss.
If the amount that has been accumulated in the cash flow hedge reserve is a
loss and the Group expects that all or a portion of that loss will not be
recovered in one or more future periods, the Group immediately reclassify the
amount that is not expected to be recovered into profit or loss.
When the hedging relationship no longer meets the risk management objective on
the basis of which it qualified for hedge accounting (i.e. the entity no
longer pursues that risk management objective), or when a hedging instrument
expires or is sold, terminated, exercised, or there is no longer an economic
relationship between the hedged item and the hedging instrument or the effect
of credit risk starts to dominate the value changes that result from that
economic relationship or no longer meets the criteria for hedge accounting,
the Group discontinues prospectively the hedge accounting treatments. If the
hedged future cash flows are still expected to occur, that amount shall remain
in the cash flow hedge reserve and shall be accounted for as cash flow hedges.
If the hedged future cash flows are no longer expected to occur, that amount
shall be immediately reclassified from the cash flow hedge reserve to profit
or loss as a reclassification adjustment. A hedged future cash flow that is no
longer highly probable to occur may still be expected to occur, if the hedged
future cash flows are still expected to occur, that amount shall remain in the
cash flow hedge reserve and shall be accounted for as cash flow hedges.
- Fair value hedges
A fair value hedge is a hedge of the exposure to changes in the fair value of
a recognized asset or liability or an unrecognised firm commitment, or a
portion of such an asset, liability or firm commitment.
The gain or loss from remeasuring the hedging instrument is recognised in
profit or loss. The gain or loss on the hedged item attributable to the hedged
risk adjusts the carrying amount of the recognised hedged item not measured at
fair value and is recognised in profit or loss.
Any adjustment to the carrying amount of a hedged item is amortised to profit
or loss if the hedged item is a financial instrument (or a component thereof)
measured at amortised cost.The amortisation is based on a recalculated
effective interest rate at the date that amortisation begins.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(12) Impairment of other non-financial long-term assets
Internal and external sources of information are reviewed at each balance
sheet date for indications that the following assets, including fixed assets,
construction in progress, right-of-use assets, goodwill, intangible assets,
long-term deferred expenses and investments in subsidiaries, associates and
joint ventures may be impaired.
Assets are tested for impairment whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. The recoverable
amounts of goodwill and intangible assets with uncertain useful lives are
estimated annually no matter there are any indications of impairment. Goodwill
is tested for impairment together with related asset units or groups of asset
units.
An asset unit is the smallest identifiable group of assets that generates cash
inflows largely independent of the cash inflows from other assets or groups of
assets. An asset unit comprises related assets that generate associated cash
inflows. In identifying an asset unit, the Group primarily considers whether
the asset unit is able to generate cash inflows independently as well as the
management style of production and operational activities, and the decision
for the use or disposal of asset.
The recoverable amount is the greater of the fair value less costs to sell and
the present value of expected future cash flows generated by the asset (or
asset unit, set of asset units).
Fair value less costs to sell of an asset is based on its selling price in an
arm's length transaction less any direct costs attributable to the disposal.
Present value of expected future cash flows is the estimation of future cash
flows to be generated from the use of and upon disposal of the asset,
discounted at an appropriate pre-tax discount rate over the asset's remaining
useful life.
If the recoverable amount of an asset is less than its carrying amount, the
carrying amount is reduced to the recoverable amount. The amount by which the
carrying amount is reduced is recognised as an impairment loss in profit or
loss. A provision for impairment loss of the asset is recognised accordingly.
Impairment losses related to an asset unit or a set of asset units first
reduce the carrying amount of any goodwill allocated to the asset unit or set
of asset units, and then reduce the carrying amount of the other assets in the
asset unit or set of asset units on a pro rata basis. However, the carrying
amount of an impaired asset will not be reduced below the highest of its
individual fair value less costs to sell (if determinable), the present value
of expected future cash flows (if determinable) and zero.
Once an impairment loss is recognised, it is not reversed in a subsequent
period.
(13) Long-term deferred expenses
Long-term deferred expenses are amortised on a straight-line basis over their
beneficial periods
(14) Employee benefits
Employee benefits are all forms of considerations and compensation given in
exchange for services rendered by employees, including short-term
compensation, post-employment benefits, termination benefits and other long
term employee benefits.
(a) Short-term compensation
Short term compensation includes salaries, bonuses, allowances and subsidies,
employee benefits, medical insurance premiums, work-related injury insurance
premium, maternity insurance premium, contributions to housing fund, unions
and education fund and short-term absence with payment etc. When an employee
has rendered service to the Group during an accounting period, the Group shall
recognise the short-term compensation actually incurred as a liability and
charge to the cost of an asset or to profit or loss in the same period, and
non-monetary benefits are valued with the fair value.
(b) Post-employment benefits
The Group classifies post-employment benefits into either Defined Contribution
Plan (DC plan) or Defined Benefit Plan (DB plan). DC plan means the Group only
contributes a fixed amount to an independent fund and no longer bears other
payment obligation; DB plan is post-employment benefits other than DC plan. In
this reporting period, the post-employment benefits of the Group primarily
comprise basic pension insurance and unemployment insurance and both of them
are DC plans.
Basic pension insurance
Employees of the Group participate in the social insurance system established
and managed by local labor and social security department. The Group makes
basic pension insurance to the local social insurance agencies every month, at
the applicable benchmarks and rates stipulated by the government for the
benefits of its employees. After the employees retire, the local labor and
social security department has obligations to pay them the basic pension. When
an employee has rendered service to the Group during an accounting period, the
Group shall recognise the accrued amount according to the above social
security provisions as a liability and charge to the cost of an asset or to
profit or loss in the same period.
(c) Termination benefits
When the Group terminates the employment relationship with employees before
the employment contracts expire, or provides compensation as an offer to
encourage employees to accept voluntary redundancy, a provision for the
termination benefits provided is recognised in profit or loss under the
conditions of both the Group has a formal plan for the termination of
employment or has made an offer to employees for voluntary redundancy, which
will be implemented shortly; and the Group is not allowed to withdraw from
termination plan or redundancy offer unilaterally.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(15) Income tax
Current tax and deferred tax are recognised in profit or loss except to the
extent that they relate to business combinations and items recognised directly
in equity (including other comprehensive income).
Current tax is the expected tax payable calculated at the applicable tax rate
on taxable income for the year, plus any adjustment to tax payable in respect
of previous years.
At the balance sheet date, current tax assets and liabilities are offset if
the Group has a legally enforceable right to set them off and also intends
either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
Deferred tax assets and liabilities are recognised based on deductible
temporary differences and taxable temporary differences respectively.
Temporary difference is the difference between the carrying amounts of assets
and liabilities and their tax bases. Unused tax losses and unused tax credits
able to be utilised in subsequent years are treated as temporary differences.
Deferred tax assets are recognised to the extent that it is probable that
future taxable income will be available to offset the deductible temporary
differences.
Temporary differences arise in a transaction, which is not a business
combination, and at the time of transaction, does not affect accounting profit
or taxable profit (or unused tax losses), will not result in deferred tax.
Temporary differences arising from the initial recognition of goodwill will
not result in deferred tax.
At the balance sheet date, the amounts of deferred tax recognised is measured
based on the expected manner of recovery or settlement of the carrying amount
of the assets and liabilities, using tax rates that are expected to be applied
in the period when the asset is recovered or the liability is settled in
accordance with tax laws.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date. If it is unlikely to obtain sufficient taxable income to offset against
the benefit of deferred tax asset, the carrying amount of the deferred tax
assets is written down. Any such write-down should be subsequently reversed
where it becomes probable that sufficient taxable income will be available.
At the balance sheet date, deferred tax assets and liabilities are offset if
all the following conditions are met:
- the taxable entity has a legally enforceable right to offset current
tax assets and current tax liabilities; and
- they relate to income taxes levied by the same tax authority on
either:
- the same taxable entity; or
- different taxable entities which either to intend to settle the current
tax liabilities and assets on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax liabilities or assets are expected to be settled or
recovered.
(16) Provisions
Provisions are recognised when the Group has a present obligation as a result
of a contingent event, it is probable that an outflow of economic benefits
will be required to settle the obligations and a reliable estimate can be
made. Where the effect of time value of money is material, provisions are
determined by discounting the expected future cash flows.
Provisions for future dismantlement costs are initially recognised based on
the present value of the future costs expected to be incurred in respect of
the Group's expected dismantlement and abandonment costs at the end of related
oil and gas exploration and development activities. Any subsequent change in
the present value of the estimated costs, other than the change due to passage
of time which is regarded as interest costs, is reflected as an adjustment to
the provision of oil and gas properties.
(17) Revenue recognition
Revenue arises in the course of the Group's ordinary activities, and increases
in economic benefits in the form of inflows that result in an increase in
equity, other than those relating to contributions from equity participants.
The Group sells crude oil, natural gas, petroleum and chemical products, etc.
Revenue is recognised according to the expected consideration amount, when a
customer obtains control over the relevant goods or services. To determine
whether a customer obtains control of a promised asset, the Group shall
consider indicators of the transfer of control, which include, but are not
limited to, the Group has a present right to payment for the asset; the Group
has transferred physical possession of the asset to the customer; the customer
has the significant risks and rewards of ownership of the asset; the customer
has accepted the asset.
Sales of goods
Sales are recognised when control of the goods have transferred, being when
the products are delivered to the customer. Advance from customers but goods
not yet delivered is recorded as contract liabilities and is recognised as
revenues when a customer obtains control over the relevant goods.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(18) Government grants
Government grants are the gratuitous monetary assets or non-monetary assets
that the Group receives from the government, excluding capital injection by
the government as an investor. Special funds such as investment grants
allocated by the government, if clearly defined in official documents as part
of "capital reserve" are dealt with as capital contributions, and not regarded
as government grants.
Government grants are recognised when there is reasonable assurance that the
grants will be received and the Group is able to comply with the conditions
attaching to them. Government grants in the form of monetary assets are
recorded based on the amount received or receivable, whereas non-monetary
assets are measured at fair value.
Government grants received in relation to assets are recorded as deferred
income, and recognised evenly in profit or loss over the assets' useful lives.
Government grants received in relation to revenue are recorded as deferred
income, and recognised as income in future periods as compensation when the
associated future expenses or losses arise; or directly recognised as income
in the current period as compensation for past expenses or losses.
(19) Borrowing costs
Borrowing costs incurred on borrowings for the acquisition, construction or
production of qualified assets are capitalised into the cost of the related
assets in the capitalisable period.
Except for the above, other borrowing costs are recognised as financial
expenses in the income statement when incurred.
(20) Repairs and maintenance expenses
Repairs and maintenance (including overhauling expenses) expenses are
recognised in profit or loss when incurred.
(21) Environmental expenditures
Environmental expenditures that relate to current ongoing operations or to
conditions caused by past operations is expensed as incurred. Liabilities
related to future remediation costs are recorded when environmental
assessments and/or cleanups are probable and the costs can be reliably
estimated. As facts concerning environmental contingencies become known to the
Group, the Group reassesses its position both with respect to accrued
liabilities and other potential exposures.
(22) Research and development costs
Research costs and development costs that cannot meet the capitalisation
criteria are recognised in profit or loss when incurred.
(23) Dividends
Dividends and distributions of profits proposed in the profit appropriation
plan which will be authorised and declared after the balance sheet date, are
not recognised as a liability at the balance sheet date and are separately
disclosed in the notes to the financial statements. Dividends are recognised
as a liability in the period in which they are declared.
(24) Related parties
If a party has the power to control, jointly control or exercise significant
influence over another party, or vice versa, or where two or more parties are
subject to common control, joint control from another party, they are
considered to be related parties, except for the two parties significantly
influenced by a party. Related parties may be individuals or enterprises.
Where enterprises are subject to state control but are otherwise unrelated,
they are not related parties.
In addition to the related parties stated above, the Company determines
related parties based on the disclosure requirements of Administrative
Procedures on the Information Disclosures of Listed Companies issued by the
CSRC.
(25) Segment reporting
Reportable segments are identified based on operating segments which are
determined based on the structure of the Group's internal organisation,
management requirements and internal reporting system. An operating segment is
a component of the Group that meets the following respective conditions:
‧ engage in business activities from which it may earn revenues and
incur expenses;
‧ whose operating results are regularly reviewed by the Group's
management to make decisions about resource to be allocated to the segment and
assess its performance; and
‧ for which financial information regarding financial position, results
of operations and cash flows are available.
Inter-segment revenues are measured on the basis of actual transaction price
for such transactions for segment reporting, and segment accounting policies
are consistent with those for the consolidated financial statements.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(26) Changes in significant accounting policies
In 2021, the Group has adopted the following newly revised accounting
standards and implementation guidance and illustrative examples issued by the
MOF, mainly include:
- CAS Bulletin No.14 (Caikuai 2021 No.1) ("Bulletin No. 14")
- Notice of Extending the Applicable Period of 'Accounting Treatment of
COVID-19 Related Rent Concessions' (Caikuai 2021 No.9)
(a) Bulletin No.14
Bulletin No.14 takes effect on 26 January 2021 (implementation date).
(i) "Public-private partnership" (PPP) arrangements
Bulletin No.14, implementation Q&As and illustrative examples clarify the
features and conditions of PPP arrangements, sets out the accounting and
disclosure requirements of a private entity in PPP arrangements. The adoption
of Bulletin No.14 does not have significant effect on the financial position
and financial performance of the Group.
(b) Caikuai 2021 No.9
The Accounting Treatment of COVID-19 Related Rent Concessions (Caikuai 2020
No.10) provides practical expedient under certain conditions for rent
concessions occurring as a direct consequence of the COVID-19 pandemic, and
combining the requirements of Caikuai 2021 No.9, such practical expedient is
only applicable to any reduction in lease payments due before 30 June 2022.
The adoption of the above regulations does not have significant effect on the
financial position and financial performance of the Group.
4 TAXATION
Major types of tax applicable to the Group are value-added tax, resources tax,
consumption tax, income tax, crude oil special gain levy, city construction
tax, education surcharge and local education surcharge.
Tax rate of products is presented as below:
Type of taxes Tax rate Tax basis and method
Value Added Tax (the "VAT") 13%, 9%, 6% Based on taxable value added amount. Tax payable is calculated using the
taxable sales amount multiplied by the applicable tax rate less current
period's deductible VAT input.
Resource Tax 6% Based on the revenue from sales of crude oil and natural gas.
Consumption Tax RMB2,109.76 per tonnage for Gasoline, RMB1,411.20 per tonnage for Diesel, Based on quantities
RMB2,105.20 per tonnage for Naphtha, RMB1,948.64 per tonnage for Solvent oil,
RMB1,711.52 per tonnage for Lubricant oil, RMB1,218.00 per tonnage for Fuel
oil, and RMB1,495.20 per tonnage for Jet fuel oil.
Corporate Income Tax 5% to 50% Based on taxable income.
Crude Oil Special Gain Levy 20% to 40% Based on the sales of domestic crude oil at prices higher than a specific
level.
City Maintenance and 1%, 5% or 7% Based on the actual paid VAT and consumption tax.
Construction Tax
Education surcharges 3% Based on the actual paid VAT and consumption tax.
Local Education surcharges 2% Based on the actual paid VAT and consumption tax.
5 CASH AT BANK AND ON HAND
The Group
At 31 December 2021 At 31 December 2020
Original Exchange RMB Original Exchange RMB
currency currency
million rates million million rates million
Cash on hand
Renminbi 1 8
Cash at bank
Renminbi 144,294 120,542
US Dollar 2,027 6.3757 12,924 1,054 6.5249 6,875
Hong Kong Dollar 3,533 0.8176 2,888 1,377 0.8416 1,159
EUR 3 7.2197 20 1 8.0250 8
Others 180 2,403
160,307 130,995
Deposits at related parities
Renminbi 15,758 23,737
US Dollar 6,943 6.3757 44,266 4,443 6.5249 28,993
EUR 67 7.2197 483 49 8.0250 394
Others 1,175 293
61,682 53,417
Total 221,989 184,412
Deposits at related parties represent deposits placed at Sinopec Finance
Company Limited and Sinopec Century Bright Capital Investment Limited.
Deposits interest is calculated based on market rate.
At 31 December 2021, time deposits with financial institutions of the Group
amounted to RMB113,399 million (2020: RMB96,853 million).
6 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
Derivative financial assets and derivative financial liabilities of the Group
are primarily commodity futures and swaps contracts. See Note 64.
7 ACCOUNTS RECEIVABLE
The Group The Company
At 31 December At 31 December At 31 December At 31 December
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Accounts receivable 38,894 39,299 21,239 21,871
Less: Allowance for doubtful accounts 4,033 3,860 93 108
Total 34,861 35,439 21,146 21,763
Ageing analysis on accounts receivable is as follows:
The Group
At 31 December 2021 At 31 December 2020
Amount Percentage Allowance Percentage Amount Percentage Allowance Percentage
to total of allowance to total of allowance
accounts to accounts accounts to accounts
receivable receivable receivable receivable
balance balance
RMB million % RMB million % RMB million % RMB million %
Within one year 34,263 88.1 83 0.2 34,478 87.7 117 0.3
Between one and two years 623 1.6 181 29.0 4,062 10.3 3,131 77.1
Between two and three years 3,411 8.8 3,190 93.5 149 0.4 85 57.0
Over three years 597 1.5 579 97.0 610 1.6 527 86.4
Total 38,894 100.0 4,033 39,299 100.0 3,860
The Company
At 31 December 2021 At 31 December 2020
Amount Percentage Allowance Percentage Amount Percentage Allowance Percentage
to total of allowance to total of allowance
accounts to accounts accounts to accounts
receivable receivable receivable receivable
balance balance
RMB million % RMB million % RMB million % RMB million %
Within one year 20,196 95.1 9 0.1 21,647 99.0 1 -
Between one and two years 946 4.5 6 0.6 76 0.3 7 9.2
Between two and three years 20 0.1 2 10.0 49 0.2 13 26.5
Over three years 77 0.3 76 98.7 99 0.5 87 87.9
Total 21,239 100.0 93 21,871 100.0 108
At 31 December 2021 and 31 December 2020, the total amounts of the top five
accounts receivable of the Group are set out below:
At 31 December At 31 December
2021 2020
Total amount (RMB million) 10,444 15,628
Percentage to the total balance of accounts receivable 26.9% 39.8%
Allowance for doubtful accounts 2,062 2,057
Sales are generally on a cash term. Credit is generally only available for
major customers with well-established trading records. Amounts due from China
Petrochemical Corporation ("Sinopec Group Company") and fellow subsidiaries
are repayable under the same terms.
Accounts receivable (net of allowance for doubtful accounts) primarily
represent receivables that are neither past due nor impaired. These
receivables relate to a wide range of customers for whom there is no recent
history of default. Information about the impairment of accounts receivable
and the Group exposure to credit risk can be found in Note 64.
During 2021 and 2020, the Group and the Company had no individually
significant accounts receivable been fully or substantially provided allowance
for doubtful accounts.
During 2021 and 2020, the Group and the Company had no individually
significant write-off or recovery of doubtful debts which had been fully or
substantially provided for in prior years.
7 ACCOUNTS RECEIVABLE (Continued)
Ageing started from the overdue date of accounts receivable. The Group always
measured the provision for impairment of accounts receivable based on the
amount equivalent to the expected credit loss during the entire duration. The
ECLs were calculated based on historical actual credit loss experience. The
rates were considered the differences between economic conditions during the
period over which the historical data has been collected, current conditions
and the Group's view of economic conditions over the expected lives of the
receivables. The Group performed the calculation of ECL rates by the operating
segment and geographical location.
Impairment provision on Impairment provision
individual basis on provision matrix basis
31 December 2021 Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision on average provision allowance
amount individual basis loss rate
RMB million RMB million RMB million % RMB million RMB million
Current and within 1 year past due 34,263 4,280 26 0.2% 57 83
1 to 2 years past due 623 500 137 35.8% 44 181
2 to 3 years past due 3,411 3,324 3,146 50.6% 44 3,190
Over 3 years past due 597 208 190 100.0% 389 579
Total 38,894 8,312 3,499 534 4,033
Impairment provision on Impairment provision
individual basis on provision matrix basis
31 December 2020 Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision on average provision allowance
amount individual basis loss rate
RMB million RMB million RMB million % RMB million RMB million
Current and within 1 year past due 34,478 5,023 117 0.0% - 117
1 to 2 years past due 4,062 3,637 3,024 25.2% 107 3,131
2 to 3 years past due 149 27 18 54.9% 67 85
Over 3 years past due 610 218 182 88.0% 345 527
Total 39,299 8,905 3,341 519 3,860
8 RECEIVABLES FINANCING
Receivables financing represents mainly the bills of acceptance issued by
banks for sales of goods and products and certain trade accounts
receivable.The business model of financial assets is achieved both by
collecting contractual cash flows and selling of these assets.
At 31 December 2021, the Group's derecognised but outstanding bills due to
endorsement or discount amounted to RMB36,400 million (2020: RMB25,740
million).
At 31 December 2021, the Group considers that its bills of acceptance issued
by banks do not pose a significant credit risk and will not cause any
significant loss due to the default of drawers.
9 PREPAYMENTS
The Group The Company
At 31 December At 31 December At 31 December At 31 December
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Prepayments 9,350 4,934 4,556 2,637
Less: Allowance for doubtful accounts 83 77 16 11
Total 9,267 4,857 4,540 2,626
Ageing analysis of prepayments is as follows:
The Group
At 31 December 2021 At 31 December 2020
Amount Percentage Allowance Percentage of Amount Percentage Allowance Percentage of
to total allowance to to total allowance to
prepayments prepayments prepayments prepayments
balance balance
RMB million % RMB million % RMB million % RMB million %
Within one year 8,541 91.3 - - 4,435 89.9 - -
Between one and two years 444 4.8 7 1.6 267 5.4 20 7.5
Between two and three years 166 1.8 25 15.1 142 2.9 8 5.6
Over three years 199 2.1 51 25.8 90 1.8 49 54.4
Total 9,350 100.0 83 4,934 100.0 77
The Company
At 31 December 2021 At 31 December 2020
Amount Percentage Allowance Percentage of Amount Percentage Allowance Percentage of
to total allowance to to total allowance to
prepayments prepayments prepayments prepayments
balance balance
RMB million % RMB million % RMB million % RMB million %
Within one year 3,965 87.0 - - 2,337 88.6 - -
Between one and two years 369 8.1 2 0.5 159 6.0 7 4.4
Between two and three years 99 2.2 10 10.1 39 1.5 - -
Over three years 123 2.7 4 3.3 102 3.9 4 3.9
Total 4,556 100.0 16 2,637 100.0 11
At 31 December 2021 and 31 December 2020, the total amounts of the top five
prepayments of the Group are set out below:
At 31 December At 31 December
2021 2020
Total amount (RMB million) 2,939 1,131
Percentage to the total balance of prepayments 31.4% 22.9%
10 OTHER RECEIVABLES
The Group The Company
At 31 December At 31 December At 31 December At 31 December
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Other receivables 37,254 35,255 47,827 38,835
Less: Allowance for doubtful accounts 1,590 1,531 898 897
Total 35,664 33,724 46,929 37,938
Ageing analysis of other receivables is as follows:
The Group
At 31 December 2021 At 31 December 2020
Amount Percentage Allowance Percentage Amount Percentage Allowance Percentage
to total other of allowance to total other of allowance
receivables to other receivables to other
receivables receivables
balance balance
RMB million % RMB million % RMB million % RMB million %
Within one year 26,579 71.3 35 0.1 24,010 68.1 51 0.2
Between one and two years 597 1.6 112 18.8 8,513 24.2 196 2.3
Between two and three years 7,661 20.6 165 2.2 1,169 3.3 84 7.2
Over three years 2,417 6.5 1,278 52.9 1,563 4.4 1,200 76.8
Total 37,254 100.0 1,590 35,255 100.0 1,531
The Company
At 31 December 2021 At 31 December 2020
Amount Percentage Allowance Percentage Amount Percentage Allowance Percentage
to total other of allowance to total other of allowance
receivables to other receivables to other
receivables receivables
balance balance
RMB million % RMB million % RMB million % RMB million %
Within one year 28,176 58.9 - - 21,378 55.0 - -
Between one and two years 3,740 7.8 2 0.1 2,123 5.5 1 -
Between two and three years 1,414 3.0 2 0.1 1,618 4.2 5 0.3
Over three years 14,497 30.3 894 6.2 13,716 35.3 891 6.5
Total 47,827 100.0 898 38,835 100.0 897
At 31 December 2021 and at 31 December 2020, the total amounts of the top five
other receivables of the Group are set out below:
At 31 December At 31 December
2021 2020
Total amount (RMB million) 19,056 22,581
Ageing Within one year, Within one year,
one to two years, one to two years,
two to three years two to three years
and over three years
and over three years
Percentage to the total balance of other receivables 51.2% 64.1%
Allowance for doubtful accounts 74.0 -
During the year ended 31 December 2021 and 2020, the Group and the Company had
no individually significant other receivables been fully or substantially
provided allowance for doubtful accounts.
During the year ended 31 December 2021 and 2020, the Group and the Company had
no individually significant write-off or recovery of doubtful debts which had
been fully or substantially provided for in prior years.
11 INVENTORIES
The Group
At 31 December At 31 December
2021 2020
RMB million RMB million
Raw materials 109,940 60,379
Work in progress 15,701 13,066
Finished goods 84,174 78,481
Spare parts and consumables 2,515 3,372
212,330 155,298
Less: Provision for diminution in value of inventories 4,897 3,107
Total 207,433 152,191
At 31 December 2021, the provision for diminution in value of inventories of
the Group was primarily due to the costs of finished goods were higher than
net realisable value.
12 LONG-TERM EQUITY INVESTMENTS
The Group
Investments in Investments Provision for Total
joint ventures in associates impairment
losses
RMB million RMB million RMB million RMB million
Balance at 1 January 2021 55,018 136,872 (3,548) 188,342
Additions for the year 4,110 5,212 - 9,322
Share of profits less losses under the equity method 9,366 13,887 - 23,253
Change of other comprehensive loss under the equity method 155 286 - 441
Other equity movements under the equity method 24 675 - 699
Dividends declared (3,872) (7,120) - (10,992)
Disposals for the year (1,176) (97) - (1,273)
Foreign currency translation differences (368) (315) 42 (641)
Other movements 127 100 - 227
Movement of provision for impairment - - (199) (199)
Balance at 31 December 2021 63,384 149,500 (3,705) 209,179
The Company
Investments in Investments in Investments in Provision for Total
subsidiaries joint ventures associates impairment
losses
RMB million RMB million RMB million RMB million RMB million
Balance at 1 January 2021 266,939 14,762 69,540 (7,885) 343,356
Additions for the year 12,646 812 1,014 - 14,472
Share of profits less losses under the equity method - 4,190 3,961 - 8,151
Change of other comprehensive loss under the equity method - - 12 - 12
Other equity movements under the equity method - 18 155 - 173
Dividends declared - (1,387) (1,019) - (2,406)
Disposals for the year (2,275) (786) (8) - (3,069)
Other movement - - 199 - 199
Movement of provision for impairment - - - (41) (41)
Balance at 31 December 2021 277,310 17,609 73,854 (7,926) 360,847
For the year ended 31 December 2021, the Group and the Company had no
individually significant long-term investment impairment.
Details of the Company's principal subsidiaries are set out in Note 59.
12 LONG-TERM EQUITY INVESTMENTS (Continued)
Principal joint ventures and associates of the Group are as follows:
(a) Principal joint ventures and associates
Name of investees Principal place Register Legal Principal activities Registered Capital Percentage of
of business location representative RMB million equity/voting right
directly or
indirectly held
by the Company
1. Joint ventures
Fujian Refining & Petrochemical Company Limited ("FREP") PRC PRC Gu Yuefeng Manufacturing refining oil products 14,758 50.00%
BASF-YPC Company Limited PRC PRC Gu Yuefeng Manufacturing and distribution of petrochemical products 12,704 40.00%
("BASF-YPC")
Taihu Limited ("Taihu") Russia Cyprus NA Crude oil and natural gas extraction 25,000 USD 49.00%
Yanbu Aramco Sinopec Refining Company Ltd. ("YASREF") Saudi Arabia Saudi Arabia NA Petroleum refining and processing 1,560 million USD 37.50%
Sinopec SABIC Tianjin Petrochemical Company Limited ("Sinopec SABIC Tianjin") PRC PRC AHMED AL-SHAIKH Manufacturing and distribution of petrochemical products 10,520 50.00%
2. Associates
China Oil & Gas Pipeline Network Corporation PRC PRC Zhang Wei Operation of oil and natural gas pipelines 500,000 14.00%
and auxiliary facilities
("PipeChina") (i)
Sinopec Finance Company Limited PRC PRC Jiang Yongfu Provision of non-banking financial services 18,000 49.00%
("Sinopec Finance")
Sinopec Capital Co.,Ltd. ("Sinopec Capital") PRC PRC Sun Mingrong Project management, equity 10,000 49.00%
management, investment consulting,self-owned equity management
Zhongtian Synergetic Energy Company Limited PRC PRC Peng Yi Mining coal and manufacturing of coal- chemical products 17,516 38.75%
("Zhongtian Synergetic Energy")
Caspian Investments Resources Ltd. The Republic of Kazakhstan British VirginIslands NA Crude oil and natural gas extraction 10,002 USD 50.00%
("CIR")
Joint ventures and associates above are limited companies.
12 LONG-TERM EQUITY INVESTMENTS (Continued)
(b) Major financial information of principal joint ventures
Summarised balance sheet and reconciliation to their carrying amounts in
respect of the Group's principal joint ventures:
FREP BASF-YPC Taihu YASREF Sinopec SABIC Tianjin
At 31 At 31 At 31 At 31 At 31 At 31 At 31 At 31 At 31 At 31
December December December December December December December December December December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets
Cash and cash equivalents 6,562 7,448 5,375 1,838 1,258 1,280 5,441 1,408 4,820 5,259
Other current assets 9,217 7,492 6,953 4,777 2,188 1,223 12,404 7,516 3,437 2,665
Total current assets 15,779 14,940 12,328 6,615 3,446 2,503 17,845 8,924 8,257 7,924
Non-current assets 13,744 15,237 9,336 9,993 14,032 12,531 41,947 45,413 18,835 18,258
Current liabilities
Current financial liabilities (1,177) (1,203) (77) (456) (32) (38) (9,549) (9,520) (597) (998)
Other current liabilities (5,008) (5,147) (2,546) (2,190) (1,931) (1,043) (15,844) (8,644) (3,547) (3,052)
Total current liabilities (6,185) (6,350) (2,623) (2,646) (1,963) (1,081) (25,393) (18,164) (4,144) (4,050)
Non-current liabilities
Non-current financial liabilities (6,857) (8,761) - - (85) (85) (30,903) (29,650) (7,599) (6,773)
Other non-current liabilities (242) (235) (92) (42) (1,439) (2,017) (1,723) (2,008) (382) (378)
Total non-current liabilities (7,099) (8,996) (92) (42) (1,524) (2,102) (32,626) (31,658) (7,981) (7,151)
Net assets 16,239 14,831 18,949 13,920 13,991 11,851 1,773 4,515 14,967 14,981
Net assets attributable to 16,239 14,831 18,949 13,920 13,523 11,439 1,773 4,515 14,967 14,981
shareholders of the company
Net assets attributable to - - - - 468 412 - - - -
minority interests
Share of net assets from 8,120 7,416 7,580 5,568 6,626 5,605 - - 7,484 7,491
joint ventures
Carrying Amounts 8,120 7,416 7,580 5,568 6,626 5,605 - - 7,484 7,491
Summarised income statement
For the year ended FREP BASF-YPC Taihu YASREF Sinopec SABIC Tianjin
31 December 2021
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Turnover 47,224 38,691 27,499 15,701 15,190 9,528 68,548 37,337 24,631 14,881
Interest income 147 118 52 27 451 291 6 17 209 183
Interest expense (411) (535) (5) (16) (107) (20) (945) (1,136) (89) (131)
Profit/(loss) before taxation 2,261 520 8,218 1,518 2,864 2,304 (2,868) (7,193) 1,393 954
Tax expense (597) (87) (2,054) (379) (601) (378) 332 1,057 (407) (236)
Profit/(loss) for the year 1,664 433 6,164 1,139 2,263 1,926 (2,536) (6,136) 986 718
Other comprehensive loss - - - - (123) (3,368) (206) (584) - -
Total comprehensive income/(loss) 1,664 433 6,164 1,139 2,140 (1,442) (2,742) (6,720) 986 718
Dividends from joint ventures 128 300 454 691 - - - - 500 -
Share of net profit/(loss) from 832 217 2,466 456 1,081 911 - (2,301) 493 359
joint ventures
Share of other comprehensive loss - - - - (60) (1,593) - (219) - -
from joint ventures (ii)
The share of profit and other comprehensive income for the year ended 31
December 2021 in all individually immaterial joint ventures accounted for
using equity method in aggregate was RMB4,494 million (2020: RMB993 million)
and RMB215 million (2020: other comprehensive income RMB808 million)
respectively. As at 31 December 2021, the carrying amount of all individually
immaterial joint ventures accounted for using equity method in aggregate was
RMB30,640 million (2020: RMB26,099 million).
12 LONG-TERM EQUITY INVESTMENTS (Continued)
(c) Major financial information of principal associates
Summarised balance sheet and reconciliation to their carrying amounts in
respect of the Group's principal associates:
PipeChina Sinopec Finance Sinopec Capital Zhongtian Synergetic Energy CIR
At 31 At 31 At 31 At 31 At 31 At 31 At 31 At 31 At 31 At 31
December December December December December December December December December December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets 86,335 74,012 194,458 175,139 13,140 11,871 3,532 3,721 576 2,402
Non-current assets 768,161 655,982 55,086 53,008 102 106 51,331 53,124 870 903
Current liabilities (136,150) (55,562) (217,987) (197,872) (28) (18) (8,577) (8,315) (822) (699)
Non-current liabilities (103,243) (104,150) (602) (514) (676) (411) (22,216) (28,422) (144) (286)
Net assets 615,103 570,282 30,955 29,761 12,538 11,548 24,070 20,108 480 2,320
Net assets attributable to 526,241 505,336 30,955 29,761 12,538 11,548 24,070 20,108 480 2,320
shareholders of the Company
Net assets attributable to 88,862 64,946 - - - - - - - -
minority interests
Share of net assets from associates 73,674 70,747 15,168 14,583 6,144 5,659 9,327 7,792 240 1,160
Carrying Amounts 73,674 70,747 15,168 14,583 6,144 5,659 9,327 7,792 240 1,160
Summarised income statement
For the year ended PipeChina Sinopec Finance Sinopec Capital ZTHC Energy CIR
31 December 2021
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Turnover 101,572 22,766 5,177 4,742 2 2 16,959 11,707 1,826 1,252
Profit for the year 29,776 6,444 2,168 2,027 990 1,278 4,184 551 461 181
Other comprehensive income 2 - 26 (372) - - - - 3 (308)
Total comprehensive income 29,778 6,444 2,194 1,655 990 1,278 4,184 551 464 (127)
Dividends declared by associates 442 - 490 - - - 86 284 1,152 2,517
Share of profit from associates 3,205 709 1,062 993 485 626 1,621 214 231 91
Share of other comprehensive - - 13 (182) - - - - 2 (154)
income from associates (ii)
The share of profit and other comprehensive income for the year ended 31
December 2021 in all individually immaterial associates accounted for using
equity method in aggregate was RMB7,283 million (2020: RMB3,444 million) and
RMB271 million (2020: loss of RMB1,101 million) respectively. As at 31
December 2021, the carrying amount of all individually immaterial associates
accounted for using equity method in aggregate was RMB44,176 million (2020:
RMB36,222 million).
Notes:
(i) Sinopec is able to exercise significant influence in PipeChina since
Sinopec has a member in PipeChina's Board of Directors and has a member in
PipeChina's Management Board.
(ii) Including foreign currency translation differences.
13 FIXED ASSETS
The Group
At 31 December At 31 December
2021 2020
RMB million RMB million
Fixed assets (a) 598,925 593,615
Fixed assets pending for disposal 7 38
Total 598,932 593,653
(a) Fixed assets
Plants and Oil and gas Equipment, Total
buildings properties machinery
and others
RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2021 138,550 757,592 996,702 1,892,844
Additions for the year 509 2,192 5,177 7,878
Transferred from construction in progress 5,487 40,357 65,182 111,026
Reclassifications 646 (617) (29) -
Decreases for the year (1,970) (5,539) (18,710) (26,219)
Exchange adjustments (57) (940) (95) (1,092)
Balance at 31 December 2021 143,165 793,045 1,048,227 1,984,437
Less: Accumulated depreciation:
Balance at 1 January 2021 59,471 572,603 577,748 1,209,822
Additions for the year 4,586 39,670 48,568 92,824
Reclassifications 185 (410) 225 -
Decreases for the year (734) (7) (12,987) (13,728)
Exchange adjustments (29) (844) (56) (929)
Balance at 31 December 2021 63,479 611,012 613,498 1,287,989
Less: Provision for impairment losses:
Balance at 1 January 2021 4,069 48,117 37,221 89,407
Additions for the year 742 1,904 6,774 9,420
Decreases for the year (124) (135) (984) (1,243)
Exchange adjustments - (60) (1) (61)
Balance at 31 December 2021 4,687 49,826 43,010 97,523
Net book value:
Balance at 31 December 2021 74,999 132,207 391,719 598,925
Balance at 31 December 2020 75,010 136,872 381,733 593,615
The Company
At 31 December At 31 December
2021 2020
RMB million RMB million
Fixed assets (a) 284,618 283,691
Fixed assets pending for disposal 4 4
Total 284,622 283,695
13 FIXED ASSETS (Continued)
(a) Fixed assets (Continued)
The Company (Continued)
Plants and Oil and gas Equipment, Total
buildings properties machinery
and others
RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2021 49,356 618,483 484,351 1,152,190
Additions for the year 2,056 1,592 10,850 14,498
Transferred from construction in progress 970 29,458 27,752 58,180
Reclassifications 360 (620) 260 -
Transferred from subsidiaries - - 33 33
Transferred to subsidiaries (422) (286) (667) (1,375)
Decreases for the year (624) (2,607) (8,157) (11,388)
Balance at 31 December 2021 51,696 646,020 514,422 1,212,138
Accumulated depreciation:
Balance at 1 January 2021 25,189 468,718 309,841 803,748
Additions for the year 2,604 31,534 27,473 61,611
Reclassifications 98 (412) 314 -
Transferred from subsidiaries - - 1 1
Transferred to subsidiaries (91) - (383) (474)
Decreases for the year (428) (7) (6,793) (7,228)
Balance at 31 December 2021 27,372 499,833 330,453 857,658
Provision for impairment losses:
Balance at 1 January 2021 1,917 41,406 21,428 64,751
Additions for the year 359 1,901 3,472 5,732
Transferred to subsidiaries (27) - (2) (29)
Decreases for the year (21) - (571) (592)
Balance at 31 December 2021 2,228 43,307 24,327 69,862
Net book value:
Balance at 31 December 2021 22,096 102,880 159,642 284,618
Balance at 31 December 2020 22,250 108,359 153,082 283,691
The additions to oil and gas properties of the Group and the Company for the
year ended 31 December 2021 included RMB2,163 million (2020: RMB1,563 million)
and RMB1,525 million (2019: RMB1,256 million), respectively of the estimated
dismantlement costs for site restoration.
In 2021, the impairment loss on fixed assets was mainly due to the impairment
loss of the chemical segment of RMB5,184 million (2020: RMB2,680 million), and
the impairment loss of the exploration and development segment of RMB2,467
million (2020: RMB8,435 million). RMB894 million (2020: RMB226 million),
impairment loss of the refining segment and RMB873 million (2020: RMB442
million) of the marketing and distribution segment. The impairment losses in
the exploration and development segment were mainly impairment losses on fixed
assets related to oil and gas production activities. Among them, oil and gas
properties and other fixed assets provided impairment losses of RMB1,904
billion and RMB563 million respectively, which were mainly related to the
decline in oil and gas reserves of individual oilfields. The Exploration and
Development segment allocates fixed assets related to oil and gas production
activities into individually identifiable groups of assets and estimates their
recoverable amounts. The recoverable amount is determined based on the
discounted value of the reserves of the relevant asset group and estimated
future cash flows, and the pre-tax discount rate adopted is 10.47% (2020:
10.47%). If the Group's estimate of future oil prices is lowered, further
impairment losses may be incurred and the aggregate amount of impairment
losses may be significant. With other conditions remaining constant and a 5%
drop in oil prices, the Group's impairment loss on fixed assets related to oil
and gas production activities will increase by approximately RMB3,628 million
(2020: RMB4,548 million); Other conditions remain unchanged and operating
costs increase by 5%, the Group's impairment loss on fixed assets related to
oil and gas production activities will increase by approximately RMB2,400
million (2020: RMB2,836 million); With other conditions remaining unchanged
and the discount rate increasing by 5%, the Group's impairment loss on fixed
assets related to oil and gas production activities will increase by
approximately RMB180 million (2020: RMB287 million). Impairment losses
recognised in the chemical segment and refining segment relate to certain
refinery and chemical production facilities and are not individually
significant. The primary factors resulting in the impairment losses were due
to the suspension of operations of certain production facilities, and evidence
that indicate the economic performance of certain production facilities was
lower than the expectation, thus the carrying amounts of these facilities were
written down to their recoverable amounts, which were determined based on the
present values of expected future cash flows of the assets using a pre-tax
discount rates ranging from 10.50% to 13.9% (2020: 9.87% to 11.60%).
At 31 December 2021 and 31 December 2020, the Group and the Company had no
individually significant fixed assets which were pledged.
At 31 December 2021 and 31 December 2020, the Group and the Company had no
individually significant fixed assets which were temporarily idle or pending
for disposal.
At 31 December 2021 and 31 December 2020, the Group and the Company had no
individually significant fully depreciated fixed assets which were still in
use.
14 CONSTRUCTION IN PROGRESS
The Group The Company
RMB million RMB million
Cost:
Balance at 1 January 2021 127,572 60,182
Additions for the year 159,729 72,196
Disposals for the year (146) (90)
Dry hole costs written off (7,702) (6,733)
Transferred to fixed assets (111,026) (58,180)
Reclassification to other assets (10,302) (927)
Exchange adjustments (56) -
Balance at 31 December 2021 158,069 66,448
Provision for impairment losses:
Balance at 1 January 2021 2,047 302
Additions for the year 144 -
Decreases for the year (39) -
Exchange adjustments (22) -
Balance at 31 December 2021 2,130 302
Net book value:
Balance at 31 December 2021 155,939 66,146
Balance at 31 December 2020 125,525 59,880
At 31 December 2021, major construction projects of the Group are as follows:
Project name Budgeted Balance at Net change Balance at Percentage Source of funding Accumulated
amount 1 January for the year 31 December of project interest
2021 2021 investment capitalised at
to budgeted 31 December
amount 2021
RMB million RMB million RMB million RMB million RMB million
Hainan Refining and Chemical Ethylene and Refining Reconstruction and 28,565 5,002 10,600 15,602 55% Bank loans & self-financing 63
Expansion Project
Zhenhai Refinery Expansion Ethylene Project 23,055 9,155 2,022 11,177 48% Bank loans & self-financing 305
Caprolactam Industry Chain Relocation and Upgrading Transformation Development 13,950 1,000 2,700 3,700 27% Bank loans & self-financing 32
Project
Tianjin Nangang Ethylene and Downstream High-end New Material Industry Cluster 29,052 - 2,999 2,999 10% Bank loans & self-financing 13
Project
Zhenhai Refining and Chemical Refining and High-end Synthetic New Material 41,639 328 1,800 2,128 5% Self-financing -
Project
15 RIGHT-OF-USE ASSETS
The Group
Land Others Total
RMB million RMB million RMB million
Cost：
Balance at 1 January 2021 171,392 40,698 212,090
Additions for the year 2,389 9,653 12,042
Decreases for the year (1,677) (3,430) (5,107)
Balance at 31 December 2021 172,104 46,921 219,025
Accumulated depreciation:
Balance at 1 January 2021 12,591 10,481 23,072
Additions for the year 6,495 6,863 13,358
Decreases for the year (182) (2,197) (2,379)
Balance at 31 December 2021 18,904 15,147 34,051
Net book value:
Balance at 31 December 2021 153,200 31,774 184,974
Balance at 31 December 2020 158,801 30,217 189,018
The Company
Land Others Total
RMB million RMB million RMB million
Cost：
Balance at 1 January 2021 115,047 2,272 117,319
Additions for the year 653 1,619 2,272
Decreases for the year (211) (935) (1,146)
Balance at 31 December 2021 115,489 2,956 118,445
Accumulated depreciation:
Balance at 1 January 2021 7,494 1,088 8,582
Additions for the year 3,760 882 4,642
Decreases for the year (50) (441) (491)
Balance at 31 December 2021 11,204 1,529 12,733
Net book value:
Balance at 31 December 2021 104,285 1,427 105,712
Balance at 31 December 2020 107,553 1,184 108,737
16 INTANGIBLE ASSETS
The Group
Land use rights Patents Non-patent Operation rights Others Total
technology
RMB million RMB million RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2021 102,177 5,383 5,593 53,567 6,179 172,899
Additions for the year 10,690 1,159 379 912 2,122 15,262
Decreases for the year (1,003) (9) (832) (688) (84) (2,616)
Balance at 31 December 2021 111,864 6,533 5,140 53,791 8,217 185,545
Accumulated amortisation:
Balance at 1 January 2021 24,957 3,791 3,477 21,522 3,931 57,678
Additions for the year 3,406 1,123 332 2,458 604 7,923
Decreases for the year (169) (7) (9) (310) (43) (538)
Balance at 31 December 2021 28,194 4,907 3,800 23,670 4,492 65,063
Provision for impairment losses:
Balance at 1 January 2021 226 482 27 189 17 941
Additions for the year 11 - 103 241 - 355
Decreases for the year (1) - - (23) - (24)
Balance at 31 December 2021 236 482 130 407 17 1,272
Net book value:
Balance at 31 December 2021 83,434 1,144 1,210 29,714 3,708 119,210
Balance at 31 December 2020 76,994 1,110 2,089 31,856 2,231 114,280
Amortisation of the intangible assets of the Group charged for the year ended
31 December 2021 is RMB6,363 million (2020: RMB5,907 million).
17 GOODWILL
Goodwill is allocated to the following Group's cash-generating units:
At 31 December At 31 December
Name of investees Principal activities 2021 2020
RMB million RMB million
Sinopec Zhenhai Refining and Chemical Branch Manufacturing of intermediate petrochemical products 4,043 4,043
and petroleum products
Shanghai SECCO Petrochemical Company Limited Production and sale of petrochemical products 2,541 2,541
("Shanghai SECCO")
Sinopec Beijing Yanshan Petrochemical Branch Manufacturing of intermediate petrochemical products and petroleum products 1,004 1,004
Other units without individual significant goodwill 1,006 1,032
Total 8,594 8,620
Goodwill represents the excess of the cost of purchase over the fair value of
the underlying assets and liabilities. The recoverable amounts of the above
cash generating units are determined based on value in use calculations. These
calculations use cash flow projections based on financial budgets approved by
management covering a one-year period and pre-tax discount rates primarily
ranging from 11.4% to 11.7% (2020: 11.4% to 13.4%). Cash flows beyond the
one-year period are maintained constant. Based on the estimated recoverable
amount, no major impairment loss was recognised.
Key assumptions used for cash flow forecasts for these entities are the gross
margin and sales volume. Management determined the budgeted gross margin based
on the gross margin achieved in the period immediately before the budget
period and management's expectation on the future trend of the prices of crude
oil and petrochemical products. The sales volume was based on the production
capacity and/or the sales volume in the period immediately before the budget
period.
18 LONG-TERM DEFERRED EXPENSES
Long-term deferred expenses primarily represent catalysts expenditures and
improvement expenditures of fixed assets.
19 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities before the consolidated elimination
adjustments are as follows:
Deferred tax assets Deferred tax liabilities
At 31 December At 31 December At 31 December At 31 December
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Receivables and inventories 3,763 2,411 - -
Payables 2,858 1,286 - -
Cash flow hedges 258 1,790 (2,709) (4,420)
Fixed assets 16,777 15,793 (15,037) (13,415)
Tax value of losses carried forward 4,749 13,322 - -
Other equity instrument investments 127 127 (9) (11)
Intangible assets 1,008 869 (492) (517)
Others 1,056 371 (870) (676)
Deferred tax assets/(liabilities) 30,596 35,969 (19,117) (19,039)
The consolidated elimination amount between deferred tax assets and
liabilities are as follows:
At 31 December At 31 December
2021 2020
RMB million RMB million
Deferred tax assets 11,207 10,915
Deferred tax liabilities 11,207 10,915
Deferred tax assets and liabilities after the consolidated elimination
adjustments are as follows:
At 31 December At 31 December
2021 2020
RMB million RMB million
Deferred tax assets 19,389 25,054
Deferred tax liabilities 7,910 8,124
At 31 December 2021, certain subsidiaries of the Company did not recognise
deferred tax of deductible loss carried forward of RMB18,342 million (2020:
RMB17,718 million), of which RMB5,564 million (2020: RMB4,349 million) was
incurred for the year ended 31 December 2021, because it was not probable that
the related tax benefit will be realised. These deductible losses carried
forward of RMB4,135 million, RMB2,308 million, RMB1,986 million, RMB4,349
million and RMB5,564 million will expire in 2022, 2023, 2024, 2025, 2026 and
after, respectively.
Periodically, management performed assessment on the probability that future
taxable profit will be available over the period which the deferred tax assets
can be realised or utilised. In assessing the probability, both positive and
negative evidence was considered, including whether it is probable that the
operations will have sufficient future taxable profits over the periods which
the deferred tax assets are deductible or utilised and whether the tax losses
result from identifiable causes which are unlikely to recur.
20 OTHER NON-CURRENT ASSETS
Other non-current assets mainly represent long-term receivables, prepayments
for construction projects and purchases of equipment.
21 DETAILS OF IMPAIRMENT LOSSES
At 31 December 2021, impairment losses of the Group are analysed as follows:
Note Balance at Provision for Written back Written off Other Balance at
1 January the year for the year for the year increase/ 31 December
2021 (decrease) 2021
RMB million RMB million RMB million RMB million RMB million RMB million
Allowance for doubtful accounts
Included: Accounts receivable 7 3,860 436 (127) (30) (106) 4,033
Prepayments 9 77 14 (54) - 46 83
Other receivables 10 1,531 83 (12) (12) - 1,590
Other non-current assets - 1,931 - - 2 1,933
5,468 2,464 (193) (42) (58) 7,639
Inventories 11 3,107 3,148 (18) (1,300) (40) 4,897
Long-term equity investments 12 3,548 206 - (7) (42) 3,705
Fixed assets 13 89,407 9,420 - (1,141) (163) 97,523
Construction in progress 14 2,047 144 - (33) (28) 2,130
Intangible assets 16 941 262 - (24) 93 1,272
Goodwill 17 7,861 - - - - 7,861
Others 6 43 - - - 49
Total 112,385 15,687 (211) (2,547) (238) 125,076
The reasons for recognising impairment losses are set out in the respective
notes of respective assets.
22 SHORT-TERM LOANS
The Group's short-term loans represent:
At 31 December 2021 At 31 December 2020
Original Exchange RMB million Original Exchange RMB
currency rates currency rates million
million million
Short-term bank loans 24,959 16,111
- Renminbi loans 24,959 16,111
Short-term other loans - 3
- Renminbi loans - 3
Short-term loans from Sinopec Group Company and 2,407 4,642
fellow subsidiaries
- Renminbi loans 1,320 1,141
- US Dollar loans 146 6.3757 934 505 6.5249 3,298
- Hong Kong Dollar loans - - 37 0.8416 31
- Euro loans 21 7.2197 153 21 8.0250 172
Total 27,366 20,756
At 31 December 2021, the Group's interest rates on short-term loans were from
interest 0.53% to 4.20% (At 31 December 2020: 0.63% to 4.55%) per annum. The
majority of the above loans are by credit.
At 31 December 2021 and 31 December 2020, the Group had no significant overdue
short-term loans.
23 BILLS PAYABLE
Bills payable primarily represented bank accepted bills for the purchase of
material, goods and products. Bills payable were due within one year.
At 31 December 2021 and 31 December 2020, the Group had no overdue unpaid
bills.
24 ACCOUNTS PAYABLE
At 31 December 2021 and 31 December 2020, the Group had no individually
significant accounts payable aged over one year.
25 CONTRACT LIABILITIES
As at 31 December 2021 and 31 December 2020, the Group's contract liabilities
primarily represent advances from customers. Related performance obligations
are satisfied and revenue is recognised within one year.
26 EMPLOYEE BENEFITS PAYABLE
(1) Employee benefits payable:
Balance at the Accrued Decreased Balance at
beginning during the year during the year the end
of the year of the year
Short-term employee benefits 7,043 97,396 (90,472) 13,967
Post-employment benefits 74 12,241 (12,246) 69
defined contribution plans 12 91 (91) 12
Total 7,129 109,728 (102,809) 14,048
(2) Short-term employee benefits
Balance at Accrued Decreased Balance at
the beginning during the year during the year the end
of the year of the year
Salaries, bonuses, allowances 3,836 72,704 (65,810) 10,730
Staff welfare 2,660 7,610 (7,684) 2,586
Social insurance 234 5,955 (5,912) 277
Medical insurance 224 5,423 (5,382) 265
Work-related injury insurance 5 381 (380) 6
Maternity insurance 5 151 (150) 6
Housing fund 47 6,244 (6,243) 48
Labour union fee, staff and workers' education fee 236 2,246 (2,203) 279
Other short-term employee benefits 30 2,637 (2,620) 47
Total 7,043 97,396 (90,472) 13,967
(3) Post-employment benefits - defined contribution plans
Balance at Accrued Decreased Balance at
the beginning during the year during the year the end
of the year of the year
Basic pension insurance 51 8,147 (8,148) 50
Unemployment insurance 8 305 (305) 8
Annuity 15 3,789 (3,793) 11
Total 74 12,241 (12,246) 69
27 TAXES PAYABLE
The Group
At 31 December At 31 December
2021 2020
RMB million RMB million
Value-added tax payable 8,818 5,089
Consumption tax payable 56,084 56,762
Income tax payable 4,809 6,586
Mineral resources compensation fee payable 8 132
Other taxes 11,548 8,279
Total 81,267 76,848
28 OTHER PAYABLES
At 31 December 2021 and 31 December 2020, other payables of the Group over one
year primarily represented payables for constructions.
29 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR
The Group's non-current liabilities due within one year represent:
At 31 December 2021 At 31 December 2020
Original Exchange RMB million Original Exchange RMB million
currency rates currency rates
million million
Long-term bank loans
- Renminbi loans 3,281 4,613
- US Dollar loans 2 6.3757 12 4 6.5249 24
Long-term loans from Sinopec Group Company and
fellow subsidiaries
- Renminbi loans 466 622
Long-term loans due within one year 3,759 5,259
Debentures payable due within one year
- Renminbi debentures 7,000 -
Lease liabilities due within one year 15,173 15,293
Others 2,719 1,942
Non-current liabilities due within one year 28,651 22,494
At 31 December 2021 and 31 December 2020, the Group had no significant overdue
long-term loans.
30 OTHER CURRENT LIABILITIES
At 31 December 2021 and 31 December 2020, other current liabilities mainly
represent output VAT to be transferred.
31 LONG-TERM LOANS
The Group's long-term loans represent:
At 31 December 2021 At 31 December 2020
Interest rate and final maturity Original Exchange RMB Original Exchange RMB
currency rates million currency rates million
million million
Long-term bank loans
- Renminbi loans Interest rates ranging from interest 1.08% to 4.00% per annum at 31 December 38,880 38,226
2021 (2020: 1.08% to 5.23%) with maturities through 2039
- US Dollar loans Interest rates at 1.55% per annum at 31 December 2020 (2020: 1.55%) with 10 6.3757 64 14 6.5249 92
maturities through 2038
Less: Portion with one year (3,293) (4,637)
Long-term bank loans 35,651 33,681
Long-term loans from Sinopec Group Company and fellow subsidiaries
- Renminbi loans Interest rates ranging from interest 1.08% to 5.23% per annum at 31 December 12,988 11,013
2021 (2020: 1.08% to 5.23%) with maturities through 2037
- US Dollar loans Interest rates at 1.65% per annum at 31 December 2021 (2020:1.60%)with 183 6.3757 1,168 213 6.5249 1,387
maturities in 2027
Less: Portion with one year (note 29) (466) (622)
Long-term loans from Sinopec Group Company and fellow subsidiaries 13,690 11,778
Total 49,341 45,459
The maturity analysis of the Group's long-term loans is as follows:
At 31 December At 31 December
2021 2020
RMB million RMB million
Between one and two years 18,373 3,520
Between two and five years 26,633 39,504
After five years 4,335 2,435
Total 49,341 45,459
Long-term loans are carried at amortised costs.
32 DEBENTURES PAYABLE
The Group
At 31 December At 31 December
2021 2020
RMB million RMB million
Debentures payable:
- Corporate Bonds (i) 49,649 38,356
Less: Portion with one year (Note 29) 7,000 -
Total 42,649 38,356
Note:
(i) The Company issued corporate bonds with a maturity of five years on
26 July 2021 at par value of RMB100. The total issued amount of the corporate
bonds is RMB5 billion. The corporate bonds adopt a simple interest rate on an
annual basis with a fixed rate at 3.20% per annum and the interest is paid
once a year.
The Company issued corporate bonds with a maturity of three years on 5 August
2021 at par value of RMB100. The total issued amount of the corporate bonds is
RMB2 billion. The corporate bonds adopt a simple interest rate on an annual
basis with a fixed rate at 2.59% per annum and the interest is paid once a
year.
The Company issued corporate bonds with a maturity of two years on 6 August
2021 at par value of RMB100. The total issued amount of the corporate bonds is
RMB2 billion. The corporate bonds adopt a simple interest rate on an annual
basis with a fixed rate at 2.80% per annum and the interest is paid once a
year.
The Company issued corporate bonds with a maturity of three years on 27
December 2021 at par value of RMB100. The total issued amount of the corporate
bonds is RMB2.55 billion. The corporate bonds adopt a simple interest rate on
an annual basis with a fixed rate at 2.50% per annum and the interest is paid
once a year.
These corporate bonds are carried at amortised cost, including USD denominated
corporate bonds of RMB11,127 million, and RMB denominated corporate bonds of
RMB38,521 million (2020: USD denominated corporate bonds of RMB11,379 million,
and RMB denominated corporate bonds of RMB26,977 million).
33 LEASE LIABILITY
The Group
At 31 December At 31 December
2021 2020
RMB million RMB million
Lease liabilities 185,406 187,033
Deduct: Portion of lease liabilities with one year (Note 29) 15,173 15,293
Total 170,233 171,740
34 PROVISIONS
Provisions primarily represent provision for future dismantlement costs of oil
and gas properties. The Group has established certain standardised measures
for the dismantlement of its retired oil and gas properties by making
reference to the industry practices and is thereafter constructively obligated
to take dismantlement measures of its retired oil and gas properties. Movement
of provision of the Group's obligations for the dismantlement of its retired
oil and gas properties is as follows:
The Group
RMB million
Balance at 1 January 2021 43,713
Provision for the year 2,163
Accretion expenses 1,135
Decrease for the year (6,435)
Exchange adjustments (81)
Balance at 31 December 2021 40,495
35 OTHER NON-CURRENT LIABILITIES
Other non-current liabilities primarily represent long-term payables, special
payables and deferred income.
36 SHARE CAPITAL
The Group
At 31 December At 31 December
2021 2020
RMB million RMB million
Registered, issued and fully paid:
95,557,771,046 listed A shares (2020: 95,557,771,046) of RMB1.00 each 95,558 95,558
25,513,438,600 listed H shares (2020: 25,513,438,600) of RMB1.00 each 25,513 25,513
Total 121,071 121,071
The Company was established on 25 February 2000 with a registered capital of
68.8 billion domestic state-owned shares with a par value of RMB1.00 each.
Such shares were issued to Sinopec Group Company in consideration for the
assets and liabilities transferred to the Company (Note 1).
Pursuant to the resolutions passed at an Extraordinary General Meeting held on
25 July 2000 and approvals from relevant government authorities, the Company
is authorised to increase its share capital to a maximum of 88.3 billion
shares with a par value of RMB1.00 each and offer not more than 19.5 billion
shares with a par value of RMB1.00 each to investors outside the PRC. Sinopec
Group Company is authorised to offer not more than 3.5 billion shares of its
shareholdings in the Company to investors outside the PRC. The shares sold by
Sinopec Group Company to investors outside the PRC would be converted into H
shares.
In October 2000, the Company issued 15,102,439,000 H shares with a par value
of RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American
Depositary Shares ("ADSs", each representing 100 H shares), at prices of
HKD1.59 per H share and USD20.645 per ADS, respectively, by way of a global
initial public offering to Hong Kong SAR and overseas investors. As part of
the global initial public offering, 1,678,049,000 state-owned ordinary shares
of RMB1.00 each owned by Sinopec Group Company were converted into H shares
and sold to Hong Kong SAR and overseas investors.
In July 2001, the Company issued 2.8 billion listed A shares with a par value
of RMB1.00 each at RMB4.22 by way of a public offering to natural persons and
institutional investors in the PRC.
During the year ended 31 December 2010, the Company issued 88,774 listed A
shares with a par value of RMB1.00 each, as a result of exercise of 188,292
warrants entitled to the Bonds with Warrants.
During the year ended 31 December 2011, the Company issued 34,662 listed A
shares with a par value of RMB1.00 each, as a result of conversion by the
holders of the 2011 Convertible Bonds.
During the year ended 31 December 2012, the Company issued 117,724,450 listed
A shares with a par value of RMB1.00 each, as a result of conversion by the
holders of the 2011 Convertible Bonds.
On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the
Placing") with a par value of RMB1.00 each at the Placing Price of HKD8.45 per
share. The aggregate gross proceeds from the Placing amounted to approximately
HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the
commissions and estimated expenses) amounted to approximately
HKD23,970,100,618.00.
In June 2013, the Company issued 21,011,962,225 listed A shares and
5,887,716,600 listed H shares as a result of bonus issues of 2 shares
converted from the retained earnings, and 1 share transferred from capital
reserve for every 10 existing shares.
During the year ended 31 December 2013, the Company issued 114,076 listed A
shares with a par value of RMB1.00 each, as a result of exercise of conversion
by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2014, the Company issued 1,715,081,853
listed A shares with a par value of RMB1.00 each, as a result of exercise of
conversion by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2015, the Company issued 2,790,814,006
listed A shares with a par value of RMB1.00 each, as a result of conversion by
the holders of the 2011 Convertible Bonds.
All A shares and H shares rank pari passu in all material aspects.
36 SHARE CAPITAL (Continued)
The Group (Continued)
Capital management
Management optimises the structure of the Group's capital, which comprises of
equity and debts and bonds. In order to maintain or adjust the capital
structure of the Group, management may cause the Group to issue new shares,
adjust the capital expenditure plan, sell assets to reduce debt, or adjust the
proportion of short-term and long-term loans and bonds. Management monitors
capital on the basis of the debt-to-capital ratio, which is calculated by
dividing long-term loans (excluding current portion) and debentures payable,
by the total of equity attributable to shareholders of the Company and
long-term loans (excluding current portion) and debentures payable, and
liability-to-asset ratio, which is calculated by dividing total liabilities by
total assets. Management's strategy is to make appropriate adjustments
according to the Group's operating and investment needs and the changes of
market conditions, and to maintain the debt-to-capital ratio and the
liability-to-asset ratio of the Group at a range considered reasonable. As at
31 December 2021, the debt-to-capital ratio and the liability-to-asset ratio
of the Group were 10.6% (2020: 10.1%) and 51.5% (2020: 48.9%), respectively.
The schedule of the contractual maturities of loans and commitments are
disclosed in Notes 31,32 and 61, respectively.
There were no changes in the management's approach to capital management of
the Group during the year. Neither the Company nor any of its subsidiaries is
subject to externally imposed capital requirements.
37 CAPITAL RESERVE
The movements in capital reserve of the Group are as follows:
RMB million
Balance at 1 January 2021 127,389
Adjustment for business combination of entities under common control (6,124)
Transaction with minority interests (1,396)
Others 319
Balance at 31 December 2021 120,188
Capital reserve represents mainly: (a) the difference between the total amount
of the par value of shares issued and the amount of the net assets transferred
from Sinopec Group Company in connection with the Reorganisation; (b) share
premiums derived from issuances of H shares and A shares by the Company and
excess of cash paid by investors over their proportionate shares in share
capital, the proportionate shares of unexercised portion of the Bond with
Warrants at the expiration date, and the amount transferred from the
proportionate liability component and the derivative component of the
converted portion of the 2011 Convertible Bonds; (c) difference between
consideration paid for the combination of entities under common control and
the transactions with minority interests over the carrying amount of the net
assets acquired.
38 OTHER COMPREHENSIVE INCOME
The Group
(a) The changes of other comprehensive income in consolidated income
statement
2021
Before-tax Tax Net-of-tax
amount effect amount
RMB million RMB million RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments 15,659 (3,881) 11,778
recognised during the year
Less: Reclassification adjustments for amounts transferred to the consolidated (8,858) 1,618 (7,240)
income statement
Subtotal 24,517 (5,499) 19,018
Cost of hedging reserve (220) - (220)
Changes in fair value of other equity instrument investments (6) 2 (4)
Other comprehensive loss that can be converted into profit or loss under the 441 - 441
equity method
Foreign currency translation differences (1,728) - (1,728)
Other comprehensive income 23,004 (5,497) 17,507
2020
Before-tax Tax Net-of-tax
amount effect amount
RMB million RMB million RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognised 9,207 (2,295) 6,912
during the year
Less: Reclassification adjustments for amounts transferred to the consolidated (198) 37 (161)
income statement
Subtotal 9,405 (2,332) 7,073
Cost of hedging reserve 162 - 162
Changes in fair value of other equity instrument investments (18) (4) (22)
Other comprehensive loss that can be converted into profit or loss under the (2,441) - (2,441)
equity method
Foreign currency translation differences (4,457) - (4,457)
Other comprehensive income 2,651 (2,336) 315
(b) The change of each item in other comprehensive income
Equity Attributable to shareholders of the company
Other Changes in fair value Cash flow Foreign Subtotal Minority Total other
comprehensive fair value of hedges hedges currency interests comprehensive
income that can other equity translation income
be converted instrument differences
into profit or investments
loss under
the equity
method
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
1 January 2020 (4,088) (16) - 1,037 2,746 (321) (1,569) (1,890)
Changes in 2020 (2,001) (4) 81 6,768 (3,485) 1,359 (1,031) 328
31 December 2020 (6,089) (20) 81 7,805 (739) 1,038 (2,600) (1,562)
1 January 2021 (6,089) (20) 81 7,805 (739) 1,038 (2,600) (1,562)
Changes in 2021 324 2 (110) (591) (1,353) (1,728) (715) (2,443)
31 December 2021 (5,765) (18) (29) 7,214 (2,092) (690) (3,315) (4,005)
As at 31 December 2021, cash flow hedge reserve amounted to a gain of RMB7,244
million (31 December 2020: a gain of RMB8,176 million), of which a gain of
RMB7,214 million was attribute to shareholders of the Company (31 December
2020: a gain of RMB7,805 million).
39 SURPLUS RESERVES
Movements in surplus reserves are as follows:
The Group
Statutory Discretionary
surplus reserve surplus reserves Total
RMB million RMB million RMB million
Balance at 1 January 2021 92,280 117,000 209,280
Appropriation 3,944 - 3,944
Balance at 31 December 2021 96,224 117,000 213,224
The PRC Company Law and Articles of Association of the Company have set out
the following profit appropriation plans:
(a) 10% of the net profit is transferred to the statutory surplus reserve.
In the event that the reserve balance reaches 50% of the registered capital,
no transfer is needed;
(b) After the transfer to the statutory surplus reserve, a transfer to
discretionary surplus reserve can be made upon the passing of a resolution at
the shareholders' meeting.
40 OPERATING INCOME AND OPERATING COSTS
The Group The Company
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Income from principal operations 2,679,500 2,048,654 1,013,961 743,188
Income from other operations 61,384 56,070 31,039 27,133
Total 2,740,884 2,104,724 1,045,000 770,321
Operating costs 2,216,551 1,685,674 808,540 584,315
The income from principal operations mainly represents revenue from the sales
of refined petroleum products, chemical products, crude oil and natural gas,
which are recognised at a point in time. The income from other operations
mainly represents revenue from sale of materials, services providing, rental
income and others. Operating costs primarily represent the products cost
related to the principal operations. The Group's segmental information is set
out in Note 63.
The detailed information about the Group's operating income is as follows:
2021 2020
RMB million RMB million
Income from principal operations 2,679,500 2,048,654
Gasoline 726,057 557,605
Diesel 542,260 422,566
Crude oil 429,038 351,707
Basic chemical feedstock 242,532 155,397
Synthetic resin 149,208 122,368
Kerosene 112,519 72,385
Natural gas 68,443 48,099
Synthetic fiber monomers and polymers 45,464 42,388
Others (i) 363,979 276,139
Income from other operations 61,384 56,070
Sale of materials and others 59,990 54,986
Rental income 1,394 1,084
Total 2,740,884 2,104,724
Note:
(i) Others are primarily liquefied petroleum gas and other refinery and
chemical byproducts and joint products and so on.
(ii) The above incomes, except rental income, are all income from
contracts.
41 TAXES AND SURCHARGES
The Group
2021 2020
RMB million RMB million
Consumption tax 213,894 197,542
City construction tax 18,044 15,710
Education surcharge 13,409 11,678
Resources tax 6,432 4,572
Others 7,253 5,516
Total 259,032 235,018
The applicable tax rate of the taxes and surcharges are set out in Note 4.
42 FINANCIAL EXPENSES
The Group
2021 2020
RMB million RMB million
Interest expenses incurred 5,679 6,517
Less: Capitalised interest expenses 996 2,011
Add: Interest expense on lease liabilities 9,200 9,349
Net interest expenses 13,883 13,855
Accretion expenses (Note 34) 1,135 1,343
Interest income (5,732) (4,803)
Net foreign exchange gains (276) (885)
Total 9,010 9,510
The interest rates per annum at which borrowing costs were capitalised during
the year ended 31 December 2021 by the Group ranged from 1.84% to 4.35% (2020:
2.60% to 4.66%).
43 CLASSIFICATION OF EXPENSES BY NATURE
The operating costs, selling and distribution expenses, general and
administrative expenses, research and development expenses and exploration
expenses (including dry holes) in consolidated income statement classified by
nature are as follows:
2021 2020
RMB million RMB million
Purchased crude oil, products and operating supplies and expenses 2,076,665 1,589,821
Personnel expenses 103,492 87,525
Depreciation, depletion and amortisation 115,680 107,461
Exploration expenses (including dry holes) 12,382 9,716
Other expenses 52,621 42,531
Total 2,360,840 1,837,054
44 SELLING AND DISTRIBUTION EXPENSES
Selling expenses mainly include wages and salaries of sales staff,
depreciation and amortization of sales equipment and related systems, etc.
45 GENERAL AND ADMINISTRATIVE EXPENSES
Administrative expenses mainly include salaries and salaries of administrative
personnel, depreciation and amortization of office facilities, office systems
and software, and repair costs.
46 RESEARCH AND DEVELOPMENT EXPENSES
The research and development expenditures are mainly used for the replacement
of resources in upstream, optimising structure and operation upgrades in
refining sector, structured adjustment of materials and products in chemical
segment.
47 EXPLORATION EXPENSES
Exploration expenses include geological and geophysical expenses and
written-off of unsuccessful dry hole costs.
48 OTHER INCOME
Other income are mainly the government grants related to the business
activities.
49 INVESTMENT INCOME
The Group The Company
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Income from investment of subsidiaries accounted for under cost method - - 21,416 19,296
Income from investment accounted for under equity method 23,253 6,712 8,151 3,637
Investment income from disposal of business and long-term 82 37,525 56 21,079
equity investments
Dividend income from holding of other equity instrument investments 34 156 22 16
Investment (loss)/income from holding/disposal of financial assets and (17,687) 687 (376) (1,013)
liabilities and derivative financial instruments at fair value
through profit or loss
Gain from ineffective portion of cash flow hedges 266 2,475 409 84
Others 84 (69) 1,203 257
Total 6,032 47,486 30,881 43,356
50 INCOME FROM CHANGES IN FAIR VALUE
The Group
2021 2020
RMB million RMB million
Net fair value gains on financial assets and financial liabilities at fair 2,913 (1,824)
value through profit or loss
Unrealised gains from ineffective portion cash flow hedges, net 428 576
Others - (5)
Total 3,341 (1,253)
51 IMPAIRMENT LOSSES
The Group
2021 2020
RMB million RMB million
Prepayments (40) 97
Inventories 3,130 11,361
Long-term equity investment 206 1,955
Fixed assets 9,420 11,783
Intangible assets 262 47
Construction in progress 144 844
Others 43 -
Total 13,165 26,087
52 NON-OPERATING INCOME
The Group
2021 2020
RMB million RMB million
Government grants 806 1,210
Others 2,710 1,160
Total 3,516 2,370
53 NON-OPERATING EXPENSES
The Group
2021 2020
RMB million RMB million
Fines, penalties and compensation 220 43
Donations 165 301
Asset scrap, damage loss 3,727 1,669
Others 3,470 2,719
Total 7,582 4,732
54 INCOME TAX EXPENSE
The Group
2021 2020
RMB million RMB million
Provision for income tax for the year 17,522 14,334
Deferred taxation 6,258 (7,873)
Under-provision for income tax in respect of preceding year (462) (117)
Total 23,318 6,344
Reconciliation between actual income tax expense and accounting profit at
applicable tax rates is as follows:
2021 2020
RMB million RMB million
Profit before taxation 108,348 48,441
Expected income tax expense at a tax rate of 25% 27,087 12,110
Tax effect of non-deductible expenses 6,142 3,340
Tax effect of non-taxable income (8,085) (8,345)
Tax effect of preferential tax rate (i) (2,766) (1,011)
Effect of income taxes at foreign operations (222) (730)
Tax effect of utilisation of previously unrecognised tax losses and temporary (701) (65)
differences
Tax effect of tax losses not recognised and temporary differences 1,391 1,087
Write-down of deferred tax assets 934 75
Adjustment for under provision for income tax in respect of preceding years (462) (117)
Actual income tax expense 23,318 6,344
Note:
(i) The provision for PRC current income tax is based on a statutory
income tax rate of 25% of the assessable income of the Group as determined in
accordance with the relevant income tax rules and regulations of the PRC,
except for certain entities of the Group in western regions in the PRC are
taxed at preferential income tax rate of 15% through the year 2021. According
to Announcement 2020 No.23 of the MOF "Announcement of the MOF, the State
Taxation Administration and the National Development and Reform Commission on
continuation of the income tax policy of western development enterprises", the
preferential income tax rate extends from 1 January 2021 to 31 December 2030.
55 DIVIDENDS
(a) Dividends of ordinary shares declared after the balance sheet date
Pursuant to a resolution passed at the director's meeting on 25 March 2022,
final dividends in respect of the year ended 31 December 2021 of RMB0.31
(2020: RMB0.13) per share totaling RMB37,532 million (2020: RMB15,739 million)
were proposed for shareholders' approval at the Annual General Meeting. Final
cash dividend proposed after the balance sheet date has not been recognised as
a liability at the balance sheet date.
(b) Dividends of ordinary shares declared during the year
Pursuant to the shareholders' approval at the General Meeting on 27 August
2021, the interim dividends for the year ending 31 December 2021 of RMB0.16
(2020: RMB0.07) per share totaling RMB19,371 million (2020: RMB8,475 million)
were approved. Dividends were paid on 17 September 2021.
Pursuant to the shareholders' approval at the Annual General Meeting on 25 May
2021, a final dividend of RMB0.13 per share totaling RMB15,739 million
according to total shares on 6 June 2021 was approved. All dividends have been
paid in the year ended 31 December 2021.
Pursuant to the shareholders' approval at the Annual General Meeting on 19 May
2020, a final dividend of RMB0.19 per share totaling RMB23,004 million
according to total shares on 9 June 2020 was approved. All dividends have been
paid in the year ended 31 December 2020.
56 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT
The Group
(a) Reconciliation of net profit to cash flows from operating activities:
2021 2020
RMB million RMB million
Net profit 85,030 42,097
Add: Impairment losses on assets 13,165 26,087
Credit impairment losses 2,311 2,066
Depreciation of right-of-use assets 12,972 12,842
Depreciation of fixed assets 92,824 85,494
Amortisation of intangible assets and long-term deferred expenses 9,884 9,125
Dry hole costs written off 7,702 5,928
Net loss/(gain) on disposal of non-current assets 3,062 (398)
Fair value (gain)/loss (3,341) 1,253
Financial expenses 9,286 10,395
Investment income (6,032) (47,486)
Decrease/(increase)in deferred tax assets 5,456 (10,143)
Increase in deferred tax liabilities 802 2,270
(Increase)/decrease in inventories (58,372) 22,407
Safety fund reserve 775 237
Increase in operating receivables (8,177) (17,610)
Increase in operating payables 57,827 23,956
Net cash flow from operating activities 225,174 168,520
(b) Net change in cash:
2021 2020
RMB million RMB million
Cash balance at the end of the year 108,590 87,559
Less: Cash at the beginning of the year 87,559 60,438
Net increase of cash 21,031 27,121
(c) The analysis of cash held by the Group is as follows:
2021 2020
RMB million RMB million
Cash at bank and on hand
- Cash on hand 1 8
- Demand deposits 108,589 87,551
Cash at the end of the year 108,590 87,559
(d) Net cash received from disposal of subsidiaries and other business
entities：
2021 2020
RMB million RMB million
Cash received from disposal of equity interests in the relevant companies, oil 4,225 49,832
and gas pipeline
and ancillary facilities
Others 980 37
Total 5,205 49,869
(e) Other cash paid relating to financing activities：
2021 2020
RMB million RMB million
Repayments of lease liabilities 19,412 15,327
Others 8,864 1,955
Total 28,276 17,282
57 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
(1) Related parties having the ability to exercise control over the Group
The name of the company : China Petrochemical Corporation
Unified social credit identifier : 9111000010169286X1
Registered address : No. 22, Chaoyangmen North Street, Chaoyang District, Beijing
Principal activities : Exploration, production, storage and transportation (including pipeline
transportation), sales and utilisation of crude oil and natural gas; refining;
wholesale and retail of gasoline, kerosene and diesel; production, sales,
storage and transportation of petrochemical and other chemical products;
industrial investment and investment management; exploration, construction,
installation and maintenance of petroleum and petrochemical constructions and
equipments; manufacturing electrical equipment; research, development,
application and consulting services of information technology and alternative
energy products; import & export of goods and technology.
Relationship with the Group : Ultimate holding company
Types of legal entity : State-owned
Authorised representative : Ma Yongsheng
Registered capital : RMB326,547 million
Sinopec Group Company is an enterprise controlled by the PRC government.
Sinopec Group Company directly and indirectly holds 68.77% shareholding of the
Company.
(2) Related parties not having the ability to exercise control over the
Group
Related parties under common control of a parent company with the Company:
Sinopec Finance (Note)
Sinopec Shengli Petroleum Administration Bureau
Sinopec Zhongyuan Petroleum Exploration Bureau
Sinopec Assets Management Corporation
Sinopec Engineering Incorporation
Sinopec Century Bright Capital Investment Limited
Sinopec Petroleum Storage and Reserve Limited
Associates of the Group:
PipeChina
Sinopec Finance
Sinopec Capital
Zhongtian Synergetic Energy
CIR
Joint ventures of the Group:
FREP
BASF-YPC
Taihu
YASREF
Sinopec SABIC Tianjin
Note: Sinopec Finance is under common control of a parent company with the
Company and is also the associate of the Group.
57 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) The principal related party transactions with Sinopec Group Company and
fellow subsidiaries, associates and joint ventures, which were carried out in
the ordinary course of business, are as follows:
The Group
Note 2021 2020
RMB million RMB million
Sales of goods (i) 297,381 228,307
Purchases (ii) 191,888 151,300
Transportation and storage (iii) 19,443 8,734
Exploration and development services (iv) 33,930 31,444
Production related services (v) 44,405 31,915
Ancillary and social services (vi) 1,730 2,952
Agency commission income (vii) 194 160
Interest income (viii) 715 704
Interest expense (ix) 385 919
Net deposits placed with related parties (viii) (8,265) (17,585)
Net funds obtained from/(repaid to) related parties (x) 30,305 (31,144)
The amounts set out in the table above in respect of the year ended 31
December 2021 and 2020 represent the relevant costs and income as determined
by the corresponding contracts with the related parties.
Included in the transactions disclosed above, for the year ended 31 December
2021 are: a) purchases by the Group from Sinopec Group Company and fellow
subsidiaries amounting to RMB173,718 million (2020: RMB149,560 million)
comprising purchases of products and services (i.e. procurement,
transportation and storage, exploration and development services and
production related services) of RMB160,048 million (2020: RMB133,827 million),
ancillary and social services provided by Sinopec Group Company and fellow
subsidiaries of RMB1,730 million (2020: RMB2,952 million), lease charges for
land, buildings and others paid by the Group of RMB10,831 million, RMB565
million and RMB159 million (2020: RMB11,086 million, RMB565 million and RMB211
million), respectively and interest expenses of RMB385 million (2020: RMB919
million); and b) sales by the Group to Sinopec Group Company and fellow
subsidiaries amounting to RMB54,453 million (2020: RMB69,470 million),
comprising RMB53,671 million (2020: RMB68,683 million) for sales of goods,
RMB715 million (2020: RMB704 million) for interest income and RMB67 million
(2020: RMB83 million) for agency commission income.
For the year ended 31 December 2021, no individually significant right-of-use
assets were leased from Sinopec Group Company and fellow subsidiaries,
associates and joint ventures by the Group. The interest expense recognised
for the year ended 31 December 2021 on lease liabilities in respect of amounts
due to Sinopec Group Company and fellow subsidiaries, associates and joint
ventures was RMB7,863 million (2020: RMB8,160 million).
For the year ended 31 December 2021, the amount of rental the Group paid to
Sinopec Group Company and fellow subsidiaries, associates and joint ventures
for land, buildings and others are RMB10,834 million, RMB572 million and
RMB269 million (2020: RMB11,090 million, RMB571 million and RMB330 million).
Among them, according to the continuing connected transaction agreement signed
in 2000, the fifth supplementary agreement for continuing connected
transactions signed on August 24, 2018, and the fourth revision memorandum of
the land use right lease contract, the actual payment of land, land and land
use rights between Sinopec Group and Sinopec Group The rental amount of houses
was RMB10,831 million and RMB565 million respectively (2020: RMB11,086 million
and RMB565 million).
As at 31 December 2021 and 31 December 2020, there was no guarantee given to
banks by the Group in respect of banking facilities to Sinopec Group Company
and fellow subsidiaries, associates and joint ventures, except for the
disclosure set out in Note 62(b). Guarantees given to banks by the Group in
respect of banking facilities to associates and joint ventures are disclosed
in Note 62(b).
Notes:
(i) Sales of goods represent the sale of crude oil, intermediate
petrochemical products, petroleum products and ancillary materials.
(ii) Purchases represent the purchase of materials and utility supplies
directly related to the Group's operations such as the procurement of raw and
ancillary materials and related services, supply of water, electricity and
gas.
(iii) Transportation and storage represent the cost for the use of railway,
road and marine transportation services, pipelines, loading, unloading and
storage facilities.
(iv) Exploration and development services comprise direct costs incurred in
the exploration and development such as geophysical, drilling, well testing
and well measurement services.
(v) Production related services represent ancillary services rendered in
relation to the Group's operations such as equipment repair and general
maintenance, insurance premium, technical research, communications,
firefighting, security, product quality testing and analysis, information
technology, design and engineering, construction of oilfield ground
facilities, refineries and chemical plants, manufacture of replacement parts
and machinery, installation, project management and environmental protection,
and management services.
(vi) Ancillary and social services represent expenditures for social welfare
and support services such as educational facilities, media communication
services, sanitation, accommodation, canteens and property maintenance.
(vii) Agency commission income
represents commission earned for acting as an agent in respect of sales of
products and purchase of materials for certain entities owned by Sinopec Group
Company.
57 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) The principal related party transactions with Sinopec Group Company and
fellow subsidiaries, associates and joint ventures, which were carried out in
the ordinary course of business, are as follows: (Continued)
Notes: (Continued)
(viii) Interest income represents interest received from deposits placed
with Sinopec Finance and Sinopec Century Bright Capital Investment Limited,
finance companies controlled by Sinopec Group Company. The applicable interest
rate is determined in accordance with the prevailing saving deposit rate.
(ix) Interest expense represents interest charges on the loans obtained from
Sinopec Group Company and fellow subsidiaries.
(x) The Group obtained loans, discounted bills and issued the acceptance
bills from Sinopec Group Company and fellow subsidiaries.
In connection with the Reorganisation, the Company and Sinopec Group Company
entered into a number of agreements under which 1) Sinopec Group Company will
provide goods and products and a range of ancillary, social and supporting
services to the Group and 2) the Group will sell certain goods to Sinopec
Group Company. These agreements impacted the operating results of the Group
for the year ended 31 December 2021. The terms of these agreements are
summarised as follows:
(a) The Company has entered into a non-exclusive "Agreement for Mutual
Provision of Products and Ancillary Services" ("Mutual Provision Agreement")
with Sinopec Group Company effective from 1 January 2000 in which Sinopec
Group Company has agreed to provide the Group with certain ancillary
production services, construction services, information advisory services,
supply services and other services and products. While each of Sinopec Group
Company and the Company is permitted to terminate the Mutual Provision
Agreement upon at least six months' notice, Sinopec Group Company has agreed
not to terminate the agreement if the Group is unable to obtain comparable
services from a third party. The pricing policy for these services and
products provided by Sinopec Group Company to the Group is as follows:
‧ the government-prescribed price;
‧ where there is no government-prescribed price, the government-guidance
price;
‧ where there is neither a government-prescribed price nor a
government-guidance price, the market price; or
‧ where none of the above is applicable, the price to be agreed between
the parties, which shall be based on a reasonable cost incurred in providing
such services plus a profit margin not exceeding 6%.
(b) The Company has entered into a non-exclusive "Agreement for Provision of
Cultural and Educational, Health Care and Community Services" with Sinopec
Group Company effective from 1 January 2000 in which Sinopec Group Company has
agreed to provide the Group with certain cultural, educational, health care
and community services on the same pricing terms and termination conditions as
agreed to in the above Mutual Provision Agreement.
(c) The Company has entered into a number of lease agreements with Sinopec
Group Company to lease certain lands and buildings effective on 1 January
2000. The lease term is 40 or 50 years for lands and 20 years for buildings,
respectively. The Company and Sinopec Group Company can renegotiate the rental
amount every three years for land. The Company and Sinopec Group Company can
renegotiate the rental amount for buildings every year. However such amount
cannot exceed the market price as determined by an independent third party.
(d) The Company has entered into agreements with Sinopec Group Company
effective from 1 January 2000 under which the Group has been granted the right
to use certain trademarks, patents, technology and computer software developed
by Sinopec Group Company.
(e) The Company has entered into a service station franchise agreement with
Sinopec Group Company effective from 1 January 2000 under which its service
stations and retail stores would exclusively sell the refined products
supplied by the Group.
(f) On the basis of a series of continuing connected transaction
agreements signed in 2000, the Company and Sinopec Group Company have signed
the Sixth Supplementary Agreement on 27 August 2021, which took effect on 1
January 2022 and made adjustment to "Mutual Supply Agreement" and "Buildings
Leasing Contract", etc.
57 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(4) Balances with Sinopec Group Company and fellow subsidiaries, associates
and joint ventures
The balances with Sinopec Group Company and fellow subsidiaries, associates
and joint ventures at 31 December 2021 and 31 December 2020 are as follows:
The ultimate holding company Other related companies
At 31 December At 31 December At 31 December At 31 December
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Cash at bank and on hand - - 61,682 53,417
Accounts receivable 30 42 8,625 16,735
Receivables financing - - 186 760
Other receivables - 122 13,941 18,062
Prepayments and other current assets 19 7 577 1,231
Other non-current assets - - 3,116 6,435
Bills payable 5 8 3,798 3,671
Accounts payable 228 123 10,139 18,990
Contract liabilities 50 41 4,627 5,896
Other payables and other current liabilities 85 681 50,564 12,078
Other non-current liabilities - - 2,779 3,010
Short-term loans - - 2,407 4,642
Long-term loans (including current portion) - - 14,156 12,400
Lease liabilities (including current portion) 72,176 74,178 86,585 87,870
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates
and joint ventures, other than short-term loans and long-term loans, bear no
interest, are unsecured and are repayable in accordance with normal commercial
terms. The terms and conditions associated with short-term loans and long-term
loans payable to Sinopec Group Company and fellow subsidiaries are set out in
Note 22 and Note 31.
As at and for the year ended 31 December 2021, and as at and for the year
ended 31 December 2020, no individually significant impairment losses for bad
and doubtful debts were recorded in respect of amounts due from Sinopec Group
Company and fellow subsidiaries, associates and joint ventures.
(5) Key management personnel emoluments
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, directly
or indirectly, including directors and supervisors of the Group. The key
management personnel compensations are as follows:
2021 2020
RMB thousand RMB thousand
Short-term employee benefits 4,612 5,753
Retirement scheme contributions 379 342
Total 4,991 6,095
58 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group's financial condition and results of operations are sensitive to
accounting methods, assumptions and estimates that underlie the preparation of
the financial statements. The Group bases the assumptions and estimates on
historical experience and on various other assumptions that it believes to be
reasonable and which form the basis for making judgements about matters that
are not readily apparent from other sources. On an on-going basis, management
evaluates its estimates. Actual results may differ from those estimates as
facts, circumstances and conditions change.
The selection of critical accounting policies, the judgements and other
uncertainties affecting application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be
considered when reviewing the financial statements. The significant accounting
policies are set forth in Note 3. The Group believes the following critical
accounting policies involve the most significant judgements and estimates used
in the preparation of the financial statements.
58 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
(a) Oil and gas properties and reserves
The accounting for the exploration and production segment's oil and gas
activities is subject to accounting rules that are unique to the oil and gas
industry. The Group has used the successful efforts method to account for oil
and gas business activities. The successful efforts method reflects the
volatility that is inherent in exploring for mineral resources in that costs
of unsuccessful exploratory efforts are charged to expense. These costs
primarily include dry hole costs, seismic costs and other exploratory costs.
Engineering estimates of the Group's oil and gas reserves are inherently
imprecise and represent only approximate amounts because of the subjective
judgements involved in developing such information. There are authoritative
guidelines regarding the engineering criteria that have to be met before
estimated oil and gas reserves can be designated as "proved". Proved and
proved developed reserves estimates are updated at least annually and take
into account recent production and technical information about each field. In
addition, as prices and cost levels change from year to year, the estimate of
proved and proved developed reserves also changes. This change is considered a
change in estimate for accounting purposes and is reflected on a prospective
basis in related depreciation rates. Oil and gas reserves have a direct impact
on the assessment of the recoverability of the carrying amounts of oil and gas
properties reported in the financial statements. If proved reserves estimates
are revised downwards, the Group's earnings could be affected by changes in
depreciation expense or an immediate write-down of the carrying amount of oil
and properties.
Future dismantlement costs for oil and gas properties are estimated with
reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with industry
practices in the similar geographic area, including estimation of economic
life of oil and gas properties, technology and price level. The present values
of these estimated future dismantlement costs are capitalised as oil and gas
properties with equivalent amounts recognised as provisions for dismantlement
costs.
Despite the inherent imprecision in these engineering estimates, these
estimates are used in determining depreciation expense, impairment expense and
future dismantlement costs. Capitalised costs of proved oil and gas properties
are amortised on a unit-of-production method based on volumes produced and
reserves.
(b) Impairment for assets
If circumstances indicate that the net book value of a long-lived asset may
not be recoverable, the asset may be considered "impaired", and an impairment
loss may be recognised in accordance with "CASs 8 - Impairment of Assets". The
carrying amounts of long-lived assets are reviewed periodically in order to
assess whether the recoverable amounts have declined below the carrying
amounts. These assets are tested for impairment whenever events or changes in
circumstances indicate that their recorded carrying amounts may not be
recoverable. When such a decline has occurred, the carrying amount is reduced
to recoverable amount. For goodwill, the recoverable amount is estimated
annually. The recoverable amount is the greater of the fair value less costs
to sell and the present value of expected future cash flows. It is difficult
to precisely estimate the fair value because quoted market prices for the
Group's assets or cash-generating units are not readily available. In
determining the value of expected future cash flows, expected cash flows
generated by the asset or the cash-generating unit are discounted to their
present value, which requires significant judgement relating to sales volume,
selling price, amount of operating costs and discount rate. The Group uses all
readily available information in determining an amount that is a reasonable
approximation of recoverable amount, including estimates based on reasonable
and supportable assumptions and projections of sales volume, selling price,
amount of operating costs and discount rate.
(c) Depreciation
Fixed assets are depreciated on a straight-line basis over the estimated
useful lives of the assets, after taking into account the estimated residual
value. Management reviews the estimated useful lives of the assets at least
annually in order to determine the amount of depreciation expense to be
recorded during any reporting period. The useful lives are based on the
Group's historical experience with similar assets and taking into account
anticipated technological changes. The depreciation expense for future periods
is adjusted if there are significant changes from previous estimates.
(d) Measurement of expected credit losses
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Group expects to receive).
The Group measures and recognises expected credit losses, considering
reasonable and supportable information about the relevant past events, current
conditions and forecasts of future economic conditions. The Group regularly
monitors and reviews the assumptions used for estimating expected credit
losses.
(e) Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realisable values, an
allowance for diminution in value of inventories is recognised. Net realisable
value represents the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs
necessary to make the sale. Management bases the estimates on all available
information, including the current market prices of the finished goods and raw
materials, and historical operating costs. If the actual selling prices were
to be lower or the costs of completion were to be higher than estimated, the
actual allowance for diminution in value of inventories would be higher than
estimated.
59 PRINCIPAL SUBSIDIARIES
The Company's principal subsidiaries have been consolidated into the Group's
financial statements for the year ended 31 December 2021. The following list
contains the particulars of subsidiaries which principally affected the
results, assets and liabilities of the Group:
Full name of enterprise Principal activities Registered Actual Percentage of Minority
capital/paid- investment at equity Interests at
up capital 31 December interest/ 31 December
2021 voting right 2021
held by the
Group
million million % RMB million
(a) Subsidiaries acquired through group restructuring:
China Petrochemical International Company Limited Trading of petrochemical products RMB1,400 RMB1,856 100.00 11
China International United Petroleum and Chemical Trading of crude oil and petrochemical products RMB5,000 RMB6,585 100.00 5,259
Company Limited
Sinopec Catalyst Company Limited Production and sale of catalyst products RMB1,500 RMB2,424 100.00 233
Sinopec Yangzi Petrochemical Company Limited Manufacturing of intermediate petrochemical products and petroleum products RMB15,651 RMB15,651 100.00 _
Sinopec Lubricant Company Limited Production and sale of refined petroleum products, lubricant base oil, and RMB3,374 RMB3,374 100.00 88
petrochemical materials
Sinopec Yizheng Chemical Fibre Limited Liability Company Production and sale of polyester chips and polyester fibres RMB4,000 RMB6,713 100.00
_
Marketing Company Marketing and distribution of refined petroleum products RMB28,403 RMB20,000 70.42 75,560
Sinopec Kantons Holdings Limited ("Sinopec Kantons") Provision of crude oil jetty services and natural gas pipeline transmission HKD248 HKD3,952 60.33 5,011
services
Sinopec Shanghai Petrochemical Company Limited ("Shanghai Petrochemical") Manufacturing of synthetic fibres, resin and plastics, intermediate RMB10,824 RMB5,820 50.44 15,132
petrochemical products and petroleum products
Fujian Petrochemical Company Limited Manufacturing of plastics, intermediate petrochemical products and petroleum RMB10,492 RMB5,246 50.00 6,915
("Fujian Petrochemical") (i) products
(b) Subsidiaries established by the Group:
Sinopec International Petroleum Exploration and Production Limited ("SIPL") Investment in exploration, production and sale of petroleum and natural gas RMB8,250 RMB8,250 100.00 6,119
Sinopec Overseas Investment Holding Limited ("SOIH") Investment holding of overseas business USD3,009 USD3,009 100.00
-
Sinopec Chemical Sales Company Limited Marketing and distribution of petrochemical products RMB1,000 RMB1,165 100.00 124
Sinopec Great Wall Energy & Chemical Company Limited Coal chemical industry investment management, production and sale of coal RMB22,761 RMB22,795 100.00 18
chemical products
Sinopec Beihai Refining and Chemical Limited Import and processing of crude oil, production, storage and sale of petroleum RMB5,294 RMB5,240 98.98 137
Liability Company products and petrochemical products
ZhongKe (Guangdong) Refinery & Petrochemical Crude oil processing and petroleum products manufacturing RMB6,397 RMB5,776 90.30 2,288
Company Limited
Sinopec Qingdao Refining and Chemical Company Limited Manufacturing of intermediate petrochemical products and petroleum products RMB5,000 RMB4,250 85.00 2,004
Sinopec-SK (Wuhan) Petrochemical Company Limited ("Sinopec-SK") Production, sale, research and development of ethylene and downstream RMB7,193 RMB7,193 59.00 5,130
byproducts
(c) Subsidiaries acquired through business combination under common control:
Sinopec Hainan Refining and Chemical Company Limited Manufacturing of intermediate petrochemical products and petroleum products RMB9,606 RMB12,615 100.00 -
Sinopec Qingdao Petrochemical Company Limited Manufacturing of intermediate petrochemical products and petroleum products RMB1,595 RMB7,233 100.00 _
Gaoqiao Petrochemical Company Limited Manufacturing of intermediate petrochemical products and petroleum products RMB10,000 RMB4,804 55.00 8,197
Sinopec Baling Petrochemical Co. Ltd. Crude oil processing and petroleum products manufacturing RMB3,000 RMB3,000 55.00 2,272
("Baling Petrochemical")
(d) Subsidiaries acquired through business combination not under common
control:
Shanghai SECCO Production and sale of petrochemical products RMB500 RMB500 67.59 3,441
* The minority interests of subsidiaries which the Group holds 100%
of equity interests at the end of the year are the minority interests of their
subsidiaries.
Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and
Hong Kong SAR, respectively, all of the above principal subsidiaries are
incorporated and operate their businesses principally in the PRC.
Note:
(i) The Group consolidated the financial statements of the entity
because it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those return through
its power over the entity.
59 PRINCIPAL SUBSIDIARIES (Continued)
Summarised financial information on subsidiaries with material minority
interests
Set out below are the summarised financial information which the amount before
inter-company eliminations for each subsidiary whose minority interests that
are material to the Group.
Summarised consolidated balance sheet
Marketing Company SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
At At 31 At At At At At At At At At At At At
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets 159,599 172,352 22,759 22,620 20,932 17,305 1,464 1,582 4,761 4,373 6,066 10,431 6,791 3,639
Current liabilities (193,315) (201,678) (1,430) (475) (15,796) (15,232) (142) (458) (196) (924) (5,434) (2,783) (8,122) (6,377)
Net current (liabilities)/assets (33,716) (29,326) 21,329 22,145 5,136 2,073 1,322 1,124 4,565 3,449 632 7,648 (1,331) (2,738)
Non-current assets 326,437 323,571 8,954 8,951 26,106 27,444 13,208 12,568 8,195 9,106 11,402 12,177 20,650 22,187
Non-current liabilities (59,604) (59,554) (17,823) (18,270) (847) (162) (700) (693) (170) (170) (1,418) (1,553) (7,512) (8,509)
Net non-current assets/ 266,833 264,017 (8,869) (9,319) 25,259 27,282 12,508 11,875 8,025 8,936 9,984 10,624 13,138 13,678
(liabilities)
Summarised consolidated statement of comprehensive income and cash flow
Year ended 31 December Marketing Company SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Turnover 1,408,523 1,099,680 2,166 2,017 89,280 74,705 5,549 4,871 528 1,064 29,723 21,626 50,208 28,702
Profit/(loss) for the year 18,582 22,415 1,429 1,160 2,004 639 951 243 871 2,047 2,817 2,132 1,606 (920)
Total comprehensive income 18,439 21,149 1,045 (720) 2,145 628 951 243 677 1,814 2,817 2,132 1,606 (920)
Comprehensive income 6,822 7,205 579 (287) 1,065 317 476 121 268 707 2,390 691 659 (377)
attributable to minority
interests
Dividends paid to minority 7,064 2,766 - 316 541 649 64 150 164 175 1,028 767 - -
interests
Net cash generated from/ 28,923 54,139 690 281 4,060 1,751 (292) (244) 133 586 3,447 3,119 5,476 (363)
(used in) operating activities
60 CHANGE IN THE SCOPE OF CONSOLIDATION
Business combination under common control
Business combination under common control in 2021
Pursuant to resolution passed at the Director's meeting on 26 March 2021, the
Company entered into agreements with Sinopec Assets Management Corporation
("SAMC") and Beijing Orient Petrochemical Industry Co., Ltd. ("BJOPI"), and
its subsidiary,Sinopec Beihai Refining and Chemical Limited Liability Company
entered into an agreement with Beihai Petrochemical Limited Liability Company
of Sinopec Group ("BHP"). According to the relevant agreements, the Company
proposed to acquire non equity assets such as the polypropylene devices and
utility business assets of Cangzhou Branch held by SAMC, organic plant
business held by BJOPI, and the pier operation platform held by BHP.
Pursuant to the resolution passed at the Directors' meeting on 29 November
2021, the Company entered into agreements with SAMC, and Sinopec Beijing
Yanshan Petrochemical Co., Ltd. ("SBJYSP"), and its subsidiary, Sinopec
Yizheng Chemical Fibre Company Limited entered into an agreement with SAMC.
According to the relevant agreements, the Group proposed to acquire non equity
assets such as thermal power, water and other business, PBT resin and other
business of Yizheng Branch held by SAMC, and thermal power and other
businesses held by SBJYSP.
As the Company, SAMC, BJOPI, BHP and SBJYSP are all under the control of
Sinopec Group Company, the transaction described above has been accounted as
business combination under common control. Accordingly, the equity and assets
acquired from Sinopec Group Company have been accounted for at historical
cost, and the consolidated financial statements of the Group prior to these
acquisitions have been restated to include the results of operation and the
assets and liabilities of Sinopec Group Company on a combined basis.
The transactions under the after-mentioned agreements will further improve the
integrated operation level of the Group, optimise the allocation of resources,
reduce connected transactions on the whole, so as to enhance the comprehensive
competitiveness of the Group in its business locations.
The financial condition as at 31 December 2020 and the results of operation
for the year ended 31 December 2020 previously reported by the Group have been
restated, as set out below:
60 CHANGE IN THE SCOPE OF CONSOLIDATION (Continued)
Business combination under common control (Continued)
Business combination under common control in 2021 (Continued)
(1) The relevant financial information disclosed for changes in the scope of
consolidation are as follows:
acquiree Share of The basis for the Date of Basis of Income of the Net profits/ Income of the Net profits/ Net cash flow Net cash flow
acquired equity business combination acquisition Determination on acquiree from (losses) of the acquiree from (losses) of the from operating of the acquiree
under the common the acquisition date 1 January 2021 acquiree from 1 January acquiree from activities of the from 1 January
control to the 1 January 2021 2020 to 1 January acquiree from 2021 to the
acquisition date to the 31 December 2020 to 1 January acquisition date
acquisition date 2020 31 December 2021 to the
2020 acquisition date
RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million
Beihai petrochemical 98.98% The acquiree and the company are controlled by Sinopec Group Company both 1 July 2021 According to the agreement 13 5 39 19 43 -
before and after combination, and the
business
control is not
transitory
Oriental Petrochemical 100% The acquiree and the company are controlled by Sinopec Group Company both 1 July 2021 According to the agreement 620 84 1,223 87 162 -
before and after combination, and the
Business
control is not
transitory
Cangzhou Branch 100% The acquiree and the company are controlled by Sinopec Group Company both 1 July 2021 According to the agreement 246 (15) 560 (6) 20 -
before and after combination, and the
business
control is not
transitory
Asset company 100% The acquiree and the company are controlled by Sinopec Group Company both 1 December 2021 According to the agreement 7,723 (376) 7,177 242 385 -
before and after combination, and the
business
control is not
Transitory
Group Yanshan 100% The acquiree and the company are controlled by Sinopec Group Company both 1 December 2021 According to the agreement 3,086 102 3,234 5 392 -
before and after combination, and the
Business
control is not
transitory
Total 11,688 (200) 12,233 347 1,002 -
(2) Cost of acquisition ：
Cost of acquisition(RMB Million) 6,124
(3) Details of the assets and liabilities acquired are as follows：
Book value at Book value at
the Acquisition Date December 31 2020
RMB Million RMB Million
Total current assets 974 480
Total assets 6,712 5,875
Total current liabilities 2,540 1,020
Total liabilities 2,557 1,031
Total shareholders' equity 4,155 4,844
The principal subsidiaries included in the scope of consolidation this year
are disclosed in Note 59.
61 COMMITMENTS
Capital commitments
At 31 December 2021 and 31 December 2020, capital commitments of the Group are
as follows:
At 31 December At 31 December
2021 2020
RMB million RMB million
Authorised and contracted for (i) 184,430 171,597
Authorised but not contracted for 90,227 33,997
Total 274,657 205,594
These capital commitments relate to oil and gas exploration and development,
refining and petrochemical production capacity expansion projects, the
construction of service stations and oil depots and investment commitments.
Note:
(i) The investment commitments of the Group is RMB3,648 million (2020:
RMB13,172 million).
Commitments to joint ventures
Pursuant to certain of the joint venture agreements entered into by the Group,
the Group is obliged to purchase products from the joint ventures based on
market prices.
Exploration and production licenses
Exploration licenses for exploration activities are registered with the
Ministry of Natural Resources. The maximum term of the Group's exploration
licenses is 7 years, and may be renewed twice within 30 days prior to
expiration of the original term with each renewal being for a two-year term.
The Group is obligated to make progressive annual minimum exploration
investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Natural Resources also issues production licenses
to the Group on the basis of the reserve reports approved by relevant
authorities. The maximum term of a full production license is 30 years unless
a special dispensation is given by the State Council. The maximum term of the
production licenses issued to the Group is 80 years as a special dispensation
was given to the Group by the State Council. The Group's production license is
renewable upon application by the Group 30 days prior to expiration.
The Group is required to make payments of exploration license fees and
production right usage fees to the Ministry of Natural Resources annually
which are expensed. Expenses recognised were approximately RMB181 million for
the year ended 31 December 2021 (2020: RMB231 million).
Estimated future annual payments are as follows:
At 31 December At 31 December
2021 2020
RMB million RMB million
Within one year 301 390
Between one and two years 112 99
Between two and three years 110 66
Between three and four years 102 63
Between four and five years 64 56
Thereafter 846 824
Total 1,535 1,498
The implementation of commitments in previous year and the Group's commitments
did not have material discrepancy.
62 CONTINGENT LIABILITIES
(a) The Company has been advised by its PRC lawyers that, except for
liabilities constituting or arising out of or relating to the business assumed
by the Company in the Reorganisation, no other liabilities were assumed by the
Company, and the Company is not jointly and severally liable for other debts
and obligations incurred by Sinopec Group Company prior to the Reorganisation.
(b) At 31 December 2021 and 31 December 2020, the guarantees by the Group in
respect of facilities granted to the parties below are as follows:
At 31 December At 31 December
2021 2020
RMB million RMB million
Joint ventures(i) 9,117 6,390
Associates (ii) 5,746 8,450
Total 14,863 14,840
Notes:
(i) The Group provided a guarantee in respect to standby credit
facilities granted to Zhongan United Coal Chemical Co., Ltd. ("Zhongan
United") by banks amount to RMB7,100 million. As at 31 December 2021, the
amount withdrawn (The portion corresponding to the shareholding ratio of the
Group) by Zhongan United from banks and guaranteed by the Group was RMB5,680
million (31 December 2020: RMB6,390 million). The Group provided a guarantee
in respect to standby credit facilities granted to Amur Gas Chemical Complex
Limited Liability Company ("Amur Gas") by banks amount to RMB23,208 million.
As at 31 December 2021, the amount withdrawn (The portion corresponding to the
shareholding ratio of the Group) by Amur Gas from banks and guaranteed by the
Group was RMB3,264 million (31 December 2020: Nil).
The Group provided a guarantee in respect to payment obligation under the raw
material supply agreements of Amur Gas amount to RMB15,493 million. As at 31
December 2021, Amur Gas has not yet incurred the relevant payment obligations
and therefore the Group has no guarantee amount (31 December 2020: Nil).
The Group provided a guarantee in respect engineering services agreement of
Amur Gas amount to RMB3,012 million. As at 31 December 2021, the relevant
payables for constructions of Amur Gas (The portion corresponding to the
shareholding ratio of the Group) and guaranteed by the Group was RMB173
million (31 December 2020: Nil).
(ii) The Group provided a guarantee in respect to standby credit
facilities granted to Zhongtian Synergetic Energy by banks amount to RMB17,050
million. As at 31 December 2021, the amount withdrawn (The portion
corresponding to the shareholding ratio of the Group) by Zhongtian Synergetic
Energy and guaranteed by the Group was RMB5,746 million (2020: RMB8,450
million).
Management monitors the risk that the specified debtor will default on the
contract and recognises a provision when ECLs on the financial guarantees are
determined to be higher than the carrying amount in respect of the guarantees.
At 31 December 2021 and 2020, the Group estimates that there is no material
liability has been accrued for ECLs related to the Group's obligation under
these guarantee arrangements.
Environmental contingencies
Under existing legislation, management believes that there are no probable
liabilities that will have a material adverse effect on the financial position
or operating results of the Group. The PRC government, however, has moved, and
may move further towards more rigorous enforcement of applicable laws, and
towards the adoption of more stringent environmental standards. Environmental
liabilities are subject to considerable uncertainties which affect the Group's
ability to estimate the ultimate cost of remediation efforts. These
uncertainties include (i) the exact nature and extent of the contamination at
various sites including, but not limited to refineries, oil fields, service
stations, terminals and land development areas, whether operating, closed or
sold, (ii) the extent of required cleanup efforts, (iii) varying costs of
alternative remediation strategies, (iv) changes in environmental remediation
requirements, and (v) the identification of new remediation sites. The amount
of such future cost is indeterminable due to such factors as the unknown
magnitude of possible contamination and the unknown timing and extent of the
corrective actions that may be required. Accordingly, the outcome of
environmental liabilities under proposed or future environmental legislation
cannot reasonably be estimated at present, and could be material.
The Group recognised normal routine pollutant discharge fees of approximately
RMB10,968 million in the consolidated financial statements for the year ended
31 December 2021 (2020: RMB11,368 million).
Legal contingencies
The Group is defendant in certain lawsuits as well as the named party in other
proceedings arising in the ordinary course of business. Management has
assessed the likelihood of an unfavourable outcome of such contingencies,
lawsuits or other proceedings and believes that any resulting liabilities will
not have a material adverse effect on the financial position, operating
results or cash flows of the Group.
63 SEGMENT REPORTING
Segment information is presented in respect of the Group's operating segments.
The format is based on the Group's management and internal reporting
structure.
In a manner consistent with the way in which information is reported
internally to the Group's chief operating decision maker for the purposes of
resource allocation and performance assessment, the Group has identified the
following five reportable segments. No operating segments have been aggregated
to form the following reportable segments.
(i) Exploration and production - which explores and develops oil fields,
produces crude oil and natural gas and sells such products to the refining
segment of the Group and external customers.
(ii) Refining - which processes and purifies crude oil, which is sourced
from the exploration and production segment of the Group and external
suppliers, and manufactures and sells petroleum products to the chemicals and
marketing and distribution segments of the Group and external customers.
(iii) Marketing and distribution - which owns and operates oil depots and
service stations in the PRC, and distributes and sells refined petroleum
products (mainly gasoline and diesel) in the PRC through wholesale and retail
sales networks.
(iv) Chemicals - which manufactures and sells petrochemical products,
derivative petrochemical products and other chemical products to external
customers.
(v) Corporate and others - which largely comprise the trading activities of
the import and export companies of the Group and research and development
undertaken by other subsidiaries.
The segments were determined primarily because the Group manages its
exploration and production, refining, marketing and distribution, chemicals,
and corporate and others businesses separately. The reportable segments are
each managed separately because they manufacture and/or distribute distinct
products with different production processes and due to their distinct
operating and gross margin characteristics.
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities
The Group's chief operating decision maker evaluates the performance and
allocates resources to its operating segments on an operating profit basis,
without considering the effects of finance costs or investment income.
Inter-segment transfer pricing is based on the market price or cost plus an
appropriate margin, as specified by the Group's policy.
Assets and liabilities dedicated to a particular segment's operations are
included in that segment's total assets and liabilities. Segment assets
include all tangible and intangible assets, except for cash at bank and on
hand, long-term equity investments, deferred tax assets and other unallocated
assets. Segment liabilities exclude short-term loans, non-current liabilities
due within one year, long-term loans, debentures payable, deferred tax
liabilities, other non-current liabilities and other unallocated liabilities.
63 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
Reportable information on the Group's operating segments is as follows:
2021 2020
RMB million RMB million
Income from principal operations
Exploration and production
External sales 156,026 104,524
Inter-segment sales 87,298 57,513
243,324 162,037
Refining
External sales 167,948 113,214
Inter-segment sales 1,212,455 826,219
1,380,403 939,433
Marketing and distribution
External sales 1,367,605 1,062,447
Inter-segment sales 7,075 4,854
1,374,680 1,067,301
Chemicals
External sales 424,774 322,169
Inter-segment sales 70,242 40,702
495,016 362,871
Corporate and others
External sales 563,147 458,154
Inter-segment sales 732,356 430,073
1,295,503 888,227
Elimination of inter-segment sales (2,109,426) (1,371,215)
Consolidated income from principal operations 2,679,500 2,048,654
Income from other operations
Exploration and production 6,674 5,718
Refining 5,161 4,633
Marketing and distribution 36,864 34,905
Chemicals 10,487 8,758
Corporate and others 2,198 2,056
Consolidated income from other operations 61,384 56,070
Consolidated operating income 2,740,884 2,104,724
2021 2020
RMB million RMB million
Operating profit/(loss)
By segment
Exploration and production 613 (20,570)
Refining 65,360 (6,526)
Marketing and distribution 23,102 19,634
Chemicals 11,361 9,592
Corporate and others 9,521 (2,048)
Elimination (4,421) 4,417
Total segment operating profit 105,536 4,499
Investment income
Exploration and production 3,023 13,837
Refining 547 13,085
Marketing and distribution 1,796 12,230
Chemicals 11,269 1,662
Corporate and others (10,603) 6,672
Total segment investment income 6,032 47,486
Less: Financial expenses 9,010 9,510
Add: Other income 5,850 7,514
Gains/(losses) from changes in fair value 3,341 (1,253)
Asset disposal gains 665 2,067
Operating profit 112,414 50,803
Add: Non-operating income 3,516 2,370
Less: Non-operating expenses 7,582 4,732
Profit before taxation 108,348 48,441
63 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
At 31 December At 31 December
2021 2020
RMB million RMB million
Assets
Segment assets
Exploration and production 371,100 354,024
Refining 304,785 270,766
Marketing and distribution 377,499 373,430
Chemicals 222,803 194,434
Corporate and others 133,961 118,458
Total segment assets 1,410,148 1,311,112
Cash at bank and on hand 221,989 184,412
Long-term equity investments 209,179 188,342
Deferred tax assets 19,389 25,054
Other unallocated assets 28,550 29,976
Total assets 1,889,255 1,738,896
Liabilities
Segment liabilities
Exploration and production 159,358 157,430
Refining 129,103 135,157
Marketing and distribution 210,215 213,455
Chemicals 65,103 47,992
Corporate and others 197,447 117,684
Total segment liabilities 761,226 671,718
Short-term loans 27,366 20,756
Non-current liabilities due within one year 28,651 22,494
Long-term loans 49,341 45,459
Debentures payable 42,649 38,356
Deferred tax liabilities 7,910 8,124
Other non-current liabilities 18,276 17,950
Other unallocated liabilities 37,795 25,319
Total liabilities 973,214 850,176
2021 2020
RMB million RMB million
Capital expenditure
Exploration and production 68,148 56,416
Refining 22,469 24,756
Marketing and distribution 21,897 25,403
Chemicals 51,648 28,217
Corporate and others 3,786 2,312
167,948 137,104
Depreciation, depletion and amortisation
Exploration and production 52,880 46,273
Refining 20,743 20,090
Marketing and distribution 23,071 23,196
Chemicals 16,093 14,830
Corporate and others 2,893 3,072
115,680 107,461
Impairment losses on long-lived assets
Exploration and production 2,467 8,495
Refining 860 1,923
Marketing and distribution 1,211 536
Chemicals 5,332 3,675
Corporate and others 165 -
10,035 14,629
63 SEGMENT REPORTING (Continued)
(2) Geographical information
The following tables set out information about the geographical information of
the Group's external sales and the Group's non-current assets, excluding
financial assets and deferred tax assets. In presenting information on the
basis of geographical segments, segment revenue is based on the geographical
location of customers, and segment assets are based on the geographical
location of the assets.
2021 2020
RMB million RMB million
External sales
Mainland China 2,166,040 1,720,695
Singapore 278,024 215,846
Others 296,820 168,183
2,740,884 2,104,724
At 31 December At 31 December
2021 2020
RMB million RMB million
Non-current assets
Mainland China 1,268,814 1,216,267
Others 40,551 36,782
1,309,365 1,253,049
64 FINANCIAL INSTRUMENTS
Overview
Financial assets of the Group include cash at bank and on hand, financial
assets held for trading, derivative financial assets, accounts receivable,
receivables financing, other receivables and other equity instrument
investments. Financial liabilities of the Group include short-term loans,
derivative financial liabilities, bills payable, accounts payable, employee
benefits payable, other payables, long-term loans, debentures payable and
lease liabilities.
The Group has exposure to the following risks from its uses of financial
instruments:
‧ credit risk;
‧ liquidity risk; and
‧ market risk.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework, and developing and
monitoring the Group's risk management policies.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, and set appropriate risk limits and controls and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations. Internal audit
department undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the Group's
audit committee.
Credit risk
(i) Risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's deposits placed with
financial institutions (including structured deposits) and receivables from
customers. To limit exposure to credit risk relating to deposits, the Group
primarily places cash deposits only with large financial institutions in the
PRC with acceptable credit ratings. The majority of the Group's accounts
receivable relates to sales of petroleum and chemical products to related
parties and third parties operating in the petroleum and chemical industries.
No single customer accounted for greater than 10% of total accounts receivable
at 31 December 2021, except for the amounts due from Sinopec Group Company and
fellow subsidiaries. The Group performs ongoing credit evaluations of its
customers' financial condition and generally does not require collateral on
accounts receivable. The Group maintains an impairment loss for doubtful
accounts and actual losses have been within management's expectations.
The carrying amounts of cash at bank and on hand, financial assets held for
trading, derivative financial assets, accounts receivable, receivables
financing and other receivables, represent the Group's maximum exposure to
credit risk in relation to financial assets.
64 FINANCIAL INSTRUMENTS (Continued)
Credit risk (Continued)
(ii) Impairment of financial assets
The Group's primary type of financial assets that are subject to the expected
credit loss model is accounts receivable, receivables financing and other
receivables.
The Group's cash deposits are placed only with large financial institutions
with acceptable credit ratings, and there is no material impairment loss
identified.
For accounts receivable and receivables financing, the Group applies the
"No.22 Accounting Standards for Business Enterprises - Financial instruments:
recognition and measurement" simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all accounts
receivable and receivables financing.
To measure the expected credit losses, accounts receivable and receivables
financing have been grouped based on shared credit risk characteristics and
the days past due.
The expected loss rates are based on the payment profiles of sales over a
period of 36 months before 31 December 2021 or 31 December 2020, respectively,
and the corresponding historical credit losses experienced within this period
and calculate expected credit losses for the above financial assets using an
allowance matrix The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of
the customers to settle the accounts receivable and receivables financing.
The detailed analysis of accounts receivable and receivables financing is
listed in note 7 and note 8.
The Group's other receivables are considered to have low credit risk (Note
10), and the loss allowance recognised during the year was therefore limited
to 12 months expected credit losses. The Group considers "low credit risk" for
other receivables when they have a low risk of default and the issuer has a
strong capacity to meet its contractual cash flow obligations in the near
term.
Liquidity risk
Liquidity risk is the risk that the Group encounters short fall of capital
when meeting its obligation of financial liabilities. The Group's approach to
managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed capital conditions, without incurring unacceptable losses or risking
damage to the Group's reputation. The Group prepares monthly cash flow budget
to ensure that they will always have sufficient liquidity to meet its
financial obligations as they fall due. The Group arranges and negotiates
financing with financial institutions and maintains a certain level of standby
credit facilities to reduce the liquidity risk.
At 31 December 2021, the Group has standby credit facilities with several PRC
financial institutions which provide the Group to borrow up to RMB441,559
million (2020: RMB443,966 million) on an unsecured basis, at a weighted
average interest rate of 2.81% per annum (2020: 2.85%). At 31 December 2021,
the Group's outstanding borrowings under these facilities were RMB11,700
million (2020: RMB4,041 million) and were included in loans.
The following table sets out the remaining contractual maturities at the
balance sheet date of the Group's financial liabilities, which are based on
contractual undiscounted cash flows (including interest payments computed
using contractual rates or, if floating, based on prevailing rates at the
balance sheet date) and the earliest date the Group would be required to
repay:
At 31 December 2021
Carrying Total Within one More than More than More than
amount contractual year or on one year but two years but five years
undiscounted demand less than less than
cash flow two years five years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term loans 27,366 27,787 27,787 - - -
Derivative financial liabilities 3,223 3,223 3,223 - - -
Bills payable 11,721 11,721 11,721 - - -
Accounts payable 203,919 203,919 203,919 - - -
Other payables and employee benefits payable 128,749 128,749 128,749 - - -
Non-current liabilities due within one year 28,651 29,554 29,554 - - -
Long-term loans 49,341 53,704 1,230 19,350 27,786 5,338
Debentures payable 42,649 47,553 1,195 30,645 10,443 5,270
Lease liabilities 170,233 280,652 - 12,030 35,412 233,210
Total 665,852 786,862 407,378 62,025 73,641 243,818
64 FINANCIAL INSTRUMENTS (Continued)
Liquidity risk (Continued)
At 31 December 2020
Carrying Total More than More than Within one More than
amount contractual one year but two years but year or on five years
undiscounted less than less than demand
cash flow two years five years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term loans 20,756 20,950 20,950 - - -
Derivative financial liabilities 4,826 4,826 4,826 - - -
Bills payable 10,394 10,394 10,394 - - -
Accounts payable 151,514 151,514 151,514 - - -
Other payables and employee benefits payable 92,141 92,141 92,141 - - -
Non-current liabilities due within one year 22,494 23,880 23,880 - - -
Debentures payable due within one year 3,018 3,024 3,024 - - -
Long-term loans 45,459 49,074 936 4,638 41,009 2,491
Debentures payable 38,356 44,791 1,240 8,044 29,514 5,993
Lease liabilities 171,740 312,544 - 15,456 43,513 253,575
Total 560,698 713,138 308,905 28,138 114,036 262,059
Management believes that the Group's current cash on hand, expected cash flows
from operations and available standby credit facilities from financial
institutions will be sufficient to meet the Group's short-term and long-term
capital requirements.
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates and interest rates. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
(a) Currency risk
Currency risk arises on financial instruments that are denominated in a
currency other than the functional currency in which they are measured.
The Group does not have significant financial instruments that are denominated
in foreign currencies other than the functional currencies of respective
entities as at 31 December, and consequently does not have significant
exposure to foreign currency risk.
(b) Interest rate risk
The Group's interest rate risk exposure arises primarily from its short-term
and long-term loans. Loans carrying interest at variable interest rates and at
fixed interest rates expose the Group to cash flow interest rate risk and fair
value interest rate risk respectively. The interest rates and terms of
repayment of short-term and long-term loans of the Group are disclosed in Note
22 and Note 31, respectively.
At 31 December 2021, it is estimated that a general increase/decrease of 100
basis points in variable interest rates, with all other variables held
constant, would decrease/increase the Group's net profit for the year by
approximately RMB254 million (2020: decrease/increase RMB245 million). This
sensitivity analysis has been determined assuming that the change of interest
rates was applied to the Group's debts outstanding at the balance sheet date
with exposure to cash flow interest rate risk. The analysis is performed on
the same basis for 2020.
(c) Commodity price risk
The Group engages in oil and gas operations and is exposed to commodity price
risk related to price volatility of crude oil, refined oil products and
chemical products. The fluctuations in prices of crude oil, refined oil
products and chemical products could have significant impact on the Group. The
Group uses derivative financial instruments, including commodity futures and
swaps contracts, to manage a portion of such risk.
At 31 December 2021, the Group had certain commodity contracts of crude oil,
refined oil products and chemical products designated as qualified cash flow
hedges and economic hedges. At 31 December 2021, the fair value of such
derivative hedging financial instruments is derivative financial assets of
RMB18,359 million (2020: RMB12,353 million) and derivative financial
liabilities of RMB3,214 million (2020: RMB4,808 million).
At 31 December 2021, it is estimated that a general increase/decrease of USD10
per barrel in basic price of derivative financial instruments, with all other
variables held constant, would impact the fair value of derivative financial
instruments, which would increase/decrease the Group's net profit for the year
by approximately RMB2,996 million (2020: increase/decrease RMB3,592 million),
and decrease/increase the Group's other comprehensive income by approximately
RMB1,160 million (2020: increase/decrease RMB10,379 million). This sensitivity
analysis has been determined assuming that the change in prices had occurred
at the balance sheet date and the change was applied to the Group's derivative
financial instruments at that date with exposure to commodity price risk. The
analysis is performed on the same basis for 2020.
64 FINANCIAL INSTRUMENTS (Continued)
Fair values
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments
measured at fair value at the balance sheet date across the three levels of
the fair value hierarchy. With the fair value of each financial instrument
categorised in its entirely based on the lowest level of input that is
significant to that fair value measurement. The levels are defined as follows:
‧ Level 1 (highest level): fair values measured using quoted prices
(unadjusted) in active markets for identical financial instruments.
‧ Level 2: fair values measured using quoted prices in active markets
for similar financial instruments, or using valuation techniques in which all
significant inputs are directly or indirectly based on observable market data.
‧ Level 3 (lowest level): fair values measured using valuation
techniques in which any significant input is not based on observable market
data.
At 31 December 2021
The Group
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Financial assets held for trading:
- Derivative financial assets 5,883 12,488 - 18,371
Receivables financing:
- Receivables financing - - 5,939 5,939
Other equity instrument investments:
- Other Investments 179 - 588 767
6,062 12,488 6,527 25,077
Liabilities
Derivative financial liabilities:
- Derivative financial liabilities 804 2,419 - 3,223
804 2,419 - 3,223
At 31 December 2020
The Group
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Financial assets held for trading:
- Equity investments, listed and at quoted market price 1 - - 1
Derivative financial assets:
- Derivative financial assets 9,628 2,900 - 12,528
Receivables financing:
- Receivables financing - - 8,735 8,735
Other equity instrument investments:
- Other Investments 149 - 1,376 1,525
9,778 2,900 10,111 22,789
Liabilities
Derivative financial liabilities:
- Derivative financial liabilities 2,471 2,355 - 4,826
2,471 2,355 - 4,826
During the year ended 31 December 2021 and 2020, there was no transfer between
instruments in Level 1 and Level 2.
Management of the Group uses discounted cash flow model with inputted interest
rate and commodity index, which were influenced by historical fluctuation and
the probability of market fluctuation, to evaluate the fair value of the
structured deposits and receivables financing classified as Level 3 financial
assets.
64 FINANCIAL INSTRUMENTS (Continued)
Fair values (Continued)
(ii) Fair values of financial instruments carried at other than fair value
The fair values of the Group's financial instruments carried at other than
fair value (other than long-term indebtedness and investments in unquoted
equity securities) approximate their carrying amounts due to the short-term
maturity of these instruments. The fair values of long-term indebtedness are
estimated by discounting future cash flows using current market interest rates
offered to the Group for debt with substantially the same characteristic and
maturities range from 0.30% to 4.65% (2020: from 0.77% to 4.65%). The
following table presents the carrying amount and fair value of the Group's
long-term indebtedness other than loans from Sinopec Group Company and fellow
subsidiaries at 31 December 2021 and 31 December 2020:
At 31 December At 31 December
2021 2020
RMB million RMB million
Carrying amount 88,593 76,674
Fair value 85,610 74,282
The Group has not developed an internal valuation model necessary to estimate
the fair value of loans from Sinopec Group Company and fellow subsidiaries as
it is not considered practicable to estimate their fair value because the cost
of obtaining discount and borrowing rates for comparable borrowings would be
excessive based on the Reorganisation of the Group, its existing capital
structure and the terms of the borrowings.
Except for the above items, the financial assets and liabilities of the Group
are carried at amounts not materially different from their fair values at 31
December 2021 and 31 December 2020.
65 BASIC AND DILUTED EARNINGS PER SHARE
(i) Basic earnings per share
Basic earnings per share is calculated by the net profit attributable to
equity shareholders of the Company and the weighted average number of
outstanding ordinary shares of the Company:
2021 2020
Net profit attributable to equity shareholders of the Company (RMB million) 71,208 33,271
Weighted average number of outstanding ordinary shares of the Company 121,071 121,071
(million)
Basic earnings per share (RMB/share) 0.588 0.275
The calculation of the weighted average number of ordinary shares is as
follows:
2021 2020
Weighted average number of outstanding ordinary shares of the Company at 1 121,071 121,071
January (million)
Weighted average number of outstanding ordinary shares of the Company at 31 121,071 121,071
December (million)
(ii) Diluted earnings per share
There are no potential dilutive ordinary shares, and diluted earnings per
share are equal to the basic earning per share.
66 RETURN ON NET ASSETS AND EARNINGS PER SHARE
In accordance with "Regulation on the Preparation of Information Disclosures
of Companies Issuing Public Shares No.9 - Calculation and Disclosure of the
Return on Net Assets and Earnings Per Share" (2010 revised) issued by the CSRC
and relevant accounting standards, the Group's return on net assets and
earnings/(loss) per share are calculated as follows:
2021 2020
Weighted Basic Diluted Weighted Basic Diluted
average earnings earnings average earnings earnings
return on per share per share return on per share per share
net assets net assets
(%) (RMB/Share) (RMB/Share) (%) (RMB/Share) (RMB/Share)
Net profit attributable to the Company's ordinary 9.35 0.588 0.588 4.46 0.275 0.275
equity shareholders
Net profit/(loss) deducted extraordinary gains and 9.49 0.597 0.597 (0.21) (0.013) (0.013)
losses attributable to the Company's ordinary
equity shareholders
67 EXTRAORDINARY GAINS AND LOSSES
Pursuant to "Explanatory Announcement No.1 on Information Disclosure for
Companies Offering Their Securities to the Public- Extraordinary Gain and
Loss" (2008), the extraordinary gains and losses of the Group are as follows:
2021 2020
RMB million RMB million
Extraordinary (gains)/losses for the year:
Net gains on disposal of non-current assets (665) (973)
Donations 165 301
Government grants (3,085) (8,605)
Gain on holding and disposal of business and various investments (259) (37,520)
Other non-operating losses, net 4,720 2,992
Net (loss)/profit acquired through business combination under common control 101 (472)
during the reporting period
977 (44,277)
Tax effect (72) 6,736
Total 905 (37,541)
Attributable to:
Equity shareholders of the Company 1,012 (34,836)
Minority interests (107) (2,705)
REPORT OF THE INTERNATIONAL AUDITOR
KPMG 畢馬威會計師事務所
8th Floor, Prince's Building 香港中環太子大廈8樓
Central, Hong Kong 香港郵政總局信箱50號
G P O Box 50, Hong Kong 電話+852 2522 6022
Telephone +852 2522 6022 傳真+852 2845 2588
Fax +852 2845 2588 網址kpmg.com/cn
Internet kpmg.com/cn
Independent auditor's report
To the shareholders of China Petroleum & Chemical Corporation
(established in the People's Republic of China with limited liability)
Opinion
We have audited the consolidated financial statements of China Petroleum &
Chemical Corporation ("the Company") and its subsidiaries ("the Group") set
out on pages 146 to 203, which comprise the consolidated statement of
financial position as at 31 December 2021, the consolidated income statement,
the consolidated statement of comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year
then ended and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair
view of the consolidated financial position of the Group as at 31 December
2021 and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial
Reporting Standards ("IFRSs") issued by the International Accounting Standards
Board ("IASB") and have been properly prepared in compliance with the
disclosure requirements of the Hong Kong Companies Ordinance.
Basis for opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing
("HKSAs") issued by the Hong Kong Institute of Certified Public Accountants
("HKICPA"). Our responsibilities under those standards are further described
in the Auditor's responsibilities for the audit of the consolidated financial
statements section of our report. We are independent of the Group in
accordance with the HKICPA's Code of Ethics for Professional Accountants ("the
Code") together with any ethical requirements that are relevant to our audit
of the consolidated financial statements in the People's Republic of China,
and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matter
Key audit matter is the matter that, in our professional judgment, was of most
significance in our audit of the consolidated financial statements of the
current period. The matter was addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this matter.
Assessment of impairment of property, plant and equipment relating to oil and
gas producing activities
Refer to notes 2(g), 2(n), 8, 17 and 44 to the consolidated financial
statements
The Key Audit Matter How the matter was addressed in our audit
The Company reported property, plant and equipment of Renminbi ("RMB") 598,925 The following are the primary procedures we performed to address this key
million as at 31 December 2021, a portion of which related to oil and gas audit matter:
producing activities. The Company reported impairment losses of RMB2,467
million for the property, plant and equipment relating to oil and gas
producing activities for the year ended 31 December 2021.
‧ we evaluated the design and tested the operating effectiveness of
certain internal controls related to the process for impairment assessment of
property, plant and equipment relating to oil and gas producing activities;
The Company groups property, plant and equipment relating to oil and gas
producing activities into cash-generating units ("CGUs") for impairment
assessment. The Company compares the carrying amount of individual CGU with
its value in use, using a discounted cash flow forecast, which was prepared ‧ we assessed the competence, capabilities and objectivity of the
based on the future production profiles included in the oil and gas reserves Company's reserves specialists and evaluated the methodology adopted by them
reports, to determine the impairment loss to be recognised. in estimating the oil and gas reserves against the recognised industry
standards;
We identified assessment of impairment of property, plant and equipment
relating to oil and gas producing activities as a key audit matter. The value ‧ we compared future selling prices for crude oil and natural gas
in use amounts of these CGUs are sensitive to the changes to future selling used in the discounted cash flow forecasts with the Company's business plans
prices and production costs for crude oil and natural gas, future production and forecasts by external analysts;
profiles, and discount rates. Therefore a higher degree of subjective auditor
judgment was required to evaluate the Company's impairment assessment of
property, plant and equipment relating to oil and gas producing activities.
‧ we compared future production costs and future production profiles
used in the discounted cash flow forecasts with oil and gas reserves reports
issued by the reserves specialists; and
‧ we involved valuation professionals with specialised skills and
knowledge, who assisted in assessing the discount rates applied in the
discounted cash flow forecasts against a discount rate range that was
independently developed using publicly available market data for comparable
companies in the same industry.
Information other than the consolidated financial statements and auditor's
report thereon
The directors are responsible for the other information. The other information
comprises all the information included in the annual report, other than the
consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the directors for the consolidated financial statements
The directors are responsible for the preparation of the consolidated
financial statements that give a true and fair view in accordance with IFRSs
issued by the IASB and the disclosure requirements of the Hong Kong Companies
Ordinance and for such internal control as the directors determine is
necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
The directors are assisted by the Audit Committee in discharging their
responsibilities for overseeing the Group's financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion. This report is made solely to you, as a body, and
for no other purpose. We do not assume responsibility towards or accept
liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with HKSAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
‧ Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations or the override of internal control.
‧ Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances but
not for the purpose of expressing an opinion on the effectiveness of the
Group's internal control.
‧ Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
‧ Conclude on the appropriateness of the directors' use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor's report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
‧ Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
‧ Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Audit Committee with a statement that we have complied
with relevant ethical requirements regarding independence and communicate with
them all relationships and other matters that may reasonably be thought to
bear on our independence and, where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with the Audit Committee, we determine those
matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's
report is Ho Ying Man, Simon.
KPMG
Certified Public Accountants
8th Floor, Prince's Building
10 Chater Road
Central, Hong Kong
25 March 2022
(B) FINANCIAL STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS")
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2021
(Amounts in million, except per share data)
Note Year ended 31 December
2021 2020
RMB RMB
Revenue
Revenue from primary business 3 2,679,500 2,048,654
Other operating revenues 4 61,384 56,070
2,740,884 2,104,724
Operating expenses
Purchased crude oil, products and operating supplies and expenses (2,076,665) (1,589,821)
Selling, general and administrative expenses 5 (54,978) (53,668)
Depreciation, depletion and amortisation (115,680) (107,461)
Exploration expenses, including dry holes (12,382) (9,716)
Personnel expenses 6 (103,492) (87,525)
Taxes other than income tax 7 (259,032) (235,018)
Impairment losses on trade and other receivables (2,311) (2,066)
Other operating income/(expenses), net 8 (21,716) (5,780)
Total operating expenses (2,646,256) (2,091,055)
Operating profit 94,628 13,669
Finance costs
Interest expense 9 (15,018) (15,198)
Interest income 5,732 4,803
Foreign currency exchange gains, net 276 885
Net finance costs (9,010) (9,510)
Investment income 10 298 37,744
Share of profits less losses from associates and joint ventures 21,22 23,253 6,712
Profit before taxation 109,169 48,615
Income tax expense 11 (23,318) (6,344)
Profit for the year 85,851 42,271
Attributable to:
Shareholders of the Company 71,975 33,443
Non-controlling interests 13,876 8,828
Profit for the year 85,851 42,271
Earnings per share:
Basic 16 0.594 0.276
Diluted 16 0.594 0.276
The notes on pages 153 to 203 form part of these consolidated financial
statements. Details of dividends payable to shareholders of the Company
attributable to the profit for the year are set out in Note 14.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2021
(Amounts in million)
Note Year ended 31 December
2021 2020
RMB RMB
Profit for the year 85,851 42,271
Other comprehensive income: 15
Items that may not be reclassified subsequently to profit or loss
Equity investments at fair value through other comprehensive income (4) (22)
Total items that may not be reclassified subsequently to profit or loss (4) (22)
Items that may be reclassified subsequently to profit or loss
Cost of hedging reserve (220) 162
Share of other comprehensive income of associates and joint ventures 441 (2,441)
Cash flow hedges 19,018 7,073
Foreign currency translation differences (1,728) (4,457)
Total items that may be reclassified subsequently to profit or loss 17,511 337
Total other comprehensive income 17,507 315
Total comprehensive income for the year 103,358 42,586
Attributable to:
Shareholders of the Company 89,549 34,837
Non-controlling interests 13,809 7,749
Total comprehensive income for the year 103,358 42,586
The notes on pages 153 to 203 form part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
(Amounts in million)
Note 31 December 31 December
2021 2020
RMB RMB
Non-current assets
Property, plant and equipment, net 17 598,925 593,615
Construction in progress 18 155,939 125,525
Right-of-use assets 19 268,408 266,012
Goodwill 20 8,594 8,620
Interest in associates 21 148,729 136,163
Interest in joint ventures 22 60,450 52,179
Financial assets at fair value through other comprehensive income 26 767 1,525
Deferred tax assets 29 19,389 25,054
Long-term prepayments and other assets 23 70,030 74,543
Total non-current assets 1,331,231 1,283,236
Current assets
Cash and cash equivalents 108,590 87,559
Time deposits with financial institutions 113,399 100,498
Financial assets at fair value through profit or loss - 1
Derivative financial assets 24 18,371 12,528
Trade accounts receivable 25 34,861 35,439
Financial assets at fair value through other comprehensive income 26 5,939 8,735
Inventories 27 207,433 152,191
Prepaid expenses and other current assets 28 69,431 58,709
Total current assets 558,024 455,660
Current liabilities
Short-term debts 30 35,252 23,769
Loans from Sinopec Group Company and fellow subsidiaries 30 2,873 5,264
Lease liabilities 31 15,173 15,293
Derivative financial liabilities 24 3,223 4,826
Trade accounts payable and bills payable 32 215,640 161,908
Contract liabilities 33 124,622 126,241
Other payables 34 239,688 179,108
Income tax payable 4,809 6,586
Total current liabilities 641,280 522,995
Net current liabilities 83,256 67,335
Total assets less current liabilities 1,247,975 1,215,901
Non-current liabilities
Long-term debts 30 78,300 72,037
Loans from Sinopec Group Company and fellow subsidiaries 30 13,690 11,778
Lease liabilities 31 170,233 171,740
Deferred tax liabilities 29 7,910 8,124
Provisions 35 43,525 45,552
Other long-term liabilities 19,243 18,968
Total non-current liabilities 332,901 328,199
915,074 887,702
Equity
Share capital 36 121,071 121,071
Reserves 653,111 625,254
Total equity attributable to shareholders of the Company 774,182 746,325
Non-controlling interests 140,892 141,377
Total equity 915,074 887,702
Approved and authorised for issue by the board of directors on 25 March 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The notes on pages 153 to 203 form part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
(Amounts in million)
Share Capital Share Statutory Discretionary Other Retained Total equity Non- Total
capital reserve premium surplus surplus reserves earnings attributable to controlling equity
reserve reserve shareholders interests
of the
Company
RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
Balance at 31 December 2019 121,071 29,730 55,850 90,423 117,000 1,941 322,931 738,946 138,358 877,304
Adjustment for business combination of entities - 4,773 - - - - - 4,773 1 4,774
under common control (Note 38)
Balance at 1 January 2020 121,071 34,503 55,850 90,423 117,000 1,941 322,931 743,719 138,359 882,078
Profit for the year - - - - - - 33,443 33,443 8,828 42,271
Other comprehensive income (Note 15) - - - - - 1,406 (12) 1,394 (1,079) 315
Total comprehensive income for the year - - - - - 1,406 33,431 34,837 7,749 42,586
Amounts transferred to initial carrying amount of - - - - - (47) - (47) 48 1
hedged items
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2019 (Note 14) - - - - - - (23,004) (23,004) - (23,004)
Interim dividend for 2020 (Note 14) - - - - - - (8,475) (8,475) - (8,475)
Appropriation (Note (a)) - - - 1,857 - - (1,857) - - -
Distributions to non-controlling interests - - - - - - - - (6,726) (6,726)
Contributions to subsidiaries from - - - - - - - - 3,325 3,325
non-controlling interests
Distribution to SAMC in the Acquisition of - (972) - - - - - (972) 972 -
Baling Branch of SAMC
Total contributions by and distributions to owners - (972) - 1,857 - - (33,336) (32,451) (2,429) (34,880)
Transaction with non-controlling interests - (138) - - - - - (138) 13 (125)
Total transactions with owners - (1,110) - 1,857 - - (33,336) (32,589) (2,416) (35,005)
Others - 870 - - - 200 (665) 405 (2,363) (1,958)
Balance at 31 December 2020 121,071 34,263 55,850 92,280 117,000 3,500 322,361 746,325 141,377 887,702
The notes on pages 153 to 203 form part of these consolidated financial
statements.
Share Capital Share Statutory Discretionary Other Retained Total equity Non- Total
capital reserve premium surplus surplus reserves earnings attributable to controlling equity
reserve reserve shareholders interests
of the
Company
RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
Balance at 1 January 2021 121,071 34,263 55,850 92,280 117,000 3,500 322,361 746,325 141,377 887,702
Profit for the year - - - - - - 71,975 71,975 13,876 85,851
Other comprehensive income (Note 15) - - - - - 17,574 - 17,574 (67) 17,507
Total comprehensive income for the year - - - - - 17,574 71,975 89,549 13,809 103,358
Amounts transferred to initial carrying amount of - - - - - (19,302) - (19,302) (648) (19,950)
hedged items
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2020 (Note 14) - - - - - - (15,739) (15,739) - (15,739)
Interim dividend for 2021 (Note 14) - - - - - - (19,371) (19,371) - (19,371)
Appropriation (Note (a)) - - - 3,944 - - (3,944) - - -
Distributions to non-controlling interests - - - - - - - - (8,982) (8,982)
Contributions to subsidiaries from - - - - - - - - 1,973 1,973
non-controlling interests
Distribution to sellers in the business - (6,124) - - - - - (6,124) - (6,124)
combination of entities under common
control (Note 38)
Total contributions by and distributions to owners - (6,124) - 3,944 - - (39,054) (41,234) (7,009) (48,243)
Transaction with non-controlling interests - (1,396) - - - - - (1,396) (6,796) (8,192)
Total transactions with owners - (7,520) - 3,944 - - (39,054) (42,630) (13,805) (56,435)
Others - 319 - - - 723 (802) 240 159 399
Balance at 31 December 2021 121,071 27,062 55,850 96,224 117,000 2,495 354,480 774,182 140,892 915,074
Notes:
(a) According to the PRC Company Law and the Articles of Association of
the Company, the Company is required to transfer 10% of its net profit
determined in accordance with the accounting policies complying with
Accounting Standards for Business Enterprises ("CASs"), adopted by the Group
to statutory surplus reserve. In the event that the reserve balance reaches
50% of the registered capital, no transfer is required. The transfer to this
reserve must be made before distribution of a dividend to shareholders.
Statutory surplus reserve can be used to make good previous years' losses, if
any, and may be converted into share capital by issuing of new shares to
shareholders in proportion to their existing shareholdings or by increasing
the par value of the shares currently held by them, provided that the balance
after such issue is not less than 25% of the registered capital.
During the year ended 31 December 2021, the Company transferred RMB3,944
million (2020: RMB1,857 million) to the statutory surplus reserve, being 10%
of the current year's net profit determined in accordance with the accounting
policies complying with CASs.
(b) The usage of the discretionary surplus reserve is similar to that of
statutory surplus reserve.
(c) As at 31 December 2021, the amount of retained earnings available
for distribution was RMB116,440 million (2020: RMB115,849 million), being the
amount determined in accordance with CASs. According to the Articles of
Association of the Company, the amount of retained earnings available for
distribution to shareholders of the Company is lower of the amount determined
in accordance with the accounting policies complying with CASs and the amount
determined in accordance with the accounting policies complying with
International Financial Reporting Standards ("IFRS").
(d) The capital reserve represents (i) the difference between the total
amount of the par value of shares issued and the amount of the net assets
transferred from Sinopec Group Company in connection with the Reorganisation
(Note 1); and (ii) the difference between the considerations paid over or
received the amount of the net assets of entities and related operations
acquired from or sold to Sinopec Group Company and non-controlling interests.
(e) The application of the share premium account is governed by Sections
167 and 168 of the PRC Company Law.
The notes on pages 153 to 203 form part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2021
(Amounts in million)
Note Year ended 31 December
2021 2020
RMB RMB
Net cash generated from operating activities (a) 225,174 168,520
Investing activities
Capital expenditure (127,965) (118,321)
Exploratory wells expenditure (16,956) (13,315)
Purchase of investments (4,935) (6,040)
Payment for financial assets at fair value through profit or loss (8,150) (6,700)
Proceeds from settlement of financial assets at fair value through profit or 8,248 10,000
loss
Payment for acquisition of subsidiary, net of cash acquired (1,106) (340)
Proceeds from disposal of investments 6,769 51,520
Proceeds from disposal of property, plant, equipment and other non-current 1,478 2,656
assets
Increase in time deposits with maturities over three months (50,844) (84,689)
Decrease in time deposits with maturities over three months 34,298 54,950
Interest received 3,372 2,305
Investment and dividend income received 10,134 11,510
Proceeds from/(payments of) other investing activities 459 (6,186)
Net cash used in investing activities (145,198) (102,650)
Financing activities
Proceeds from bank and other loans 356,459 558,680
Repayments of bank and other loans (338,232) (540,015)
Contributions to subsidiaries from non-controlling interests 1,001 4,219
Dividends paid by the Company (35,110) (31,479)
Distributions by subsidiaries to non-controlling interests (8,068) (4,821)
Interest paid (5,849) (7,512)
Payments made to acquire non-controlling interests (8,198) (1,121)
Repayments of lease liabilities (19,412) (15,327)
Proceeds from other financing activities 133 700
Repayments of other financing activities (666) (834)
Net cash used in financing activities (57,942) (37,510)
Net increase in cash and cash equivalents 22,034 28,360
Cash and cash equivalents at 1 January 87,559 60,438
Effect of foreign currency exchange rate changes (1,003) (1,239)
Cash and cash equivalents at 31 December 108,590 87,559
The notes on pages 153 to 203 form part of these consolidated financial
statements.
NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2021
(Amounts in million)
(a) Reconciliation from profit before taxation to net
cash generated from operating activities
Year ended 31 December
2021 2020
RMB RMB
Operating activities
Profit before taxation 109,169 48,615
Adjustments for:
Depreciation, depletion and amortisation 115,680 107,461
Dry hole costs written off 7,702 5,928
Share of profits from associates and joint ventures (23,253) (6,712)
Investment income (298) (37,744)
Interest income (5,732) (4,803)
Interest expense 15,018 15,198
(Gain)/loss on foreign currency exchange rate changes and derivative financial (3,723) 2,003
instruments
Loss/(gain) on disposal of property, plant, equipment and other non-current 3,062 (398)
assets, net
Impairment losses on assets 13,165 26,087
Impairment losses on trade and other receivables 2,311 2,066
233,101 157,701
Net changes from:
Accounts receivable and other current assets (8,177) (17,610)
Inventories (58,372) 22,407
Accounts payable and other current liabilities 82,408 15,169
248,960 177,667
Income tax paid (23,786) (9,147)
Net cash generated from operating activities 225,174 168,520
The notes on pages 153 to 203 form part of these consolidated financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2021
1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION
Principal activities
China Petroleum & Chemical Corporation (the "Company") is an energy and
chemical company incorporated in the People's Republic of China (the "PRC")
that, through its subsidiaries (hereinafter collectively referred to as the
"Group"), engages in oil and gas and chemical operations. Oil and gas
operations consist of exploring for, developing and producing crude oil and
natural gas; transporting crude oil and natural gas by pipelines; refining
crude oil into finished petroleum products; and marketing crude oil, natural
gas and refined petroleum products. Chemical operations include the
manufacture and marketing of a wide range of chemicals for industrial uses.
Organisation
The Company was established in the PRC on 25 February 2000 as a joint stock
limited company as part of the reorganisation (the "Reorganisation") of China
Petrochemical Corporation ("Sinopec Group Company"), the ultimate holding
company of the Group and a ministry-level enterprise under the direct
supervision of the State Council of the PRC. Prior to the incorporation of the
Company, the oil and gas and chemical operations of the Group were carried on
by oil administration bureaux, petrochemical and refining production
enterprises and sales and marketing companies of Sinopec Group Company.
As part of the Reorganisation, certain of Sinopec Group Company's core oil and
gas and chemical operations and businesses together with the related assets
and liabilities were transferred to the Company. On 25 February 2000, in
consideration for Sinopec Group Company transferring such oil and gas and
chemical operations and businesses and the related assets and liabilities to
the Company, the Company issued 68.8 billion domestic state-owned ordinary
shares with a par value of RMB1.00 each to Sinopec Group Company. The shares
issued to Sinopec Group Company on 25 February 2000 represented the entire
registered and issued share capital of the Company on that date. The oil and
gas and chemical operations and businesses transferred to the Company were
related to (i) the exploration, development and production of crude oil and
natural gas, (ii) the refining, transportation, storage and marketing of crude
oil and petroleum products, and (iii) the production and sales of chemicals.
Basis of preparation
The accompanying consolidated financial statements have been prepared in
accordance with all applicable IFRS as issued by the International Accounting
Standards Board ("IASB"). IFRS includes International Accounting Standards
("IAS") and related interpretations ("IFRIC"). These consolidated financial
statements also comply with the applicable disclosure provisions of the Rules
Governing the Listing of Securities on the Stock Exchange of Hong Kong
Limited. A summary of the significant accounting policies adopted by the Group
are set out in Note 2.
The accounting policies adopted are consistent with those of the previous
financial year, except for the adoption of new and amended standards as set
out below.
(a) New and amended standards and interpretations adopted by the Group
The IASB has issued the following amendments to IFRSs that are first effective
for the current accounting period of the Group:
‧ Amendment to IFRS 16, COVID-19-related rent concessions
‧ Amendment to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, Interest rate
benchmark reform - phase 2
None of these developments have had a material effect on how the Group's
results and financial position for the current or prior periods have been
prepared or presented. The Group has not applied any new standard or
interpretation that is not yet effective for the current accounting period.
(b) New and amended standards and interpretations not yet adopted by the
Group
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2021 reporting periods and have not been
early adopted by the Group. These standards are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
The preparation of the consolidated financial statements in accordance with
IFRS requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the period. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgements about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results could differ from
those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Key assumptions and estimation made by management in the application of IFRS
that have significant effect on the consolidated financial statements and the
major sources of estimation uncertainty are disclosed in Note 44.
2 SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The consolidated financial statements comprise the Company and its
subsidiaries, and interest in associates and joint ventures.
(i) Subsidiaries and non-controlling interests
Subsidiaries are those entities controlled by the Group. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns
through its power over the entity. When assessing whether the Group has power,
only substantive rights (held by the Group and other parties) are considered.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control effectively commences until
the date that control effectively ceases.
Non-controlling interests at the date of statement of financial position,
being the portion of the net assets of subsidiaries attributable to equity
interests that are not owned by the Company, whether directly or indirectly
through subsidiaries, are presented in the consolidated statement of financial
position and consolidated statement of changes in equity within equity,
separately from equity attributable to the shareholders of the Company.
Non-controlling interests in the results of the Group are presented on the
face of the consolidated income statement and the consolidated statement of
comprehensive income as an allocation of the total profit or loss and total
comprehensive income for the year between non-controlling interests and the
shareholders of the Company.
Changes in the Group's interests in a subsidiary that do not result in a loss
of control are accounted for as equity transactions, whereby adjustments are
made to the amounts of controlling and non-controlling interests within
consolidated equity to reflect the change in relative interests, but no
adjustments are made to goodwill and no gain or loss is recognised.
If a business combination involving entities not under common control is
achieved in stages, the acquisition date carrying value of the acquirer's
previously held equity interest in the acquiree is remeasured to fair value at
the acquisition date. Any gains or losses arising from such remeasurement are
recognised in the consolidated income statement.
When the Group loses control of a subsidiary, it is accounted for as a
disposal of the entire interest in that subsidiary, with a resulting gain or
loss being recognised in profit or loss. Any interest retained in that former
subsidiary at the date when control is lost is recognised at fair value and
this amount is regarded as the fair value on initial recognition of a
financial asset (Note 2(j)) or, when appropriate, the cost on initial
recognition of an investment in an associate or joint venture (Note 2(a)(ii)).
In the Company's statement of financial position, investments in subsidiaries
are stated at cost less impairment losses (Note 2(n)).
The particulars of the Group's principal subsidiaries are set out in Note 42.
(ii) Associates and joint ventures
An associate is an entity, not being a subsidiary, in which the Group
exercises significant influence over its management. Significant influence is
the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies.
The investments in joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights and
obligations each investor has rather than the legal structure of the joint
arrangement. A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the
arrangement.
Investments in associates and joint ventures are accounted for in the
consolidated and separate financial statements using the equity method from
the date that significant influence or joint control commences until the date
that significant influence or joint control ceases. Under the equity method,
the investment is initially recorded at cost and adjusted thereafter for the
post acquisition change in the Group's share of the investee's net assets and
any impairment loss relating to the investment (Notes 2(i) and (n)).
The Group's share of the post-acquisition, post-tax results of the investees
and any impairment losses for the year are recognised in the consolidated
income statement, whereas the Group's share of the post-acquisition, post-tax
items of the investees' other comprehensive income is recognised in the
consolidated statement of comprehensive income.
When the Group's share of losses exceeds its interest in the associate or the
joint venture, the Group's interest is reduced to nil and recognition of
further losses is discontinued except to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of the
investee. For this purpose, the Group's interest is the carrying amount of the
investment under the equity method, together with any other long-term
interests that in substance form part of the Group's net investment in the
associate or the joint venture, after applying the expected credit losses
("ECLs") model to such other long-term interests where applicable.
When the Group ceases to have significant influence over an associate or joint
control over a joint venture, it is accounted for as a disposal of the entire
interest in that investee, with a resulting gain or loss being recognised in
profit or loss. Any interest retained in that former investee at the date when
significant influence or joint control is lost is recognised at fair value and
this amount is regarded as the fair value on initial recognition of a
financial asset (see Note 2(j)) or, when appropriate, the cost on initial
recognition of an investment in an associate.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Basis of consolidation (Continued)
(iii) Transactions eliminated on consolidation
Inter-company balances and transactions and any unrealised gains arising from
inter-company transactions are eliminated on consolidation. Unrealised gains
arising from transactions with associates and joint ventures are eliminated to
the extent of the Group's interest in the entity. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
(iv) Merger accounting for common control combination
The consolidated financial statements incorporate the financial statements of
the combining entities or businesses in which the common control combination
occurs as if they had been combined from the date when the combining entities
or businesses first came under the control of the controlling party. The net
assets of the combining entities or businesses are combined using the existing
book values from the controlling parties' perspective. No amount is recognised
as consideration for goodwill or excess of acquirers' interest in the net fair
value of acquiree's identifiable assets, liabilities and contingent
liabilities over cost at the time of common control combination, to the extent
of the continuation of the controlling party's interest.
The consolidated income statement includes the results of each of the
combining entities or businesses from the earliest date presented or since the
date when the combining entities or businesses first came under the common
control, where there is a shorter period, regardless of the date of the common
control combination. The comparative amounts in the consolidated financial
statements are presented as if the entities or businesses had been combined at
the beginning of the earliest period presented or when they first came under
common control, whichever is shorter.
A uniform set of accounting policies is adopted by those entities. All
intra-Group transactions, balances and unrealised gains on transactions
between combining entities or businesses are eliminated on consolidation.
Transaction costs, including professional fees, registration fees, costs of
furnishing information to shareholders, costs or losses incurred in combining
operations of the previously separate businesses, etc., incurred in relation
to the common control combination that is to be accounted for by using merger
accounting is recognised as an expense in the period in which it is incurred.
(b) Translation of foreign currencies
The presentation currency of the Group is Renminbi. Foreign currency
transactions during the year are translated into Renminbi at the applicable
rates of exchange quoted by the People's Bank of China ("PBOC") prevailing on
the transaction dates. Foreign currency monetary assets and liabilities are
translated into Renminbi at the PBOC's rates at the date of the statement of
financial position.
Exchange differences, other than those capitalised as construction in
progress, are recognised as income or expense in the "finance costs" section
of the consolidated income statement.
The results of foreign operations are translated into Renminbi at the
applicable rates quoted by the PBOC prevailing on the transaction dates. The
statement of financial position items, including goodwill arising on
consolidation of foreign operations are translated into Renminbi at the
closing foreign exchange rates at the date of the statement of financial
position. The income and expenses of foreign operation are translated into
Renminbi at the spot exchange rates or an exchange rate that approximates the
spot exchange rates on the transaction dates. The resulting exchange
differences are recognised in other comprehensive income and accumulated in
equity in the other reserves.
On disposal of a foreign operation, the cumulative amount of the exchange
differences relating to that foreign operation is reclassified from equity to
the consolidated income statement when the profit or loss on disposal is
recognised.
(c) Cash and cash equivalents
Cash equivalents consist of time deposits with financial institutions with an
initial term of less than three months when purchased. Cash equivalents are
stated at cost, which approximates fair value.
(d) Trade, bills and other receivables
Trade, bills and other receivables are recognised initially at their
transaction price, unless they contain significant financing components when
they are recognised at fair value. They are subsequently measured at amortised
cost using the effective interest method, less loss allowances for ECLs (Note
2(j)). Trade, bills and other receivables are derecognised if the Group's
contractual rights to the cash flows from these financial assets expire or if
the Group transfers these financial assets to another party without retaining
control or substantially all risks and rewards of the assets.
(e) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
mainly includes the cost of purchase computed using the weighted average
method and, in the case of work in progress and finished goods, direct labour
and an appropriate proportion of production overheads. Net realisable value is
the estimated selling price in the ordinary course of business, less the
estimated costs of completion and the estimated costs necessary to make the
sale.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) Property, plant and equipment
An item of property, plant and equipment is initially recorded at cost, less
accumulated depreciation and impairment losses (Note 2(n)). The cost of an
asset comprises its purchase price, any directly attributable costs of
bringing the asset to working condition and location for its intended use. The
Group recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing part of such an item when that cost is
incurred, when it is probable that the future economic benefits embodied with
the item will flow to the Group and the cost of the item can be measured
reliably. All other expenditure is recognised as an expense in the
consolidated income statement in the year in which it is incurred.
Gains or losses arising from the retirement or disposal of an item of
property, plant and equipment, other than oil and gas properties, are
determined as the difference between the net disposal proceeds and the
carrying amount of the item and are recognised as income or expense in the
consolidated income statement on the date of retirement or disposal.
Depreciation is provided to write off the cost amount of items of property,
plant and equipment, other than oil and gas properties, over its estimated
useful life on a straight-line basis, after taking into account its estimated
residual value, as follows:
Estimated usage Estimated
period residuals rate
Buildings 12 to 50 years 3%
Equipment, machinery and others 4 to 30 years 3%
Where parts of an item of property, plant and equipment have different useful
lives, the cost of the item is allocated on a reasonable basis between the
parts and each part is depreciated separately. Both the useful life of an
asset and its residual value, if any, are reassessed annually.
(g) Oil and gas properties
The Group uses the successful efforts method of accounting for its oil and gas
producing activities. Under this method, costs of development wells, the
related supporting equipment and proved mineral interests in properties are
capitalised. The cost of exploratory wells is initially capitalised as
construction in progress pending determination of whether the well has found
proved reserves. The impairment of exploratory well costs occurs upon the
determination that the well has not found proved reserves. The exploratory
well costs are usually not carried as an asset for more than one year
following completion of drilling, unless (i) the well has found a sufficient
quantity of reserves to justify its completion as a producing well if the
required capital expenditure is made; (ii) drilling of the additional
exploratory wells is under way or firmly planned for the near future; or (iii)
other activities are being undertaken to sufficiently progress the assessing
of the reserves and the economic and operating viability of the project. All
other exploration costs, including geological and geophysical costs, other dry
hole costs and annual lease rentals to explore for or use oil and natural gas,
are expensed as incurred. Capitalised costs of proved oil and gas properties
are amortised on a unit-of-production method based on volumes produced and
reserves.
Management estimates future dismantlement costs for oil and gas properties
with reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with the industry
practices and the future cash flows are adjusted to reflect such risks
specific to the liability, as appropriate. These estimated future
dismantlement costs are discounted at pre-tax risk-free rate and are
capitalised as oil and gas properties, which are subsequently amortised as
part of the costs of the oil and gas properties.
(h) Construction in progress
Construction in progress represents buildings, oil and gas properties, various
plant and equipment under construction and pending installation, and is stated
at cost less impairment losses (Note 2(n)). Cost comprises direct costs of
construction as well as interest charges, and foreign exchange differences on
related borrowed funds to the extent that they are regarded as an adjustment
to interest charges, during the periods of construction.
Construction in progress is transferred to property, plant and equipment when
the asset is substantially ready for its intended use.
No depreciation is provided in respect of construction in progress.
(i) Goodwill
Goodwill represents amounts arising on acquisition of subsidiaries, associates
or joint ventures. Goodwill represents the difference between the cost of
acquisition and the fair value of the net identifiable assets acquired.
Prior to 1 January 2008, the acquisition of the non-controlling interests of a
consolidated subsidiary was accounted for using the acquisition method whereby
the difference between the cost of acquisition and the fair value of the net
identifiable assets acquired (on a proportionate share) was recognised as
goodwill. From 1 January 2008, any difference between the amount by which the
non-controlling interest is adjusted (such as through an acquisition of the
non-controlling interests) and the cash or other considerations paid is
recognised in equity.
Goodwill is stated at cost less accumulated impairment losses. Goodwill
arising on a business combination is allocated to each cash-generating unit,
or groups of cash-generating units, that is expected to benefit the synergies
of the combination and is tested annually for impairment (Note 2(n)). In
respect of associates or joint ventures, the carrying amount of goodwill is
included in the carrying amount of the interest in the associate or joint
venture and the investment as a whole is tested for impairment whenever there
is objective evidence of impairment (Note 2(n)).
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Financial assets
(i) Classification and measurement
The Group classifies financial assets into different categories depending on
the business model for managing the financial assets and the contractual terms
of cash flows of the financial assets: a) financial assets measured at
amortised cost, b) financial assets measured at fair value through other
comprehensive income ("FVOCI"), c) financial assets measured at fair value
through profit or loss. A contractual cash flow characteristic which could
have only a de minimis effect, or could have an effect that is more than de
minimis but is not genuine, does not affect the classification of the
financial asset.
Financial assets are initially recognised at fair value. For financial assets
measured at fair value through profit or loss, the relevant transaction costs
are recognised in profit or loss. The transaction costs for other financial
assets are included in the initially recognised amount. However, trade
accounts receivable and bills receivable arising from sale of goods or
rendering services, without significant financing component, are initially
recognised based on the transaction price expected to be entitled by the
Group.
Debt instruments
Debt instruments held by the Group mainly includes cash and cash equivalents,
time deposits with financial institutions, receivables. These financial assets
are measured at amortised cost and FVOCI.
‧ Amortised cost: The business model for managing such financial assets
by the Group are held for collection of contractual cash flows. The
contractual cash flow characteristics are to give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal
amount outstanding. Interest income from these financial assets is recognised
using the effective interest rate method.
‧ FVOCI: The business model for managing such financial assets by the
Group are held for collection of contractual cash flows and for selling the
financial assets, where the assets' cash flows represent solely payments of
principal and interest on the principal amount outstanding. Movements in the
carrying amount are taken through other comprehensive income, except for the
recognition of impairment gains or losses, foreign exchange gains and losses
and interest income calculated using the effective interest rate method, which
are recognised in profit or loss.
Equity instruments
Equity instruments that the Group has no power to control, jointly control or
exercise significant influence over, are measured at fair value through profit
or loss and presented in financial assets at fair value through profit or
loss.
In addition, the Group designates some equity instruments that are not held
for trading as financial assets at FVOCI, are presented in financial assets at
FVOCI. The relevant dividends of these financial assets are recognised in
profit or loss. When derecognised, the cumulative gain or loss previously
recognised in other comprehensive income is transferred to retained earnings.
(ii) Impairment
The Group recognises a loss allowance for ECLs on a financial asset that is
measured at amortised cost and a debt instrument that is measured at FVOCI.
The Group measures and recognises ECLs, considering reasonable and supportable
information about the relevant past events, current conditions and forecasts
of future economic conditions.
The Group measures the ECLs of financial instruments on different stages at
each the date of the statement of financial position. For financial
instruments that have no significant increase in credit risk since the initial
recognition, on first stage, the Group measures the loss allowance at an
amount equal to 12-month ECLs. If there has been a significant increase in
credit risk since the initial recognition of a financial instrument but credit
impairment has not occurred, on second stage, the Group recognises a loss
allowance at an amount equal to lifetime ECLs. If credit impairment has
occurred since the initial recognition of a financial instrument, on third
stage, the Group recognises a loss allowance at an amount equal to lifetime
ECLs.
For financial instruments that have low credit risk at the date of the
statement of financial position, the Group assumes that there is no
significant increase in credit risk since the initial recognition, and
measures the loss allowance at an amount equal to 12-month ECLs.
For financial instruments on the first stage and the second stage, and that
have low credit risk, the Group calculates interest income according to
carrying amount without deducting the impairment allowance and effective
interest rate. For financial instruments on the third stage, interest income
is calculated according to the carrying amount minus amortised cost after the
provision of impairment allowance and effective interest rate.
For trade accounts receivable and bills receivable and financial assets at
FVOCI related to revenue, the Group measures the loss allowance at an amount
equal to lifetime ECLs.
The Group recognises the loss allowance accrued or written back in profit or
loss.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Financial assets (Continued)
(iii) Derecognition
The Group derecognises a financial asset when: a) the contractual right to
receive cash flows from the financial asset expires; b) the Group transfers
the financial asset and substantially all the risks and rewards of ownership
of the financial asset; c) the financial asset has been transferred and the
Group neither transfers nor retains substantially all the risks and rewards of
ownership of the financial asset, but the Group has not retained control.
On derecognition of equity instruments at FVOCI, the amount accumulated in the
fair value reserve is transferred to retained earnings. It is not recycled
through profit or loss. While on derecognition of other financial assets, this
difference is recognised in profit or loss.
(iv) Financial guarantees issued
Financial guarantees are contracts that require the issuer (i.e. the
guarantor) to make specified payments to reimburse the beneficiary of the
guarantee (the "holder") for a loss the holder incurs because a specified
debtor fails to make payment when due in accordance with the terms of a debt
instrument.
Financial guarantees issued are initially recognised at fair value, which is
determined by reference to fees charged in an arm's length transaction for
similar services, when such information is obtainable, or to interest rate
differentials, by comparing the actual rates charged by lenders when the
guarantee is made available with the estimated rates that lenders would have
charged, had the guarantees not been available, where reliable estimates of
such information can be made. Where consideration is received or receivable
for the issuance of the guarantee, the consideration is recognised in
accordance with the Group's policies applicable to that category of asset.
Where no such consideration is received or receivable, an immediate expense is
recognised in profit or loss.
Subsequent to initial recognition, the amount initially recognised as deferred
income is amortised in profit or loss over the term of the guarantee as income
from financial guarantees issued.
The Group monitors the risk that the specified debtor will default on the
contract and recognises a provision when ECLs on the financial guarantees are
determined to be higher than the carrying amount in respect of the guarantees
(i.e. the amount initially recognised, less accumulated amortisation).
(k) Financial liabilities
The Group, at initial recognition, classifies financial liabilities as either
financial liabilities subsequently measured at amortised cost or financial
liabilities at fair value through profit or loss.
The Group's financial liabilities are mainly financial liabilities measured at
amortised cost, including trade accounts payable and bills payable, other
payables, and loans, etc. These financial liabilities are initially measured
at the amount of their fair value after deducting transaction costs and use
the effective interest rate method for subsequent measurement.
Where the present obligations of financial liabilities are completely or
partially discharged, the Group derecognises these financial liabilities or
discharged parts of obligations. The differences between the carrying amounts
and the consideration received are recognised in profit or loss.
(l) Determination of fair value for financial instruments
If there is an active market for financial instruments, the quoted price in
the active market is used to measure fair values of the financial instruments.
If no active market exists for financial instruments, valuation techniques are
used to measure fair values. In valuation, the Group adopts valuation
techniques that are applicable in the current situation and have sufficient
available data and other information to support it, and selects input values
that are consistent with the asset or liability characteristics considered by
market participants in the transaction of relevant assets or liabilities, and
gives priority to relevant observable input values. Use of unobservable input
values where relevant observable input values cannot be obtained or are not
practicable.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised initially at fair value. At
each date of the statement of financial position, the fair value is
remeasured. The gain or loss on remeasurement to fair value is recognised
immediately in profit or loss, except where the derivatives qualify for hedge
accounting.
Hedge accounting is a method which recognises the offsetting effects on profit
or loss (or other comprehensive income) of changes in the fair values of the
hedging instrument and the hedged item in the same accounting period, to
represent the effect of risk management activities.
Hedged items are the items that expose the Group to risks of changes in future
cash flows and that are designated as being hedged and that must be reliably
measurable. The Group's hedged items include a forecast transaction that is
settled with an undetermined future market price and exposes the Group to risk
of variability in cash flows, etc.
A hedging instrument is a designated derivative whose changes in cash flows
are expected to offset changes in cash flows of the hedged item.
The hedging relationship meets all of the following hedge effectiveness
requirements:
(i) There is an economic relationship between the hedged item and the
hedging instrument, which shares a risk and that gives rise to opposite
changes in fair value that tend to offset each other.
(ii) The effect of credit risk does not dominate the value changes that
result from that economic relationship.
(iii) The hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the entity actually hedges
and the quantity of the hedging instrument that the entity actually uses to
hedge that quantity of hedged item. However, that designation does not reflect
an imbalance between the weightings of the hedged item and the hedging
instrument.
Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that
is attributable to a particular risk associated with all, or a component of, a
recognised asset or liability (such as all or some future interest payments on
variable-rate debt) or a highly probable forecast transaction, and could
affect profit or loss. Hedge effectiveness is determined at the inception of
the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged
item and hedging instrument.
As long as a cash flow hedge meets the qualifying criteria for hedge
accounting, the separate component of equity associated with the hedged item
(cash flow hedge reserve) is adjusted to the lower of the following (in
absolute amounts):
(i) The cumulative gain or loss on the hedging instrument from inception
of the hedge; and
(ii) The cumulative change in fair value (present value) of the hedged item
(i.e. the present value of the cumulative change in the hedged expected future
cash flows) from inception of the hedge.
The gain or loss on the hedging instrument that is determined to be an
effective hedge is recognised in other comprehensive income.
The portion of the gain or loss on the hedging instrument that is determined
to be an ineffective hedge is recognised in profit or loss.
If a hedged forecast transaction subsequently results in the recognition of a
non-financial asset or non-financial liability, or a hedged forecast
transaction for a non-financial asset or a non-financial liability becomes a
firm commitment for which fair value hedge accounting is applied, the entity
removes that amount from the cash flow hedge reserve and include it directly
in the initial cost or other carrying amount of the asset or the liability.
This is not a reclassification adjustment and hence it does not affect other
comprehensive income.
For cash flow hedges, other than those covered by the preceding policy
statements, that amount is reclassified from the cash flow hedge reserve to
profit or loss as a reclassification adjustment in the same period or periods
during which the hedged expected future cash flows affect profit or loss.
If the amount that has been accumulated in the cash flow hedge reserve is a
loss and the Group expects that all or a portion of that loss will not be
recovered in one or more future periods, the Group immediately reclassifies
the amount that is not expected to be recovered into profit or loss.
When the hedging relationship no longer meets the risk management objective on
the basis of which it qualified for hedge accounting (i.e. the entity no
longer pursues that risk management objective), or when a hedging instrument
expires or is sold, terminated, exercised, or there is no longer an economic
relationship between the hedged item and the hedging instrument or the effect
of credit risk starts to dominate the value changes that result from that
economic relationship or no longer meets the criteria for hedge accounting,
the Group discontinues prospectively the hedge accounting treatments. If the
hedged future cash flows are still expected to occur, that amount remains in
the cash flow hedge reserve and is accounted for as cash flow hedges. If the
hedged future cash flows are no longer expected to occur, that amount is
immediately reclassified from the cash flow hedge reserve to profit or loss as
a reclassification adjustment. A hedged future cash flow that is no longer
highly probable to occur may still be expected to occur, if the hedged future
cash flows are still expected to occur, that amount remains in the cash flow
hedge reserve and is accounted for as cash flow hedges.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Derivative financial instruments and hedge accounting (Continued)
Fair value hedges
A fair value hedge is a hedge of the exposure to changes in the fair value of
a recognised asset or liability or an unrecognised firm commitment, or a
portion of such an asset, liability or firm commitment.
The gain or loss from remeasuring the hedging instrument is recognised in
profit or loss. The gain or loss on the hedged item attributable to the hedged
risk adjusts the carrying amount of the recognised hedged item not measured at
fair value and is recognised in profit or loss.
Any adjustment to the carrying amount of a hedged item is amortised to profit
or loss if the hedged item is a financial instrument (or a component thereof)
measured at amortised cost.The amortisation is based on a recalculated
effective interest rate at the date that amortisation begins.
(n) Impairment of assets
The carrying amounts of assets, including property, plant and equipment,
construction in progress, right-of-use assets and other assets, are reviewed
at each date of the statement of financial position to identify indicators
that the assets may be impaired. These assets are tested for impairment
whenever events or changes in circumstances indicate that their recorded
carrying amounts may not be recoverable. When such a decline has occurred, the
carrying amount is reduced to the recoverable amount. For goodwill, the
recoverable amount is estimated at each date of the statement of financial
position.
The recoverable amount is the greater of the fair value less costs to disposal
and the value in use. In determining the value in use, expected future cash
flows generated by the asset are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Where an asset does not
generate cash inflows largely independent of those from other assets, the
recoverable amount is determined for the smallest group of assets that
generates cash inflows independently (i.e. a cash-generating unit).
The amount of the reduction is recognised as an expense in the consolidated
income statement. Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of any goodwill
allocated to the cash-generating unit and then, to reduce the carrying amount
of the other assets in the unit on a pro rata basis, except that the carrying
value of an asset will not be reduced below its individual fair value less
costs to disposal, or value in use, if determinable.
Management assesses at each date of the statement of financial position
whether there is any indication that an impairment loss recognised for an
asset, except in the case of goodwill, in prior years may no longer exist. An
impairment loss is reversed if there has been a favourable change in the
estimates used to determine the recoverable amount. A subsequent increase in
the recoverable amount of an asset, when the circumstances and events that led
to the write-down or write-off cease to exist, is recognised as an income. The
reversal is reduced by the amount that would have been recognised as
depreciation had the write-down or write-off not occurred. An impairment loss
in respect of goodwill is not reversed.
(o) Trade, bills and other payables
Trade, bills and other payables generally are financial liabilities and are
initially recognised at fair value and thereafter stated at amortised cost
unless the effect of discounting would be immaterial, in which case they are
stated at invoice amounts.
(p) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the consolidated income
statement over the period of borrowings using the effective interest method.
(q) Provisions and contingent liability
A provision is recognised for liability of uncertain timing or amount when the
Group has a legal or constructive obligation arising as a result of a past
event, when it is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate can be made.
When it is not probable that an outflow of economic benefits will be required,
or the amount cannot be estimated reliably, the obligation is disclosed as a
contingent liability, unless the probability of outflow of economic benefits
is remote. Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more future events are also disclosed
as contingent liabilities unless the probability of outflow of economic
benefits is remote.
Provisions for future dismantlement costs are initially recognised based on
the present value of the future costs expected to be incurred in respect of
the Group's expected dismantlement and abandonment costs at the end of related
oil and gas exploration and development activities. Any subsequent change in
the present value of the estimated costs, other than the change due to passage
of time which is regarded as interest cost, is reflected as an adjustment to
the provision and oil and gas properties.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(r) Revenue recognition
Revenue arises in the course of the Group's ordinary activities, and increases
in economic benefits in the form of inflows that result in an increase in
equity, other than those relating to contributions from equity participants.
The Group sells crude oil, natural gas, petroleum and chemical products, etc.
Revenue is recognised according to the expected consideration amount, when a
customer obtains control over the relevant goods or services. To determine
whether a customer obtains control of a promised asset, the Group shall
consider indicators of the transfer of control, which include, but are not
limited to, the Group has a present right to payment for the asset; the Group
has transferred physical possession of the asset to the customer; the customer
has the significant risks and rewards of ownership of the asset; the customer
has accepted the asset.
Sales of goods
Sales are recognised when control of the goods have transferred. Obtaining
control of relevant goods means that a customer can direct the use of the
goods and obtain almost all the economic benefits from it. Advance from
customers but goods not yet delivered is recorded as contract liabilities and
is recognised as revenues when a customer obtains control over the relevant
goods.
(s) Government grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions.
Government grants relating to costs are deferred and recognised in the profit
or loss over the period necessary to match them with the costs that they are
intended to compensate.
Government grants relating to the purchase of property, plant and equipment
are included in non-current liabilities as deferred income and are credited to
profit or loss on a straight-line basis over the expected lives of the related
assets.
(t) Borrowing costs
Borrowing costs are expensed in the consolidated income statement in the
period in which they are incurred, except to the extent that they are
capitalised as being attributable to the construction of an asset which
necessarily takes a period of time to get ready for its intended use.
(u) Repairs and maintenance expenditure
Repairs and maintenance expenditure is expensed as incurred.
(v) Environmental expenditures
Environmental expenditures that relate to current ongoing operations or to
conditions caused by past operations are expensed as incurred.
Liabilities related to future remediation costs are recorded when
environmental assessments and/or cleanups are probable and the costs can be
reliably estimated. As facts concerning environmental contingencies become
known to the Group, the Group reassesses its position both with respect to
accrued liabilities and other potential exposures.
(w) Research and development expense
Research and development expenditures that cannot be capitalised are expensed
in the period in which they are incurred. Research and development expense
amounted to RMB11,481 million for the year ended 31 December 2021 (2020:
RMB10,087 million).
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(x) Leases
A lease is a contract that a lessor transfers the right to use an identified
asset for a period of time to a lessee in exchange for consideration.
(i) As lessee
The Group recognises a right-of-use asset at the date at which the leased
asset is available for use by the Group, and recognises a lease liability
measured at the present value of the remaining lease payments. The lease
payments include fixed payments, the exercise price of a purchase option if
the Group is reasonably certain to exercise that option, and payments of
penalties for terminating the lease if the lease term reflects the Group
exercising that option, etc. Variable payments that are based on a percentage
of sales are not included in the lease payments, and should be recognised in
profit or loss when incurred. Lease liabilities to be paid within one year
(including one year) from the date of the statement of financial position is
presented in current liabilities.
Right-of-use assets of the Group mainly comprise land. Right-of-use assets are
measured at cost which comprises the amount of the initial measurement of the
lease liability, any lease payments made at or before the commencement date,
any initial direct costs incurred by the lessee, less any lease incentives
received. The Group depreciates the right-of-use assets over the shorter of
the asset's useful life and the lease term on a straight-line basis. When the
recoverable amount of a right-of-use asset is less than its carrying amount,
the carrying amount is reduced to the recoverable amount.
Payments associated with short-term leases with lease terms within 12 months
and all leases of low-value assets are recognised on a straight-line basis
over the lease term as an expense in profit or loss or as cost of relevant
assets, instead of recognising right-of-use assets and lease liabilities.
A lessee shall account for a lease modification as a separate lease if both:
(1) the modification increases the scope of the lease by adding the right to
use one or more underlying assets; and (2) the consideration for the lease
increases by an amount commensurate with the stand-alone price for the
increase in scope and any appropriate adjustments to that stand-alone price to
reflect the circumstances of the articular contract.
For a lease modification that is not accounted for as a separate lease, except
for the practical expedient which applies only to rent concessions occurring
as a direct consequence of the COVID-19 pandemic, the Group determine the
lease term of the modified lease at the effective date of the modification,
and remeasure the lease liability by discounting the revised lease payments
using a revised discount rate. The Group decrease the carrying amount of the
right-of-use asset to reflect the partial or full termination of the lease for
lease modifications that decrease the scope or shorten the term of the lease,
and shall recognise in profit or loss any gain or loss relating to the partial
or full termination of the lease. The Group make a corresponding adjustment to
the right-of-use asset for all other lease modifications.
(ii) As lessor
A lease that transfers substantially all the risks and rewards incidental to
ownership of an asset is a finance lease. An operating lease is a lease other
than a finance lease.
When the Group leases self-owned plants and buildings, equipment and
machinery, lease income from an operating lease is recognised on a
straight-line basis over the period of the lease. The Group recognises
variable lease income which is based on a certain percentage of sales as
rental income when occurred.
(y) Employee benefits
The contributions payable under the Group's retirement plans are recognised as
an expense in the consolidated income statement as incurred and according to
the contribution determined by the plans. Further information is set out in
Note 40.
Termination benefits, such as employee reduction expenses, are recognised
when, and only when, the Group demonstrably commits itself to terminate
employment or to provide benefits as a result of voluntary redundancy by
having a detailed formal plan which is without realistic possibility of
withdrawal.
(z) Income tax
Income tax comprises current and deferred tax. Current tax is calculated on
taxable income by applying the applicable tax rates. Deferred tax is provided
using the statement of financial position liability method on all temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes only
to the extent that it is probable that future taxable income will be available
against which the assets can be utilised. Deferred tax is calculated on the
basis of the enacted tax rates or substantially enacted tax rates that are
expected to apply in the period when the asset is realised or the liability is
settled. The effect on deferred tax of any changes in tax rates is charged or
credited to the consolidated income statement, except for the effect of a
change in tax rate on the carrying amount of deferred tax assets and
liabilities which were previously charged or credited to other comprehensive
income or directly in equity.
The tax value of losses expected to be available for utilisation against
future taxable income is set off against the deferred tax liability within the
same legal tax unit and jurisdiction to the extent appropriate, and is not
available for set off against the taxable profit of another legal tax unit.
The carrying amount of a deferred tax asset is reviewed at each date of
statement of financial position and is reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(aa) Dividends
Dividends and distributions of profits proposed in the profit appropriation
plan which will be authorised and declared after the date of statement of
financial position, are not recognised as a liability at the date of statement
of financial position and are separately disclosed in the notes to the
financial statements. Dividends are recognised as a liability in the period in
which they are declared.
(bb) Segment reporting
Operating segments, and the amounts of each segment item reported in the
consolidated financial statements, are identified from the financial
information provided regularly to the Group's chief operating decision maker
for the purposes of allocating resources to, and assessing the performance of
the Group's various lines of business.
3 REVENUE FROM PRIMARY BUSINESS
Revenue from primary business mainly represents revenue from the sales of
refined petroleum products, chemical products, crude oil and natural gas,
which are recognised at a point in time.
2021 2020
RMB million RMB million
Gasoline 726,057 557,605
Diesel 542,260 422,566
Crude oil 429,038 351,707
Basic chemical feedstock 242,532 155,397
Synthetic resin 149,208 122,368
Kerosene 112,519 72,385
Natural gas 68,443 48,099
Synthetic fiber monomers and polymers 45,464 42,388
Others (i) 363,979 276,139
2,679,500 2,048,654
Note:
(i) Others are primarily liquefied petroleum gas and other refinery and
chemical byproducts and joint products.
4 OTHER OPERATING REVENUES
2021 2020
RMB million RMB million
Sale of materials and others 59,990 54,986
Rental income 1,394 1,084
61,384 56,070
5 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The following items are included in selling, general and administrative
expenses:
2021 2020
RMB million RMB million
Variable lease payments, low-value and short-term lease payment 2,393 2,683
Auditor's remuneration:
- Audit services 59 73
- Others 8 8
6 PERSONNEL EXPENSES
2021 2020
RMB million RMB million
Salaries, wages and other benefits 91,560 78,542
Contributions to retirement schemes (Note 40) 11,932 8,983
103,492 87,525
7 TAXES OTHER THAN INCOME TAX
2021 2020
RMB million RMB million
Consumption tax (i) 213,894 197,542
City construction tax (ii) 18,044 15,710
Education surcharge (ii) 13,409 11,678
Resources tax 6,432 4,572
Others 7,253 5,516
259,032 235,018
Notes:
(i) Consumption tax was levied based on sales quantities of taxable
products, tax rate of products is presented as below:
Products RMB/Ton
Gasoline 2,109.76
Diesel 1,411.20
Naphtha 2,105.20
Solvent oil 1,948.64
Lubricant oil 1,711.52
Fuel oil 1,218.00
Jet fuel oil 1,495.20
(ii) City construction tax and education surcharge is levied on an entity
based on its paid amount of value-added tax and consumption tax.
8 OTHER OPERATING INCOME/(EXPENSES), NET
2021 2020
RMB million RMB million
Government grants (i) 6,706 8,776
Ineffective portion of change in fair value of cash flow hedges 694 3,052
Net realised and unrealised loss on derivative financial instruments not (14,873) (1,252)
qualified as hedging
Impairment losses on long-lived assets (ii) (10,035) (14,629)
(Loss)/gain on disposal of property, plant, equipment and other non-current (3,062) 398
assets, net
Fines, penalties and compensations (220) (43)
Donations (165) (301)
Others (761) (1,781)
(21,716) (5,780)
Notes:
(i) Government grants for the years ended 31 December 2021 and 2020
primarily represent financial appropriation income and non-income tax refunds
received from respective government agencies without conditions or other
contingencies attached to the receipts of the grants.
(ii) Impairment losses on long-lived assets for the year ended 31 December
2021 primarily represent impairment losses recognised in the exploration and
production ("E&P") segment of RMB2,467 million (2020: RMB8,495 million),
the chemicals segment of RMB5,332 million (2020: RMB3,675 million), the
refining segment of RMB860 million (2020: RMB1,923 million), and the marketing
and distribution segment of RMB1,211 million (2020: RMB536 million). The
impairment losses in the E&P segment were mainly the impairment losses of
properties, plant and equipment relating to oil and gas producing activities.
The primary factors resulting in the E&P segment impairment loss were low
oil price outlook in the long term and downward revision of oil and gas
reserve in certain fields. E&P segment determines recoverable amounts of
properties, plant and equipment relating to oil and gas producing activities,
which include significant judgments and assumptions. The recoverable amounts
were determined based on the present values of the expected future cash flows
of the assets using a pre-tax discount rate 10.47% (2020: 10.47%). Further
future downward revisions to the Group's oil or nature gas price outlook would
lead to further impairments which, in aggregate, are likely to be material. It
is estimated that a general decrease of 5% in oil price, with all other
variables held constant, would result in additional impairment loss on the
Group's properties, plant and equipment relating to oil and nature gas
producing activities by approximately RMB3,628 million (2020: RMB4,548
million). It is estimated that a general increase of 5% in operating cost,
with all other variables held constant, would result in additional impairment
loss on the Group's properties, plant and equipment relating to oil and gas
producing activities by approximately RMB2,400 million (2020: RMB2,836
million). It is estimated that a general increase of 5% in discount rate, with
all other variables held constant, would result in additional impairment loss
on the Group's properties, plant and equipment relating to oil and gas
producing activities by approximately RMB180 million (2020: RMB287 million).
Impairment losses recognised in the chemical segment and refining segment
relate to certain refinery and chemical production facilities and are not
individually significant. The impairment losses were mainly due to the
suspension of operations of certain production facilities, and evidence that
indicate the economic performance of certain production facilities
continuously was lower than the expectation, thus the carrying amounts of
these facilities were written down to their recoverable amounts, which were
determined based on the present values of forecasted future cash flows of the
cash generating units using pre-tax discount rates ranging from 10.50% to
13.9% (2020: 9.87% to 11.60%).
9 INTEREST EXPENSE
2021 2020
RMB million RMB million
Interest expense incurred 5,679 6,517
Less: Interest expense capitalised* (996) (2,011)
4,683 4,506
Interest expense on lease liabilities 9,200 9,349
Accretion expenses (Note 35) 1,135 1,343
Interest expense 15,018 15,198
* Interest rates per annum at which borrowing costs were capitalised for 1.84% to 4.35% 2.60% to 4.66%
construction in progress
10 INVESTMENT INCOME
2021 2020
RMB million RMB million
Investment income from disposal of business and long-term equity investments 82 37,525
(i)
Dividend income from holding of other equity instrument investments 34 156
Others 182 63
298 37,744
Note:
(i) The Company and Sinomart KTS Development Limited, Sinopec Natural
Gas Limited Company and Sinopec Marketing Company Limited ("Marketing
Company"), the subsidiaries of the Company entered into the Agreement on Cash
Payment to Purchase Equity in Sinopec Yu Ji Pipeline Company Limited, the
Agreement on Additional Issuance of Equity and Cash Payment to Purchase
Assets, the Agreement on Cash Payment to Purchase Assets and the Agreement on
Additional Issuance of Equity to Purchase Assets with China Oil & Gas
Pipeline Network Corporation ("PipeChina"), on 21 July 2020 and on 23 July
2020 respectively, pursuant to which the Company and its subsidiaries proposed
to dispose target business, including equity interests in the relevant
companies, oil and gas pipeline and ancillary facilities, to PipeChina. The
above transactions were considered and approved by the 15th Session of 7th
Directorate Meeting on 23 July 2020 and the second Extraordinary General
Meeting on 28 September 2020. The transaction consideration was mainly
additional issuance of equity and/or cash payment by PipeChina and the gain on
above transactions was RMB37,731 million in 2020.
11 INCOME TAX EXPENSE
Income tax expense in the consolidated income statement represents:
2021 2020
RMB million RMB million
Current tax
- Provision for the year 17,522 14,334
- Adjustment of prior years (462) (117)
Deferred taxation (Note 29) 6,258 (7,873)
23,318 6,344
Reconciliation between actual income tax expense and the expected income tax
expense at applicable statutory tax rates is as follows:
2021 2020
RMB million RMB million
Profit before taxation 109,169 48,615
Expected PRC income tax expense at a statutory tax rate of 25% 27,292 12,154
Tax effect of non-deductible expenses 5,948 3,281
Tax effect of non-taxable income (8,096) (8,330)
Tax effect of preferential tax rate (i) (2,766) (1,011)
Effect of income taxes at foreign operations (222) (730)
Tax effect of utilisation of previously unrecognised tax losses and temporary (701) (65)
differences
Tax effect of tax losses not recognised and temporary differences 1,391 1,087
Write-down of deferred tax assets 934 75
Adjustment of prior years (462) (117)
Actual income tax expense 23,318 6,344
Notes:
(i) The provision for PRC current income tax is based on a statutory
income tax rate of 25% of the assessable income of the Group as determined in
accordance with the relevant income tax rules and regulations of the PRC,
except for certain entities of the Group in western regions in the PRC are
taxed at preferential income tax rate of 15% through the year 2021. According
to Announcement 2020 No. 23 of the MOF "Announcement of the MOF, the State
Taxation Administration and the National Development and Reform Commission on
continuation of the income tax policy of western development enterprises", the
preferential tax rate of 15% extends from 1 January 2021 to 31 December 2030.
12 DIRECTORS' AND SUPERVISORS' EMOLUMENTS
(a) Directors' and supervisors' emoluments
The emoluments of every director and supervisor is set out below:
Emoluments paid or receivable in respect of Emoluments paid
director's other services in connection with or receivable
the management of the affairs of the Company in respect of a
or its subsidiary undertaking person's services
as a director,
whether of the
Company or
its subsidiary
undertaking
2021
Salaries, Bonuses Retirement Directors'/ Total
allowances and scheme Supervisors' fee
benefits in kind contributions
Name RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Directors
Ma Yongsheng 291 322 102 - 715
Zhao Dong (i) - - - - -
Yu Baocai 24 409 9 - 442
Ling Yiqun - - - - -
Li Yonglin (ii) - - - - -
Liu Hongbin
Zhang Yuzhuo (iii) - - - - -
Independent non-executive directors
Cai Hongbin - - - 417 417
Johnny Karling Ng - - - 417 417
Shi Dan (iv) - - - 300 300
Bi Mingjian (iv) - - - 300 300
Tang Min (v) - - - 117 117
Supervisors
Zhang Shaofeng (vi) - - - - -
Jiang Zhenying - - - - -
Zhang Zhiguo (vii) - - - - -
Yin Zhaolin (vii) - - - - -
Guo Hongjin (vii) 202 140 61 - 403
Li Defang 154 100 44 - 298
Lv Dapeng (viii) 216 140 61 - 417
Chen Yaohuan (viii) 371 692 102 - 1,165
Zou Huiping (ix) - - - - -
Sun Huanquan (x) - - - - -
Yu Renming (x) - - - - -
Total 1,258 1,803 379 1,551 4,991
12 DIRECTORS' AND SUPERVISORS' EMOLUMENTS (Continued)
(a) Directors' and supervisors' emoluments (Continued)
The emoluments of every director and supervisor is set out below: (Continued)
Emoluments paid or receivable in respect of Emoluments paid
director's other services in connection with or receivable
the management of the affairs of the Company in respect of a
or its subsidiary undertaking person's services
as a director,
whether of the
Company or
its subsidiary
undertaking
2020
Salaries, Bonuses Retirement Directors'/ Total
allowances and scheme Supervisors' fee
benefits in kind contributions
Name RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Directors
Zhang Yuzhuo (iii) - - - - -
Ma Yongsheng 299 620 94 - 1,013
Yu Baocai - - - - -
Liu Hongbin - - - - -
Ling Yiqun - - - - -
Zhang Shaofeng (vi) - - - - -
Dai Houliang (xi) - - - - -
Li Yunpeng (xii) - - - - -
Li Yong (xiii) - - - - -
Independent non-executive directors
Tang Min (v) - - - 350 350
Cai Hongbin - - - 350 350
Johnny Karling Ng - - - 350 350
Fan Gang (xiv) - - - - -
Supervisors
Zhao Dong (i) - - - - -
Jiang Zhenying 366 710 83 - 1,159
Zou Huiping (ix) 272 555 59 - 886
Sun Huanquan (x) 247 160 60 - 467
Yu Renming (x) - - - - -
Li Defang - - - - -
Yu Xizhi (xv) 125 613 23 - 761
Zhou Hengyou (xv) 125 611 23 - 759
Yang Changjiang (xvi) - - - - -
Zhang Baolong (xvi) - - - - -
Total 1,434 3,269 342 1,050 6,095
Notes：
(i) Mr. Zhao Dong ceased being chairman of the Board of Supervisors from
25 May 2021, and was elected to be non-executive director from 25 May 2021.
(ii) Mr. Li Yonglin was elected to be director from 25 May 2021.
(iii) Due to change of working arrangement, Mr. Zhang Yuzhuo has tendered his
resignation as chairman, non-executive director, chairman of Strategy
Committee,and Sustainable Development Committee of the Board, member of
Nomination Committee of the Board from 2 August 2021.
(iv) Ms. Shi Dan was elected to be independent non-executive director from
25 May 2021; Mr. Bi Mingjian was elected to be independent non-executive
director from 25 May 2021.
(v) Mr. Tang Min ceased being independent non-executive director from 25
May 2021.
(vi) Mr. Zhang Shaofeng ceased being non-executive director from 25 May
2021, and was elected to be chairman of the Board of Supervisors from 25 May
2021.
(vii) Mr. Zhang Zhiguo was elected
to be supervisor from 25 May 2021; Mr. Yin Zhaolin was elected to be
supervisor from 25 May 2021; Mr. Guo Hongjin was elected to be supervisor from
25 May 2021
(viii) Mr. Lv Dapeng was elected to be supervisor from 11 January 2021; Mr.
Chen Yaohuan was elected to be supervisor from 11 January 2021.
(ix) Mr. Zou Huiping ceased being supervisor from 28 January 2021.
(x) Mr. Sun Huanquan ceased being supervisor from 11 January 2021; Mr. Yu
Renming ceased being supervisor from 11 January 2021.
(xi) Mr. Dai Houliang ceased being chairman and non-executive director from
19 January 2020.
(xii) Mr. Li Yunpeng ceased being
non-executive director from 24 March 2020.
(xiii) Mr. Li Yong ceased being non-executive director from 22 September
2020.
(xiv) Mr. Fan Gang ceased being independent non-executive director from 28
August 2020.
(xv) Mr. Yu Xizhi ceased being
supervisor from 18 May 2020; Mr. Zhou Hengyou ceased being supervisor from 18
May 2020.
(xvi) Mr. Yang Changjiang ceased being supervisor from 9 September 2020; Mr.
Zhang Baolong ceased being supervisor from 9 September 2020.
13 SENIOR MANAGEMENT'S EMOLUMENTS
For the year ended 31 December 2021, the five highest paid individuals in the
Company included five senior management. The emolument paid to each of five
senior management was above RMB1,000 thousand. The total salaries, wages and
other benefits was RMB7,100 thousand, and the total amount of their retirement
scheme contributions was RMB510 thousand. For the year ended 31 December 2020,
the five highest paid individuals in the Company included one supervisor and
four senior management.
Number of individuals
2021 2020
Emoluments
HKD1,000,001 to HKD1,500,000 - 3
HKD1,500,001 to HKD2,000,000 5 2
During 2021 and 2020, the Company did not incur any emoluments paid or
receivable in respect of a person accepting office as a director, or any
payments to any director for loss of office.
14 DIVIDENDS
Dividends payable to shareholders of the Company attributable to the year
represent:
2021 2020
RMB million RMB million
Dividends declared and paid during the year of RMB0.16 per share (2020: 19,371 8,475
RMB0.07 per share)
Dividends declared after the date of the statement of financial position of 37,532 15,739
RMB0.31 per share (2020: RMB0.13 per share)
56,903 24,214
Pursuant to the shareholders' approval at the General Meeting on 27 August
2021, the interim dividends for the year ended 31 December 2021 of RMB0.16
(2020: RMB0.07) per share totaling RMB19,371 million (2020: RMB8,475 million)
were approved. Dividends were paid on 17 September 2021.
Pursuant to a resolution passed at the director's meeting on 25 March 2022,
final dividends in respect of the year ended 31 December 2021 of RMB0.31
(2020: RMB0.13) per share totaling RMB37,532 million (2020: RMB15,739 million)
were proposed for shareholders' approval at the Annual General Meeting. Final
cash dividend proposed after the date of the statement of financial position
has not been recognised as a liability at the date of the statement of
financial position.
Dividends payable to shareholders of the Company attributable to the previous
financial year, approved during the year represent:
2021 2020
RMB million RMB million
Final cash dividends in respect of the previous financial year, approved 15,739 23,004
during the year of
RMB0.13 per share (2020: RMB0.19 per share)
Pursuant to the shareholders' approval at the Annual General Meeting on 25 May
2021, a final dividend of RMB0.13 per share totaling RMB15,739 million
according to total shares on 16 June 2021 was approved. All dividends have
been paid in the year ended 31 December 2021.
Pursuant to the shareholders' approval at the Annual General Meeting on 19 May
2020, a final dividend of RMB0.19 per share totaling RMB23,004 million
according to total shares on 9 June 2020 was approved. All dividends have been
paid in the year ended 31 December 2020.
15 OTHER COMPREHENSIVE INCOME
2021 2020
Before tax Tax Net of tax Before tax Tax Net of tax
amount effect amount amount effect amount
RMB million RMB million RMB million RMB million RMB million RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging 15,659 (3,881) 11,778 9,207 (2,295) 6,912
instruments recognised during the year
Reclassification adjustments for amounts 8,858 (1,618) 7,240 198 (37) 161
transferred to the consolidated income statement
Net movement during the year recognised 24,517 (5,499) 19,018 9,405 (2,332) 7,073
in other comprehensive income (i)
Changes in the fair value of instruments at (6) 2 (4) (6) (4) (10)
fair value through other comprehensive income
Transfer of loss on disposal of equity investments at - - - (12) - (12)
fair value through other comprehensive income to
retained earnings
Net movement during the year recognised (6) 2 (4) (18) (4) (22)
in other comprehensive income
Cost of hedging reserve (220) - (220) 162 - 162
Share of other comprehensive income of associates 441 - 441 (2,441) - (2,441)
and joint ventures
Foreign currency translation differences (1,728) - (1,728) (4,457) - (4,457)
Other comprehensive income 23,004 (5,497) 17,507 2,651 (2,336) 315
Note:
(i) As at 31 December 2021, cash flow hedge reserve amounted to a gain
of RMB7,244 million (31 December 2020: a gain of RMB8,176 million), of which a
gain of RMB7,214 million was attributable to shareholders of the Company (31
December 2020: a gain of RMB7,805 million).
16 BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic earnings per share for the year ended 31 December
2021 is based on the profit attributable to ordinary shareholders of the
Company of RMB71,975 million (2020: RMB33,443 million) and the weighted
average number of shares of 121,071,209,646 (2020: 121,071,209,646) during the
year.
There are no potential dilutive ordinary shares, and diluted earnings per
share are equal to the basic earning per share.
17 PROPERTY, PLANT AND EQUIPMENT
Equipment,
Plants and Oil and gas, machinery
buildings properties and others Total
RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2020 132,327 727,552 1,027,324 1,887,203
Additions 390 1,563 5,163 7,116
Transferred from construction in progress 10,965 32,214 98,427 141,606
Reclassifications 1,443 (125) (1,318) -
Invest into the joint ventures and associated companies - - (115) (115)
Reclassification to other long-term assets (38) - (1,052) (1,090)
Disposals (6,396) (806) (131,501) (138,703)
Exchange adjustments (141) (2,806) (226) (3,173)
Balance at 31 December 2020 138,550 757,592 996,702 1,892,844
Balance at 1 January 2021 138,550 757,592 996,702 1,892,844
Additions 509 2,192 5,177 7,878
Transferred from construction in progress 5,487 40,357 65,182 111,026
Reclassifications 646 (617) (29) -
Invest into the joint ventures and associated companies (8) - (188) (196)
Reclassification to other long-term assets (665) (22) (1,027) (1,714)
Disposals (1,297) (5,517) (17,495) (24,309)
Exchange adjustments (57) (940) (95) (1,092)
Balance at 31 December 2021 143,165 793,045 1,048,227 1,984,437
Accumulated depreciation and impairment losses:
Balance at 1 January 2020 61,069 587,192 608,622 1,256,883
Depreciation for the year 4,680 32,054 48,760 85,494
Impairment losses for the year 684 4,739 6,360 11,783
Reclassifications 393 (98) (295) -
Invest into the joint ventures and associated companies - - (54) (54)
Reclassification to other long-term assets (8) - (161) (169)
Written back on disposals (3,229) (464) (48,125) (51,818)
Exchange adjustments (49) (2,703) (138) (2,890)
Balance at 31 December 2020 63,540 620,720 614,969 1,299,229
Balance at 1 January 2021 63,540 620,720 614,969 1,299,229
Depreciation for the year 4,586 39,670 48,568 92,824
Impairment losses for the year 742 1,904 6,774 9,420
Reclassifications 185 (410) 225 -
Invest into the joint ventures and associated companies (5) - (133) (138)
Reclassification to other long-term assets (82) (7) (170) (259)
Written back on disposals (771) (135) (13,668) (14,574)
Exchange adjustments (29) (904) (57) (990)
Balance at 31 December 2021 68,166 660,838 656,508 1,385,512
Net book value:
Balance at 1 January 2020 71,258 140,360 418,702 630,320
Balance at 31 December 2020 75,010 136,872 381,733 593,615
Balance at 31 December 2021 74,999 132,207 391,719 598,925
The Group compares the carrying amount of individual cash-generating units
which were grouped for the property, plant and equipment related to oil and
gas producing activities with its value in use, using a discounted cash flow
forecast prepared based on the future production profiles included in the oil
and gas reserve reports, and recorded impairment losses amounting to RMB2,467
million for the year ended 31 December 2021 (2020: RMB8,435 million).
The addition to oil and gas properties of the Group for the year ended 31
December 2021 included RMB2,163 million (2020: RMB1,563 million) of estimated
dismantlement costs for site restoration.
At 31 December 2021 and 31 December 2020, the Group had no individual
significant property, plant and equipment which had been pledged.
At 31 December 2021 and 31 December 2020, the Group had no individual
significant property, plant and equipment which were temporarily idle or
pending for disposal.
At 31 December 2021 and 31 December 2020, the Group had no individual
significant fully depreciated property, plant and equipment which were still
in use.
18 CONSTRUCTION IN PROGRESS
2021 2020
RMB million RMB million
Balance at 1 January 125,525 176,119
Additions 159,729 131,099
Dry hole costs written off (7,702) (5,928)
Transferred to property, plant and equipment (111,026) (141,606)
Reclassification to other long-term assets (10,302) (11,464)
Impairment losses for the year (144) (844)
Disposals and others (107) (21,798)
Exchange adjustments (34) (53)
Balance at 31 December 155,939 125,525
As at 31 December 2021, the amount of capitalised cost of exploratory wells
included in construction in progress related to the exploration and production
segment was RMB12,255 million (2020: RMB11,129 million). The geological and
geophysical costs paid during the year ended 31 December 2021 were RMB4,174
million (2020: RMB3,166 million).
19 RIGHT-OF-USE ASSETS
Land Others Total
RMB million RMB million RMB million
Cost
Balance at 1 January 2020 248,775 34,188 282,963
Additions 14,370 9,653 24,023
Decreases (9,790) (3,140) (12,930)
Balance at 31 December 2020 253,355 40,701 294,056
Balance at 1 January 2021 253,355 40,701 294,056
Additions 13,263 9,650 22,913
Decreases (2,862) (3,430) (6,292)
Balance at 31 December 2021 263,756 46,921 310,677
Accumulated depreciation
Balance at 1 January 2020 9,101 5,702 14,803
Additions 9,358 6,354 15,712
Decreases (896) (1,575) (2,471)
Balance at 31 December 2020 17,563 10,481 28,044
Balance at 1 January 2021 17,563 10,481 28,044
Additions 9,966 6,863 16,829
Decreases (407) (2,197) (2,604)
Balance at 31 December 2021 27,122 15,147 42,269
Net book value
Balance at 1 January 2020 239,674 28,486 268,160
Balance at 31 December 2020 235,792 30,220 266,012
Balance at 31 December 2021 236,634 31,774 268,408
20 GOODWILL
31 December 31 December
2021 2020
RMB million RMB million
Cost 16,455 16,481
Less: Accumulated impairment losses (7,861) (7,861)
8,594 8,620
Impairment tests for cash-generating units containing goodwill
Goodwill is allocated to the following Group's cash-generating units:
Principal activities 31 December 31 December
2021 2020
RMB million RMB million
Sinopec Zhenhai Refining and Chemical Branch Manufacturing of intermediate petrochemical 4,043 4,043
products and petroleum products
Shanghai SECCO Petrochemical Company Limited Production and sale of petrochemical products 2,541 2,541
("Shanghai SECCO")
Sinopec Beijing Yanshan Petrochemical Branch Manufacturing of intermediate petrochemical 1,004 1,004
products and petroleum products
Other units without individually significant goodwill 1,006 1,032
8,594 8,620
Goodwill represents the excess of the cost of purchase over the fair value of
the underlying assets and liabilities. The recoverable amounts of the above
cash generating units are determined based on value in use calculations. These
calculations use cash flow projections based on financial budgets approved by
management covering a one-year period and pre-tax discount rates primarily
ranging from 11.4% to 11.7% (2020: 11.4% to 13.4%). Cash flows beyond the
one-year period are maintained constant. Based on the estimated recoverable
amount, no major impairment loss was recognized for the year ended 31
December, 2021.
Key assumptions used for cash flow forecasts for these cash generating units
are the gross margin and sales volume. Management determined the budgeted
gross margin based on the gross margin achieved in the period immediately
before the budget period and management's expectation on the future trend of
the prices of crude oil and petrochemical products. The sales volume was based
on the production capacity and/or the sales volume in the period immediately
before the budget period.
21 INTEREST IN ASSOCIATES
The Group's investments in associates are with companies primarily engaged in
the oil and gas, petrochemical, and marketing and distribution operations in
the PRC.
The Group's principal associates are as follows:
Name of company % of Principal activities Measurement Country of Principal place
ownership method incorporation of business
interests
PipeChina (i) 14.00 Operation of oil and natural gas Equity method PRC PRC
pipeline and auxiliary facilities
Sinopec Finance Company Limited 49.00 Provision of non-banking financial Equity method PRC PRC
("Sinopec Finance")
services
Sinopec Capital Company Limited 49.00 Project and equity investment, Equity method PRC PRC
("Sinopec Capital")
investment management, investment
consulting,self-owned equity
management
Zhongtian Synergetic Energy Company 38.75 Mining coal and manufacturing Equity method PRC PRC
Limited ("Zhongtian Synergetic Energy")
of coal-chemical products
Caspian Investments Resources Ltd. 50.00 Crude oil and natural gas extraction Equity method British Virgin Islands The Republic of Kazakhstan
("CIR")
21 INTEREST IN ASSOCIATES (Continued)
Summarised financial information and reconciliation to their carrying amounts
in respect of the Group's principal associates:
PipeChina Sinopec Finance Sinopec Capital Zhongtian Synergetic Energy CIR
31 31 31 31 31 31 31 31 31 31
December December December December December December December December December December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets 86,335 74,012 194,458 175,139 13,140 11,871 3,532 3,721 576 2,402
Non-current assets 768,161 655,982 55,086 53,008 102 106 51,331 53,124 870 903
Current liabilities (136,150) (55,562) (217,987) (197,872) (28) (18) (8,577) (8,315) (822) (699)
Non-current liabilities (103,243) (104,150) (602) (514) (676) (411) (22,216) (28,422) (144) (286)
Net assets 615,103 570,282 30,955 29,761 12,538 11,548 24,070 20,108 480 2,320
Net assets attributable to 526,241 505,336 30,955 29,761 12,538 11,548 24,070 20,108 480 2,320
owners of the Company
Net assets attributable to 88,862 64,946 - - - - - - - -
non-controlling interests
Share of net assets from associates 73,674 70,747 15,168 14,583 6,144 5,659 9,327 7,792 240 1,160
Carrying Amounts 73,674 70,747 15,168 14,583 6,144 5,659 9,327 7,792 240 1,160
Summarised statement of comprehensive income
Year ended 31 December PipeChina (ii) Sinopec Finance Sinopec Capital Zhongtian Synergetic Energy CIR
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Revenue 101,572 22,766 5,177 4,742 2 2 16,959 11,707 1,826 1,252
Profit for the year 29,776 6,444 2,168 2,027 990 1,278 4,184 551 461 181
Other comprehensive income 2 - 26 (372) - - - - 3 (308)
Total comprehensive income 29,778 6,444 2,194 1,655 990 1,278 4,184 551 464 (127)
Dividends declared by associates 442 - 490 - - - 86 284 1,152 2,517
Share of profit from associates 3,205 709 1,062 993 485 626 1,621 214 231 91
Share of other comprehensive income from associates (iii) - - 13 (182) - - - - 2 (154)
The share of profit and other comprehensive income for the year ended 31
December 2021 in all individually immaterial associates accounted for using
equity method in aggregate was RMB7,283 million (2020: RMB3,444 million) and
RMB271 million (2020: loss of RMB1,101 million) respectively. As at 31
December 2021, the carrying amount of all individually immaterial associates
accounted for using equity method in aggregate was RMB44,176 million (2020:
RMB36,222 million).
Notes:
(i) The Group has a member in the Board of Directors of PipeChina.
According to the structure and the resolution mechanism of the Board of
Directors, the Group can exercise significant influence on PipeChina.
(ii) The summarised statement of comprehensive income for the year 2020
presents the operating results from the date when the Group can exercise
significant influence on PipeChina to 31 December 2020.
(iii) Including foreign currency translation differences.
22 INTEREST IN JOINT VENTURES
The Group's principal interests in joint ventures are as follows:
Name of entity % of Principal activities Measurement Country of Principal place
ownership method incorporation of business
interests
Fujian Refining & Petrochemical 50.00 Manufacturing refining oil products Equity method| PRC PRC
Company Limited ("FREP")
BASF-YPC Company Limited 40.00 Manufacturing and distribution Equity method PRC PRC
("BASF-YPC")
of petrochemical products
Taihu Limited ("Taihu") 49.00 Crude oil and natural gas extraction Equity method Cyprus Russia
Yanbu Aramco Sinopec Refining 37.50 Petroleum refining and processing Equity method Saudi Arabia Saudi Arabia
Company Ltd. ("YASREF")
business
Sinopec SABIC Tianjin Petrochemical 50.00 Manufacturing and distribution of Equity method PRC PRC
Company Limited ("Sinopec SABIC
petrochemical products
Tianjin")
Summarised statement of financial position and reconciliation to their
carrying amounts in respect of the Group's principal joint ventures:
FREP BASF-YPC Taihu YASREF Sinopec SABIC Tianjin
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets
Cash and cash equivalents 6,562 7,448 5,375 1,838 1,258 1,280 5,441 1,408 4,820 5,259
Other current assets 9,217 7,492 6,953 4,777 2,188 1,223 12,404 7,516 3,437 2,665
Total current assets 15,779 14,940 12,328 6,615 3,446 2,503 17,845 8,924 8,257 7,924
Non-current assets 13,744 15,237 9,336 9,993 14,032 12,531 41,947 45,413 18,835 18,258
Current liabilities
Current financial liabilities (1,177) (1,203) (77) (456) (32) (38) (9,549) (9,520) (597) (998)
Other current liabilities (5,008) (5,147) (2,546) (2,190) (1,931) (1,043) (15,844) (8,644) (3,547) (3,052)
Total current liabilities (6,185) (6,350) (2,623) (2,646) (1,963) (1,081) (25,393) (18,164) (4,144) (4,050)
Non-current liabilities
Non-current financial liabilities (6,857) (8,761) - - (85) (85) (30,903) (29,650) (7,599) (6,773)
Other non-current liabilities (242) (235) (92) (42) (1,439) (2,017) (1,723) (2,008) (382) (378)
Total non-current liabilities (7,099) (8,996) (92) (42) (1,524) (2,102) (32,626) (31,658) (7,981) (7,151)
Net assets 16,239 14,831 18,949 13,920 13,991 11,851 1,773 4,515 14,967 14,981
Net assets attributable to owners of the company 16,239 14,831 18,949 13,920 13,523 11,439 1,773 4,515 14,967 14,981
Net assets attributable to non-controlling interests - - - - 468 412 - - - -
Share of net assets from joint ventures 8,120 7,416 7,580 5,568 6,626 5,605 - - 7,484 7,491
Carrying Amounts 8,120 7,416 7,580 5,568 6,626 5,605 - - 7,484 7,491
Summarised statement of comprehensive income
Year ended 31 December FREP BASF-YPC Taihu YASREF Sinopec SABIC Tianjin
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Revenue 47,224 38,691 27,499 15,701 15,190 9,528 68,548 37,337 24,631 14,881
Depreciation, depletion and amortisation (2,789) (2,222) (1,467) (1,244) (667) (541) (3,224) (3,140) (1,164) (1,085)
Interest income 147 118 52 27 451 291 6 17 209 183
Interest expense (411) (535) (5) (16) (107) (20) (945) (1,136) (89) (131)
Profit/(loss) before taxation 2,261 520 8,218 1,518 2,864 2,304 (2,868) (7,193) 1,393 954
Tax expense (597) (87) (2,054) (379) (601) (378) 332 1,057 (407) (236)
Profit/(loss) for the year 1,664 433 6,164 1,139 2,263 1,926 (2,536) (6,136) 986 718
Other comprehensive income - - - - (123) (3,368) (206) (584) - -
Total comprehensive income 1,664 433 6,164 1,139 2,140 (1,442) (2,742) (6,720) 986 718
Dividends declared by joint ventures 128 300 454 691 - - - - 500 -
Share of net profit/(loss) from joint ventures 832 217 2,466 456 1,081 911 - (2,301) 493 359
Share of other comprehensive loss from joint ventures (i) - - - - (60) (1,593) - (219) - -
The share of profit and other comprehensive income for the year ended 31
December 2021 in all individually immaterial joint ventures accounted for
using equity method in aggregate was RMB4,494 million (2020: RMB993 million)
and RMB215 million (2020: RMB808 million) respectively. As at 31 December
2021, the carrying amount of all individually immaterial joint ventures
accounted for using equity method in aggregate was RMB30,640 million (2020:
RMB26,099 million).
Note:
(i) Including foreign currency translation differences.
23 LONG-TERM PREPAYMENTS AND OTHER ASSETS
31 December 31 December
2021 2020
RMB million RMB million
Operating rights of service stations 29,714 31,856
Long-term receivables from and prepayment to Sinopec Group Company and fellow 1,520 2,801
subsidiaries
Prepayments for construction projects to third parties 7,470 5,861
Others (i) 31,326 34,025
70,030 74,543
Note:
(i) Others mainly comprise time deposits with terms of three years,
catalyst expenditures and improvement expenditures of property, plant and
equipment.
The cost of operating rights of service stations is charged to expense on a
straight-line basis over the respective periods of the rights. The movement of
operating rights of service stations is as follows:
2021 2020
RMB million RMB million
Operating rights of service stations
Cost:
Balance at 1 January 53,567 53,549
Additions 912 493
Decreases (688) (475)
Balance at 31 December 53,791 53,567
Accumulated amortisation:
Balance at 1 January 21,711 19,536
Additions 2,699 2,365
Decreases (333) (190)
Balance at 31 December 24,077 21,711
Net book value at 31 December 29,714 31,856
24 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
Derivative financial assets and derivative financial liabilities of the Group
are primarily commodity futures and swaps contracts. See Note 43.
25 TRADE ACCOUNTS RECEIVABLE
31 December 31 December
2021 2020
RMB million RMB million
Amounts due from third parties 30,159 22,473
Amounts due from Sinopec Group Company and fellow subsidiaries 2,199 12,045
Amounts due from associates and joint ventures 6,536 4,781
38,894 39,299
Less: Loss allowance for expected credit losses (4,033) (3,860)
34,861 35,439
The ageing analysis of trade accounts receivable (net of loss allowance for
expected credit losses) is as follows:
31 December 31 December
2021 2020
RMB million RMB million
Within one year 34,180 34,361
Between one and two years 442 931
Between two and three years 221 64
Over three years 18 83
34,861 35,439
Loss allowance for expected credit losses are analysed as follows:
2021 2020
RMB million RMB million
Balance at 1 January 3,860 1,848
Provision for the year 436 2,173
Written back for the year (127) (68)
Written off for the year (30) (23)
Others (106) (70)
Balance at 31 December 4,033 3,860
Sales are generally on a cash term. Credit is generally only available for
major customers with well-established trading records. Amounts due from
Sinopec Group Company and fellow subsidiaries are repayable under the same
terms.
These receivables relate to a wide range of customers for whom there is no
recent history of default.
Information about the impairment of trade accounts receivable and the Group's
exposure to credit risk can be found in Note 43.
26 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
31 December 31 December
2021 2020
RMB million RMB million
Non-current assets
Unlisted equity instruments 588 1,376
Listed equity instruments 179 149
Current assets
Trade accounts receivable and bills receivable (i) 5,939 8,735
6,706 10,260
Note:
(i) As at 31 December 2021 and 2020, bills receivable and certain trade
accounts receivable were classified as financial assets at FVOCI, as the
Group's business model is achieved both by collecting contractual cash flows
and selling of these assets.
27 INVENTORIES
31 December 31 December
2021 2020
RMB million RMB million
Crude oil and other raw materials 109,940 60,379
Work in progress 15,701 13,066
Finished goods 84,174 78,481
Spare parts and consumables 2,515 3,372
212,330 155,298
Less: Allowance for diminution in value of inventories (4,897) (3,107)
207,433 152,191
The cost of inventories recognised as an expense in the consolidated income
statement amounted to RMB2,177,141 million for the year ended 31 December 2021
(2020: RMB1,657,227 million). It includes the write-down of inventories of
RMB3,148 million mainly related to finished goods (2020: RMB11,689 million
mainly related to finished goods).
28 PREPAID EXPENSES AND OTHER CURRENT ASSETS
31 December 31 December
2021 2020
RMB million RMB million
Receivables 35,918 35,096
Advances to suppliers 9,267 4,857
Value-added input tax to be deducted 19,137 18,625
Prepaid income tax 5,109 131
69,431 58,709
29 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities before offset are attributable to the
items detailed in the table below:
Deferred tax assets Deferred tax liabilities
31 December 31 December 31 December 31 December
2021 2020 2021 2020
RMB million RMB million RMB million RMB million
Receivables and inventories 3,763 2,411 - -
Payables 2,858 1,286 - -
Cash flow hedges 258 1,790 (2,709) (4,420)
Property, plant and equipment 16,777 15,793 (15,037) (13,415)
Tax losses carried forward 4,749 13,322 - -
Financial assets at fair value through other comprehensive income 127 127 (9) (11)
Intangible assets 1,008 869 (492) (517)
Others 1,056 371 (870) (676)
Deferred tax assets/(liabilities) 30,596 35,969 (19,117) (19,039)
The consolidated elimination amount between deferred tax assets and
liabilities are as follows:
31 December 31 December
2021 2020
RMB million RMB million
Deferred tax assets 11,207 10,915
Deferred tax liabilities 11,207 10,915
Deferred tax assets and liabilities after the consolidated elimination
adjustments are as follows:
31 December 31 December
2021 2020
RMB million RMB million
Deferred tax assets 19,389 25,054
Deferred tax liabilities 7,910 8,124
As at 31 December 2021, certain subsidiaries of the Company did not recognise
deferred tax of deductible loss carried forward of RMB18,342 million (2020:
RMB17,718 million), of which RMB5,564 million (2020: RMB4,349 million) was
incurred for the year ended 31 December 2021, because it was not probable that
the future taxable profits will be available. These deductible losses carried
forward of RMB4,135 million, RMB2,308 million, RMB1,986 million, RMB4,349
million and RMB5,564 million will expire in 2022, 2023, 2024, 2025, 2026 and
after, respectively.
Periodically, management performed assessment on the probability that future
taxable profit will be available over the period which the deferred tax assets
can be realised or utilised. In assessing the probability, both positive and
negative evidence was considered, including whether it is probable that the
operations will have sufficient future taxable profits over the periods which
the deferred tax assets are deductible or utilised and whether the tax losses
result from identifiable causes which are unlikely to recur.
29 DEFERRED TAX ASSETS AND LIABILITIES (Continued)
Movements in the deferred tax assets and liabilities are as follows:
Balance at Recognised in Recognised Others Transferred Balance at
1 January consolidated in other from 31 December
2020 income comprehensive reserve 2020
statement income
RMB million RMB million RMB million RMB million RMB million RMB million
Receivables and inventories 2,546 (122) (12) (1) - 2,411
Payables 1,142 144 - - - 1,286
Cash flow hedges (268) (42) (2,316) - (4) (2,630)
Property, plant and equipment 4,146 (2,244) 127 349 - 2,378
Tax losses carried forward 3,594 9,960 (84) (148) - 13,322
Financial assets at fair value through 124 (4) (4) - - 116
other comprehensive income
Intangible assets 87 19 - 246 - 352
Others (564) 162 24 73 - (305)
Net deferred tax assets/(liabilities) 10,807 7,873 (2,265) 519 (4) 16,930
Balance at Recognised in Recognised Others Transferred Balance at
1 January consolidated in other from 31 December
2021 income comprehensive reserve 2021
statement income
RMB million RMB million RMB million RMB million RMB million RMB million
Receivables and inventories 2,411 1,378 (26) - - 3,763
Payables 1,286 1,572 - - - 2,858
Cash flow hedges (2,630) (203) (5,499) - 5,881 (2,451)
Property, plant and equipment 2,378 (1,004) 41 325 - 1,740
Tax losses carried forward 13,322 (8,554) (19) - - 4,749
Financial assets at fair value through 116 - 2 - - 118
other comprehensive income
Intangible assets 352 63 - 101 - 516
Others (305) 490 (3) 4 - 186
Net deferred tax assets/(liabilities) 16,930 (6,258) (5,504) 430 5,881 11,479
30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND
FELLOW SUBSIDIARIES
Short-term debts represent:
31 December 31 December
2021 2020
RMB million RMB million
Third parties' debts
Short-term bank loans 24,959 16,111
RMB denominated 24,959 16,111
Short-term other loans - 3
RMB denominated - 3
Current portion of long-term bank loans 3,293 4,637
RMB denominated 3,281 4,613
USD denominated 12 24
Current portion of long-term corporate bonds 7,000 -
RMB denominated 7,000 -
Corporate bonds - 3,018
RMB denominated - 3,018
35,252 23,769
Loans from Sinopec Group Company and fellow subsidiaries
Short-term loans 2,407 4,642
RMB denominated 1,320 1,141
USD denominated 934 3,298
Hong Kong Dollar ("HKD") denominated - 31
European Dollar ("EUR") denominated 153 172
Current portion of long-term loans 466 622
RMB denominated 466 622
2,873 5,264
38,125 29,033
The Group's weighted average interest rates on short-term loans were 2.72%
(2020: 2.53%) per annum at 31 December 2021. The above borrowings are
unsecured.
30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND
FELLOW SUBSIDIARIES (Continued)
Long-term debts represent:
Interest rate and final maturity 31 December 31 December
2021 2020
RMB million RMB million
Third parties' debts
Long-term bank loans
RMB denominated Interest rates ranging from 1.08% to 4.00% 38,880 38,226
per annum at 31 December 2021
with maturities through 2039
USD denominated Interest rates at 1.55% per annum 64 92
at 31 December 2021 with maturities
through 2038
38,944 38,318
Corporate bonds (i)
RMB denominated Fixed interest rates ranging from 2.20% to 38,522 26,977
4.90% per annum at 31 December 2021
with maturities through 2026
USD denominated Fixed interest rates ranging from 3.13% to 11,127 11,379
4.25% per annum at 31 December 2021
with maturities through 2043
49,649 38,356
Total third parties' long-term debts 88,593 76,674
Less: Current portion (10,293) (4,637)
78,300 72,037
Long-term loans from Sinopec Group Company and fellow subsidiaries
RMB denominated Interest rates ranging from 1.08% to 12,988 11,013
5.23% per annum at 31 December 2021
with maturities through 2037
USD denominated Interest rates at 1.65% per annum at 31 December 2021 1,168 1,387
with maturities in 2027
Less: Current portion (466) (622)
13,690 11,778
91,990 83,815
Short-term and long-term bank loans, short-term other loans and loans from
Sinopec Group Company and fellow subsidiaries are primarily unsecured and
carried at amortised cost.
Notes:
(i) The Company issued corporate bonds with a maturity of five years on
26 July 2021 at par value of RMB100. The total issued amount of the corporate
bonds is RMB5 billion. The corporate bonds adopt a simple interest rate on an
annual basis with a fixed rate at 3.20% per annum and the interest is paid
once a year.
The Company issued corporate bonds with a maturity of three years on 5 August
2021 at par value of RMB100. The total issued amount of the corporate bonds is
RMB2 billion. The corporate bonds adopt a simple interest rate on an annual
basis with a fixed rate at 2.95% per annum and the interest is paid once a
year.
The Company issued corporate bonds with a maturity of two years on 6 August
2021 at par value of RMB100. The total issued amount of the corporate bonds is
RMB2 billion. The corporate bonds adopt a simple interest rate on an annual
basis with a fixed rate at 2.80% per annum and the interest is paid once a
year.
The Company issued corporate bonds with a maturity of three years on 27
December 2021 at par value of RMB100. The total issued amount of the corporate
bonds is RMB2.55 billion. The corporate bonds adopt a simple interest rate on
an annual basis with a fixed rate at 2.50% per annum and the interest is paid
once a year.
These corporate bonds are carried at amortised cost.
31 LEASE LIABILITIES
31 December 31 December
2021 2020
RMB million RMB million
Lease liabilities
Current 15,173 15,293
Non-current 170,233 171,740
185,406 187,033
32 TRADE ACCOUNTS PAYABLE AND BILLS PAYABLE
31 December 31 December
2021 2020
RMB million RMB million
Amounts due to third parties 193,547 132,256
Amounts due to Sinopec Group Company and fellow subsidiaries 4,227 11,512
Amounts due to associates and joint ventures 6,145 7,746
203,919 151,514
Bills payable 11,721 10,394
Trade accounts payable and bills payable measured at amortised cost 215,640 161,908
The ageing analysis of trade accounts payable and bills payable is as follows:
31 December 31 December
2021 2020
RMB million RMB million
Within 1 month or on demand 138,741 146,415
Between 1 month and 6 months 25,280 9,793
Over 6 months 51,619 5,700
215,640 161,908
33 CONTRACT LIABILITIES
As at 31 December 2021 and 2020, the Group's contract liabilities primarily
represent advances from customers. Related performance obligations are
expected to be satisfied and revenue is recognised within one year.
34 OTHER PAYABLES
31 December 31 December
2021 2020
RMB million RMB million
Salaries and welfare payable 14,048 7,129
Interest payable 822 667
Payables for constructions 54,596 42,027
Other payables 93,764 59,023
Taxes other than income tax 76,458 70,262
239,688 179,108
35 PROVISIONS
Provisions primarily represent provision for future dismantlement costs of oil
and gas properties. The Group has mainly committed to the PRC government to
establish certain standardised measures for the dismantlement of its oil and
gas properties by making reference to the industry practices and is thereafter
constructively obligated to take dismantlement measures of its oil and gas
properties.
Movement of provision of the Group's obligations for the dismantlement of its
oil and gas properties is as follow:
2021 2020
RMB million RMB million
Balance at 1 January 43,713 42,438
Provision for the year 2,163 1,563
Accretion expenses 1,135 1,343
Decrease for the year (6,435) (1,490)
Exchange adjustments (81) (141)
Balance at 31 December 40,495 43,713
36 SHARE CAPITAL
31 December 31 December
2021 2020
RMB million RMB million
Registered, issued and fully paid
95,557,771,046 listed A shares (2020: 95,557,771,046) of RMB1.00 each 95,558 95,558
25,513,438,600 listed H shares (2020: 25,513,438,600) of RMB1.00 each 25,513 25,513
121,071 121,071
The Company was established on 25 February 2000 with a registered capital of
68.8 billion domestic state-owned shares with a par value of RMB1.00 each.
Such shares were issued to Sinopec Group Company in consideration for the
assets and liabilities transferred to the Company (Note 1).
Pursuant to the resolutions passed at an Extraordinary General Meeting held on
25 July 2000 and approvals from relevant government authorities, the Company
is authorised to increase its share capital to a maximum of 88.3 billion
shares with a par value of RMB1.00 each and offer not more than 19.5 billion
shares with a par value of RMB1.00 each to investors outside the PRC. Sinopec
Group Company is authorised to offer not more than 3.5 billion shares of its
shareholdings in the Company to investors outside the PRC. The shares sold by
Sinopec Group Company to investors outside the PRC would be converted into H
shares.
In October 2000, the Company issued 15,102,439,000 H shares with a par value
of RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American
Depositary Shares ("ADSs", each representing 100 H shares), at prices of
HKD1.59 per H share and USD20.645 per ADS, respectively, by way of a global
initial public offering to Hong Kong and overseas investors. As part of the
global initial public offering, 1,678,049,000 state-owned ordinary shares of
RMB1.00 each owned by Sinopec Group Company were converted into H shares and
sold to Hong Kong and overseas investors.
In July 2001, the Company issued 2.8 billion listed A shares with a par value
of RMB1.00 each at RMB4.22 by way of a public offering to natural persons and
institutional investors in the PRC.
During the year ended 31 December 2010, the Company issued 88,774 listed A
shares with a par value of RMB1.00 each, as a result of exercise of 188,292
warrants entitled to the Bonds with Warrants.
During the year ended 31 December 2011, the Company issued 34,662 listed A
shares with a par value of RMB1.00 each, as a result of conversion by the
holders of the 2011 Convertible Bonds.
During the year ended 31 December 2012, the Company issued 117,724,450 listed
A shares with a par value of RMB1.00 each, as a result of conversion by the
holders of the 2011 Convertible Bonds.
On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the
Placing") with a par value of RMB1.00 each at the Placing Price of HKD8.45 per
share. The aggregate gross proceeds from the Placing amounted to approximately
HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the
commissions and estimated expenses) amounted to approximately
HKD23,970,100,618.00.
In June 2013, the Company issued 21,011,962,225 listed A shares and
5,887,716,600 listed H shares as a result of bonus issues of 2 shares
converted from the retained earnings, and 1 share transferred from the share
premium for every 10 existing shares.
During the year ended 31 December 2013, the Company issued 114,076 listed A
shares with a par value of RMB1.00 each, as a result of exercise of conversion
by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2014, the Company issued 1,715,081,853
listed A shares with a par value of RMB1.00 each, as a result of exercise of
conversion by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2015, the Company issued 2,790,814,006
listed A shares with a par value of RMB1.00 each, as a result of exercise of
conversion by the holders of the 2011 Convertible Bonds.
All A shares and H shares rank pari passu in all material aspects.
Capital management
Management optimises the structure of the Group's capital, which comprises of
equity, debts and bonds. In order to maintain or adjust the capital structure
of the Group, management may cause the Group to issue new shares, adjust the
capital expenditure plan, sell assets to reduce debt, or adjust the proportion
of short-term and long-term loans and bonds. Management monitors capital on
the basis of the debt-to-capital ratio, which is calculated by dividing
long-term loans (excluding current portion) and debentures payable, including
long-term debts and loans from Sinopec Group Company and fellow subsidiaries,
by the total of equity attributable to shareholders of the Company and
long-term loans (excluding current portion) and debentures payable, and
liability-to-asset ratio, which is calculated by dividing total liabilities by
total assets. Management's strategy is to make appropriate adjustments
according to the Group's operating and investment needs and the changes of
market conditions, and to maintain the debt-to-capital ratio and the
liability-to-asset ratio of the Group at a range considered reasonable. As at
31 December 2021, the debt-to-capital ratio and the liability-to-asset ratio
of the Group were 10.6% (2020: 10.1%) and 51.6% (2020: 49.0%), respectively.
The schedule of the contractual maturities of loans and commitments are
disclosed in Notes 30 and 37, respectively.
There were no changes in the management's approach to capital management of
the Group during the year. Neither the Company nor any of its subsidiaries is
subject to externally imposed capital requirements.
37 COMMITMENTS AND CONTINGENT LIABILITIES
Capital commitments
At 31 December 2021 and 2020, capital commitments of the Group are as follows:
31 December 31 December
2021 2020
RMB million RMB million
Authorised and contracted for (i) 184,430 171,597
Authorised but not contracted for 90,227 33,997
274,657 205,594
These capital commitments relate to oil and gas exploration and development,
refining and petrochemical production capacity expansion projects, the
construction of service stations and oil depots and investment commitments.
Note:
(i) The investment commitments of the Group is RMB3,648 million (2020:
RMB13,172 million).
Commitments to joint ventures
Pursuant to certain of the joint venture agreements entered into by the Group,
the Group is obliged to purchase products from the joint ventures based on
market prices.
Exploration and production licenses
Exploration licenses for exploration activities are registered with the
Ministry of Natural Resources. The maximum term of the Group's exploration
licenses is 7 years, and may be renewed twice within 30 days prior to
expiration of the original term with each renewal being for a two-year term.
The Group is obligated to make progressive annual minimum exploration
investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Natural Resources also issues production licenses
to the Group on the basis of the reserve reports approved by relevant
authorities. The maximum term of a full production license is 30 years unless
a special dispensation is given by the State Council. The maximum term of
production licenses issued to the Group is 80 years as a special dispensation
was given to the Group by the State Council. The Group's production license is
renewable upon application by the Group 30 days prior to expiration.
The Group is required to make payments of exploration license fees and
production right usage fees to the Ministry of Natural Resources annually
which are expensed. Expenses recognised were approximately RMB181 million for
the year ended 31 December 2021 (2020: RMB231 million).
Estimated future annual payments are as follows:
31 December 31 December
2021 2020
RMB million RMB million
Within one year 301 390
Between one and two years 112 99
Between two and three years 110 66
Between three and four years 102 63
Between four and five years 64 56
Thereafter 846 824
1,535 1,498
Contingent liabilities
At 31 December 2021 and 2020, the guarantees by the Group in respect of
facilities granted to the parties below are as follows:
31 December 31 December
2021 2020
RMB million RMB million
Joint ventures (ii) 9,117 6,390
Associates (iii) 5,746 8,450
14,863 14,840
37 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Contingent liabilities (Continued)
Management monitors the risk that the specified debtor will default on the
contract and recognises a provision when ECLs on the financial guarantees are
determined to be higher than the carrying amount in respect of the guarantees.
At 31 December 2021 and 2020, the Group estimates that there is no material
liability has been accrued for ECLs related to the Group's obligation under
these guarantee arrangements.
Notes:
(ii) The Group provided a guarantee in respect to standby credit
facilities granted to Zhongan United Coal Chemical Co., Ltd. ("Zhongan
United") by banks amount to RMB7,100 million. As at 31 December 2021, the
amount withdrawn (The portion corresponding to the shareholding ratio of the
Group) by Zhongan United from banks and guaranteed by the Group was RMB5,680
million (31 December 2020: RMB6,390 million). The Group provided a guarantee
in respect to standby credit facilities granted to Amur Gas Chemical Complex
Limited Liability Company ("Amur Gas") by banks amount to RMB23,208 million.
As at 31 December 2021, the amount withdrawn (The portion corresponding to the
shareholding ratio of the Group) by Amur Gas from banks and guaranteed by the
Group was RMB3,264 million (31 December 2020: Nil).
The Group provided a guarantee in respect to payment obligation under the raw
material supply agreement of Amur Gas amount to RMB15,493 million. As at 31
December 2021, Amur Gas has not yet incurred the relevant payment obligations
and therefore the Group has no guarantee amount (31 December 2020: Nil).
The Group provided a guarantee in respect the engineering services agreement
of Amur Gas amount to RMB3,012 million. As at 31 December 2021, the relevant
payables for constructions of Amur Gas (The portion corresponding to the
shareholding ratio of the Group) and guaranteed by the Group was RMB173
million (31 December 2020: Nil).
(iii) The Group provided a guarantee in respect to standby credit facilities
granted to Zhongtian Synergetic Energy by banks amount to RMB17,050 million.
As at 31 December 2021, the amount withdrawn (The portion corresponding to the
shareholding ratio of the Group) by Zhongtian Synergetic Energy and guaranteed
by the Group was RMB5,746 million (2020: RMB8,450 million).
Environmental contingencies
Under existing legislation, management believes that there are no probable
liabilities that will have a material adverse effect on the financial position
or operating results of the Group. The PRC government, however, has moved, and
may move further towards more rigorous enforcement of applicable laws, and
towards the adoption of more stringent environmental standards. Environmental
liabilities are subject to considerable uncertainties which affect
management's ability to estimate the ultimate cost of remediation efforts.
These uncertainties include (i) the exact nature and extent of the
contamination at various sites including, but not limited to refineries, oil
fields, service stations, terminals and land development areas,whether
operating, closed or sold, (ii) the extent of required cleanup efforts, (iii)
varying costs of alternative remediation strategies, (iv) changes in
environmental remediation requirements, and (v) the identification of new
remediation sites. The amount of such future cost is indeterminable due to
such factors as the unknown magnitude of possible contamination and the
unknown timing and extent of the corrective actions that may be required.
Accordingly, the outcome of environmental liabilities under proposed or future
environmental legislation cannot reasonably be estimated at present, and could
be material.
The Group paid normal routine pollutant discharge fees of approximately
RMB10,968 million in the consolidated financial statements for the year ended
31 December 2021 (2020: RMB11,368 million).
Legal contingencies
The Group is defendant in certain lawsuits as well as the named party in other
proceedings arising in the ordinary course of business. Management has
assessed the likelihood of an unfavourable outcome of such contingencies,
lawsuits or other proceedings and believes that any resulting liabilities will
not have a material adverse effect on the financial position, operating
results or cash flows of the Group.
38 BUSINESS COMBINATION
Pursuant to resolution passed at the Director's meeting on 26 March 2021, the
Company entered into agreements with Sinopec Assets Management Corporation
("SAMC") and Beijing Orient Petrochemical Industry Co., Ltd. ("BJOPI"), and
its subsidiary,Sinopec Beihai Refining and Chemical Limited Liability Company
entered into an agreement with Beihai Petrochemical Limited Liability Company
of Sinopec Group ("BHP"). According to the relevant agreements, the Company
proposed to acquire non equity assets such as the polypropylene devices and
utility business assets of Cangzhou Branch held by SAMC, organic plant
business held by BJOPI, and the pier operation platform held by BHP.
Pursuant to the resolution passed at the Directors' meeting on 29 November
2021, the Company entered into agreements with SAMC, and Sinopec Beijing
Yanshan Petrochemical Co., Ltd. ("SBJYSP"), and its subsidiary, Sinopec
Yizheng Chemical Fibre Company Limited entered into an agreement with SAMC.
According to the relevant agreements, the Group proposed to acquire non equity
assets such as thermal power, water and other business, PBT resin and other
business of Yizheng Branch held by SAMC, and thermal power and other
businesses held by SBJYSP.
The consideration of the transaction amount to RMB6,124 million.
As the Company, SAMC, BJOPI, BHP and SBJYSP are all under the control of
Sinopec Group Company, the transaction described above has been accounted as
business combination under common control. Accordingly, the equity and assets
acquired from Sinopec Group Company have been accounted for at historical
cost, and the consolidated financial statements of the Group prior to these
acquisitions have been restated to include the results of operation and the
assets and liabilities of Sinopec Group Company on a combined basis.
The transactions under the after-mentioned agreements will further improve the
integrated operation level of the Group, optimise the allocation of resources,
reduce connected transactions on the whole, so as to enhance the comprehensive
competitiveness of the Group in its business locations.
38 BUSINESS COMBINATION (Continued)
The financial condition as at 31 December 2020 and the results of operation
for the year ended 31 December 2020 previously reported by the Group have been
restated, as set out below:
The Group, as Acquired assets Elimination and The Group,
previously and liabilities Adjustment as restated
reported of Sinopec
Group Company
RMB million RMB million RMB million RMB million
Summarised consolidated income statement
for the year ended 31 December 2020:
Revenue 2,105,984 12,233 (13,493) 2,104,724
Profit attributable to shareholders of the Company 33,096 347 - 33,443
Profit attributable to non-controlling interests 8,828 - - 8,828
Basic earnings per share (RMB) 0.273 0.003 - 0.276
Diluted earnings per share (RMB) 0.273 0.003 - 0.276
Summarised consolidated statement of financial position
as at 31 December 2020:
Current assets 455,395 480 (215) 455,660
Total assets 1,733,805 5,875 (784) 1,738,896
Current liabilities 522,190 1,020 (215) 522,995
Total liabilities 850,947 1,031 (784) 851,194
Total equity attributable to shareholders of the Company 741,494 4,831 - 746,325
Non-controlling interests 141,364 13 - 141,377
Summarised consolidated statement of cash flows
for the year ended 31 December 2020:
Net cash generated from operating activities 167,518 1,002 - 168,520
Net cash used in investing activities (102,203) (447) - (102,650)
Net cash used in financing activities (36,955) (555) - (37,510)
Net increase in cash and cash equivalents 28,360 - - 28,360
39 RELATED PARTY TRANSACTIONS
Parties are considered to be related to the Group if the Group has the
ability, directly or indirectly, to control or jointly control the party or
exercise significant influence over the party in making financial and
operating decisions, or vice versa, or where the Group and the party are
subject to control or common control. Related parties may be individuals
(being members of key management personnel, significant shareholders and/or
their close family members) or other entities and include entities which are
under the significant influence of related parties of the Group where those
parties are individuals, and post-employment benefit plans which are for the
benefit of employees of the Group or of any entity that is a related party of
the Group.
(a) Transactions with Sinopec Group Company and fellow subsidiaries,
associates and joint ventures
The Group is part of a larger group of companies under Sinopec Group Company,
which is controlled by the PRC government, and has significant transactions
and relationships with Sinopec Group Company and fellow subsidiaries. Because
of these relationships, it is possible that the terms of these transactions
are not the same as those that would result from transactions among wholly
unrelated parties.
The principal related party transactions with Sinopec Group Company and fellow
subsidiaries, associates and joint ventures, which were carried out in the
ordinary course of business are as follows:
Note 2021 2020
RMB million RMB million
Sales of goods (i) 297,381 228,307
Purchases (ii) 191,888 151,300
Transportation and storage (iii) 19,443 8,734
Exploration and development services (iv) 33,930 31,444
Production related services (v) 44,405 31,915
Ancillary and social services (vi) 1,730 2,952
Agency commission income (vii) 194 160
Interest income (viii) 715 704
Interest expense (ix) 385 919
Net deposits placed with related parties (viii) (8,265) (17,585)
Net funds obtained from/(repaid to) related parties (x) 30,305 (31,144)
The amounts set out in the table above in respect of the year ended 31
December 2021 and 2020 represent the relevant costs and income as determined
by the corresponding contracts with the related parties.
39 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries,
associates and joint ventures (Continued)
Included in the transactions disclosed above, for the year ended 31 December
2021 are: a) purchases by the Group from Sinopec Group Company and fellow
subsidiaries amounting to RMB173,718 million (2020: RMB149,560 million)
comprising purchases of products and services (i.e. procurement,
transportation and storage, exploration and development services and
production related services) of RMB160,048 million (2020: RMB133,827 million),
ancillary and social services provided by Sinopec Group Company and fellow
subsidiaries of RMB1,730 million (2020: RMB2,952 million), lease charges for
land, buildings and others paid by the Group of RMB10,831 million, RMB565
million and RMB159 million (2020: RMB11,086 million, RMB565 million and RMB211
million), respectively and interest expenses of RMB385 million (2020: RMB919
million); and b) sales by the Group to Sinopec Group Company and fellow
subsidiaries amounting to RMB54,453 million (2020: RMB69,470 million),
comprising RMB53,671 million (2020: RMB68,683 million) for sales of goods,
RMB715 million (2020: RMB704 million) for interest income and RMB67 million
(2020: RMB83 million) for agency commission income.
For the year ended 31 December 2021, no individually significant right-of-use
assets were leased from Sinopec Group Company and fellow subsidiaries,
associates and joint ventures by the Group. The interest expense recognised
for the year ended 31 December 2021 on lease liabilities in respect of amounts
due to Sinopec Group Company and fellow subsidiaries, associates and joint
ventures was RMB7,863 million (2020: RMB8,160 million).
For the year ended 31 December 2021, the amount of rental the Group paid to
Sinopec Group Company and fellow subsidiaries, associates and joint ventures
for land, buildings and others are RMB10,834 million, RMB572 million and
RMB269 million (2020: RMB11,090 million, RMB571 million and RMB330 million).
As at 31 December 2021 and 2020, there was no guarantee given to banks by the
Group in respect of banking facilities to Sinopec Group Company and fellow
subsidiaries, associates and joint ventures, except for the guarantees
disclosed in Note 37. Guarantees given to banks by the Group in respect of
banking facilities to associates and joint ventures are disclosed in Note 37.
The directors of the Company are of the opinion that the above transactions
with related parties were conducted in the ordinary course of business and on
normal commercial terms or in accordance with the agreements governing such
transactions, and this has been confirmed by the independent non-executive
directors.
Notes:
(i) Sales of goods represent the sale of crude oil, intermediate
petrochemical products, petroleum products and ancillary materials.
(ii) Purchases represent the purchase of materials and utility supplies
directly related to the Group's operations such as the procurement of raw and
ancillary materials and related services, supply of water, electricity and
gas.
(iii) Transportation and storage represent the cost for the use of railway,
road and marine transportation services, pipelines, loading, unloading and
storage facilities.
(iv) Exploration and development services comprise direct costs incurred in
the exploration and development such as geophysical, drilling, well testing
and well measurement services.
(v) Production related services represent ancillary services rendered in
relation to the Group's operations such as equipment repair and general
maintenance, insurance premium, technical research, communications,
firefighting, security, product quality testing and analysis, information
technology, design and engineering, construction of oilfield ground
facilities, refineries and chemical plants, manufacture of replacement parts
and machinery, installation, project management, environmental protection and
management services.
(vi) Ancillary and social services represent expenditures for social welfare
and support services such as educational facilities, media communication
services, sanitation, accommodation, canteens, and property maintenance.
(vii) Agency commission income
represents commission earned for acting as an agent in respect of sales of
products and purchase of materials for certain entities owned by Sinopec Group
Company.
(viii) Interest income represents interest received from deposits placed
with Sinopec Finance and Sinopec Century Bright Capital Investment Limited,
finance companies controlled by Sinopec Group Company. The applicable interest
rate is determined in accordance with the prevailing saving deposit rate. The
balance of deposits at 31 December 2021 was RMB61,682 million (2020: RMB53,417
million).
(ix) Interest expense represents interest charges on the loans obtained from
Sinopec Group Company and fellow subsidiaries.
(x) The Group obtained loans, discounted bills and issued the acceptance
bills from Sinopec Group Company and fellow subsidiaries.
39 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries,
associates and joint ventures (Continued)
In connection with the Reorganisation, the Company and Sinopec Group Company
entered into a number of agreements under which 1) Sinopec Group Company will
provide goods and products and a range of ancillary, social and supporting
services to the Group and 2) the Group will sell certain goods to Sinopec
Group Company. These agreements impacted the operating results of the Group
for the year ended 31 December 2021. The terms of these agreements are
summarised as follows:
‧ The Company has entered into a non-exclusive "Agreement for Mutual
Provision of Products and Ancillary Services" ("Mutual Provision Agreement")
with Sinopec Group Company effective from 1 January 2000 in which Sinopec
Group Company has agreed to provide the Group with certain ancillary
production services, construction services, information advisory services,
supply services and other services and products. While each of Sinopec Group
Company and the Company is permitted to terminate the Mutual Provision
Agreement upon at least six months notice, Sinopec Group Company has agreed
not to terminate the agreement if the Group is unable to obtain comparable
services from a third party. The pricing policy for these services and
products provided by Sinopec Group Company to the Group is as follows:
(1) the government-prescribed price;
(2) where there is no government-prescribed price, the government-guidance
price;
(3) where there is neither a government-prescribed price nor a
government-guidance price, the market price; or
(4) where none of the above is applicable, the price to be agreed between
the parties, which shall be based on a reasonable cost incurred in providing
such services plus a profit margin not exceeding 6%.
‧ The Company has entered into a non-exclusive "Agreement for Provision
of Cultural and Educational, Health Care and Community Services" with Sinopec
Group Company effective from 1 January 2000 in which Sinopec Group Company has
agreed to provide the Group with certain cultural, educational, health care
and community services on the same pricing terms and termination conditions as
described in the above Mutual Provision Agreement.
‧ The Company has entered into a series of lease agreements with Sinopec
Group Company to lease certain lands and buildings effective on 1 January
2000. The lease term is 40 or 50 years for lands and 20 years for buildings,
respectively. The Company and Sinopec Group Company can renegotiate the rental
amount every three years for land. The Company and Sinopec Group Company can
renegotiate the rental amount for buildings every year. However such amount
cannot exceed the market price as determined by an independent third party.
‧ The Company has entered into agreements with Sinopec Group Company
effective from 1 January 2000 under which the Group has been granted the right
to use certain trademarks, patents, technology and computer software developed
by Sinopec Group Company.
‧ The Company has entered into a service stations franchise agreement
with Sinopec Group Company effective from 1 January 2000 under which its
service stations and retail stores would exclusively sell the refined products
supplied by the Group.
‧ On the basis of a series of continuing connected transaction
agreements signed in 2000, the Company and Sinopec Group Company have signed
the Sixth Supplementary Agreement on 27 August 2021, which took effect on 1
January 2022 and made adjustment to "Mutual Supply Agreement" and "Buildings
Leasing Contract", etc.
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates
and joint ventures included in the following accounts captions are summarised
as follows:
31 December 31 December
2021 2020
RMB million RMB million
Trade accounts receivable 8,655 16,777
Financial assets at fair value through other comprehensive income 186 760
Prepaid expenses and other current assets 14,537 19,422
Long-term prepayments and other assets 3,116 6,435
Total 26,494 43,394
Trade accounts payable and bills payable 14,170 22,792
Contract liabilities 4,677 5,937
Other payables 50,649 12,759
Other long-term liabilities 2,779 3,010
Short-term loans and current portion of long-term loans from Sinopec Group 2,873 5,264
Company and fellow subsidiaries
Long-term loans excluding current portion from Sinopec Group Company and 13,690 11,778
fellow subsidiaries
Lease liabilities (including to be paid within one year) 158,761 162,048
Total 247,599 223,588
39 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries,
associates and joint ventures (Continued)
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates
and joint ventures, other than short-term loans and long-term loans, bear no
interest, are unsecured and are repayable in accordance with normal commercial
terms. The terms and conditions associated with short-term loans and long-term
loans payable to Sinopec Group Company and fellow subsidiaries are set out in
Note 30.
As at and for the year ended 31 December 2021, and as at and for the year
ended 31 December 2020, no individually significant loss allowance for
expected credit losses were recognised in respect of amounts due from Sinopec
Group Company and fellow subsidiaries, associates and joint ventures.
(b) Key management personnel emoluments
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, directly
or indirectly, including directors and supervisors of the Group. The key
management personnel compensation is as follows:
2021 2020
RMB'000 RMB'000
Short-term employee benefits 4,612 5,753
Retirement scheme contributions 379 342
4,991 6,095
(c) Contributions to defined contribution retirement plans
The Group participates in various defined contribution retirement plans
organised by municipal and provincial governments for its staff. The details
of the Group's employee benefits plan are disclosed in Note 40. As at 31
December 2021 and 2020, the accrual for the contribution to post-employment
benefit plans was not material.
(d) Transactions with other state-controlled entities in the PRC
The Group is a state-controlled energy and chemical enterprise and operates in
an economic regime currently dominated by entities directly or indirectly
controlled by the PRC government through its government authorities, agencies,
affiliations and other organisations (collectively referred as
"state-controlled entities").
Apart from transactions with Sinopec Group Company and fellow subsidiaries,
the Group has transactions with other state-controlled entities, include but
not limited to the followings:
‧ sales and purchases of goods and ancillary materials;
‧ rendering and receiving services;
‧ lease of assets;
‧ depositing and borrowing money; and
‧ uses of public utilities.
These transactions are conducted in the ordinary course of the Group's
business on terms comparable to those with other entities that are not
state-controlled.
40 EMPLOYEE BENEFITS PLAN
As stipulated by the regulations of the PRC, the Group participates in various
defined contribution retirement plans organised by municipal and provincial
governments for its staff. The Group is required to make contributions to the
retirement plans at rates ranging from 13.0% to 16.0% of the salaries, bonuses
and certain allowances of its staff. In addition, the Group provides a
supplementary retirement plan for its staff at rates not exceeding 8% of the
salaries. The Group has no other material obligation for the payment of
pension benefits associated with these plans beyond the annual contributions
described above. The Group's contributions for the year ended 31 December 2021
were RMB11,932 million (2020: RMB8,983 million).
41 SEGMENT REPORTING
Segment information is presented in respect of the Group's business segments.
The format is based on the Group's management and internal reporting
structure.
In a manner consistent with the way in which information is reported
internally to the Group's chief operating decision maker for the purposes of
resource allocation and performance assessment, the Group has identified the
following five reportable segments. No operating segments have been aggregated
to form the following reportable segments.
(i) Exploration and production, which explores and develops oil fields,
produces crude oil and natural gas and sells such products to the refining
segment of the Group and external customers.
(ii) Refining, which processes and purifies crude oil, that is sourced from
the exploration and production segment of the Group and external suppliers,
and manufactures and sells petroleum products to the chemicals and marketing
and distribution segments of the Group and external customers.
(iii) Marketing and distribution, which owns and operates oil depots and
service stations in the PRC, and distributes and sells refined petroleum
products (mainly gasoline and diesel) in the PRC through wholesale and retail
sales networks.
(iv) Chemicals, which manufactures and sells petrochemical products,
derivative petrochemical products and other chemical products mainly to
external customers.
(v) Corporate and others, which largely comprises the trading activities of
the import and export companies of the Group and research and development
undertaken by other subsidiaries.
The segments were determined primarily because the Group manages its
exploration and production, refining, marketing and distribution, chemicals,
and corporate and others businesses separately. The reportable segments are
each managed separately because they manufacture and/or distribute distinct
products with different production processes and due to their distinct
operating and gross margin characteristics.
41 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities
The Group's chief operating decision maker evaluates the performance and
allocates resources to its operating segments on an operating profit basis,
without considering the effects of finance costs or investment income.
Inter-segment transfer pricing is based on the market price or cost plus an
appropriate margin, as specified by the Group's policy.
Assets and liabilities dedicated to a particular segment's operations are
included in that segment's total assets and liabilities. Segment assets
include all tangible and intangible assets, except for interest in associates
and joint ventures, investments, deferred tax assets, cash and cash
equivalents, time deposits with financial institutions and other unallocated
assets. Segment liabilities exclude short-term debts, income tax payable,
long-term debts, loans from Sinopec Group Company and fellow subsidiaries,
deferred tax liabilities and other unallocated liabilities.
Information of the Group's reportable segments is as follows:
2021 2020
RMB million RMB million
Revenue from primary business
Exploration and production
External sales 156,026 104,524
Inter-segment sales 87,298 57,513
243,324 162,037
Refining
External sales 167,948 113,214
Inter-segment sales 1,212,455 826,219
1,380,403 939,433
Marketing and distribution
External sales 1,367,605 1,062,447
Inter-segment sales 7,075 4,854
1,374,680 1,067,301
Chemicals
External sales 424,774 322,169
Inter-segment sales 70,242 40,702
495,016 362,871
Corporate and others
External sales 563,147 458,154
Inter-segment sales 732,356 430,073
1,295,503 888,227
Elimination of Inter-segment sales (2,109,426) (1,371,215)
Revenue from primary business 2,679,500 2,048,654
Other operating revenues
Exploration and production 6,674 5,718
Refining 5,161 4,633
Marketing and distribution 36,864 34,905
Chemicals 10,487 8,758
Corporate and others 2,198 2,056
Other operating revenues 61,384 56,070
Revenue 2,740,884 2,104,724
41 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
2021 2020
RMB million RMB million
Result
Operating profit/(loss)
By segment
- Exploration and production 4,685 (16,476)
- Refining 65,279 (5,525)
- Marketing and distribution 21,204 20,828
- Chemicals 11,106 10,818
- Corporate and others (3,225) (393)
- Elimination (4,421) 4,417
Total segment operating profit 94,628 13,669
Share of profit/(loss) from associates and joint ventures
- Exploration and production 2,783 2,117
- Refining 662 (2,516)
- Marketing and distribution 3,731 2,200
- Chemicals 11,323 1,723
- Corporate and others 4,754 3,188
Aggregate share of profits from associates and joint ventures 23,253 6,712
Investment income
- Exploration and production 55 13,118
- Refining (10) 14,941
- Marketing and distribution 3 8,980
- Chemicals (54) (61)
- Corporate and others 304 766
Aggregate investment income 298 37,744
Net finance costs (9,010) (9,510)
Profit before taxation 109,169 48,615
31 December 31 December
2021 2020
RMB million RMB million
Assets
Segment assets
- Exploration and production 371,100 354,024
- Refining 304,785 270,766
- Marketing and distribution 377,499 373,430
- Chemicals 222,803 190,789
- Corporate and others 133,961 118,458
Total segment assets 1,410,148 1,307,467
Interest in associates and joint ventures 209,179 188,342
Financial assets at fair value through other comprehensive income 767 1,525
Deferred tax assets 19,389 25,054
Cash and cash equivalents, time deposits with financial institutions 221,989 188,057
Other unallocated assets 27,783 28,451
Total assets 1,889,255 1,738,896
Liabilities
Segment liabilities
- Exploration and production 166,486 163,588
- Refining 146,763 136,980
- Marketing and distribution 228,826 234,309
- Chemicals 69,977 49,625
- Corporate and others 198,828 119,215
Total segment liabilities 810,880 703,717
Short-term debts 35,252 23,769
Income tax payable 4,809 6,586
Long-term debts 78,300 72,037
Loans from Sinopec Group Company and fellow subsidiaries 16,563 17,042
Deferred tax liabilities 7,910 8,124
Other unallocated liabilities 20,467 19,919
Total liabilities 974,181 851,194
41 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
2021 2020
RMB million RMB million
Capital expenditure
Exploration and production 68,148 56,416
Refining 22,469 24,756
Marketing and distribution 21,897 25,403
Chemicals 51,648 28,217
Corporate and others 3,786 2,312
167,948 137,104
Depreciation, depletion and amortisation
Exploration and production 52,880 46,273
Refining 20,743 20,090
Marketing and distribution 23,071 23,196
Chemicals 16,093 14,830
Corporate and others 2,893 3,072
115,680 107,461
Impairment losses on long-lived assets
Exploration and production 2,467 8,495
Refining 860 1,923
Marketing and distribution 1,211 536
Chemicals 5,332 3,675
Corporate and others 165 -
10,035 14,629
(2) Geographical information
The following tables set out information about the geographical information of
the Group's external sales and the Group's non-current assets, excluding
financial instruments and deferred tax assets. In presenting information on
the basis of geographical segments, segment revenue is based on the
geographical location of customers, and segment assets are based on the
geographical location of the assets.
2021 2020
RMB million RMB million
External sales
Mainland China 2,166,040 1,720,695
Singapore 278,024 215,846
Others 296,820 168,183
2,740,884 2,104,724
31 December 31 December
2021 2020
RMB million RMB million
Non-current assets
Mainland China 1,268,814 1,216,267
Others 40,551 36,782
1,309,365 1,253,049
42 PRINCIPAL SUBSIDIARIES
As at 31 December 2021, the following list contains the particulars of
subsidiaries which principally affected the results, assets and liabilities of
the Group.
Name of company Particulars of Interests Interests Principal activities
issued capital held by the held by
(million) Company non-controlling
% interests
%
Sinopec Great Wall Energy & Chemical RMB22,761 100.00 - Coal chemical industry investment
Company Limited
management, production and sale of
coal chemical products
Sinopec Yangzi Petrochemical Company Limited RMB15,651 100.00 - Manufacturing of intermediate petrochemical
products and petroleum products
Sinopec Overseas Investment Holding USD3,009 100.00 - Investment holding of overseas business
Limited ("SOIH")
Sinopec International Petroleum Exploration and RMB8,250 100.00 - Investment in exploration, production and
Production Limited ("SIPL")
sale of petroleum and natural gas
Sinopec Yizheng Chemical Fibre Limited RMB4,000 100.00 - Production and sale of polyester chips and
Liability Company
polyester fibres
Sinopec Lubricant Company Limited RMB3,374 100.00 - Production and sale of refined petroleum
products, lubricant base oil, and
petrochemical materials
China International United Petroleum and RMB5,000 100.00 - Trading of crude oil and petrochemical
Chemical Company Limited
products
Sinopec Qingdao Petrochemical Company Limited RMB1,595 100.00 - Manufacturing of intermediate petrochemical
products and petroleum products
Sinopec Catalyst Company Limited RMB1,500 100.00 - Production and sale of catalyst products
China Petrochemical International Company Limited RMB1,400 100.00 - Trading of petrochemical products
Sinopec Chemical Sales Company Limited RMB1,000 100.00 - Marketing and distribution of petrochemical
products
Sinopec Hainan Refining and Chemical RMB9,606 100.00 - Manufacturing of intermediate petrochemical
Company Limited
products and petroleum products
Sinopec Beihai Refining and Chemical Limited RMB5,294 98.98 1.02 Import and processing of crude oil,
Liability Company
production, storage and sale of petroleum
products and petrochemical products
ZhongKe (Guangdong) Refinery & Petrochemical RMB6,397 90.30 9.70 Crude oil processing and petroleum products
Company Limited
manufacturing
Sinopec Qingdao Refining and Chemical Company RMB5,000 85.00 15.00 Manufacturing of intermediate petrochemical
Limited
products and petroleum products
Marketing Company RMB28,403 70.42 29.58 Marketing and distribution of refined
petroleum products
Shanghai SECCO RMB500 67.59 32.41 Production and sale of petrochemical
products
Sinopec Kantons Holdings Limited HKD248 60.33 39.67 Provision of crude oil jetty services and
("Sinopec Kantons")
natural gas pipeline transmission services
Sinopec-SK (Wuhan) Petrochemical Company RMB7,193 59.00 41.00 Production, sale, research and development
Limited ("Sinopec-SK")
of petrochemical products, ethylene and
downstream byproducts
Gaoqiao Petrochemical Company Limited RMB10,000 55.00 45.00 Manufacturing of intermediate petrochemical
products and petroleum products
Sinopec Baling Petrochemical Co.Ltd. RMB3,000 55.00 45.00 Crude oil processing and petroleum products
("Baling Petrochemical")
manufacturing
Sinopec Shanghai Petrochemical Company RMB10,824 50.44 49.56 Manufacturing of synthetic fibres, resin
Limited ("Shanghai Petrochemical")
and plastics, intermediate petrochemical
products and petroleum products
Fujian Petrochemical Company Limited RMB10,492 50.00 50.00 Manufacturing of plastics, intermediate
("Fujian Petrochemical") (i)
petrochemical products and petroleum
products
Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and
Hong Kong SAR respectively, all of the above principal subsidiaries are
incorporated and operate their businesses principally in the PRC. All of the
above principal subsidiaries are limited companies.
Notes:
(i) The Group consolidated the financial statements of the entity
because it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity.
42 PRINCIPAL SUBSIDIARIES (Continued)
Summarised financial information on subsidiaries with material non-controlling
interests
Set out below are the summarised financial information which the amount before
inter-company eliminations for each subsidiary that has non-controlling
interests that are material to the Group.
Summarised consolidated statement of financial position
Marketing Company SIPL* Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
At At At At At At At At At At At At At At
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets 159,599 172,352 22,759 22,620 20,932 17,305 1,464 1,582 4,761 4,373 6,066 10,431 6,791 3,639
Current liabilities (193,315) (201,678) (1,430) (475) (15,796) (15,232) (142) (458) (196) (924) (5,434) (2,783) (8,122) (6,377)
Net current (33,716) (29,326) 21,329 22,145 5,136 2,073 1,322 1,124 4,565 3,449 632 7,648 (1,331) (2,738)
(liabilities)/assets
Non-current assets 326,437 323,571 8,954 8,951 25,988 27,314 13,208 12,568 8,195 9,106 11,402 12,177 20,650 22,187
Non-current liabilities (59,604) (59,554) (17,823) (18,270) (747) (52) (700) (693) (170) (170) (1,418) (1,553) (7,512) (8,509)
Net non-current 266,833 264,017 (8,869) (9,319) 25,241 27,262 12,508 11,875 8,025 8,936 9,984 10,624 13,138 13,678
assets/(liabilities)
Net assets 233,117 234,691 12,460 12,826 30,377 29,335 13,830 12,999 12,590 12,385 10,616 18,272 11,807 10,940
Attributable to owners 157,557 159,205 6,341 5,876 15,254 14,727 6,915 6,499 7,579 7,454 7,175 12,352 6,966 6,455
of the Company
Attributable to 75,560 75,486 6,119 6,950 15,123 14,608 6,915 6,500 5,011 4,931 3,441 5,920 4,841 4,485
non-controlling interests
Summarised consolidated statement of comprehensive income
Year ended 31 December Marketing Company SIPL* Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Revenue 1,408,523 1,099,680 2,166 2,017 89,198 74,624 5,549 4,871 528 1,064 29,723 21,626 50,208 28,702
Profit/(loss) for the year 18,582 22,415 1,429 1,160 2,077 656 951 243 871 2,047 2,817 2,132 1,606 (920)
Total comprehensive 18,439 21,149 1,045 (720) 2,218 645 951 243 677 1,814 2,817 2,132 1,606 (920)
income
Comprehensive income 6,822 7,205 579 (287) 1,101 325 476 121 268 707 2,390 691 659 (377)
attributable to non-
controlling interests
Dividends paid to non- 7,064 2,766 - 316 541 649 64 150 164 175 1,028 767 - -
controlling interests
Summarised statement of cash flows
Year ended 31 December Marketing Company SIPL* Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Net cash generated from/ 28,923 54,139 690 281 3,950 1,680 (292) (244) 133 586 3,447 3,119 5,476 (363)
(used in) operating
activities
Net cash generated from/ 2,420 (40,010) 15 (2,659) (2,359) (3,888) 420 (649) 1,276 3,846 1,534 (4,335) (1,789) (2,340)
(used in) investing
activities
Net cash (used in)/generated (31,081) (12,402) (1,172) 1,683 (3,393) 1,682 (142) 882 (1,066) (1,250) (7,828) (2,879) (653) 2,176
from financing activities
Net increase/(decrease) in 262 1,727 (467) (695) (1,802) (526) (14) (11) 343 3,182 (2,847) (4,095) 3,034 (527)
cash and cash equivalents
Cash and cash equivalents 8,642 6,901 7,699 8,833 6,916 7,450 68 79 3,182 117 5,181 9,278 1,066 1,593
at 1 January
Effect of foreign currency 95 14 (164) (439) (2) (8) - - (93) (117) (1) (2) - -
exchange rate changes
Cash and cash equivalents 8,999 8,642 7,068 7,699 5,112 6,916 54 68 3,432 3,182 2,333 5,181 4,100 1,066
at 31 December
* The non-controlling interests of subsidiaries which the Group
holds 100% of equity interests at the end of the year are the non-controlling
interests of their subsidiaries.
43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES
Overview
Financial assets of the Group include cash and cash equivalents, time deposits
with financial institutions, financial assets at fair value through profit or
loss, derivative financial assets, trade accounts receivable, amounts due from
Sinopec Group Company and fellow subsidiaries, amounts due from associates and
joint ventures, financial assets at FVOCI and other receivables. Financial
liabilities of the Group include short-term debts, loans from Sinopec Group
Company and fellow subsidiaries, derivative financial liabilities, trade
accounts payable and bills payable, amounts due to Sinopec Group Company and
fellow subsidiaries, amounts due to associates and joint ventures, other
payables, long-term debts and lease liabilities.
The Group has exposure to the following risks from its uses of financial
instruments:
‧ credit risk;
‧ liquidity risk; and
‧ market risk.
The Board of Directors has overall responsibility for the establishment,
oversight of the Group's risk management framework, and developing and
monitoring the Group's risk management policies.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, and set appropriate risk limits and controls to
monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management controls and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations. Internal audit
department undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the Group's
audit committee.
Credit risk
(i) Risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's deposits placed with
financial institutions (including structured deposits) and receivables from
customers. To limit exposure to credit risk relating to deposits, the Group
primarily places cash deposits only with large financial institutions in the
PRC with acceptable credit ratings. The majority of the Group's trade accounts
receivable relate to sales of petroleum and chemical products to related
parties and third parties operating in the petroleum and chemical industries.
No single customer accounted for greater than 10% of total trade accounts
receivable at 31 December 2021, except the amounts due from Sinopec Group
Company and fellow subsidiaries. Management performs ongoing credit
evaluations of the Group's customers' financial condition and generally does
not require collateral on trade accounts receivable. The Group maintains a
loss allowance for expected credit losses and actual losses have been within
management's expectations.
The carrying amounts of cash and cash equivalents, time deposits with
financial institutions, financial assets at fair value through profit or loss,
derivative financial assets, trade accounts receivable, financial assets at
FVOCI and other receivables, represent the Group's maximum exposure to credit
risk in relation to financial assets.
(ii) Impairment of financial assets
The Group's primary type of financial assets that are subject to the expected
credit loss model is trade accounts receivable, financial assets at FVOCI and
other receivables.
The Group's cash deposits are placed only with large financial institutions
with acceptable credit ratings, and there is no material impairment loss
identified.
For trade accounts receivable and financial assets at FVOCI, the Group applies
the IFRS 9 simplified approach to measuring ECLs which uses a lifetime
expected loss allowance for all trade accounts receivable and financial assets
at FVOCI.
To measure the ECLs, trade accounts receivable and financial assets at FVOCI
have been grouped based on shared credit risk characteristics and the days
past due.
The ECLs were calculated based on historical actual credit loss experience.
The rates were considered the differences between economic conditions during
the period over which the historical data has been collected, current
conditions and the Group's view of economic conditions over the expected lives
of the receivables. The Group performed the calculation of ECL rates by the
operating segment.
43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Credit risk (Continued)
(ii) Impairment of financial assets (Continued)
The following table provides information about the exposure to credit risk and
ECLs for accounts receivable as at December 31, 2021 and 2020.
Impairment provision on individual basis Impairment provision on provision matrix basis
Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision on average provision allowance
amount individual loss rate
basis
31 December 2021 RMB million RMB million RMB million % RMB million RMB million
Current and within 1 year past due 34,263 4,280 26 0.2% 57 83
1 to 2 years past due 623 500 137 35.8% 44 181
2 to 3 years past due 3,411 3,324 3,146 50.6% 44 3,190
Over 3 years past due 597 208 190 100.0% 389 579
Total 38,894 8,312 3,499 534 4,033
Impairment provision on Impairment provision on
individual basis
provision matrix basis
Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision on average provision allowance
amount individual loss rate
basis
31 December 2020 RMB million RMB million RMB million % RMB million RMB million
Current and within 1 year past due 34,478 5,023 117 0.0% - 117
1 to 2 years past due 4,062 3,637 3,024 25.2% 107 3,131
2 to 3 years past due 149 27 18 54.9% 67 85
Over 3 years past due 610 218 182 88.0% 345 527
Total 39,299 8,905 3,341 519 3,860
All of the entity's other receivables are considered to have low credit risk,
and the loss allowance recognised during the period was therefore limited to
12 months expected losses. The Group considers there was no significant
increase in credit risk for other receivables by taking into account of their
past history of making payments when due and current ability to pay, and thus
the impairment provision recognised during the period was limited to 12 months
expected losses.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. Management prepares monthly cash flow budget to
ensure that the Group will always have sufficient liquidity to meet its
financial obligations as they fall due. The Group arranges and negotiates
financing with financial institutions and maintains a certain level of standby
credit facilities to reduce the Group's liquidity risk.
As at 31 December 2021, the Group has standby credit facilities with several
PRC financial institutions which provide borrowings up to RMB441,559 million
(2020: RMB443,966 million) on an unsecured basis, at a weighted average
interest rate of 2.81% per annum (2020: 2.85%). As at 31 December 2021, the
Group's outstanding borrowings under these facilities were RMB11,700 million
(2020: RMB4,041 million) and were included in debts.
43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Liquidity risk (Continued)
The following table sets out the remaining contractual maturities at the date
of the statement of financial position of the Group's financial liabilities,
which are based on contractual undiscounted cash flows (including interest
payments computed using contractual rates or, if floating, based on prevailing
rates current at the date of the statement of financial position) and the
earliest date the Group would be required to repay:
31 December 2021
Total
contractual Within More than 1 More than 2
Carrying undiscounted 1 year or year but less years but less More than
amount cash flow on demand than 2 years than 5 years 5 years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term debts 35,252 35,871 35,871 - - -
Long-term debts 78,300 85,718 2,169 49,390 27,518 6,641
Loans from Sinopec Group Company and 16,563 18,457 3,174 604 10,712 3,967
fellow subsidiaries
Lease liabilities 185,406 296,485 15,833 12,031 35,411 233,210
Derivative financial liabilities 3,223 3,223 3,223 - - -
Trade accounts payable and bills payable 215,640 215,640 215,640 - - -
Other payables 131,468 131,468 131,468 - - -
665,852 786,862 407,378 62,025 73,641 243,818
31 December 2020
Total
contractual Within More than 1 More than 2
Carrying undiscounted 1 year or year but less years but less More than
amount cash flow on demand than 2 years than 5 years 5 years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term debts 23,769 25,280 25,280 - - -
Long-term debts 72,037 80,562 1,339 11,753 60,414 7,056
Loans from Sinopec Group Company 17,042 17,978 5,512 929 10,109 1,428
and fellow subsidiaries
Lease liabilities 187,033 328,501 15,957 15,456 43,513 253,575
Derivative financial liabilities 4,826 4,826 4,826 - - -
Trade accounts payable and bills payable 161,908 161,908 161,908 - - -
Other payables 94,083 94,083 94,083 - - -
560,698 713,138 308,905 28,138 114,036 262,059
Management believes that the Group's current cash on hand, expected cash flows
from operations and available standby credit facilities from financial
institutions will be sufficient to meet the Group's short-term and long-term
capital requirements.
43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates and interest rates. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
(a) Currency risk
Currency risk arises on financial instruments that are denominated in a
currency other than the functional currency in which they are measured.
The Group does not have significant financial instruments that are denominated
in foreign currencies other than the functional currencies of respective
entities as at 31 December, and consequently does not have significant
exposure to foreign currency risk.
(b) Interest rate risk
The Group's interest rate risk exposure arises primarily from its short-term
and long-term debts and loans from Sinopec Group Company and fellow
subsidiaries. Debts bearing interest at variable rates and at fixed rates
expose the Group to cash flow interest rate risk and fair value interest rate
risk respectively. The interest rates and terms of repayment of short-term and
long-term debts, and loans from Sinopec Group Company and fellow subsidiaries
of the Group are disclosed in Note 30.
As at 31 December 2021, it is estimated that a general increase/decrease of
100 basis points in variable interest rates, with all other variables held
constant, would decrease/increase the Group's profit for the year by
approximately RMB254 million (2020: decrease/increase by approximately RMB245
million). This sensitivity analysis has been determined assuming that the
change of interest rates was applied to the Group's debts outstanding at the
date of the statement of financial position with exposure to cash flow
interest rate risk. The analysis is performed on the same basis for 2020.
(c) Commodity price risk
The Group engages in oil and gas operations and is exposed to commodity price
risk related to price volatility of crude oil, refined oil products and
chemical products. The fluctuations in prices of crude oil, refined oil
products and chemical products could have significant impact on the Group. The
Group uses derivative financial instruments, including commodity futures and
swaps contracts, to manage a portion of this risk.
Based on the dynamic study and judging of the market, combined with the
resource demand and production and operation plan, the Group evaluate and
monitor the market risk exposure caused by transaction positions, and
continuously manage and hedge the risk of commodity price fluctuation caused
by market changes.
As at 31 December 2021, the Group had certain commodity contracts of crude
oil, refined oil products and chemical products designated as qualified cash
flow hedges and economic hedges. As at 31 December 2021, the fair value of
such derivative hedging financial instruments is derivative financial assets
of RMB18,359 million (2020: RMB12,353 million) and derivative financial
liabilities of RMB3,214 million (2020: RMB4,808 million).
As at 31 December 2021, it is estimated that a general increase/decrease of
USD10 per barrel in basic price of derivative financial instruments, with all
other variables held constant, would impact the fair value of derivative
financial instruments, which would decrease/increase the Group's profit for
the year by approximately RMB2,996 million (2020: increase/decrease RMB3,592
million), and decrease/increase the Group's other reserves by approximately
RMB1,160 million (2020: increase/decrease RMB10,379 million). This sensitivity
analysis has been determined assuming that the change in prices had occurred
at the date of the statement of financial position and the change was applied
to the Group's derivative financial instruments at that date with exposure to
commodity price risk. The analysis is performed on the same basis for 2020.
43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Fair values
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments
measured at fair value at the date of the statement of financial position
across the three levels of the fair value hierarchy defined in IFRS 7,
'Financial Instruments: Disclosures', with the fair value of each financial
instrument categorised in its entirety based on the lowest level of input that
is significant to that fair value measurement. The levels are defined as
follows:
‧ Level 1 (highest level): fair values measured using quoted prices
(unadjusted) in active markets for identical financial instruments.
‧ Level 2: fair values measured using quoted prices in active markets
for similar financial instruments, or using valuation techniques in which all
significant inputs are directly or indirectly based on observable market data.
‧ Level 3 (lowest level): fair values measured using valuation
techniques in which any significant input is not based on observable market
data.
At 31 December 2021
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Derivative financial assets:
- Derivative financial assets 5,883 12,488 - 18,371
Financial assets at fair value through other comprehensive income:
- Equity instruments 179 - 588 767
- Trade accounts receivable and bills receivable - - 5,939 5,939
6,062 12,488 6,527 25,077
Liabilities
Derivative financial liabilities:
- Derivative financial liabilities 804 2,419 - 3,223
804 2,419 - 3,223
At 31 December 2020
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Financial assets at fair value through profit or loss:
- Equity investments, listed and at quoted market price 1 - - 1
Derivative financial assets:
- Derivative financial assets 9,628 2,900 - 12,528
Financial assets at fair value through other comprehensive income:
- Equity instruments 149 - 1,376 1,525
- Trade accounts receivable and bills receivable - - 8,735 8,735
9,778 2,900 10,111 22,789
Liabilities
Derivative financial liabilities:
- Derivative financial liabilities 2,471 2,355 - 4,826
2,471 2,355 - 4,826
During the years ended 31 December 2021 and 2020, there was no transfer
between instruments in Level 1 and Level 2.
Management of the Group uses discounted cash flow model with inputted interest
rate and commodity index, which were influenced by historical fluctuation and
the probability of market fluctuation, to evaluate the fair value of the
structured deposits and trade accounts receivable and bills receivable
classified as Level 3 financial assets.
43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Fair values (Continued)
(ii) Fair values of financial instruments carried at other than fair value
The disclosures of the fair value estimates, and their methods and assumptions
of the Group's financial instruments, are made to comply with the requirements
of IFRS 7 and IFRS 9 and should be read in conjunction with the Group's
consolidated financial statements and related notes. The estimated fair value
amounts have been determined by the Group using market information and
valuation methodologies considered appropriate. However, considerable
judgement is required to interpret market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Group could realise in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The fair values of the Group's financial instruments carried at other than
fair value (other than long-term indebtedness and investments in unquoted
equity securities) approximate their carrying amounts due to the short-term
maturity of these instruments. The fair values of long-term indebtedness are
estimated by discounting future cash flows using current market interest rates
offered to the Group for debt with substantially the same characteristic and
maturities range from 0.30% to 4.65% (2020: 0.77% to 4.65%). The following
table presents the carrying amount and fair value of the Group's long-term
indebtedness other than loans from Sinopec Group Company and fellow
subsidiaries at 31 December 2021 and 2020:
31 December 31 December
2021 2020
RMB million RMB million
Carrying amount 88,593 76,674
Fair value 85,610 74,282
The Group has not developed an internal valuation model necessary to estimate
the fair values of loans from Sinopec Group Company and fellow subsidiaries as
it is not considered practicable to estimate their fair values because the
cost of obtaining discount and borrowing rates for comparable borrowings would
be excessive based on the Reorganisation of the Group, the Group's existing
capital structure and the terms of the borrowings.
Except for the above items, the financial assets and liabilities of the Group
are carried at amounts not materially different from their fair values at 31
December 2021 and 2020.
44 ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group's financial condition and results of operations are sensitive to
accounting methods, assumptions and estimates that underlie the preparation of
the consolidated financial statements. Management bases the assumptions and
estimates on historical experience and on various other assumptions that it
believes to be reasonable and which form the basis for making judgements about
matters that are not readily apparent from other sources. On an ongoing basis,
management evaluates its estimates. Actual results may differ from those
estimates as facts, circumstances and conditions change.
The selection of critical accounting policies, the judgements and other
uncertainties affecting application of such policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be
considered when reviewing the consolidated financial statements. The
significant accounting policies are set forth in Note 2. Management believes
the following critical accounting policies involve the most significant
judgements and estimates used in the preparation of the consolidated financial
statements.
Oil and gas properties and reserves
The accounting for the exploration and production's oil and gas activities is
subject to accounting rules that are unique to the oil and gas industry. There
are two methods to account for oil and gas business activities, the successful
efforts method and the full cost method. The Group has elected to use the
successful efforts method. The successful efforts method reflects the
volatility that is inherent in exploring for mineral resources in that costs
of unsuccessful exploratory efforts are charged to expense as they are
incurred. These costs primarily include dry hole costs, seismic costs and
other exploratory costs. Under the full cost method, these costs are
capitalised and written-off or depreciated over time.
Engineering estimates of the Group's oil and gas reserves are inherently
imprecise and represent only approximate amounts because of the subjective
judgements involved in developing such information. There are authoritative
guidelines regarding the engineering criteria that have to be met before
estimated oil and gas reserves can be designated as "proved". Proved and
proved developed reserves estimates are updated at least annually and take
into account recent production and technical information about each field. In
addition, as prices and cost levels change from year to year, the estimates of
proved and proved developed reserves also change. This change is considered a
change in estimate for accounting purposes and is reflected on a prospective
basis in relation to depreciation rates. Oil and gas reserves have a direct
impact on the assessment of the recoverability of the carrying amounts of oil
and gas properties reported in the financial statements. If proved reserves
estimates are revised downwards, earnings could be affected by changes in
depreciation expense or an immediate write-down of the property's carrying
amount.
Future dismantlement costs for oil and gas properties are estimated with
reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with industry
practices in similar geographic area, including estimation of economic life of
oil and gas properties, technology and price level. The present values of
these estimated future dismantlement costs are capitalised as oil and gas
properties with equivalent amounts recognised as provisions for dismantlement
costs.
Despite the inherent imprecision in these engineering estimates, these
estimates are used in determining depreciation expense, impairment loss and
future dismantlement costs. Capitalised costs of proved oil and gas properties
are amortised on a unit-of-production method based on volumes produced and
reserves.
44 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Impairment for long-lived assets
If circumstances indicate that the net book value of a long-lived asset, may
not be recoverable, the asset may be considered "impaired", and an impairment
loss may be recognised in accordance with IAS 36 "Impairment of Assets". The
carrying amounts of long-lived assets are reviewed periodically in order to
assess whether the recoverable amounts have declined below the carrying
amounts. These assets are tested for impairment whenever events or changes in
circumstances, including environmental protection and energy structure
transition variables, indicate that their recorded carrying amounts may not be
recoverable. When such a decline has occurred, the carrying amount is reduced
to recoverable amount. For goodwill, the recoverable amount is estimated
annually. The recoverable amount is the greater of the net selling price and
the value in use. It is difficult to precisely estimate selling price because
quoted market prices for the Group's assets or cash-generating units are not
readily available. In determining the value in use, expected cash flows
generated by the asset or the cash-generating units are discounted to their
present value, which requires significant judgement relating to future selling
prices of crude oil, natural gas, refined and chemical products, the
production costs, the product mix, production volumes, production profiles,
the oil and gas reserves and discount rate. Management uses all readily
available information in determining an amount that is a reasonable
approximation of recoverable amount, including estimates based on reasonable
and supportable assumptions and projections of sale volume, selling price,
amount of operating costs and discount rate.
Depreciation
Property, plant and equipment, other than oil and gas properties, are
depreciated on a straight-line basis over the estimated useful lives of the
assets, after taking into account the estimated residual value. Management
reviews the estimated useful lives of the assets at least annually in order to
determine the amount of depreciation expense to be recorded during any
reporting period. The useful lives are based on the Group's historical
experience with similar assets and take into account anticipated technological
changes. The depreciation expense for future periods is adjusted if there are
significant changes from previous estimates.
Measurement of expected credit losses
The Group measures and recognises ECLs using readiness matrix, considering
reasonable and supportable information about the relevant past events, current
conditions and forecasts of future economic conditions. The Group regularly
monitors and reviews the assumptions used for estimating ECLs.
Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realisable values, an
allowance for diminution in value of inventories is recognised. Net realisable
value represents the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs
necessary to make the sale. Management bases the estimates on all available
information, including the current market prices of the finished goods and raw
materials, and historical operating costs. If the actual selling prices were
to be lower or the costs of completion were to be higher than estimated, the
actual allowance for diminution in value of inventories could be higher than
estimated.
45 PARENT AND ULTIMATE HOLDING COMPANY
The directors consider the parent and ultimate holding company of the Group as
at 31 December 2021 is Sinopec Group Company, a state-owned enterprise
established in the PRC. This entity does not produce financial statements
available for public use.
46 STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY
STATEMENT OF FINANCIAL POSITION OF THE COMPANY (Amounts in million) Note 31 December 31 December
2021 2020
RMB RMB
Non-current assets
Property, plant and equipment, net 284,618 283,691
Construction in progress 66,146 59,880
Right-of-use assets 113,304 115,992
Investment in subsidiaries 269,456 259,087
Interest in associates 73,782 69,508
Interest in joint ventures 17,609 14,761
Financial assets at fair value through other comprehensive income 201 428
Deferred tax assets 8,715 12,661
Long-term prepayments and other assets 38,848 30,855
Total non-current assets 872,679 846,863
Current assets
Cash and cash equivalents 34,575 28,081
Time deposits with financial institutions 76,116 71,107
Derivative financial assets 4,503 7,776
Trade accounts receivable 21,146 21,763
Financial assets at fair value through other comprehensive income 227 707
Dividends receivable 971 796
Inventories 63,661 39,034
Prepaid expenses and other current assets 73,906 53,816
Total current assets 275,105 223,080
Current liabilities
Short-term debts 24,387 21,571
Loans from Sinopec Group Company and fellow subsidiaries 867 3,271
Lease liabilities 7,085 7,190
Derivative financial liabilities 1,121 362
Trade accounts payable and bills payable 91,365 71,840
Contract liabilities 7,505 5,840
Other payables 280,560 234,844
Total current liabilities 412,890 344,918
Net current liabilities 137,785 121,838
Total assets less current liabilities 734,894 725,025
Non-current liabilities
Long-term debts 56,765 49,311
Loans from Sinopec Group Company and fellow subsidiaries 9,015 8,079
Lease liabilities 104,426 105,691
Provisions 35,271 36,089
Other long-term liabilities 3,955 4,472
Total non-current liabilities 209,432 203,642
525,462 521,383
Equity
Share capital 121,071 121,071
Reserves (a) 404,391 400,312
Total equity 525,462 521,383
46 STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY
(Continued)
(a) RESERVES MOVEMENT OF THE COMPANY
The reconciliation between the opening and closing balances of each component
of the Group's consolidated reserves is set out in the consolidated statement
of changes in equity. Details of the change in the Company's individual
component of reserves between the beginning and the end of the year are as
follows:
The Company
2021 2020
RMB million RMB million
Capital reserve
Balance at 1 January 9,382 9,247
Others (1,079) 135
Balance at 31 December 8,303 9,382
Share premium
Balance at 1 January 55,850 55,850
Balance at 31 December 55,850 55,850
Statutory surplus reserve
Balance at 1 January 92,280 90,423
Appropriation 3,944 1,857
Balance at 31 December 96,224 92,280
Discretionary surplus reserve
Balance at 1 January 117,000 117,000
Balance at 31 December 117,000 117,000
Other reserves
Balance at 1 January 8,881 3,912
Share of other comprehensive income of associates and joint ventures, net of 12 (182)
deferred tax
Cash flow hedges, net of deferred tax 102 4,911
Special reserve 469 240
Balance at 31 December 9,464 8,881
Retained earnings
Balance at 1 January 116,919 131,674
Profit for the year 39,950 18,821
Distribution to owners (Note 14) (35,110) (31,479)
Appropriation (3,944) (1,857)
Special reserve (469) (240)
Others 204 -
Balance at 31 December 117,550 116,919
404,391 400,312
(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE WITH
THE ACCOUNTING POLICIES COMPLYING WITH CASS AND IFRS
(UNAUDITED)
Other than the differences in the classifications of certain financial
statements captions and the accounting for the items described below, there
are no material differences between the Group's consolidated financial
statements prepared in accordance with the accounting policies complying with
CASs and IFRS. The reconciliation presented below is included as supplemental
information, is not required as part of the basic financial statements and
does not include differences related to classification, presentation or
disclosures. Such information has not been subject to independent audit or
review. The major differences are:
(i) GOVERNMENT GRANTS
Under CASs, grants from the government are credited to capital reserve if
required by relevant governmental regulations. Under IFRS, government grants
relating to the purchase of fixed assets are recognised as deferred income and
are transferred to the income statement over the useful life of these assets.
(ii) SAFETY PRODUCTION FUND
Under CASs, safety production fund should be recognised in profit or loss with
a corresponding increase in reserve according to PRC regulations. Such reserve
is reduced for expenses incurred for safety production purposes or, when
safety production related fixed assets are purchased, is reduced by the
purchased cost with a corresponding increase in the accumulated depreciation.
Such fixed assets are not depreciated thereafter. Under IFRS, payments are
expensed as incurred, or capitalised as fixed assets and depreciated according
to applicable depreciation methods.
Effects of major differences between the shareholders' equity under CASs and
the total equity under IFRS are analysed as follows:
Note 31 December 31 December
2021 2020
RMB million RMB million
Shareholders' equity under CASs 916,041 888,720
Adjustments:
Government grants (i) (967) (1,018)
Total equity under IFRS* 915,074 887,702
Effects of major differences between the net profit under CASs and the profit
for the year under IFRS are analysed as follows:
Note 2021 2020
RMB million RMB million
Net profit under CASs 85,030 42,097
Adjustments:
Government grants (i) 51 52
Safety production fund (ii) 775 237
Others (5) (115)
Profit for the year under IFRS* 85,851 42,271
* The figures are extracted from the consolidated financial
statements prepared in accordance with the accounting policies complying with
IFRS during the year ended 31 December 2020 and 2021which have been audited by
PricewaterhouseCoopers and KPMG, respectively.
(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED)
In accordance with "Accounting Standards Codification (ASC) Topic 932
Extractive Activities - Oil and Gas", issued by the Financial Accounting
Standards Board of the United States, "Rule 4-10 of Regulation S-X", issued by
Securities and Exchange Commission (SEC), and in accordance with "Industrial
Information Disclosure Guidelines for Public Company - No.8 Oil and Gas
Exploitation", issued by Shanghai Stock Exchange, this section provides
supplemental information on oil and gas exploration and producing activities
of the Group and its equity method investments at 31 December 2021 and 2020,
and for the years then ended in the following six separate tables. Tables I
through III provide historical cost information under IFRS pertaining to
capitalised costs related to oil and gas producing activities; costs incurred
in oil and gas exploration and development; and results of operation related
to oil and gas producing activities. Tables IV through VI present information
on the Group's and its equity method investments' estimated net proved reserve
quantities; standardised measure of discounted future net cash flows; and
changes in the standardised measure of discounted cash flows.
Tables I to VI of supplemental information on oil and gas producing activities
set out below represent information of the Company and its consolidated
subsidiaries and equity method investments.
Table I: Capitalised costs related to oil and gas producing activities
2021 2020
RMB million RMB million
Total China Other Total China Other
countries countries
The Group
Property cost, wells and related equipments 793,045 752,352 40,693 757,592 716,683 40,909
and facilities
Supporting equipments and facilities 188,766 188,742 24 184,638 184,621 17
Uncompleted wells, equipments and facilities 43,349 43,236 113 37,445 37,439 6
Total capitalised costs 1,025,160 984,330 40,830 979,675 938,743 40,932
Accumulated depreciation, depletion, amortisation (787,623) (748,705) (38,918) (742,195) (702,829) (39,366)
and impairment losses
Net capitalised costs 237,537 235,625 1,912 237,480 235,914 1,566
Equity method investments
Share of net capitalised costs of associates and 3,521 - 3,521 5,843 - 5,843
joint ventures
Total of the Group's and its equity method investments' 241,058 235,625 5,433 243,323 235,914 7,409
net capitalised costs
Table II: Costs incurred in oil and gas exploration and development
2021 2020
RMB million RMB million
Total China Other Total China Other
countries countries
The Group
Exploration 21,762 21,762 - 16,752 16,752 -
Development 46,147 45,590 557 38,241 37,636 605
Total costs incurred 67,909 67,352 557 54,993 54,388 605
Equity method investments
Share of costs of exploration and development of 442 - 442 100 - 100
associates and joint ventures
Total of the Group's and its equity method investments' 68,351 67,352 999 55,093 54,388 705
exploration and development costs
Table III: Results of operations related to oil and gas producing activities
2021 2020
RMB million RMB million
Total China Other Total China Other
countries countries
The Group
Revenues
Sales 72,953 72,953 - 52,354 52,354 -
Transfers 86,650 84,484 2,166 58,069 56,052 2,017
159,603 157,437 2,166 110,423 108,406 2,017
Production costs excluding taxes (49,649) (48,674) (975) (44,595) (43,487) (1,108)
Exploration expenses (12,382) (12,382) - (9,716) (9,716) -
Depreciation, depletion, amortisation and (54,104) (53,644) (460) (52,608) (51,754) (854)
impairment losses
Taxes other than income tax (11,249) (11,249) - (7,379) (7,379) -
Profit before taxation 32,219 31,488 731 (3,875) (3,930) 55
Income tax expense (8,225) (7,872) (353) 188 - 188
Results of operation from producing activities 23,994 23,616 378 (3,687) (3,930) 243
Equity method investments
Revenues
Sales 8,812 - 8,812 4,913 - 4,913
8,812 - 8,812 4,913 - 4,913
Production costs excluding taxes (2,246) - (2,246) (998) - (998)
Exploration expenses - - - - - -
Depreciation, depletion, amortisation and (533) - (533) (940) - (940)
impairment losses
Taxes other than income tax (4,391) - (4,391) (1,930) - (1,930)
Profit before taxation 1,642 - 1,642 1,045 - 1,045
Income tax expense (355) - (355) (303) - (303)
Share of profit for producing activities of associates 1,287 - 1,287 742 - 742
and joint ventures
Total of the Group's and its equity method investments' 25,281 23,616 1,665 (2,945) (3,930) 985
results of operations for producing activities
The results of operations for producing activities for the years ended 31
December 2021 and 2020 are shown above. Revenues include sales to unaffiliated
parties and transfers (essentially at third-party sales prices) to other
segments of the Group. Income taxes are based on statutory tax rates,
reflecting allowable deductions and tax credits. General corporate overhead
and interest income and expense are excluded from the results of operations.
Table IV: Reserve quantities information
The Group's and its equity method investments' estimated net proved
underground oil and gas reserves and changes thereto for the years ended 31
December 2021 and 2020 are shown in the following table.
Proved oil and gas reserves are those quantities of oil and gas, which by
analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible from a given date forward, from known
reservoirs, and under existing economic conditions, operating methods, and
government regulation before contracts providing the right to operate expire,
unless evidence indicates that renewal is reasonably certain, regardless of
whether the estimate is a deterministic estimate or probabilistic estimate.
Due to the inherent uncertainties and the limited nature of reservoir data,
estimates of underground reserves are subject to change as additional
information becomes available.
Proved developed oil and gas reserves are proved reserves that can be expected
to be recovered through existing wells with existing equipment and operating
methods or in which the cost of the required equipment is relatively minor
compared with the cost of a new well.
"Net" reserves exclude royalties and interests owned by others and reflect
contractual arrangements and obligation of rental fee in effect at the time of
the estimate.
2021 2020
Other Other
Total China countries Total China countries
The Group
Proved developed and undeveloped reserves (oil)
(million barrels)
Beginning of year 1,252 1,232 20 1,450 1,433 17
Revisions of previous estimates 194 185 9 (161) (171) 10
Improved recovery 141 141 - 109 109 -
Extensions and discoveries 101 101 - 111 111 -
Production (248) (243) (5) (257) (250) (7)
End of year 1,440 1,416 24 1,252 1,232 20
Non-controlling interest in proved developed and 8 - 8 5 - 5
undeveloped reserves at the end of year
Proved developed reserves
Beginning of year 1,145 1,130 15 1,343 1,326 17
End of year 1,315 1,291 24 1,145 1,130 15
Proved undeveloped reserves
Beginning of year 107 102 5 107 107 -
End of year 125 125 - 107 102 5
Proved developed and undeveloped reserves (gas)
(billion cubic feet)
Beginning of year 8,181 8,181 - 7,216 7,216 -
Revisions of previous estimates 32 32 - 171 171 -
Improved recovery 666 666 - 692 692 -
Extensions and discoveries 678 678 - 1,171 1,171 -
Production (1,108) (1,108) - (1,069) (1,069) -
End of year 8,449 8,449 - 8,181 8,181 -
Proved developed reserves
Beginning of year 6,357 6,357 - 6,026 6,026 -
End of year 6,734 6,734 - 6,357 6,357 -
Proved undeveloped reserves
Beginning of year 1,824 1,824 - 1,190 1,190 -
End of year 1,715 1,715 - 1,824 1,824 -
Table IV: Reserve quantities information (Continued)
2021 2020
Other Other
Total China countries Total China countries
Equity method investments
Proved developed and undeveloped reserves of
associates and joint ventures (oil) (million barrels)
Beginning of year 290 - 290 290 - 290
Revisions of previous estimates 8 - 8 13 - 13
Improved recovery 1 - 1 - - -
Extensions and discoveries 35 - 35 11 - 11
Production (25) - (25) (24) - (24)
End of year 309 - 309 290 - 290
Proved developed reserves
Beginning of year 244 - 244 245 - 245
End of year 263 - 263 244 - 244
Proved undeveloped reserves
Beginning of year 46 - 46 45 - 45
End of year 46 - 46 46 - 46
Proved developed and undeveloped reserves of
associates and joint ventures (gas)
(billion cubic feet)
Beginning of year 10 - 10 9 - 9
Revisions of previous estimates 1 - 1 4 - 4
Improved recovery - - - - - -
Extensions and discoveries - - - - - -
Production (4) - (4) (3) - (3)
End of year 7 - 7 10 - 10
Proved developed reserves
Beginning of year 8 - 8 9 - 9
End of year 6 - 6 8 - 8
Proved undeveloped reserves
Beginning of year 2 - 2 - - -
End of year 1 - 1 2 - 2
Total of the Group and its equity method investments
Proved developed and undeveloped reserves (oil)
(million barrels)
Beginning of year 1,542 1,232 310 1,740 1,433 307
End of year 1,749 1,416 333 1,542 1,232 310
Proved developed and undeveloped reserves (gas)
(billion cubic feet)
Beginning of year 8,191 8,181 10 7,225 7,216 9
End of year 8,456 8,449 7 8,191 8,181 10
Table V: Standardised measure of discounted future net cash flows
The standardized measure of discounted future net cash flows, related to the
above proved oil and gas reserves, is calculated in accordance with the
requirements of "ASC Topic 932 Extractive Activities - Oil and Gas", "SEC Rule
4-10 of Regulation S-X", and "Industrial Information Disclosure Guidelines for
Public Company - No.8 Oil and Gas Exploitation". Estimated future cash inflows
from production are computed by applying the average, first-day-of-the-month
price adjusted for differential for oil and gas during the twelve-month period
before the ending date of the period covered by the report to year-end
quantities of estimated net proved reserves. Future price changes are limited
to those provided by contractual arrangements in existence at the end of each
reporting year. Future development and production costs are those estimated
future expenditures necessary to develop and produce year-end estimated proved
reserves based on year-end cost indices, assuming continuation of year-end
economic conditions. Estimated future income taxes are calculated by applying
appropriate year-end statutory tax rates to estimated future pre-tax net cash
flows, less the tax basis of related assets. Discounted future net cash flows
are calculated using 10% discount factors. This discounting requires a
year-by-year estimate of when the future expenditure will be incurred and when
the reserves will be produced.
The information provided does not represent management's estimate of the
Group's and its equity method investments' expected future cash flows or value
of proved oil and gas reserves. Estimates of proved reserve quantities are
imprecise and change over time as new information becomes available. Moreover,
probable and possible reserves, which may become proved in the future, are
excluded from the calculations. The arbitrary valuation requires assumptions
as to the timing and amount of future development and production costs. The
calculations are made for the years ended 31 December 2021 and 2020 and should
not be relied upon as an indication of the Group's and its equity method
investments' future cash flows or value of its oil and gas reserves.
2021 2020 (Revised) (Note)
RMB million RMB million
Total China Other Total China Other
countries countries
The Group
Future cash flows 941,015 930,302 10,713 595,159 589,659 5,500
Future production costs (413,006) (407,903) (5,103) (275,409) (271,824) (3,585)
Future development costs (79,562) (77,687) (1,875) (80,785) (77,659) (3,126)
Future income tax expenses (113,598) (111,178) (2,420) (11,758) (10,521) (1,237)
Undiscounted future net cash flows 334,849 333,534 1,315 227,207 229,655 (2,448)
10% annual discount for estimated timing of cash flows (93,354) (93,164) (190) (54,158) (52,706) (1,452)
Standardised measure of discounted future net cash flows 241,495 240,370 1,125 173,049 176,949 (3,900)
Discounted future net cash flows attributable to 370 - 370 (1,284) - (1,284)
non-controlling interests
Equity method investments
Future cash flows 49,217 - 49,217 31,259 - 31,259
Future production costs (18,026) - (18,026) (13,050) - (13,050)
Future development costs (6,328) - (6,328) (5,712) - (5,712)
Future income tax expenses (4,513) - (4,513) (1,740) - (1,740)
Undiscounted future net cash flows 20,350 - 20,350 10,757 - 10,757
10% annual discount for estimated timing of cash flows (10,201) - (10,201) (4,828) - (4,828)
Standardised measure of discounted future net cash flows 10,149 - 10,149 5,929 - 5,929
Total of the Group's and its equity method investments' results 251,644 240,370 11,274 178,978 176,949 2,029
of standardised measure of discounted future net cash flows
Note: Pursuant to Amendments to the XBRL Taxonomy,
Accounting Standards Update No. 2010-03 Extractive Activities-Oil and Gas
(Topic 932), the Company has revised the future development cost attributable
to China for the year ended 31 December 2020 in Table V and Table VI to
include future cash flows related to the settlement of asset retirement
obligations.
Table VI: Changes in the standardised measure of discounted cash flows
2021 2020 (Revised)
RMB million RMB million
The Group
Sales and transfers of oil and gas produced, net of production costs (98,705) (58,449)
Net changes in prices and production costs 135,697 (122,641)
Net changes in estimated future development cost (7,413) (11,628)
Net changes due to extensions, discoveries and improved recoveries 62,449 44,602
Revisions of previous quantity estimates 26,613 (11,211)
Previously estimated development costs incurred during the year 5,475 6,684
Accretion of discount 16,448 31,940
Net changes in income taxes (72,118) 19,375
Net changes for the year 68,446 (101,328)
Equity method investments
Sales and transfers of oil and gas produced, net of production costs (2,174) (1,984)
Net changes in prices and production costs 4,967 (5,190)
Net changes in estimated future development cost (752) (299)
Net changes due to extensions, discoveries and improved recoveries 1,760 369
Revisions of previous quantity estimates 402 437
Previously estimated development costs incurred during the year 287 232
Accretion of discount 1,022 979
Net changes in income taxes (1,292) 1,180
Net changes for the year 4,220 (4,276)
Total of the Group's and its equity method investments' results of net changes 72,666 (105,604)
for the year
CORPORATE INFORMATION
STATUTORY NAME
中国石油化工股份有限公司
ENGLISH NAME
China Petroleum & Chemical Corporation
CHINESE ABBREVIATION
中国石化
ENGLISH ABBREVIATION
Sinopec Corp.
LEGAL REPRESENTATIVE
Mr. Ma Yongsheng
AUTHORISED REPRESENTATIVES
Mr. Yu Baocai
Mr. Huang Wensheng
SECRETARY TO THE BOARD
Mr. Huang Wensheng
REPRESENTATIVE ON SECURITIES MATTERS
Mr. Zhang Zheng
REGISTERED ADDRESS AND PLACE OF
BUSINESS
No.22 Chaoyangmen North Street,
Chaoyang District
Beijing, PRC
Postcode : 100728
Tel. : 86-10-59960028
Fax : 86-10-59960386
Website : http://www.sinopec.com
E-mail addresses : ir@sinopec.com
REGISTERED ADDRESS CHANGE INFORMATION
No change during the reporting period
PLACE OF BUSINESS IN HONG KONG
20th Floor, Office Tower
Convention Plaza
1 Harbour Road
Wanchai
Hong Kong
CHANGES IN THE PLACES FOR INFORMATION
DISCLOSURE AND THE PROVISION OF
REPORTS
No change during the reporting period
LEGAL ADVISORS
People's Republic of China:
Haiwen & Partners
20th Floor, Fortune Financial Centre
No. 5, Dong San Huan Central Road
Chaoyang District
Beijing PRC
Postcode: 100020
Hong Kong:
Herbert Smith Freehills
23rd Floor, Gloucester Tower
15 Queen's Road
Central, Hong Kong
U.S.A.:
Skadden, Arps, Slate, Meagher & Flom LLP
30/F, China World Office 2
No. 1, Jian Guo Men Wai Avenue,
Beijing, PRC
REGISTRARS
A Shares:
China Securities Registration and Clearing
Company Limited Shanghai Branch Company
188 Yanggao South Road
Shanghai Pilot Free Trade Zone, PRC
H Shares:
Hong Kong Registrars Limited
R1712-1716, 17th Floor, Hopewell Centre
183 Queen's Road East
Hong Kong
DEPOSITARY FOR ADRS
The US:
Citibank, N.A.
388 Greenwich St., 14th Floor
New York NY 10013
United States of America
COPIES OF THIS ANNUAL REPORT ARE
AVAILABLE AT
The PRC:
China Petroleum & Chemical Corporation
Board Secretariat
No.22 Chaoyangmen North Street,
Chaoyang District
Beijing, PRC
The US:
Citibank, N.A.
388 Greenwich St., 14th Floor
New York NY 10013
USA
The UK:
Citibank, N.A.
Citigroup Centre
Canada Square, Canary Wharf
London E14 5LB, U.K.
PLACES OF LISTING OF SHARES, STOCK
NAMES AND STOCK CODES
A Shares:
Shanghai Stock Exchange
Stock name : SINOPEC CORP
Stock code : 600028
H Shares:
Hong Kong Stock Exchange
Stock code : 00386
ADRs:
New York Stock Exchange
Stock code : SNP
London Stock Exchange
Stock code : SNP
NAMES AND ADDRESSES OF AUDITORS OF
SINOPEC CORP.
Domestic : KPMG Huazhen LLP
Auditors Certified Public Accountants in China
Address : 8th Floor
KPMG Tower
Oriental Plaza
1 East Chang An Avenue,
Beijing, PRC
Postcode : 100738
Overseas : KPMG
Auditors Public Interest Entity
Auditor registered in accordance with the Financial Reporting Council
Ordinance
Address : 8th Floor, Prince's Building
10 Chater Road Central,
Hong Kong
DOCUMENTS FOR INSPECTION
The Company's 2021 annual report is disclosed on the website of the Shanghai
Stock Exchange (http://www.sse.com.cn) and the Company's designated
information disclosure media "China Securities News", "Shanghai Securities
News" and "Securities Times". The following documents will be available for
inspection during normal business hours after 25 March 2022 at the registered
address of Sinopec Corp. upon requests by the relevant regulatory authorities
and shareholders in accordance with the Articles of Association and the laws
and regulations of PRC:
a) The original copies of the 2021 annual report signed by Mr. Ma
Yongsheng, the Chairman;
b) The original copies of financial statements and consolidated financial
statements as of 31 December 2021 prepared under IFRS and CASs, signed by Mr.
Ma Yongsheng, the Chairman, Mr. Yu Baocai, the President, Ms. Shou Donghua,
the Chief Financial Officer and head of the financial department of Sinopec
Corp.;
c) The original auditors' reports signed by the auditors; and
d) Copies of the documents and announcements that Sinopec Corp. has
published in the newspapers designated by the CSRC during the reporting
period.
By Order of the Board
Ma Yongsheng
Chairman
Beijing, PRC, 25 March 2022
If there is any inconsistency between the Chinese and English versions of this
annual report, the Chinese version shall prevail.
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