REPORT DESCRIPTIONS. Contents CHAIRMAN S LETTER 02 PRESIDENT S LETTER 04 KEY PERFORMANCE 06 ABOUT US 08 CORPORATE GOVERNANCE PERFORMANCE OVERVIEW

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1 2017

2 REPORT DESCRIPTIONS Reporting Scope: The entire China National Offshore Oil Corporation (CNOOC) group of companies. Reporting Period: January 1 - December 31, Considering the consistency and comparability of the disclosed information, part of the information was extended with its disclosure time brought forward or backward. Principles of Preparation: To meet the needs of stakeholders and the general public, by disclosing key information on the Company in a true, objective, timely and comprehensive manner. Alternative Reference: China National Offshore Oil Corporation is hereinafter also referred to as CNOOC, the Company, the Corporation, we, our or us. Data Used in the Report: All disclosed financial data or information related to the Company is the final accounting data audited by third parties. Unless otherwise specified, all amounts are expressed in Renminbi (RMB). Information Sources: The Company s official documents, statistical reports and our subsidiaries fulfilment of responsibilities. Language: This report is published in both Chinese and English. In case of discrepancies, the Chinese version shall prevail. Accessibility: This report is available in print and electronic formats. The digital version can be downloaded from the Company s website at To obtain a print version of the report, please report@cnooc.com.cn. Contents CHAIRMAN S LETTER 02 PRESIDENT S LETTER 04 KEY PERFORMANCE 06 ABOUT US 08 CORPORATE GOVERNANCE Resumes of the Board Members 12 Operation of the Board 14 Risk Management 15 Resumes of other Senior Executives 16 PERFORMANCE OVERVIEW Auditor s Report 20 Consolidated Income Statement 21 Consolidated Balance Sheet 22 Consolidated Cash Flows Statement 24 Notes to the Financial Statements 25 BUSINESS Oil & Gas Exploration and Development 28 Engineering & Technical Services 31 Refining and Marketing 34 Natural Gas and Power Generation 36 Financial Services 38 Internationalization 40 MANAGEMENT Technological Innovation 46 Management Innovation 49 QHSE 51 Informationization Progress 58 Human Resource Management 60 Corporate Culture 63 Corporate Citizenship 66 ABOUT THE COVER Bozhong 35-2 Oilfield MILESTONES GLOSSARY 72 AGENCY DIRECTORY 74 FEEDBACK 76 CNOOC offshore operation site

3 CHAIRMAN S LETTER the supply of natural gas to meet peak in summer and winter, embodying our fulfillment of social responsibility. We continued to carry out the activity Quality and Benefit Year 4.0 and in depth implementation of new ideas, new techniques, new methods, simplification, standardization, localization, enhanced internal coordination and promoted lean management. As consequence, efficiency and performance were improved significantly and the finding cost per boe of incremental oil reserves obtained by overseas exploration created a historical low, which helped the Company initially establish low cost competitive advantage for its oil and gas business. CNOOC regards safe operation and quality control as the fundamental for corporate sustainable development. Adhering to the core values of Safety First, Environment Foremost, People-oriented and Equipment Intact, we build CNOOC-featured safety culture and craftsman spirit, adopt a dual prevention mechanism including risk classification management and hidden danger investigation and prevention, in order to continuously provide high quality, comprehensive energy products and services. CNOOC adheres to the internationalization strategy. Guided by Peaceful Cooperation, Openness and Tolerance, Mutual Learning, Mutual Benefit and Common Development, spirit of the Silk Road, we focus on promoting cooperation in the oil and gas industry along and around the 21st-Century Maritime Silk Road and give full play to the advantages of the full industry chain of the Company so as to continuously improve our competitive power and position in the global market. In 2018, new trends and new features will emerge in the energy industry. The world oil industry is entering a new period in which companies gradual adapt to low oil prices and explore transition for future development. China s energy industry presents a new trend featured by structural adjustment, industrial upgrading, scientific and technological progress, lowcarbon development and opening up to the market. In the face of a new environment of internal and external development, CNOOC will carry out the key tone of the central government making progress while maintaining stability, vigorously deepen the reforms of quality, efficiency and driving force, promote the transition of ideology and idea, management model, driving force and industrial structure, and plan the high quality development of the Company in the new era by taking reform and transition as the main logic. CHAIRMAN S LETTER Dear all, I would like to take this opportunity, on behalf of the Board of Directors and all employees of CNOOC, to express our heartfelt gratitude to all who have cared for and supported us all these years. Over the past year, faced with the major changes in the global political and economic environment and the energy industry, CNOOC carefully put in practice the spirit of the 19th CPC National Congress, firmly implemented the new concept of development and persisted in deepening the reform so as to improve the quality and performance of the Company. In 2017, operating revenue, total profit, net profit and tax payment were RMB billion, 48.2 billion, 34.1 billion and 95.9 billion respectively. The Company s total assets and net assets reached RMB 1,129.2 billion and RMB billion respectively at the end of The overseas assets accounted for 36.8% of total assets. CNOOC s ranking among The World s Top 50 Oil Companies by Petroleum Intelligence Weekly (PIW) was 31. CNOOC always makes it a point to contribute high quality energy to the society and continuously improves its comprehensive strength, especially the ability to ensure oil and gas supply. Over the past year, the Company promoted oil and gas reserve and output increment by intensifying oil and gas exploration and development; vigorously developed clean energy, increased the supply of liquefied natural gas (LNG), comprehensively improved the capacity of refining, accelerated the upgrading of the refined oil and developed the upstream and downstream industries in a coordinated way in order to meet the people s growing demand for high quality energy. We fully tapped the potential to stabilize gas price and increase In 2018, CNOOC will make great efforts to increase efficiency and performance, build an upstream exploration and development sector with competitive advantage in cost and scale, increase oil and gas reserves and production, optimize oil and gas assets portfolio, enhance technology and management, to strengthen the fundamental of corporate sustainable development. The Company will carry out the green development concept, promote the comprehensive capacity of natural gas supply, explore new energy business in a sound way and improve the carbon assets management capacity, to build a competitive low-carbon industrial system. The Company will accelerate industrial transformation and upgrading, promote the integration of production, refining and marketing, stimulate industrial innovation and hatching and accelerate the construction of Smart CNOOC to improve the overall anti-risk capability of the whole industrial chain. The Company will also deepen the reform of the institution and mechanism, optimize group control, establish an industrial management system suitable for the development of business, promote the reform of the scientific research management system and intensify the reform of the Cadre, Human Resources and Wage to provide a strong support for the long-term sustainable development of CNOOC. In 2018, CNOOC stands at the new historical starting point and steps on a new journey of struggle. Guided by Xi Jinping s new era of socialism with Chinese characteristics, we remain true to our original aspiration and keep the mission firmly in mind to actively build a clean, low-carbon, efficient and safe energy supply system, in order to make new achievements in the future of the Company as making contribution to building a community of shared future for mankind, achieving the national Two Centenary Goals and realizing the Chinese Dream of the great rejuvenation of the Chinese nation! Chairman Yang Hua April 20,

4 PRESIDENT S LETTER and endeavored to build a multi-source natural gas supply system through steadily promoting the connection between Mengxi Pipeline and Tianjin LNG. We accelerated the quality upgrading of refined oil, meanwhile the advantage of integrating our refining industry has shown effects. We helped to build new industrial forms in order to upgrade services and explore new profit-making business. We speeded up the development of new business including Receiving Terminal + Storage Tank turnkey project services, e-commerce platform, electricity sales etc., and actively planned the distributed energy and LNG bunkering for vessels. The Company enhanced risk management to ensure sound compliance operation. The production responsibility system was carried out at all levels of the Company so that production was safe, stable and controllable. The Company s annual energy saving and emission reduction targets were completed. CNOOC Oil & Petrochemicals and CNOOC BlueChemical were named the first group of national Green Factories. The Company carefully implemented financial risk prevention and intensified audit and special inspection. We comprehensively checked and handled with our high leverage transactions and debt risks in order to enhance the investment responsibility. We adhered to the innovation driven strategy to improve our capability for sustainable development. We have invited tenders from suppliers outside of CNOOC, made great efforts to extend our engineering & technical services to the markets both outside CNOOC and abroad, sped up the formation of oil products network and cooperated with Shanghai Petroleum and Natural Gas Exchange to introduce the open bidding mechanism to China for the first time. The Company vigorously carried out New Ideas, New Techniques, New Methods, Simplification, Standardization, Localization and the independently developed LNG tank technologies were successfully applied, the production of 6-inch submarine hose achieved localization, the solid fluidization method was proven effective to extract marine natural gas hydrate. We increased R&D investment and promoted sci-tech research management for more than 20 key projects like the Study on Fracture System and Reservoir-forming in the West of Bohai Sea. The Research on the Industrial Application of Key Drilling and Completion Technologies for HTHP Wells in South China Sea won the first prize of the State Scientific and Technological Progress Awards. PRESIDENT S LETTER Dear all, The year of 2017 is remarkable in Chinese history as the 19th CPC National Congress was held in October. It is also critical year for CNOOC as all employees made concerted efforts to improve quality and benefit of the Company and achieve turnarounds in operational performance. In the whole year of 2017, the output of crude oil and natural gas reached million tons and 25.9 billion m 3 respectively. Imported LNG reached million tons. Natural gas-fired power output was 21.3 billion kwh million tons of crude oil was processed and trading volume of oil products amounted to 92.5 million tons. Altogether 330,000 tons of standard coal equivalent was saved. In 2017, CNOOC has been promoting corporate transformation and industrial upgrading by improving quality and efficiency. Our oil and gas business achieved high performance. On the aspect of exploration, we obtained 19 discoveries in the whole year; in the southeast of Bohai Sea, discovered Bozhong 36-1, a 100 million tons scale oilfield; in the East of South China Sea, discovered 3 new medium-scale commercial oilfields; obtained continuous discoveries the Stabroek block in Guyana; and won bidders in two pre-salt blocks in Brazil. We steadily advanced major projects. For example, the Phase II Project of Huizhou Refinery was successfully started up in one go; the projects of Jiangsu LNG, Zhangzhou LNG, Tianjin LNG Phase II and Zhejiang LNG Phase II were launched; the construction of Mengxi Pipeline and Dehua Branch Pipeline was sped up. We promoted corporate transformation and industrial upgrading with reform and innovation. As a result, the industrial structure was optimized. We vigorously promoted the business of oil and gas filling, distributed energy, LNG cold energy utilization In 2018, the global economy is predicted to continue recovery and China s economy will also enter a new era of pursuing high quality development. In the short term, the world oil market will remain a relative balance between supply and demand with the oil price fluctuating at the median level. As the overcapacity of domestic refinery is becoming more and more severe, the elimination of backward production capacities is accelerated, players in the market are diversifying and the market competition will be fiercer than ever. CNOOC will take advantage of oil price rebound to enhance the profitability and competitiveness of oil and gas business; improve the management of engineering & technical services companies, optimize the structure of assets and increase the utilization ratio of assets; stimulate the innovative thinking to reinforce marketing in the midstream and downstream business in order to create competitive differentiation and advantage; improve the integration of our financial business to oil and gas business; enhance the scientific and technological innovation and promote the application of sci-tech research results to production; encourage innovation in marketing to improve the market expanding ability; firmly hold the sense of safety and responsibility and improve the system of risk prevention and control; deepen reform to promote more synergy and vitality in production and management. In 2018, we all employees of CNOOC will unite our efforts, defy all difficulties, and open up a new journey to achieve our strategic goal of building the Company an international first class energy company with Chinese characteristics. President Liu Jian April 20,

5 China National Offshore Oil Corporation KEY PERFORMANCE Total Assets (RMB 100 million) Operating Revenue (RMB 100 million) , , , Total Profit (RMB 100 million) 4,377 4, , ,692 Taxes & Bonuses (RMB 100 million) , Capital Investment (RMB 100 million) ,507 Net Assets (RMB 100 million) KEY PERFORMANCE ,057 Total Assets at the End of Operating Revenue in 2017 Total Profit in 2017 Upstream 47.5% Upstream 23.9% Upstream 75.7% Mid- and Downstream 27.0% Mid- and Downstream 68.4% Mid- and Downstream 11.9% Engineering & Technical Services Others 9.8% 15.7% Engineering & Technical Services 6.6% Engineering & Technical Services 4.4% Others 1.1% Others 8.0% Yacheng 13-1 Gasfield operation site 06 07

6 ABOUT US ABOUT US China National Offshore Oil Corporation, the largest offshore oil and gas producer in China, is a state-owned mega company operating directly under the control of the State-owned Assets Supervision and Administration Commission of the State Council of the People s Republic of China (herin referred to as SASAC in the Report). Headquartered in Beijing, CNOOC was founded in After more than 30 years of reform and development, it has become an international energy company with prominent core business, a complete industrial chain and business spreading across 40 countries and regions. The five main business segments of the Company are oil & gas exploration and development, engineering and technical services, refining and marketing, natural gas and power generation and financial services. On November 1, 2017, CNOOC changed its Chinese registration name while transforming from an enterprise owned by the whole people into Company Limited (wholly state-owned). In 2017, the Company was ranked 115th in Fortune Global 500 and 31th in Petroleum Intelligence Weekly (PIW) s World s Top 50 Oil Companies. By the end of 2017, Moody s and Standard & Poor s rated the Company with credit ratings of A1 and A+. Both outlooks are stable. 4 Development Goals International first class energy company with Chinese characteristics Corporate Philosophy People-oriented, responsibilities, win-win benefits, credibility, innovation 5 Vision Energy for all Development Principles Core Development Strategies Cooperation, steadiness, and differentiation Innovation-driven strategy; Internationalization strategy; Low-carbon green strategy; Market leading strategy; Talent development strategy Main Business Engineering & Technical Services Oilfield Services Offshore Oil Engineering Services Energy Technology Services Oil & Gas Exploration and Development Exploration Development Production Natural Gas and Power Generation LNG Receiving Terminals Natural Gas Pipelines Natural Gas-fired Power Generation Urban Gas Supply Vehicle/Vessel Gas Natural Gas Liquefaction and Distribution China National Offshore Oil Corporation (CNOOC) Financial Services Finance Company Trust Insurance Financial and Strategic Investment Finance Leasing Refining and Marketing Oil Refining Petrochemistry Chemical Fertilizer Business Development & Marketing Offshore LNG transportation 08 09

7 CORPORATE GOVERNANCE CORPORATE GOVERNANCE Constitution of the Board of Directors In 2017, there were altogether 7 members in the Board of Directors, including Chairman Yang Hua, President Liu Jian, Outside Directors Boon Swan Foo, Zhang Chengjie, Xia Dawei and Ju Zhanghua and Employee Director Chen Wei. In March 2018, Wang Dongjin was appointed Director of the Company, so that the Board of Directors has 8 members. In March 2018, Cheng Chi was elected the Company s Employee Director by the Labor Union Member s Congress. Chen Wei was no longer the Company s Employee Director in the meanwhile. Constitution of Special Committees Currently, the Company s Board of Directors is equipped with four special committees. The Strategic Development Committee consists of 5 Directors, of which Yang Hua is the head and Liu Jian, Boon Swan Foo, Zhang Chengjie and Xia Dawei are the other members. The Nominating Committee has 3 Directors, of which Yang Hua is the head and Zhang Chengjie and Xia Dawei are members. The Remuneration and Appraisal Committee consists of 3 Outside Directors, of which Zhang Chengjie is the head and Boon Swan Foo and Ju Zhanghua are the other members. The Audit Committee consists 3 outside Directors, of which Xia Dawei is the head, Boon Swan Foo and Ju Zhanghua are the other members. SASAC Board of Directors Board of Supervisors Senior Management Strategic Development Committee Nomination Committee Remuneration and Assessment Committee Audit Committee Front row (middle): Yang Hua, Chairman, Secretary of Party Leadership Group Front row (right): Liu Jian, Director, President, Vice Secretary of Party Leadership Group Front row (left): Boon Swan Foo, Outside Director Head: Yang Hua Members: Liu Jian, Boon Swan Foo, Zhang Chengjie, Xia Dawei Head: Yang Hua Members: Zhang Chengjie, Xia Dawei Head: Zhang Chengjie Members: Boon Swan Foo, Ju Zhanghua Head: Xia Dawei Members: Boon Swan Foo, Ju Zhanghua Back row (second from right): Zhang Chengjie, Outside Director Back row (second from left): Xia Dawei, Outside Director Back row (first from right): Ju Zhanghua, Outside Director Back row (first from left): Chen Wei, Employee Director 10 11

8 CORPORATE GOVERNANCE Resumes of the Board Members Yang Hua Chairman, Secretary of Party Leadership Group Born in May 1961, Mr. Yang Hua graduated from China University of Petroleum (the former East China Petroleum Institute) with a Bachelor in Petroleum Production Engineering in August He received an MBA degree from Massachusetts Institute of Technology (MIT) in May He is a Sloan Fellow of MIT and professor-level senior economist. Mr. Yang joined CNOOC in August 1982 and had served in a number of positions including Manager of Field Development Department of CNOOC Research Center, Deputy Chief Geologist and Deputy Director of Overseas Development Department of CNOOC, President of Overseas Oil & Gas Corporation Ltd., and Senior Vice President, Chief Financial Officer, President, CEO, Vice Chairman of CNOOC Ltd., and Assistant President of CNOOC. In April 2010, Mr. Yang took the position of Vice President and Party Leadership Group Member of CNOOC. In August 2011, he took the position of CNOOC Director and President. Since April 2015, he has served as Chairman of the Board and Secretary of Party Leadership Group of CNOOC. In May 2015, he took the position of Chairman of the Board of CNOOC Ltd. and from June 2016 to April 2017, he also served as CEO of CNOOC Ltd. Liu Jian Director, President, Vice Secretary of Party Leadership Group Born in March 1958, Mr. Liu Jian graduated from Huazhong University of Science and Technology with a Bachelor in Marine Internal Combustion Design in January 1982 and received an MBA from Tianjin University in He is professor-level senior engineer. Mr. Liu was assigned to China Offshore Oil Bohai Corporation in 1982 and successively served as Section Chief of Petroleum Production Platform, Deputy Director of Maintenance Center, Deputy Mine Director and Vice General Manager. In January 1994, he took the position of Deputy General Manager of Oilfield Production Company, Director of the Production Department of China Offshore Oil Bohai Corporation, General Manager of Drilling & Production Company and President of Drilling & Production Co., Ltd. In July 1999, he was appointed Vice President of Tianjin Branch of CNOOC Ltd. In May 2001, he was appointed Vice President of Zhanjiang Branch of CNOOC Ltd. and later President and Secretary of Party Committee. After April 2003, he successively served as Senior Vice President and Director of Development & Production Department of CNOOC Ltd. and Executive Vice President of CNOOC Ltd. In November 2006, Mr. Liu was appointed Assistant President of CNOOC. From February 2009 to October 2010, he also served as Vice Chairman of the Board, CEO and Party Committee Secretary of COSL. In May 2010, Mr. Liu was appointed Vice President and Party Leadership Group Member of CNOOC. From October 2010 to December 2016, he served as Chairman of the Board of COSL. From December 2010 to November 2016, he served as Chairman of the Board and Party Committee Secretary of COOEC. After December 2016, he successively served as Vice Chairman and Chairman of CNOOC. Since August 2015, he has served as Director, President and Vice Secretary of Party Leadership Group of CNOOC. Boon Swan Foo Outside Director Born in December 1955, Mr. Boon Swan Foo holds an MBA from National University of Singapore. He served as CEO of ST Marine & ST Aerospace, CEO and Deputy Chairman of ST Engineering Ltd., Managing Director of Singapore Agency for Science, Technology and Research, Chairman of Exploit Technologies Private Limited, Director of China-Singapore Suzhou Industrial Park Development Co., Ltd., Chairman of Singapore Changi Airport Enterprise Pte Ltd. Mr. Boon is Chairman of Global Investments Limited and Allgrace Investment Management Private Limited, Director of Shin Corporation PLC, MIH Holdings Limited (South Africa) and Singbridge International Singapore Pte Ltd., Outside Director of Dongfeng Motor Corporation, Senior Advisor to Temasek Holdings (Private) Limited, Advisor to ST Engineering Ltd., Outside Director of China Huadian Corp. Mr. Boon also holds an Adjunct Professorship at the Nanyang Technological University. He has served as Outside Director of CNOOC since February Zhang Chengjie Outside Director Born in June 1953, Mr. Zhang Chengjie had served as Vice Secretary of Party Committee of North China Electric Power College, Vice President of North China Electric Power University (NCEPU), Party Committee Secretary of CPC of NCEPU Baoding, Vice Party Committee Secretary of the CPC and Secretary of Commission for Discipline of NCEPU. Mr. Zhang was then appointed as Branch Secretary and Deputy Director Party of HR Department of China Guodian Corporation, Director of HR Department, Assistant President, Vice President and Party Leadership Group Member of China Guodian Corporation. Mr. Zhang has served as Outside Director of CNOOC since April Xia Dawei Outside Director Born in February 1953, Mr. Xia Dawei graduated from Changchun University of Technology with a Bachelor in Engineering Management in 1982 and received Master s degree in Industrial Economics from Shanghai University of Finance and Economics in Mr. Xia started his career in 1969, and had successively been a visiting researcher at Osaka City University, Dean of the School of International Business Administration, Assistant President, Vice President and Executive Vice President of Shanghai University of Finance and Economics. He is professor, instructor for doctoral candidates, President and Party Committee Secretary of Shanghai National Accounting Institute and honorary professor of Chinese University of Hong Kong. Mr. Xia also holds posts including Vice President of Chinese Industrial Economic Association, consultant of China Accounting Standards Committee of the Ministry of Finance, member of the Corporate Internal Control Standards Committee of the Ministry of Finance and member of the Expert Committee for Listed Companies of Shanghai Stock Exchange. Mr. Xia has served as Outside Director of CNOOC since February Ju Zhanghua Outside Director Born in September 1949, Mr. Ju Zhanghua had served in many positions in China Huaneng Group, including Deputy Manager of Administration Department, Manager of Securities and Financing Department, and Manager of Administration Department of Huaneng International Power Development Corporation, Manager of General Administration Department and Assistant President of China Huaneng Group before he took the position of Vice President and Party Leadership Group Member of China Huaneng Group. He has served as Outside Director of CNOOC since April Chen Wei Employee Director Born in January 1958, Mr. Chen Wei graduated from China University of Petroleum (the former East China Petroleum Institute) with a Bachelor in Petroleum Production Engineering in 1982 and received an MBA from Tsinghua University in He is a professor-level senior engineer. Mr. Chen started his career in 1976 and joined CNOOC in He successively took a number of positions including Deputy Director of Development Department, Deputy Director of Overseas Department, and Deputy Director of Information Department of CNOOC Research Center, Deputy Director of CNOOC Research Center and General Manager of Human Resources Department of CNOOC. In January 2002, Mr. Chen was appointed Senior Vice President of CNOOC Ltd. He also successively served as General Manager of the Administration Department of CNOOC Ltd., General Manager of the Human Resources Department of CNOOC Ltd., Director and Party Committee Secretary of CNOOC Research Center, General Manager of Technology Development Department of CNOOC and President and Party Committee Secretary of CNOOC Research Institute. From February 2012 to March 2018, Mr. Chen served as Employee Director of CNOOC. Since March 2013, he has served as Assistant President of CNOOC and Executive Vice President of CNOOC Ltd. In May 2016, he also assumed the post of General Counsel and Compliance Officer of CNOOC Ltd

9 CORPORATE GOVERNANCE Operation of the Board Board Meeting Session Time Means Approved Proposal 21st Meeting of the Second Session of the Board of Directors 22nd Meeting of the Second Session of the Board of Directors 23rd Meeting of the Second Session of the Board of Directors 24th Meeting of the Second Session of the Board of Directors 25th Meeting of the Second Session of the Board of Directors 26th Meeting of the Second Session of the Board of Directors 27th Meeting of the Second Session of the Board of Directors April 6 April 20 July 20 September 4 October 19 December 8 December 14 Special Committee Meeting Telecommunication On the Spot On the Spot Telecommunication On the Spot Telecommunication On the Spot Audited and approved the proposal of appointing Mr. Xu Keqiang as Vice President of the Company. Debriefed the report of Main Operational Achievements in the first quarter of 2017 and 2016 President s Report. Audited and approved 6 proposals including 2016 Final Accounting Plan, 2016 Profit Distribution Plan, 2017 Employment Plan of Financial Audit Institution, 2016 Internal Control Appraisal Report, 2016 Comprehensive Risk Management Report and 2016 Report of the Board of Directors. Debriefed the reports on production and operation of the Company in the first half year of Audited and approved 2 proposals including CNOOC Plan of Transformation to Limited Company and the Revision of the Articles of Association of CNOOC. Debriefed 2 reports on production and operation of the Company in the first three quarters of Audited and approved 2 proposals including the CNOOC subsidiary enterprises classification plan and classification results and 2018 Plan of the Board of Directors. Audited and approved the proposal of Mengxi Pipeline Project. Audited and approved 5 proposals including Five-Year Rolling Development Plan , 2018 Production and Construction Budget Plan, 2018 Tibet Aid and Poverty Relief and Public Welfare Donation Plan, 2018 Operation Budget Plan (including Capital Balance Budget Plan and Derivative Business Plan), 2017 Key Audit Findings Report and 2018 Internal Audit Plan. Debriefed 2 reports on the transfer of part of state capital to enrich National Social Security Fund and the advancement of the transformation to Company Limited. In 2017, the Strategic Development Committee of the Board of Directors held one meeting, and the Audit Committee of the Board of Directors held two meetings. Risk Management Compliance Operations CNOOC has made unremitting efforts to strengthen risk management and improve its internal control system, which are believed fundamental for the corporate growth and to be permanent. In 2007, the Company strengthened the risk investigation with regard to frequency, scope and depth, and initially established the major risk tracking and reporting mechanism. CNOOC continued the rolling update of the internal control system by combining full update with partial (focal) amendment in order for dynamic adaptability. Party building was placed at the center of the corporate governance reform. Through institutional construction, Party Leadership Group has been deeply integrated into the collective decision on important issue, cadre nomination, key project operation and large funds usage decision-making process. In the meanwhile, the Company optimized the investment decision-making system and the working procedure of the Investment Review and Decision-Making Committee. Moreover, online and offline training were both emphasized to help business personnel better apprehend the internal control system and constantly improve the executive power. CNOOC highlighted Three Lines of Defense for comprehensive risk management, strengthened interaction among risk management, internal control and audit, made overall audit plan which was risk and problem orientated, and enhanced informationization, standardization and normalization for internal audit. Internal Audit CNOOC takes Checking Problems, Controlling Risks, Improving Efficiency and Promoting Development as the principle line to improve the internal audit management and optimize audit resource allocation. The Company enhanced the universal coverage of auditing supervision on key domains, key factors and key projects, which provided a solid guarantee for improving the perception and prevention of major risks, preventing the loss of state assets, improving risk management, efficiency, compliance operation and sustainable development. In 2017, the Company completed 525 internal audit projects, 1,955 audit findings and 1,004 audit advices. Anti-corruption In pursuit of strengthening anti-corruption, CNOOC kept tough stance on corruption and dealt with cases violating the Company s regulation with an iron hand, besides enhancing anti-corruption awareness on a daily basis and carrying out training for preventing crises before they emerge. The Company conducted internal patrol inspection in headquarters and subsidiaries for checking problems and acting as a deterrent, thereby urging them to deepen rectification, reinforce reform and promote development. CNOOC continued to improve the institutional system, focusing on the supervision and inspection of the implementation, comprehensively strengthen the internal control and corporate governance, and resolutely correct all kinds of violations of disciplines and regulations. The first meeting of the Strategic Development Committee of the Board of Directors was held on December 14, The Committee audited three proposals including Five-Year Rolling Development Plan from 2018 to 2022, 2018 Production and Construction Budget Plan, and 2018 Operation Budget Plans (including Capital Balance Budget Plan and Derivative Business Plan) and prepared an audition opinion for the Board of Directors. The first meeting of the Audit Committee of the Board of Directors was held on April 20, The Committee debriefed the report on 2016 Final Accounting Plan presented by the external audit institution, studied 2016 Final Accounting Plan, 2016 Profit Distribution Plan, 2016 Internal Control Appraisal Report, 2016 Comprehensive Risk Management Report, and 2017 Employment Plan of Financial Audit Institution and prepared an audition opinion for the Board of Directors. The second meeting of the Audit Committee of the Board of Directors was held on December 13, The Committee debriefed the report on the implementation of the proposal for management of external audit institutions and studied 2017 Key Audit Findings Report and 2018 Internal Audit Plan. Compliance Operations Internal Audit Anti-corruption 14 15

10 CORPORATE GOVERNANCE Resumes of other Senior Executives Wu Guangqi Vice President, Vice Secretary of Party Leadership Group Li Hui Vice President, Party Leadership Group Member Wu Guangqi Vice President, Vice Secretary of Party Leadership Group Born in August 1957, Mr. Wu Guangqi is a Doctor of Management, professor-level senior economist and Certified Senior Enterprise Risk Manager. Mr. Wu graduated with a Bachelor of Science from Ocean University of China and received the 4th session of post-graduate training for young and middle-aged cadres at the Central Party School. He also held a Master s degree in Management from China University of Petroleum and a Doctor s degree in Management from Huazhong University of Science and Technology. Mr. Wu has served CNOOC at a number of posts since 1994, including Party Committee Secretary and Vice President of CNOOC Petro Tech Services, Director of General Office of CNOOC, Party Committee Secretary, Discipline Inspection Secretary and Chairman of Labor Union of CNOOC Research Center, Party Committee Secretary and Director of Ideological and Political Department of CNOOC, and Assistant President of CNOOC. In 2002, Mr. Wu was appointed a temporary leading position by the Organization Department of the Central Committee of the CPC as Deputy Director of Engineering and Construction Department of China Three Gorges Project Corporation. In August 2004, he assumed Party Leadership Group Member and Team Leader of Party Discipline Inspection of CNOOC. In December 2011, he assumed Vice President and Party Leadership Group Member. Since October 2016, he has served as Vice President, Vice Secretary of Party Leadership Group of CNOOC, President of CNOOC Party School and Secretary of Party Committee (Beijing) of CNOOC. Li Hui Vice President, Party Leadership Group Member Born in October 1963, Mr. Li Hui received a Bachelor in foreign trade from University of International Business and Economics in August He is a senior international business engineer. From August 1987 to January 2000, Mr. Li served in a number of positions in China National Metals & Minerals Import & Export Corp., including Deputy General Manager of the Trade Company and President of South America Co., Ltd. He also served as Deputy General Manager of Beijing Economic-Technological Development Area from September 1998 to January From January 2000 to April 2010, Mr. Li served in Sinochem Group (renamed China National Chemicals Import & Export Corp. since October 2003). He assumed Deputy Director of Sinochem Oil Group, Assistant President of China National Chemicals Import & Export Corp, etc. from July 2000 to May In May 2001, he was appointed Vice President and Party Leadership Group Member of China National Chemicals Import and Export Corporation and concurrently Director of Sinochem Oil Group and General Manager of Sinochem International Oil Co. In September 2009, he was appointed Vice President, Party Leadership Group Member of Sinochem Oil Group and President of Sinochem Exploration and Development Company. Since April 2010, Mr. Li has served as Vice President and Party Leadership Group Member of CNOOC. From July 2011 to August 2016, he also served as Chairman of the Board of China BlueChemical Ltd. In November 2013, he assumed Chairman of the Board of China Petrochemical Import & Export Co., Ltd. In December 2015, he also served as Chairman of the Board of CNOOC Gas & Power Group Co., Ltd. Lv Bo Vice President, Party Leadership Group Member Yuan Guangyu Vice President, Party Leadership Group Member Chen Bi Vice President, Party Leadership Group Member Wen Dongfen Zhong Qingming Xu Keqiang Chief Accountant, Party Leadership Group Member Party Leadership Group Member, Team Leader of Party Discipline Inspection Vice President 16 17

11 CORPORATE GOVERNANCE Lv Bo Vice President, Party Leadership Group Member Born in November 1962, Mr. Lv Bo received a Bachelor in Management from China University of Mining and Technology and then an MBA from China Europe International Business School in September Since 1985, he served in a number of positions in the Ministry of Coal Industry, the Ministry of Energy and the Organization Department of the Central Committee of the CPC, including deputy-division-director-level cadre in Personal and Labor Department of the Ministry of Energy, Deputy Division Chief and then Division Chief of the First Office of Economic and Technology Officials Bureau of the Organization Department of the Central Committee of the CPC, Division Chief of the First Office of the Fourth Officials Bureau and Division Chief of the Second Office of the Fifth Officials Bureau of the Organization Department of the Central Committee of the CPC. Mr. Lv joined CNOOC in 2002 and was appointed Director of Human Resources Department of CNOOC. In November 2006, he was appointed Assistant President of CNOOC. In November 2007, he was appointed Party Leadership Group Member of CNOOC. From October 2008 to October 2016, he also served as Director of Party Committee (Beijing) of CNOOC. Since April 2010, he has served as Vice President and Party Leadership Group Member of CNOOC. In December 2012, he was also appointed Chairman of the Board of CNOOC EnerTech. From May 2015 to October 2016, he also served as President of CNOOC Party School. Since November 2016, he has also served as Chairman of the Board of COOEC. Since December 2016, he has served as Chairman of the Board of COSL and China Ocean Oilfields Services (HK) Ltd. Yuan Guangyu Vice President, Party Leadership Group Member Born in April 1959, Mr. Yuan Guangyu received a Bachelor in Drill Engineering from the Development School in East China Petroleum Institute and an MBA of China Europe International Business School. He is a professor-level senior engineer. He joined CNOOC in August, 1982, and served in a number of positions including Deputy Manager of Bohai Oil Drilling Company, Vice General Manager of CNOOC North Drilling Company, Deputy Director of Operation Department of CNOOC, General Manager and Party Committee Secretary of CNOOC North Drilling Company, CEO, President Deputy Party Committee Secretary and Party Committee Secretary of COSL. From November 2006 to May 2016, he served as the Assistant President of CNOOC. From February 2009 to June 2016, he served as Executive Vice President of CNOOC. From April 2013 to June 2016, he successively took the positions of General Manager, Deputy Party Committee Secretary and Party Committee Secretary of Petroleum Administration Bureau of CNOOC and General Manager and Party Committee Secretary of Tianjin Branch of CNOOC Ltd. From June 2016 to April 2017, he served as President of CNOOC Ltd. and Chairman of the Board of CNOOC International Ltd. In June 2016, he was also appointed President of CNOOC Ltd. Since July 2016, he has served as Vice President and Party Leadership Group Member of CNOOC. From March 2017 to April 2017, he also served as Chairman of the Board of Nexen. In April 2017, he was also appointed CEO of CNOOC Ltd. Chen Bi Vice President, Party Leadership Group Member Born in April 1961, Mr. Chen Bi received a Bachelor in Petroleum Production Engineering from the Development School in Southwest Petroleum Institute, a Master s degree in Petroleum engineering from Heriot-Watt University and an MBA from the School of Economics and Management in Tsinghua University. He is a professor-level senior engineer. Mr. Chen joined CNOOC in February 1982 and took a number of positions including Deputy Manager of Drilling Engineering Department of CNOOC Nanhai West Corp., Deputy Manager of Nanhai West Drilling & Production Company, Division Chief and Deputy Manager of Development and Production Department of CNOOC, Deputy General Manager and General Manager of Development and Production Department of CNOOC, General Manager and Secretary of Party Leadership Group of Tianjin Branch of CNOOC Ltd., Vice President and Executive Vice President of CNOOC Ltd. and the Chief Safety Officer of CNOOC. Since July 2016, Mr. Chen was appointed Vice President, Party Leadership Group Member and Chief Safety Officer of CNOOC. In August 2016, he was also appointed President of China BlueChemical Ltd. Wen Dongfen Chief Accountant, Party Leadership Group Member Born in September 1964, Mrs. Wen Dongfen received a Bachelor in Business Management from Shanxi Finance and Economics College. She is a professor-level senior accountant. She was appointed Deputy Director of Financial Planning Department of Sinopec in December 2001, Deputy Director of Financial Department of Sinopec in May 2008 and Director of Financial Department of Sinopec in March From May 2012 to December 2015, she also served as Chairwoman of the Board of Shengjun International Investment Limited and Vice Chairman of Sinopec Finance Limited. In December 2015, she was appointed Financial Director and Director of Financial Department of Sinopec. Since July 2016, she has served as Chief Accountant and Party Leadership Group Member of CNOOC. In November 2017, she was also appointed Chairwoman of CNOOC Finance Co., Ltd., CNOOC Insurance Ltd. and Zhonghai Trust Co., Ltd. Zhong Qingming Party Leadership Group Member, Team Leader of Party Discipline Inspection Born in December 1963, Mr. Zhong Qingming received a Bachelor in Political Economy from the Economics School in Zhengzhou University in 1987 and a Master s degree in National Economic Plan and Management from the Department of Economic Management in Jilin University in He started his career in July 1990 and took a number of positions including section chief of Case Management Department of the Ministry of Supervision and in the Central Commission for Discipline Inspection, section chief of Investigation Division of Department of Inquisition, deputy-division-director-level Discipline Inspector and Supervisor of Department of Inquisition, Deputy Director of the Investigation Section of Department of Inquisition, Director of General Office of Department of Inquisition, Director of Review Office of Department of Inquisition, Director of Second Review Office of Department of Inquisition, deputy-bureau-director-level Discipline Inspector and Special Supervisor of the Discipline Inspection Office and Director of Second Review Office of Department of Inquisition, deputybureau-director-level Discipline Inspector and Special Supervisor of the First and Fifth Discipline Inspection Office, Deputy Director of the Seventh Discipline Inspection, bureau-director-level Discipline Inspector, Special Supervisor and Deputy Director. Since December 2016, he has served as Party Leadership Group Member and Team Leader of Party Discipline of CNOOC. Xu Keqiang Vice President Born in April 1971, Mr. Xu Keqiang received a Bachelor in Oil and Gas Geology and a Master s degree in Coal Field Oil and Gas Geology Exploration from Northwest University. He is a professor-level senior engineer. He started his career in August 1996 and took a number of positions including Deputy General Manager of CNPC International (Russia), Deputy General Manager of CNPC International (Kazakhstan) and General Manager of CNPC International (Aidan), Deputy General Manager and Party Committee Member of DPS (Kazakhstan) Co., Ltd. and General Manager of Aktobe Oil and Gas, General Manager and Vice Secretary of Party Committee of CNPC Tuha Oilfield Branch, Director of Tuha Oil Exploration and Development command post. Since March 2017, he has served as Vice President of CNOOC. In April 2017, he was also appointed President of CNOOC Ltd., Chairman of the Board of CNOOC International Ltd. and Chairman of the Board of Nexen

12 PERFORMANCE OVERVIEW PERFORMANCE OVERVIEW Consolidated Income Statement For the year ended 31 December 2017 Currency: RMB million Items Current Period Prior Period Auditor s Report To the Board of China National Offshore Oil Corporation: GTCSZ (2018) No. 110ZA2744-T We have audited the consolidated financial statement of China National Offshore Oil Corporation (the Group ), which comprise the consolidated and company statement of financial position as at 31 December 2017, and the consolidated and company statement of comprehensive income, consolidated and company statement of changes in owner s equity and consolidated and company statement of cash flows for the year then ended 31 December 2017, and the notes to the financial statements. Management s Responsibilities for the Financial Statement Management of the Group is responsible for the preparation and fair presentation of the financial statement in accordance with Accounting Standards for Business Enterprises, and for such internal control as management determines in necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibilities 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. As part of an audit in accordance with China Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We obtain an understanding of internal control relevant to the audit in order to design audit procedures, 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 and evaluate the overall presentation, structure and content of the financial statements, including the disclosures. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Opinion In our opinion, the accompanying consolidated financial statement present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises. Grant Thornton Certified Public Accountants Beijing, China 20 April Revenue 550, ,741 Including: Operating revenue 548, ,216 Interest income 1,790 1,506 Premium earned Fees and commissions income Total cost 513, ,680 Including: Operating cost 435, ,384 Interest expenses 2 2 Fees and commissions expenses 0 1 Net expenses of claim settlement Net provision for insurance contracts service Reinsurance expenses Taxes and surcharges 17,644 19,495 Selling expenses 6,001 5,559 Administrative expenses 14,706 14,314 Financial expenses 7,163 9,971 Impairment on assets 23,979 21,446 Other costs and expenses 9,228 7,431 Add: Gain from changes in fair value -2, Investment income 9,536 5,782 Gain on foreign exchange Gains from assets disposal ( - for losses) ,382 Other income 4, Operating profits 48,088 5,418 Add: Non-operating income 809 6,146 Less: Non-operating expenses 734 1, Profit before tax 48,163 10,530 Less: Income tax expenses 14, Net profit 34,103 10,300 Net profit attributable to shareholders of the Company 20,401 11,642 *Profit attributable to minority shareholders 13,702-1, Other comprehensive income after tax: -10,761 12,025 Other comprehensive income (net of tax) attributable to shareholders of the company Other comprehensive income (net of tax) attributable to non-controlling interests Notes: * items for use in consolidation; items for financial entities only. -6,924 8,161-3,837 3, Total comprehensive income 23,343 22,325 Total comprehensive income attributable to shareholders of the Company 13,478 19,803 *Total comprehensive income attributable to minority shareholders 9,865 2,

13 PERFORMANCE OVERVIEW Consolidated Balance Sheet Consolidated Balance Sheet (Continued) For the year ended 31 December 2017 Currency: RMB million For the year ended 31 December 2017 Currency: RMB million Item Closing Balance Opening Balance Current Assets: Cash 77,727 97,164 Financial assets at fair value through profit and loss 3,060 1,698 Derivative financial assets 75 1,075 Notes receivable 5,070 2,796 Accounts receivable 25,626 27,398 Advances to suppliers 5,962 6,376 Reinsurance premium receivables Reserve receivable for reinsurance 1,327 1,697 Interests receivable Dividends receivable Other receivables 9,367 10,242 Securities purchased under agreements to resell Inventories 33,487 29,769 Assets held for sale Current portion of non-current assets 64,731 38,488 Other current assets 14,886 18,691 Total Current Assets 242, ,507 Non-current assets: Loans and advances 10,193 7,251 Available-for-sale financial assets 94,166 70,798 Held-to-maturity investments 875 4,183 Long-term receivables 4,053 5,832 Long-term equity investments 55,491 52,812 Investment property Fixed assets 198, ,221 Construction in progress 29,575 38,518 Construction materials 617 1,031 Fixed assets pending for disposal 56 8 Oil and gas properties 399, ,029 Intangible assets 18,427 17,717 Development disbursements 30 3 Goodwill 14,633 15,732 Long-term deferred expenses 3,847 4,007 Deferred tax assets 45,843 41,119 Other non-current assets 10,041 7,700 Total Non-current Assets 886, ,248 Total Assets 1,129,235 1,157,755 Notes: * items for use in consolidation; items for financial entities only. Item Closing Balance Opening Balance Current Liabilities: Short-term borrowings 58,986 47,013 Deposits and placements from other financial institutions Financial liabilities at fair value through profit and loss Derivative financial liabilities 2, Notes payable 203 1,976 Accounts payable 57,938 60,499 Advances from customers 7,017 8,425 Employee benefits payable 8,710 8,703 Taxes and surcharges payable 14,502 13,051 Interests payable 2,353 2,263 Dividends payable Other payables 15,828 17,059 Reinsurance premium payable Reserve of insurance contract 1,760 2,265 Liabilities held for sale 39 - Current portion of non-current liabilities 6,924 17,495 Other current liabilities 225 4,578 Total Current Liabilities 177, ,766 Non-current Liabilities: Long-term borrowings 42,830 47,155 Bonds payable 164, ,704 Long-term payable 1,537 1,812 Long-term employee benefits payable Grants payable Provisions 56,422 54,002 Deferred Income 5,338 5,174 Deferred tax liabilities 9,129 11,538 Other non-current liabilities 2 2 Total Non-current Liabilities 279, ,980 Total Liabilities 457, ,746 Equity: Paid-in capital 114, ,346 Capital reserve 32,242 31,889 Other comprehensive income -6, Specific reserve 1,116 1,031 Surplus reserve 312, ,891 General risk reserve 1,620 1,542 Retained profit 34,188 29,643 Equity attributable to shareholders of the Company 489, ,211 * Minority interests 182, ,797 Total Owners Equity 672, ,009 Total Liabilities and Owners Equity 1,129,235 1,157,755 Notes: * items for use in consolidation; items for financial entities only

14 PERFORMANCE OVERVIEW Consolidated Cash Flows Statement For the year ended 31 December 2017 Currency: RMB million Items Current Period Prior Period 1. Cash flows from operating activities: Cash received from sales and services 575, ,199 Net increase in deposits and placements from financial institutions Cash received from premiums of original insurance contracts - - Net amount of reinsurance business 1, Cash received from interests, fees and commissions 2,341 2,013 Taxes and surcharges refunds 2,558 3,238 Other cash receipts related to operating activities 8,255 7,008 Total cash inflows from operating activities 590, ,258 Cash paid for goods and services 361, ,517 Net increase in loans and advances 1,965 1,701 Net increase in deposits with central banks and other financial institutions Cash paid for claim settlements on original insurance contracts Cash paid for interests, fees and commissions 3 3 Cash paid for policy dividends - - Cash paid to and for employees 25,504 23,889 Taxes and surcharges cash payments 72,156 63,725 Other cash payments related to operating activities 13,006 10,803 Total cash outflows from operating activities 474, ,209 Net cash flows from operating activities 115,489 95, Cash flows from investing activities: Cash received from withdraw of investments 205, ,063 Cash received from investment income 7,723 6,983 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 3,691 14,216 Net cash received from disposal of subsidiaries and other business units Other cash receipts related to investing activities 742 8,014 Total cash inflows from investing activities 217, ,048 Cash paid for fixed assets, intangible assets and other long-term assets 62,896 70,463 Cash payments for investments 248, ,589 Net cash paid for acquiring subsidiaries and other business units 0 1 Other cash payments related to investing activities 360 2,107 Total cash outflows from investing activities 312, ,161 Net cash flows from investing activities -94,590-25, Cash flows from financing activities: Cash received from investments by others 717 1,020 Cash received from borrowings 99,538 80,682 Other cash receipts related to financing activities 2, Total cash inflows from financing activities 102,759 81,769 Cash repayments for debts 104, ,972 Cash payments for distribution of dividends, profit and interest expenses 27,500 27,655 Other cash payments related to financing activities 8,882 1,590 Total cash outflows from financing activities 140, ,218 Net cash flows from financing activities -37,812-66, Effect of foreign exchange rate changes on cash and cash equivalents -1,621 1, Net increase in cash and cash equivalents -18,534 4,751 Add: Balance of cash and cash equivalents at 1 January ,594 84, Balance of cash and cash equivalents at 31 December ,060 89,594 Notes to the Financial Statements 1. Company Profile China National Offshore Oil Corporation (hereinafter referred to as CNOOC or the Company ) is a state-owned oil company established on 15 February 1982 with the approval of the State Council of the People s Republic of China. According to the Regulations of the People s Republic of China Concerning the Exploitation of Offshore Petroleum Resources in Cooperation with Overseas Partners promulgated by the Chinese State Council, the Company is granted an exclusive right of operating the business of exploiting oil and natural gas resources in cooperation with partners offshore from the People s Republic of China. The Company is also an investment institution authorized by the state. 2. The Basis of the Preparation of Financial Statements The financial statements are prepared in accordance with the requirements of Accounting Standards for Business Enterprises Basic Standards, specific standards and relevant regulations (hereafter referred to as ASBE collectively). CNOOC Limited, COSL, CNOOC Insurance Ltd. and other overseas subsidiaries of the Company are prepared in accordance with accounting standards of the country of incorporation. The consolidated financial statements have been adjusted according to relevant standards. 3. Significant Accounting Policies (1) Accounting period The accounting year of the Group is from 1 January to 31 December. (2) Functional currency The functional currency of the Group is RMB. (3) Measurement basis The Company follows the accrual basis of accounting. The financial statements are prepared under the historical cost convention except for certain financial assets and financial liabilities. If an asset is impaired, provisions shall be recognized. Financial assets and liabilities at fair value through profit or loss, the Available-for-sale financial assets and derivative financial instruments are recognised at fair value. Inventories and fixed assets delayed in payment exceeding credit terms are recognised at present value of purchasing price. Inventories with impairment losses are recognised at net realizable value and the other assets are recognised at lower amount between recoverable amount and its fair value. Assets surplus should be recorded at the replacement cost. Non-current assets held for sale are recognised by the lower amount between fair value subtracting estimated expenses and original book value when satisfying the held-for-sale condition. Notes: items for financial entities only

15 China National Offshore Oil Corporation BUSINESS BUSINESS Oil & Gas Exploration and Development Engineering Refining Natural & Technical Services and Marketing Gas and Power Generation Financial Services Internationalization CNOOC Yacheng Operation Company 26 27

16 BUSINESS OIL & GAS EXPLORATION AND DEVELOPMENT CNOOC always puts oil & gas exploration and development high on its agenda in an innovative manner to stabilize and further its business development. Guided by the idea of seeking new mediumand large-scale oil & gas fields, CNOOC makes extensive breakthroughs in oil & gas exploration both at home and abroad, and takes the initiative to fulfill the responsibility of supplying oil & gas so as to continuously satisfy people s ever-increasing consumption demands for petroleum and natural gas. Oil and Gas Exploration In 2017, CNOOC continued to improve the integration of exploration and development, enhance the monetization capability of reserves and shorten the cycle of liquidation; allocated investment in China seas by concentrating on mature exploration areas but also paid attention to exploration in new areas; overseas exploration realized rolling development on the basis of the existing core projects; and kept the rational share of exploration investment in the Company s total capital expenditure and ensured the Company s medium- and long-term development with relatively high workload. In 2017, the reserve replacement ratio of the Company soared up to 305% with the reserve and production ratio returning to more than ten years. In China seas, the exploration workload of the Company continued to be fully achieved. 116 exploratory wells were explored, 2 of which were under cooperation. 4,417 kilometers of 2D seismic materials and 11,063 square kilometers of 3D seismic materials were collected under both self-operation and cooperation. The Company obtained 17 new discoveries in China seas and successfully rated 14 hydrocarbon-bearing structures. The success ratio of self-operation well exploration in China seas reached 48%-61%. In 2017, the Company continued to conduct valuemaximization exploration strategies in China seas and led to abundant achievements, but also enhanced the natural gas exploration and achieved breakthroughs in many fields. The main results include: Efficiently completed the rating of 4 large- and mediumscale oilfields including Bozhong 36-1 Kenli 6-4/5/6 Longkou7-6 WS 16-1 west/ws The deep-layer natural gas exploring in Bohai Sea achieved major breakthrough. The newly discovered Bozhong 19-6 was estimated to be the largest natural gas discovery ever recorded in the Bohai Bay basin. The exploration in high temperature and ultra-high pressure gas fields in the South China Sea achieved breakthrough, which confirmed the exploration potential of Ledong 10 in Yinggehai basin. The newly discovered Lufeng 14-8 and Lufeng 8-1 south in the Pearl River Mouth Basin greatly increased the reserve in Lufeng area. The Company drilled 12 exploratory wells, collected 3,163 square kilometers of 3D seismic materials, obtained 2 new discoveries and successfully rated 2 hydrocarbon-bearing structures overseas. The main results include: The Company continuously got new discoveries the Stabroek block in Guyana where has become one of CNOOC s most successful overseas exploration projects. Rated Libra structure in Brazil and the reserve reached expectations. Nigeria Preowei-3 well was successfully rated following the significant discovery of Owowo and the reserve has significantly scaled up. In 2017, the Company focused on overseas strategic layout and won many new high-quality projects in Senegal and Brazil, etc. Development and Production In 2017, the Company completed the production goal and the oil and gas output surpassed the target set at the beginning of the year. The Company organized operation resources and well advanced engineering construction. Under the premise of safe production, the Company completed all development and production targets of the year. The maiden voyage of China s first mobile offshore production test platform In 2017, the Company completed all development and production targets of the year through maintaining high production time efficiency and finely adjusting industrial structure, optimizing water injection and reducing decline rate of oilfields. The net oil and gas output reached million barrels of oil equivalent (boe) and surpassed the production target of million boe set at the beginning of the year. The 5 new projects, including Penglai 19-9 Oilfield comprehensive adjustment, Enping 23-1 Oilfield cluster, Weizhou 12-2 Oilfield Phase II, BD Gasfield and Hangingstone were put into operation in succession on schedule. The Company produced million tons of crude oil and 25.9 billion m 3 of natural gas, of which million tons of crude oil and 14.3 billion m 3 of natural gas were domestic production, million tons of crude oil and 11.6 billion m 3 of natural gas were produced overseas. In 2017, the Company led development and production by lean management and technology-driven concept, economical and efficient operation and highlighting sustainable development. The main results include: Ensured the basic production and consolidated the foundation of the oil industry through lean management. Continuously reduced all-in cost per boe by strict cost control in on stream projects for efficient operation. Actively deployed adjustment wells to increase production. Promoted the thermal recovery of heavy oil in Bohai Sea by enhanced technology-driven concept and striving for break through technical bottlenecks. Unconventional Gas Acceleration of the development and utilization of unconventional gas is of great strategic significance for energy structure optimization and energy supply guarantee. China United Coalbed Methane Corporation Ltd. ( CUCBM ) tracked the new development trend of unconventional gas in the world and promoted the exploration and development of unconventional gas, following the guidelines Developing CBM, Emphasizing Tight Gas, Exploring Shale Gas and the principle of 28 29

17 BUSINESS ENGINEERING & TECHNICAL SERVICES The engineering & technical services sector is the solid foundation for the sustainable development of the oil & gas business. The Company adhered to cost reduction and efficiency enhancement through safe, quality and highly efficient operation, overall promotion of management and strengthening risk control, highlighted technology innovation and enhanced equipment capacity, so that the level of engineering technology was steadily improved, critical breakthrough was achieved in operation capacity enhancement, international competitiveness and influence were continuously enhanced in Bozhong 35-2 Oilfield Operation Integration of Exploration and Development, Integration of Production and Sales, Integration of Self-operation and Cooperation, Integration of Tight Gas and CBM Exploration and Development. Relying upon the progress of science and technology, CUCBM continued to intensify exploration and development, accelerate the development of unconventional gas industry and strive to create new growth opportunities, and achieved a total output of 1.19 billion m 3 of CBM in 2017, with an increase of 22.7% compared with last year. CUCBM actively promoted the integration of tight gas and CBM exploration and development and managed to innovate the mode of integration. In practice, after sweet points are found, a development plan is prepared when the exploratory well collects the data of reserves; once the data of proven reserves is ready, a part of the reserves will be developed according to the plan. The new mode could achieve efficient and profitable development by shortening the time of monetization of reserves and taking integration advantages. CUCBM selected the LX-8 LX-9 well area in Linxing Gasfield for the tight gas integration test project and the Northern Shizhuang block for the CBM integration test project. The tight gas project was put into production in November 2017 and achieved drilling, test, pipeline construction, production and sale in the same year. The CBM project achieved drilling, fracture and drainage and production in the same year. The success of test projects set a new mode for the efficient development of unconventional gas such as tight gas and CBM. CUCBM carried out development tests for the CBM at 2,000-meter depth underground by using the exploratory well drilled for tight gas. The peak output of tested LX-26 well reached 1,700 m 3 per day and the output of the tested LX-37 well increased steadily. The commingled production of CBM and tight gas was proven feasible and effective to improve the efficiency of resources utilization and economic benefits. Oilfield Services China Oilfield Services Limited (COSL) has decades of experience in offshore oil and natural gas exploration, development and production, with its business including geophysical prospecting, well drilling, oilfield technology and ship. With the most powerful offshore oil service equipment group in the Asia-Pacific region, COSL can provide sole business operation services as well as integrated packaged turnkey operation services. The business expands to six major areas including the Southeast Asia, the Middle East, America, Europe, Africa and the Far East and covers over 30 countries and regions in the world. The equipment capacity continues to be intensified, the technological results keep emerging and the internationalized operation level is greatly improved. COSL has become one of the largest comprehensive offshore oilfield services providers in the world. COSL vigorously develops domestic and foreign markets. In the domestic market, it strives to provide a one-stop comprehensive solution to help oil companies regain low cost advantages. A breakthrough was made in the market for cooperative blocks as completing the 3D collection and processing project of Eni (China), winning the bidding for the 3D collection and processing project of Australian Sky Energy Company and the Pearl River Mouth exploration project and the tidal project of SK. COSL introduced the major achievements in the integrated service advantage and key technologies to overseas customers with the use of the Workshop marketing model. Overseas business grew as 4 new markets such as Papua New Guinea, Argentina, Cameroon and Kuwait were developed and 24 customers including Kangean, WNEL, TWINZA, Fieldwood, LUNDIN Reform and innovation speed up technological progress. The construction of a joint laboratory (North America) for oilfield services technology research with Oliden Technology LLC accelerated the serialization and industrialization of the logging technology and equipment of COSL. The connection of COSL Welleader with Halliburton FEWD system and the mutual connection with Bake Hughes accelerated the industrialization of COSL s self-developed Drilog LWD system and Welleader rotary steering drilling system and equipment and improved operational capability. The MoU on machining with Foshan Nanhai Zhongnan Machinery Co., Ltd. was reached, which could help COSL break through the bottleneck of machining capacity in the trusteeship mode. COSL further improved the layout of serialization and industrialization for technical products. On the bassis of the serial list of technical products, COSL carried out for the first time a special planning of industrialization, which better analysed the market demand and technological environment of all technology series, clarified the industrialization results of key nodes and matched the deployment of each professional line. COSL organized technical experts to examine the industrialization incentive projects for first 15 technical products and concluded that 7 projects had been industrialized and 4 projects had achieved the goal of industrialization. In addition, 76 LWD instruments and supporting equipment and 70 rotary steering instruments and supporting equipment were made. Various research work related to the industrialization of selfdeveloped complete set of geophysical equipment was accelerated as well as the self-developed foamed and fixed cable completed the sea test by hitching to the vessel 718, and others were newly added. both indicates that COSL has made substantial progress in 30 31

18 BUSINESS the key equipment technology of the complete equipment for seismic acquisition based on foamed and fixed cable. Offshore Oil Engineering Service COOEC concentrates on the engineering construction of offshore oil and gas and LNG, sets cost reduction, efficiency and service improvement as the principle and working steadily and meticulously in the whole process of project as the goal, makes efforts to build the leading general contracting capacity of offshore oil engineering EPCI (engineering, procurement, construction, installation) in the Asia-Pacific region. In 2017, the share of international projects in all COOEC s projects was at a historical peak. 25 large- and mediumsize construction projects were implemented throughout the year, 117,000 tons of steel structure were processed, 7,100 ship days were put into operation, 86 project milestones were completed and the engineering machinery completion was brought forward 200 days cumulatively. The operation ability and efficiency kept increasing. In 2017, the offshore projects were operated with high efficiency and stability. 7 projects were completed, including Chengbei Oilfield equipment and facilities upgrading and reform project and Wenchang capacity release project. In Yamal project it completed 11 modules of sealing of roof structure in a month and created the new record of the Company s large-scale hoisting. The float of upper platform of Wenchang 9-2/9-3 for the first time achieved complete CNOOC Blue whale carrying out offshore operation domestic design, 2 new domestically-made achievements were applied for the first time. The international projects got remarkable results. In 2017, COOEC synchronously ran 8 international projects such as Yamal project and Petrobras FPSO. Yamal project is the largest overseas order project in the history of COOEC, including 36 core process modules, weighed totally 180,000 tons. Petrobras FPSO P67/P70 project, was highly praised by the Brazilian owner. The market expansion made new breakthroughs in 2017, as COOEC made great efforts in developing both international and domestic market. It won a number of large-scale engineering projects such as Dongfang 13-2 Gasfield Cluster development engineering project, Penglai 19-3 Oilfield 1/3/8/9 area comprehensive adjustment project. An accumulative total of 225 contracts were signed or negotiated. LNG-related new business achieved a milestone in the history of COOEC. In 2017, COOEC gained a number of qualifications for participating in the bidding of all the large LNG projects in China. It also developed the business scope from building storage tank to building receiving terminal + storage tank EPC, which meant a critical breakthrough of operation from liquid gas to gas-to-liquid. The development of COOEC was further accepted by the market. In 2017, COOEC for the first time won the PMI (China) Annual Award of Project Management. Yamal project and Shell SDA project were highly appraised by the owners. Energy Technical Services CNOOC EnerTech is dedicated in building an internationally competitive energy technology service company, which places energy services at the core and develops diversified industries in a coordinated way, with the integration of technological research and development, manufacturing and professional technical service. CNOOC EnerTech highlights specialization in its development guidelines and creates the technology + service + product business model through constant resource integration, organization integration, industrial integration and structural optimization, in order to achieve service supports production, product drives service and technology advances industry. CNOOC EnerTech aims to be an innovative enterprise with one-stop service and sustainable development ability. Its business covers most links from upstream to downstream of the oil and gas industrial chain and is formed with four core business segments including energy technical services, FPSO production technical services, energy logistics services and HSE and energy saving services. Energy technical services go back on the fast growth track. CNOOC EnerTech takes providing energy technical service as the core business. It provides oil companies with all technical services including engineering technology, equipment operation and maintenance, pipeline technology and information services. On the basis of the oil and gas industry, CNOOC EnerTech continues to improve the professional technical level and the quality of service as well as enhance market development. In 2017, the income from energy technical services increased by 23.73% compared with last year. FPSO production technical services make stable profit and cash flow. CNOOC EnerTech is the only supplier in China s offshore area that provides comprehensive and integrated FPSO production technology services for oil and gas production enterprises. By the end of 2017, CNOOC EnerTech had 8 FPSO, ranking third in Asia and sixth in the world among FPSO operators. In 2017, the calendar day s utilization rate of FPSO was 100%. In 2017, the supply of energy logistics services by CNOOC EnerTech increased by 27.34% compared with last year. CNOOC EnerTech focuses on providing support services for production and mid- and downstream in the offshore oil industry, providing logistics support for offshore oil and gas field exploitations through marine supplies and catering services, and assisting oil and gas companies to distribute all kinds of oil and gas products to wholesalers and retailers through logistics and sales services. Safety, environmental protection and energy saving business keep stable development. In order to achieve long-term sustainable development and make full use of its advantages, CNOOC EnerTech has actively invested in business related to safety, environmental protection and energy saving and has already had the national certificate of environmental impact assessment for the national second grade construction project. CNOOC EnerTech is the first domestic professional service company of providing marine environmental protection that operates in accordance with international practices and standard and is qualified with level 2 oil spill response capability. It has 9 international advanced multi-functional oil spill environmental protection ships and oil spill drift software, which makes it the leading advantage in the field of oil spill response. In 2017, CNOOC EnerTech actively developed the external market and the overseas market to further enhance the capacity of opening industries. It won the bidding for CBM integrated package EPC project of Guizhou Natural Gas Energy Investment and opened the local CBM market. TCDTO-1, the self-developed reformed oil non hydrofining catalyst, was successfully applied to projects in Yunnan Petrochemical, Ningxia Petrochemical and North Asphalt Fuel. The income from the external market in 2017 increased by 44.65% compared with last year. In the overseas market, CNOOC EnerTech won 3 major projects such as clearing tank, QHSE service and pipeline supply for Missan Oilfield, with clearing tank and pipeline supply business for the first time entering the overseas market. In 2017, the Russian business returned CNOOC EnerTech more than RMB 100 million, with a single order for color board coating close to RMB 30 million. CNOOC EnerTech promotes the transformation of scientific research system by market-orientation. It strengthened the top level institutional arrangement and integrated the research and development platforms and technology centers of subsidiaries into 6 virtual institutes and establish an open and decision-making expert committee composed of internal and external experts. A number of core technologies at the company level were established in energy technology services, energy saving, environmental protection and digital logistics. A clear technical development goal and an implementation path were put forward

19 BUSINESS REFINING AND MARKETING The refining and petrochemical segment is an important part in CNOOC s industrial chain and value chain, but also an important guarantee for CNOOC to build a world-class energy company with Chinese characteristics. In 2017, CNOOC Oil & Petrochemicals promoted reform and innovation, continuously optimized the operation mechanism, emphasized safe production and green development, orderly advanced key projects and construction, accelerated terminal network development and consequently improved the ability of sustainable development. Refining and Petrochemistry In 2017, CNOOC Oil & Petrochemicals achieved all the operational targets and enhanced the core competitiveness of the refining and petrochemical industry of CNOOC million tons of crude oil was processed, 8.78 million tons of refined oil products, 1.08 million tons of ethylene, 2.72 million tons of sodium carbonate, 6.94 million tons of asphalt and 1.08 million tons of lubricating oil were produced in the whole year. Phase II Project of Huizhou Refinery CNOOC Oil & Petrochemicals insists on the principle of maximization of overall value of the refining and the share of high value-added products such as benzene petrochemical segment, continuously optimizes production ethylene and propylene; Taizhou Petrochemical optimized and operation as well as overall resources allocation. It the raw materials for lubricating oil and coking unit with reinforced market analysis and coordinate both internal notable effect. CNOOC Oil & Petrochemicals actively and external crude oil resources supply so as to reduce promoted the refined oil quality upgrading task. China interregional transport and greatly reduce logistics costs; Offshore Bitumen and ZOJE Petrochemical produced fuel improved industry policy study and technical and process at CN-VI standard on schedule. Huizhou Petrochemical research, optimized product structure and production upgraded the production capacity for gasoline and diesel plan so as to increase the share of high value-added at CN-VI standard. products and improve the profitability of refineries. For CNOOC Oil & Petrochemicals orderly advanced the key example, Huizhou Refinery adjusted process to increase projects and construction. The Phase II Project of Huizhou the production of jet fuel and ethylene; Daxie Petrochemical Refinery was put into operation in one go on September optimized raw materials and technology and increased 30, It took only 11 days of operation from the atmospheric-vacuum oil extract and heating up to open up the whole process and created the Chinese fastest record of start operation of the 10 million tons scale oil refining project. Shandong Haihua integration project and Huizhou state reserve project accepted Mechanical Completion organized by the Company. Daxie Petrochemical advanced the solubilization project on schedule. Huizhou Refinery refining products structure optimization and quality upgrading project and Daxie Petrochemical arene project entered the substantive stage. The Phase III Project of Huizhou Refinery and Daxie petrochemical products Daxie Petrochemical factory complex upgrading and rebuilding or extension project started the preliminary study. CNOOC Oil & Petrochemicals continues to implement post-evaluation of investment projects to keep improving the quality of investment management. In 2017, it organized the post-evaluation on 35 projects. CNOOC Oil & Petrochemicals promoted reform and innovation to stimulate endogenous dynamic. It vigorously promoted the integration of regionalization management and the integrated management of oil refining and petrochemical business in Huizhou Refinery and CSPC. It completed the restructuring and integration of Shandong Engineering and Qingdao Engineering and reorganized the Refining and Petrochemical Institute by adopting new operation mode that effectively integrated resources of scientific engineering research and improved technological innovation capability. It continuously improved the system construction in production control by improving the production perception, analysis and optimization and vigorously promoting intelligent production. Huizhou Refinery was selected as the national Intelligent Manufacturing Pilot Demonstration Project. Marketing CNOOC always takes customer satisfaction as an important indicator to measure service quality. It fully integrates internal and external resources, actively develops and optimizes service network, attaches importance to customer information protection, continuously improves service capabilities and customer satisfaction, so as to achieve 100% resolution rate of customer complaints and common development with customers on the basis of mutual benefit. CNOOC is committed to helping customers enjoy products and services of the Company in a more convenient way. The Company takes the industrial layout of Two Deltas and One Bay (the Yangtze River Delta, the Pearl River Delta and the Bohai Bay) as the core of service network, innovates service modes and continues to enhance the construction of gas stations and oil depots. In 2017, based on the market-oriented ideology, CNOOC Oil & Petrochemicals optimized the flow of sales, innovated marketing model and strived to promote the value of products. CNOOC Oil & Petrochemicals accelerated the construction of terminal network for oil products and continued to strengthen the lean operation and field management of gas stations. It actually controls 1,166 gas stations. The amount of gas stations developed in 2017 created a historical new high since CNOOC had launched downstream business and the terminal service network is getting perfect. CNOOC Oil & Petrochemicals enhanced the consciousness of proactive service and made a full application of Internet+ and WeChat marketing. By customer segmentation management, it increased benefit of retail and brand value, the retail sales volume in 2017 grew by 13% compared with last year. It actively explored the sale of refining and petrochemical products on e-business platform. The salt chemical products and packaged lubricating oil were successfully sold on line. With high quality of oil products, the upgrading visual image of gas stations and warmer services, CNOOC Oil & Petrochemicals won the favour of more consumers

20 BUSINESS NATURAL GAS AND POWER GENERATION As a member of Global Compact and a main driver of energy revolution, CNOOC actively carries out low-carbon action and responds to the Paris Agreement to build a clean, low-carbon, safe and efficient energy system. Natural gas and power generation segment has become an important part of the mid- and downstream business of the Company. Accelerating the development of natural gas and power generation is in line with the restructuring of national energy consumption, but also the most promising profit-making business. CNOOC e-business platform URL link Natural gas sales operation management center CNOOC Gas & Power Group is deeply aware of the role of natural gas as key low-carbon and clean energy. The Group continued to concentrate on the Yangtze River Delta, the Pearl River Delta and the Bohai Bay Area, optimize the layout of the industry,extend natural gas supply network and actively builds LNG receiving terminals, natural gas pipelines and gas stations, striving for building up the coastal natural gas pipeline network to enhance supply capacity of clean energy and promote sustainable development in the surrounding areas. By the end of 2017, CNOOC had developed the natural gas business in 18 provinces and 70 prefecture-level cities, built 9 LNG receiving terminals with the LNG receiving capacity up to 33.8 million tons per year, 170 gas stations and 4,662 km of land natural gas pipeline and accumulated 21.3 billion kwh of power. The Group developed the synergistic effects of industrial chain, innovating the conventional ways of thinking and marketing means to enlarge the market space for incremental supply and strengthen the competitive Active marketing to develop customers Customer Q&A Call center for main funcitions Whole process management of order service Publicity and market research Exclusive services to VIP customers advantages on the traditional market. In 2017, the Group achieved rapid growth of sales of gas in all regions with the annual sales of billion m 3, consolidated the second largest natural gas supplier in China with the LNG imports of million tons and maintained the leading position in the domestic LNG industry. The Group continued to innovate operation to rapidly enhance its market development capability. The Group integrated itself into the Internet era through entering the terminal market and building the flagship store for CNOOC natural gas business. Owing to a series of promotional activities, 371 customers registered online and the online transaction amount reached RMB 2.63 billion in 2017, which effectively promoted the initiative of the Group in sales channels. The Trading Company led a pilot project of introducing the public bidding mechanism to East China market in cooperation with Shanghai Petroleum and Natural Gas Exchange. As the mechanism was for the first time applied in China, the Trading Company played a leading role in the industry and set a good example of reform for the society. The Group continues to promote technological innovation and enhance the driving force for development. The three self-developed technical pillar brands, natural gas liquefaction, LNG receiving terminals and large-scale storage tanks, keep expanding influences on the markets. Through enhancing synergistic innovation, the Group won the bidding for the Shanghai 200,000 m 3 LNG storage tank engineering project, the largest LNG storage tank in China. The technology used in the project has broken several foreign technical monopolies and become a milestone in the domestic LNG storage tank construction. The technology was also successfully applied to the construction of 3 storage tanks of 160,000 m 3 capacity respectively in Tianjin and Fujian. The Group also won the bidding for the Xi an 1.4 million tons liquefaction engineering project of Shaanxi Gas Group, the largest liquefaction project in China, indicating that the self-developed million-level liquefaction process stepped into the application phase. The Group won the CWC LNG Technological Innovation Award 2017 and became the first Chinese company to win the award. The Group adheres to the responsibility of the central enterprises and ensuring the people s livelihood, intensified the resource scheduling, fully excavate the supply potential and helped stabilize the market price. On the basis of scientific forecast on the huge demand for natural gas in the winter of 2017, the Group settled arrangements in advance, including purchasing and stocking millions of tons of LNG, coordinating upstream resource sellers and optimizing shipment date to ensure the availability LNG loading scene: ensuring the supply to the BRICs Summit of more than 20 billion m 3 of natural gas for the winter. In addition, CNOOC leased a FSRU and let it berth at Tianjin LNG Receiving Terminal. The FSRU provided an additional capacity of supplying 14 million m 3 per day to Beijing- Tianjin-Hebei region. Another two LNG carriers were leased and ordered by CNOOC to wait at sea for further instructions, which also enhanced regional reserve and supply capacity for emergency. The Group also promoted the inter-connection of gas pipelines operated by CNOOC, CNPC and Tianjin Binda and organized 250 tankers to carry natural gas from South China to North China to create and expand a channel for emergency supply. The Group supplied a total of 20.7 billion m 3 of natural gas in the winter of Furthermore, in the face of the sharp rise of the LNG price, the Group strengthened self-discipline, took the initiative to stabilize the LNG price and maintained the market order with others. As a result, the price fluctuation of liquid resources was limited between RMB 4,500-5,100 per ton. The Group remained the natural gas power generation in safe and steady operation. It took the activity of culture of intervention in safety as a special means to improve the safety consciousness of all employees and helped them transform the safety idea from I am asked to be safe to I want to be safe. Its subordinate power plants continuously optimized operation modes and inspection and maintenance, actively tried new ways of energy saving and tapped latent potentialities. Thus all economic indexes were improved

21 BUSINESS FINANCIAL SERVICES Based on the Company s industrial development, our financial services focus on the integration of industry and finance, strengthen the risk control, actively innovate financial products and services models, expand the service network, optimize the information system, strive to improve the value of our financial service brand and keep the quality of financial capital and profitability constantly increased. CNOOC Finance Co., Ltd. Zhonghai Trust Co., Ltd. CNOOC Finance has kept the zero record of nonperforming assets and bad loans. The financial service RMB billion and net assets reached RMB By the end of 2017, total assets of Zhonghai Trust reached network develops with the expansion of the Company s billion, with the newly increased non-performing assets kept industrial chain and has covered the coastal areas where to be zero. The trust business grew steadily. At the end of CNOOC s main business locates in. For the qualified the year, it maintained 554 trust plans and the trust assets internal customers, the service coverage rate has reached reached RMB billion. The annual operation revenue 93% and the clients are distributed in 108 cities of 28 reached RMB billion and total profit reached RMB provinces. CNOOC Finance continuously strengthened 987 million. fund collection from internal customers. The fund collected Zhonghai Trust continuously develops its business and in 2017 increased by 10.23% compared with last year. seeks for breakthrough in business innovation and The efficient fund centralization lays a foundation for the transformation. It provided strong supports to the growth Company to overall operate capital resources in a larger of the real economy through facilitating key projects in scope and improve the efficiency of capital operation. line with the Belt and Road Initiative and the national Self-support credit of CNOOC Finance gave strong backing strategy of coordinated development of Beijing, Tianjin and to the development of the Company s main industry and Hebei, as well as projects concerning people s livelihood key projects, The company provided a total of RMB 4.4 such as local shantytowns rebuilding. The autonomous billion of project credit line to Fujian LNG, Zhuhai Pipeline, securities investment products represented by Wenying Guangdong Natural Gas, Shanghai LNG and other series, Wenjian Series and Yuanhang series, won companies; provided bridge loan to Fujian LNG in order to the favor of the internal and external investors. It further meet the demand for project construction in early stage. enriched the business varieties by completing the first single REITS project that was fully market-based operated In 2017, CNOOC Finance completed 563,400 settlements and dominated by trust companies in China, and issuing with the amount of RMB 4.98 trillion, increased by 151% the Zhonghai Taikang QDII project, the first project that and 113% respectively. The average daily self-support credit takes Shanghai-Hong Kong stoke connect programe as the loan balance reached RMB billion, which the selfsupport credit loan balance at the end of the year reached main transaction. It explored the way of transformation as launching the Micro-star 1 project. In 2017, Zhonghai Trust RMB billion, which was 39% higher than last year. carried out over 60 cross-team cooperation projects and the The settlement and sales of foreign exchange amounted to fund in operation reached RMB 12 billion. The project-related RMB billion, which was 54% higher than last year. The trust remuneration was over RMB 50 million, increased annual foreign exchange business income was RMB 30.2 by 1.1 times over the previous year. It provided financial million, which was 69% higher than last year. The annual management services for the internal customers. The fund operation revenue was RMB billion and the profit management scaled up to more than RMB 125 billion and after provision was RMB billion. By December 31, the cumulative paid trust income exceeded 1.68 billion. 2017, total assets of CNOOC Finance reached RMB billion, which was 22% higher than last year and reached Zhonghai trust has established a good social image with the highest level in its history. sound operation and professional capabilities of financial management. The market influence of the company s brand has been continuously improved. In 2017, Zhonghai Trust won the excellent service award for credit assets registration and circulation business issued by the credit assets registration and circulation center of the banking system, awarded Top 100 Enterprises of Outstanding Contribution to the Economic Development of Huangpu District (Shanghai), for the sixth time won the Excellent Company Award selected by Trustworthiness of Shanghai Securities News, and was for the ninth time award Excellent Risk Control Trust Company selected by Excellent Trust Company of Securities Times. CNOOC Insurance Ltd. CNOOC Insurance fully implements the Company s development strategy, vigorously develops the market, steadfastly serves the real industry and achieves a steady development. It has made new breakthroughs in business development and created many first in its history. In 2017, CNOOC Insurance kept good operation performance, greatly improved financial indicators and strongly supported the development of the Company s main industry. At the end of 2017, total asset reached RMB billion and net assets reached RMB billion. The capacity of underwriting and corresponding to major disasters also continued to be intensified. CNOOC Investment Co., Ltd. In 2017, through enhancement of strategic management and equity value management, CNOOC Investment managed 19 equities, including 12 equities of management participation and 5 equities of strategic holding. It participated in management by distributing dividend and examining the proposals of the Board of Directors, Supervisory Board, General Meeting, and stopped losses by asset disposal. In 2017, CNOOC Investment kept good performance in quality of assets, operation of equity and governance structure. At the end of 2017, CNOOC Investment Co., Ltd. reached RMB billion total assets and RMB billion net assets and RMB 905 million total profit. CNOOC International Lease Finance Company CNOOC International Lease Finance Company lays a solid foundation to conduct business innovation, strengthen risk management and run all business with good results. Based on enhancing financing in key projects, exploring direct leasing business model and tapping the potentials of marginal oilfields development, the Lease Company improves the integration of industry and finance and vigorously supports the development of the Company s main business. On the basis of active and cautious study on equity diversification, the Lease Company built a set of institutions for efficient corporate governance and a system for the shareholding reform. In 2017, the Lease Company signed 7 new contracts of lease business with a total contract amount of RMB billion. At the end of 2017, the total amount of the leased assets was RMB billion, the accumulative operation revenue was RMB 968 million and the total profit was RMB 229 million

22 INTERNATIONALIZATION CNOOC emphasizes the effectiveness of operation, management innovation and cooperation overseas, continuously optimizes its global business arrangement and strengthens soft power, steadily improves overseas business management quality, pursues economic efficiency of production, promotes values of overseas assets and improves the sustainability of overseas business. Business Overseas CNOOC is an important force in the implementation of the national Go out strategy and the construction of The Belt and Road. In 2017, the Company aimed to maximize value from overseas business for stakeholders as the primary task. It actively contributed to ensuring the national energy supply, promoting the development of the local economy and providing better products and services to customers. In the whole year, the overseas crude oil output was million tons and the natural gas output was 11.6 billion m 3. CNOOC Ltd. continued to be well recognized by the international capital market. In 2017, it continued to be listed in Platts Top 250 Global Energy Company Ranking and was awarded again Best Investor Relations Company (China) and Asia s Best CEO (Investor Relations) by Corporate Governance Asia. It was also awarded the titles of Deals of the year by sector - Oil and gas deal of the year and Best Deals by Country - Oil and gas deal of the year by The Asset Triple A Asia Infrastructure Awards 2017 and the title of Corporate Awards Platinum, organized by The Asset. In addition, it was awarded 2017 China Securities Golden Bauhinia Awards - Best Board Secretary of Listed Companies by Ta Kung Wen Wei Media Group. COSL strived to develop its overseas market. COSL timely and carefully introduced the major achievements in the integrated service advantage and key technologies to overseas customers with the use of the Workshop marketing model. 140 new contracts were signed with the total amount of contract reaching RMB billion. COOEC has constantly achieved good results in the international projects. In 2017, it implemented 8 international projects such as Yamal project, Petrobras FPSO, Qatari NFA WHP-3 and SHELL SDA refining and petrochemical, etc. In Yamal project it completed 11 modules of sealing of roof structure in a month, thus created the new record of the company s large-scale hoisting. In Petrobras FPSO P67/ P70 project, it overcame the difficulties of high technical requirement, multifaceted coordination between Brazilian and Chinese parties and late delivery of materials, precisely managed the overall progress of the project and won high appraisal from Brazilian owners. CNOOC EnerTech has made a positive breakthrough in the overseas market development. In 2017, it won the bidding for 3 major projects such as clearing tank, QHSE service and pipeline supply for Missan Oilfield, with the total amount of contract exceeding USD 30 million. Especially, clearing tank and pipeline supply business for the first time entered the overseas market. The Russian business returned CNOOC Changzhou Coatings Research Institute more than RMB 100 million, with a single order for color board coating close to RMB 30 million. CNOOC Gas & Power Group operated its international business steadily and soundly. In 2017, the total LNG imports were million tons with the year-on-year growth of 23.8%, reaching a historical new high. It has constantly furthered the cooperation with the resource owners and other buyers. The Company strengthens the training of international talents 40

23 A3 C18 B9 A18 B14 C1 B11 C20 D11 C21 B3 D6 A9 A12 D5 C16 D9 A14 B4 A7 B20 D1 C9 B15 C7 C13 B5 D10 B12 C10 B16 C19 B10 D14 C6 B7 A16 C25 D2 C11 A4 B8 C14 C15 A10 A5 B19 C24 A2 B17 A6 A15 D3 C22 C2 B1 D12 C23 C17 A1 C4 B6 D7 D13 A17 A11 B18 C12 A19 D8 C3 D4 C5 B2 A8 C8 A13 B21 A20 B Africa Oceania Europe Asia North America South America 1. Algeria 2. Nigeria 3. Equatorial Guinea 4. Gabon 5. Cameroon 6. Congo (Brazzaville) 10. Egypt 11. Uganda 12. Kenya 15. Madagascar 31. Australia 32. Papua New Guinea 33. New Caledonia 34. New Zealand 7. United Kingdom 8. Iceland 9. Netherlands 13. Norway 22. Russia 14. Saudi 16. Iraq 17. Kuwait 18. Qatar 19. United Arab Emirates 20. Oman 21. India 23. Myanmar 24. Singapore 25. Thailand 26. Vietnam 27. Malaysia 28. Brunei 29. China Hong Kong 30. Indonesia 35. Canada 36. United States 37. Mexico 38. Ecuador 39. Colombia 40. Argentina 41. Trinidad and Tobago 42. Guyana 43. Brazil CNOOC Ltd. COSL COOEC CNOOC EnerTech A1. Indonesia A2. Gabon A3. Iceland A4. Nigeria A5. Guyana A6. Congo (Brazzaville) A7. Algeria A8. Australia A9. Canada A10. Trinidad and Tobago A11. Papua New Guinea A12. United States A13. Argentina A14. Iraq A15. Uganda A16. Mexico A17. Colombia A18. United Kingdom A19. Brazil A20. New Zealand B1. Singapore B2. Australia B3. Canada B4. Iraq B5. United Arab Emirates B6. Indonesia B7. Mexico B8. Thailand B9. Norway B10. Myanmar B11. Russia B12. India B13. New Zealand B14. UK B15. Saudi B16. Oman B17. Gabon B18. Papua New Guinea B19. Cameroon B20. Kuwait B21. Argentina C1. Netherlands C2. Kenya C3. Madagascar C4. Indonesia C5. Australia C6. China Hong Kong C7. Saudi C8. New Caledonia C9. Egypt C10. India C11. Nigeria C12. Brazil C13. Qatar C14. Thailand C15. Vietnam C16. Iraq C17. Brunei C18. Norway C19. Myanmar C20. Russia C21. Canada C22. Uganda C23. Malaysia C24. Equatorial Guinea C25. Mexico D1. Kuwait D2. Nigeria D3. Uganda D4. Australia D5. United States D6. Canada D7. Indonesia D8. Brazil D9. Iraq D10. United Arab Emirates D11. Russia D12. Singapore D13. Ecuador D14. China Hong Kong

24 Opening up, Expanding Imports Guided by Peaceful Cooperation, Openness and Tolerance, Mutual Learning, Mutual Benefit and Common Develop- North America Europe Russia ment, the spirit of the Silk Road, CNOOC endeavors to build an energy Silk Road to achieve the connectivity of global resources as our way to build a community of shared future for mankind. Iraq Asia China LNG imports (10,000 tons) Africa Oman , % Gabong , % LNG Brazil South America Congo Angola Indonesia Australia Oceania ,316 Trade volume of crude oil (10,000 tons) crude , % , % ,616

25 BUSINESS International Trade Key performance indicators of CNOOC Petrochemical Import & Export Co., Ltd. created historical new high, such as annual trading volume reaching million tons and sales revenue RMB billion. It continuously improved competitiveness in sales by simultaneously enhancing domestic and international trade, made all efforts to improve quality and profitability, and managed to ensure supply of crude oil to the Phase II Project of Huizhou Refinery, provided integrated and comprehensive services by optimization of resource allocation, ship chartering, execution process and financial factoring on the basis of visiting customers. Cooperated with Huizhou Refinery, the exports greatly added value to the refined oil products and helped the maximization of the Company s overall value. The Import & Export Company made unremitting efforts to expand channels for resource acquisition and optimized the purchase ratios of imported resources for CNOOC and Shell Petrochemicals Company Limited (CSPC). It fully played the role of window for overseas markets and achieved new breakthroughs in first hand resources acquisition and customer development in the international market. The warehousing business has also made great achievements. Yantai Integration project promoted the transfer volume of oil products to a large extent through enhancing market development and implementing lean management. Xinhai oil storage Co., Ltd., subsidiary of Daxie Petrochemical, raised storage rents under long-term contracts by adjusting the market development strategy and continuously implemented the cost-reduction and efficiency activity. Taking serving oilfield production as the primary task, the shipping business actively tapped potentials. The shipping companies were subject to the overall situation of offshore oil production and transportation, approached challenges of the world shipping market, optimized and expanded their shipping capacities in a coordinated way so as to promote the contribution of high profitability to the Company. The financial business has made positive contributions to the task of Ensuring Growth. It took opportunities to collect low interest funds, obviously reduced the cost of financing and improved the yield of financial products. The Import & Export Company implemented the idea of creating value from service and lean management, and made special contributions to the Company. The financial sector implemented financial management rules required by the Company to further strengthen the financial infrastructure and normalize and optimize financial accounting and tax management. The legal and risk management sector strictly controlled market risks and credit risks. The transaction examination rate, the admittance of counterparty examination rate and the recovery rate of the account receivable were all up to 100%. There were zero illegal transactions and zero major risk events in the whole year of Daxie storage facilities for oil products trading 43

26 China National Offshore Oil Corporation MANAGEMENT MANAGEMENT Technological Management QHSE Innovation Innovation Informatization Human Progress Resource Management Corporate Corporate Culture Citizenship Unmanned aerial vehicle (UAV) data acquisition and field monitoring flight training 44 45

27 MANAGEMENT TECHNOLOGICAL INNOVATION Scientific and technological innovation is the strategic engine for the development of enterprises. Taking the oil and gas industry as the cornerstone, CNOOC adheres to the innovation-driven strategy, focuses on core technologies and constantly explores new marine energy, in order to provide inexhaustible power for sustainable development. Management of Research Project CNOOC gave full play to the leading role of scientific and technological innovation, and continued to reinforce the research on core technologies. In 2017, the Company invested RMB 7.29 billion in science and technology, of which RMB 2.79 billion was for R&D, equivalent to 1.33% and 0.51% of the main business revenues respectively. The Company actively adjusted the managing model of scientific research project and supported research on key issues. According to the top-level designed 35 major scientific and technological projects in the 13th Five-Year Plan, the Company demonstrated and passed 79 research projects, completed the annual inspection of 134 continuing projects on schedule and the completion rate achieved 100%. 82 projects were completed in the whole year and achieved more than 20 periodical and symbolic results, such as Marine Natural Gas Hydrate Production Test by Solid Fluidization Technology, Study on Fracture System and Reservoir-forming in the West of Bohai Sea, Rules of Gas Accumulation and Key E&P Technologies for HTHP Gas Fields in Yingqiong Basin. Establishment of Research Platform The Company has steadily promoted the construction of the technical research platform and effectively improved its R&D capability. In 2017, it implemented 14 platform construction projects, launched 7 new laboratory construction projects for offshore low permeability gas reservoir E&P, unconventional oil and gas E&P, well logging and directional drilling, etc. 3 platform construction projects were accepted in the year, which helped the Company develop the abilities of well logging and directional drilling equipment design and function test, of research and development experiment of complete set of equipment technology for high precision towing cable seismic system, of catalytic materials analysis and characterization and evaluation as well as oil refining auxiliaries dynamic evaluation test. In the trial operation stage, the 3 platforms supported or promoted the research and industrialization of the core technical equipment and products such as the ELIS imaging logging system, Hai Liang II equipment and series of hydrogenation catalyst, etc. The Natural Gas Hydrate State Key Laboratory submitted by the Company was approved by the Ministry of Science and Technology. Joint Research Institute of Marine Energy Engineering and Technology, China Marine Resources Development Strategy Research Center, CNOOC Refining and Petrochemical Science Research Institute were unveiled. CNOOC Science and Technology Park in Beijing Future Science Park (Changping) was officially opened. Main Achievements in Technical Innovation CNOOC continuously improves the system of scientific and technological innovation and has greatly improved its independent innovation ability. In 2017, the Company achieved 48 awards at provincial and ministerial level Major achievements in scientific research Project and above, including 1 National Prize for scientific and technological achievements, 21 provincial and ministerial level prize for scientific and technological achievements and 26 industrial prize for scientific and technological achievements. The Research on the Industrial Application of Key Drilling and Completion Technologies for HTHP Wells in the South China Sea won the First Prize of the State Scientific and Technological Progress Awards. CNOOC led the drafting of the ISO Oil and Gas Industry - Specifications for Offshore Modular Drilling Rigs on Fixed Platforms, which was released as an international standard. CNOOC Gas & Power Group won the CWC LNG Technological Innovation Award In 2017, CNOOC was granted 840 authorized patents, including 508 invention patents; issued 126 technical standards, including 1 international standards, 15 national standards, 34 industrial standards, 76 enterprise standards. CNOOC organized and participated in 28 international and national scientific and technological communications with 4,086 person-time in total, which helped the Company show its innovation achievements to the public and broaden the vision of researchers. Effects of innovation Marine Natural Gas Hydrate Production Test by Solid Fluidization Technology Formed an integrated engineering technology system of natural gas hydrate resource investigation, evaluation, sampling drilling and solid fluidization test; successfully implemented the production test. Sci-Tech investment (RMB 100 million) R&D investment (RMB 100 million) Authorized patents (item) Research and Application of Key Technology for High Precision Imaging Processing of Overseas Offshore Pre-salt Oil and Gas Reservoirs in Deepwater Successfully applied to the 300 km 2 imaging process in Libra block, confirmed the newly discovered 1.86 billion barrels of proven oil in place Study on the Evaluation Method of Marine Source Rocks in the West Africa Passive Continental Margin Basins Effectively guided the favorable play selection and new venture evaluation in the drift sequence of West Africa passive continental margin basins; selected 3 favorable exploration plays and 5 favorable exploration blocks in the Lower Congo basin, Niger delta basin Issued technological standards (item) Scientific and technological awards (provincial level and above) (item) Scientific and technological paper (core journal) (piece) Study on Fracture System and Reservoirforming in the West of Bohai Sea Oil and Gas Geology and Key Exploration Technologies on the Continental Margin of the Pearl River Mouth Basin Established hydrocarbon pooling patterns and a technical process suitable for the study on reservoir-forming in active fracture zones in the West of Bohai Sea; guided by the patterns and process, obtained 4 commercial discoveries like CFD 6-4. Discovered 3 mid-size oilfields like Lufeng 14-8, with million m 3 of newly found proven reserve in place; discovered 20.2 million m 3 of 3P reserves and potential resources in Liuhua 34-6 structure Study on Accumulation Mechanism of Tight Sandstone Gas in Linxing-Shenfu Block Newly added 5.6 billion m 3 of natural gas geological reserves in E&P integration area and the cumulative production reached up to 78 million m

28 MANAGEMENT Project Online Profile Control & Flooding Technologies for Oilfields with High Water Cut in Bohai Bay Study on Enhancing Oil Recovery of the Reef Limestone Oilfields in the East of South China Sea Large Diameter MRCT Key Technologies of Short Radius Side Drilling and Completion in Suizhong 36-1 Oilfield Development of Large CWHE for LNG High Temperature Resistant Cementing Slurry Series New De-mulsification Technology for Oilfields Optimal Implementation and Producing Technology of Horizontal Wells in Thick Carbonate Reservoirs Innovation of Integration Technology System for Tight Gas E&P Complete Set Technology of Phosphorusless Water Treatment High Performance High Build Epoxy Anticorrosive Coating Effects of innovation Formed online profile control and flooding technology system and the supporting technical system; implemented the systems in C17 well and other wells in Qinhuangdao 32-6 Oilfield, accumulatively increased 12,530 m 3 of oil reserve. Achieved series of achievements in geophysical characterization for reef limestone reservoirs and high precision logging evaluation in the East of South China Sea; applied the achievements to 2 adjustment wells including C7H3, and accumulatively increased 770,000 m 3 of oil production. Developed a large diameter MRCT and applied in 5 wells onshore and offshore, obtained 103 cores; the performance reached the international advanced level. Formed a short radius side drilling technology system specially for Suizhong 36-1 Oilfield development and adjustment, successfully applied in 5 wells including SZ36-1- E19H1, whose project duration was saved by 4.54 days, footage by 1,120 meters and cost by RMB million. Developed the first set of CWHE for LNG in China with the capacity of 300,000 m 3 per day, intended to use in Xi an LNG project, which is estimated to save tens of millions of RMB for the project owner. Achieved industrialization; developed 3 markets including Shell, Haski and the eastern Tarim Basin of Xinjiang; created over RMB 60 million of output value. The products have been applied in 3 oilfields such as Nanpu 35-2 with more than 1,560 tons of sales and over RMB 24.5 million of output value. Implemented horizontal well and explored ESP in the Mishrif layer; the productivity of a single horizontal well reached 4,500 barrels per day, which hit historic level. Established a tight gas E&P integration test area (LX 8/9 well area), with an annual output of 60 million m 3 and an accumulative production of LNG over 10 million tons in Used by Huizhou Petrochemical, CNPC Guangxi Petrochemical, SINOPEC Sabic Tianjin Petrochemical and other enterprises, with an output value over RMB 100 million. Broke the monopoly of foreign technologies in the field of marine and heavy duty anticorrosive coatings; successfully applied to ships and offshore oil platforms with an accumulative sales revenue of RMB 36.5 million. MANAGEMENT INNOVATION Management innovation is an essential guarantee for enterprises to strengthen their competitiveness and achieve sustainable growth. Under the current complicated environment of scientific and technological evolution and profound changes in the operating environment, CNOOC must understand new trends and requirements of management innovation, make continuous management innovation and incorporate the innovation results into the whole management process. Establishment of Innovation Platform In 2017, CNOOC continued to promote innovation by stimulating creativity and innovation capability of the staff, cultivating innovative culture, creating an innovative environment and promoting the Four Ones project (set up a set of indicators, build a set of mechanisms, cultivate a number of talents and ram a culture). The Company established an Innovation Fund with RMB 200 million for the first phase, introduced the market mechanism to the operation, built a platform as incubator for innovation, integrated talents, funds and projects to effectively join the capital market and the product market, in order to support the in-house innovative and entrepreneurial activities and explore new business models. The Company organized the first CNOOC Innovation Contest and the Selection of the Innovation Fund Projects, but also invited famous entrepreneurs, academicians, presidents of university to share concepts and practices of innovation with the staff through 3 sessions of Innovation Forum. The activities have inspired the staff. The Contest collected 290 innovative projects and the Selection 80, covering the fields of technology, management, business model, etc. Thus, an cultural atmosphere for innovation was created. CNOOC s subsidiaries made progress of innovation promotion through constant exploration and various practices. CNOOC EnerTech elaborately organized 10 sessions of Development Forum, created 152 startups, launched 74 E&I (to be entrepreneur, to be innovator) Youth Projects and made 39 positive results. The project New Inorganic Membrane Materials and the Development of Separation Engineering Equipment made a breakthrough progress as the developed molecular sieve membrane Chairman Yang Hua made a speech on CNOOC Innovation Contest 48 49

29 MANAGEMENT QHSE CNOOC attaches great importance to employees physical and mental health, commits itself to creating safe production environment for its employees through scientific management and efficient methods, and devotes to providing society with higher quality products and marketing services in safe, efficient and environment-friendly manners, so as to contribute its values to achieve sustainable development of society and environment. Quality Management CNOOC adheres to the directives of People-oriented, Safety First, Honest and Law-abiding, Reinforcing Foundation, Innovation-driven and Winning with Quality, pursues the Live pictures of CNOOC Innovation Contest quality management objectives of satisfy clients by excellent and leading operation, implements the national strategy of building a powerful country by high quality and functional inorganic ultrafiltration membrane were verified by industrial application and consequently the innovation outcomes were put onto newly established automatic production line. CNOOC Gas & Power Group continuously promoted innovation on business model, creative awareness, guides innovation directions and encourages innovative activities. Since CNOOC issued the Management Method of CNOOC Modernization Achievements of Management in 2005, the innovation achievements for management modernization has kept development, carries out the quality improvement actions in an all-round way, identifies quality risks comprehensively, improves the quality management system, cultivates the quality culture and continuously improves product, engineering and service quality. A CNOOC employee inspecting the platform facilities on a snowy night. actively integrated itself into the Internet era, realized on line sales through e-commerce platform. CNOOC Ltd. Tianjin. organized various activities such as the Youth Science and Technology Forum, professional skills competition, Youth Lecture and offshore Five Trifles, with positive results in cost reduction and value creation. CNOOC Ltd. Shanghai gradually implemented the unmanned management of imported platforms in order to reduce offshore operation cost. COSL put forward the Guidance on the Promotion of Commercialization of Research Results in order to improve the collaboration and interaction among research, manufacturing and operation, enhance the construction of carriers for pilot test and industrialization, and clean off the regulation barriers for the commercialization of innovation results. Management of Innovation Achievements emerging. By the end of 2017, the Company rated totally 245 company-level management achievements, applied and won 103 industrial awards and 31 national awards (11 first prizes and 20 second prizes). The achievements covered the fields of corporate reform and development, production, operation and project management, etc. mainly reflecting the outstanding results that the Company had made in management innovation, improved the corporate management and contributed to the development of the core competitiveness and the construction of a world-class energy company with Chinese characteristics. In 2017, CNOOC rated 27 company-level management modernization achievements, submitted and won 11 ministerial level achievements, including 6 first prizes, 3 second prizes and 2 third prizes, submitted and won 3 national level achievements with second prizes. CNOOC identifies quality risk and emphasizes the clarification of quality management priorities. In 2017, the Company held the quality manager meeting, required all subsidiaries to abide with the quality planning in the 13th Five-Year Plan, reinforce risk management and control for quality improvement as well as the quality management of key products, further normalize the management of testing institutions such as laboratories, establish the quality accidents management system and implement in-depth quality management. CNOOC implements special quality examination to improve product and service quality. In 2017, the Company conducted quality audit in CNOOC BlueChemical Hainan Base, covering 11 departments and management offices and the whole process of production and process, with 37 problems discovered and rectified. The Company also strengthened quality supervision of key vehicle products of Eagle Eye on the Qinhuangdao 32-6 CEPI platform were awarded National Trustworthy Group for Quality, COOEC and Zhuhai LNG Terminal of CNOOC Gas & Power Group were awarded National Advanced Enterprise of Implementing Excellent Performance Model. CNOOC Gas & Power Group won this award for three consecutive years and thus won the Special Prize for National Advanced Enterprise of Implementing Excellent Performance Model. CNOOC promotes the activities of quality management teams to strengthen the construction of quality culture. In 2017, the Company continued to promote theme activities of QC Team to highlight its achievements in the construction of quality culture and obtained 369 outstanding QC achievements of the industry, 7 QC Teams won the National Excellent QC Team Awards and the total number of QC teams registered by subsidiaries reached 1,800, with an CNOOC constantly inspires sprit of innovation, stimulates Guangxi Energy Company and Hebei Marketing Company increase of 39% over last year. with Full Coverage, Whole Process and Same Standard, checking 25 gas stations, 1 oil depot and 1 transport fleet. 91 problems were discovered and rectified. CNOOC carries out Quality Month activity to promote Spirit of Craftsmanship. The Company actively responded to the requirement of AQSIQ to strengthen advertisement CNOOC carried out quality management activities and won for Quality Month on newspapers, exhibition board, various national awards. In 2017, 8 teams of CNOOC s new media, posters, etc. About 52,500 employees of 50 51

30 MANAGEMENT subordinate units participated in the activity and there were totally 2,246 departments involved in the launching ceremony. In the very month, 1,830 special inspections were carried out and 4,375 quality problems were solved. CNOOC consolidates the construction of brand management system and devotes to building an internationally renowned brand. By refining the core values of the brand CNOOC and revising the corporate image brochure, the Company unified both cultural connotation and image of CNOOC and improved the world s recognition on CNOOC. A series of brands of products such as CNOOC 36-1 asphalt, Haijiang lubricant, Awode painting and Yuandu salty products as well as Fudao, Tianye and Sakefu fertilizers have been recognized by the society. COSL has become an international renowned brand in the oilfield services industry. CNOOC endeavors to conduct quality management training and strengthen quality management consciousness. Through quality management training with various forms, rich content and clear classification, the Company not only enhances employees consciousness of quality management, but also improves suppliers and contractors consciousness of quality management, so as to comprehensively improve the quality management level. Occupational Health CNOOC professional skills competition and operation units, through a series of on the spot activities, including lectures given by experts, group interviews, workshops, psychological behavior training and psychological consultation. CNOOC actively carries out occupational health monitoring and evaluation to improve health service quality. In 2017, the Company conducted 37 occupational disease hazard pre-assessment projects and completed 36 occupational disease prevention facilities. The regular inspection of occupational disease hazard factors in workplace achieved all-around coverage and the occupational health inspection rate for the staff contacting with occupational disease hazard factors reached 99.7%. Offshore Oil Press and got positive feedback. All Grouplevel managers endorsed safety and participated in video recording of Leaders Comments on Safety. Chairman Yang Hua gave the first lesson Safety, Our Responsibility and Our Mission to the headquarters managers. Other Grouplevel managers gave 9 lessons of safety on occasions of investigation and Party Leadership Group Member s Reception Day. All subsidiaries positively responded to the lessons and 1,178 senior managers at all levels throughout the Company gave 2,065 lessons in the whole year. CNOOC set Be Safe in the Last One CM as theme of Safe Production Month in 2017 and coordinated the relevant activities to fully identify responsibilities of main bodies of safe production. The Company conducted a series of activities. It organized the essay contest of Be Safe in the Last One CM, receiving 1,422 essays and selecting the best 60 essays to publish in China Offshore Oil Press; released nearly 200 messages on production safety by the WeChat Public Account of the Company and 253 messages by the Company s Microblog Account; organized the microvideo competition on security warning, receiving 140 microvideos; organized the Team Safety and Environmental Protection Knowledge and Skills Competition, with more than 5,700 participants from 15 group member units; organized 1,440 debates on Be Safe in the Last One CM, with more than 19,750 employees participating in; organized the vote for Best Slogan for Team Security on the Company s Microblog, with a total of more than 139,000 votes. In 2017, the Company launched the first Selection of Safe Production Advanced Individuals. 99 employees including frontline employees, production managers and safety managers were selected for their dedication to duty, diligent work, good management skills and outstanding performance in the field of safety production. Safe Production Based on the QHSE management system, CNOOC constantly intensifies key preventions and controls, works hard to provide safer working environment for its employees and contractors and build the first-class capability of safe production management. CNOOC intensifies safety supervision measures in key fields. In 2017, the Company carried out comprehensive remediation activities to ensure the safety management of dangerous chemicals, identified and assigned duties to each main body, made it clear for safety risks and major hazards, and reinforced the foundation of safely producing dangerous chemicals. CNOOC also conscientiously carried out the comprehensive electrical fire troubleshooting programs on the basis of comprehensive investigation on the quality of electrical appliances in use, hidden dangers and weaknesses of electrical risk prevention in electrical design and construction for building projects Adhering to the People-oriented philosophy of QHSE, CNOOC always puts the physical and mental health of its employees at the forefront. We unremittingly strengthen the occupational health management, focus on the identification, analysis, evaluation and control of occupational disease hazard factors in workplaces, actively improve the operation environment and popularize occupational health promotion activities, so as to ensure the safety and health of the employees in an all-around way. Operational Safety CNOOC puts operational safety as the base and lifeline of its sustainable development. Adhering to QHSE s core value of Safety First, Environment Foremost, People-oriented and Equipment Intact, CNOOC constantly improves its safe production support system, enhances safety management in areas of personnel, production process and emergency response, and strives to build the inherent safety. CNOOC conducts health promotion activities for its employees. The Company called on all its employees to participate in walking and body building activities by adopting the Health Embraces CNOOC all staff health management system. It also launched basic mental health information services, and continues to expand the stress management and mental health services to the offshore employees and those working at departments of headquarters and research institutes. CNOOC built a safe production mental health model for stress management and mental health services, suitable for its production Safety Culture CNOOC always advocates Safety Standard Behaviors and on-site operation behavior guidance of Five Do s and Five No-nos. The Company carried out a variety of publicity and educational activities to continuously build the CNOOC-specific safety culture conforming to the core concept of People-oriented, Execution and Intervention. In 2017, CNOOC focused on the construction of leadership in safety. Chairman Yang Hua wrote a letter to all staff, Your Safe, I Ease, which was later published by China Offshore platform keeping production with efforts of ice resistance 52 53

31 MANAGEMENT and buildings in use. In addition, the Company carried out special safety hazards investigation and troubleshooting activities for platform drilling and workover machines, emphasizing safety hazards rectification for drilling and workover machines, and organized special investigation to comprehensively enhance the platform drilling and workover machines safety management. The Company actively strengthened maritime management and put the CNOOC Maritime Safety Management Methods into practice, which helped improve the maritime regulation system. CNOOC continues to improve the safety supervision system and QHSE management. In 2017, the Company published CNOOC QHSE Management Practices, of which 123 articles on management practice comprehensively reflected the basic framework, organization, responsibility scope and development history of the corporate QHSE management. The Company continuously optimized and improved the internal control system of QHSE. 18 rules were added, 6 revised and 9 abolished in order to ensure the compliance and feasibility of the QHSE management system. CNOOC strengthens the audit and inspection efforts to ensure the implementation of management rules. According to the yearly target Resolutely Prevent the Occurrence of Major Accidents, Prevent Large Accidents in an All-round Way and Reduce Ordinary Accidents proposed by the Company s Safety Committee, the Company takes superior audit and special review as main measures to urge the effective implementation of national and corporate requirements of safety and the corporate QHSE risk prevention and control. In 2017, the Company conducted superior audit on the HSE management system in Nexen Petroleum UK Ltd., CNOOC Ltd. Shenzhen and CNOOC Oil & Petrochemicals; reviewed the rectification of 2016 audit findings in Nexen Long Lake project and Calgary office; conducted special review on the quality of oil products and the self-operated railway; completed special audit on high risk contractors in such fields as diving and helicopter; conducted special audit on marine safety management. The Company set up the Leading Group of Safety Inspection and conducted the safety production inspection actions. The Party Leadship Group Members of the Company led 5 inspection activities, the departmental inspection team conducted 25 inspections and all subordinate units conducted 11,203 inspections in total. The Company also received 14 inspections by the safety committee of the State Council and 530 inspections by the relevant local authorities. The safety matters and hidden dangers discovered were timely rectified. CNOOC continues to strengthen the supervision and management functions of HSE for overseas branches. In 2017, the Company strengthened the overseas leadership in the safety management and made overseas managers themselves example of safety practice to strengthen their execution power; organized the review on the rectification of HSE audit findings in Nexen last year, conducted special audit and joint emergency exercise in Nexen Petroleum UK Ltd. according to the annual plan; and participated in the audit led by COSL on the HSE management in the European Drilling Company (CDE), a wholly owned subsidiary of COSL. These audit activities improved the headquarters HSE leadership and supervision, regulation and guiding role for overseas project. The Company also participated in pre-commissioning test and expert audit in early stage of new projects of CNOOC International Company s Indonesian joint venture project. The Company carried out publicity and training activities to promote safety consciousness of employees, which played a significant role in improving the performance of overseas HSE. CNOOC pays high attention to the impact of international political and social unrest on overseas operation. Combines with its overseas safety management and good practice in the industry, the Company further clarified its security management requirements for overseas projects, established and improved overseas security management mechanisms and security information collection channels, provided strong support to the security of overseas operation. Emergency Management Based on hazard identification and risk analysis, CNOOC constantly improved the emergency management system, gradually developed major accident scenarios construction, explored the way of integrating the ICS system into the existing emergency plans, carried out antiterrorism investigation on risks and hidden dangers in the whole group and put into practice the Rules for Terrorism Prevention in Offshore Oil and Gas Production Facilities. CNOOC keeps good performance in Typhoon warning and emergency disposal. In 2017, 27 tropical cyclones were formed in the Northwest of Pacific Ocean and South China Sea, of which 15 cyclones influenced the Company s regular production and operation. Furthermore, super strong typhoons and double typhoons frequently occurred. To avoid the influence of typhoon, CNOOC timely activated Beautiful scenery of Liaodong Terminal emergency plan and applied 670 helicopters, 78 ships to mobilize 16,440 safety operation staff which successfully prevent any casualties. CNOOC continuously improve its emergency response capability. In 2017, the Company advanced the construction of the national level sea pipe emergency rescue base of Shenzhen Branch of COOEC, promoted Fujian rush-repair and maintenance center of CNOOC Gas & Power Group and well control center of CNOOC EnerTech to apply for the national emergency rescue bases and strengthen the cooperation with OSRL. Environmental Protection As a member of the global contract and a main promoter of the Energy Revolution, CNOOC has carried out the principle of Innovation, Coordination, Green, Open and Sharing and practiced the idea of Lucid Waters and Lush Mountains are Invaluable Assets. We integrate environmental protection into the whole business and strive to reduce the impact of enterprise production and operation on the environment in order to achieve the harmonious development between man and nature, and provide more quality energy products to meet people s growing needs of the beautiful ecological environment. Tackling Climate Change As a responsible energy corporation, CNOOC has actively responded to the Paris Agreement and climate change. The Company focuses on building a clean and low-carbon, safe and efficient energy system, continues to build an allaround low-carbon management system and strives to achieve the wonderful vision of Our High Quality Energy for Clear Water and Blue Sky. In 2017, CNOOC clarified its duties of low-carbon management, set up low-carbon promotion leading groups and low-carbon promotion offices in the second level subordinates and other key controlled discharging subsidiaries, actively participated in the construction of carbon market in China, participated in the drafting of lowcarbon standards of the industry, built up the low-carbon management system, formulated low-carbon management regulations and rules, completed the construction of lowcarbon management information platform and carried out a number of research projects like The Carbon Emissions Effects Analysis of Newly Developed Domestic Offshore Oil and Gas Fields in the 13th Five-Year Plan period. In 2017, CNOOC carried out carbon emissions effects assessment of oil and gas fields with comprehensive energy consumption of more than 20,000 tons of standard coal, or CO 2 direct emissions of more than 10,000 tons, and downstream investment projects with comprehensive energy consumption of more than 50,000 tons of standard coal, elaborated the scope, review process and depth of report content of carbon emissions effects assessment for investment and construction projects of fixed assets. A competent professional technical team was set up and a technical, assessment and management system of carbon emissions was formed. In 2017, CNOOC conducted carbon inventory in 35 key controlled discharging subsidiaries and made it clear the corporate carbon assets, carbon quota in need and the basis for participation in the formulation of national standards of the industry as well as for making low-carbon development strategy. More than 1,000 person-time were trained of low-carbon management and the training time was in total 300 class hours

32 MANAGEMENT Energy Conservation and Emission Reduction As an advocator and practitioner of low-carbon economy, CNOOC always adheres to green, low-carbon and circular development philosophy and takes energy conservation and emission reduction as important approaches to transform the development pattern and enhance core competitiveness, actively takes part in the environmental governance and implements commitment on emission reduction. In 2017, CNOOC invested RMB 350 million in energy conservation and emission reduction, implemented 158 projects and reduced energy consumption per RMB 10,000 turnover to tons of standard coal. Working with the State Oceanic Administration on the regulation of marine pollution discharge permission, the Company carried out related research with a special report as outcome. The Company also led the formulation of industrial standards in the Synthetic Ammonia Green Factory Assessment Guide. Both CNOOC BlueChemical and CNOOC & Shell Petrochemicals were named the national Green Factory Demonstration Unit, while COOEC s project Green Supply Chain System Construction of Typical Marine Equipment was selected in the yearly state key projects of green manufacturing system integration. CNOOC centers on strengthening the environmental impact assessment management. Taking CNOOC environmental management information system as a platform, the Company promotes the whole process environmental protection management by focusing on the strict EIA management, pollutant emission standards and total quantity control management as well as the overall emission reduction management. In 2017, the Company s SO 2 emission was 4,709.8 tons; the NO x emission was 10,267.9 tons; and ammonia nitrogen emission was 66.2 tons, decreased by 21%, 4% and 39% over the same period last year, respectively. The COD was 1,073.9 tons. With emphasis on utilization efficiency of water resources, CNOOC strengthens the protection of water resources, implements water-saving activities and promotes the recycling of water resources in order to save freshwater resources and enhance sustainable recycling of water resources. The Company continues to intensify technological innovation, strengthen water use process management, take comprehensive measures to reuse wastewater and reclaimed water, and comprehensively strengthen water resources management. In 2017, CNOOC clarified the water conservation tasks and targets to all subsidiaries and promoted the implementation of water conservation down to every level of the Company. CNOOC actively conducted water conservation advocating and strengthened the sense of crisis of water resource and water conservation, used a series of water conservation management and technical measures for water-saving, implemented optimization of production process and continued to decrease the fresh water consumption per unit of product, and saved fresh water resources through the use of reclaimed water, sea water desalinization and other measures. CNOOC consumed million tons of fresh water and saved tons of water resources in the whole year. Ecological Protection As a proactive advocate and practitioner for the protection of marine ecological environment, CNOOC always attaches great importance to the protection of biodiversity in the area surrounding the operation zone. Environment protection is the Company s unwavering commitment during all phases of a project life cycle. In order to maintain a harmonious balance between the economy-centered projects and ecological environment, the Company makes it a point to pre-assess environmental risks, so that it can identify the environmentally sensitive targets in the vicinity of the projects and avoid environmental risks. In addition, through the platform of CNOOC Marine Environmental and Ecological Protection Public Welfare Foundation (hereinafter referred to as CNOOC Welfare Foundation), the Company have actively committed itself to the ecological diversity research and protection projects, promoting resource restoration and environment improvement in the area where the projects are located and establishing characteristic projects, such as protection of largha seal and enhancement and releasing, and makes great efforts to create better ecological conditions for building a beautiful China. Ecological risk assessment of crustacean resources enhancement. In 2017, CNOOC funded the research project Ecological Risk Assessment of Crustacean Resources Enhancement, which was proposed to study the ecological problems caused by the current largescale enhancement and release in China, for example the possible ecological risks of the crustacean enhancement and release, and to guide the planning for enhancement and release as well as production practices by using a set of risk assessment techniques in order to avoid serious ecological problems in the process of enhancement such as the ecological competition in the same niche and the decline in biological diversity. Largha seal protection and research project. CNOOC Welfare Foundation has funded the Largha Seal Protection and Research project in Dalian Largha Seal National Nature Reserve for five consecutive years. The project has already been regarded as a characteristic ecological protection project of the Foundation. In 2017, the project completed the investigation on the distribution and habitat of Largha Seals in the breeding season, and the investigation and research on the quality of sea ice in breeding-grounds of Largha Seals. The analysis of the chemical composition of the sea ice, especially the concentration of pollutants, provides theoretical data for largha seal protection. Research on protection and restoration technology for ecological environment and resources in the typical coastal zone of Shandong, China. CNOOC Welfare Foundation has funded Shandong Marine Development Research Association to carry out research projects for keeping abreast of the situation of germplasm resource for bioremediation in the typical coastal zone of Shandong and formulating policies to protect coastal wetland and vegetation. During the period , the project selected the key resources of species for bioremediation and directionally restored 55.5 million units; carried out the research on the key technology of vegetation restoration in coastal wetlands and restored 15 hectares of vegetation; applied for 2 patents; and built 1 popular science exhibition room for marine ecological environment protection. Study on the population, migration distribution and protection of finless porpoises in the Huanghai Sea and the Bohai Sea. CNOOC Welfare Foundation funded a five-year research project to keep track of the population development and individual behavior ecology of finless porpoises in the Huanghai Sea and the Bohai Sea, and to make a constructive strategy for finless porpoise protection. During the project period, 2 investigations on finless porpoises were carried out in Sanwan of Bohai Sea with 87 witness of porpoises; and 4 cruises investigations were carried out by adopting acoustic detection and intercept survey in the coastal waters of the South Huanghai Sea, and 64 porpoises were observed. The investigations has accumulated experiences for further investigation on the population of finless porpoises in China s seawaters and provided a scientific basis for the finless porpoise reserve area planning in the Huanghai Sea and the Bohai Sea. Beautiful Weizhou Island Ecovillage Construction Project. In 2017, CNOOC Welfare Foundation continued to subsidize the Beautiful Weizhou Island Ecovillage Construction Project, actively promoted the follow-up projects of road transformation and concentrated treatment of sewage rainwater in Zitongmu Village and organized the publicity activities of environmental protection knowledge. The development of the project contributed to protecting biological resources and ecological environment of Weizhou Island and the surrounding sea, improving the villagers consciousness of protecting natural environment and helping the construction of a beautiful Weizhou Island. Marine enhancement and release project. In collaboration with the Ministry of Agriculture, CNOOC Welfare Foundation continued to carry out aquatic lives enhancement and release activities in sea areas of Xisha and Fujian and effectively promoted the sustainable development of local fisheries and increased local fishermen s income. The activities promoted the development of local economy, produced significant ecological, economic and social benefits, and received extensive attention and strong support from all sectors of the society. The marine enhancement and release project has become a characteristic marine environmental protection project of the Foundation. In 2017, Nexen sponsored and participated in local projects of bird protection. Signal trackers were installed on birds in the vicinity of the Long Lake operation area to monitor breeding and migration of birds, in order to provide data support to research on bird behaviors in oil sands operation areas. Nexen also carried out ecological restoration in the abandoned catchment of NEBC shale gas zone and returned lakes and wetlands to the region. Seabirds resting on the platform 56 57

33 MANAGEMENT INFORMATIONIZATION PROGRESS CNOOC always adheres to the policy of development driven by business and led by IT. Based on the general principle of promote the interconnection and sharing of resources, accelerate the integration of informationization and industrialization and facilitate the digital transformation, the Company achieved a lot in safeguarding network information security, facilitating digital application, promoting Internet+ and coordinating overseas resources and business. Safeguarding Network Information Security The Company promoted the comprehensive management of network security, risk assessment, safety monitoring and terminal safety management, effectively improved the ability of safeguarding network security, achieved zero accidents in network security and fulfilled the task of safeguarding network security during the 19th CPC National Congress. In addition, the Company effectively handled the effect of the global outbreak of extortion virus, with zero infections to its core information system. Core Data Centers (two places three centers) Regional Data Centers four regions Datacenter framework Two sympatry datacenters in Beijing Enhancing Fundamental Capabilities An allopatry datacenter in Shanghai Tianjin Shanghai Shenzhen Zhanjiang CNOOC thoroughly implemented the informationization planning according to the 13th Five-Year Plan, completed the cloud setup of infrastruction of 5 data centers in Beijing, Tianjin, Shanghai, Dubai and Singapore and initially formed the intensive, integrated and globalized cloud layout. The Company vigorously promoted the resource integration of information infrastructure, completed the relocation of Yanjiao Disaster Recovery Center and the put Beiqijia data center into operation, so that the two places three centers disaster recovery system was enabled in an allround way. Relying upon the Regional Data Center, the Company effectively integrated the scattered machine rooms into the green, safe, efficient and intelligent Group Data Center. The key projects such as the CNOOC pilot project Coordinated Command Platform for Production Operation Phase II, Assistant Decision-making System for Production Optimization and Coordinated Research Environment for Exploration were put into operation; the projects such as Oil and Gas Gathering and Transportation Auxiliary System and Knowledge Base for Exploration were steadily advanced on schedule. The exploration and development data integration and the construction of Data Center (A2) were promoted and implemented in an allround way, thus the exploration and investment portfolio optimization system was initially built. The digitalization of main engineering facilities was continuously promoted and the digitized rate was already over 50%. Promoting the Application of Informationization CNOOC actively promotes in-depth integration of information technology into production management, with the value of information being increasingly prominent. The promotion and implementation of ERP was launched in an all-around way. The remote logistics management achieved the full coverage of Bohai Oilfield. The Procurement Business System was issued three star class (highest) certification by Chinese Information Security Certification Center, marking that CNOOC s informationization has stood at the forefront in central enterprises. The contract management information system interlinked the management of business and contracting through its integration with the Procurement Business System and the SAP system. CNOOC E-learning Net was formally launched to help employees learn in an autonomous, fragmented and mobile situation. The first phase of the Company s technology management information system was launched to test in July 2017, with the incorporation of the original 6 heterogeneous systems into a system. The Company also completed the overall plan of the central financial sharing system, in the meanwhile, the capital management platform was accelerating on the basis of abundant demand analysis. Promoting Internet+ As a member of the first group of e-commerce consortium composed by central enterprises, by the end of 2017, CNOOC had opened 12 shops on the e-commerce platform with 470 registered authenticated users and a settlement amount of RMB 2.8 billion. The CNOOC one-card-pass was continuously promoted, the overall migration and network transformation of the core system were completed. A set of new functions such as WeChat Public Account, intelligent payment terminal and customer group management, which were in urgent need for the sales of the card, were rapidly put into use. At the end of 2017, the zero pipe system covered 630 refueling stations and 1.23 million cards were issued. CNOOC continued to build its own mobile platform and the mobile application development management platform completed the centralized management on the access system to monitor the development of 12 functional points. 51 mobile applications were put into use and 18 sets of business systems achieved mobile access and online running. All these made the application of corporate business systems fast and mobile, convenient and security for examination, approval, and information inquiry. Coordinating the Layout of Overseas Resources CNOOC coordinates the overseas informationization development and promotes the implementation of overseas information and technology sharing support system. On the basis of the stable running of APAC IT Sharing Support Center, the Company established and put EMEA Support Center and Call Center (servicing the Middle East area) into operation; completed the establishment of the cloud computing platform for APAC center and launched the planning and construction of NCSA IT Sharing Support System; optimized Nexen IT budget system; promoted the corporate negotiation for global software and hardware agreement and completed the signing of global software agreement with SAP and Oracle so as to steadily improve the support ability of overseas IT sharing services and better meet the demand of the Company for IT means to enhance overseas management and control

34 MANAGEMENT HUMAN RESOURCE MANAGEMENT CNOOC firmly believes that employees are the most valuable resource for its sustainable development and upholds the People-oriented and Caring for Employees concept. The Company fulfills its responsibilities to employees, respects their legal rights and interests, facilitates their professional development, improves their working environment, cares for their physical and mental health, and promotes the integration of local and foreign employees, so as to achieve common development of the Company and its employees. Employee Salary and Benefits The Company adheres to the principle of Gender Equality and Equal Pay for Equal Work, and treats the employees equally, regardless of race, nationality, faith, gender, age, marital status and special legal protection. CNOOC strictly complies with the applicable laws and policies of the jurisdictions where it operates, and on basis of the principles including marketization of recruitment, monetization of allocations and socialization of benefits, gradually forms a normalized salary and benefits mechanism by building a distribution system which matches the market mechanism and is closely connected to value contribution. The Company builds a comprehensively effective employee welfare system, continuously implements the unified and standardized occupational pension system and Presence of frontline employees constantly increases the multi-level, multi-dimensional and comprehensive employee insurance framework. Besides social basic insurance (endowment insurance, medical insurance, employment injury insurance, unemployment insurance and maternity insurance), the Company also provides supplemented insurance (personal accident insurance, commercial supplementary medical insurance, and juvenile children supplementary medical insurance) and occupational pension and housing allowance. CNOOC also provides physical examination, special physical examination for special types of work, paid leave, difficulty assistance, emergency relief, critical illness relief and various other benefits as part of our efforts to help them solve the worries that employees may have. By the end of 2017, the workforce had reached 98,000. Career Development CNOOC provides employees with equal and open environment and clear access for career development. Based on the characteristics of professions, the Company has designed three career development accesses including management, technology and operation personnel, besides establishing a Four in One training system with respect to selection, training, assessment and promotion & certification, so as to improve personal professional ability and work performance step by step in a planned manner. CNOOC constantly improves the three accesses for management, technology and working personnel with emphasis on mechanism building to shorten the path of promotion. The Company always focuses on building talent pools and constantly implements programs of the selection and training of excellent young talents, enhances systematic management of professional qualification, promotes innovation of the selection of technical experts in subordinates. The Company has put forward the Deepening the Reform of the Professional Title Management System (Provisional) to improve system building, which does not highlight one s academic background, record of service or published papers, but moral character, ability and performance and allow more excellent young talents to have opportunities to stand out. CNOOC continuously deepened the reform of the cadre and personnel system, for example, set up the Party Leadership Group on talent work, built the expert consulting system for Party Leadership Group Members, promoted the reform of talent utilization and assessment support mechanism. The Company increased its efforts for cadre selection and exchanges, such as emphasizing the training of young cadres and job exchange between departments at headquarters and frontline units. Making full use of multiple opportunities of job rotation and exchange, training in frontline units, secondment in local governments and aiding constructions in areas under harsh conditions, the Company selected young managers to work under harsh conditions or at the frontline of reform to undertake urgent, hard, dangerous and major tasks for better growth. The Company also enhanced competition in selection and strengthened inspection and examination, increased efforts to train, select, exchange, supervise and manage cadres and enforced accountability, improved the quality of cadres so as to maintain the Party s purity and capabilities of cadres. Expert Professionals The Company enhances recommendation, selection and management of high-level talents and actively participates in the national talent selection and recommendation. In 2017, 107 employees were selected the fourth batch of Technical Experts of subordinate units, 2 were selected the second batch of Skilled Experts of the Company, 88 won senior technician qualification and 357 won technician qualification. CNOOC attaches great importance to the training and selection of high-skill personnel and achieved excellent results. The Company conducted innovation training courses for technicians to exchange innovative skills and organized technicians to take active part in national and industrial skills competition. The Company has compiled High-skill Talents Evaluation and Appointment Demand Forecast ( ) and promoted on-demand evaluation and appointment of skilled talents to keep a scientific proportion of talent structure. The Company conducted skills innovation demonstration sessions and technician comprehensive knowledge training sessions to help skilled talents keep improving their creative consciousness and ability of concluding achievements. CNOOC sent technical experts and Golden Medal winners in national welder competition to the United States to learn and master the international first-class welding techniques, and organized 48 high-skill employees to draw experiences of National Skill Master Studio building from outstanding enterprises. Employee Training CNOOC training highlights both long-term and short term effects, taking Up for Strategy and Down for Performance English training 60 61

35 MANAGEMENT as principle, and conduct long-term training for key groups. The Company actively promoted the learning organization constructions, encouraged employees to set up the concept of lifelong learning, improved the talent training system at various levels and stages, innovated training and increased training investment systematically, and created a platform for ability building and potential development for employees. CNOOC continued to implement Key Training Plan and conducted targeted training. For the managers at middle and high levels, the Company implemented professional subdivision for specific rotational training; for mid-age and young managers, the Company designed threemonth off-job training programs to improve their strategic management capability with firm belief and global vision so as to shoulder major tasks; for high-level technical experts and core staff, the Company arranged comprehensive professional and technical training sessions in the fields of exploration, development, production, drilling and completion, and put forward the Young Technical Talents Training Sessions to cultivate technical experts and managers in the fields of deep-water, unconventionals, reservoir geophysics, seismic data processing, oil recovery technologies, HTHP oilfields and equipment and facilities integrity, in order to improve the core professional technical capabilities and technological innovation capabilities of the Company s technical personnel; for high-skill technicians, the Company organized comprehensive capabilities improvement sessions for mid-age and young technicians to improve their abilities of on-site management, innovation and teaching apprentices. In 2017, CNOOC carried out 540,000 training sessions, with 1.8 million person-time, including 1 million person-time of online learning, and 6.59 million hours of training (i.e. 74 hours per capita), of which, 67 annual key rotational training sessions for senior managers directly under the control of the SASAC were carried out with 4,566 person-time. Aiming to accelerate the cultivation of international talent, the Company selected and sent 5 leading international talents to receive training in the United States; selected 99 core international talents to receive 3 sessions of centralized training, 4 of which were sent to Nexen for a short-term exchange. CNOOC also strengthened construction of the coach team by cultivating 35 qualified talent appraisers (the first batch), 30 case developers and 30 internal coaches. The second competition of Good Course, Good Coach was held with receiving a total of 389 courses, of which 40 works of face-to-face courses and 60 high-quality microclass works entered the final, and the best 10 lectures were awarded. Supported by classified and systematical training courses, CNOOC compiled the Individual Development Program (IDP): collect and analyze the information of general and professional training demand of all staff, systematically design training programs, implement individual performance evaluation with the consideration of the results of training. The Program was expected to steadily improve the specialization level and integrative capability quality of employees. The Company broadened the channels for training on informationization for employees and introduced various training models like Internet+. The Company actively set up the mixed training model of online + offline with mobile + PC and the online platform CNOOC E-learning Net, on which more than 500 courses were uploaded and more than 700,000 students registered. With the strict cost control and the use of various online platform, the number of trainees increased by 120% over the year of CNOOC E-learning Net CORPORATE CULTURE Enterprise culture is the soul of an enterprise and the source of power for the development of an enterprise. In 2017, CNOOC conformed to the global energy development trend, gave full play to the leading role of enterprise culture, strengthened confidence under pressure, uniformed the thought and gathered the strength of all staff, promoted the construction of enterprise culture and fully ensured the survival and development of the Company. Spirit of CNOOC The Company carried forward the Spirit of CNOOC, held theme activities, built ideological consensus, set examples of advanced individuals and units, inspired the passion of all staff for devotion, truth-seeking and innovation and shaped the great image of CNOOC. CNOOC carried out the corporate debate on carrying forward the Spirit of Oil, which was expanded to the grassroots level with Party Committees at every level taking the leading role and basic Party branches being main body of activities. Leaders of Party organizations at all levels CNOOC frogman Chu Jinyong taking part in TV programme gave more than 100 special lectures on the Spirit of Oil, all subordinate units organized site visits, speech contests Party Building, continued to enhance the brand building and lectures on reviewing the history of CNOOC, etc. All for the annual report by further highlighting characteristics, grass-roots Party branches in the Company were covered pioneering thinking and innovation path, made a multidimensional and vivid presentation of Party building by the debate activities. China Offshore Oil Press devoted 6 columns to the activities such as Carrying forward the achievements, and better demonstrated the productivity of Spirit of Oil in Action. 22 special articles were released Party building. Making full use of new media technologies, on WeChat and 24 interview videos on the debate were CNOOC continued to build the Party E Branch in CNOOC, planned and produced. a WeChat Public Account of CNOOC. At present, the CNOOC conducted a tour of thematic lecture Carrying account is followed by 4,631 people and covers 100% forward the Spirit of Oil, with the theme of Party Building of Party organizations and party-masses departments at Promoting Production, focusing on the key attention of all levels in the Company, Through constantly enriching the Party Leadship Group, including the emphases and hot content and innovating forms, the account conducted topics closely related to the overall reform and development activities such as the live show of Education of Spirit of of the Company, vividly showed the work highlights of Party in Basic Party Organizations and Swearing an Oath every business sector and spiritual features of the staff. 11 Together with the General Secretary of CPC, etc. further lectures were held in eight main areas, with nearly 6,000 enhancing pervasiveness, attractiveness and influence. CNOOC employees attending the scene, more than 1,000 CNOOC keeps setting advanced individuals and units people watched the live show through the online platform as examples for others. In 2017, the Company edited the Blue Live. Many of the audience commented that they Examples of CNOOC Deeds of the Advanced Collectives were shocked not only by the mental power conveyed by and Model Workers of China s Marine oil Industry (2014- CNOOC people, but also by the deeper understanding of 2016), which contains the moving stories of 15 advanced the Spirit of Oil. collectives and 25 model workers, to wider spread the Spirit CNOOC carefully compiled the 2017 Annual Report on of Oil and the Culture of CNOOC

36 MANAGEMENT presented the great achievements of CNOOC in equipment and talents in the process of pushing forward into the deep sea. A survey shows that three consecutive episodes of the documentary won the No.1 of TV rating nationwide in the same time period. During the 19th CPC National Congress, CCTV1 and CCTV9 broadcasted The Source of Energy, an episode of the TV series Super Engineering, which introduced the ship building of HAI YANG SHI YOU 286 in detail. By telling the stories behind the project, the great efforts made by and challenges faced by CNOOC people on the way of pushing forward into the deep sea were showed to the public. forwarded content, to release the dynamic work in a way easy to understand and rich in forms. The activity, numbers of subscription, forwarding and saved in favorite of the new media platforms continuously grew up. In 2017, the 5 new media platforms released more than 2,300 messages of all kinds and won over 12 million clicks. Among these messages, 32 videos and more than 200 articles were pushed for the special subject of the 19th CPC National Congress. Employee s lives Tour of thematic lecture Carrying Forward the Spirit of Oil Chu Jinyong, CNOOC Frogman, and Gai Fengxi, Key Stand, were elected Craftsmen of the Great Nation Energy, Chemistry and Geology and were recommended to take part in the key activities of Chinese Dream - Craftsmen of the Great Nation, carried out jointly by Cyberspace Administration of China and All-China Federation of Trade Unions. Their deeds have been reported by 23 mainstream medias including People s Daily Online and Xinhua news. The Company also recommended Xu Changgui to take part in the special programme Magnificent Voyage, recorded by CCTV for the successful convocation of the 19th CPC National Congress. The Company strengthens the construction of window for the corporate brand to improve the value of the brand CNOOC. As brand carrier, CNOOC exhibition hall received 1,631visitor in the year of 2017, carried out 11 activities such as Visiting CNOOC on Children s Day and opening days, and other public welfare activities like Mobile Classroom for Offshore Oil. The exhibition hall was listed in the first batch of national research, practice and education projects for students of primary and secondary schools by the Ministry of Education, as one of the four projects of the national assets system. It was also awarded as the Demonstration Project of the underground space management of the central state organs. Culture Promotion In 2017, CNOOC proactively made positive campaign, strengthened the mainstream voice and improved the level of journalism and campaign work. The quantity and quality of reports attained new breakthroughs. CNOOC focused on plan and report of the main business. The successful start-up of the Phase II Project of Huizhou Refinery, the deliveries of China s first movable trial production platform and first trenching DP working vessel HAI YANG SHI YOU 295, as well as Pan Asia LNG carrier, were reported by mainstream medier such as Xinhua News, CCTV, People s Daily Online, and China Energy News, etc. On the eve of the 19th CPC National Congress, the Economic Daily devoted a whole page to report CNOOC s achievement during the five past years with the headline of Deeply Rooted in Exploring Marine Resources, Realize the Dream of Blue Sky and Sea, and introduced the environmental protection of Bohai Oilfield with the theme of Develop by Protection and Protect by Development. The campaign has achieved good results. CNOOC managed to diversify the propaganda methods. For example, the Company collaborated with CCTV to plan and film the documentary Push forward into the Deep Sea, a series in Discover China, which profoundly Achievements in the development of China s marine oil industry and CNOOC The Company and Xinhua News Agency jointly planned the interview with Yang Hua, Secretary of Party Leadership Group and Chairman of CNOOC, as one of the series of interviews for the programme New State-owned Enterprises Forging Ahead. The interview showed the public the great achievements made by CNOOC since the 18th National Congress in deepening the state-owned enterprises reform and building the international first-class energy company with Chinese characteristics. The representatives of the deep water drilling and completion team were organized by the Company to take part in Children Travel far From Home, the special programme of Hunan Satellite TV for celebrating the 19th CPC National Congress, telling the stories behind the work and life of CNOOC people and singing in the chorus the Song of Marine Oil in the public media for the first time. The activity showed the achievements of China s oil industry as well as the spirit of fighting, selfless dedication, native land emotion and contribution to the motherland by energy. The Company displayed the model of drilling platform HAI YANG SHI YOU 981 in the Five-Year Achievements of Forging Ahead Exhibition, organized by the Propaganda Department of the Central Committee of the CPC, on the occasion just before the convocation of CPC National Congress. The exhibition was highly concerned by Party and state leaders, the public and the media, and helped the Company establish a good image. CNOOC enhanced the use of new media as complementary means of traditional media and achieved focus communication. By the end of 2017, the Company had operated 5 WeChat Public Accounts and microblogs, of which 3 were followed by more than 50,000 fans respectively. The total number of fans was 230,000. Picture, text, video, H5 and other forms were used, with original or CNOOC advocates Happy Working and Happy Living, enriches employees cultural life by various activities and strives to help employees achieve a balance between work and life. The Company continued to carry out Health Embraces CNOOC activities, actively advocate the concept of sport health, strengthen the physical and mental health management for employees, vigorously promote the second-level subordinate units to set up staff associations of basketball, badminton, etc. and actively carry out culture and sports activities for the staff, which could be various and small-scale but loved by the masses

37 MANAGEMENT CORPORATE CITIZENSHIP The development of a company requires strong support from the whole society, which, in turn, requires active contributions from companies to develop. As making full efforts to ensure energy supplies, enhancing environment protection and creating economic values, CNOOC always focuses on livelihood and complies with its obligations and responsibilities of a corporate citizenship, promoting social progress with its real actions. In 2017, the Company continued to commit to humanitarian engagements and voluntary service, making joint efforts to build the community with an investment of RMB million. Social Public Welfare CNOOC Marine Environmental and Ecological Protection Public Welfare Foundation is the unified management platform for public welfare programs such as charity and environmental protection carried out by CNOOC. The Company has been committed to marine environmental and ecological protection, promotion of marine ecological scientific research and technological development, support for international communication and cooperation in the oceanic domain, and other public welfare undertakings. In 2017, CNOOC Welfare Foundation input more than RMB million in social public welfare, including RMB million to poverty alleviation and aid in Tibet, RMB 15.8 million to marine environmental protection, RMB 7.74 million to public welfare cooperation. In the evaluation of social organizations organized by the Ministry of Civil Affairs, CNOOC Welfare Foundation was rated a 4A-level foundation. The Foundation also won multiple awards, such as Children and Young People s Charity Award, Guangming Charity Award, Award for Organization and Group with Most Caring. to improve learning environment for students, reduce the economic burden on the families of the students, improve the educational level of the poverty-stricken areas and help the students grow up healthily. With the platform CNOOC College Student Fund, jointly set by CNOOC and China Song Ching Ling Foundation, CNOOC cumulatively donated more than RMB 40 million, benefiting 37 colleges and universities, and directly subsidized more than 14,000 economy inferior students in the past 14 years. CNOOC continued donations and support to the Water Cellar for Mothers project of China Women s Development Foundation, with the cumulative donation of RMB 22.8 million, construction of 7,252 water cellars and 52 smallscale centralized water supply works, reconstruction of drinking water and hand washing facilities in 32 schools, and improvement of infrastructure in 7 villages. In 2017, CNOOC Welfare Foundation donated RMB 2 million to China Women s Development Foundation to Water Cellar for Mothers and Water Cellar for Mothers - Safe Drinking Water on Campus projects located in Yan an City, Shaanxi, and Ulanqab City, Inner Mongolia. efforts. The Company established the regular communication mechanism with communities and listened for rationalization proposals of local governments and residents. Under the premise of safe production, CNOOC took advantage of its own resources and capabilities, actively participated in social maritime rescue. CNOOC kept Inviting in and Going out to help people in communities understand the Company, learn knowledge, thus established a profound friendship with them through mutual respect, mutual help and mutual learning. Adhering to the concept of Respect, Mutual Trust and Win-win, CNOOC actively integrates into community. A series of long-term and systematic community construction such as charity and donation, voluntary services and funding education have been carried out to benefit local residents. CNOOC takes project investment to drive local development with job creation and economic growth, so as to deeply influence on community. CNOOC Iraq Company spend annual budget of USD 5 million on education and infrastructure construction other than oilfield operation. In 2017, the Company signed 9 contracts for social contribution projects, including road and power grid project of Al-Musharrah District in Amara City, 2 construction projects of three-floor steel mixed structure school buildings with a total architectural area of 5,400 m 2. Based on Safe Production Month activities, the Company carried out security publicity and sent charity to villagers and school children living around the oilfield. CNOOC people brought various drinks and cakes as well as visors and footballs as gifts to the local participants. The Company and its employees won the praise of the local people and achieved positive social responses. CNOOC Uganda Company organized community relations teams to share information with community through daily communication, regular visits, thematic communication meetings, partner joint activities and regular meeting of the Advisory Committee, so as to respond to community s opinions, complaints and suggestions and promote the community relations management. The Company carried out for five consecutive years the CNOOC Scholarship program to primary and middle school students in Hoima, with accumulated 330 students benefited. 8 students were sent in succession to study in China and achieved good results. CNOOC SES Ltd. carried out underwater photography and coral reef training for 20 residents living in poverty of Thousand Islands Regency, in the vicinity of its operation area, and encouraged local communities to develop tourism and marine environmental protection industry. CNOOC has been shouldering social responsibility and fighting for 23 years on the road to poverty alleviation and aid in Tibet. At present, the Company undertakes the Counterpart aid task targeted at Wuzhi Mountains and Baoting County in Hainan, Hezuo City and Xiahe County in Gansu, Zhuozi County in Inner Mongolia and Nyima County in Tibet. By the end of 2017, the Company had cumulatively dispatched 37 cadres and 16 engineers and technicians, as well as investing RMB 470 million for poverty alleviation and aid in Tibet. CNOOC has funded the construction of Hope Schools and subsidized economy inferior college students in order Integration into Community CNOOC commits to serving the community, creating harmony and bringing benefits to the people, makes efforts to share our resources with communities, proactively carries out community building in a cooperative way and repays communities with its development outcomes. The Company constantly advanced the Warm Hearts projects to help local residents solve difficulties in life, improve local ecological environment, drive the community culture building, effectively improve the residents living standard and build their beautiful home with cooperative 66 67

38 MILESTONES 2017 MILESTONES 2017 Date Event January 3 HAI YANG SHI YOU 720 completed its seismic exploration in the Arctic area was selected into 2016 Top 10 Events in China Oil Industry. January 9 Oil and gas geological theory and technology Innovation and major breakthrough in exploration in the deepwater of the continental margin of the North of South China Sea won the second prize of the State Scientific and Technological Progress Awards in January 19 CNOOC Gas & Power Group got the first LNG deal done on the CNOOC e-commerce platform. February 24 The first indigenously designed and constructed offshore movable test production platform, HAI YANG SHI YOU 162, was successfully delivered. Blue Force volunteer action April 8 CNOOC won the Children and Young People s Charity Award. The Company renovated 3 local primary school buildings, funded the local middle schools to set up libraries and computer rooms, carried out the training program Knowledge Impartment: Strategy and Practice for 30 teachers. These activities effectively improved the levels of both soft and hard ware for local education. Nexen continued to provide charitable donations and voluntary services to the Canadian Anti Domestic Violence Association, YWCA Children Care Center, Safe Haven in Calgary, Shelter Association and Food Relief Center. It actively encouraged women to study science and engineering, invited 15 female students from 11 schools to visit the Company and invited 40 female employees to introduce their own experiences. Nexen actively participated in the Sisters Soup initiative proposed by local charities. 150 volunteers boiled 900 bowls of soup for women, youth and children in the rescue center. This is the sixth time that Nexen participated in the charity event. Voluntary Services CNOOC constantly advocates and promotes voluntary services. In 2017, CNOOC proactively expanded the scope of voluntary services through the Company s Labor Union, the Youth League Committee and women s organizations, supported the passion of the staff and extended the corporate social responsibility to better serve the society. Blue Force, CNOOC s young volunteer action, aims at carrying out various public welfare activities such as marine knowledge popularization and marine environmental protection, voluntary aid teaching, community services, social assistance for the old, the disabled and the weak. Hundreds of young volunteer teams and tens of thousands of young volunteers have been involved in building a bridge between young employees and enterprises as well as between enterprises and society. CNOOC innovated voluntary service means as adopting project management model to more widely support young employees passion for welfare services. The Company selected 14 projects to subsidize. Relying on volunteer service teams, the Company implemented welfare projects such as Visiting CNOOC, Voluntary Aid Teaching for Children of Migrant Rural Workers, Protection of Cultivated land and Renewable Resources, Agrochemical Services down to the Countryside, Caring for Empty Nesters, etc. and fully stimulated young employees to serve the Company and the society. April 10 April 24 May 12 May 13 May 15 June 9 June 26 CNOOC signed PSC with Husky Oil for Block 16/25 in South China Sea. CNOOC signed MoU with the Government of Zhanjiang City to further win-win cooperation in oil and gas E&P, oil and gas industry chain extension and clean energy utilization, etc. CNOOC s Offshore heavy oil field high-efficiency development technology and Large-scale offshore oil and gas platform blocks float installation innovation technology were selected into Top Ten Scientific and Technological innovation in China s Petroleum and Petrochemical Industry. CNOOC put EMEA IT Sharing Support Center into operation in Dubai. COSL signed the drilling service contract with Rosneft. CNOOC Ltd. was awarded Best Investor Relations Company (China) and Chairman Yang Hua was awarded Asia s Best CEO (Investor Relations) by the 7th Asian Excellence Award, organized by Corporate Governance Asia. CNOOC Science and Technology Park was put into operation. Joint Research Institute of Marine Energy Engineering and Technology and CNOOC Refining and Petrochemical Science Research Institute were unveiled