Alternative Reference: China National Offshore Oil Corporation is herein also referred to as CNOOC, the company, the corporation, we, our or us.

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2 NOTES Reporting Scope: The entire China National Offshore Oil Corporation (CNOOC) group of companies Reporting Period: 1 January December 2012 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 herein 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 are 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. All information has been reviewed by our management, supervision department and the various subsidiaries. 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. ABOUT THE COVER The largest self-managed oilfield in China: Suizhong 36-1 offshore oilfield

3 China National Offshore Oil Corporation 2012 ANNUAL REPORT

4 CONTENTS 04 CHAIRMAN S LETTER 06 PRESIDENT S LETTER 08 KEY RESULTS 10 ABOUT US 12 CORPORATE GOVERNANCE 13 Board of Directors 16 System Construction of the Board of Directors 16 Operation of the Board of Directors 18 Senior Management 21 PERFORMANCE HIGHLIGHTS 22 Auditor s Report 23 Consolidated Income Statement 24 Consolidated Balance Sheet 26 Consolidated Cash Flow Statement 27 Notes Summary to Financial Statements 29 PROJECTS & OPERATIONS 30 Oil and Gas E&P 30 Oil and Gas Exploration 31 Development and Production 32 Unconventional Gas 34 Refining and Gas & Power 34 Refining and Petrochemistry 37 Gas & Power 40 Engineering & Technical Services 40 Oilfield Services 42 Offshore Oil Engineering Services 43 Comprehensive Services 44 Alternative Energy 45 Financial Services 46 Internationalization 48 Overseas Business 49 International Trade

5 51 MANAGEMENT 52 Technology Innovation 52 Technology Projects 52 Fertilizers Technology 53 Technology Achievements 55 Management Innovation 55 Management Improvement 56 Results of Management Innovation 57 QHSE 57 High Quality Products and Services 58 Occupational Health 59 Operational Safety 63 Environmental Protection 68 Informationization Progress 68 Basic Research 69 Basic Management 69 Information Security 69 Informationization for Production 70 Data Resource Construction and Management 71 Human Resource Management 71 Salary and Benefits Management 72 Career Development 72 Professional Expertise Development 73 Employee Training 75 Corporate Culture 75 Corporate Culture Building 76 Corporate Cultural Activities 77 Corporate Citizenship 77 Humanitarian Engagement 78 Construction of Harmonious Mining Communities 79 Community Engagement Overseas 81 LOOKING AHEAD TO MILESTONE EVENTS 85 GLOSSARY OF TERMS 88 DIRECTORY 92 FEEDBACK FORM

6 ANNUAL REPORT CHAIRMAN S LETTER Dear all, Thank you for walking through a tremendous 2012 and marching into a 2013 filled with hope and opportunities together with us marked the 30 th anniversary of the founding of CNOOC and was the beginning of our Second Leap Forward Programme. We have played our part in increasing domestic energy supplies and boosting socioeconomic development through achieving new milestones in all business segments and constantly taking our overall strength and core competencies to greater heights. The year saw us finish with an operating income of RMB billion, total profit of RMB billion, profit tax payment of RMB billion, historical breakthroughs in our exploration activities, and continued growth in the gross oil and gas production. In particular, all three core performance indicators, namely, oil and gas production, total profit and operating income saw tremendous breakthroughs with the oil and gas production in Chinese waters exceeding 50 million tonnes in 2010, the total profit exceeding RMB 100 billion in 2011, and the operating income exceeding RMB 500 billion in With widespread recognition garnered from our competition and the society at large for our growth performance, we have seen our Fortune Global 500 ranking rise to 101, up by 61 positions compared to Our brand value and social image also improved further. In 2012, we kept the directives of the Second Leap Forward Programme in mind and continued to step up our efforts, to expand our operations from the shallow to the deep waters, and to overseas, as well as to bring our corporate governance to be more aligned with current practices and requirements. We have successfully completed the acquisition of the Canadian energy company Nexen. This, being the largest ever foreign acquisition by a Chinese company, is a crucial step in our journey towards internationalization. Other than bringing a substantial increase to our level of internationalization, the

7 CHAIRMAN S LETTER 05 deal will also improve our asset structure and expand our reserves and yield significantly. Our independently designed and constructed 3,000-metre, sixth-generation deepwater semisubmersible drilling platform, Hai Yang Shi You 981 commenced operations in South China Sea and received widespread attention from the society. With the creation of a deepwater operating fleet with Hai Yang Shi You 981 at the core, China s capabilities in exploring and developing deepwater oil and gas resources and expertise in building large offshore facilities are now on par with international standards. We have also taken our corporate governance to a higher level with the installation and proper operation of the First Board of Directors, which signified significant progress in the development of our governance structure and evolution of a complete modern framework is not only going to be a pivotal year of transition in China s Twelfth Five-Year Plan period, but also a crucial year in our implementation of the Second Leap Forward Programme. Moving forward, we will push ahead with our efforts to reshape our business structure and improve the quality and efficiency of economic growth. This involves implementing, in earnest, the directives of the Second Leap Forward Programme that entail focused, accelerated, effective, intensive and preferential development of our various business segments. As part of this, we will enhance the capabilities for the development of offshore resources, focus on developing the primary oil and gas segment, maintain a steady growth of oil and gas production in the shallow waters, proactively implement the deepwater strategy, and push ahead steadily with the exploration and development of deepwater oil and gas resources. Additionally, we will continue to expand our efforts to develop LNG and other clean energy, as well as participate actively in the exploration and practical development of the unconventional oil and gas and alternative energy businesses. Environment-wise, we will strive to transform ourselves into an ecologically civilized energy company by fulfilling our energy saving and emission reduction responsibilities and effectively protecting the marine ecological environment. Leveraging on our rich experience in international collaboration, we will be taking bold and active measures to explore and expand our level of collaboration. The focus will be on the post-acquisition integration of Nexen, to achieve seamless integration and an increase in the value of resources, technology, management, culture and human resource, and to create a successful model for the internationalization of Chinese companies. As we progress further into the 21 st century, we will see the development of the marine economy emerge as a new global economic growth driver that underpins the sustainable development of the human society. Following the 18 th CPC National Congress, promoting the development of the marine economy is now a national strategy as part of the plan to build China into a maritime power. This has presented new opportunities for significant development of the offshore oil industry. In order to strive to be the main driving force of China s grand plan to become a maritime power, we will step up our efforts to push ahead steadily with the Second Leap of the industry and use it as a breakthrough to participate in and promote the development of the marine economy. Let us work together to promote the systematic development of the marine economy in our quest to build an all-round, moderately prosperous society and achieve the grand revival of Chinese civilization. Chairman Wang Yilin 24 April 2013

8 ANNUAL REPORT PRESIDENT S LETTER Dear all, Thank you for the continued attention and strong support you have given us marked an incredibly momentous year in our history. Faced with complex and daunting economic and energy market situations in China and the world at large, we actively addressed and tackled any issues or challenges coming our way as we adhere to the strategic directions of the Board of Directors and implement the decisions comprehensively, to focus on developing our primary businesses and strengthen our basic management. The year saw us achieve a total production of million tonnes of crude oil, 16.4 billion cubic metres of natural gas, million tonnes of processed crude oil, and 7.79 million tonnes of refined oil products, as well as million tonnes of LNG imports. Key performance indicators fared better than expected. Energy saving, emission reduction and other binding targets were on track. All businesses developed systematically, with continuous improvements in the quality and efficiency of economic growth. Our overall competitiveness and sustainability saw significant improvements. In 2012, we committed ourselves to develop and improve the quality of our primary oil and gas business. Exploration activities at home and abroad saw significant breakthroughs. The total oil and gas production maintained continued growth. At the same time, we maintained and cleaned up Penglai 19-3 in a systematic manner and strictly in accordance with government requirements, to facilitate the formal resumption of production in the oilfield. Our increased overseas expansion efforts paid off with considerable breakthroughs. We have successfully completed the acquisition of the Canadian energy company Nexen, which would increase our levels of internationalization

9 PRESIDENT S LETTER 07 and international operations significantly. As we unwaveringly implement the deepwater strategy, we built and commissioned a joint deepwater operating fleet consisting of six vessels with specific functions centred around the Hai Yang Shi You 981 platform. This has raised our deepwater operational capabilities remarkably and signified substantive progress in our deepwater strategy. With the sustainability ethos firmly entrenched in our minds, we managed to push ahead stably with the implementation of oil and gas field construction, facilities construction, overseas projects and other key projects. Throughout the year, we have steadily raised the standard of our production and operations management, continuously strengthened our technological innovation capabilities and achieved overall stability in the areas of safety, environmental protection, energy saving, emission reduction and compliance operations. All these created a good start for our Second Leap Forward Programme. Extraordinary results achieved by the company in the past year make us a profound understanding that, we must continue to strengthen the analysis on the situation of production and operation so as to make scientific and timely judgments and actively respond to market changes; to reinforce and optimize the oil and gas business as the cornerstone of the company, comprehensively promote the exploration and development in shallow water, deep water, overseas as well as unconventional oil and gas and strive to increase both reserves and production; to make quality, health, safety and environmental protection as the lifeblood of the company, put energy saving and emission reduction at heart to ensure intrinsic safety and clean production in order to achieve win-win in-between economic, social and environmental benefits; to promote scientific and technological innovation as a key driving force for the development of the company and to fully release the potential of innovation; to place quality and efficiency at the centre of production and operation and enhance the company s sustainable development by management and technological innovation as well as institutional optimization, apply cost reduction and efficiency improvement in the whole production and operation process is not only going to be a pivotal year for achieving our goals for the Twelfth Five-Year Plan period, but also a crucial year in our full-fledged implementation of the Second Leap Forward Programme. Moving forward with such arduous tasks on our shoulders, we will concentrate on improving the quality and efficiency of economic growth. This entails focusing on developing our primary businesses, grasping a firm hold of the construction of key projects, accelerating the promotion of technological innovations, putting in efforts to reduce cost and increase productivity, tightening the management of safety and environmental protection, strictly ensuring legal compliance in our operations, and fully meeting our annual production and operations targets. With these, we strive to push ahead steadily with the Second Leap Forward Programme and bring about better and faster development of China s offshore oil industry! President Yang Hua 24 April 2013

10 ANNUAL REPORT KEY RESULTS Hai Yang Shi You 937 drilling platform

11 KEY RESULTS 09 Total Assets Unit: 100 million RMB Operating Revenue Unit: 100 million RMB Total Profit Unit: 100 million RMB Net Assets Unit: 100 million RMB Capital Investments Unit: 100 million RMB Taxes and Dividends Unit: 100 million RMB % 14 % 28 % 1 % 7 % 2 % 8 % Total Assets in % Operating Revenue in 2012 Total Profit in % 23 % 64 % 79 % Upstream Mid and downstream Engineering technologies and services Other Upstream Mid and downstream Engineering technologies and services Other Upstream Mid and downstream Engineering technologies and services Other

12 ANNUAL REPORT ABOUT US China National Offshore Oil Corporation (hereinafter referred to as CNOOC, the company, the corporation, we, our or us ), which is the largest offshore oil and gas producer in China, is a mega state-owned company operating under the control of the State-owned Assets Supervision and Administration Commission of the State Council of the People s Republic of China (hereinafter referred to as SASAC). Headquartered in Beijing, CNOOC has, since our founding in 1982, maintained strong growth momentum, evolving from a purely upstream oil and gas exploration company to an international energy company with promising primary businesses and a complete industrial chain. In 2012, our positions in Petroleum Intelligence Weekly (PIW) s World s Top 50 Oil Companies and the Fortune Global 500 respectively rose to 33 rd and 101 st, up by 1 and 61 positions from the previous year. Standard & Poor s and Moody s continue to rate the Company with credit ratings of AA- and Aa3, the highest possible for a Chinese corporation. In order to create favourable premises for China s offshore oil industry to make the full Second Leap Forward, we have been operating soundly while addressing and tackling any issues or challenges coming our way and grasping a firm hold on the current industrial development trends and opportunities. Throughout our development in line with the Second Leap Forward Programme, we have been transforming our business model and adjusting the industry structure. Now, our business covers the main segments of oil & gas exploration and development; refining and gas & power generation; engineering technical and professional services; alternative energies and financial services. China National Offshore Oil Corporation Corporate Affairs Management Department (Veteran Cadres Bureau) Policy Research Office (CNOOC Energy Economics Institute) Party Committee of CNOOC Beijing Region Political and Ideological Affairs Department (Press Office) Audit and Supervision Department Legal Department Procurement Department Information Department Science and Technology Development Department Refining and Sales Department Project Construction Department Project Technology Department International Cooperation Department (External Affairs Bureau) Quality, Health, Safety and Environmental Department Treasury Department Finance and Asset Management Department Planning Department Human Resource Department General Office (Secretariat of the Board of Directors)

13 ABOUT US 11 Our Vision Energy for All Corporate Spirit Be dedicated, effective and innovative Corporate Philosophy People-orientation, responsibilities, win-win benefits, credibility, innovation Development Principles Cooperation, sustainable growth, and differentiation Development Goals Develop into a world class energy company by 2020 Develop into a global leading energy company by 2030 Core Development Strategies Synergetic development strategy Technology-driven strategy Talent development strategy Cost effective strategy Low-carbon green strategy

14 ANNUAL REPORT CORPORATE GOVERNANCE Chen Wei Xia Dawei Boon Swan Foo Zhang Jianwei Wang Yilin Yang Hua Wang Kaiyuan He Gong Xie Zhongyu Wang Yilin, Chairman of the Board of Directors, Party Leadership Group Secretary Yang Hua, Director of the Board, President, Party Leadership Group Member Zhang Jianwei, Director of the Board, Party Leadership Group Member, Chief Compliance Offi cer Wang Kaiyuan, Outside Director Boon Swan Foo, Outside Director He Gong, Outside Director Xia Dawei, Outside Director Xie Zhongyu, Outside Director Chen Wei, Worker Director SASAC Strategic Development Committee Board of Supervisors Board of Directors Senior Management Nomination Committee Remuneration and Assessment Committee Audit Committee

15 CORPORATE GOVERNANCE 13 Board of Directors Wang Yilin Chairman of the Board of Directors, Party Leadership Group Secretary Born in 1956, Mr. Wang Yilin graduated from China University of Petroleum with a Bachelor of Science degree in Petroleum Geology and Exploration in He also received a Doctorate degree in Mineral Prospecting and Exploration from China University of Petroleum in Mr. Wang started his career in 1982, and had served as Vice Director and Director of Exploration and Development Research Center of Xinjiang Petroleum Administration, Vice Director, Chief Exploration Geologist and Vice Party Secretary of Xinjiang Petroleum Administration, and General Manager and Party Secretary of Xinjiang Oilfield Company of China National Petroleum Corporation (CNPC). He successively assumed the positions of Party Secretary of Xinjiang Petroleum Administration, Director and Party Secretary of Karamay Municipal People s Congress Standing Committee, First Party Secretary of Karamay Military Sub-district, and Assistant President of CNPC. In December 2003, he became Vice President and Party Leadership Group Member of CNPC. Mr. Wang assumed Chairman and Party Leadership Group Secretary of CNOOC in April Born in 1961, Mr. Yang Hua graduated from China University of Petroleum with a Bachelor of Science degree in Petroleum Engineering in He also received an MBA degree from Massachusetts Institute of Technology in Mr. Yang joined CNOOC in 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 and President of CNOOC Limited, and Assistant President of CNOOC. In April 2010, Mr. Yang became Vice President and Party Leadership Group Member of CNOOC. In September 2010, Mr. Yang concurrently served as Vice Chairman and Chief Executive Officer of CNOOC Limited. Mr. Yang assumed Director and President of CNOOC in August Yang Hua Director of the Board, President, Party Leadership Group Member Zhang Jianwei Director of the Board, Party Leadership Group Member, Chief Compliance Officer Born in 1957, Mr. Zhang Jianwei received a Bachelor of Arts degree in Philosophy from Xiamen University. Mr. Zhang started his career in 1975 and had served as Deputy Director of General Office of Light Industry Development Strategy Research Center. He successively assumed a number of positions in the Secretarial Bureau of the General Office of the CPC Central Committee, including Deputy Director of Inspection Department, Investigator and Deputy Director of Conference Department, and Deputy Director of Secretarial Bureau. Mr. Zhang was subsequently appointed Deputy Director General of General Office of the General Administration of Quality Supervision, Inspection and Quarantine, and Deputy Director General and Party Leadership Group Member of the Standardization Administration. Mr. Zhang assumed Director, Party Leadership Group Member and Chief Compliance Officer of CNOOC in December 2011.

16 ANNUAL REPORT Born in 1943, Mr. Wang Kaiyuan started his career in Mr. Wang had served as Director of Political Department and member of the Standing Committee of the Party Committee of Shenyang Administration of Civil Aviation, and Director and Vice Party Secretary of Shenyang Administration of Civil Aviation. He was successively the President and Vice Party Secretary of China Northern Airlines, Deputy Director General and member of the Party Committee of Civil Aviation Administration of China, President and Vice Party Secretary of Air China Limited, President and Vice Party Secretary of China National Aviation Holding Company. Subsequently, Mr. Wang assumed Director of Commercial Aircraft Corporation of China, Ltd., Outside Director of China International Travel Service Corporation Limited, and Outside Director of Sinotrans Limited. He has also been member of the Tenth National Committee of Chinese People s Political Consultative Conference. Mr. Wang assumed Outside Director of CNOOC in February Wang Kaiyuan Outside Director Boon Swan Foo Outside Director Born in 1955, Mr. Boon Swan Foo holds an MBA from the National University of Singapore. He served as CEO of ST Marine & ST Aerospace, CEO & 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. Mr. Boon also holds an Adjunct Professorship at the Nanyang Technological University. Mr. Boon assumed Outside Director of China National Offshore Oil Corporation in February Born in 1943, Mr. He Gong graduated from Wuhan Polytechnic University with a Bachelor of Science degree in Tractor Design and Manufacture in Mr. He had served as Vice Director and Party Leadership Group Member of Yunnan Electric Power Bureau, Director and Vice Party Secretary of Manwan Hydropower Station Engineering Management Bureau, Vice President and Party Leadership Group Member of China Three Gorges Project Corporation, Vice President and Party Leadership Group Member of State Power Corporation, preparatory group leader of China Huadian Corporation, and President and Party Secretary of China Huadian Corporation. He successively became Outside Director of Dongfang Electric Corporation and Independent Director of China Railway Group Limited. Mr. He assumed Outside Director of CNOOC in February He Gong Outside Director

17 CORPORATE GOVERNANCE 15 Xia Dawei Outside Director Born in 1953, Mr. Xia Dawei graduated from Changchun University of Technology with a Bachelor of Science degree 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 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 successively. Mr. Xia is currently President and Party Secretary of Shanghai National Accounting Institute. He is a professor and an instructor for doctoral candidates of Shanghai National Accounting Institute and an honorary professor of the 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 assumed Outside Director of CNOOC in February Born in 1943, Mr. Xie Zhongyu graduated from Beijing University of Chemical Technology with a Bachelor of Science degree in Process Instruments and Automation in Mr. Xie had served in a number of positions in the Ministry of Chemical Industry, including Director of Investigation and Research Department of Investigation and Research Office, Deputy Director General of Investigation and Research Office and Policy Research Office, Deputy Director General and Director General of Department of Policy, Laws and Regulations, and Director General of General Office. He was successively Deputy Director General and Party Leadership Group Member of State Petroleum and Chemical Industry Bureau, Chairman of the Board of Supervisors for Key State Owned Enterprises, and Director of Nuclear Power Technology Corporation. Mr. Xie assumed Outside Director of CNOOC in February Xie Zhongyu Outside Director Chen Wei Worker Director Born in 1958, Mr. Chen Wei graduated from China University of Petroleum with a Bachelor of Science degree in Petroleum Engineering in 1982 and received an MBA degree from Tsinghua University in Mr. Chen started his career in He had served as Deputy Manager of the Development Department, Deputy Manager of the Overseas Research Department, Manager of the Information Department and Vice Director of CNOOC Research Center, and General Manager of the Human Resources Department of CNOOC. In February 2002, Mr. Chen became Senior Vice President of CNOOC Limited. He concurrently assumed General Manager of the Administration Department of CNOOC Limited, General Manager of the Human Resources Department of CNOOC Limited, Director and Party Secretary of CNOOC Research Center, General Manager of the Technology Development Department of CNOOC, and President and Party Secretary of CNOOC Research Institute. Mr. Chen assumed Worker Director of CNOOC in February 2012.

18 ANNUAL REPORT At a working meeting convened by SASAC in February 2012, we formalized the installation of the CNOOC Board of Directors and kick-started its operation. With this, we have taken our corporate governance to a higher level and achieved a new developmental milestone marked by significant progress in the development of our governance structure and evolution of a complete modern framework. System Construction of the Board of Directors Since the installation of the First Board of Directors, we speed up the development and creation of a policy framework and governance structure for the sound and proper operations of the Board of Directors. The Board approved ten corporate governance documents, including the CNOOC Articles of Association, the CNOOC Rules of Procedure for Board of Directors Meetings, the CNOOC Rules of Procedure for Meetings of the Strategic Development Committee of the Board of Directors, the CNOOC Rules of Procedure for Meetings of the Nomination Committee of the Board of Directors, the CNOOC Rules of Procedure for Meetings of the Remuneration and Assessment Committee of the Board of Directors, the CNOOC Rules of Procedure for Meetings of the Audit Committee of the Board of Directors, the CNOOC Rules of Procedure for the President, the CNOOC Detailed Rules of Procedure for the Secretary of the Board of Directors, the CNOOC Delegation of Authority Policy of the Board of Directors and the CNOOC Interim Measures for the Performance Appraisal and Salary Management of Senior Managers. The power and responsibilities of the Board of Directors and relevant governing bodies are thus clarified. As a consequence, a system of corporate governance with scientific design, standardized structure, clear responsibilities and effective operation is basically established. Operation of the Board of Directors In 2012, CNOOC s First Board of Directors held a total of five meetings, all of which were on-site. The Board of Directors listened to 14 reports, formed 30 resolutions and considered 30 bills, of which 10 were about institutions of corporate governance and 20 were about decisions. On March 20 th, the first session of the Board of Directors ended with the approval of eight institutions of corporate governance including the CNOOC Articles of Association, the CNOOC Board of Directors Work Plan 2012 and appointed the directors and members of four standing committees, the President, the deputy general managers and the chief accountant. On April 26 th, the second session of the Board of Directors ended with the passing of the CNOOC Annual Financial Report for Fiscal Year 2011 and the CNOOC Profit Distribution for Fiscal Year 2011, the approval of the CNOOC Delegation of Authority Policy of the Board of Directors, the appointment of the Secretary of the Board of Directors, and the confirmation of four decisions including the CNOOC Annual operation budget for Fiscal Year 2012 and the CNOOC Annual Production and Construction Plan for Fiscal Year 2012.

19 CORPORATE GOVERNANCE 17 On July 22 nd, the third session of the Board of Directors ended with the approval of the plan by CNOOC Limited to acquire 100% equity stakes in the Canadian company Nexen. On July 31 st, the fourth session of the Board of Directors ended with the approval of the Outline of the Second Leap Forward Programme and the CNOOC Interim Measures for the Performance Appraisal and Salary Management of Senior Managers. On October 18 th, the fifth session of the Board of Directors ended with the approval of the 2013 CNOOC Board of Directors Work Plan. In 2012, the Strategic Development, Nomination, Remuneration and Assessment, and Audit Committees of the Board of the Directors met a total of five times, to examine and discuss a range of issues, including, respectively, the policy for managing the delegation of authority by the Board of Directors, the candidates for the Secretary of the Board, the guidelines and procedures for the appraisal of the Company s senior managers, the Company s financial report for fiscal year 2011 and engagement of the financial audit firm.

20 ANNUAL REPORT Senior Management Wu Guangqi Vice President, Party Leadership Group Member Born in 1957, Mr. Wu Guangqi is a senior economist and Certified Senior Enterprise Risk Manager. He serves as Vice President of CNOOC and a Member of CNOOC Party Leadership Group. He also serves as Executive Director and the Compliance Officer of CNOOC Limited. Mr. Wu graduated with a Bachelor of Science degree from the Ocean University of China and was a graduate student of the 4 th Middle and Young Leaders Training Program from the Party School of the Central Committee of C.P.C. He also holds a doctor s degree in Management from the China Petroleum University. Since 1994, Mr. Wu has been in the senior management positions of CNOOC and served as the Party Secretary and Vice President of CNOOC PetroTech Services, the Director of the General Office, Assistant President and the Secretary of the Chinese Communist Party Committee, Party Leadership Group Member and the Chief Compliance Officer of CNOOC. In 2002, Mr. Wu was transferred and appointed to a temporary leading position by the Organization Department of the Communist Party of China Central Committee as the Deputy Director of the Engineering and Construction Department of China Three Gorges Project Corporation. Mr. Wu has also served as Director of China Institute of Internal Audit, Director of Asia Association of Risk and Crisis Management, Deputy Director of the China Risk Management Federation, Director of China Soong Ching Ling Foundation and Director of China Women s Development Foundation. Born in 1963, Mr. Li Hui is a Senior Professor of International Business with a wide range of experience in international trade and international capital markets. He received a Bachelor s degree in Economics from the University of International Business and Economics in From August 1987 to January 2000, he served in a number of positions in China National Metals & Minerals Import & Export Corp., including Depute General Manager of the trade unit and President of its South American unit. Meanwhile, Mr. Li also served as Depute 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 (named China National Chemicals Import & Export Corp. until 2003), played a leading role in further integrating and restructuring its oil operations, and outstanding operational performance has been witnessed subsequently. From July 2000 to May 2001, he served as Assistant President of China National Chemicals Import & Export Corp. and Vice Director of Sinochem Oil Group. In May 2001, he was appointed as Vice President and Party Leadership Group Member of China National Chemicals Import & Export Corp., Director of Sinochem Oil Group and General Manager of Sinochem International Oil Co. In September 2009, he was appointed as Vice President and Party Leadership Group Member of Sinochem Group and General Manager of Sinochem Petroleum Exploration & Production Co., Ltd. In May 2010, Mr. Li was appointed as Vice President and Party Leadership Group Member of CNOOC. Li Hui Vice President, Party Leadership Group Member

21 CORPORATE GOVERNANCE 19 Born in 1962, Mr. Lv Bo received a Bachelor of Science degree in Management from China University of Mining and Technology and an MBA degree from China Europe International Business School. Since 1985, he worked in the Ministry of Coal Industry, the Ministry of Energy and the Organization Department of the Communist Party of China Central Committee before joining CNOOC in In that year, he was appointed Director of the Human Resources Department of CNOOC. In November 2006, Mr. Lv became an Assistant President of CNOOC. Since November 2007, he served as a Party Leadership Group Member of CNOOC. In May 2010, Mr. Lv was appointed as a Vice President of CNOOC. Lv Bo Vice President, Party Leadership Group Member Born in 1958, Mr. Liu Jian graduated from Huazhong University of Science and Technology with a Bachelor of Science degree and received his MBA degree from Tianjin University. Mr. Liu joined CNOOC in 1982 and has years of experience in the oil and gas industry. He served as a Manager of CNOOC Bohai Corporation Oil Production Company, the Deputy General Manager of Tianjin Branch of CNOOC (China) Limited, General Manager of Zhanjiang Branch of CNOOC (China) Limited, a Senior Vice President of CNOOC Limited and General Manager of the Development and Production Department of CNOOC Limited. In October 2005, he became an Executive Vice President of CNOOC Limited. In November 2006, Mr. Liu was appointed as an Assistant President of CNOOC. He also served as Chief Executive Officer of China Oilfield Services Limited, a listed subsidiary of CNOOC, since March In May 2010, Mr. Liu was appointed as a Vice President and Party Leadership Group Member of CNOOC. Since August 2010, Mr. Liu has been appointed as Chairman of China Oilfield Services Limited. Liu Jian Vice President, Party Leadership Group Member Li Fanrong Vice President, Party Leadership Group Member Born in 1963, Mr. Li Fanrong is a senior engineer. He graduated from Jianghan Petroleum University with a Bachelor of Science degree in Oil Production Engineering, and later received an MBA degree from Cardiff Business School in UK. Mr. Li joined CNOOC in From 1984 to 1989, he engaged in well testing in CNOOC Nanhai East Corporation. From 1990 to 1995, he served as a Production Supervisor and a Platform Manager of the ACT (Agip-Chevron-Texaco) Operators Group. From 1995 to 2005, he successively served as Production Department Manager of Liuhua Oilfield Joint Operation Organization, General Manager of Lufeng 22-1 Oilfield Joint Operation Organization, Deputy General Manager of CNOOC (China) Limited-Shenzhen Branch and concurrently the Chinese Chief Representative of CACT (CNOOC-Agip-Chevron-Texaco) Operators Group. In November 2005, he was appointed as General Manager of Development and Production Department of CNOOC Limited. In February 2007, he became the General Manager of CNOOC (China) Limited-Shenzhen Branch. In April 2009, he was appointed as an Assistant President of CNOOC and concurrently as the General Manager of CNOOC Energy Technology & Services Limited. In May 2010, Mr. Li was appointed as a Vice President and Party Leadership Group Member of CNOOC. In September 2010, Mr. Li was appointed as President of CNOOC Limited. In November 2011, he was appointed as Chief Executive Officer of CNOOC Limited.

22 ANNUAL REPORT Born in 1955, Mr. Wu Mengfei received a Bachelor of Science degree and a Master s degree from China University of Petroleum (the former East China Petroleum Institute). He also received an MBA degree from the Sloan School of Management at MIT as a Sloan Fellow. Mr. Wu joined CNOOC in 1988 and served as Director of the Planning and Capital Department of CNOOC, Chief Financial Officer of CNOOC Limited, Chief Financial Officer and Executive Vice President of China Oilfield Services Limited, and Chairman of the Board of China BlueChemical Limited, the three subsidiaries of CNOOC. Mr. Wu is now Chief Financial Officer of CNOOC. He also serves as Chairman of the Board of Aegon-CNOOC Life Insurance Co., Ltd., CNOOC Insurance Ltd., CNOOC Investment Co., Ltd., CNOOC Finance Co., Ltd., and Zhonghai Trust Co., Ltd. Wu Mengfei Chief Financial Officer, Party Leadership Group Member Wang Jiaxiang Vice President, Party Leadership Group Member Born in 1955, Mr. Wang Jiaxiang is a senior engineer. He graduated from China University of Petroleum (the former East China Petroleum Institute), majoring in Drilling Engineering, and later received a Doctor s degree from Tianjin University in Management Science and Engineering. Mr. Wang joined CNOOC in He successively served as Production Section Director, Chief Engineer, Deputy Director and Director of Drilling Department of CNOOC Bohai Corporation and Deputy General Manager of CNOOC Bohai Corporation. From 2001 to April 2005, he served as Deputy General Manager of CNOOC (China) Limited-Tianjin Branch, Executive Deputy General Manager and General Manager of CNOOC Bohai Corporation. In November 2004, he was appointed as General Manager of CNOOC Oil Base Group Limited. In January 2007, Mr. Wang was appointed as an Assistant President of CNOOC. Since December 2007, he has served as General Manager of CNOOC Gas & Power Group. In February 2013, Mr. Wang was appointed as a Vice President and Party Leadership Group Member of CNOOC.

23 PERFORMANCE HIGHLIGHTS 21 PERFORMANCE HIGHLIGHTS Offshore Oil Engineering construction

24 ANNUAL REPORT AUDITOR S REPORT Da Hua Audit Zi [2013] No To China National Offshore Oil Corporation: We have audited the accompanying consolidated financial statements of China National Offshore Oil Corporation, which comprises the consolidated balance sheet as at 31 December 2012, and the consolidated income statement and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Chinese Accounting Standards for Business Enterprises and the Accounting Systems for Business Enterprises. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Independent Auditing Standards of Chinese Certified Public Accountants. Those standards require that we comply with ethical requirements and plan, and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of China National Offshore Oil Corporation as of 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with Chinese Accounting Standards for Business Enterprises. Da Hua Certified Public Accountants Beijing, China April 24, 2013

25 PERFORMANCE HIGHLIGHTS 23 Consolidated Income Statement Year ended 31 December 2012 RMB million OPERATING INCOME 488, ,566 Less: Operating cost 336, ,028 Business tax and surcharges 28,376 34,509 Selling expenses 2,560 2,899 Administrative expenses 11,146 12,638 Finance cost 1,088 2,134 Impairment losses on assets 2, Add: Investment income 4,499 4,476 Gains and losses on fair value changes Exchange gains PROFIT FROM OPERATING ACTIVITIES 110,594 99,956 Add: Non-operating income 2,807 5,393 Less: Non-operating expenses 1, PROFIT BEFORE TAX 112, ,982 Less: Income tax 25,581 30,195 NET PROFIT 86,669 74,787 Less: Minority interests 29,544 25,984 NET PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY 57,125 48,803 OTHER COMPREHENSIVE INCOME -5, TOTAL COMPREHENSIVE INCOME 80,907 74,385 Total comprehensive income attributable to owners of the Parent Company 53,096 48,825 Total comprehensive income attributable to minority interests 27,811 25,560 Note: Adjustments were made to the figures for 2011 in the statement in accordance with PRC Accounting Standards for Business Enterprises.

26 ANNUAL REPORT Consolidated Balance Sheet 31 December 2012 RMB million 1 January December 2012 CURRENT ASSETS Cash 103, ,877 Financial assets held for trading 9 3,561 Notes receivable 4,302 5,193 Accounts receivable 22,540 27,683 Prepayment 9,488 8,497 Interest receivable 1, Dividend receivable Other receivables 7,325 15,541 Purchase of buyback financial assets Inventories 30,849 26,157 Other current assets 5,308 2,936 Total current assets 184, ,051 NON-CURRENT ASSETS Granted loans and advances 2,804 2,081 Available-for-sale financial assets 44,017 78,145 Held-to-maturity investment 34,802 14,543 Long-term receivable Long-term equity investment 42,152 42,173 Real estate held for investment Fixed assets 120, ,742 Construction in process 40,687 43,129 Construction materials 782 1,079 Disposal of fixed assets Oil & Gas assets 215, ,036 Intangible assets 10,891 12,555 Development expenses Goodwill 5,780 5,782 Long-term deferred expenses 1,505 2,608 Deferred income tax assets 9,984 14,243 Other non-current assets 3,950 3,929 Total non-current assets 533, ,046 TOTAL ASSETS 718, ,097 Note: Adjustments were made to the figures for 1 January 2012 in the statement in accordance with PRC Accounting Standards for Business Enterprises.

27 PERFORMANCE HIGHLIGHTS 25 Consolidated Balance Sheet ( Continued ) 31 December 2012 RMB million 1 January December 2012 CURRENT LIABILITIES Short-term borrowings 37,121 53,254 Financial liabilities held for trading Notes payable Accounts payable 37,728 46,492 Advance from customers 5,973 4,149 Salaries, wages and welfare payable 8,006 8,899 Taxes payable 28,716 24,784 Interest payable 1, Dividend payable Other payables 10,982 12,261 Non-current liabilities due within one year 7,193 4,640 Other current liabilities 82 1,719 Total current liabilities 138, ,439 NON-CURRENT LIABILITIES Long-term borrowings 45,254 43,024 Bonds payable 28,152 45,608 Long-term account payables 3,234 2,696 Special payables 1,477 1,386 Estimated liabilities 25,033 29,477 Deferred income tax liabilities 13,864 14,034 Other non-current liabilities 4,170 3,989 Total non-current liabilities 121, ,214 Total liabilities 259, ,653 EQUITY Paid-up capital 98, ,922 Capital reserve 35,158 35,275 Special reserve Profit surplus 14,487 15,991 Retained earning 189, ,557 Currency translation differences -11,826-11,882 Total equity attributable to owners of the Parent Company 326, ,295 Minority interest 132, ,149 TOTAL EQUITY 459, ,444 TOTAL LIABILITIES AND EQUITY 718, ,097

28 ANNUAL REPORT Consolidated Cash Flow Statement Year ended 31 December 2012 RMB million 2012 CASH FLOWS FROM OPERATING ACTIVITIES Cash from sales of goods and services rendered 551,209 Taxes refund received 2,087 Other cash received relating to operating activities 8,156 Subtotal of Cash Inflows 561,452 Cash paid for goods and services 323,836 Cash paid to and on behalf of employees 15,194 Taxes paid 124,488 Other cash paid relating to operating activities 12,350 Subtotal of Cash Outflows 475,869 Net Cash Flows from Operating Activities 85,583 CASH FLOWS FROM INVESTING ACTIVITIES Cash received from withdrawn investment 171,319 Cash received from investment income 5,998 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 429 Net cash received from disposal of subsidiary and other operating entities -40 Other cash received relating to investing activities 1,741 Subtotal of Cash Inflows 179,447 Cash paid to acquire fixed assets, intangible assets and other long-term assets 58,106 Cash paid for investments 189,967 Net cash paid to acquire subsidiary and other operating entities 2,313 Other cash paid relating to investing activities 1,061 Subtotal of Cash Outflows 251,447 Net Cash Flows from Investing Activities -72,000 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from new investment 3,898 Cash received from borrowing 101,448 Cash received from issuing bonds Other cash relating to financing activities 30,734 Subtotal of Cash Inflows 136,080 Cash paid to repay debts 73,846 Cash paid to allocate dividends, profit or repay interests 20,775 Other cash paid relating to financing activities 11,620 Subtotal of Cash Outflows 106,241 Net Cash Flows from Financing Activities 29,839 EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH -143 NET INCREASE IN CASH AND CASH EQUIVALENTS 43,279 Add: Balance of cash and cash equivalents at beginning of period 76,040 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD 119,319

29 PERFORMANCE HIGHLIGHTS 27 Notes Summary to Financial Statements Corporate Information The China National Offshore Oil Corporation ( the Company or CNOOC ), incorporated in on Feb 15 th 1982, is a state-owned oil company approved by the Chinese State Council. According to the Regulations of People s Republic of China Concerning the Exploitation of The Offshore Petroleum Resources in Cooperation with Foreign Enterprises promulgated by the State Council, CNOOC was authorized to completely take charge of the business of exploiting oil and gas resources in cooperation with overseas partners offshore from China. At the same time the company is also authorized to be an investment organization by the state. Basis of Preparation The financial statements have been prepared on the basis that the company will continue to operate as a going concern. Based on the transactions and conditions which have been occurred, the financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises Basic Standard and 38 Specific Standards issued by the Ministry of Finance (MOF) in February 2006, and application guidance, bulletins and other relevant accounting regulations issued subsequently (collectively referred to as Accounting Standards for Business Enterprises or CAS ). The subsidiaries of the company which are registered abroad (CNOOC Limited, Chinese Ocean Offshore Oilfields Service, CNOOC Insurance Limited and etc) apply local Accounting Standards for Business Enterprises and have been adjusted accounting books according to CAS in preparing consolidated financial statements. Summary of Significant Accounting Policies 1. Accounting Period The accounting period of the Company is the calendar year from January 1 to December Functional Currency The functional currency of the Company and its subsidiaries which are registered in China is Renminbi Yuan (RMB). The functional currency for those subsidiaries registered abroad is local currency. The financial statements prepared by local currency have been translated into RMB financial statements. 3. Basis of Account The accompanying financial statements have been prepared in accordance with the accrual base, historical cost convention.

30 ANNUAL REPORT

31 PROJECTS & OPERATIONS 29 PROJECTS & OPERATIONS Jinzhou 25-1 South oil-gas field

32 ANNUAL REPORT OIL AND GAS E&P The company has been relentlessly focusing on the core business of oil and gas E&P. Through in technology and management, the company achieved coordinated development and constantly met the increasing demand of oil and gas. Oil and Gas Exploration The company adhered to highlighting the core business of oil and gas, increased investment in exploration, encouraged the innovation of work methodology and technical means, and focused tremendously on the exploration and development of new medium and large oil fields. As a consequence, oil and gas exploration achieved a historic breakthrough in 2012 as the reserve replacement ratio reached 188%. In 2012, the company introduced the inclined cable broadband 3D sampling and processing technology to broaden the effective bandwidth and improve the data resolution and signal-to-noise ratio, and obviously improved the deep imaging; combined sand control and artificial lift mining technologies and the production capability in the heavy oil well testing exceeded 100 tonnes; innovated techniques of test operation, combined the use of high quality screen tube for sand control, pump cable heating, the complete wellbore heat preservation technology and steam heated concentric tube, so that the Penglai well achieved historically high yield record in heavy and light oil tests. Owing to management innovation, Hai Yang Shi You 981 successfully drilled three self-managed wells and saw one commercial and one geological natural gas discovery; the gas exploration kept high success ratio, the company saw a commercial discovery in Ningbo 14-2, a potential commercial discovery by preliminary prospecting in Huangyan 2-2s, a discovery in conventional porosity and permeability reservoirs in Ningbo 31-1, successfully evaluated Ningbo 13-4, and preliminary prospected/evaluated four oil- and gas-containing structures. In 2012, the company completed a total of 16,100 kilometres and 26,700 square kilometres of 2D and 3D seismic surveys, respectively and drilled 99 exploratory wells in China s seas. Our oil and gas exploratory operations saw significant progress, with record high results for the self-managed ones. We discovered a series of economically exploitable medium and large oil fields discovered medium and large oil and gas fields like Penglai 9-1 and Kenli 2-1, made 12 commercial discoveries and have successfully evaluated 14 oil- and gascontaining structures. Our exploration success ratio of self-managed wells in China s seas reached 53%-68%. We also successfully took the first step towards self-managed deepwater exploration as drilled 3 self-managed deepwater exploratory well and made Offshore construction of Hai Yang Shi You 202 gas discoveries in the South China Sea.

33 PROJECTS & OPERATIONS 31 Hai Yang Shi You 981 drilling its first well The company saw substantive progress exploration abroad, including 9 oil and gas discoveries, a 100- million-tonne oilfield in the Algerian HBR block, 4 discoveries in 5 wells in the Indonesian MS block. The progressive exploration and evaluation in Uganda saw great increase of proven reserves. Through operation of oil and gas interests, the company optimized the overseas exploration and made sure of a set of targets for drilling, which would lead leap forward development in our overseas business. Development and Production Under the influence of many unfavorable factors such as the short-term suspension of production in Penglai 19-3 and typhoons, 2012 could be the most difficult year for CNOOC to enhance oil and gas development and production. The company strived to increase production by improving conventional measures, innovating working methods for reserve discovery and upgrading techniques so as to enhance operation, facilitate professionals in each line to interact closely, and strengthen complete quality control. In 2012, the company saw an increase of 1.21 million tonnes (oil and gas equivalent) of production by conventional measures improvement and well overhaul. Confined by the limited well positions, the company put forward the four-in-one geological technology combining seismic, logging, geology and reservoir, and tried hard to drill 9 high yield wells with producing more than 300 cubic metres per day and adjustment wells increased 1.34 million tonnes (oil and gas equivalent) of production. Development wells such as Yacheng 13-4 gasfield, Liuhua 4-1 oilfield, Fanyu 4-2/5-1 adjustment projects and Lufeng 13-2 oilfield started production in advance.

34 ANNUAL REPORT With all these efforts, in 2012, the company produced a total of million tonnes of crude oil, of which the domestic production reached million tonnes and the overseas production reached million tonnes; produced 16.4 billion cubic metres of natural gas, of which the domestic production reached 11.3 billion cubic metres and the overseas production reached 5.1 billion cubic metres. Unconventional Gas The company kept close watch on the development trend of unconventional gas in the world, actively participated in the exploration and development of the unconventional gas and in particular, focused on coalbed methane and shale gas. Coalbed Methane (CBM) The company conscientiously implemented the national coalbed methane development planning. Relying on scientific and technological progress, the company continued to increase exploration and development efforts to accelerate the development of coalbed methane industry and tried hard to foster a new growth pole. Following the guideline of Focusing on the key blocks to explore and invest, the company spent 85% of the annual exploration investment in the key blocks and especially enhanced exploration and development in the Qinshui Basin and the Eastern Ordos Basin. The overall workload of the 2D seismic exploration in 2012 was three times that of In 2012, the company achieved 26 CBM blocks with an area of about 18,000 square kilometres. As a result, the proven reserves of CBM reached 32 billion cubic metres and the CBM production capacity reached 466 million cubic metres, an increase of 30.9% over the previous year. In 2012, the CBM sales reached 365 million cubic metres, an increase of 35.9% over the previous year. The company adhered to the national policies related to solving the overlapping mining rights and in 2012, actively negotiated with local coal mining enterprises and signed 37 agreements with 36 coal enterprises, involving an area of 2,840 square kilometres; established a strategic partnership with three major coal enterprises in Shanxi Province, which laid the foundation for the CBM exploration and development for the company. The company orderly implemented major R&D projects including the national science and technology project of Development of Large Scale Oil and Gas Fields and CBM; completed the geological survey project of Evaluation of Major CBM Zone Exploration and Development Prospects whose result was assessed Excellent by China Geological Survey Bureau; actively promoted the construction of industrial standardization and completed three work including Report Preparation of Proven CBM Reserves.

35 PROJECTS & OPERATIONS 33 Shale Gas Based on the analysis of the shale gas exploration in both global and China s perspectives and its own capability, the company adhered to the principle of combining domestic exploration and development with overseas mergers and acquisitions, combing self-exploration and development with cooperation with foreign companies, combining the overall planning with step-by-step implementation, combining self-development with state support, took theoretical study, methodological innovation and technological progress as the driving force, focused on training professionals in the domain of shale gas exploration and development, in order to build the CNOOC shale gas exploration and development system and promote the shale gas business for the company. The company s Wuhu Western Lower Yangtze shale gas block locates in central and southern Anhui Province, with an exploration area of 4,840 square kilometres. In 2012, the company completed 250 square kilometres of 2D seismic acquisition, drilled 4 shallow shafts with a total footage of 1,670 metres, selected 5 favourable zones in 3 categories, with a total area of about 2,080 square kilometres and good potential and prospects of shale gas resources according to the preliminary estimates. In 2012, the company actively participated in the second round of China shale gas prospecting rights tender, launched by the Ministry of Land and Resources of China; carried out a large number of shale gas explorations in American Eagle Ford and Niobrara shale oil and gas blocks and made substantial progress. Wide line seismic data acquisition in Anhui Wuhu shale gas block

36 ANNUAL REPORT REFINING AND GAS & POWER Crude Oil Refining Capacity Unit: 10,000 tonnes The refining and gas & power business segment plays an important role in optimizing the industrial value chain of the company and helps CNOOC to develop into a world class energy company. Refining and Petrochemistry The refining business, consisting of production and sales of petrochemical products and fertilizers, is the extension of the oil and gas E&P and enhances the competitiveness of the company Production of Refined Oil Unit: 10,000 tonnes In 2012, under the unfavorable impact of high oil price shocks, disordered refined oil prices in the domestic market, the weak demand in the downstream market and so on, the company strengthened the market analysis and forecast. Adhering to the business strategy of in time production and sales, the company optimized resource allocation, enhanced technological research, promoted the production and marketing integration and strengthened production safety so as to improve the delicacy management and implement high-quality production. The company showed therefore good operational results as processing million tonnes of crude oil, an increase of 15% over the previous year; producing 7.79 million tonnes of refined oil, an increase of 15% over the previous year; producing 7.5 million tonnes of fuel oil, down by 1% from the previous year; producing ethylene 1.02 million tonnes, an increase of 4% over the previous year; producing aromatic hydrocarbons and the derivatives 3.23 million tonnes, an increase of 13% over the previous year; and producing 6.93 million tonnes of asphalt, an increase of 30% over the previous year. Facilities in Huizhou refinery

37 PROJECTS & OPERATIONS 35 Our subsidiary, CNOOC Huizhou Refining & Petrochemicals Company (Huizhou Refinery in short), adhering to the principle of market-oriented, quality-based and finely managed, maintained various economic and technical indicators at the top level in the refining industry. Huizhou Refinery increased the yield of light oil and especially, increased 350,000 tonnes of the high value-added production over the previous year by optimizing raw materials and products structures; increased RMB 600 million of comprehensive benefits over the previous year by reducing the loss in transportation and processing of crude oil; saved RMB 120 million by strengthening energy saving management; Huilian project Phase II innovated the management methods, confirmed all of the 17 sets of the imported patent contracts and began the overall planning; successfully started in the first trial of the 500,000 tonnes per annum catalytic gasoline selective hydrogenation desulfurization project. In addition, the bonded warehouse for storing the national crude oil reserves was put into use. In 2012, our subsidiary, China Offshore Oil & Gas Development & Utilization Company won again the No.1 of Domestic Asphalt Industry Contributions Award. Through the innovation of marketing management, adjusting the marketing strategy and strengthening marketing integration, we further developed business in Jiangxi, Hunan and other key markets, and improved profitability. In the overseas markets, we also made great progress as exporting asphalt products to Brazil, Australia and other countries, exporting environment-friendly rubber oil exported to South Korea and registered in the USA. SBS-modified asphalt and 50# asphalt sales set new records of 100,000 tonnes, respectively. Production of Fuel Oil Unit: 10,000 tonnes ,000 tonnes per annum methanol plant of CNOOC Chemical

38 ANNUAL REPORT Production of Ethylene Unit: 10,000 tonnes Production of Asphalt Unit: 10,000 tonnes Our subsidiary, CNOOC Marketing Company, actively responded to changes in the market, enhanced marketing management, developed and maintained end users. As a result, sales continued to grow as the annual sales of refined oil and chemical products reached million tonnes, up by 14.25% from the previous year, including the sales of refined oil amounted to million tonnes with the direct sale accounting for 48% and the retail accounting for 13%, which showed a good growth prospect. The Company adhered to the marketing mode of centring on warehouse for the refined oil sales, optimized resource allocation, and made great efforts to achieve current efficiency with sustainable development. In 2012, we continued to ensure the oil supply for special use, including the supply of 330,000 tonnes of oil for national reserves and trains, an increase of 50.6% over the previous year; the supply of 472,000 tonnes of oil for offshore production, an increase of 9.1% over the previous year; the sales of million tonnes of aviation kerosene, an increase of 12.8% over the previous year. The company pushed forward the development and construction of gas stations and oil storage warehouses. The oil storage warehouse construction projects made steady progresses in Yingkou, Taizhou, Yantai, Ningbo and Hunan. Up to the end of 2012, the company owned 356 gas stations and 36 oil storage warehouses with the storage capacity of 1.03 million cubic metres. Our subsidiary, CNOOC Chemical, facing the inadequate supply of natural gas, weak demand in the phosphate fertilizer market and other unfavourable factors, took the long period operation of equipment and labor contest as the main methods to strictly implement cost quota management, strengthening delicacy management and fully mobilize production bases in order to maintain the operational performance. In 2012, CNOOC Chemical produced 1.86 million tonnes of urea, 710,000 tonnes of phosphate fertilizer, 890,000 tonnes of compound fertilizer, 1.59 million tonnes of methanol, 29,000 tonnes of pom. Our Fudao s phosphate fertilizers and Sakefu s compound fertilizers were well known in the market and reached out to customers in the USA, Japan, Australia, South Africa and other high-end markets.

39 PROJECTS & OPERATIONS 37 Gas & Power Natural gas development is stepping into a golden age. Accelerating the development of natural gas and (gas-fired) power generation is in line with the national strategy of energy consumption structure adjustment, but also a practical way for the company to supply clean energies and promote green development. Natural gas and power generation has become one of the pillar industries of the company and shows the greatest growth potential. In 2012, the company maintained a leading position in China s LNG industry, with importing LNG million tonnes, accounting for 74% of the national total. The LNG receiving stations supplied gas for Guangdong, Fujian and Shanghai safely and stably. Zhejiang LNG receiving station was put into trial operation ahead of schedule. The company completed the unloading of two large LNG ships, filling the blanks in replacement, cooling and filling technologies with regard to multiple systems such as unloading, storage and torch, etc. Natural gas pipelines in Guangdong, Hainan, Zhejiang and Shandong maintained safe and stable operation LNG Imports (10,000 tonnes) Natural Gas-fired Generation Capacity (100 million kwh) Night view of Fujian LNG receiving station

40 ANNUAL REPORT Zhejiang LNG storage tanks The company achieved a major breakthrough in procurement of resources, with the signing of cooperation framework agreements with BG group regarding the increase in long-term procurement of LNG resources by 5 million tonnes per annum. The contracted LNG price was linked with oil and Henry Hub prices, setting a precedent in Asia. Drawing upon the Shandong Heze project of LNG production from coke oven gas, we promoted similar projects elsewhere and timely started the pilot project of biomass biogas development. The High Quality project made steady progress. Three storage tanks of Zhuhai LNG receiving station successfully lifted. Fujian network project Phase II started the Fuzhou - Fuding section. Guangdong pipe network project Phase I basically completed. The Circum-Hainan pipe network project succeeded in Dongya gas pipeline connection. Jinzhou 25-1 South natural gas utilization project completed the mechanic work. The China-made R0110 heavy gas turbine test platform project succeeded in the first trial. The distributed energy project in Tianjin R&D Base was included in the first batch of national natural gas distributed energy demonstration projects. The company sped up the entrance in the vehicle and ship gas filling market. Up to the end of 2012, we provided the vehicle gas filling services in 70 prefectural cities of 21 provinces, with 116 LNG filling stations in operation or under construction, for totally 10,895 vehicles. The company implemented LNG powered tractor modification tests in Anhui and Hainan, and began the pilot project of filling gas for fishing boats in Tianjin and Guangxi.

41 PROJECTS & OPERATIONS 39 The company made efforts for innovation, creation and efficiency integration, built core competitiveness in the technology field and made critical progress in the research on natural gas liquefaction technologies. The implementation plan of the project of key technologies for offshore natural gas liquefaction and storage, part of the national 863 Programme, was approved by the State. Through LNG security tests with simulation by computer, the company verified the safety of LNG fuel system for vehicle and ship, and worked out the principle of for-ship-use LNG related equipment and system safety design, which technically supported the national regulations on LNG fuelled ship. Our research achievement of Large LNG Storage Tank HAZOP Model registered copyright in the State Intellectual Property Office and its core technology had been applied in two tanks with the capacity of 30,000 cubic metres for Tianjin floating LNG project. The company increased the large-scale liquefaction capacity from 2.6 million tonnes per annum to 3.5 million tonnes per annum and gradually formed the capacity of independent research on core technologies and techniques for large natural gas liquefaction plant. The company also independently developed a mini mobile liquefaction device. The company s research result of Extension and Management of LNG Industry Chain Based on the Vertical Integration Strategy won the first prize of National Innovation Awards for Modernization of Enterprise Management. The management mode of natural gas and power generation industry was accepted at the national level. Filling the vehicle with LNG

42 ANNUAL REPORT ENGINEERING & TECHNICAL SERVICES Oilfield engineering & technical services sector is the back stone for the sustainable development of the oil and gas business. The company continued to strengthen management and expand the market in order to enhance the core competitiveness. In 2012, the company saw significant improvement of engineering & technical services and fast growth of the business performance. Oilfield Services Our oilfield services infiltrated the various phases of offshore oil and natural gas exploration, development and production, offering not only standalone services but also a comprehensive suite of integration-ready and general contracting services, with coverage extending from Chinese waters all the way to Southeast Asia, Australia, America, Northern Europe, Middle East, North Africa and other regions. Our subsidiary, COSL, greatly improved its capability of international operation. Up to the end of 2012, the overseas fixed assets accounted for 54.6% of the total fixed assets in COSL. The company adhered to the strategic thinking of restructuring, exploring deep water, providing highend products and services, and under the direction of market demand, invested in the construction of large-scale equipment and key equipment, focusing on enhancing technical capacity and capability of manufacturing deepwater equipment, in order to support our Second Leap Forward. Hai Yang Shi You 720

43 PROJECTS & OPERATIONS 41 China s first independently designed and constructed 3,000-metre, sixth-generation deepwater semisubmersible drilling platform, Hai Yang Shi You 981, commenced operations in the 1,500-metre-deep water area of eastern South China Sea on 9 May This marked that the Deepwater Strategy of China s offshore oil industry made substantial progress. Our deepwater pipe laying crane Hai Yang Shi You 201, deepwater engineering exploration ship Hai Yang Shi You 708 and High-powered deepwater three-use working ship Hai Yang Shi You 681 set sail in succession. Our underwater engineering achieved a historic breakthrough as successful wellhead replacement at 1500-metre depth subsea. Our 12-cable deepwater geophysical prospecting ship Hai Yang Shi You 720 completed a total of 11,000 square kilometres of 3D seismic surveys. We achieved the operational goal of producing more than 100 tonnes per day, more than 1,000 tonnes per month, more than 10,000 tonnes per annum and led China s deepwater exploration and development capability and large-scale marine equipment manufacturing capability into the advanced ranks in the world. The company continued to hold the dominant position in China s offshore market. The domestic rig signing rate reached 100%. Our market share of geophysical prospecting in self-managed and cooperative blocks were both 100%. The company continued to expand unconventional oil and gas business and completed the wireline logging service for its first shale gas project. The company insisted on combining independent innovation and integrated innovation. Based on different professional characteristics, the company adopted flexible means such as cooperative research, technical import and technology transfer to promote innovation and drive development. In 2012, we focused on enhancing the ability of transferring scientific and technological achievements into practice. For example, we initially realized the large-scale application of the heavy oil thermal recovery technology; completed several field throughput test of using multiple thermal fluid thermal recovery technology in Bohai Nanbao 35-2 oilfield. The company actively explored overseas markets. By implementing international business management system, optimizing the overseas business layout and strengthening the operational risk management, our scale of international business continued to expand and the success rate of tender increased substantially. On the basis of maintaining the business in Indonesia, Gulf of Mexico, North Sea, Norway, Iraq and other traditional areas, COSL newly entered the Thai market and enhanced competitiveness in overseas oilfield services market.

44 ANNUAL REPORT Offshore Oil Engineering Services The company took reducing cost and increasing profit in the offshore oil and gas, and LNG projects as the main way to build EPCI (engineering, procurement, construction, installation) capability so as to lead the offshore oil engineering industry in the Asia-Pacific region. Hai Yang Shi You 937 undocking In the case of substantial growth of offshore operations with regard to numbers of ships and working days, the company organized carefully and managed scientifically all the projects undertaken. As a result, the operational efficiency and capacity achieved historic record. The offshore jacket installation for Bozhong 25-1 South and Panyu 4-2, jacket sliding and launching for Panyu 5-1 and onshore jacket construction for Lishui 36-1 completed ahead of schedule. The pipe laying for Liwan 3-1 in both shallow water and deepwater sections gained the highest efficiency in the company s history. Asia s largest jacket was successfully installed in Liwan 3-1 deepwater gas field, showing that our capacity of construction, shipping, transportation, launching of large structures for the first time exceeded 30,000 tonnes. Our large-scale operating ship fleet for the first fleet entered the Arabian Sea, achieving a breakthrough in long distance towage transport. Our manufacturing and debugging capabilities continue to increase for the high-end skid-mounted equipment. The amount of orders of skid-mounted products grew to more than RMB 500 million. The company obtained and completed its first general contracting project of saturation diving jacket detection and obtained general contracting for Tianjin floating LNG project and a part of Shandong Yantai oil tank construction project. The company strengthened the engineering team building and overseas project management, and actively expanded overseas markets such as Australia, Russia and Saudi Arabia. In 2012, 15% of engineering contracts were signed for overseas business. WZ 12-1 PUQB platform modular lifting operations

45 PROJECTS & OPERATIONS 43 Comprehensive Services The company continued to implement the Internal Entrepreneurship Plan, highlight the specialization and differentiation among professions, speed up industrial development, enhance driving forces for endogenous growth, and optimize the business mode of technology + service + products. The industrial system composed by energy technology services, integrated energy services, FPSO and shipping, and fine chemical industry, showed vitality. The reform in mining area achieved greatly with regard to transferring social service from the company to local government and maintained local stability and harmony. The company made significant progress in value-adding from developing differentiated services, stabilizing services prices and obtaining synergy for economic growth. The scale and the managerial quality of our FPSO operation came out top in the world. The technical service capacity reached the international advanced level and we developed the overall solution for polymer injection. We broke the monopoly by foreign producers as independently developed the sand control technology for well drilling and completion, the 9-5/8 sand control tools and the series of color-based coating technology of high performance. We successfully applied the core technology of oilfield equipment maintenance, such as oilfield equipment on-line monitoring, in oilfield production. We also developed the deepwater pipeline coating technology for the operation 1500-metre depth underwater, the leading technology in the domestic market with the capability of providing deepwater pipeline integrated services like deepwater counterweight, dry/wet insulation, anticorrosion, joint position coating, etc. All these technological achievements strongly supported the deepwater strategy of the company. In addition, the LNG cold energy utilization showed scale effect and the establishment of Cold Energy Utilization Institute helped us to further develop the potential of the LNG industry. The company took emerging industries as an important source of economic growth. Services for security technology, energy saving and environmental protection and unconventional gas drilling technology saw a momentum of development. The company owned shares for six large LNG vessels, but also started the design and building of small and medium LNG vessel and harbour tug. A complete industrial chain of LNG transport was formed. The company pushed forward key projects steadily. The phase I of Huizhou Logistics Base construction project was successfully completed and brought into practice. The largest single series device of acrylic acid and acrylates was put into operation and created the shortest record of succeeding in the first material input experiment for the similar device. TCDTO-1, CNOOC s first independently researched and developed high-efficiency catalyst for the refining of aromatic hydrocarbons demonstrated outstanding capability in the thorough removal of olefins during its operational use at Huizhou Refinery. Floating Production Storage & Offloading (FPSO) - Hai Yang Shi You 113

46 ANNUAL REPORT ALTERNATIVE ENERGY We take supplying green energy to the market as our main responsibility, make technology and business model innovation as the driving force of development and select the efficient alternative energy industries to develop in priority. We have simultaneously implemented various biodiesel production measures. We succeeded in the trial production of biodiesel at a FAME processing facility, which has the world s highest production capacity for a single facility and a design capacity of 270,000 million tonnes per annum. Additionally, by tackling the technical issues about the key equipment, we succeeded in the first trial production of biodiesel from waste cooking oil at two biodiesel facilities, the success of which will contribute to reducing raw material cost by at least RMB 1,000 per tonne. Our wind farm operations have scaled some new heights. As a result of our enhanced delicacy management of the four wind farms, we have managed to keep the annual availability rates of all wind turbine generators at more than 99%, and that of key equipment at more than 99.2%. Over the past year, our wind power production reached 670 million kwh, up by 26% from the previous year. Gansu Changma Phase 2 Wind Farm received the honour of A Our wind farm in Erenhot, Inner Mongolia Friendly Wind Farm from Gansu Electric Power Company of SGCC (State Grid Corporation of China), thus becoming the pacesetter among the wind power companies at the 10 million kilowatt wind power base in the city of Jiuquan. The market outlook for the battery business is good. Our subsidiary, Lishen Battery is the largest lithium ion battery manufacturer in China and the fifth ranked internationally in terms of the battery market share. It won the national new energy automobile technology innovation project and becomes one of the 141 national pilot industrial enterprises to cultivate brand. The sales and marketing network of Lishen now covers Europe, North America and Asia. Up to the end of 2012, Lishen successfully developed more than ten key technologies, including high voltage battery chemistry system, power battery cathode water solvent system technology, high ratio energy Li(NiCoMn)O2 battery chemistry system, large capacity square type mobile phone battery platform chemistry system. Lishen also developed high performance lithium iron phosphate system based battery power system and applied it in the Tianjin City Autobus Project. The first batch of 60 power batteries has been equipped in 40 electric autobuses in Tianjin for demonstration operation. We actively promoted the SNG business. Our two key SNG projects are fully supported by both the State and the local government as demonstration projects.

47 PROJECTS & OPERATIONS 45 FINANCIAL SERVICES Based on the Group s industrial development, our financial services focused on the combination of industry and finance, strengthened the risk control, actively Innovated financial products and service modes, expanded the service network, optimized information systems, strived to improve our financial service brand and kept the quality of financial capital and profitability at high levels in order to help CNOOC to develop into a world class energy company. CNOOC Finance Co., Ltd. actively consolidated and extended its financial service chain, and endeavored to support key Group members and key projects. In 2012, the annual settlement amounted to RMB 2.26 trillion; provided RMB billion of preferential credit loans to Group members, directly saving financial cost of RMB 770 million; completed exchange settlement and sales amounted to USD billion. As a result, CNOOC Finance fulfilled its commitment of risk control, cost efficiency and value creation endowed by the Group. CNOOC Finance maintained the zero record of non-performing assets and loans, so that guaranteed the funds safety of the Group. CNOOC Finance continued to maintain the standard & Poor s AA-, Moody s Aa3 sovereign credit rating. Zhonghai Trust Co., Ltd. vigorously developed itself into a top-ranking asset management company. With constant restructuring and exploiting potentialities, it improved return on assets, trustee revenue and performance of asset management. The operational revenue of Zhonghai Trust in 2012 hit the record. Up to the end of 2012, the accumulated asset under its management amounted to RMB 1.8 trillion with none of our trust products expired. Since 2004, Zhonghai Trust has kept the zero record of new non-performing assets and the accumulated return to clients amounted to RMB 35 billion. Zhonghai Trust continued to innovate assets management products, extend its industrial chain and increase the brand influence. Zhonghai Trust won the China Outstanding Trust Company Comprehensive Award for the sixth consecutive year and the China Most Growing Trust Company for the fifth consecutive year. CNOOC Insurance Ltd. continued to execute the integrated insurance policy, strengthen risk management, fully develop the role of balancing and reducing insurance costs, controlling and diversifying risks for the Group, and facilitate the development of relevant industrial segments. CNOOC Insurance paid close attention to major claim cases and sped up claim settlement to ensure a timely production recovery and guarantee interests of policyholders to the largest degree. In 2012, CNOOC Insurance introduced the war risk insurance to the Group for overseas projects locating in politically sensitive areas; provided Panyu 34-1, 36-1 Lishui, Suizhong 36-1, 35-2/35-1 Panyu and Kenli 3-2 projects with builders insurance. CNOOC Investment Co., Ltd. is authorized by the Group to execute financial investment and strategic investment. It used the current assets and investment profits to sustain the core competitiveness of the Group through enhancing the governance on subordinated equity entities, closely following and managing private equity investment and actively discovering new investment opportunities under controllable risks. In 2012, CNOOC Investment installed the Fourth Board of Directors and adjusted directors and supervisors in relevant invested companies.

48 ANNUAL REPORT INTERNATIONALIZATION Indonesian operation area We fostered global thinking and vision, kept close watch on the international energy market and continued to strengthen the dynamic study on the energy industry in order to improve our ability of capturing business opportunities. We adhered to the 3R investment principle of balancing resources, returns, risk, actively pushed forward transnational mergers and acquisitions and constantly optimized the allocation of overseas assets; increased resource import and expanded the scale of international trade. In the meanwhile, we continued to strengthen the abilities of overseas business management, resource integration and risk control ability so as to enhance our internationalization. Team building in the Indonesian operation area

49 B12 B25 B16 D11 A10 C1 B1 D10 A13 B24 D14 B17 B3 D6 A16 A8 C2 D9 C13 C7 C9 B18 B13 A15 B11 B10 A18 C10 B21 D15 B4 D1 B22 C6 B6 A4 C14 B26 B9 C15 D8 A3 D2 C11 B14 A11 B5 A5 D4 B15 B7 A6 A1 C4 A17 D5 A2 B8 D12 D3 A7 A12 B23 B20 D13 C12 B19 C3 D7 C5 B2 A9 C8 A Africa 1. Algeria 2. Nigeria 3. Equatorial Guinea 4. Gabon Middle East 5. Congo (Brazzaville) 6. Angola 7. Tunisia 8. Libya 10. Egypt 11. Uganda 12. Tanzania 15. Madagascar 14. Saudi Arabia 16. Iraq 17. Qatar CNOOC Ltd. A1. Indonesia A2. Gabon A3. Cambodia A4. Myanmar A5. Nigeria A6. Equatorial Guinea Europe, Eurasia and Australia 18. The United Arab Emirates 19. Oman 20. Iran A13. United States A14. Argentina A15. Qatar A16. Iraq A17. Uganda A18. Gulf of Mexico B1. Kazakhstan B2. Australia B3. Iraq B4. India B5. Cambodia B6. Myanmar B7. Equatorial Guinea Netherlands 13. Norway 22. Kazakhstan 23. Russia 21. India 24. Myanmar 25. Singapore 26. Thailand 27. Cambodia 28. Vietnam 29. Hong Kong 30. Indonesia 31. Philippines 32. Korea 33. Australia 34. Papua New Guinea 35. New Caledonia B15. Singapore B16. Canada B17. Tunisia B18. Libya B19. Angola B20. Tanzania B21. The United Arab Emirates B22. Oman B23. Papua New Guinea B24. Korea B25. Russia B26. Thailand C1. Netherlands C2. Iran C3. Madagascar C4. Indonesia C5. Australia 39 North America South America 36. Canada 37. United States 38. Gulf of Mexico 39. Argentina 40. Trinidad and Tobago 41. Brazil COOEC B8. Indonesia B9. Philippines B10. Gulf of Mexico B11. Saudi Arabia B12. Norway B13. Iran B14. Vietnam COSL A7. Congo (Brazzaville) A8. Algeria A9. Australia A10. Canada A11. Trinidad and Tobago A12. Papua New Guinea CNOOC EnerTech C6. Hong Kong C7. Saudi Arabia C8. New Caledonia C9. Egypt C10. India C11. Nigeria C12. Brazil C13. Qatar C14. Thailand C15. Vietnam D1. Myanmar D2. Nigeria D3. Congo (Brazzaville) D4. Equatorial Guinea D5. Uganda D6. Iran D7. Australia D8. Cambodia D9. Qatar D10. United States D11. Canada D12. Indonesia D13. Brazil D14. Iraq D15. The United Arab Emirates

50 Ugandan staff trained in the Tianjin Tanggu Base Overseas Business The company continued to optimize overseas business layout and investment structure, improve the quality and efficiency of overseas project operation. As a result, the scale of international business continued expansion. In 2012, the proportion of overseas assets reached 26.4% and the proportion of overseas income accounted for 25.5% of the Group s total. All these greatly improved CNOOC transnationality index and brought the company a step closer to the world class company. Up to the end of 2012, CNOOC had 23 overseas projects in 17 countries, including 11 in-production projects, 1 development project and 11 exploration projects. The in-production and development projects involved Indonesia, Nigeria, Canada, Trinidad and Tobago, Argentina, Iraq, the USA, Australia and Uganda, etc. and the exploration projects involved Burma, Kampuchea, Equatorial Guinea, Congo, Algeria, Papua New Guinea, Gabon, Qatar, the Gulf of Mexico, etc. In 2012, CNOOC acquired a total of 33.3% of the equity of Chesapeake involving the oil and gas assets in the Denver-Julesburg Basin and the Powder River Basin, the consideration was USD 570 million in cash; acquired one third of exploration rights of the British company Tullow in each of the Uganda 1, 2 and 3A blocks, the consideration was USD billion in cash. On February 26 th, 2013, CNOOC Limited completed the acquisition of Nexen, the consideration was USD 15.1 billion in cash, which is so far the largest overseas acquisition by a Chinese company. Workshop scenarios in the Indonesian operation area Jacket docking to offshore platform Logging truck on site Chinese and foreign staff doing joint on-site quality inspection Up to the end of 2012, our subsidiary, COSL, completed its overseas layout in Southeast Asia, America, Europe and the Middle East, and continued to strengthen the competitiveness in the world oilfield services market. The proportion of overseas fixed assets reached 54.6% of COSL s total. In the Southeast Asian market, COSL BOSS platform won the bid of BP Berau drilling services contract, which showed that COSL s competitiveness in the world jack-up drilling platform service market; Bohai 8 jack-up drilling platform won the bid of the HUSKY Indonesia project; the geophysical survey vessels Hai Yang Shi You 719, Hai Yang Shi You 720 and Hai Yang Shi You 718 won the bids of projects in Thailand, Burma and Pakistan, respectively; oil-based mud services made breakthroughs in the Indonesian market. In the Mexico market, COSL Confidence and Hai Yang Shi You 936 platforms earned long-term contracts and the offshore drilling rig module COSL1-4 resigned contracts. In the Norwegian North Sea market, COSL Pioneer had been highly recognized by customers, owing to the high quality and efficiency of operations in four local wells, and was named Monthly Star in May; COSL Innovator started to implement the Statoil operation contract; COSL Promoter successfully obtained AoC certificate and was about to start work. In Iraq, we drilled through the salt layer and efficiently implemented acidizing treatments; the first well of the Iraq project saw high-yielding owing to the excellent work of our LR7001 team and LR7005, LR7006 teams began operation in August and September, respectively. Our subsidiary, CNOOC EnerTech, took the Middle East and Africa as the main strategic target regions and made breakthroughs in overseas business. In 2012, it signed the research contract for production development scheme in Maysan oilfields of Iraq, which set a milestone for expanding the international market. Today, CNOOC EnerTech provides various services in 15 countries and regions, including drilling and completion technology services, increasing production services, security services, catering services and logistics, etc. Our subsidiary, COOEC, further optimized the layout of international business, concentrated on the three major target markets in Southeast Asia, the Middle East and Australia. In 2012, its overseas income hit the record and overseas orders amounted to RMB 2.18 billion. COOEC participated in several projects, including the Australian WOODSIDE LNG 327 module construction and the Russian YAMAL LNG 264 module construction project, tendered for more than 50 Saudi SARB LNG modular construction projects and the BROWSE DTU deepwater project in cooperation with KVAERNER. The ICHTHYS ONSHORE LNG project whose contract value aggregated more than USD 300 million was successfully implemented. Workshop scenarios on LAN JIANG pipelaying vessel Foreign employee participating in job skills competition

51 PROJECTS & OPERATIONS 49 International Trade The company constantly improved market analysis, strictly controlled operational risks, enhanced the resource control ability and raised resource import. The international trade maintained a momentum of rapid development, business scale continued to expand, and the profitability increased substantially. In 2012, the company traded million tonnes of crude oil, up by 39% from 2011, including 8.22 million tonnes of imported crude oil, an increase of 78% over the previous year; 2.68 tonnes of fuel oil, an increase of 106% over the previous year, of which 2.18 million tonnes were imported, an increase of 102% over the previous year; 640,000 tonnes of imported condensate oil, a decrease of 63% over the previous year; 310,000 tonnes of imported naphtha, an increase of 100% over the previous year; million tonnes of imported LNG, essentially unchanged from the previous year. Crude Oil Trading Volume Unit: 10,000 tonnes Fuel Oil Trading Volume Unit: 10,000 tonnes Nexen Buzzard oilfield located in Britain s North Sea

52 ANNUAL REPORT

53 MANAGEMENT 51 MANAGEMENT Oilfield services professionals

54 ANNUAL REPORT TECHNOLOGY INNOVATION In order to leverage fully on the leading and driving roles of technology innovation, we made continuous efforts to improve our innovation framework, technology management policies and technology talent incentive scheme. We have standardized the statistical requirements for R&D investments and, for the first time, carried out a project across all 32 research institutions within the corporation to assess their innovation capabilities. We have also made proactive efforts to push ahead with the rapid transformation and commercialization of technological achievements. Development of the research platform saw significant progress with a series of innovations achieved. Investment in Science and Technology Unit: 100 million RMB Technology Projects We focused immensely on tackling the key technical bottlenecks affecting the development of the oil and gas development and production, liquefied natural gas and coalbed methane, oilfield technical services and facilities, midstream, downstream, alternative energy and other business segments. Over the past year, we conducted research on 320 planned technology topics and fully launched the implementation of 26 key science and technology projects in the Twelfth Five-Year Plan scope with a focus on 18 core domains. Six research projects within the National 863 Programme framework, including the Critical High-Resolution Deepwater Seismic Technology Research and the Deepwater Pipe Laying Technology, passed checks and received acceptance by the State authorities. R&D Capital Input Unit: 100 million RMB Fertilizers Technology We independently developed the 90-day sustained-release coated urea, which was the unique slow-release fertilizer product registered in the Ministry of Agriculture. We successfully developed with independent effort the new process of nitro compound fertilizer production by non phosphate dissolved pulp, which greatly reduced the cost of compound fertilizer production Our new process of low grade collophanite room temperature doublereverse flotation realized the industrial application and effectively reduced costs as well as improving product quality.

55 MANAGEMENT 53 Geophysical Technology The preliminary application of our independently developed Hai Liang high-resolution seismic data acquisition system was successful. The Enhanced Formation Dynamic Tester (EFDT) set a new record in China for formation testing operations and completed operations successively in Iraq, Myanmar and Indonesia. Development and Mining Technology The multi-component thermal fluid thermal recovery technology has effectively increased the daily oil production and serves as a demonstration of our capabilities. Research into key technologies for exploration and development of low porosity and permeability oil and gas fields saw significant progress and resulted in a series of technology for well drilling and completion and reservoir reconstruction and fracking, along with their supporting technologies. Well Drilling Technology The first experiment for enhanced-efficiency drilling and completion of unconventional-size slim holes in the Bohai Bay was successful. The low-density (1.2g/cm 3 ) grouting technology has successfully resolved various technical issues, including cementing under complex pressure conditions. Offshore Engineering Technology The trial production of the first umbilical cable for underwater production system in China was successful. The high-efficiency pipe production line of CNOOC Engineering has formally gone into production and increased production efficiency by 110%. Unconventional Oil and Gas Research We have evaluated various shale oil and gas projects in North America, Europe and Australia as well as shale gas projects in China. We undertook the national key project for shale gas research. We carried out tests on the combined mining of coalbed methane, shale gas and tight gas. Refining Technology Our non-hydrorefining catalyst for reformate operation, which we have independent patent rights, has met advanced international standards and seen industrial use. Cold Energy Utilization Technology Our technologies for synthesis of butyl rubber and air separation using LNG cold energy received three national invention patents and 34 utility model patents. Technology Achievements In 2012, we received the second prize of the State Scientific and Technological Progress Awards (SSTPA) for our achievements in the development of the key technology for well cluster configurations at Suizhong 36-1 offshore oilfield, won Scientific and Technological Achievement Awards at the provincial and ministerial levels for 22 achievements, including research and practical application of the mechanism in the formation of hidden oil and gas reservoirs in the Shijiutuo area of the Bohai Sea, and awards from the trade associations for 19 achievements, including development and application of the technology and equipment for implementing high-efficiency injection allocation in polymer flooding of oil on offshore platforms. The 2012 CNOOC Scientific and Technological Achievement Awards went to 36 achievements, including research and application of the technology for moderate sand production via multiplebranch diversion. He Baosheng of CNOOC Research Institute won the 21 st Sun Yueqi Youth Science and Technology Award.

56 ANNUAL REPORT Over the past year, we successfully filed a total of 570 patent applications, including 210 for inventions and received 497 new patents, including 201 for inventions, bringing our patent achievements to a record high. We published a total of 103 sets of technical standards comprising 3 sets of national standards, 60 sets of industry standards and 40 sets of corporate standards. We have also received seven awards for the achievements of our QC teams in the petroleum and petrochemical industries. The Panyu Project Team, a Zero Defects QC team, received the honour of National Excellent Team. Scientific and Technological Awards Unit: awards Scientific and Technological Papers Unit: papers State Scientific and Technological Progress Award Ministry-level Corporate-level Published in Core Journals Published in Journals Patents Unit: patents Technology Standards Unit: standards Authorized Invention Patents Authorized Patents Accepted Patents National Standards CNOOC Standards Industrial Standards

57 MANAGEMENT 55 MANAGEMENT INNOVATION Scientific management is the foundation of corporate development. It is also an indispensible and dynamic prerequisite for CNOOC to realize the Second Leap Forward. In 2012, the Group vigorously propagated the Outline of Second Leap Forward Programme to each employee. Each unit carefully worked out implementation schemes and adjusted development plans according to its actual conditions. As a consequence, we saw a good beginning in the implementation of the Second Leap Forward Programme. Management Improvement Since the SASAC put the Management Improvement Programme into practice, we have taken the Programme as the main support to realize our goals of Second Leap Forward and developing into a world class energy company. Owing to our efficient organization and orderly promotion, the Management Improvement Programme was implemented at the grass-roots level and integrated into the daily operation and management. The initial effects were observable. The headquarters and all subordinates actively explored new mechanisms to push forward the Programme, in accordance with the theme of strengthening basic management, focusing on reducing cost and improving efficiency, continuously improving management quality, facilitating the Second Leap Forward. According to the overall deployment plan, we worked out a series of guidance documents, held on-site and remote video conferences to mobilize personnel and decided effective measures. Owing to our hard work, CNOOC was granted by SASAC the 2012 Central State-owned Enterprises Management Improvement Outstanding Organization Award. Keeping the Chinese reform and development in mind and targeting at developing into a world class energy company, CNOOC adopted benchmarking as main methodology, searched, analyzed and resolved problems in a scientific way. The Procurement Department strengthened the centralized procurement and increased the degree of centralization to 50% in 2012, up by 20% from In order to adapt to the new mechanism of corporate governance, the Audit and Supervision Department will regard the revision of internal control system as an important part of the comprehensive risk management. It organized relevant departments to revise 16 internal control subsystems and 184 institutions, and worked out 108 new institutions in The Information Department pushed forward the improvement in a gradual approach and in 2012 revised 12 informationization management methods and 40 detailed management rules.

58 ANNUAL REPORT Results of Management Innovation Management Innovation Papers: Industry / Ministry-level Unit: papers Corporate-level Management Innovation Achievements Unit: awards The company paid great attention to management innovation, committed itself in transforming the extensive growth mode to the innovation driven mode, exploring new theories, new methods and new practice in line with international practices under Chinese conditions. The company relied upon management to improve efficiency, profitability and competitiveness, in order to produce power for development into a world class energy company. The company constantly improved the management innovation system and encouraged the management innovation behavior to solve the critical and thorny problems in the way of development. As a result, employees realized the important role of management and were fully mobilized to participate in management innovation. Management practices were innovated from the team on the frontline to the Group headquarters. These achievements helped the company being constantly received the ministry-level award 3 Evaluations Outstanding Organization Unit for years. Up to the end of 2012, CNOOC awarded 114 management achievements at the corporate-level, of which 51 won ministry-level awards, 19 won nation-level Award (10 won the first prize and 9 won the second prize). The company paid great attention to the appliance of the achievements. Bi-annual conferences and publication of achievement reports on the company s intranet further ensured high in-house circulation of the management achievements and consolidated the practice mode of modern enterprise with CNOOC characteristics. In 2012, CNOOC awarded 30 management achievements within the company, of which 8 achievements won ministry-level prizes, including 3 first-class, 3 second-class and 2 third-class. Two achievements of CNOOC, Extension and Management of LNG industry Chain Based on the Vertical Integration Strategy and Overseas Compliance Management of Large-scale State-owned holding listed companies, won the first and second prizes at the 19 th National Enterprise Management Modernization Innovation Achievement Award respectively. COSL Oilfield Chemistry Division Tanggu Base actively implementing the rule that directors lead teams on duty on the frontline

59 MANAGEMENT 57 QHSE High Quality Products and Services We manage and control the quality of our products and services strictly in accordance with the highest possible standards, with the purpose of raising our core competitiveness through the creation of established brands, and building a good reputation through the delivery of quality customer services. To this end, our market influence is constantly increasing. In our control of quality, we adhere to the directives of putting people and safety first, maintaining the integrity and abiding by the law, strengthening the foundations with innovations, and achieving success through quality. As we strive toward improving the overall standard of our quality management, we understand that the quality of our products and services is a strategy, foundation and support for the creation of competitive advantages. In 2012, we promulgated our Quality Management Plan for the Twelfth Five-Year Plan Period, in which we identified nine tasks for implementation during the specified period, as well as the measures for establishing management responsibilities, creating a framework for the relevant expertise, and investing in quality management. Product Quality It is our commitment to deliver exceptional quality and customer satisfaction. As we continue to improve the quality management framework and implementation rules, we strive to increase the overall awareness of quality management among all employees, to meet the ever-increasing customer demands for quality. As part of our on-going effort to raise the quality supervision standards, our subsidiaries have established a dynamic protocol for monitoring the quality of crude oil and adjusting the process parametres and production conditions systematically. We have managed to ensure the quality of our oil products by addressing the root causes of refined oil quality issues, increasing efforts on inspecting the quality of oil products and imposing strict controls on the warehouse storage and logistics process. In all inspections by the national authorities so far, the metrological accuracy of equipment at our oil storage warehouses and service stations and the pass rate from random inspections of oil product quality have been 100%. Boasting a premium quality of our refined oil products, our diesel products have met the Euro V standards, and we provide the market with Euro V-compliant petrol. Sales of our 15 mature lines of asphalt products cover markets both at home and worldwide. Special-purpose coatings saw their successful use in the conventional islands of some of the nuclear stations, the Shenzhou 9 spacecraft and large aircraft projects in China. TCDTO-1, our independently researched and developed high-efficiency catalyst for the refining of aromatic hydrocarbons, has now attained a quality level that is on par with world-leading standards. Brand Building As part of our on-going effort to increase the intrinsic value of our brands and lay a solid foundation for improving our brand management capabilities, we have set up a set of CNOOC-specific protocols and frameworks, as well as a collaborative platform for brand management.

60 ANNUAL REPORT In early 2012, we trialled the implementation of the collaborative brand management platform. The CNOOC 36-1 asphalt product line has become the top national brand for heavy-duty asphalt and received accreditation as the Established, Branded Product of the Chinese Petroleum and Chemical Industry in Lishen s batteries have garnered high levels of recognition from Samsung, Apple, TTI, Vodafone and other international clients. Fudao s phosphate fertilizers and Sakefu s compound fertilizers, both renowned domestically and internationally, now reach out to customers in the United States, Japan, Australia, South Africa and other high-end markets. Service Quality We have created a professional and delicate customer service framework by segmenting our prospective customers in the industrial chain into groups and gaining an in-depth understanding of their different needs and requirements based on market analysis and orientation. In doing so, we managed to maintain and strengthen our relationships with customers, and consolidate our traditional market share. With a good image and reputation in the industry and an ever-increasing level of customer satisfaction, we now have a firm customer base. Occupational Health We pay attention to occupational health management and put the safety and wellbeing of our employees at the forefront with a focus on the identification, analysis and control of occupational disease risk factors with the purpose of improving the workplace environment and taking active measures to protect the health of employees. In 2012, we stepped up our efforts to carry out occupational health training on-site and promote outstanding occupational health case studies. We have launched the CNOOC Occupational Health Management System across the board. We coordinated the review of nine preliminary occupational hazard evaluation reports. Additionally, we reviewed assessment reports on the effects of control measures and inspected the completed protective facilities for occupational disease hazards at three projects. The coverage rate of occupational health physical examination and the implementation rate of regular inspection for workplace occupational disease risk factors were 99.2% and 97.25%, respectively. The coverage rate of occupational health screening and surveillance records was 100%. Over the past year, there was no case of occupational disease. Both the Occupational Health Service Centres of CNOOC General Hospital and the Worker s Hospital of CNOOC Nanhai West Corporation hold accreditation as a National Grade A Assessor for Occupational Disease Hazards. The Offshore Medical Rescue Centre of CNOOC General Hospital is currently the largest and most professional field emergency medical service provider in China with the greatest number of diving doctors on board. Having a fast-responding logistics support system in place for offshore operational emergency, the Centre is capable of attending to more than 50,000 patients every year.

61 MANAGEMENT 59 Operational Safety The offshore oil industry is a high-risk one. Hence, we always consider production safety to be the lifeblood of our corporate development. As we strive to build a superior operational quality and safety management system, we have created a safety culture with five to-dos and no-nos firmly entrenched in our minds and been putting considerable effort into developing a safety management framework, increasing our efforts on investigating, eliminating, managing and controlling safety hazards, and pushing ahead with the development of an emergency management framework. Production Safety We have been conducting the Production Safety Month and the Production Safety Warning Week activities through various means, to inculcate a safety culture across the corporation. In 2012, seven of our video works for promoting production safety, including Small Screw Makes Big Things, won two Third Class Awards and five Excellence Awards at the Third Production Safety Video Works Screening event. The large sea area around Jinzhou 9-3 oilfield froze up. Our icebreaker worked 24/24 to open ice in order to ensure the normal production. While intensifying the initial management of production safety, we compiled and promulgated the CNOOC Guidelines on Preparing Preliminary Safety Assessments of Oil and Gas Facility Upgrading and Expansion Projects. As part of the proactive effort to push ahead with the development of a safety management framework, we strictly reviewed the frameworks of CNOOC Southeast Asia, Hubei Dayukou Chemical, CNOOC Petrochemicals, CNOOC Engineering (Qingdao) and other subsidiaries. We intensified our efforts in creating and enforcing production safety standards across the board. Out of the 64 subsidiaries that need to be assessed, 43 already met requirements. We have stepped up our supervision and inspection

62 ANNUAL REPORT efforts on production safety. For instance, we conducted pre-drilling safety inspections at Hai Yang Shi You 981 and the project sites in Southeast Asia, Canada and other locations. We have also reviewed the safety practices of our diving and helicopter contractors. On the basis of self-inspection, we conducted joint safety inspections on oil storage warehouses together with seven ministries and commissions including State Administration of Work Safety (SAWS) and reported the status of any rectification measures, promptly to SAWS. As part of the increased efforts to manage production safety, our subsidiaries overseas have implemented our risk management system for safe operation abroad, and imposed strict reporting requirements for safety accidents and other unexpected events. Over the past year, there was no major accident abroad. In 2012, we had 117 cases of recordable injuries or accidents due to production safety, no accident cases involving employee fatalities, and 2 accident cases involving contractor fatalities (2 employees of our contractors died). With no incidence of serious accidents and a significant drop in the number of ordinary accidents during the year, we have ensured the stable and orderly progress of our production safety work. The implementation of safety rectification measures at Huizhou Refinery following the explosion incident on July 11 th 2011 is now essentially complete. Through accident investigation report, 3D accident simulation, conferences, training and other means, we required all operating units across the corporation to learn the lessons from the incident and crack down on the potential occurrence of similar incidents. We have stepped up our efforts to study geological oil formations at the Penglai 19-3 oil field and maintained and managed our oil fields systematically and strictly in accordance with government requirements. Additionally, we made proactive efforts to reach an agreement with the Ministry of Agriculture, the State Oceanic Administration (SOA), and ConocoPhillips on the compensation and remedies for fishery losses and ecological damages, as well as urged ConocoPhillips to implement rectification measures. On February 16 th 2013, SOA agreed to let ConocoPhillips resume its production related operations gradually. Safety men and technicians on Hai Yang Shi You 202 doing jointly weekly equipment inspection

63 MANAGEMENT 61 Prevention and Control of Major Hazards We have strengthened our efforts to prevent and control major hazards by improving the management framework, the quality of employees and the supervision and inspection process, pushing ahead with capacity building, inculcating a sense of accountability, increasing the level of crisis response, and other aspects. To this end, we have set up a system for investigating, eliminating, managing and controlling major hazards and risks, in which a dynamic database of risk information enables us to get up to speed, in real time, on the status of risk assessment, hazard investigation and elimination and the past rectification measures of our subsidiaries. In 2012, we recorded a total of 69 risks and 9,340 hazards in the system and resolved 8,986 hazards. The percentage of hazards rectified reached as high as 96.2%. Troubleshooting safety risks Equipment and Facilities Management As part of our efforts to create an intrinsically safe environment, we have focused on managing equipment at the source and through the whole life cycle, strengthened the use of new technology for the field maintenance and management of equipment, and transformed the equipment management process from preventive maintenance to predictive maintenance. We implemented an equipment and facilities management system based on supervision and guidance from the headquarters, and actual management and control of the equipment and facilities by the various subsidiaries. By adhering firmly to our six integration principles for the overall management of equipment and facilities, we have maintained all equipment in good operating conditions through timely upgrade and refurbishment. Our inventory of equipment currently covers 1,427 sub-categories in 26 main categories within the petrochemical industry and is gradually shifting towards more sophisticated, large-scale and complex equipment. In 2012, we assessed the availability rate of all key production equipment across the corporation to be at least 98%, and this has ensured the needs of production and development. We believe that computerization is an essential means to improve safety management. In 2012, we rolled out various key management information systems, including a management and control system for investigating and eliminating major hazards and risks, an information system for the QHSE management of contractors, an information system for production safety standards and an accident management system. Emergency Management With hazard identification and risk assessment as the basis, we created a comprehensive emergency management framework comprising the emergency planning system, emergency command system, emergency management information system and emergency response teams. Through training and drills, we managed to increase the overall ability of the corporation to resist risks, and minimize the impact of emergencies.

64 ANNUAL REPORT We adopted a three-tier emergency response management model involving the headquarters, subsidiaries and the operating sites, as well as created a three-tier emergency planning system comprising the crisis management plan of the headquarters, emergency response plan of subsidiaries and the emergency response action plan of the operating sites. Additionally, we continually improve the emergence response plan through drills and practical experience. In 2012, we promulgated the CNOOC Guidelines on Preparing On-Site Emergency Response Action Plans, continuously pushed ahead with development of the emergency management information system, implemented and managed typhoon precautionary measures based on the strategy of taking precautions both onshore and offshore, reinforcing structures to withstand typhoons while avoiding them, and taking extensive precautions while focusing on key areas. Through effective implementation of the comprehensive emergency management framework, the headquarters successfully responded to five emergency events and prevented the occurrence of secondary accidents. Marine oil spill response exercise Contractor Safety Management We choose our partners carefully and increase their safety management standards by binding them to contractual agreements, providing training to them, as well as monitoring and supervising the operational process. To this end, we have developed a contractor HSE management information system in accordance with the Contractor HSE Management Regulations. Additionally, we promulgated the Management Measures for Shallow Water Operational Safety Qualifications and awarded the CNOOC Shallow Water Operational Safety Qualification to contractors that meet the requirements of the ADCI Standards and that of CNOOC for the management of operational safety in the shallow waters.

65 MANAGEMENT 63 Environmental Protection Focusing on low-carbon green growth for ensuring a balance between socioeconomic development and nature is a necessary measure for the building of a beautiful China. With the principle of developing a green, low-carbon, clean and renewable economy in mind, we stepped up our efforts, to transform ourselves into an environmentally friendly company that conserves resources. As we fulfil our environmental responsibilities and strive to achieve win-win outcomes for the economic development of the corporation and the development of ecological civilization in the society, we continually improve and optimize both the business and product structures, implement cleaner production, develop renewable economy, proactively combat climate change, and implement energy saving, emission reduction and environmental protection measures. Climate Change In 2012, we continued to implement the CNOOC Action Plan for Combating Climate Change. As part of this, we have fully fulfilled our commitment to reshape the business structure, develop low-carbon energy sources, underline international collaboration, meet the requirements of laws and regulations, optimise the allocation of resources, implement energy saving and emission reduction measures, adhere to measurement and statistical standards, advocate carbon trading, and to step up efforts on awareness training to improve understanding. In doing so, we focused on staying abreast of and studying the relevant technologies and policies with the aim of providing more variety of low-carbon options for our future development of energy sources. In 2012, we continued to push ahead with offshore natural gas production, expand LNG imports steadily, pay proactive attention to the development of coalbed methane and shale gas, and strive to optimise the allocation of relevant resources at home and abroad. As we continue to improve our natural gas-fired power, wind power, biomass energy, alternative energy vehicle and other projects, we have cumulatively provided the country with almost 71 billion kwh of electricity, which is equivalent to a saving of around 3.57 million tonnes of standard coal. We completed the construction and trial production China s first biodiesel demonstration facility with an annual capacity of 60,000 tonnes, in which we own independent intellectual property rights. As the battery team leader of the Electric Vehicle Industry Alliance, we undertook development in 10 generic technologies, including an advanced manufacturing process, and technology for the management system of motive power batteries. We researched and developed motive power battery systems for six all-electric vehicle models, including Changan A00 and FAW Besturn B50 and have trialled their use on different models. Additionally, we initiated more than 120 research and development projects on compact lithium-ion battery technology and undertook research into 27 topics of the National 863 Programme and other science and technology programmes at the provincial and ministerial levels, including research and development into high-performance, rechargeable lithium-ion motive power battery systems for electric vehicles. Currently, we have received 665 national patents. We have also participated in formulating China s industry standards for motive power batteries.

66 ANNUAL REPORT Type Unit Total Natural Gas-Fired 100 million kwh Wind Power Generation 100 million kwh We are currently developing more than ten CDM projects in the areas of wind power, natural gas-fired power, associated gas-fired power and biodiesel. Five wind power projects already obtained EB registration with the United Nations. We have also developed measures to reduce carbon dioxide emissions by nearly 840,000 tonnes per annum. Two gas-fired power generation CDM projects have traded carbon credits. We led the development of the LNG refuelling methodology for vehicles, which is the first methodology in the field of transportation in China that received approval from the CDM Executive Board (CDM EB). This has helped facilitate the promotion and use of LNG as a transportation fuel. Energy Saving and Emission Reduction It is our belief that energy saving and emission reduction are the key to transforming our development model and increasing our core competitiveness. We have effectively conserved energy and reduced emissions through improving the governance framework, strengthening the assessment of responsibilities in meeting targets, tightening the management control, stepping up efforts in implementing technology reforms, and other measures on an on-going basis. Energy saving and emission reduction monitoring

67 MANAGEMENT 65 As we implement the institutionalized and delicacy management of energy saving across the board, we have created the relatively complete organizational and policy frameworks. We proactively implemented the second phase project of the management information system for energy saving and emission reduction. Currently, we have completed the system development work and implemented the system at most of the production units. In 2012, we managed to save energy equivalent to 538,000 tonnes of standard coal and reduce the annual gross energy consumption per RMB 10,000 of production output to an equivalent of tonnes of standard coal. This means an additional saving of 5% compared to the previous year. We focused on the implementation of ten key energy saving and emission reduction projects, including the utilization of turbine waste heat, conversion of boilers from fuel oil to natural gas, recovery and utilization of associated gas, terminal gas power conversion, recovery of low-pressure fuel gas from terminals, reconstruction of atmospheric- and low-pressure furnaces, dual dehydration of heavy alkali, installation of phase change heat transfer devices, and the optimization of energy systems, which saw energy savings equivalent to 93,000 tonnes of standard coal. In 2012, we completed on-site assessments of the responsibilities of 15 key high-energy-consumption subsidiaries in meeting their energy saving and emission reduction targets for 2011, asked our Energy Saving and Emission Reduction Monitoring Centre to monitor the energy savings and emission reductions of, and perform energy audits on 65 subsidiaries, and assessed and reviewed the energy savings of 17 key fixedasset investment projects. Additionally, we have engaged 330 volunteer supervisors across the corporation, formulated five corporate energy saving standards, including Energy Saving Monitoring Standards for Offshore Oilfields, and invested approximately RMB 349 million in the implementation of 152 energy saving and emission reduction projects. It is our commitment to make proactive efforts to achieve cleaner production. With this in mind, we adopted a pollutant emission quota allocation system, to allow the various operating units to meet the energy saving and emission reduction targets. We have stepped up our efforts to recover and utilise greenhouse gases. For instance, at our FPSO (floating production storage and offloading) facility in the Wenchang oil field, we treat light hydrocarbons in the associated gas we offload and then store them. We are capable of treating and recovering 180,000 cubic metres of associated gas per day. We have also made use of the carbon dioxide emitted from synthetic ammonia facilities, to produce food-grade dry ice and biodegradable plastic. In doing so, we could recover 36,000 tonnes of carbon dioxide each year. In 2012, our sulphur dioxide and chemical oxygen demand (COD) emissions were, respectively, 12,968 tonnes and 1,698 tonnes, down 0.7% and 0.2% from the previous year. We have compiled and submitted to the authorities, emission reduction data for nitrogen oxides (NO x) and ammonia/nitrogen. Over the past year, we emitted 18,337 tonnes of NO x and 443 tonnes of ammonia/nitrogen. On this basis, we will be putting more efforts into taking appropriate emission reduction measures in order to meet our emission targets for these two pollutants in the Twelfth Five-Year Plan period.

68 ANNUAL REPORT Cleaner Production We have always strived to protect the biodiversity of the areas we operate and their surroundings. Protecting the environment is our unwavering commitment during all phases of a project life cycle, from the establishment all the way through to abandonment. We always make it a point to pre-assess environmental risks during the pre-feasibility and feasibility study stages so that we can identify in advance the environmentally sensitive targets in the vicinity of the project, as well as avoid environmental risks and make the necessary arrangements in good time. For instance, when we designed the natural gas pipelines in Fujian province, we laid additional pipelines totalling kilometres in length in order to avoid the Python Nature Reserve in the county of Minhou, Bianfuzhou Wetland Reserve and other nature reserves. This added several hundreds of millions of RMB to our investment. In 2012, Hai Yang Shi You 922 successfully completed well abandonment and also recovered all mud and lithic debris and categorized all other garbage before transporting them back on land for further environmental treatment. This has helped restore the seafloor landscape with no effects posed on any form of marine navigation and fishery production and in turn, achieve a harmonious balance between the development and utilization of marine resources and the protection of the environment. We invested significantly in upgrading the zero emission systems on offshore platforms, including wastewater and human excreta treatment facilities. As we implement the State Council-approved Bohai Blue Sea Action Plan, in earnest, we have implemented a lead sealing policy on the sewerage system of all our vessels in the Bohai Sea, to achieve zero emissions in our vessel operations. Our subsidiary, Huizhou Refinery achieved world-leading levels for the various Cleaner Production indicators, including water consumption, energy consumption and pollutant emission. They have achieved zero discharge of production wastewater and solid wastes in areas near the coast, and 100% compliance of requirements for deep-sea wastewater discharge. Additionally, they became the only refining and chemical company among the 90 companies accredited as a Cleaner Production Company in Guangdong Province. Outside of China, we focus a lot on environmental protection, energy saving and emission reduction issues in the areas we operate and strictly observe the requirements of international conventions and rules, as well as local laws and regulations. In our proactive efforts to fulfil our operating ethos of energy saving, environmental protection and low-carbon green growth, we ensure an effective implementation of the various measures on environmental protection, energy saving and emission reduction through the support of strong organization and management, systematic policy framework, sophisticated equipment and a high quality operations team.

69 MANAGEMENT 67 The garden-like plant of CNOOC Zhongshan Natural Gas Co., Ltd. Renewable Economy We have been adhering strictly to our strategy of developing a clean, green, low-carbon and renewable economy that would reduce resource consumption and pollutant emissions and achieve a harmonious balance between the corporation, society and nature. In 2010, the methodology for air separation using LNG cold energy, which we developed based on the Fujian LNG Cold Energy Project, became the first methodology in the field of cold energy utilization worldwide that received approval from the United Nations. At present, the third-party certification process is complete, and we have submitted an application to the United Nations for review. In 2012, we set up the Cold Energy Utilization Research Institute as an incubator for the CNOOC LNG Cold Energy Utilization Project. At a facility located in the city of Heze in Shandong province, we produce LNG clean energy through the synthesis of methane from the coke oven gas and carbon dioxide emitted by companies in the vicinity under the catalytic action of nickel-based catalysts. In doing so, we have managed to turn trash into treasure, with 140,000 tonnes of waste carbon dioxide recyclable each year. In early 2012, we initiated and set up the CNOOC Marine Environmental and Ecological Protection Public Welfare Foundation with a donation of RMB 500 million. Charged with the responsibility of protecting the marine environment and ecology, the Foundation has initiated scientific research and technological development in this area and has supported international exchange and collaboration activities in the maritime field, as well as other related charitable causes.

70 ANNUAL REPORT INFORMATIONIZATION PROGRESS We adhered to the principle of informationization driven by business and innovation led by IT, and strived to build a digital CNOOC trough integration of informationization and industrialization. FOUR DEEPENS informationization for management acknowledgement Informationization as a part of core competitiveness transformation emphasizing informationization for both production and management appliance data management data integration helping construction and improvement transformation the information support capability in conventional areas information system function realization function facilitating managerial innovation and the transformation of production mode integration achieving synergistic effect and the construction of informationization enterprise transformation transformation strengthening informationization support capabilities in deep waters and overseas realizing the value of informationization Basic Research We achieved a series of research projects, including CIO System Construction of the Group, Optimization and Integration of Organizational Structure and Workgroup for Informationization, Study on the Overall Scheme of Data Management, Overall planning and Scheme of ERP System, Overall Planning and Scheme of Disaster Recovery Centre, Study on the Support Strategy for Overseas Informationization and Decision Support System Construction Strategy. We carried out the intelligent oil field research and design work and chose Huangyan 14-1 gas field as a pilot. Headquarters data centre Future technology city data centre>400 km asynchronous technology Southern area data centre Non-local disaster recovery centre synchronous technology Local disaster recovery centre Chaoyangmen data centre>400 km asynchronous technology

71 MANAGEMENT 69 Basic Management We completed the physical MPLS cloud network building, established a fundamental network platform in accordance with the idea of physically shared, logically independent which met the need by the modern enterprise system. This platform helps mergers and acquisitions and restructuring in business segments considering the fast growth and the development strategy of the Group. Information Security The company completed security assessment of 202 information systems of the Group and recording work at the second and third level information systems; started the information system security evaluation at the third level; completed the training on industrial control system security check and information security for Group s key security position; edited reports on various topics, including The Overseas Investment Information Security Analysis, Information Security Support Strategy for Overseas Investment and Countermeasures to Overseas Investment Risk. Informationization for Production We actively promoted the feasibility study and implementation of planned projects according to the special plan of informationization for production that was put forward in We brought about the idea of a main line, two bases, three categories of systems, four centres to guide the informationization for production, especially for upstream oil and gas E&P. In practice, we carried out the pilot work of data integration and data center construction for integrated E&P and completed a series of work, including the preliminary investigation and analysis, integrated data model design, the source collection standardization and interconnection networking system building. Aiming to support the deepwater strategy, we carried out studies on the overall solution deepwater communication technology, including Solutions for Asset management in oilfields a main line two bases Offshore communication data management Geographic information system, knowledge management system, decision support system three categories four centres Drilling operation centre, production centre, oil reservoir research centre, emergency command centre

72 ANNUAL REPORT Communication in Distant Waters and The Emergency Communication System in Distant Waters, and worked out the standards for building the communication system in distant waters. We completed the production data acquisition and the construction of demonstration platform for LNG production, realized the real-time remote inquiry and display on the production data of LNG receiving terminals, pipelines, and power plants. We also completed the pilot project of operation and management system building and optimized/upgraded the informationization for production command, operation and supervision. Data Resource Construction and Management On the basis of the current 15 categories of data (material, equipment, etc.) under its management, in 2012, the company s main data management platform (MDM) achieve the centralized management of 13 categories of data, including the SAP account, secondary cost elements and employees, expanding the scope of main data management and release; completed pilot cleanup of more than 35,000 data packages, verified the feasibility of material classification and template optimization. Digital Offshore Oilfield In recent years, CNOOC has been endeavouring to promote the construction of digital offshore oilfield. Up to 2012, we initially established data management systems for exploration, development, drilling and engineering, and developed various appliances including exploration management, pipeline integrity management, key equipment remote diagnosis, expertise support, comprehensive analysis of production data, while-drilling decision support, geographical information, emergency safety management, geology and reservoir research, and so on. Professionals can realize trans-regional virtual collaboration with the information means to do remote analysis, decision and command for oilfield production, drilling operations, emergency management, etc. This mode helps to ensure the high efficient oilfield production, low cost with safety and environmental protection, but also promote the transformation of oilfield production and management. Oilfield animation of virtual reality observation room

73 MANAGEMENT 71 HUMAN RESOURCE MANAGEMENT The principle of putting people first underpins the sustainable development of a company. At CNOOC, we firmly believe that employees are our most valuable resource and asset and put them at the heart of what we do. We want our employees to grow together with us. As we fulfil our responsibilities to them, in earnest, we improve their working conditions, create a career development framework, care for their mental health, and promote diversity and employment of locals in the areas we operate. Salary and Benefits Management We respect the applicable laws and policies of the jurisdictions in which we operate and have established a competitive salary and benefits framework with marketization of labour, monetization of allocations and socialization of benefits in mind. The purpose of which is to allow employment and income flexibility. As we continue to implement the corporate annuity scheme across the board, we constantly increase the reach, multidimensionality and comprehensiveness of our employee insurance framework. Additionally, we provide employees with physical examination, paid leave, difficulty assistance, critical illness relief and various other benefits as part of our efforts to help them solve any worries they may have. We have improved our incentive structure by increasing our efforts to reward the primary business units and key employees. In our planning and coordination of the upstream reward measures, we have created a reward system for the primary business and formulated the measures for rewarding major oil and gas exploration discoveries as well as significant contributions to development and production, construction, and engineering technology. At the end of 2012, our workforce reached 102,562. Master and students

74 ANNUAL REPORT Career Development We adopt a systematic talent development strategy, aiming to improve our human resource planning, to train and shape our employees to international levels and provide them with career development path. We strive to create a better employee development framework that allows us to attract top talent, groom talent for key projects, and recruit and retain technical professionals. As part of our efforts to create a pool of expertise and encourage appropriate personnel movements within the company, we open our vacancies to internal applicants through the ehr system. In doing so, we provided them with a wealth of opportunities to grow and develop their careers. As we continually improved the personnel policy framework for officers, we strengthened the performance evaluation, competitive selection, interaction and grooming of management staff with the purpose of ensuring proper appointment of managers. With an enhanced nomination system in place, we have put in serious efforts, to select personnel and fill vacancies based on open competition. In 2012, we filled 75% of the 36 vacancies for management officers through a competitive selection procedure and have successfully organized open recruitment exercises to fill 5 vacancies for the Chief Financial Officers of our subsidiaries. Additionally, we selected and appointed senior management positions, including the Deputy General Manager of CNOOC Gas and Power Group and Vice President of China BlueChemical through open competition. Professional Expertise Development Strengthening the selection and management of high-end technical professionals is our priority. We have been improving the expert assessment framework and proactively pushing ahead with the building of a network of T Series professionals. In our on-going efforts to optimise the assessment framework, by grade level, category and specialization, we have, since 2007, selected 278 experts across two grades through the framework. We actively promote the implementation of the system of T Series professionals across our subsidiaries. We formulated the plan to implement the T Series technical personnel system for development and mining, well drilling and completion, exploration, information technology and other specialization, to improve the relevant implementation measures and the supporting policies of CNOOC Engineering and other subsidiaries. In our on-going efforts to assess professional qualifications, we named 110 personnel across six fields Professional-Rank Senior Professionals, and 258 personnel Senior Professionals. Additionally, in our increased efforts to nominate and select national technical experts, we named 15 candidates to enjoy special subsidies from the government. Four experts received the title of National Energy Policy Research Expert. Since 2008, we have attracted a total of 291 experienced high-end Returned Overseas Scholars with a significant track record of science and technology research achievements and seven experts under the Recruitment Programme of Global Experts (also called the Thousand Talents Programme), with 85% having Masters, Doctorate or higher qualifications. We placed these experts in key positions across different fields within our group of companies. As part of the effort to strengthen management of the vocational qualifications of professionals, we arranged for those working in engineering projects across the corporation, to take certification exams. 1,063 participated and 93% passed, of which six obtained Large-Project Manager qualification, and 36 obtained Experienced (Senior) Project Manager qualification. Additionally, we organized and supervised the assessment of vocational qualifications across the board and awarded the title of Exploration Manager and above to 50 personnel.

75 MANAGEMENT 73 In our on-going increased efforts to build a team of technical experts, we have established standards for 65 categories of workers, developed 18 sets of training materials and created a knowledge base for 39 categories of workers. These formed the basis for training and assessing front-line skilled workers. Almost 10,000 workers participated in vocational skills assessment, and a record high of more than 6,000 obtained higher qualifications. We have 14 National Technical Experts on board. Among all skilled workers from the main categories, 28.99% hold at least Senior Skilled Worker qualification and 3.02% are technicians or senior technicians. For the first time, we recognized skilled workers across the board and have groomed 35 outstanding performing teams, 35 outstanding individuals and 30 outstanding performance assessors. In 2012, we systematically reviewed the rules and structure for shaping skilled workers, and have essentially completed the Research Report on the Rules and Structure for Shaping CNOOC Skilled Workers. Employee Training As we proactively promote a learning environment within the organization, we continually strive to create a pool of expertise through increased training efforts. We have implemented a training framework involving collaborative efforts across all levels of the corporation, each with clear roles and responsibilities. By way of coherent planning, division of responsibilities, focusing on relevant areas, and systematic management, we hope to widen participation across the board and have a comprehensive framework in place for delivering large-scale training in a variety of subjects through different channels to employees at all levels. Additionally, we made use of the National Key Laboratories and our deepwater and overseas projects to provide training to high-end professionals whenever required, in the hope of grooming them for key projects. Training Centre: Oilfield production flow simulation room

76 ANNUAL REPORT In 2012, we edited the CNOOC Training Master Plan for the first time as part of our on-going efforts to improve the attitudes and competencies of our employees. We have invested a total of RMB 206 million in delivering 42,016 training sessions of various kinds to 735,083 personnel, chalking up an average annual training cost of RMB 2,287 and duration of 81.7 hours per employee. We set up an awareness promotion team, split into two groups for northern and southern China, to organise and conduct ten sessions of presentations on the vision and goals of the Second Leap Forward Programme in Beijing, Tianjin, Yanjiao (Hebei province), Shanghai, Shenzhen, Huizhou, Zhanjiang, and Dongfang (Hainan province). A total of 2,230 CNOOC employees attended these presentations, at the end of which they fully understood the grand strategy and accepted and supported the implementation of the programme. In order to meet the development needs of our overseas operations, we expanded the channels to deliver training across all levels in the areas of key professional knowledge and skills, including unconventional oil and gas exploration and development, foreign oil finance and taxation, modern project management, and operations management. We organized and conducted a systematic two-month training course on unconventional oil and gas technology management in the University of Calgary for 24 mid-level technical managers. The course covered more than 20 topics in four key areas, namely, development of thickened oil, shale gas and thickened carbonate oil, and laws and regulations. Additionally, in collaboration with Sinopec, we picked eight mid-level finance managers from across the corporation and sent them to the United States for a four-month dedicated training on foreign oil finance management % 9.4% 2.3 % 44.6 % 26.7 % 21.8 % 5.3 % Staff Age Groups 41.2 % Job Structure Staff Educational Levels 34.9 % 27.1 % 28.7 % 16.0 % 22.0 % 20 and under Management positions Technical positions Operation positions Graduate School University College Specialized Secondary/Technical/ Vocational School Higher Secondary School and other

77 MANAGEMENT 75 CORPORATE CULTURE Corporate Culture Building Corporate culture is the soul for a company and the power source for the corporate development. In 2012, the company took the Outline of the Second Leap Forward as guide, Energy For All as vision, be dedicated, effective and innovative as spirit, promoted the corporate culture building, and provided a powerful ideological guarantee and spiritual motivation for the efficient implementation of the Second Leap Forward Programme. The company organized a series of activities to support the corporate culture building including The CNOOC Spirit in my mind speech contest and the Recalling the CNOOC glory, talking about the dreams of youth story-telling contest, organizing Offshore Iron Man Hao Zhenshan and staff representatives to explore the source of Iron Man spirit in Daqing and organizing the CNOOC Spirit presentation team to do a speech tour in the Group. Learning and practicing the CNOOC Spirit gained stream across the Group. The company created the China Offshore Oil Newspaper Wednesday Edition and mobile phone newspaper and revised both intranet and internet websites of the company. These improved the timeliness and information richness of promoting the corporate culture. CNOOC s first large-scale comprehensive and permanent exhibition platform - Chinese offshore oil industry Museum officially opened and received more than 7,000 visitors in This further expanded the company s social influence. The company organized the art performance Path of Leap Forward - to celebrate CNOOC s 30 th Anniversary, started the edition of CNOOC s 30 years, publishing the feature film Glorious 30 Years, issued the special commemorative stamps Offshore Oil and organized a series of theme activities to reflect the extraordinary path and glorious achievements that CNOOC experienced during the past 30 years.

78 ANNUAL REPORT The book launch for Win at Grassroots Ten Oceanic Person of Year Zhu Jiang Corporate Cultural Activities The drilling of Hai Yang Shi You 981 was paid great attention by all circles of the society. This event received 33 CCTV broadcast reports and nearly 700 planar media reports, which were reprinted 6,000 times on the internet. The Offshore Iron Man Hao Zhenshan met the media as the May 1 Model Worker in Beijing and Shenzhen. The company and the State Oceanic Administration co-sponsored the China Oceans Day in 2012 and held the forum Moving toward Deep Waters China s strategies for exploring oceanic energies. Zhu Jiang, from the CNOOC Research Institute was named Ten Oceanic Persons of the Year The company launched the first selection of Double 100 Double 10 Red Team and basic model workers at grassroots, edited and published books like Win at the grassroots, I know your heart and so on, in order to help improve management quality and soft power of grassroots managers. Our subsidiaries, CNOOC Enterprises Corporation and CNOOC Tianjin Chemical Research & Design Institute were awarded National civilized unit and the CNOOC Research institute won the Capital civilized unit in Li Qingping from Research Institute won the Ten National Female Economic innovative Figures. COSL Hai Yang Shi You 719 won the National Workers Vanguard. The company organized a series of theme activities to celebrate the 90 th anniversary of the Youth Communist League, for example, organized study group as the through-train for young employees to talk with senior managers; formed 252 Guo Mingyi Benevolence Teams, with 7,422 youths actively engaged in the initiatives of the various teams through participation in teaching, helping the poor, low-carbon environmental protection and other volunteering work or community welfare activities; organized evaluation of 100 achievements of the Youth Innovation and Efficiency Improvement Programme; launched the Striving for young pioneers, dedicating youth to deepwater exploration activities; organized the Second CNOOC Young Pioneer selection; carried out the investigation of state of mind and psychological status of young employees recruited during 2009 to 2012, in order to provide the necessary information to further mobilize young employees and improve the work of the Communist Youth league.

79 MANAGEMENT 77 CORPORATE CITIZENSHIP The development of a company requires strong support from the whole of society, which, in turn, requires active contributions from companies in order to develop. As we forge ahead aggressively to ensure energy supply and create economic value, we have never forgotten our roles and responsibilities as a corporate citizen. We commit and dedicate ourselves to improving the livelihoods and development of communities through participation in charitable causes. Humanitarian Engagement Aid to Tibet 2012 was a pivotal year for our fourth round of aid to Tibet, in which we completed and commissioned nine humanitarian projects. Aid to Sichuan In 2012, the nine projects, which we funded and built to render aid to Sichuan, have all been commissioned. These facilities now serve seven million people in Deyang, Luojiang County and Guangyuan. Nearly 10,000 students have moved into new classrooms capable of sustaining earthquakes of magnitude greater than 8. This marked the completion of the largest ever series of humanitarian projects in the 30-year history of CNOOC. Eliminating Anaemia in Infants and Young Children In 2012, we contributed RMB 1 million to support the project of China Children and Teenagers Fund (CCTF) to eliminate anaemia in infants and young children. Poverty Reduction Supporting Legal Aid Lifeline Express In 2012, we contributed RMB 1 million to support the 1+1 legal volunteer programme of China Legal Aid Foundation to meet the legal needs of the poor in counties with no lawyers available. We donated RMB 500,000 to China Lifeline Express Foundation to support the surgeries of 250 poor cataract patients in the city of Baise in Guangxi province. Mother Water Cellar Project In 2012, we donated RMB 2 million to CWDF, to support the implementation of the Mother Water Cellar Project in the city of Yan an in Shaanxi province. In doing so, we helped serve 7,436 people in the area. We have asked CWDF to set up a dedicated bank account for the central management of project funds and to keep records of all grants to beneficiaries in order to ensure transparency and accountability of the use of funds. Disaster Relief In 2012, we donated RMB 3 million each to the provinces of Yunnan and Guizhou to support the disaster relief efforts in earthquake affected areas. In Yunnan, the main structure of the buildings in all seven COSL-financed Project Hope primary schools remained intact and undamaged. All 2,338 students and 94 teachers were safe and sound, and residents in the vicinity gathered in the schools for refuge. Educational Assistance In 2012, we continued to support the education cause through various means, including donations to Project Hope primary schools, establishment of scholarships and bursaries, and financing of social institutions. Just to name a few, in the city of Yan an in Shaanxi province, we have donated more than RMB 400,000 worth of money and materials and established a long-term assistance relationship with Nanguan Primary School, and in the city of Kaili in Guizhou province, we have donated RMB 500,000 to finance the construction of student canteens at Diwu Primary School. All 12 COSL-financed Project Hope primary schools in the provinces of Yunnan and Hainan started operations during the year with donations of more than RMB 500,000. We received three awards from Hainan province, including the 20 th Anniversary Award for Outstanding Contribution to Project Hope. We have also continued to award scholarships to outstanding students in China University of Petroleum and other higher education institutions.

80 ANNUAL REPORT As part of our commitment to give back to the society, we constantly engage ourselves in poverty reduction, disaster relief, educational support and assistance, and other charitable causes by providing whatever intellectual, material and financial support within our means. In 2012, we donated a total of RMB million and received the China Charity Award, the highest possible award in China for charitable giving. As we continually explore different poverty reduction measures, we focus not only on resolving immediate needs, but also enabling sustainable livelihoods and self-development capabilities in the communities we serve. In 2012, we received the honour of an Outstanding State-Owned Key Enterprise in Poverty Reduction and Development, won the Lifeline Express 15 th Anniversary Special Award, and were among the first batch of companies, to be honoured with an appreciation plague from China Women s Development Foundation (CWDF) for being a strategic partner of the Mother Water Cellar Project. Construction of Harmonious Mining Communities As part of our proactive community engagement efforts to address the living needs of residents, we carried out a series of heart-warming projects that would help create harmonious ambiences and beautiful landscapes in the communities. In the Bohai mining area, we have (1) constructed a security network covering the entire community, (2) established a framework involving the combined efforts of the water supply, electricity supply, heat supply, water drainage, facilities management, medical insurance and other functional departments, to serve the needs of the residents, (3) introduced the Interim Measures for Harmony and Stability in the Bohai Mining Community and perfected the organizational stability, environment, public services, and relief assurance frameworks for the community, (4) implemented the Implementation Rules for Bohai Retiree Services, to create a new service brand incorporating the provision of family, cultural and healthy lives after retirement, and (5) innovated a personalized relief model in our implementation of the third phase of One Hundred Households Assistance Programme and the Quality of Life Improvement Assistance Model modelled after the livelihood assistance model. In the western South China Sea, we have proactively (1) pushed forward plans to improve the mining community services, including water supply, electricity supply, heat supply and water drainage, (2) carried out poverty reduction programmes, to help solve the worries of needy employees and their family members, and (3) organized 186 sessions of cultural and sports activities to enrich the leisure lives of retired employees, drawing an attendance of around 45,000. Huizhou Refinery Open Day

81 MANAGEMENT 79 Community Engagement Overseas Becoming a responsible global corporate citizen is our goal. Overseas, in the areas we operate, we adhere to the principle of promoting harmony and achieving win-win outcomes, and take the initiative to assimilate into the local communities. Ever since we entered the Ugandan market, we have been paying regular visits to Buhuka in Hoima District, where the Kingfisher oil field is. We helped the residents repair their water tower, launched an exercise to donate supplies in support of the education cause, as well as donated medicines to two hospitals in Ntoroko District, to help ease medicine shortage. In Indonesia, we respect the religion, customs and traditions of our local employees. We let them have enough time for prayers and provide them with Halal food. During Ramadan (Muslim fasting month) and Idul Adha (Muslim Day of Sacrifice), we help them buy festive gifts. We have helped the residents of Pulau Kelapa in the Thousand Islands to rebuild their jetty, plant mangrove forests, and build a turtle breeding base. Every year, we offer training courses to the students of almost 70 schools in the Thousand Islands, as well as award scholarships. In Qatar, we commit ourselves to protect the local fisheries within the areas we operate. We strictly require our workers to exercise caution in avoiding the drift nets and fish cages during operations, and to get along amicably with the fishermen. As one of the partners of the OML 130 project in Nigeria, we have been donating approximately USD 2 million annually for educational investment and personnel training purposes. Additionally, we have provided the local communities with medical emergency response equipment and helped build the Federal Central Neuropsychiatric Clinic. Our Iraq project team made donations to the families of needy employees and issued safety warnings to all contractors, to remind them to observe minefield safety regulations when in the camps and operation areas. As part of our on-going efforts to support and contribute to the cultural exchange between China and Australia, in 2012, we sponsored for the third time, the Western Australia qualifying round for the World Chinese Bridge Competition for University Students. In Canada, we have, since 2012, set up a three-year scholarship programme at the Schulich School of Engineering at the University of Calgary and financed the scholarship programmes of Calgary Homeless Foundation and the Faculty of Social Work at the University of Calgary. These have brought benefits to almost 1,000 people. CNOOC sponsors the Chinese Bridge Competition of the University of Western Australia Happy Ugandan primary school students