PETROCHINA COMPANY LIMITED

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this Circular or as to the action to be taken, you should consult a licensed securities dealer or other registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser. If you have sold or otherwise transferred all your shares in PetroChina Company Limited, you should at once hand this Circular together with the accompanying form of proxy to the purchaser or the transferee or to the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. PETROCHINA COMPANY LIMITED (a joint stock limited company incorporated in the People s Republic of China with limited liability) (Stock Code: 857) (A) CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION SUBSCRIPTION FOR RMB2.441 BILLION NEW REGISTERED CAPITAL OF CHINA PETROLEUM FINANCE CO., LTD (B) SHARE ISSUE MANDATE Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders of PetroChina Company Limited All capitalised terms used in this Circular have the meanings set out in the section headed Definitions on pages 1 to 4 of this Circular. A letter from the Board is set out on pages 5 to 13 of this Circular. A letter from the Independent Board Committee containing its advice to the Independent Shareholders in respect of the Subscription Agreement pursuant to which the Subscription will be effected is set out on pages 14 to 15 of this Circular. A letter from ICBCI, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement pursuant to which the Subscription will be effected is set out on pages 16 to 28 of this Circular. A notice convening the AGM to be held at Beijing Oriental Bay International Hotel, 26 Anwai Xibinhe Road, Dongcheng District, Beijing, the PRC on Thursday, 20 May 2010 at 9:00 a.m. is set out on pages N-1 to N-4 of this Circular. Whether or not you are able to attend the AGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed on it as soon as practicable and in any event by not later than 24 hours before the time appointed for holding the AGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjourned meeting should you so wish. 31 March 2010

2 CONTENTS Page Definitions Letter from the Board (A) Connected Transaction and Discloseable Transaction Subscription for RMB2.441 Billion New Registered Capital of China Petroleum Finance Co., Ltd. 1. Introduction The Subscription Agreement Reasons for and Benefits of the Subscription Relationship between the Parties and Listing Rules Implications Information on the Company Information on CNPC Information on CPF (B) Share Issue Mandate 8. Share Issue Mandate (C) General 9. The AGM Recommendations Additional Information Letter from the Independent Board Committee Letter from ICBCI Appendix General Information Notice of AGM N-1 i

3 DEFINITIONS In this Circular, unless the context otherwise requires, the following expressions have the meanings set out below: ADS(s) The American Depository Share(s) issued by the Bank of New York as the depository bank and listed on the New York Stock Exchange, with the ADS representing 100 H Shares AGM the annual general meeting of the Company to be held at Beijing Oriental Bay International Hotel, 26 Anwai Xibinhe Road, Dongcheng District, Beijing, the PRC on Thursday, 20 May 2010 at 9:00 a.m., the notice of which is set out on pages N-1 to N-4 of this Circular, and any adjournment thereof associate(s) has the meaning given to it in the Listing Rules A Shares The domestic ordinary shares issued by the Company to domestic investors for subscription and trading on the Shanghai Stock Exchange and are denominated in RMB Board the board of directors of the Company Banking Regulatory Agencies the China Banking Regulatory Commission and its agencies Circular this circular dated 31 March 2010 CBRC the China Banking Regulatory Commission CNPC China National Petroleum Corporation, a State-owned enterprise incorporated under the laws of the PRC and the controlling shareholder of the Company, and for the purpose of this Circular, shall include all subsidiaries, branches and units of CNPC other than the Group CPF China Petroleum Finance Co., Ltd, a company incorporated under the laws of the PRC with limited liability, and is 92.5% owned by CNPC and 7.5% owned by the Company as at the date of this Circular 1

4 DEFINITIONS Company Completion Date connected person(s) controlling shareholder Director(s) Group HK$ Hong Kong PetroChina Company Limited, a joint stock company limited by shares incorporated in the PRC on 5 November 1999, during the reorganisation of CNPC and under the Company Law of the PRC, the H Shares of which are listed on the Hong Kong Stock Exchange with ADSs listed on the New York Stock Exchange, and the A Shares of which are listed on the Shanghai Stock Exchange the date falling within fifteen business days after the date of satisfaction of all the conditions precedent pursuant to the Subscription Agreement, i.e. the date of consideration payment by the Company has the meaning given to it in the Listing Rules has the meaning given to it in the Listing Rules the directors of the Company the Company and its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong The Hong Kong Special Administrative Region of the PRC H Share(s) the overseas-listed foreign share(s) in the Company s share capital, with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange and subscribed for in Hong Kong dollars, and which include the H Share(s) and the underlying ADS(s) Hong Kong Stock Exchange Independent Board Committee Independent Financial Adviser or ICBCI The Stock Exchange of Hong Kong Limited the independent committee of the Board comprising all the independent non-executive Directors of the Company, being Mr. Chee-Chen Tung, Mr. Liu Hongru, Mr. Franco Bernabè, Mr. Li Yongwu and Mr. Cui Junhui ICBC International Capital Limited, a licensed corporation carrying out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO 2

5 DEFINITIONS IFRS Independent Shareholders Latest Practicable Date Listing Rules PRC or China PRC GAAP RMB SFO Share(s) Shareholder(s) Subscription Subscription Agreement subsidiaries International Financial Reporting Standards Shareholders other than CNPC and its associates 24 March 2010, being the latest practicable date prior to the printing of this Circular for the purpose of ascertaining certain information contained in this Circular The Rules Governing the Listing of Securities on the Hong Kong Stock Exchange the People s Republic of China, but for the purpose of this Circular and for geographical reference only, references in this Circular to China and the PRC do not apply to Taiwan, the Macau Special Administrative Region and Hong Kong the Generally Accepted Accounting Principles in China Renminbi, the lawful currency of the PRC Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong ordinary shares of the Company, including the A Share(s) and the H Share(s) the shareholder(s) of the Company the capital contribution by the Company of RMB9.618 billion in cash to (a) subscribe for a total of RMB2.441 billion new registered capital of CPF and (b) account the remaining RMB7.177 billion into the capital reserves of CPF pursuant to the Subscription Agreement the subscription agreement dated 25 March 2010 entered into between the Company, CPF and CNPC in respect of the Subscription has the meaning given to it in the Listing Rules 3

6 DEFINITIONS This Circular contains translations between RMB and Hong Kong dollar amounts at RMB1.00 = HK$1.14, being the exchange rate prevailing on 24 March The translations should not be taken as a representation that the RMB could actually be converted into Hong Kong dollars at that rate or at all. The English language text of this Circular and the accompanying form of proxy shall prevail over the Chinese language text in the event of any inconsistency. 4

7 LETTER FROM THE BOARD PETROCHINA COMPANY LIMITED (a joint stock limited company incorporated in the People s Republic of China with limited liability) (Stock Code: 857) Board of Directors: Jiang Jiemin (Chairman) Zhou Jiping (Vice Chairman) Wang Yilin Zeng Yukang Wang Fucheng Li Xinhua Liao Yongyuan Wang Guoliang Jiang Fan Chee-Chen Tung* Liu Hongru* Franco Bernabè* Li Yongwu* Cui Junhui* Legal Address: World Tower 16 Andelu Dongcheng District Beijing PRC * Independent non-executive Directors 31 March 2010 To the Shareholders Dear Sir or Madam, (A) CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION SUBSCRIPTION FOR RMB2.441 BILLION NEW REGISTERED CAPITAL OF CHINA PETROLEUM FINANCE CO., LTD (B) SHARE ISSUE MANDATE (A) CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION SUBSCRIPTION FOR RMB2.441 BILLION NEW REGISTERED CAPITAL OF CHINA PETROLEUM FINANCE CO., LTD 1. INTRODUCTION The Board refers to the announcement of the Company dated 25 March 2010 relating to the Subscription Agreement. The purpose of this letter is to provide you with information 5

8 LETTER FROM THE BOARD necessary to enable you to make an informed decision on whether to vote for or against the ordinary resolutions to be proposed at the AGM in relation to the approval of the Subscription Agreement. The Company has entered into the Subscription Agreement with CPF and CNPC on 25 March 2010, pursuant to which the parties have agreed for the Company to contribute a total capital of RMB9.618 billion (approximately HK$ billion) to (a) subscribe for a total of RMB2.441 billion new registered capital of CPF (approximately HK$2.783 billion) and (b) account the remaining RMB7.177 billion into the capital reserves of CPF. As each of CPF and CNPC is a connected person of the Company, and as the applicable percentage ratios of the transactions contemplated in the Subscription Agreement exceed 5% but are less than 25%, the Subscription constitutes a connected and discloseable transaction of the Company and is subject to the reporting, announcement and independent shareholders approval requirements under Chapter 14A and 14 of the Listing Rules. Each of CNPC and its associates, who held an aggregate of % of interest in the Company as of the Latest Practicable Date, will abstain from voting on the resolution to approve the Subscription Agreement. The Independent Board Committee, comprising all of the independent non-executive Directors, has been established to advise the Independent Shareholders, and ICBCI has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders, in each case on the terms of the Subscription Agreement pursuant to which the Subscription will be effected. 2. THE SUBSCRIPTION AGREEMENT Date: 25 March 2010 Parties: (a) the Company; (b) (c) CPF; and CNPC. The Subscription and the new registered capital of CPF Pursuant to the Subscription Agreement, the Company will contribute a total capital of RMB9.618 billion (approximately HK$ billion) to (a) subscribe for a total of RMB2.441 billion new registered capital of CPF (approximately HK$2.783 billion) and (b) account the remaining RMB7.177 billion into the capital reserves of CPF. Prior to the Subscription, the capital contribution by the Company to CPF was RMB225 million, representing approximately 7.5% of the total registered capital of CPF. Following completion of the Subscription, the total registered capital of CPF will be 6

9 LETTER FROM THE BOARD increased from RMB3 billion to RMB5.441 billion, in which an aggregate of RMB2.666 billion will be contributed by the Company, representing approximately 49% of the enlarged total registered capital of CPF. The capital contribution by CNPC to CPF remains RMB2.775 billion, which represents approximately 51% of the enlarged total registered capital of CPF following completion of the Subscription. Consideration BDO China Shu Lun Pan CPAS ( ), public accountants independent of the Company, audited the financial statements of CPF as at 30 June In accordance with the audited financial statements of CPF prepared under the PRC GAAP as at 30 June 2009, the book value of the total assets, the liabilities and the net assets of CPF was RMB billion, RMB billion and RMB billion respectively and following adjustments based on the equity approach, the total assets of CPF were RMB billion and the net assets were RMB billion. Beijing Zhongfeng Assets Appraisal Co., Ltd. ( ), valuers independent of the Company, conducted independent asset valuation on the market value of the total equity attributable to equity holders of CPF. Two different approaches were adopted in the valuation, namely the asset-based approach and the income approach. Based on the calculation adopting the asset-based approach, as at 30 June 2009, the valued total assets of CPF was RMB billion, which compared to the book value of the total assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), increased by RMB0.393 billion, representing a premium of 0.13%. The valued liabilities of CPF was RMB billion, which compared to the book value of the liabilities of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), decreased by RMB0.043 billion, representing a discount of 0.02%. The valued net assets of CPF was RMB billion, which (i) compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), increased by RMB0.435 billion, representing a premium of 3.88%, and (ii) compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP and following adjustments based on the equity approach), increased by RMB0.196 billion, representing a premium of 1.72%. Based on the calculation adopting the income approach, as at 30 June 2009, the valued total equity attributable to equity holders of CPF was RMB billion, which compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), increased by RMB0.601 billion, representing a premium of 5.36% and compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP and following adjustments based on the equity approach), increased by RMB0.362 billion, representing a premium of 3.16%. 7

10 LETTER FROM THE BOARD According to Beijing Zhongfeng Assets Appraisal Co., Ltd., valuer independent of the Company, the advantage of the asset-based approach is that it directly reflects the value of each category of assets and the disadvantage is that it does not appropriately take into account the future value of assets, which may result in insufficient evaluation of the comprehensive corporate value and the value of the intangible assets. However, the income approach is to evaluate assets from the perspective of the basis of the fair market value of the assets (which means the prospective profitability of assets). Since CPF is both a capital-intensive and intelligence-intensive enterprise, the income approach is a better approach to present the total equity value attributable to equity holders of CPF in its entirety with accuracy. Accordingly, Beijing Zhongfeng Assets Appraisal Co., Ltd. adopted the income approach in its valuation to conclude its final valuation results. Accordingly, the consideration for the Subscription was arrived at after arm s length negotiations on a fair and equal basis, and taking into account the valued total equity attributable to equity holders of CPF as at 30 June 2009 as well as the total capital of CPF prior to the Subscription. The consideration was determined also based on the market environment, the operation status, the profitability and the cash flow generating ability of CPF. The Company will subscribe for the new registered capital of CPF pursuant to the Subscription Agreement. As such, there was no original and/or ascertainable purchase cost paid by CPF. The total consideration under the Subscription Agreement amounts to approximately RMB9.618 billion (approximately HK$ billion). The consideration will be paid in full in cash on the Completion Date as agreed in the Subscription Agreement to a designated account of CPF. The consideration will be satisfied in full from the Company s internal funds. Conditions precedent The payment of consideration by the Company to CPF is conditional upon satisfaction in full of the following conditions: (a) (b) (c) each of the Company and CNPC having obtained their respective effective approvals from their respective internal authorities of the Subscription; CPF having obtained effective approvals from its internal authorities of the Subscription, including but not limited to: (i) the subscription plan, (ii) changes to the registered capital and share structure and amendments to the articles of association of CPF resulting from the Subscription, and (iii) other matters in relation to the Subscription; the approval by the Banking Regulatory Agencies of the Subscription having been obtained; and 8

11 LETTER FROM THE BOARD (d) all undertakings, representations and warranties given by the parties in the Subscription Agreement being true and accurate. The Subscription Agreement s becoming effective The Subscription Agreement will become effective from the date on which all necessary internal corporate authorizations and approvals in relation to the execution and performance of the Subscription Agreement are duly obtained by each of the Company, CPF and CNPC. 3. REASONS FOR AND BENEFITS OF THE SUBSCRIPTION The Board considers that the Subscription is an important step to enhance the investment return of the Company and to further materialise the internalisation of financial services and benefits in the CNPC group with the following significances: (a) (b) (c) following completion of the Subscription and as a result of the increase of the Company s shareholding in CPF from 7.5% to 49%, the new shareholding structure is more compatible with the quantity of business between the Company and CPF, and the Company will consequently enjoy more benefits from the robust capital management income of CPF, which will bring new opportunities for the Company to enhance its financial profitability and to strengthen its return on equity to the shareholders of the Company; resulting from the enhanced strength of CPF following the Subscription, the Company will benefit from more integrated financial services provided by CPF domestically and overseas, as well as reduced financing and trading costs of the Company; and the Subscription will strengthen CPF s capital adequacy, improve its financial performance indexes and satisfy the long-term development and regulatory necessities for CPF, which will in return provide more comprehensive accounting management services and financial support to the members of the CNPC group, including the Company. The Board is of the view that the transactions contemplated in the Subscription Agreement are on normal commercial terms and entered into in the ordinary and usual course of business of the Company, are fair and reasonable and in the interests of the Company and its shareholders as a whole. 4. RELATIONSHIP BETWEEN THE PARTIES AND LISTING RULES IMPLICATIONS CNPC is the controlling shareholder of the Company. CPF is 92.5% owned by CNPC and 7.5% owned by the Company as at the date of this Circular. Therefore, both CNPC and CPF are connected persons of the Company pursuant to Rule 14A.11 of the Listing Rules. Accordingly, the Subscription constitutes a connected transaction of the Company. 9

12 LETTER FROM THE BOARD As the applicable percentage ratios of the transactions contemplated in the Subscription Agreement exceed 2.5%, the Subscription constitutes a connected transaction of the Company subject to the reporting, announcement and independent shareholders approval requirements for the purpose of Chapter 14A of the Listing Rules. As the applicable percentage ratios of the transactions contemplated in the Subscription Agreement exceed 5% but are less than 25%, the Subscription also constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Pursuant to Chapter 14A of the Listing Rules, shareholders approval is required to approve the connected transaction and any connected person with a material interest in the relevant connected transaction are required to abstain from voting on the relevant resolution at the AGM. Accordingly, CNPC and its associates will abstain from voting on the resolution to approve the Subscription Agreement at the AGM. The Independent Board Committee, comprising all of the independent non-executive Directors, has been established to advise the Independent Shareholders, and ICBCI has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders, in each case on the terms of the Subscription Agreement pursuant to which the Subscription will be effected. Their respective views are included in the letter from the Independent Board Committee and the letter from the Independent Financial Adviser set out in this Circular. 5. INFORMATION ON THE COMPANY The Company was incorporated in the PRC on 5 November 1999 as a joint stock company limited by shares, during the reorganisation of CNPC, under the Company Law of the PRC. The Company s H Shares are listed on the Hong Kong Stock Exchange with American Depository Shares listed on the New York Stock Exchange, and its A Shares are listed on the Shanghai Stock Exchange. The Company is the largest oil and gas producer and distributor, playing a dominant role in the oil and gas industry in China. It is not only one of the companies with the biggest sales revenue in China, but also one of the largest oil companies in the world. The Company is engaged in extensive petroleum and natural gas-related activities, including principally the exploration, development, production and sale of crude oil and natural gas; the refining, transportation, storage and marketing of crude oil and petroleum products; the production and sale of basic petrochemical products, derivative chemical products and other petrochemical products; and the transmission of natural gas, crude oil and oil products as well as the sale of natural gas. 10

13 LETTER FROM THE BOARD 6. INFORMATION ON CNPC CNPC is a petroleum and petrochemical conglomerate that was formed in July 1998 as a result of the restructuring launched by the State Council of the predecessor of CNPC, China National Petroleum Company ( ). CNPC is also a state-authorised investment corporation and a state controlled company. CNPC is a multi-regional, multiindustry, multinational comprehensive energy company integrating upstream and downstream operations, domestic and international trade as well as production and distribution operated in line with the modern enterprise governance regime. 7. INFORMATION ON CPF CPF was incorporated on 18 December 1995 as a non-banking financial institution. As at the date of this Circular, CPF is 92.5% owned by CNPC and 7.5% owned by the Company. Its registered capital is approximately RMB3 billion and its corporate type is limited liability company. CPF primarily engages in, including but not limited to, providing guarantee to members of the CNPC group, providing entrusted loan and entrusted investment services to members, bill acceptance and discounting for members, internal fund transfer and settlement among members and relevant internal settlement and clearance plans designing, taking deposits from members, providing loans and financing leases to members, underwriting corporate bonds of members of the CNPC group, and investment in marketable securities. As at 31 December 2009, the total assets of CPF were approximately RMB billion (approximately HK$ billion) and the net asset value of CPF was approximately RMB billion (approximately HK$ billion). For the three years ended 31 December 2007, 2008 and 2009, the profit before taxation of CPF was RMB3.738 billion (approximately HK$4.261 billion), RMB2.633 billion (approximately HK$3.002 billion) and RMB3.001 billion (approximately HK$3.421 billion), respectively. For the three years ended 31 December 2007, 2008 and 2009, the net profit after taxation of CPF was RMB2.564 billion (approximately HK$2.923 billion), RMB2.171 billion (approximately HK$2.475 billion) and RMB2.296 billion (approximately HK$2.617 billion), respectively. The financial information of CPF prepared under the PRC GAAP does not contain any material variations if such information would be prepared under the IFRS. (B) SHARE ISSUE MANDATE 8. SHARE ISSUE MANDATE At the annual general meeting of the Company held on 12 May 2009, a general mandate was given to the Directors to issue Shares. The general mandate will lapse at the conclusion of the AGM unless renewed. Accordingly, in order to ensure flexibility and to give discretion to the Directors in the event that it becomes desirable to issue any Shares, a special resolution will be proposed at the AGM to renew the unconditional mandate to the Directors that during 11

14 LETTER FROM THE BOARD the period as permitted under the general mandate, to separately or concurrently issue, allot and deal with additional domestic shares and overseas listed foreign shares of the Company of not more than 20% of each of the existing domestic shares and overseas listed foreign shares of the Company in issue as at the date of the relevant resolution to be proposed and passed at the AGM (the Share Issue Mandate ). The Directors have no present intention to issue any new Shares pursuant to the Share Issue Mandate and the Company did not obtain any other special mandate to issue new Shares in the past 12 months. The Company shall obtain the approval of the China Securities Regulatory Commission for any issue of new securities under the Share Issue Mandate. The Company is not required to convene a general meeting of the Shareholders or class meetings of the Shareholders in respect of any issue of overseas listed foreign shares under the Share Issue Mandate. However, notwithstanding the Directors have been given the Share Issue Mandate, the Company will be required to convene a general meeting of the Shareholders to seek Shareholders approval for the issuance of domestic shares if such approval is required pursuant to the relevant PRC laws and regulations. (C) GENERAL 9. THE AGM Pursuant to Rule 14A.54 of the Listing Rules, any connected person with a material interest in the relevant connected transaction is required to abstain from voting on the relevant resolution at the AGM. Accordingly, CNPC and its associates, who held an aggregate of % of interest in the Company as of the Latest Practicable Date, will abstain from voting on the resolution to approve the Subscription Agreement at the AGM. A notice of the AGM to be held at Beijing Oriental Bay International Hotel, 26 Anwai Xibinhe Road, Dongcheng District, Beijing, the PRC on Thursday, 20 May 2010 at 9:00 a.m. is set out on pages N-1 to N-4 of this Circular at which an ordinary resolution, among others, will be proposed to approve the Subscription Agreement pursuant to which the Subscription will be effected. The vote of the Independent Shareholders at the AGM will be taken by way of a poll. A form of proxy for use at the AGM is enclosed. Whether or not Shareholders are able to attend the AGM, they are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. To be valid, for holders of A Shares, this form of proxy, together with the notarised power of attorney or other document of authorisation (if any), must be delivered to the Secretariat of the Board of Directors of the Company at Room 0610, Block C, 9 Dongzhimen North Street, Dongcheng District, Beijing, PRC (postal code: ) not less than 24 hours before the time appointed for the AGM. In order to be valid, for holders of H Shares, the above documents must be delivered to Hong Kong Registrars Limited, 17Mth Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong within the same period. Holders of A Shares and H Shares whose names appear on the register of members of the Company after office hours on 11 May 2010 are entitled to attend the AGM. The register of 12

15 LETTER FROM THE BOARD members of H Shares of the Company will be closed from 20 April 2010 to 20 May 2010 (both days inclusive), during which period no share transfer of H Shares will be registered. The Articles of Association provide that Shareholders who intend to attend the AGM shall lodge a written reply to the Company 20 days before the date of the AGM (the Reply Date ). In case the written replies received by the Company from the Shareholders indicating their intention to attend the EGM represent less than one half of the total number of voting shares, the Company shall within five days from the Reply Date inform the Shareholders of the proposed matters for consideration at the AGM and the date and venue of the AGM by way of announcement. The AGM may be convened after the publication of such announcement. You are urged to complete and return the form of proxy and reply slip whether or not you intend to attend the AGM. Completion and return of the form of proxy will not preclude you from attending and voting at the AGM (or any subsequent meetings following the adjournments thereof) should you wish to do so. 10. RECOMMENDATIONS The Directors (excluding the independent non-executive Directors whose views are expressed in the letter from the Independent Board Committee set out on pages 14 to 15 of this Circular, after taking into account the advice from ICBCI set out in the letter from ICBCI on pages 16 to 28 of this Circular) believe that the Subscription is on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and in the interests of the Company and the Shareholders as a whole, and therefore recommend the Independent Shareholders to vote in favour of the resolution numbered 7 set out in the notice of the AGM on pages N-1 to N-4 of this Circular. The Directors believe that the Share Issue Mandate are in the interests of the Company as well as its Shareholders. Accordingly, the Directors recommend all Shareholders to vote in favour of the resolution numbered 8 set out in the notice of the AGM on pages N-1 to N-4 of this Circular. 11. ADDITIONAL INFORMATION Your attention is drawn to (i) the letter from the Independent Board Committee set out on 14 to 15 of this Circular, (ii) the letter from ICBCI containing its advice to the Independent Board Committee and the Independent Shareholders set out on pages 16 to 28 of this Circular, and (iii) the information set out in the Appendix to this Circular. Yours faithfully, By Order of the Board PetroChina Company Limited Jiang Jiemin Chairman 13

16 LETTER FROM THE INDEPENDENT BOARD COMMITTEE PETROCHINA COMPANY LIMITED (a joint stock limited company incorporated in the People s Republic of China with limited liability) (Stock Code: 857) 31 March 2010 To the Independent Shareholders Dear Sir or Madam, CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION SUBSCRIPTION FOR RMB2.441 BILLION NEW REGISTERED CAPITAL OF CHINA PETROLEUM FINANCE CO., LTD We refer to the circular (the Circular ) dated 31 March 2010 issued by the Company to the Shareholders of which this letter forms a part. Terms defined in the Circular shall have the same meaning when used in this letter, unless the context otherwise requires. On 25 March 2010, the Board announced that the Company entered into the Subscription Agreement with CPF and CNPC on 25 March 2010, pursuant to which the parties have agreed for the Company to contribute a total capital of RMB9.618 billion (approximately HK$ billion) to (a) subscribe for a total of RMB2.441 billion new registered capital of CPF (approximately HK$2.783 billion) and (b) account the remaining RMB7.177 billion into the capital reserves of CPF. As each of CPF and CNPC is a connected person of the Company, the Subscription constitutes a connected transaction of the Company and is subject to the Independent Shareholders approval. In view of the interest of the Independent Shareholders, we have been appointed as the Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our view, the Subscription is on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and in the interest of the Company and the Shareholders as a whole. ICBCI has been appointed as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders to advise as to: (a) whether or not the Subscription Agreement are on normal commercial terms and the terms of the Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned; and 14

17 LETTER FROM THE INDEPENDENT BOARD COMMITTEE (b) whether or not the entering into the Subscription Agreement is in the interests of the Company and its Shareholders as a whole. The text of the letter of advice from ICBCI containing recommendations and the principal factors that they have taken into account in arriving at their recommendations are set out on pages 16 to 28 of the Circular. Having considered the information set out in the Letter from the Board and the principal factors, reasons and recommendations set out in the letter from ICBCI, we are of the opinion that the Subscription is on normal commercial terms, in the ordinary and usual course of business, fair and reasonable and in the interest of the Company and the Shareholders as a whole. Accordingly, we recommend that the Independent Shareholders vote in favour of the resolution numbered 7 set out in the notice of the AGM on pages N-1 to N-4 of the Circular to approve the terms of the Subscription Agreement at the AGM. Yours faithfully, Chee-chen Tung Liu Hongru Franco Bernabè Li Yongwu Cui Junhui Independent Board Committee 15

18 LETTER FROM ICBCI The following text is the text of the letter of advice dated 31 March 2010 from ICBCI to the Independent Board Committee and the Independent Shareholders for the purpose of inclusion in this circular. 31 March 2010 To the Independent Board Committee and the Independent Shareholders Dear Sirs, CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION INTRODUCTION We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscription. Details of the Subscription are set out in the circular of the Company dated 31 March 2010 to its Shareholders (the Circular ) of which this letter forms part. ICBCI has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to: (a) whether or not the Subscription Agreement are on normal commercial terms and the terms of the Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned; and (b) whether or not the entering into the Subscription Agreement is in the interests of the Company and its Shareholders as a whole. The terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires. As the applicable percentage ratios as calculated pursuant to Rule of the Listing Rules exceed 5% but are less than 25%, the transaction as contemplated under the Subscription Agreement constitutes a discloseable transaction to the Company. CNPC is the controlling shareholder of the Company, and CNPC owns 92.5% interest in CPF as at the date of the Circular, and therefore both CPF and CNPC are connected persons of the Company pursuant to Rule 14A.11 of the Listing Rules. Accordingly, the transaction as contemplated under the Subscription Agreement also constitutes a connected transaction to the Company and is subject to the Independent Shareholders approval according to Rule 14A.18 of the Listing Rules. CNPC and its respective associates will abstain from voting at the AGM in respect of the ordinary resolution to approve the Subscription. In formulating our opinion and recommendations, we have relied, without assuming for independent verification, on the information and facts supplied to us by the Company and/or its advisers and have assumed that any representations made to us are true, accurate and 16

19 LETTER FROM ICBCI complete in all material respects as at the Latest Practicable Date. We have assumed that all data, representations and opinions contained or referred to in the Circular are fair and reasonable and have been relied upon. We have also assumed that no material facts have been omitted and we are not aware of any facts or circumstances which would render the data provided and the representations made to us untrue, inaccurate or misleading. We have no reason to doubt the truth, accuracy and completeness of the data and representations provided to us by the Company and/or its advisers. The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading. We consider that we have reviewed sufficient information to reach an informed view in order to provide a reasonable basis for our advice. We have not, however, conducted any independent in-depth investigation into the business and financial performance of the Company, CNPC, CPF or any of their respective subsidiaries and associated companies. As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, we have not been involved in the negotiations in respect of the terms of the Subscription Agreement. Our opinion has been made on the assumption that all obligations to be performed by each of the parties to the Subscription Agreement will be fully performed in accordance with the terms thereof. Our opinion is based upon the financial, economic, market, regulatory, and other conditions as they exist on, and the facts, information, and opinions made available to us up to the Latest Practicable Date. We have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date. This letter is for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Subscription Agreement and, except for its inclusion in this circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purpose, without our prior written consent. PRINCIPAL FACTORS AND REASONS In arriving at our opinion, we have taken the following principal factors and reasons into consideration: 1. Background and rationale of the Subscription 1.1 Background of the Company The Company is the largest oil and gas producer and distributor, playing a dominant role in the oil and gas industry in China. It is not only one of the companies with the biggest sales revenue in China, but also one of the largest oil companies in the world. The Company is engaged in extensive petroleum and natural gas-related activities, including principally the exploration, development, production and sale of crude oil and natural gas; the refining, transportation, storage and marketing of crude oil and petroleum products; the production and sale of basic petrochemical products, derivative chemical products and other petrochemical products; and the transmission of natural gas, crude oil and oil products as well as the sale of natural gas. 17

20 LETTER FROM ICBCI 1.2 Reasons for the Subscription CPF is a non-banking financial institution established with the approval of The People s Bank of China and is held as to 92.5% and 7.5% by CNPC and the Company respectively as at the date of the Circular. The registered capital of CPF is approximately RMB3 billion. In the places where some of CNPC s members are located, CPF has established Daqing branch, Shenyang branch, Jilin branch, Xi an branch and 61 operating units, and furthermore, it has also set up a subsidiary in Hong Kong, namely China Petroleum Finance (Hong Kong) Limited ( CPF HK ). CPF primarily engages in, including but not limited to, providing guarantee to members of the CNPC group, providing entrusted loan and entrusted investment services to members, bill acceptance and discounting for members, internal fund transfer and settlement among members and relevant internal settlement and clearance plans designing, taking deposits from members, providing loans and financing leases to members, underwriting corporate bonds of members of the CNPC group, and investment in marketable securities. The following diagrams provide an illustration of the shareholding structures of CPF before and after completion of the Subscription. Shareholding structure of CPF before completion of the Subscription: Controlling CNPC The Company 7.5% 92.5% CPF 18

21 LETTER FROM ICBCI Shareholding structure of CPF after completion of the Subscription: Controlling CNPC The Company 49% 51% CPF CPF has maintained long-term close co-operation with the Company since the establishment of the Company. CPF has not only provided a convenient and timely settlement platform, but also provided strong financing support to the Company by provision of relatively low-cost corporate loans. During the period from January 2006 to June 2009, the external settlement transactions CPF processed for the Company had accounted to 52.32% of the total settlement amount handled by CPF for CNPC. During the same period, average loans provided by CPF to the Company accounted for 40.99% of the total loans and advances made by CPF, while average deposits by the Company in CPF accounted for only 7.85% of the total amount of deposits of CPF. Compared with the respective interest rates on loans provided by other banks to the Company, interest rates on loans granted by CPF to the Company is generally lower than market rate, which has not only reduced the financing costs and external financing needs of the Company, but also, as the Directors believe, enhanced the Company s bargaining power when dealing with commercial banks, enabled the commercial banks to provide services of higher quality to the Company, and improved the Company s financing conditions and environments. Meanwhile, the establishment of CPF HK has also broadened the channel of financing for overseas projects of the Company. 19

22 LETTER FROM ICBCI In recent years, CPF has achieved sustainable growth in terms of scale of operation and profitability. It has ranked first among its domestic peers (finance companies excluding banks and other financial institutions in China) in terms of total assets, settlement volume, revenue and profit according to the 2009 yearbook of finance companies in China. The major operational indicators, extracted from the audited financial statements of CPF prepared in accordance with the PRC GAAP for the four years ended 31 December 2009 and six months ended 30 June 2009, are shown as below: (RMB Million) As at As at 31 December 30 June Total assets 219, , , , ,832 Loans and advances to customers 38,282 35,697 53, ,944 57,953 Deposits 169, , , , ,225 Net asset value 7,085 9,054 10,479 12,016 11,458 Total liabilities 212, , , , ,374 Net asset value per share (RMB) For the six months ended For the year ended 31 December 30 June Revenue 2,432 4,362 3,237 4,002 2,279 Net interest income Net profit 1,285 2,564 2,171 2,296 1,463 For each of the four years ended 31 December 2009, CPF achieved a revenue of RMB2,432 million, RMB4,362 million, RMB3,237 million and RMB4,002 million respectively, and net profit of RMB1,285 million, RMB2,564 million, RMB2,171 million and RMB2,296 million respectively, which represent an overall increase of 64.6% in revenue and 78.7% in net profit. The substantial growth of financial performance in 2007 and a slight decrease in 2008 are mainly attributable to the fluctuation of investment income, which increased from RMB1,840 million in 2006 to RMB4,176 million in 2007 and then decreased to RMB3,018 million in The total assets of CPF also increased by 74.9% from RMB219,772 million as at 31 December 2006 to RMB384,459 million as at 31 December

23 LETTER FROM ICBCI We concur with the Directors that the Subscription will bring the Company the following benefits: (1) following completion of the Subscription and as a result of the increase of the Company s shareholding in CPF from 7.5% to 49%, the new shareholding structure is more compatible with the quantity of business between the Company and CPF, and the Company will consequently enjoy more benefits from the robust capital management income of CPF, which will bring new opportunities for the Company to enhance its financial profitability and to strengthen its return on equity to the shareholders of the Company; (2) resulting from the enhanced strength of CPF following the Subscription, the Company will benefit from more integrated financial services provided by CPF domestically and overseas, as well as reduced financing and trading costs of the Company; and (3) the Subscription will strengthen CPF s capital adequacy, improve its financial performance indexes and satisfy the long-term development and regulatory necessities for CPF, which will in return provide more comprehensive accounting management services and financial support to the members of the CNPC group, including the Company. 1.3 Main clauses of the Subscription Agreement Date: 25 March 2010 Parties: Subject matter and consideration (a) the Company; (b) CPF; and (c) CNPC The Company will contribute a total capital of RMB9,618 million (approximately HK$10,965 million) in cash to (a) subscribe for a total of RMB2,441 million new registered capital of CPF (approximately HK$2,783 million); and (b) account the remaining RMB7,177 million (approximately HK$8,182 million) into the capital reserves of CPF. Upon completion of the Subscription, the registered capital of CPF will increase from RMB3,000 million to RMB5,441 million, and the shareholding of CNPC in CPF will decrease from 92.5% to 51%, while the shareholding of the Company in CPF will increase from 7.5% to 49%. 21

24 LETTER FROM ICBCI Conditions precedent: The payment of consideration by the Company to CPF is conditional upon satisfaction in full of the following conditions: a. each of the Company and CNPC having obtained their respective effective approvals from their respective internal authorities of the Subscription; b. CPF having obtained effective approvals from its internal authorities of the Subscription, including but not limited to: (i) the subscription plan, (ii) changes to the registered capital and share structure and amendments to the articles of association of CPF resulting from the Subscription, and (iii) other matters in relation to the Subscription; c. the approval by the Banking Regulatory Agencies of the Subscription having been obtained; and d. all undertakings, representations and warranties given by the parties in the Subscription Agreement being true and accurate. Payment: The total consideration of RMB9,618 million will be paid by the Company to a designated account of CPF in full in cash on the Completion Date. 22

25 LETTER FROM ICBCI 2. Financial assessment of the terms of the consideration 2.1 Basis of the consideration BDO China Shu Lun Pan CPAS ( ), public accountants independent of the Company, audited the financial statements of CPF as at 30 June In accordance with the audited financial statements of CPF prepared under the PRC GAAP and following adjustments of the long-term equity investment based on the equity approach as at 30 June 2009, the net assets of CPF amounted RMB11,461 million as at 30 June According to the enterprise valuation report of CPF prepared by Beijing Zhongfeng Assets Appraisal Co., Ltd. ( ) (the Valuer ), valuers independent of the Company, the market value of the total equity attributable to equity holders of CPF is RMB11,823 million, which compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), increased by RMB601 million, representing a premium of 5.36% and compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP and following adjustments based on the equity approach), increased by RMB362 million, representing a premium of 3.16%. As the registered capital of CPF is RMB3,000 million, the valuation of the equity per share is RMB3.94 as at 30 June We have reviewed the enterprise valuation report of CPF and discussed with the Valuer on the basis and assumptions behind the report, which we are satisfied with, and understand that the appraised shareholders equity was determined by the asset-based approach and the income approach in accordance with the applicable valuation principles generally adopted in the PRC, and that an integrated market analysis has been factored in the valuation. The total shareholders equity was based on the audited net assets of CPF of RMB11.46 billion as at 30 June 2009 and adjusted by the fair value of the assets of CPF. Based on the calculation adopting the asset-based approach, as at 30 June 2009, the valued total assets of CPF was RMB292,685 million, which compared to the book value of the total assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), increased by RMB393 million, representing a premium of 0.13%. The valued liabilities of CPF was RMB281,027 million, which compared to the book value of the liabilities of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), decreased by RMB43 million, representing a discount of 0.02%. The valued net assets of CPF was RMB11,657 million, which (i) compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP), increased by RMB435 million, representing a premium of 3.88%, and (ii) compared to the book value of the net assets of CPF for the same period (in accordance with the audited financial statements of CPF prepared under the PRC GAAP and following adjustments based on the equity approach), increased by RMB196 million, representing a premium of 1.72%. 23