SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2006
PETROCHINA COMPANY LIMITED
16 ANDELU, DONGCHENG DISTRICT
BEIJING, THE PEOPLE'S REPUBLIC OF CHINA, 100011
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- )
-------
PetroChina Company Limited (the "Registrant") is furnishing under the cover
of Form 6-K the Registrant's announcement regarding its acquisition of a 67%
interest in PetroKazakhstan, continuing connected transactions and amendments to
articles of association.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[PETROCHINA LOGO]
PETROCHINA COMPANY LIMITED
(a joint stock company incorporated in
the People's Republic of China with limited liability)
(STOCK CODE: 857)
CONNECTED TRANSACTION
ACQUISITION OF A 67% INTEREST IN PETROKAZAKHSTAN
CONTINUING CONNECTED TRANSACTIONS
(1) REVISION OF EXISTING CAPS
(2) TRANSACTIONS WITH CNPC (HK)
AMENDMENTS TO ARTICLES OF ASSOCIATION
Financial Adviser to PetroChina Company Limited
[DEUTSCHE BANK LOGO]
DEUTSCHE BANK AG, HONG KONG BRANCH
SUMMARY
(A) THE ACQUISITION
PetroChina announces that CNPC E&D, a subsidiary of PetroChina and a 50:50 joint
venture between PetroChina and CNODC, entered into the Acquisition Agreement
through the Acquirer (a wholly-owned subsidiary of CNPC E&D) with the Vendor (a
wholly-owned subsidiary of CNODC) on 23 August 2006, for the acquisition by the
Acquirer of CNODC's entire interest in PetroKazakhstan, representing 67% of the
issued share capital of PetroKazakhstan.
The Acquisition constitutes a connected transaction of PetroChina under the
Listing Rules. As the relevant percentage ratios involved in the Acquisition are
more than 0.1% but less than 2.5% for the Group, the Acquisition is only subject
to reporting and announcement requirements and is exempted from the independent
shareholders' approval requirement under Rule 14A.32 of the Listing Rules.
(B) CONTINUING CONNECTED TRANSACTIONS
1. REVISION OF EXISTING CAPS
PetroChina proposes to revise the Existing Caps under the Amended Comprehensive
Agreement and the CRMSC Products and Services Agreement as previously approved
by the Independent Shareholders (or by the Shareholders in respect of the
Existing Caps for the CRMSC Transactions) on 8 November 2005. The Proposed Caps,
for the three-year period from 1 January 2006 to 31 December 2008, are the
result of:
o continuing connected transactions arising as a result of the
completion of the Acquisition, which will fall within the scope of the
Amended Comprehensive Agreement; and
o changes to PetroChina's production and operational environment that
are expected to have an impact on the Existing Caps under the Amended
Comprehensive Agreement and the CRMSC Products and Services Agreement,
as explained in detail in this announcement.
The Proposed Caps are subject to reporting, announcement and Independent
Shareholders' approval (or Shareholders' approval in respect of the Proposed
Caps for the CRMSC Transactions) requirements under the Listing Rules.
An Independent Board Committee has been appointed by the Board to consider the
Proposed Caps. ICEA Capital Limited has been retained as the Independent
Financial Adviser to advise the Independent Board Committee as to whether the
Proposed Caps are fair and reasonable so far as the Shareholders are concerned.
2. TRANSACTIONS WITH CNPC (HK)
The Group obtained a waiver from the Stock Exchange on 2 January 2004 from
strict compliance with the disclosure requirement of the Listing Rules in
respect of the CNPC (HK) Transactions for a period of three financial years
ending 31 December 2006. The Board approved the CNPC (HK) Caps for the period
from 1 January 2007 to 31 December 2008 at its meeting held on 23 August 2006.
Given that the relevant percentage ratios involved the CNPC (HK) Transactions
are more than 0.1% but less than 2.5% for the Group, they are only subject to
reporting and announcement requirements and exempted from the independent
shareholders' approval requirement under Rule 14A.34 of the Listing Rules.
(C) AMENDMENTS TO THE ARTICLES
PetroChina proposes to expand its business scope and to amend its Articles
accordingly. The proposed amendments to the Articles will be subject to the
approval of Shareholders.
A circular containing, among other things, details of the Proposed Caps, the
proposed amendments to the Articles, a letter from the Independent Financial
Adviser, a recommendation by the Independent Board Committee and a notice
convening an extraordinary general meeting of PetroChina to approve the Proposed
Caps and proposed amendments to the Articles will be sent to the Shareholders as
soon as possible.
FINANCIAL ADVISER
Deutsche Bank AG, Hong Kong Branch is the financial adviser to PetroChina in
respect of the Acquisition.
(A) THE ACQUISITION
1. BACKGROUND TO THE ACQUISITION
(a) ACQUISITION OF CNPC E&D
On 9 June 2005, PetroChina entered into an agreement with CNODC, Central Asia
Petroleum Company Limited and CNPC E&D to acquire a 50% interest in CNPC E&D.
Pursuant to this agreement, CNPC E&D obtained a contractual priority right to
(a) require CNODC or its subsidiaries to sell to CNPC E&D; or (b) purchase from
CNODC or its subsidiaries, certain assets owned by CNODC or its subsidiaries
relating to the exploration, development, production, pipeline and refining
businesses of crude oil and natural gas in areas outside the PRC. Detailed
information about this acquisition and the priority right was set out in the
circular to the Shareholders dated 30 June 2005. This acquisition was approved
by the extraordinary general meeting of PetroChina held on 16 August 2005 and
was completed on 29 November 2005.
(b) THE CNPCI ACQUISITION
On 21 August 2005, CNODC, through its wholly-owned subsidiary CNPCI, entered
into an arrangement agreement with PKZ, pursuant to which CNPCI acquired the
entire issued share capital of PKZ at US$55 per share (with a total
consideration of approximately US$4.08 billion) through 818 Inc., a wholly-owned
subsidiary of CNPCI incorporated in Canada ("CNPCI ACQUISITION"). The CNPCI
Acquisition was completed on 26 October 2005. Following completion of the CNPCI
Acquisition, PKZ became an indirect wholly-owned subsidiary of CNODC.
After the completion of the CNPCI Acquisition, PetroChina promptly procured CNPC
E&D to negotiate with CNODC for the exercise of its contractual priority right
to purchase its interest in PKZ to the extent permitted by applicable laws. A
clarification announcement was published by PetroChina on 15 December 2005 in
this regard.
(c) KAZAKH GOVERNMENT'S STATUTORY PRE-EMPTIVE RIGHT
According to the Kazakhstan Subsoil Use Law, the government of the Republic of
Kazakhstan holds a statutory right of pre-emption over any transfers of any
subsoil use interest. This statutory pre-emptive right applies to the CNPCI
Acquisition and the proposed transfer by CNPCI of its interests in PKZ to CNPC
E&D.
In connection with the process of obtaining a wavier of the statutory
pre-emptive right from the government of the Republic of Kazakhstan, CNODC,
through its wholly-owned subsidiary CNPCI, entered into a memorandum of
understanding with KMG on 15 October 2005, pursuant to which CNPCI agreed to
sell 33% (on a fully diluted basis) of the total issued share capital of PKZ to
KMG at a purchase price of US$55 per share ("KMG ACQUISITION") and KMG agreed to
assist PKZ in applying for a waiver from the government of the Republic of
Kazakhstan for its statutory pre-emptive right.
On 12 May 2006, CNPCI and KMG agreed that 818 Inc. and PKZ would amalgamate
under the laws of the Province of Alberta, Canada and that the new company
resulting from the Amalgamation would become the owner of all of the assets and
liabilities of PKZ and 818 Inc. (except the shares of PKZ). The Amalgamation was
completed on 29 June 2006 and the new company's name remains the same as
PetroKazakhstan Inc. ("PETROKAZAKHSTAN").
On 4 July 2006, the Ministry of Energy and Mineral Resources of the Republic of
Kazakhstan approved the CNPCI Acquisition, the Amalgamation, the KMG Acquisition
and the proposed transfer by CNPCI of its interests in PetroKazakhstan to CNPC
E&D.
On 5 July 2006, CNPCI, the Vendor (a wholly owned subsidiary of CNODC), KMG and
KMGS further entered into the Interest Purchase Agreement, pursuant to which the
Vendor agreed to sell and KMGS agree to purchase 33% of the total issued share
capital of PetroKazakhstan at a purchase price of US$55 per share. The KMG
Acquisition was completed on 5 July 2006.
2. THE ACQUISITION AGREEMENT
(a) PRINCIPAL TERMS
The Vendor and the Acquirer entered into the Acquisition Agreement on 23 August
2006, for the sale by the Vendor, and the acquisition by the Acquirer, of
49,732,760 common shares in PetroKazakhstan, representing 67% of the total
issued and outstanding common shares of PetroKazakhstan and CNODC's entire
interest in PetroKazakhstan.
The Acquirer is a wholly owned subsidiary of Pervinage, which is in turn an
indirect wholly owned subsidiary of CNPC E&D. CNPC E&D is a subsidiary of
PetroChina and a 50:50 joint venture between PetroChina and CNODC.
(b) CONSIDERATION
The aggregate consideration for the Acquisition is US$2,735,301,800, equivalent
to US$55 per share and the per share consideration paid by KMG and KMGS to the
Vendor pursuant to the KMG Acquisition described above.
The Acquisition was negotiated and entered into on an arm's length basis and on
normal commercial terms. The total consideration was determined following
negotiation with the Vendor and is based on, amongst other things, the results
of due diligence, as well as PetroChina's valuation analysis by reference to
PetroKazakhstan's production, operating costs and capital expenditures analysis
conducted by McDaniel & Associates Consultants Ltd., an independent reserves
valuer.
The consideration will be paid on the closing date of the Acquisition by the
payment of cash in RMB or U.S. dollars. The consideration will be funded by a
combination of CNPC E&D's internal resources and debt financing.
The Board (including independent non-executive directors) is of the view that
the total consideration payable by the Acquirer for the Acquisition and the
other terms of the Acquisition Agreement are fair and reasonable and the
Acquisition is in the best interests of PetroChina and its Shareholders as a
whole.
3. CORPORATE STRUCTURE
(a) BEFORE THE ACQUISITION
The following diagram sets out a simplified structure chart showing the relevant
parties immediately prior to the Acquisition:
-------------
| CNPC |
| |
-------------
|
--------------------
100% | | 88.21%
------------- ------------- --------------
| KMG | | CNODC | | PetroChina |
| | | | | |
------------- ------------- --------------
| | |50% | 50%
| | | |
| | -------------------
| | |
100% | 100% | |
------------- ------------- --------------
| KMGS | | CNPCI | | CNPC E&D |
| | | | | |
------------- ------------- --------------
| | |
| | |
| 100% | | 100%
| ------------- --------------
| | Vendor | | CNODCI |
| | | | |
| ------------- --------------
| | |
33% | 67% | |
------------------ |
| | 100%
------------------- --------------
| PetroKazakhstan | | Pervinage |
| | | |
------------------- --------------
| |
| | 100%
| --------------
| | Acquirer |
| | |
------------------------- --------------
| |
| 99.7% |
------------- --------------------------
| | | Other subsidiaries |
| PKKR | | and joint ventures of |
| | | PetroKazakhstan |
------------- --------------------------
|
|
| 100%
-------------
| Valsera |
| |
-------------
|
| 96.7%
-------------
| PKOP |
| |
-------------
(b) AFTER THE ACQUISITION
Following the Acquisition, CNPC E&D will hold 67% of the total issued share
capital of PetroKazakhstan through the Acquirer. The following diagram sets out
a simplified group structure chart showing the relevant parties immediately
following completion of the Acquisition and the PKOP reorganization as explained
in the paragraph headed "(A) The Acquisition -- 4. Other Terms of the
Acquisition -- (c) Arrangement with KMG -- (ii) Reorganization of PKOP's
interests":
-------------
| CNPC |
| |
-------------
|
--------------------
100% | | 88.21%
------------- ------------- --------------
| KMG | | CNODC | | PetroChina |
| | | | | |
------------- ------------- --------------
| | | |50% | 50%
| | | | |
| | | -------------------
| | | |
| 100% | 100% | |
| ------------- ------------- --------------
| | KMGS | | CNPCI | | CNPC E&D |
| | | | | | |
| ------------- ------------- --------------
| | | |
| | 100% | | 100%
| | ------------- --------------
| | | Vendor | | CNODCI |
| | | | | |
| | ------------- --------------
| | |
| | | 100%
| | --------------
| | | Pervinage |
| | 33% | |
| | --------------
| | |
| | | 100%
| | --------------
| | | Acquirer |
| | | |
| | --------------
| | | |
| | | |
| | | |
| --------------------------------------- |
| | 67% |
| ------------------ |
| | PetroKazakhstan | |
| | | |
| ------------------ |
| | |
| -------------------- |
| | 99.7% | |
| ------------ -------------------- |
| | | | Other subsidiaries | |
| | PKKR | | and joint ventures | |
| | | | of PetroKazakhstan | |
| ------------ -------------------- |
| |
| |
| |
| |
| |
| |
| |
| |
| 50% |
---------- |
| Valsera | 50% |
| |--------------------------------------------
----------
|
| 96.7%
----------
| PKOP |
| |
----------
4. OTHER TERMS OF THE ACQUISITION
(a) CONDITIONS PRECEDENT
The closing of the Acquisition is conditional on the fulfillment of certain
conditions, including:
(i) the obtaining of all necessary approvals from the relevant government
authorities in Canada, Kazakhstan and the PRC with respect to the
Acquisition;
(ii) the accuracy of representations and warranties provided by the Vendor and
the Acquirer respectively under the Acquisition Agreement; and
(iii) the execution of an assignment and assumption agreement with respect to
the Shareholders Agreement as further explained in paragraph (c) below;
(b) CLOSING
The closing of the Acquisition will occur within 14 business days from the date
on which the last of the conditions set out in the Acquisition Agreement is
satisfied or waived, and is expected to take place as soon as practicable and in
any event by no later than 31 December 2006 (unless otherwise agreed by the
Vendor and the Acquirer).
(c) ARRANGEMENTS WITH KMG
(i) Shareholders Agreement
As a condition of the transfer of the 67% interest in PetroKazakhstan by the
Vendor to the Acquirer, the Acquirer will enter into an assignment and
assumption agreement on or before the closing of the Acquisition, pursuant to
which the Pervinage and the Acquirer will assume all of the respective rights,
interests, liabilities and obligations of CNPCI and the Vendor under the
Shareholders Agreement entered into between CNPCI, the Vendor, KMG, KMGS and
PetroKazakhstan dated 5 July 2006. The Shareholders Agreement provides that so
long as KMG and/or any affiliate of KMG collectively hold not less than 16% of
the issued share capital of PetroKazakhstan, each shareholder shall have a veto
right relating to, amongst other things, liquidation of or mergers involving, or
changes to the capital structure of the PetroKazakhstan Group, annual work
programs or annual budgets of PetroKazakhstan and certain related-party
transactions. As a result of these veto rights, KMG is regarded as having
substantive minority participative rights, through such veto rights, which would
enable KMG or KMGS to participate in the operations of PetroKazakhstan and
prevent PetroChina from unilaterally passing key resolutions on a number of key
financial and operating matters of PetroKazakhstan. PetroChina and KMG are
therefore considered as having joint control over PetroKazakhstan and PetroChina
is not in a position to consolidate PetroKazakhstan's accounts in its
consolidated financial statements. PetroKazakhstan will be equity-accounted
for in PetroChina's consolidated financial statements in accordance with
International Accounting Standards. In addition, pursuant to the Shareholders
Agreement, CNPCI has committed to procure PetroKazakhstan to supply certain
crude oil to PKOP's refinery at Shymkent.
(ii) Reorganization of PKOP's interests
PKOP is currently a subsidiary of PetroKazakhstan. The main business of PKOP
includes the operation of a refinery located in Shymkent, the Republic of
Kazakhstan, which does not constitute the core business of the PetroKazakstan
Group. PetroKazakhstan owns approximately 99.7% of PKKR, which owns 100% of
Valsera. Valsera is a holding company of an approximately 96.7% interest in
PKOP. Upon the closing of KMG Acquisition, KMG indirectly holds approximately
33% of Valsera through its interest in PetroKazakhstan.
As part of the arrangements between CNPCI and KMG, CNPCI and KMG entered into
the PKOP MOA on 5 July 2006 with respect to a proposed reorganization of PKOP,
pursuant to which PKKR will transfer a 50% equity interest in Valsera to KMG and
the balance of 50% will be transferred to the Vendor on the terms and conditions
stated in the PKOP MOA. Pursuant to the Acquisition Agreement, the Vendor agreed
to transfer all of its rights and obligations under the PKOP MOA to the
Acquirer. The reorganization is expected to take place as soon as practicable.
If the proposed reorganization of PKOP occurs prior to the completion of the
Acquisition, the Vendor has agreed to transfer all its rights, benefits and
interests derived from the PKOP MOA (including any consideration or payment
received directly or indirectly from KMG or its affiliates for the transfer of
the 50% equity interests in Valsera and the Vendor's remaining 50% equity
interests in Valsera) to the Acquirer for nil consideration. If the proposed
reorganization of PKOP occurs after the completion of the Acquisition, the
Vendor has agreed that the Acquirer shall carry out the reorganization of PKOP
in accordance with the PKOP MOA in place of the Vendor. Accordingly, upon
completion of the PKOP reorganization, the Acquirer will own a 50% direct
interest in Valsera. PetroChina has taken into account of the reorganization of
PKOP's interests in determining the consideration of the Acquisition.
5. INFORMATION ON PETROKAZAKHSTAN
The business of the PetroKazakhstan Group involves the acquisition, exploration,
development and production of oil and gas, refining of oil and the sale of oil
and refined products or businesses reasonably related thereto. All of
PetroKazakhstan's exploration and production operations are located in the
80,000 km2 South Turgai basin in south central Kazakhstan. PetroKazakhstan holds
working interests in five exploration licenses covering a total of over 4.0
million acres.
PetroKazakhstan has interests in eleven fields, at different stages of
development in Kumkol South, Kumkol North, South Kumkol, East Kumkol, North
Nurali, Kyzylkiya, Maibulak, Aryskum, Akshabulak, Nurali and Aksai.
PetroKazakhstan exports crude oil from a variety of loading points through a
number of pipeline systems and rail routes, and also operates a refinery located
at Shymkent.
Set out below is certain financial information extracted from the audited
financial statements of PetroKazakhstan for the years ended 31 December 2004 and
2005 prepared in accordance with Canadian generally accepted accounting
principles (GAAP):
YEAR ENDED 31 DECEMBER
---------------------------------------------------
2004 2005
(US$,000) (US$,000)
------------------------- ----------------------
Shareholders' equity 890,077 1,101,990
Income before taxes 803,070 734,850
Net income 500,668 379,438
The table below sets out selected gross proven reserves data of PetroKazakhstan
as at 31 December 2005 and gross production data of 2005 extracted from a
reserves report dated 19 July 2006 prepared by McDaniel & Associates Consultants
Ltd.:
GROSS RESERVES (1)
Crude Oil million barrels 322.326
Natural Gas billion cubic feet 69.62
Natural Gas Liquids million barrels of oil equivalent 6.526
Total Oil Equivalent million barrels of oil equivalent 340.455
GROSS PRODUCTION (2)
Crude Oil million barrels 42.27
Natural Gas billion cubic feet 0
Natural Gas Liquids million barrels of oil equivalent 0
Total Oil Equivalent million barrels of oil equivalent 42.27
Notes:
(1) Gross reserves include working interest of proven reserves before deduction
of royalties payable to others.
(2) Gross production include working interest production before deduction of
royalties payable to others
6. REASONS FOR THE ACQUISITION
The Board believes that the Acquisition represents an important opportunity for
PetroChina to further enhance its overseas working interests of oil and gas
reserve, to expand PeroChina's overseas exploration and
production assets in a strategically important region, to derive synergies from
the Kazakhstan-China Pipeline, the Dushanzi Refinery and CNPC E&D's existing
Kazakhstan exploration and production operations and to further improve
PetroChina's financial performance.
(a) FURTHER ENHANCE PETROCHINA'S OVERSEAS WORKING INTERESTS OF OIL AND GAS
RESERVE
As of 31 December 2005, PetroKazakhstan has gross proven reserves of 340.455
million barrels of oil equivalent with annual production of 42.27 million
barrels of oil equivalent. In addition, PetroKazakhstan has sizeable land
interests, amounting to approximately 4.0 million acres in the South Turgai
basin.
(b) EXPAND PETROCHINA'S OVERSEAS EXPLORATION AND PRODUCTION ASSETS IN A
STRATEGICALLY IMPORTANT REGION
PetroKazakhstan's exploration and production assets are strategically located in
a region that enjoys a long history of friendly relations with the PRC and easy
access to the Kazakhstan-China Pipeline.
(c) DRIVE SYNERGIES FROM THE KAZAKHSTAN-CHINA PIPELINE, THE DUSHANZI REFINERY
AND CNPC E&D'S EXISTING KAZAKHSTAN EXPLORATION AND PRODUCTION OPERATIONS
PetroKazakhstan is expected to provide synergies with CNPC E&D's existing
operations in Kazakhstan. The Board believes PetroChina would benefit from
improved operating
efficiencies arising from the Acquisition, including by sharing infrastructure,
CNPC E&D's advanced enhanced oil recovery (EOR) technology and management
expertise.
In addition, the Acquisition will further secure the Kazakhstan-China Pipeline
utilization rate, and thus improve its return on investment. The Acquisition
will also secure crude oil supply, in a cost effective manner, to PetroChina's
Dushanzi Refinery which is currently being expanded to double its capacity.
(d) IMPROVE PETROCHINA'S FINANCIAL PERFORMANCE AND CREATE SHAREHOLDER VALUE IN
THE LONG TERM
The Acquisition is expected to enhance PetroChina's financial performance and
pave the way for realizing shareholder value in the long term.
7. INFORMATION REGARDING PETROCHINA, CNODC AND CNPC E&D
(a) INFORMATION REGARDING PETROCHINA
PetroChina, one of the largest companies in the PRC in terms of sales, is
engaged in a broad range of petroleum and natural gas-related activities,
including:
(i) the exploration, development, production and sale of crude oil and natural
gas;
(ii) the refining, transportation, storage and marketing of crude oil and
petroleum products;
(iii) the production and sale of basic petrochemical products, derivative
petrochemical products and other chemical products; and
(iv) the transmission of natural gas, crude oil and refined products, and the
sale of natural gas.
(b) INFORMATION REGARDING CNODC
CNODC is a wholly-owned subsidiary of CNPC. Its primary operations include
international oil and gas production, exploration and development.
(c) INFORMATION REGARDING CNPC E&D
CNPC E&D is a subsidiary of PetroChina and a joint venture entity held 50:50 by
PetroChina and CNODC.
CNPC E&D's principal activities are international exploration and production of
oil and gas assets. CNPC E&D's operations include oil and gas production assets
in locations including Kazakhstan, Venezuela, Azerbaijan, Peru, Indonesia,
Ecuador, Algeria and the PRC. CNPC E&D also has pipeline assets in locations
including Kazakhstan, refining assets in Algeria and exploration assets in Chad,
Ecuador, Niger, Algeria and Canada.
8. LISTING RULES IMPLICATIONS
CNODC is wholly owned by CNPC, the controlling shareholder of PetroChina. As at
the date of this announcement, CNPC holds approximately 88.21% of the issued
share capital of PetroChina. Pursuant to the Listing Rules, CNODC and the Vendor
are connected persons of PetroChina.
CNPC E&D is a connected person of PetroChina pursuant to Listing Rule 14A.11(5).
Upon the completion of the Acquisition, PetroChina will, through CNPC E&D, hold
67% of PetroKazakhstan. PetroKazakhstan will therefore become a non-wholly owned
subsidiary of CNPC E&D and PetroChina and a connected person of PetroChina
pursuant to Rule 14A.11(6) of the Listing Rules.
The Acquisition constitutes a connected transaction of PetroChina under the
Listing Rules. As the relevant percentage ratios involved in the Acquisition are
more than 0.1% but less than 2.5% for the Group, the Acquisition is only subject
to reporting and announcement requirements and exempted from the independent
shareholders' approval requirement under Rule 14A.32 of the Listing Rules.
The Board (including independent non-executive directors) is of the view that
the Acquisition was negotiated and entered into on an arm's length basis and on
normal commercial terms. The terms (including but not limited to the
consideration payable by the Acquirer for the Acquisition) of the Acquisition
Agreement are fair and reasonable and that the Acquisition is in the best
interests of PetroChina and its Shareholders as a whole.
(B) CONTINUING CONNECTED TRANSACTIONS
1. REVISION OF EXISTING CAPS
PetroChina proposes to revise the Existing Caps under the Amended Comprehensive
Agreement and the CRMSC Products and Services Agreement as previously approved
by the Independent Shareholders (or by the Shareholders in respect of the
Existing Caps for the CRMSC Transactions) on 8 November 2005. The Proposed Caps,
for the three-year period from 1 January 2006 to 31 December 2008, are the
result of:
o continuing connected transactions arising as a result of the
completion of the Acquisition, which will fall within the scope of the
Amended Comprehensive Agreement; and
o changes to PetroChina's production and operational environment that
are expected to have an impact on the Existing Caps under the Amended
Comprehensive Agreement and the CRMSC Products and Services Agreement,
as explained in detail in this announcement.
The Amended Comprehensive Agreement applies to connected transactions between
the CNPC Group (including Jointly-owned Companies) and the Group. Pursuant to
the Amended Comprehensive Agreement, a Jointly-owned Company means a company in
which both PetroChina and the CNPC Group are shareholders, and where the CNPC
Group and/or its subsidiaries and/or affiliates (individually or together)
is/are entitled to exercise, or control the exercise of, 10% or more of the
voting power at any general meeting of such company.
As explained in the paragragh headed "(A) The Acquisition - 4. Other Terms of
the Acquisition -- (c) Arrangements with KMG -- (i) Shareholders Agreement"
above, PetroKazakhstan will be equity-accounted for in PetroChina's consolidated
financial statements since PetroChina and KMG are considered as having joint
control over PetroKazakhstan. At the same time, PetroKazakhstan will be treated
as a "subsidiary" of PetroChina for the purposes of the Listing Rules because,
among other things, PetroChina will hold more than half of the issued share
capital of PetroKazakhstan. Accordingly, upon the completion of the Acquisition,
PetroKazakhstan will become a non-wholly owned subsidiary of PetroChina. It will
also become a connected person of PetroChina pursuant to Rule 14A.11(6) of the
Listing Rules as well as a Jointly-owned Company as defined by the
Amended Comprehensive Agreement. Given that PetroKazakhstan will be a subsidiary
of PetroChina held through CNPC E&D, connected transactions involving the
PetroKazakhstan Group will be treated in the same manner as transactions
involving CNPC E&D and its subsidiaries, which were approved by the Independent
Shareholders on 8 November 2005. On this basis, PetroChina has classified
connected transactions between the PetroKazakhstan Group and the Group as
transactions between the CNPC Group (including Jointly-owned Companies) and the
Group, and connected transactions between the PetroKazakhstan Group and the CNPC
Group as transactions between the Group and the CNPC Group.
The Proposed Caps are subject to reporting, announcement and Independent
Shareholders' approval (or Shareholders' approval in respect of the Proposed
Caps for the CRMSC Transactions) requirements under the Listing Rules.
An Independent Board Committee has been appointed by the Board to consider the
Proposed Caps. ICEA Capital Limited has been retained as the Independent
Financial Adviser to advise the Independent Board Committee as to whether the
Proposed Caps are fair and reasonable so far as the Shareholders are concerned.
A circular containing, among other things, details of the Proposed Caps, a
letter from the Independent Financial Adviser, a recommendation by the
Independent Board Committee and a notice convening an extraordinary general
meeting of PetroChina to approve the Proposed Caps will be sent to the
Shareholders as soon as possible.
(a) REVISION DUE TO CONTINUING CONNECTED TRANSACTIONS ARISING AS A RESULT OF
THE ACQUISITION
(i) Production services to be provided by the CNPC Group to the Group
The Amended Comprehensive Agreement provides that the CNPC Group (including
Jointly-owned Companies such as PetroKazakhkstan) shall supply crude oil,
refined oil, chemical products, natural gas and production services
(including transportation) to the Group at the government-prescribed price.
Where there is no government-prescribed price but market price is
available, the price shall be determined with reference to the market
price.
The Board has considered and proposed the following increases to the
Existing Caps in respect of this category of transaction. Such increases
are attributable to the Group's proposed purchase of crude oil from the
PetroKazakhstan Group and transportation of such crude oil via the
Kazakhstan-China Pipeline and the Western Pipeline in accordance with the
Amended Comprehensive Agreement.
PROPOSED INCREASE TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Production services to be provided 13,040 36,000 34,720
by the CNPC Group to the Group
The above proposed increases to the Existing Caps have been determined with
reference to the following: the estimated growth in crude oil production
and business of the PetroKazakhstan Group; current market prices of crude
oil; potential fluctuations and increases in the prices of crude oil both
in the international market and in the domestic market; the estimated
annual crude oil volume to be purchased by the Group from the
PetroKazakhstan Group; the transportation capacities of the
Kazakhstan-China Pipeline and the Western Pipeline; and charges of the
Kazakhstan-China Pipeline and the Western Pipeline for oil transportation
and the potential fluctuations and increases in such charges. The
significant increases of transaction amount in 2007 and 2008 are due to the
increases of the Kazakhstan-China Pipeline's transportation capacity, which
is 3.5 million tonnes in 2006 and expected to be 10 million tonnes in 2007
and 2008 when its construction is fully completed.
(ii) Construction and technical services to be provided by the CNPC Group to the
Group.
Prior to the Acquisition, the Group has obtained construction and technical
services from the CNPC Group. Given that the construction and technical
services provided to the Group by the CNPC Group are of a high quality and
on favourable pricing terms, the Group (including the PetroKazakhstan
Group) will continue to obtain construction and technical services from the
CNPC Group after the Acquisition.
The Board has considered and proposed the following increases to the
Existing Caps in respect of this category of transaction. Such increases
are attributable to the provision of services by the CNPC Group to the
PetroKazakhstan Group, including but not limited to geophysical
prospecting, well drilling, logging, well testing, down-hole operations,
oilfield surface facilities construction, construction design and
construction supervision. This category of transaction will be charged on
actual cost incurred basis.
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Construction and technical services 1,880 1,800 1,640
to be provided by the CNPC Group to
the Group.
The above proposed increases to the Existing Caps have been determined
with reference to the following: historical transaction price and
transaction amounts for the construction and technical services of the
PetroKazakhstan Group; and the estimated business growth of the
PetroKazakhstan Group.
(iii) Material supply services to be provided by the CNPC Group to the Group
Prior to the Acquisition, the Group has obtained material supply services
from the CNPC Group. Given that the material supply services provided by
the CNPC Group to the Group is of a high quality and on favourable pricing
terms, the Group (including the PetroKazakhstan Group) will continue to
obtain material supply services from the CNPC Group after the Acquisition.
This category of transaction will be charged on actual cost incurred
basis.
The Board has considered and proposed the following increases to the
Existing Caps in respect of this category of transaction. Such increases
are attributable to the provision of casing pipes, drill heads, drilling
liquid and lubricating oil and other raw materials or equipment by the
CNPC Group to the PetroKazakhstan Group.
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Material supply services to be 240 480 480
provided by the CNPC Group to the
Group
The above increases to the Existing Caps have been determined with
reference to the following: historical transaction prices and transaction
amounts in respect of material supply transactions of the PetroKazakhstan
Group; estimated business growth of the PetroKazakhstan Group; and
estimated changes in the volume of purchases by the PetroKazakhstan Group.
(b) REVISION DUE TO CHANGES TO PETROCHINA'S PRODUCTION AND OPERATIONAL
ENVIRONMENT
(i) Products and services to be provided by the Group to the CNPC Group
The Amended Comprehensive Agreement provides that the Group shall provide
products such as natural gas, crude oil and refined oil to the CNPC Group
at the government-prescribed price, or where there is no
government-prescribed price, the price shall be determined with reference
to the market price.
The reasons for applying for increases to the Existing Caps of this
transaction are:
o Natural gas
Natural gas is sold at government-prescribed price in the PRC. The
National Development and Reform Commission issued the Notice on the
Reform of the Mechanism for Determining the Ex-Factory Prices of
Natural Gas and Recent Appropriate Increase of the Ex-Factory Prices
of Natural Gas on 23 December 2005, which made adjustments to the
pricing mechanism and the ex-factory price of natural gas. Pursuant
to the notice, the ex-factory price of natural gas was increased
from 26 December 2005. The notice also indicated that the PRC
government would increase the price of natural gas in the next five
years and would establish a system to link the price of natural gas
to the price of substitution products including crude oil, liquefied
petroleum gas and coal.
o Refined oil
Refined oil is sold at government-prescribed price in the PRC. In
the first half of 2006, the National Development and Reform
Commission has issued two notices on the adjustments to the prices
of refined oil, which increased the ex-factory prices of refined oil
on 26 March and 24 May 2006 respectively.
o Crude oil
Currently, the crude oil prices on the domestic market of the PRC
are adjusted with reference to the crude oil prices on the
international market. As there has been a substantial increase in
the crude oil price on the international market recently, the
increase with respect to domestic crude oil price has jumped well
above its level as at 8 November 2005 when Independent Shareholders'
approval for the Existing Caps was sought.
o Nephtha, solvent oil
The Ministry of Finance and the State Administration of Taxation
issued the Notice on Adjustments and Perfection of the Policy on
Consumer Taxes on 20 March 2006, which imposes consumer tax on
naphtha, solvent oil and other products, and the costs of raw
materials for chemical products have increased as a result.
o Transaction amount
As a result of business development, there is an increase of the
amount of transactions between the Group and the CNPC Group as
compared with the amount of 8 November 2005 when Independent
Shareholders' approval for the Existing Caps was sought.
The table below sets out the monthly average prices of natural gas,
refined oil, crude oil, naphtha and solvent oil of PetroChina for April
2005 (when PetroChina performed its estimates for the Existing Caps),
September 2005 (when PetroChina announced and applied for the
Shareholders' approval on the Existing Caps) and July 2006:
MONTHLY AVERAGE PRICES (RMB YUAN/TON)
PRODUCTS
APRIL 05 SEPTEMBER 05 JULY 06 % INCREASE % INCREASE THAN
THAN APRIL 05 SEPTEMBER 05
NATURAL GAS 585 585 690 17.95% 17.95%
REFINED OIL
Gasoline 3,277 4,062 4,800 46.48% 18.18%
Jet fuel 3,160 4,375 5,114 61.81% 16.88%
Diesel Oil 2,864 3,573 4,219 47.33% 18.09%
CRUDE OIL 2,332 3,616 4,056 73.59% 12.17%
NEPHTHA 2,396 3,844 4,657 94.40% 21.17%
SOLVENT OIL 3,369 4,308 4,631 37.45% 7.5%
Due to the above reasons, the Board has considered and proposed the
following increases to the Existing Caps in respect of this category of
transaction.
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Products and services to be 17,536 21,498 23,219
provided by the Group to the
CNPC Group
The above proposed increases to the Existing Caps have been determined
with reference to the following: historical transaction records for
products and services provided by the Group to the CNPC Group; the actual
and estimated increases to the price of relevant products; and the actual
and estimated business growth of the Group and the CNPC Group.
(ii) Products and services to be provided by the CNPC Group to the Group
(a) Production services
The proposed increases to the Existing Caps of this category of
transaction are mainly attributable to the fact that due to the PRC's
increasing demand on crude oil, the Group intends to purchase crude oil
from CNPC E&D and its subsidiaries in addition to the crude oil from the
PetroKazakhstan Group as set out in section (B)1(a)(i) of this
announcement.
Other production services consist of water supply, electricity generation
and supply, gas supply, transportation, etc. by the CNPC Group to the
Group. Such increases are attributable to the formal commencement of
operation of the Kazakhstan-China Pipeline and the Western Pipeline in the
near future and the internal integration of the CNPC Group, which will
increase its delivery capacity in the refined oil retail market in the
PRC, thus creating more opportunities of refined oil delivery business for
the Group.
The Board has considered and proposed the following increases to the
Existing Caps in respect of this category of transaction.
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Production services to be 23,430 31,514 31,151
provided by the CNPC Group to
the Group
The above proposed increases have been determined with reference to the
following: historical transaction records for the production services
provided by the CNPC Group to the Group; medium and long term development
plan of the Group; the actual and estimated business growth of the Group;
and the potential increase in the international and domestic market prices
of crude oil, petroleum and other petrochemical products.
(b) Construction and technical services
Due to expansion of the Group's businesses and the further confirmation to
the medium and long term development plan of the Group, the Board has
considered and proposed the following increases to the Existing Caps in
respect of this category of transaction:
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Construction and technical 21,187 24,959 24,385
services to be provided by
the CNPC Group to the Group
The above proposed increases to the Existing Caps have been determined
with reference to the following: historical transaction records for the
construction and technical services provided by the CNPC Group to the
Group; the medium and long term development plan of the Group; the actual
and the estimated business growth of the Group; the increases of prices of
relevant oil products; and the estimated relevant service price.
(c) Material supply services
Due to expansion of the Group's businesses and the further confirmation to
the medium and long term development plan of the Group, the Board has
considered and proposed the following increases to the Existing Caps in
respect of this category of transaction.
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Material supply services to be 646 649 595
provided by the CNPC Group to
the Group
The above proposed increases to the Existing Caps have been determined
with reference to the following: historical transaction records for the
supply of materials services provided by the CNPC Group to the Group; the
medium and long term development plan of the Group; the actual and the
estimated business growth of the Group; and the actual and estimated
prices of relevant materials.
(iii) Products and services to be provided by the Group to CRMSC
On 1 September 2005, PetroChina entered into the CRMSC Products and
Services Agreement with CRMSC, pursuant to which PetroChina should provide
CRMSC with products and services including, among other things, refined
products (such as gasoline, diesel and other petroleum products) on an
ongoing basis. Detailed information about the terms and conditions of the
CRMSC Products and Services Agreement and the annual caps in respect of
CRMSC Transactions were disclosed in the circular to the Shareholders
dated 22 September 2005 and were approved by the Shareholders at the
extraordinary general meeting held on 8 November 2005.
Due to the increase of the refined oil price, the Board has considered and
proposed the following increases to the Existing Caps in respect of this
category of transaction.
PROPOSED INCREASES TO THE EXISTING CAPS
(RMB in millions)
CATEGORY OF PRODUCTS AND SERVICES 2006 2007 2008
Products and services to be 722 666 658
provided by the Group to CRMSC
The above proposed increases have been determined with reference to the
following: the Group's historical transaction records with CRMSC; the
estimated business growth of the Group and CRMSC; and the actual and
estimated price of refined oil.
(c) PROPOSED CAPS
The Board has proposed the following Proposed Caps for the period from 1 January
2006 to 31 December 2008 after considering the revisions described in the above
sub-sections (a) and (b).
(RMB in millions)
2006 2007 2008
CATEGORY OF PRODUCTS AND EXISTING PROPOSED EXISTING PROPOSED EXISTING PROPOSED
SERVICES CAPS CAPS CAPS CAPS CAPS CAPS
(i) Products and
services to be
provided by
the CNPC Group
to the Group
(a) Production 27,513 63,983 28,923 96,437 32,647 98,518
services
(b) 91,614 114,681 88,280 115,039 79,636 105,661
Construction
and technical
services
(c) Material 4,471 5,356 4,331 5,459 4,500 5,574
supply
services
(ii) Products and 19,134 36,670 23,472 44,970 26,910 50,129
services to be
provided by
the Group to
the CNPC Group
(iii) Products and 10,326 11,048 11,359 12,025 12,495 13,152
services to be
provided by
the Group to
CRMSC
2. TRANSACTIONS WITH CNPC (HK)
As at the date of this announcement, CNPC (HK) is a 51.99% subsidiary owned by
CNPC and therefore a connected person of PetroChina. PetroChina entered into two
production sharing contracts with CNPC (HK), pursuant to which PetroChina agreed
to share in the oil and natural gas produced from Karamay Oilfield, as to 46% by
PetroChina and 54% by the CNPC (HK) Group and from the Leng Jiapu Oilfield, as
to 30% by PetroChina and 70% by the CNPC (HK) Group. Detailed information about
the CNPC (HK) Transactions was disclosed by PetroChina in an announcement on 30
December 2003.
Pursuant to these production sharing contracts, the CNPC (HK) Transactions
include the following:
(i) Services provided by the Group to the CNPC (HK) Group
The Group has provided and shall continue to provide assistance to the
CNPC(HK) Group, for among other things, leasing warehouses and terminal
facilities, and obtaining transportation and communication facilities. For
such assistance, the CNPC (HK) Group pays an annual assistance fee of US$
50,000 for each of the Karamay Oilfield and the Leng Jiapu Oilfield.
The CNPC(HK) Group has paid and shall continue to pay the Group an amount
of US$50,000 annually for training of personnel for each of the Karamay
Oilfield and the Leng Jiapu Oilfield.
(ii) Products provided by the CNPC (HK) Group to the Group
Although there is no contractual obligation upon the Group to purchase oil
production of the Karamay Oilfield and the Leng Jiapu Oilfield from the
CNPC (HK) Group, the Group has and intends to continue to accept part of
the deliveries in order to save transportation costs. The price of various
grades of crude oil sold is determined with reference to the prevailing
price in arm's length transactions of a similar quality crude oil prices
with reference to the trend of the international oil prices.
The Group obtained a waiver from the Stock Exchange on 2 January 2004 from
strict compliance with the disclosure requirement of the Listing Rules in
respect of the CNPC (HK) Transactions for a period of three financial years
ending 31 December 2006. The table below sets out the cap amounts of the CNPC
(HK) Transactions for the three years ending 31 December 2006:
CNPC (HK) CAPS
CATEGORY OF PRODUCTS AND SERVICES 2004 2005 2006
(i) Services provided by the Group 0.2 0.2 0.2
to the CNPC (HK) Group (US$ in
millions)
(ii) Products provided by the CNPC 18,208 23,192 23,192
(HK) Group to the Group (RMB in
millions) (Note 1) (Note 2)
Notes:
(1) The caps are based on 3% of the book value of the Group's net tangible
assets of the relevant years pursuant to the waiver from the Stock Exchange on 2
January 2004.
(2) The cap for 2006 is based 3% of the book value of the Group's net tangible
assets of 2005.
Given that the relevant percentage ratios involved the CNPC (HK) Transactions
are more than 0.1% but less than 2.5% for the Group, they are only subject to
reporting and announcement requirements and exempted from the independent
shareholders' approval requirement under Rule 14A.34 of the Listing Rules. On
its meeting held on 23 August 2006, the Board approved the CNPC (HK) Caps for a
period from 1 January 2007 to 31 December 2008 as follows. The Board (including
independent non-executive directors) is of the view that the CNPC (HK) Caps are
fair and reasonable and in the best interests of PetroChina and its Shareholders
as a whole.
CNPC (HK) CAPS
CATEGORY OF PRODUCTS AND SERVICES 2007 2008
(i) Services provided by the Group 0.2 0.2
to the CNPC (HK) Group (US$ in
millions)
(ii) Products provided by the CNPC 4,370 4,241
(HK) Group to the Group (RMB in
millions)
(C) AMENDMENTS TO THE ARTICLES
Due to the ongoing development of PetroChina's businesses, the Board proposes to
expand PetroChina's business scope and to amend its Articles accordingly.
Article 10(2) of the Articles provides the following:
"The Company's [PetroChina's] scope of business includes: the exploration,
production and sale of onshore oil and natural gas; the production and sale of
refined, petrochemical and chemical products; the operation of oil and natural
gas pipelines; the research and development for oil exploration and production
technology and petrochemical technology; the sale of materials, equipment and
machines necessary for production and construction of oil and gas,
petrochemicals and pipelines (except those items required to be specifically
authorized by the State); the import and export of crude oil and refined oil;
the operation of, or to act as agent in, the import and export of various
commodities and technologies (except the commodities or technologies which are
required to be operated by companies designated by the State or are prohibited
to import or export), the operation of processing with imported materials and
the 'Three Types of Processing plus Compensation Trade'; the operation of contra
trade and transit trade; the operation of the oil exploration, development and
production business under the overseas co-operation contracts of which China
National Petroleum Corporation has assigned its interests."
Article 10(2) shall be amended as follows:
"The Company's [PetroChina's] scope of business includes: the exploration,
production and sale of oil and natural gas; the production and sale of refined,
petrochemical and chemical products; THE SALE OF CHEMICAL FERTILIZERS;
WAREHOUSING AND TRANSPORTATION OF PETROLEUM AND PETROCHEMICAL PRODUCTS; THE
OPERATION OF CONVENIENT STORES AND OTHER AUXILIARY FACILITIES AFFILIATED TO THE
SERVICE STATIONS AS WELL AS THE PROVISION OF THE ANCILLARY SERVICES; the
operation of oil and natural gas pipelines, and THE PROVISION OF RELEVANT
ENGINEERING AND TECHNOLOGICAL DEVELOPMENT AND CONSULTANCY SERVICES AS WELL AS
THE OIL AND GAS RELATED IT SERVICES; THE PROVISION OF SERVICES IN CONNECTION
WITH THE LEASE OF BUILDINGS AND EQUIPMENT AS WELL AS THE PROVISION OF WATER,
ELECTRICITY AND HEAT SUPPLY; the sale of materials, equipment and machines
necessary for production and construction of oil and gas, petrochemicals and
pipelines (except those items required to be specifically authorized by the
State); the import and export of crude oil and refined oil; the operation of, or
to act as agent in, the import and export of various commodities and
technologies (except the commodities or technologies which are required to be
operated by companies designated by the State or are prohibited to import or
export), the operation of processing with imported materials and the 'Three
Types of Processing plus Compensation Trade'; the operation of contra trade and
transit trade; the operation of the oil exploration, development and production
business under the overseas co-operation contracts of which China National
Petroleum Corporation has assigned its interests."
The Board be authorized, as proposed to be approved at the extraordinary general
meeting of PetroChina, to make such modifications to the above proposed
amendments to the Articles as required by the relevant regulatory bodies of the
PRC.
The proposed amendments to the Articles will be subject to Shareholders'
approval. Further information about the proposed amendments to the Articles will
also be included in the circular which will be sent to the Shareholders by
PetroChina as soon as possible.
TERMS USED IN THIS ANNOUNCEMENT
"818 Inc." 818 Acquisition Inc., a company incorporated under
the laws of Alberta, Canada and
amalgamated with PKZ on 29 June 2006
"Acquirer" Pervinage Holding B.V., a wholly-owned subsidiary
of the CNPC E&D incorporated in Netherlands on
17 August 2006
"Acquisition" the acquisition of a 67% interest in
PetroKazakhstan by the Acquirer from
the Vendor
"Acquisition Agreement" the share purchase agreement dated
23 August 2006, entered into between
the Vendor and the Acquirer in
respect of the Acquisition
"Amalgamation" the amalgamation between 818 Inc. and
PKZ on 29 June 2006
"Amended Comprehensive the comprehensive products and services
Agreement" agreement between CNPC and PetroChina
dated 10 March 2001, which was amended
on 9 June 2005 and 1 September 2005
respectively. The terms and conditions
of the agreement were disclosed in
detail in the circular to the Shareholders
dated 22 September 2005 and were approved
by the Independent Shareholders on
8 November 2005
"Articles" the articles of association of
PetroChina, approved by the Shareholders
on 26 May 2005
"Board" the board of directors of PetroChina
"CNODC" ("CHINESE CHARACTERS") (China National Oil
and Gas Exploration and Development Corporation*),
a state-owned enterprise incorporated under the
laws of the PRC, the entire interest of which
is owned by CNPC
"CNODCI" CNODC International Holding Ltd., a limited
liability company incorporated with the laws of
the British Virgin Islands and a wholly owned
subsidiary of CNPC E&D
"CNPC" ("CHINESE CHARACTERS") (China National Petroleum
Corporation*), a state-owned enterprise
incorporated under the laws of the PRC, and the
controlling shareholder of PetroChina, holding
approximately 88.21% of the issued share capital
of PetroChina
"CNPC E&D" ("CHINESE CHARACTERS") (CNPC Exploration and
DevelopmentCompany Limited*), a company
incorporated under the laws of the PRC with
limited liability, having its previous English
name as Zhong You Kan
Tan Kai Fa Company Limited
"CNPC Group" CNPC and its subsidiaries, associates and
affiliates, excluding the Group
"CNPC (HK)" CNPC (Hong Kong) Limited, a company
incorporated with limited liability in Bermuda and
listed on the Stock Exchange
"CNPC (HK) Caps" annual caps for CNPC (HK) Transactions
"CNPC (HK) Group" CNPC (HK) and its subsidiaries
"CNPC (HK) Transactions" continuing connected transactions between the
Group and CNPC (HK) Group as set out in Section
(B) 2 of this announcement
"CNPCI" CNPC International Ltd., a wholly-owned
subsidiary of CNODC incorporated in Cayman Islands
"CNPCI Acquisition" the acquisition by 818 Inc. of PKZ completed on
26 October 2005
"CRMSC" ("CHINESE CHARACTERS") (China Railway Materials and
Suppliers Corporation*), a state-owned enterprise
established under the laws of the PRC
"CRMSC Products and the agreement dated 1 September 2005 entered
Services Agreement" into between PetroChina and CRMSC in relation to
the provision of certain products and services
"CRMSC Transactions" the transactions contemplated under the CRMSC
Products and Services Agreement
"Dushanzi Refinery" a refinery located at Dushanzi, Xinjiang
Uygur Autonomous Region, the PRC,
operated by PetroChina
"Existing Caps" existing caps of continuing connected
transactions under the Amended Comprehensive
Agreement and the CRMSC Products and Services
Agreement for the period from 1 January 2006 to
31 December 2008
"Group" PetroChina and its subsidiaries
"Independent Board the independent committee of the Board,
Committee" comprising Messrs Chee-Chen Tung, Liu Hongru
and Franco Bernabe, established on 23 August
2006 for the purpose of reviewing and advising
Independent Shareholders in respect of the Proposed
Caps
"Independent Financial ICEA Capital Limited
Adviser"
"Independent the shareholder(s) of PetroChina other than CNPC
Shareholder(s)" and its associates, as defined by the
Listing Rules
"Interest Purchase the Interest Purchase Agreement dated 5 July
Agreement" 2006 between CNPCI, the Vendor, KMG and KMGS
for the sale and purchase of 33% of the total
issued share capital of PetroKazakhstan
"Jointly-owned Companies" a company in which both PetroChina and the CNPC
Group are shareholders, and where the CNPC Group
and/or its subsidiaries and/or affiliates
(individually or together) is/are entitled to
exercise, or control the exercise of, 10% or more
of the voting power at any general meeting of
such company
"Kazakhstan-China the oil pipeline from Atasu, Republic of
Pipeline" Kazakhstan to Alashankou, the PRC, operated by
Kazakhstan-China Pipeline Limited Liability
Partnership
"Karamay Oilfield" the Karamay Oilfield in Junggar basin in Xinjiang
Uygur Autonomous Region, the PRC
"KMG" JSC National Company Kazmunaigaz, a state owned
oil company organised and existing under the law
of the Republic of Kazakhstan
"KMG Acquisition" the acquisition by KMG (through KMGS) of a 33%
interest in PetroKazakhstan completed on 5 July
2006
"KMGS" Kazmunaigaz PKI Finance B.V., a private company
with limited liability existing under the law of
the Netherlands and a wholly-owned subsidiary of
KMG
"Leng Jiapu Oilfield" the Leng Jiapu Oilfield in Liaohe, Liaoning
Province, the PRC
"Listing Rules" the Rules Governing the Listing of Securities on
the Stock Exchange
"Pervinage" Pervinage S.a r.l., a wholly owned subsidiary of
CNPC E&D incorporated in Luxembourg
"PetroChina" ("CHINESE CHARACTERS") (PetroChina Company Limited*),
a joint stock company limited by shares incorporated
in the PRC on 5 November 1999 under laws of the PRC,
and listed on the Stock Exchange with American
Depository Shares listed on the New York Stock
Exchange
"PetroKazakhstan" PetroKazakhstan Inc., a corporation existing
under the laws of the Province of Alberta Canada.
On 29 June 2006, 818 Inc. and PKZ amalgamated under
the laws of the Province of Alberta, Canada and
that the new company after the Amalgamation became
the owner of all of the assets and liabilities of
PKZ and 818 Inc. (except the shares of PKZ) and the
new company's name after the Amalgamation remains
the same as PetroKazakhstan Inc.
"PetroKazakhstan Group" PetroKazakhstan and its subsidiaries
"PKZ" PetroKazakhstan Inc., a corporation existed under
the laws of the Province of Alberta Canada, which
was amalgamated with 818 Inc. on 29 June 2006
"PKKR" JSC PetroKazakhstan Kumkol Resources, a joint
stock company established and existing under the
laws of the Republic of Kazakhstan
"PKOP" PetroKazakhstan Oil Products, a limited liability
partnership established and existing under the
laws of the Republic of Kazakhstan
"PKOP MOA" a memorandum of agreement dated 5 July
2006 by and between CNPCI and KMG with respect of a
proposed reorganization of PKOP
"PRC" the People's Republic of China
"Proposed Caps" the proposed maximum annual aggregate values of
the relevant continuing connected transactions
under the Amended Comprehensive Agreement
and the CRMSC Products and Services Agreement as set
out Section (B) 1 (c) of this announcement
"Shareholder(s)" the holder(s) of shares of PetroChina
"Shareholders Agreement" the Shareholders Agreement dated 5 July 2006
between CNPCI, the Vendor, KMG, KMGS and
PetroKazakhstan
"Stock Exchange" the Stock Exchange of Hong Kong Limited
"Valsera" Valsera Holding B.V., an indirect wholly--owned
subsidiary of PetroKazakhstan incorporated in
Netherlands, the 96.7% owner of PKOP
"Vendor" 819 Luxembourg S.a r.l., an indirect wholly owned
subsidiary of CNODC incorporated in
Luxembourg
"Western Pipeline" the oil pipeline from Dushanzi, Xinjiang Uygur
Autonomous Region to Lanzhou, Gansu Province,
the PRC, operated by China Petroleum West
Pipeline Co., Ltd.
By Order of the Board
PETROCHINA COMPANY LIMITED
Li Huaiqi
Secretary to the Board
Beijing, the PRC, 23 August 2006
As at the date of this announcement, our Chairman is Mr. Chen Geng; our Vice
Chairman is Mr. Jiang Jiemin; our Executive Directors are Messrs Su Shulin and
Duan Wende; our Non-executive Directors are Messrs Zheng Hu, Zhou Jiping, Wang
Yilin, Zeng Yukang, Gong Huazhang and Jiang Fan; and our Independent
Non-executive Directors are Messrs Chee-Chen Tung, Liu Hongru and Franco
Bernabe.
* For identification purposes only.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PetroChina Company Limited
Dated: August 24, 2006 By: /s/ Li Huaiqi
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Name: Li Huaiqi
Title: Company Secretary