We regard it as our mission to supply more clean energy for better life of our people. Based on our understanding of China’s demand for energy supply in long term, CNOOC started to conduct study on importing LNG to China’s southeast coastal provinces in the middle of the 1990s. The Company has built up its leading position in LNG business in China through construction of several key LNG receiving terminals and investment in related business. In developing our gas and power business, we will focus on LNG and construct the coastal gas trunk line to develop and use gas efficiently and safely. We will also actively diversify our worldwide LNG resource supply to fuel sustainable economic growth and social development in the coastal provinces.

As a clean energy, LNG enjoys a continuously enlarging share in world energy consumption and has a huge market potential. As the pioneer in China’s LNG industry, CNOOC was the first company to introduce LNG to China. Through construction of a number of large-scale LNG projects along southeast coast, the Company is to help fuel economic growth as well as achieve balance between energy supply and environment protection.

Guangdong LNG Project is China’s pilot LNG project. The project followed international practices and complied with China’s planning and construction requirements. It has important implications and good experiences to other projects in the country. The combined scale of the two phases is 12.1 million tons per annum. The first phase was put into production when receiving the first cargo on May 26 and the project started business operation on September 28, 2006.

The receiving terminal of Fujian LNG Project is located at Xiuyu Port of Putian City. With a capacity of 2.6 million tons per annum for Phase I, it is expected to complete construction by the end of 2007. Upon production, it will provide town gas to five cities including Fuzhou, Putian, Quanzhou, Xiamen and Zhangzhou, as well as three power plants in Putian, Xiamen and Jinjiang. In September 2006, the procurement and sales agreement came into effect and Indonesian Tangguh Project will supply gas to the terminal. The two storage tanks completed construction in November 2006.

The other two ongoing projects in Shanghai and Zhejiang province were both progressing well. Shanghai LNG Project has secured resource supply. In addition, CNOOC was conducting preliminary preparation for its planned LNG projects in Zhuhai, Guangdong province and Hainan province.

Developing along the value chain, CNOOC’s power generation and pipeline business were in promising progress. The three power plants and four pipeline companies that the company held or owned a stake in 2006 all posted profit. The electricity generated was 3.52 billion kwhs, sales of electricity reached 3.38 billion kwhs and sales of gas reached 2.63 BCM.

In the coming few years, CNOOC will focus on LNG and construct the coastal gas trunk line in developing its gas and power business. It will also selectively invest in gas power generation, town gas, CNG and related business. It will also speed up its LNG shipping business. The Company plans to develop CNOOC brand into a widely recognized brand in the southeast coastal provinces.