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Strengthening International Exchanges and Cooperation
for Sustainable Oil & Gas Growth

Keynote Address at International Oil & Gas Conference in China 2006
Zhou Jiping, Vice President
December 5, 2006

Honorable SPE President, Mr. Abdul, Mr. Huang Yan, Chairman of Chinese Petroleum Society, Distinguished Guests, Ladies and Gentlemen,

Good Morning!

Today, I am very pleased to join you all at the opening of the International Oil & Gas Conference and Exhibition in China 2006. The event is co-organized by the Chinese Petroleum Society and the Society of Petroleum Engineers. First of all, please allow me, on behalf of China National Petroleum Corporation, and also in the name of myself, to extend my sincere congratulations and the warmest welcome to all of you.

The theme of the conference is "Sustainable Growth for Oil and Gas". It brings together the world industrial leaders and experts to share views, experiences and technologies, and to explore ways to achieve win-win solution. The event is of great importance to promote technical development and cooperation, and to ensure the sustainable growth for oil and gas.

It is known that, with the rapid development of global economy, the demand for energy, particularly for oil and gas keeps increasing. In this context, oil companies are actively exploring and producing more oil and gas to meet the energy demand for social and economic development. As of the end of 2005, the global proven oil reserves exceeded 171 billion tons and gas reserves 180 trillion cubic meters. In 2005, the world oil and gas production was 3.9 billion tons and 2.76 trillion cubic meters. Oil and gas production drives the social development of Mankind.

CNPC, like other world oil majors, is trying its best to bring more production as a way to meet demand of the fast growing Chinese economy. In 2005, CNPC produced 105 million tons of crude oil and 36 billion cubic meters of natural gas, added 500 million tons of oil reserve and 350 billion cubic meters gas reserve. CNPC contributed to the national as well as global economy.

World petroleum industry has a history of more than 100 years. In the past century, global petroleum production witnessed three major increments, which is brought about by breakthroughs in petroleum theory and technologies. In 1920s-1930s, the application of technologies such as seismic reflected wave method, internal combustion engine drilling rig and cone bit, increased the production from 100 million tons to 200 million tons. In 1960-1970s, thanks to new theories and technologies in plate tectonics, water flooding, and jet drilling, oil production worldwide was increased from 1 billion tons to 2 billion tons. Since 1990s, 3D seismic and directional well drilling technology improved the success rate of exploration drilling from 50% in early 1990s to today's 70%. The single well oil and gas equivalent increased from 2 million barrel to over 7 million barrels.

Offshore seismic, drilling and production technology, plus the development of petroleum equipment have made it possible to tap reserve beyond 3000 meters deep in water. Offshore oil production represents more than one-third of the world total. Breakthroughs in basin simulation, horizontal drilling, 3-D seismic and deep water exploration stabilize world oil production at 3 billion tons per year. History proves that science and technology is the key to the successful story of petroleum industry, which has become the cornerstone of the global economy.

Reviewing the past, we see that science & technology have created numerous miracles and greatly push forward the development of world petroleum industry. Looking into the future, R&D achievements and key technological breakthroughs will remain as the essential driving force for the growth of the world petroleum industry.

Today, exploration targets have gradually shifted to deeper formation, deep waters, deserts, and mountainous area, remote and barren lands. New targets for deep formation exploration mean both 6000-7000 meters onshore structures and 3000 meters water depth. Newly discovered reservoirs are of small size and low quality, with larger proportion of "difficult to tap" reserves. 75% of the newly added reserve comes from complicated or hidden oil pool of existing oil fields. These make it even more difficult to discover and produce residual oil and gas reserve. With the lower quality and higher gravity of oil, it becomes increasingly challenging to increase the comprehensive utilization rate of oil. In addition, environmental concerns require a more technically clean production process. Solutions for existing technical bottlenecks must be found to achieve sustainable development of the petroleum industry.

Concerted efforts of the world petroleum community are required to find solutions to bottlenecks of the industry. International oil majors, national oil companies and service companies should share experiences and technologies to solve problems of their own. Strengthening technical exchanges among countries will not only provide a platform for understanding, but also create more opportunities for cooperation.

This event also provides a good chance for oil companies to discuss and share their research and development results as well as their best practices. We will, as always, support and actively participate in this kind of activities. Please join me in extending a warm applaud to the organizers for providing us such a networking platform!

With over fifty years' development, CNPC has formed a unique theoretical system, and advanced & practical petroleum technologies, which backed the development of Chinese petroleum industry. The non-marine petroleum geological theory put an end to the "China is poor in oil" argument and led to discoveries of large oil fields one after another. The application of large heterogeneous sandstone reservoir development theory, separate zone production, stabilizing oil output by controlling water-cut, and tertiary recovery technologies, stabilized the production of Daqing oilfield at around 50 million tons per year for 27 consecutive years, a record of world petroleum industry. Progressive E&P technologies make it possible for the commercial development of small fault-block reservoirs. In conclusion, these major world leading R&D achievements have effectively guided the E&P operations of Chinese large oil fields.

Our unique E & P technologies, theories and best practices have a good application in overseas projects and achieved remarkable results. For example, by using geological theory and exploration technologies for passive rift basin and under-explored basins in Sudan, CNPC made a discovery of 5 billion barrels oil in place in Block 3/7 of Melut Basin of Sudan, a basin abandoned by western companies, and built up a production capacity of 10 million tons per year. Another example is in Kazakhstan. By using production technologies for carbonate reservoir of abnormal high pressure and extremely low porosity, CNPC increased the daily single well production of Kenziyak sub-salt formation to 500 tons from only tens of tons. Practices prove that the unique E & P technologies and theories of China are also applicable overseas. CNPC is willing to share our experience with our partners.

Over the last decades, CNPC sticks to our philosophy of win-win solution for cooperation. We take full advantage of our integrated strength of both oil company and service company in a bid to lower the operational risk of partners and capital expenditure of host countries. CNPC lives on technology and human resources and is committed to provide supports to host countries in technology and human resource. CNPC pays equal attention to resource and market and make due investment to ensure benefits for both parties. At the same time, human resource training for host countries is highlighted for technical, managerial and operational personnel to realize localization of project employment. Harmonious development is also our focus for international cooperation. We pay great attention to environment and support local economic development through rational development and utilization of resources. In the process of translating resources value to the people, we bring civilization, fairness, peace and friendship to our partners. CNPC will firmly hold these philosophies for a win-win solution with host countries and partners.

Ladies and Gentlemen,

This conference goes beyond a technical event; it is rather a platform to enhance friendship, understanding and win-win cooperation. A platform for exchanges on a regular basis will facilitate technical advancement, international cooperation, and development of global petroleum economy. I believe that what we will harvest from the conference is not only technical solutions, but a chance for friendship and shared development.

In closing, I wish the conference a complete success, and have a pleasant stay in Beijing.

Thank you for your attention.

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