On behalf of the board of directors (the ¡°Board¡±) of Sino Oil and Gas Holdings Limited (the ¡°Company¡±, and together with its subsidiaries, collectively the ¡°Group¡±), I hereby present the annual results of the Group for the year ended 31 December 2017.
Atmospheric pollution prevention is one of the focuses of the national environmental protection policy in China. To deal with smoggy weather and improve air quality, the Chinese government vigorously launched ¡°coal-to-gas¡± projects in 2017 and put high emphasis on securing the natural gas supply, whilst actively supporting enterprises to scale up domestic gas production. We believe that the ¡°coal-to-gas¡± initiative will become one of the most significant drivers of natural gas consumption. According to the statistics of National Development and Reform Commission, growth of natural gas demand reached 14.8% in 2017 compared to that of only 6.6% in 2016. Meanwhile, the supply-side reform in Shanxi province yielded remarkable results and made some progress, contributing to the gradual recovery of the local economy. The provincial government expedited the development of coalbed methane, the strategic emerging industry, and the development of national comprehensive energy bases to ensure the implementation of ¡°Gasification for Shanxi¡± strategy. We are therefore optimistic about the natural gas consumer market in China, and are confident of the prospect of the coalbed methane industry.
Backed by the above favorable factors, our Sanjiao CBM Project (¡°Sanjiao Project¡±) continued to develop steadily in the preceding year. The Group actively expanded sales during the year, thus the sale-to-production rate of Sanjiao Project reached approximately 90%. Meanwhile, our project team pushed forward various infrastructure projects in full swing. Last year, the annual production capacity of the project exceeded 100 million cubic meters with 16 new wells having access to the pipeline network. Besides, the expansion of the CBM processing station has been completed with daily processing capacity of 500,000 cubic meters. In order to cope with the development of Sanjiao Project, the project team has commenced the expansion of the CBM processing station to a daily processing capacity of 750,000 cubic meters.
Given the macro policy support and long-term growth potential of the project, the Group believes that the growth of the earnings of Sanjiao Project would be huge. The Group will continue to focus its resources on developing Sanjiao Project and increasing the production capacity in order to achieve steady and sustainable growth and lay a solid foundation for the expansion of business presence.
In 2017, the international crude oil market has mounted a turnaround. With the positive impact of the output reduction agreement with the Organization of the Petroleum Exporting Countries, fundamentals of the industry continue to improve and the international crude oil market is regaining its balance, with oil price rising steadily. We will capture investment opportunities as appropriate to steer the Group for a long-term and sustainable development. We will actively identify potential merger and acquisition projects relating to the oil and gas industry chain in China and other countries, and perform in-depth research and assessment in a prudent and pragmatic manner to ensure that relevant decision-making could fully protect the interests of shareholders.
In the meantime, the Board, after careful consideration, is of the opinion that optimizing the shareholder structure is beneficial to the steady development of the Group and achieving a higher standard of corporate governance. Accordingly, with the long term support from loyal shareholders who share the common vision with the Group, the Board is actively introducing quality strategic shareholders such that the Group could maximise its corporate value.
In March 2018, the Board introduced Mr. Zhang Yongdong, a financial investor, as a shareholder of the Company. I would like to thank Mr. Zhang for his recognition of the Group¡¯s business operations as well as his strong support for its future development. Lastly, I, on behalf of the Group, would like to express my heartfelt gratitude to our shareholders, business partners and investors for their trust and support over the years. I would also like to extend my deepest appreciation to all our staff members. All our colleagues will continue to work hard to bring fruitful returns to our shareholders.
Hong Kong, 29 March 2018