Earnings Call: Q2 2021

Aug 26, 2021

And Board Secretary. On behalf of the company, I'd like to welcome you to our 2021 interim results presentation. First, allow me to introduce the directors and Corp Management present today. They are Chairman, Mr. Sai Fei Liang Executive Director and President, Mr. Fengming Zhang Senior Vice President, Mr. Reni Xin Vice President, Mr. Liu Guang Vice President, Mr. Tianjin Hui Vice President and Chief Engineer, Mr. Yang Ji Gang. The presentation today includes 4 parts: 1st, overview of financial performance in the first half of the year then overview of operation performance, then remarks from the Chairman, followed by a TIA session. Now, I will walk you through the company's financial performance in the first half. In H1, 2021, PetroChina's realized oil price, US59.45 dollars per barrel, up $20.43 $3.4 lower than H1 twenty nineteen, down 5.4% For a 2 year average decline of 2.7 percent, revenue, 1,200,000,000,000, up RMB267.44 billion or 28.8 percent, better than the same period of 2019. Operating profit, RMB88.46 billion, up RMB94.5 billion year on year, RMB17.8 billion higher than H1 2019 had an average 2 year growth of 11.9 percent. Net profit attributable to the parent RMB53.04 billion, up RMB83.02 billion, RMB24.62 billion higher than H1 2019 and saw an average 2 year growth of 36.6 percent. Earnings per share, dollars 0.29 a 7 year high in the same period. PetroChina enhanced asset management further optimized that structure and saw more solid financial foundation. As of June 30, total assets, RMB2.5 trillion, up 1.8% versus the end of last year. Interest carried debt, RMB382.73 billion, up 3.7% versus the end of last year. Composite cost of interest bearing debt 2.54%, down 0.33 percentage points Debt to asset ratio 45%, down 0.1 percentage points. Debt to capital ratio 21.6%, up 0.3 percentage points. We value cash flow management and saw a large FCF increase. Cash flow from operation, RMB116.03 billion, up RMB36.95 billion year on year or 46.7 percent FTF 4,670,000,000 yen up 30,980,000,000 Guided by the business development plan, we optimized the investment structure As advanced key projects in a coordinated way, CapEx in H1 was RMB73.8 billion, down 1.2% year on year. Such a scale is reasonable and controllable. In H1, we work to boost exploration and development. ENP spent RMB54.08 billion or 73.2 percent over the total. R and C Business So faster upgrading and structural adjustments took RMB16.6 billion or 22.5 percent of the total CapEx. We upheld low cost growth and well to beef up fine management, quality and efficiency. Major costs were effectively controlled. In H1, lifting cost US10.59 dollars per barrel, up 1.1% adjusted for RMB appreciation, lifting costs in China $11.21 per barrel, down 2.8% adjusted for RMB appreciation. Cash processing cost RMB159.27 per tonne, down 1.3% year on year. Marketing costs 388.81 yen per ton, down 9.4% year on year. Operating profit of E and P segment, RMB30.87 billion, up RMB20.52 billion year on year, price changes of oil and gas products added to the profit by RMB56.28 billion. Sales changes cut the profit by RMB4.36 billion, among which higher gas sales added RMB3.68 billion and lower crude sales cut RMB8.04 billion mainly due to factors like OpEx compliance leading to less overseas crude sales Net cost RMB8.09 billion. OpEx and others rose by RMB31.4 billion, including RMB19.99 billion from purchase, RMB2.8 billion from taxes exclusive of income tax and RMB2.31 billion from DD and A. For operating profits of refining and chemical segment, RMB22.19 billion, up RMB32.73 billion. Refining business took RMB13.46 billion, up RMB27.1 billion. Higher margins added RMB26.2 billion, higher crude yuan added RMB400 million, less OpEx added RMB500 million. Chemicals business RMB8.73 billion, up RMB8.73 billion, up RMB5.63 billion price changes at RMB22.86 billion Sales changes at RMB3.31 billion, higher OpEx, capped the profit by RMB20.54 billion, including RMB19.29 billion from purchase, service and others. Operating profit of marketing segment, RMB6.64 billion, up RMB19.53 billion. Marketing business in China booked RMB2.66 billion, up RMB17.28 billion, including RMB15.64 billion from higher gross margin, RMB1.07 billion from more sales and RMB570 1,000,000 from lower OpEx. Operating profits of international trade RMB3.98 billion, up RMB2.25 billion year on year. Natural Gas and Pipeline Business segment booked RMB36.8 billion, up RMB22.5 billion year on year. Operating profit for potential gas marketing business, RMB13.23 billion, up RMB19.4 billion year on year. Sales price in China averaged RMB1.75 per cubic meter, up 1.3% year on year due to lower cost and higher sales price, Importing natural gas, beta profit. Operating profit of City Gas Business RMB8.59 billion, up RMB1.63 billion. OP of pipeline business RMB1.68 billion, down RMB16.2 billion, mainly due to less pipeline on the PetroChina after the transactions. Others That is RMB17.75 billion, largely from the RMB18.32 billion of equivalent energy pipeline disposal. To reward our shareholders, the Board plan to pay out interim dividend of RMB13.04 per share, 45% of net profit attributable to the parent under IFRS totaling RMB23.87 billion, the highest interim dividend since 2015. As for the financial review, next, Executive Director and President, Mr. Hongyong Zhang, will review the company's operational performance in H1. Thank you, Mr. Cai. Now, I will brief you on the company's operational performance in the first half of the year. In the first half of twenty twenty one, as COVID-nineteen somewhat simplified, while the economy is picking up And the Chinese economy is steadily recovering for the better. Global oil demand saw material uptick with climbing crude prices. Writing on the macroeconomic recovery, rising oil prices and demand, we upheld The 5 strategies of innovation, resource, market, internationalization, green and low carbon and promoted Coordinated progress in production operation, quality and efficiency, reform and innovation as well as E and C efforts, We actively are upgrading the market management and quality, start to fund management and cost control, managed to sustain steady operation of oil and gas industry chain with ever improving production dynamics And of course, bunker results. Domestic exploration made notable progress and development efforts saw proactive capacity building. In H1, we highlighted efficient exploration and enhanced risk and concentrated exploration. 35 results, including 5 strategic breakthroughs were made. Hutangwan well in Zhengzhou Basin, the 1st major breakthrough in South Edge, Offshore in exploration of our 20 cubic meter gas province, Michangwang well in Erdos Basin, First, automation presold well with industrial gas flow broke new grounds for automation presold exploration. Pinahuan Belt in Sichuan Basin with great potential Jurassic Lukasthaya shale oil is set to open a new chapter For exploration in Sichuan, as oil prices rose, we took initiative to boost production operation, Slow down the natural decline in legacy oil fields like Zaxing and push for cost effective capacity building in new blocks Such as in Chongqing, SREIM and Yichuan, much progress was made. Average inputs for each new oil and gas well fell by over 5% as output profile climbed by 6.2% and 5%, respectively. Overseas Corporation saw steady advances and sound growth. In H1, we took active and sound steps To resume production and operation in key projects and continue to optimize business portfolio and asset structure, A number of major discoveries were made by intensive work in enhanced exploration. Risk exploration in Nizhaya broke new grounds, All 7 test wells drilled with high steady oil outputs of 419 Cubic Meters, projects in Chad So major discoveries, 6 test wells, both large oil and gas flow. In Kazakhstan, October, A number of test wells saw high yielding oil flows. This slide shows our major production results In the first half of the year, in H1, oil and gas outputs 820,000,000 BOE, including 730,000,000 BOE in China, up 3.5% year on year. Crude output in China, 370,000,000 BOE, up 0.6 percent marketable gas output in China 2.2 Tcf, up 6.7% year on year. Domestic gas takes a larger share in the production mix, which was further optimized. Refining and Chemical structure further improved We have solidified in key projects. For refining, we optimized crude allocation and gave priority Through integrated and efficient subsidiaries, crude run 610,000,000 barrels, up 6.7% year on year. Outputs of refined products, 54,906,000 tons, up 5.4% year on year, gasoline and carolishing up 15.1% and 49.1% respectively. We pursued market oriented growth and adjusted fuel mix, diesel gasoline ratio 0.92, down by 0.26. Guangdong Petrochemical project is well underway. For chemicals business, we upgraded ethylene feedstock allocation and kept a high utilization ratio. More high value added products were produced and marketing strategies fine tuned. Chemical commodities Totals 14,720,000 tons, up 6.3% year on year. Outputs of synthetic resin and rubber, up by 1% and 3.5%, respectively. The company tapped into the rich ethane resources Its gas fields and with its own technologies completed the national demo ethane to ethylene projects and Chongqing and Terine. Chongqing with 800 kilotons capacity succeeded its start up on August 3. Tarim with 600 kilotons capacity is under test run. The 2 will add 1,400,000 tons of ethylene capacity and become new profit drivers for PetroChina's chemicals business. Refined product marketing saw visible improvement with enhanced value creation capacity. We present linked production and marketing in view of market changes, boosted precision marketing and actively expanded end users In direct sale clients, in H1, refined product sales 80,330,000 tons, up 4.9 percent. Sales in China, dollars 63,592,000 up 10.3%, among which gasoline up 16.2%, carousing up 76.3%. We further expanded retail business, adding another and 56 gas stations. Non oil business exposed all channel sales model Covering both online and offline, gross margin, 2,280,000,000 yen, a record time. International trade But to underpin the value chain, maximize the both domestic and international resources and the market, Expanded international fuels and the chemicals market, trade volume 220,000,000 tons, up 2.8%. Natural gas marketing shot up in both volume and efficiency. With robust demand for natural gas amid carbon peak and neutrality targets, we worked flat out to In Hong's partnership with City Gas clients and power plants and proof for early commissioning of new clients. Gas sales 124.1 Bcm, Up 11.9% year on year, among which sales in China, 96.3 bcm, up 17.6% year on year. End user sales 22.26 bcm, up 23.1%. We strictly implement national pricing policies, improve sales structure and boost online transaction. Sales profit saw large jump. Key projects, including Tangshan LNG Terminal for contingency and deep shaving Are well underway. Phase 3 of Jiangsu LNG is basically complete. New energy and new businesses are taking off. Industry strategic layout further improved. In 2021, we plan to add new energy capacity of 3,450,000 TCE per annum, we newly signed geothermal heating contract for 10,000,000 square meters. Clean alternative projects being built will replace tons of fuel use of 350,000 TCE annually. We gained approvals For 8 50 megawatts of wind and photovoltaic, launched a hydrogen purification project Of 2,000 SDM per hour, with proactive planning in hydrogen refueling, high Zhejiang and photon stations for Beijing Winter Olympics And now up and running, 6 more are under construction. We are planning 6 new energy bases in Beijing Tianjin Hebei region, Zillium, Daqing, Qinghai, Yimmen and Eastern Jose will boost de bottlenecking efforts on new energy and materials, strengthen external technical exchange and cooperation and form an R and D system in this regard. We launched carbon peak and neutrality action plan. With energy saving as the first few, we strive to reduce consumption, increase the use of clean alternatives in our production to cut carbon emission, we enhanced carbon removals and launched 18 CCUS appraisal and experimental projects. Total capacity, 600 kilotons per annum. Emphasizing green and low carbon, we further cemented the foundation for sustainable development. We strictly comply with laws and regulations, embrace social responsibilities, include growing a low carbon internal corporate strategy, Strengthen ecological protection to become an outstanding corporate citizen globally. The Board has renamed HST Committee As Sustainable Development Committee, adding ESG and other sustainability topics as well as strategic planning Into its scope of responsibilities, we remain committed to the integration and coordination of development and environmental production. With priority on the latter, we enhanced clean production, energy saving and emission costs. In H1, we saved energy use of 340,000 TCE and water of 4,500,000 cubic meters. We carried on with Venting Gas Recovery and led the funding of China Oil and Gas Mission Alliance As one of the first 10 companies to enter China's carbon trading market, we engaged in the first phase trading. We heightened Technical research and demo application of CCUS and 2 concurrency and carbon neutrality first station programs. We actively enforced China's overall planning of carbon peak and neutrality, formulated green and no carbon action plan, According to our 3 step plan of clean alternative strategic replacement and grain development, We strive to peak carbon at around 2025. At 2,035, supply more green and 0 carbon energy Then the fossil fuels we consume and reach near 0 emissions at around 2,030. We stick to COVID control on an ongoing basis with over 93% of staff vaccinated. We enhanced employee health management and issued 10 measures on building healthy enterprises and its implementation program. Here on the slide, our 2021 operational targets and delivery in H1 For your reference, in H2, we'll carry on with the deployment of the Board to build A world class international energy company, they exert ourselves and press ahead, deliver good performance to reward our shareholders and give back to society. Thank you. That's all. Now, Let's welcome our Chairman, Mr. Dai Hu Liang. Dear investors, friends from the media, ladies and gentlemen, Good afternoon. I'm very pleased to join you online once again to share our H1 performance and outlook for the future. First of all, as always, on behalf of the Board, top management and entire staff, My sincere appreciation to all investors, analysts and firms from the media for your long time trust and support. Just now, the top management shared with you our 2021 interim results. In 2021, with the rapid recovery in China's economy and the rebound in market demand and international enterprises. We coordinated various efforts in production and operations, improving both quality and efficiency, Performance and Innovation as well as DSP Management. We maintain safe and reliable operations across both oil and gas value chains. Quality and efficiency of our development saw significant improvement. In H1, explorations saw notable highlights With major breakthroughs and discoveries in key basins like Zhenghe, Odos, Sichuan and Bohai Bay. Our oil and gas reserve continues to expand and resource base for the consolidated. Oil and gas production and sales, along with refining and chemical business grew in both volume and profit, product mix further optimize Output and sales of home produced gas and chemical commodity went up by 6.7%, 17.6 and 6.3% respectively. New energy and new material business layout picked up pace. Growing a low carbon transition and digitalization made headway. Key projects are proceeding orderly. All business segments are turning profits. Net profit attributable to parent reached RMB53.04 billion, A 7 year high for the same period, showing full value growth of the company And the capital markets continue to show positive forecast about the company. Currently, COVID-nineteen pandemic is still evolving. Economic recovery is diverging across the world And competition in the oil and gas market intensifies such a tough and complex environment poses certain risks and challenges. Meanwhile, we also see China's economy continue to recover steadily with more solid foundation for the better. The government further improves business environment, promotes fair competition and rolled out policies to include technical innovation and growing low Carbon Development. In China, refined product consumption further rebounds. Gas demand maintains fast growth. All these form a conducive environment for our growth. Next, we will seize opportunity, Follow the general principle of prudent progress, strive forward with oil, gas and new energy business, grow refining and new energy and new materials business, And we'll focus on restructuring, reform and innovation, improve ESG management To build on our current progress and sustain strong momentum, crude industry chain will highlight adding reserve, Informing stable output and boosting sales and profits, proceed to efficient exploration, take SEC RRR and focused on key basins and regions, strengthen comprehensive geostudies and principles and great success rates to constantly make big discoveries and new strategic breakthroughs, will stick to profitable production, tighten cost control, Make active EOR efforts in mature oil fields, push new projects to reach intended capacity and profitability. We'll better coordinate refining, marketing and trade. The market oriented and client centered Emphasize structural adjustment of Fannie and Chemicals and market expansion for refined products to build strength In resource allocation, marketing and value creation, gas industry chain will maintain fast production ramp up, boosting quality and profits We'll cash in on the booming demand, double efforts in domestic production ramp up, speed up capacity building in key gas regions and ensure rapid growth of home produced gas to better coordinate and balance domestic and overseas resources and markets, Fine tune marketing strategies and sales structure to improve service and our profitability. We will summarize efforts in new energies, new materials and new businesses and pursue sound growth Following the 3 step plan of clean alternatives, strategic replacement and green development, we'll speak to opening up and Corporations developed solar, wind and geothermal power based on local conditions. We actively plan out high grade industry chain, work harder on new material and new product development, explore carbon and other new businesses to drive our green and low carbon transition. For further improved quality and efficiency As our long term strategy, we bring further and achieve concrete results. We'll tap into our internal potential and achieve greater success in this regard. As for reform and innovation, we'll focus on debottlenecking and key breakthroughs. We'll further modernize governance system and capabilities, Implement a market based operation mechanism To fully arouse enthusiasm of entire staff to both production, sales and profits, we enhanced technical innovations, target key bottlenecks Make breakthroughs, advanced digitization, use technical innovation to solve operation and production pace and improved efficiency and profitability. We'll strengthen the company with capable personnel. We will focus on building A new and efficient HR architecture to sustain talent supply for high quality growth, Both productivity and value of human capital. Ladies and gentlemen, dear friends, Health China will remain committed to the pursuit Offscreen development and reliable energy supply to power customers' growth and people's capitalized will ride on the sound momentum and exert more efforts to deliver even better performance. We hope that you can continue to support PetroChina and I look forward So, fortunately, I have with you to score new success. Thank you. Thank you, Chairman. Just now, we briefed you on our 2021 interim results. Now, we will have a Q and A session, and there will be consecutive interpreting. To give more people the chance to ask, The first question comes from Neil Babbage of Sanford Bernstein. Thank you. Congratulations on the results. Just a couple of questions for me. Firstly, on the low carbon development Can you give us some outline of the CapEx, which is going to be allocated to low carbon energy projects? Are there any revenue targets that you have? And when you look across solar, wind, hydrogen, geothermal, where do you see the most attractive Opportunities for PetroChina. My second question is on the dividend payout ratio. We're now back at 45 Which is close to the long term average. Do you expect the payout ratio to remain at this level over the medium term? Would you like to take SCORP to raise the payout ratio higher? Chairman Bai Hou Liang will take your first question. PetroChina has always attached great importance to green and low carbon transition development. We have incorporated green and low carbon into one of our 5 strategies and we have included the ESG management Under the responsibility of a Board committee and under the peak carbon and carbon neutrality goals, We have set a 3 step initiative of clean alternative, strategic replacement and green development. As for the CapEx in green and no carbon development, it will be decided based on the Actual circumstances in different years and we are now preparing a very detailed plan in this regard. And after careful analysis And in due course, we will disclose relevant information. But all in all, our target is to have oil, gas New Energy taking respectively 1 third of our total energy mix by the year 2,035 And CapEx increase is a progressive process and each year we will increase the CapEx based on the circumstances. As for which energy resources is most attractive from the factory to China? I think we may have detailed judgments concerning different types of energy resources based on their risk condition and also based on the Synergies we have working with other companies, but Petri China will leverage our advantages. For instance, we believe natural gas will always be a very important will always have a very important role to play in our new energy development and also in our efforts to achieve carbon neutrality. And in the meantime, for instance, in our existing oil field, Some of the oil fields have photovoltaic or wind resources, and these resources are complementary to their oil and gas resources. So we will utilize this advantage in these oil fields. And in other places, they have geothermal resources, And we will based on the resource transition to develop new energy business. And all in all, we will prepare pragmatic a pathway to develop new energy and low carbon initiatives based on the investment and returns, based on the efficiency and our goal to achieve carbon neutrality. To develop clean energy and low carbon business, we will pay great attention to technology advancement and R and D. And based on the different technological requirements of developing different business segments, we will set up a new Energy Research Institution to develop or utilize relevant technologies in energy development and utilization. And in the meantime, we will also develop a series of technologies around CCS and CCUS and to harness This is Patrick China's advantage in relevant technology and talent. Thank you. I'm CFO, Chai Shao Ping. I will take your second question. Since Central China got listed, we have a quite stable payout policy That is a 45% of the net profit or net income attributable to the parent shareholder. And in recent years, based on the 45% payout ratio in the low oil price environment, the company has issued Special dividend. In the first half of this year, Based on PetroChina's cash flow, CapEx and our arrangements for future development, we have decided a 45% payout ratio. And going forward, we will maintain stable payout ratio policies. Thank you. The next question comes from Chenxi Zhu of Shanghai Chenchenbao. Thank you. With Shanghai Securities News, Congratulations on the stellar results in the first half of this year, which is the best in the same period in the recent years. And I have two questions. The first one is we have been witnessing the fading of COVID-nineteen, the recovering of the economy and Recovering of demand in the Chinese market as well. So my question is, how do you look at the economy and how do you look at The demand for oil and gas resources in the first half of this year and in the following years. The second question is, may I have your readings on the demand of resources and the prices forecast. Senior Vice President, Renyi Xin, is taking your question. In the first half of this year, China's GDP went up by 12 point 7% year on year and for the past 2 years is an average growth of 5.3%. We estimate the annual GDP growth rate will be over 8%. So if there's no fundamental Change if there's no significant changes in the fundamentals in the following years, we believe the Chinese economy will still have sound growth momentum And its development is still in a very significant strategic opportunity period and economic operation will be maintained within a proper range. As for the demand for refined oil products, fueled by the recovering economy In H1, our domestic refined product consumption has recovered to the double of the same period of 2019, And we estimate in the 14 months of this year, the consumption of refined oil products will be 184,000,000 tons, up by 2.7 percent. During the 14th 5 year plan period, The demand growth for refined products is estimated to be 1.2% and among which The demand for gasoline will maintain mild growth rate and demand for diesel will be stable or even have a slight And the demand for jet fuel will increase fairly rapidly. In terms of natural gas, Approved by different factors, including the improving economy, the coal to gas reaching and the goals for peak carbon and carbon neutrality, The natural gas market in China has seen a robust demand, not only in the peak season, but also in the off season. And in H1, the consumption of natural gas has grown by a 2 digit growth rate. So in the second half, the market demand will continue to maintain a very robust momentum, especially We will see rapid growth of natural gas demand for power generation. It is estimated that natural gas consumption will be around 185.6 Bcm, up by 8.2%. And in the 14th 5 year plan period, the annual growth rate of domestic natural gas demand will hit 7% to 9% roughly. And the demand by the year 2025 will hit 440 to 500 BCM, which will provide Very broad market base for PetroChina's natural gas business and boost its sound and sustainable development. As for your question concerning the international crude oil supply and demand balance and the forecast For the oil and gas prices, in terms of crude oil in international markets, And under the circumstances of continued OPEC plus production management, we believe in this year, the global When oil supply demand gap will be around 600,000 barrels per day And by next year, the global oil demand can basically recover to the level of 2018 and the supply will hit 102,000,000 barrels per day, so it's a roughly balance of supply and demand. And in the following years, Affected by a multiple of factors, including the fading of COVID-nineteen, the adjustment between supply and demand And the monetary policies, we believe the international crude supply and demand will continue to adjust And we estimate within this year, the Brent average price will be RMB65 to RMB70 per barrel in following years, 50 to 70 barrels per barrel. In terms of natural gas, this year, the global natural gas supply and demand both recovered robustly And the growth rate of demand is faster than the growth rate of supply, then the supply demand balance is tightening up, which has brought up great recovery of international gas prices. In the following years, we estimate global Natural gas supply demand will continue to tighten and impacted by the delayed final investment decision on Some of the most important LNG projects in the world, we believe the LNG supply will continue to tighten. And this year, we estimate The LNG spot cargo price in Northeast Asia will be roughly US11.3 dollars to US11.7 dollars per 1,000,000 Btu and US6 dollars to US10 dollars per 1,000,000 BTU in the following years. And faced with the fluctuation of oil and gas prices In the international market, Hydro China will continue to have stringent control of our cost and make proper investment In health, quality and efficiency, we feel optimistic about our target to build ourselves into a world class International Energy Company. The next question comes from Harris Cih of Credit Suisse. Thank you. I'm with Credit Suisse. Congratulations on your stellar performance in the first half of this year. Our question is around imported gas. And we've noticed that in Q1 in this year, it is reported that your imported gas has been able to be profitable. And will that situation be sustained in the second quarter? And what is the General picture in the first half of this year of your imported gas loss. And as you just mentioned that in Asia, the LNG spot Price has been maintained at quite high level. So my question is what measures will the company take to curb The potential cost inflation of natural gas in the coming peak season of this winter? Thank you. CFO, Chaixiao Ping is taking a question. In the first half of this year, Hydro China imported natural gas of 37.215 Bcm with an earning of RMB3.1 billion. And among which, Q1 has witnessed an earning of 8,000,000,000 yen and Q2 had a loss of RMB5 1,000,000,000. In the 14 months of this year, we will redouble our efforts to contain the import losses. And for instance, we will hike The production of domestic natural gas in order to reduce our imported volume and the second, we will import more low cost Our natural gas resources are in order to reduce the overall loss. And we're also working on the convergence of residential for the second half of this year. Thank you. The next question comes from Matthew Zhao of Bank of America. Thank you. With Bank of America, I've got 2 questions. The first is, could you please brief us on any new progress you have achieved in the first half of this year in the development of new energy and new materials? And the second, we have witnessed increase of crude prices. So will that bring up your SEC reserves for this year? I'm Anya Zhang, President of Petrichina. I'm glad to take your questions. As for our progress New Energy and New Materials. Petuchina's New Energy business is starting up very quickly. We have prepared a special program on the development of new energy and new business. During the 14th 5 year plan period, we will focus on the 6 Basins and 5 projects in the areas of geothermal, wind power, PV power and integrated development of natural gas, power generation and new energy and also the development of associated resources. In this year, we plan to add A new energy development and utilization capacity of 3,450,000 tons of standard coal The year and in the first half, we have already added a geothermal heating contract area of 10,000,000 square meters and we have already gained the approval for building up a wind power and PV power capacity of 850,000 kilowatts and we're trying to gain more new approvals. And our geothermal distributed wind energy and PV power generation and other alternative projects Under construction can be translated into a capacity of 350,000 tons of standard coal per year. We've also launched a hydrogen purification project that we're actively working on hydrogen refueling business. As you may know, we have already set up and put into operation, and Photon, a hydrogen refueling station for the Beijing Winter Olympic Games and we are also working on the construction of another 6 hydrogen refueling stations. We're working to find new opportunities to expand our hydrogen network. HydroChina's new materials business will focus on high performance synthetic materials, degradable materials, Engineering plastics, specialty fiber and specialty carbon materials, etcetera, we have 3 new materials projects, which has been launched already. As for the second question about reserves, especially reserve adjustments given the higher crude prices background, As we have just introduced in our results announcement, in this year, the PetroChina's E&P Our business has made 35 important results, among which we have 5 strategic breakthroughs And we have appraised and identified 4 sizable reserve zones. By the end of 2020, PetroChina's SEC domestic crude reserve was 588,000,000 tons and our SEC domestic natural gas reserve was 2.12 TCM and if calculated based on the crude prices of 2019, our PE reserve, our SEC standard, was 99.2 1,000,000,000 tons and up by 13,900,000 To clarify, Based on the crude price of 2019, our SEC P1 reserve was 99,000,000 tons And the company of B&M will have SEC standard reserve appraisal by the end of each year and the new reserve statistics will be disclosed by the end of March of 2022. In the first half of this year, the company's SEC reserve appraisal has already been conducted and the crude Our proved crude reserve has add by CHF 99.75 million and our basic estimate is that if the 2021 appraisal oil price go up to US65 dollars per barrel, Our SEC crude reserve will add another 85,000,000 tons. Thank you. Given some constraints, one final question. The last question comes from Nelson Wang of With CICC, my question is around natural gas business. We have witnessed the natural gas price reforms in China recently. And I've also noticed that in this off season, China has been able to hike the residential gas prices, which is the first time ever. And I'm wondering what other measures can the company take to make the natural gas prices more market oriented, for instance, to link the domestic price with international natural gas price. Thank you. Therefore, Chaixiao is taking your question. The natural gas development in China is witnessing great momentum. For instance, in places like Xinjiang, Minjiang, Guangxi and Thanks, Zhu. The local government has tried to link the gas prices and which is positive for asked to establish a market oriented natural gas price. As far as we know, There are now many provinces in China have been able to finish the convergence of residential and nonresidential gas prices During the off season, On May 18, The NDRC has issued a notice on an action plan of deepening the price mechanism reform during the 14th 5 year plan period. And as for the market reform for natural gas prices, it will be also based on the direction of regulation in the midstream and deregulation in upstream and downstream. PetroChina, the government in natural gas Market oriented reforms and to try to push the establishment and development of a high standard Domestic natural gas market system and to enhance the end user utilization efficiency of natural gas resources and strengthen the Profitability of our natural gas business value chain. Thank you. This is the end of the results announcement. Thank you for joining.