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Shell Investor Centre: Changbei natural gas field starts commercial production

Thursday, March 1, 2007

PetroChina Company Ltd. (PetroChina) and Shell China Exploration and Production Ltd. (Shell) announced today the start of commercial production and gas delivery from the Changbei gas field.

PetroChina and Shell are jointly developing the field under a Production Sharing Contract, with Shell currently being the field development operator. Located on the edge of the Maowusu desert in the Ordos Basin of Shaanxi Province and Inner Mongolia Autonomous Region, it is the largest onshore upstream cooperative development Shell has had in China.

As Changbei goes into commercial production, it will provide natural gas to the markets of Beijing, Tianjin, Shandong and Hebei. It is expected that production will rise to the planned plateau rate of 3 billion cubic metres/yr during 2008. To attain these levels of production from the relatively difficult Changbei reservoir, Shell is applying its global technical expertise, most particularly through the use of the long multi-lateral horizontal wells.

The safe start of full commercial production on schedule on the 1st March 2007 is a significant milestone and is a practical demonstration of what the Shell/PetroChina partnership can achieve.”

Notes to editors

PetroChina, as one of the largest companies in China, is an integrated oil company with businesses ranging from upstream to downstream, domestic trade to international trade and production to sales. PetroChina is engaged in a broad range of business activities including the exploration and production of crude oil and natural gas, refining and marketing of crude oil and petroleum products, production and marketing of petrochemical products, the transportation and storage of crude oil and refined products as well as the transmission and marketing of natural gas. At present, PetroChina ranks number seven in America’s Petroleum Intelligence Weekly “The World’s Largest Oil Company”.

As the largest oil and natural gas producer and supplier in China, PetroChina is the national market leader in the upstream business and is one of the world’s foremost players in terms of its oil and gas output and reserves. PetroChina owns fourteen oil and gas regions spanning across the country including Daqing, Changqing, Tarim, Xinjiang and Liaohe. The company produces more than a hundred million tons of crude oil annually. PetroChina’s natural gas business has developed rapidly and its annual growth rate has exceeded 20% for two years in a row. A strong network of natural gas fields has been established in four major gas zones including Southwest, Tarim, Changqing and Qinghai. In 2006, PetroChina’s crude oil output reached 829 million barrels, representing an increase of 6.8 million barrels, or 0.8 percent from the previous year, setting another new record high. Output of marketable natural gas reached 1,382.4 billion cubic feet, representing an increase of 262.9 billion cubic feet, or 23.5 percent from 2005.

Shell is one of the largest independent oil and natural gas companies investing in China, covering businesses from upstream to downstream. Its major projects include oil production in the offshore Xijiang oil fields, Changbei natural gas development and the Nanhai petrochemicals plant that has an accumulative production of 2.3 million MTPA. Its lubricant, bitumen and retail businesses are growing in China. In 2006, Shell acquired a 75% share in Tongyi, China’s leading independent lubricants company, and bought Koch Materials China (Hong Kong) Limited, a deal that doubles the size of Shell’s bitumen business in China.

Shell’s business objective in China is to help address the country’s priorities of energy supply and security, environmental challenges and energy efficiency, working in partnership with Chinese companies and customers both in China and overseas.

PetroChina and Shell signed a revised Changbei Production Sharing Contract in May 2005. Based on this contract, Shell became the development operator for the Changbei gas field. Major projects include the construction of the central processing facilities, inter-field pipelines and a drilling programme, which is expected to involve about 50 horizontal and multi-lateral wells over 10 years.

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