It is a bid for PetroChina to boost its reserves portfolio, promote overseas business development and enhance corporate value in a long run, said Chen Geng, Chairman of PetroChina.

According to the agreement, the acquisition will allow PetroChina to own 50 percent interest in Newco, a subsidiary of CNPC, by cash injection. It will give PetroChina access of Newco'soil and gas assets in 10 foreign countries including Kazakhstan, Venezuela, Algeria, Peru, Oman, Azerbaijan, Canada, Ecuador, Nigerand Chad.

To streamline its existing overseas businesses with the planned acquisition, PetroChina also agreed to transfer the entire issued share capital of its wholly-owned subsidiary PetroChina International Ltd. to the Newco for 579.355 million yuan (US$69.97 billion).

After the deal, PetroChina International, mainly engaging in oil and gas exploration and production in Indonesia, will become a wholly-owned subsidiary of Newco.

China National Oil and Gas Exploration and Development Corporation (CNODC) and Central Asia Petroleum Company Limited (Central Asia) now own 95 percent and 5 percent interest in the Newco, respectively.

Upon completion of the acquisition by PetroChina, CNODC will acquire the 5 percent interest in the Newco from Central Asia. Newco will be owned half to half by PetroChina and CNODC, respectively, in the end while PetroChina will pay the total consideration to the Newco.

PetroChina believes the two transactions will provide an opportunity to increase its oil and gas reserves and production, and provide a new platform for the growth of its overseas business. The transactions will also improve the Company's financial performance and optimize shareholders' value in the long term and the Newco will benefit from stronger financial support from PetroChina.

After the acquisition, PetroChina will be enabled to diversify its overseas exploration by tapping into Central Asia, South America, Middle East and Africa, which have abundant oil and gas resources, and increase substantially its overseas net proven reserves and production.

According to PetroChina, upon the completion of the transactions, the company's consolidated international reserves will total 866 million barrels of oil equivalent, an increase of 879 percent from the current 88.5 million barrels of oil equivalent. Its total oil and gas reserves will increase 4.31 percent and total oil and gas production will rise 5.41 percent.

The two transactions represent a milestone in PetroChina's efforts to become a large international energy company, said Chen Geng.

With this strategic platform and sizable overseas portfolios, PetroChina will turn its domestic businesses into global operations by increasing overseas reserves and production, he said.

Chen added that PetroChina will also benefit from improved operating efficiencies by sharing management expertise with Newco in overseas business development.

The assets acquisition by PetroChina is expected to be completed by the end of 2005, while the transfer of PetroChina International to Newco is expected to be completed by the end of February 2006.

PetroChina was born in 1999 from the CNPC during the regrouping move of the largest oil producer of China. PetroChina got most capital and debts of CNPC in four sectors including exploration and production, refinery and sales, chemical products and natural gas.

PetroChina was listed in the New York Stock Exchange and Hong Kong Stock Exchange, LTD. in April 2000.