10:21     SINOPEC KANTONS<00934> - Announcement (7)                           

    The Directors expect that these connected transactions will               
    continue and the monetary amount will increase substantially              
    for reasons set out below, in particular, the collective                  
    bargaining power of Sinopec Group, which the Group wishes to              
    utilize more in the future and is beneficial to the Group. The            
    aggregate amounts paid by the Group in respect of these                   
    transactions shall not exceed HK$2,600 million, HK$3,400 million          
    and HK$3,400 million for each of the three financial years ending         
    31 December 2005, 31 December 2006 and 31 December 2007                   
    respectively.                                                             
                                                                              
    Reasons for the transactions and cap                                      
                                                                              
    Sourcing crude oil from Sinopec Group will strengthen the                 
    collective bargaining power of Sinopec Group as and when Sinopec          
    Group negotiates crude oil prices with international oil majors           
    and other oil companies.                                                  
                                                                              
    Also, the finance cost of the Group is reduced: Sinopec Group             
    will be entering into the agreements with the crude oil vendors           
    directly. Generally, the Group is not required to issue letters           
    of credit to Sinopec Group in these transactions. Thus, the               
    finance cost incurred by the Group is thereby reduced.                    
                                                                              
    In addition, given its trading nature, the amount of business             
    to be conducted is market and customer demand driven. It is in            
    the interest of the Company and its future business development           
    that it can capture any increase in the volume and the quantity           
    or other new opportunities in its trading businesses as they              
    arise.                                                                    
                                                                              
    Furthermore, with reference to the dominant position and                  
    increase in turnover and activities of Sinopec Group in the               
    petroleum and petrochemical industry of the PRC, the number and           
    amount of these connected transactions between members of the             
    Sinopec Group and the Group is expected to increase.                      
                                                                              
    Apart from the reasons set out above, in arriving at the above            
    caps, the following factors are taken into account:                       
                                                                              
    (a)     the respective historical figures of these connected              
    transactions.                                                             
                                                                              
    (b)     the expected increase in the consumption of petroleum and         
    petrochemical products, the expected increase in the demand of            
    crude oil by the crude oil refineries and the expected increase           
    in crude oil refining capacities of these refineries, including           
    the Sinopec Guangzhou Branch Expansion.                                   
                                                                              
    (c)     the volatility and possible increase in the international         
    and the PRC market price of crude oil, petroleum and                      
    petrochemical products.                                                   
                                                                              
    3.      Petroleum and petrochemical products trading                      
                                                                              
    Nature of the transaction and connected parties                           
                                                                              
    The Group has traded and will continue to trade (including sale           
    or purchase in different transactions and different products)             
    petroleum products with members of the Unipec Group, the CPIC             
    Group (such as Sinopec (Hong Kong) Co. Ltd., a wholly owned               
    subsidiary of CPIC; and Sinopec / CAOSC Co. Ltd., of which 70%            
    of its share capital is owned by CPIC) and CPIGC.                         
                                                                              
    In addition, the Group has traded and will continue to trade              
    petrochemical products with members of the CPIC Group and CPIGC.          
                                                                              
    Pricing basis and cap