spc ar 07 full

Delivering More

Report to Shareholders 2007

Leveraging its strong foundation in the downstream business, SPC has grown into an integrated regional enterprise delivering outstanding returns to its stakeholders.

Scale & Spread

Revenue, Volume and Production Volume● 2001● 2004● 2007

1 Group Financial Highlights 2 Chairman’s Statement 6 Delivering More14 Key Figures15 Group Strategic Directions16 Group at a Glance18 Board of Directors 22 Key Executives 24 Board of Directors – Past Principal

Directorships in the Last Five Years 25 Key Executives – Past Principal

Directorships in the Last Five Years 26 Operations Review – Exploration & Production 30 Operations Review – Refi ning, Supply & Trading 34 Operations Review – Marketing 38 Corporate Governance 56 Enterprise Risk Management 58 Environment Health, Safety & Security 62 Responsible Corporate Citizenship

Through Community Outreach 64 Human Capital Strategy: Moving Ahead 67 Corporate Structure 68 List of Properties

Statutory Report and Accounts70 Financial Review72 Directors’ Report 77 Statement by Directors 78 Independent Auditors’ Report79 Consolidated Income Statement80 Balance Sheets 81 Consolidated Statement of Changes in Equity82 Statement of Changes in Equity – Company83 Consolidated Cash Flow Statement84 Notes to the Financial Statements Investor Information135 Corporate Directory136 Financial Calendar137 Shareholdings Statistics138 Share Performance 139 Notice of Annual General Meeting/Closure of Books Proxy Form Notes

REFINING,SUPPLY

& TRADING00.0

REVENUE

$145.1 MILLION

PRODUCTION VOLUME

10,000 BOEPD

REVENUE

$4.9 BILLION

VOLUME

73.2 MILLIONBARRELS

REVENUE

$8.6 BILLION

VOLUME

76.9 MILLIONBARRELS

DO

WN

STREA

M

UPSTREAM

SPC

REVENUE

$30.9 MILLION

PRODUCTION VOLUME

1,605 BOEPD

REVENUE

$2.3 BILLION

VOLUME

44.9 MILLION BARRELS

REVENUE

$36.1 MILLION

PRODUCTION VOLUME

2,600 BOEPD

CONTENTS

GROUP FINANCIAL HIGHLIGHTS

2007 2006 % change

For the year ($ million) Revenue 8,767 8,574 2 Profi t Gross 747 502 49 Before tax 581 338 72 Attributable 508 285 79Operating cash fl ow 387 375 3 Per share Earnings (cents) Attributable 98.79 55.33 79Net assets ($) 3.48 3.06 14Net tangible assets ($) 3.25 2.85 14 At year-end ($ million) Shareholders’ funds 1,790 1,570 14 Net borrowings 362 23 1,491 Return on Equity (%) Profi t before tax 35 23 52Attributable profi t 30 19 58 Shareholder value Distribution (cents per share) Interim Dividend 20 – – Ordinary dividend 40 20 100 Special dividend – 15 –

2007 1Q 2Q 3Q 4Q Total

Group quarterly results ($ million) Revenue 1,925 1,975 2,239 2,628 8,767 Gross profi t 153 237 152 205 747 Profi t before tax 118 205 109 149 581 Attributable profi t 112 179 100 117 508 EPS (cents) 22 35 19 23 99

55

99

2006

2007

Earnings Per Share (cents)

19

30

2006

2007

Return On Equity (%)

Singapore Petroleum Company Limited Report to Shareholders 2007 1Group Financial Highlights

CHAIRMAN’S STATEMENT

DEAR SHAREHOLDERS,I am pleased to report that 2007 was a year of record achievements for SPC, despite this being one of the most volatile years in the oil industry. The Group recorded a PATMI of $508.3 million, an improvement of 78.6% over the PATMI of 2006 and achieved a return on equity of 30%.

Crude oil prices commenced the year at around US$55.00 per barrel. Continuing geopolitical tensions, supply uncertainties and refi nery outages combined to push crude and product prices higher as the year progressed. The benchmark West Texas Intermediate (WTI) crude surged to a new peak of US$99.29 per barrel before ending the year at US$95.98 per barrel. Refi ning margins were likewise extremely volatile during the year, with average quarterly margins swinging from a high of US$9.00 per barrel to a low of US$5.00 per barrel.

Earnings Per Share

+78.5%

2007 was a year of record achievements for SPC, despite this being one of the most volatile years in the oil industry.

Singapore Petroleum Company Limited Report to Shareholders 20072 Chairman’s Statement

Despite these volatilities, the Group was able to steer a steady course and deliver its best ever performance to date.

2007 IN REVIEW2007 was a year of strong economic growth for the global economy. In line with this growth, crude oil demand for 2007 was estimated to be 85.7 million barrels per day (bpd) representing an increase of 1.2% over the 84.7 million bpd consumption in 2006.

Strong demand for refi ned petroleum products was also seen throughout the year. This was due to the tight global refi ning capacity and continued strong demand for energy to fuel economic growth especially from China, India, the Middle-East and Russia.

DOWNSTREAM PROVIDING SOLID EARNINGS BASE SPC’s downstream operations continued to perform well in 2007 contributing $8.6 billion in turnover and $523.2 million in operating profi t.

The fi rm demand for refi ned products kept the Singapore Refi ning Company Private Limited (SRC) running at full capacity during the year. Strong refi ning margins coupled with the reliable operations at SRC enabled the Group to maintain its sales revenue. During the year, SRC successfully carried out a major scheduled maintenance of its Crude Distillation Unit No. 1 complex. Safety is always the top priority in our operations and this major exercise was accomplished smoothly and safely.

Other initiatives at SRC include a US$121 million project for clean diesel production. This will enable SPC to meet Euro-IV diesel specifi cations by

2009. Continuous upgrading of the refi ning capabilities to meet changing emission standards will remain a priority as the Group does its part for a green and clean environment. Upgrading our refi nery to process new and challenging crudes will also be needed.

SPC’s island-wide service station network continued to fi nd new ways to better serve the motoring public and expand its base of loyal customers. SPC is the fi rst retail network on mainland Singapore to provide compressed natural gas.

GROWING E&P PORTFOLIO 2007 had also been signifi cant for the progress achieved in the upstream business. Turnover from Exploration and Production (E&P) activities totalled $145.1 million and operating profi t was $52.4 million.

Since SPC’s move into the upstream business in 2000, the E&P portfolio and footprint has grown considerably to eight Production Sharing Contracts (PSC) and one exploration permit across fi ve countries. To date, the Group has invested more than US$400 million in E&P assets that extend from China to Australia.

In China, SPC made its largest overseas investment to date by acquiring producing oilfi elds in the Bohai Bay. The Group was also successful in acquiring a 100% interest in a PSC exploration block, Block 26/18 in China and a 35% interest in an exploration permit in Australia.

As a result of the China acquisition and production from the existing Kakap and Oyong oilfi elds, oil and gas production at the end of 2007 increased to an average

Singapore Petroleum Company Limited Report to Shareholders 2007 3Chairman’s Statement

The Group will further invest in oil and gas producing assets, while developing the existing acreages.

CHAIRMAN’S STATEMENT

10,000 barrels of oil equivalent per day (boepd), from below 3,000 boepd at the beginning of the year.

In line with the vision to be a strong integrated oil and gas company, the Group will further invest in oil and gas producing assets, while developing the existing acreages. This would enhance shareholder value and ensure long-term growth.

FINANCIAL PERFORMANCERecord oil prices in 2007 enabled SPC to post record revenues of $8.8 billion, a 2.2% increase over the previous year. PATMI reached a record level of $508.3 million, a 78.6% increase. Earnings per share rose 78.5% to 98.8 cents.

DIVIDENDS With the excellent performance, the Board is recommending a record fi nal dividend of 40 cents per share. In August, for the fi rst time, SPC paid an interim dividend. Together with the interim payment of 20 cents per share and the proposed fi nal dividend, the total dividend for full year 2007 would

amount to 60 cents per share. These dividends are all on the new one-tier tax exempt basis. SHARE BUYBACKMotivating and retaining staff is crucial for the Group’s long-term growth. As part of the incentive for staff to pursue a life-long career in SPC, the Group has in place a share award programme. Towards fulfi lling this programme, the Group bought back 1.4 million shares as treasury shares in 2007 under the Share Buyback Mandate.

MAINTAINING FINANCIAL PRUDENCE AND LIQUIDITYThe volatility in fi nancial markets triggered by the US sub-prime credit crisis resulted in a liquidity and credit squeeze for many companies. The Group has weathered this volatility well and has in place adequate fi nancial resources to continue funding its growth. In 2007, SPC established a US$1 billion Multicurrency Debt Issuance Programme. This facility would enable the Group to tap the capital markets for funds as and when required.

Singapore Petroleum Company Limited Report to Shareholders 20074 Chairman’s Statement

285

508

2006

2007

PATMI

PATMI

508.3m+78.6%PATMI reached a record level of $508.3 million, a 78.6% increase.

FOCUSING ON EHSSAs the Group grows and further regionalises its operations, it becomes increasingly important to be more vigilant about environmental, health, safety and security (EHSS) issues.

Growth and expansion for the Group must be on the basis of sound and effective EHSS practices.

CORPORATE GOVERNANCE ACCOLADES SPC’s good corporate governance practices have not gone unnoticed by the investing public. The Company was honoured with a third place award at the 2007 SIAS Corporate Governance Award event, the fi fth consecutive time it has won an award. The Company was also recognised as a merit recipient of the Most Transparent Company Award. This was followed by a joint Bronze award under the Singapore Corporate Awards 2008 for the Best Managed Board.

OUTLOOK FOR THE INDUSTRYGlobal refi ning capacity is expected to be constrained both by high construction costs and skill shortages. Although the volatility in global fi nancial markets is likely to restrain economic activities, refi ning margins are expected to remain relatively healthy in 2008 given the continued lack of meaningful spare refi ning capacity and the continuing strong demand for petroleum products from Asia, the Middle-East and Russia.

For the refi ning operations, the Group intends to continuously upgrade its capability to produce cleaner fuels including clean motor gasoline and to be able to process a wider range of diffi cult crudes that will improve its margins.

The growth that the Group has achieved in E&P production in 2007 will also result in increased contribution to the Group’s bottomline in 2008.

IN APPRECIATIONAll that the Group had achieved in 2007 could not have happened without many willing hands and great hearts. Much of this success was due to the competence, passion and teamwork of both the SPC and SRC staff. At SPC, we have built up a multinational and multi-talented team to take us to the next level as an integrated oil and gas company. As we continue our journey to build and grow SPC, I wish to extend my heartfelt appreciation to fellow Board Members for their counsel and guidance. I would also like to thank our shareholders, customers and business partners for their continuing confi dence and support.

Yours sincerely,

Choo Chiau BengChairmanFor and on behalf of the Board

29 February 2008

Singapore Petroleum Company Limited Report to Shareholders 2007 5Chairman’s Statement

Growth

Value

With its scale and spread, SPC is

Delivering More

Returns

6 Singapore Petroleum Company Limited Report to Shareholders 2007

Delivering More

Total Revenue

2004

2007

2001

4,974.4

8,766.7

2,337.3

$ million

SPC IS DELIVERING MORE VALUE

Refi ning

From its refi ning roots, SPC has grown to become an integrated oil and gas enterprise. SPC is well positioned to deliver more value with its diversifi ed earnings stream.

Integrated

SPC IS DELIVERING MORE GROWTH

From a predominantly homegrown company to a regional player, SPC’s presence has expanded to include Australia, Cambodia, China, Hong Kong, Indonesia, Taiwan, Thailand and Vietnam.

Singapore

Regional

180.3

Total Assets

UpstreamDownstream

2004

2007

2001

1,900.5

3,361.9

1,012.7

107

$ million

779.1

SPC IS DELIVERING MORE RETURNS

Steady

Strong

2004

2007

2001

252.9

508.3

-1.2

$ million

PATMI

From delivering sustainable to superior returns, SPC has a business strategy to maximise performance. Its vision for a fully integrated value chain will continue to fuel future growth.

KEY FIGURES

Cash and Cash Equivalents

$458.2m

Cash and cash equivalents rose 13.4% to $458.2 million

Return On Equity

30%

ROE improved from 19% to 30%

NAV Per Share

$3.48

NAV per share improved 13.7% Earnings Per Share

98.79¢

EPS increased 78.5%

Dividend Payout Ratio

61%

The Board has recommended a one-tier tax-exempt dividend payout of 40 cents per share for approval at the forthcoming AGM. Together with the interim dividend of 20 cents per share, the total payout will be 61% of the Group’s PATMI.

Total Acreage Size

40,900

Turnover

$8.8b

The SPC Group achieved revenue of $8.8 billion, an improvement of 2.2%

PATMI

$508.3m

The SPC Group achieved a PATMI of $508.3 million, its best performance to date

SPC owns interests in nine exploration, pre-development and production acreages in the Asia-Pacifi c region with a total size of more than 40,900 km2

Singapore Petroleum Company Limited Report to Shareholders 200714 Key Figures

GROUP STRATEGIC DIRECTIONS

STRATEGIC DIRECTIONS

Realise the Company’s long-term strategy to grow its business through upstream activities.

STRATEGY IN ACTION

• First acreage outside Southeast Asia – T/47P (Bass Basin, Australia)

• First operatorship – Block 26/18 (Pearl River Mouth Basin, China)

• First oil production from Oyong fi eld, Indonesia

• Largest upstream acquisition to date – Blocks 04/36 and 05/36 (Bohai Bay, China)

Maintain steady downstream earnings and reputation as a reliable supplier of quality petroleum products by enhancing refi ning capability.

• Undertook ultra-low sulphur diesel production project that would conform to Euro-IV specifi cations

• Achieved refi nery utilisation of more than 97% for 2007

Deliver value and reinforce brand equity by seeking growth opportunities at home and abroad.

• Increased product innovation at the retail service stations – launched CNG and installed ATMs, snack kiosks, and plasma TV screens

• Acquired 60% of PT Solar Premium Company, an Indonesian fuels-marketing company

To be a strong, integrated oil and gas company with a premium brand in the Asia-Pacifi c region.

Singapore Petroleum Company Limited Report to Shareholders 2007 15Group Strategic Directions

GROUP AT A GLANCE

BUSINESSES

SPC’s downstream business remained the main revenue generator. Steep crude and product prices coupled with tight global refi ning capacity throughout 2007 enabled the Group to realise average refi ning margins of about US$7.00 per barrel, compared to US$4.50 per barrel in 2006.

SRC operated safely and reliably throughout the year and achieved an average utilisation of more than 97%. SPC processed a total of 51.5 million barrels through the refi nery. SRC will increase the production of ultra-low sulphur diesel of Euro-IV standard by 2009.

Innovation and partnerships continued to be SPC’s competitive edge in the retail sector. Its most visible branding platform, the island-wide network of service stations was leveraged to benefi t the motoring public. SPC is the fi rst network to retail compressed natural gas on mainland Singapore in 2008. The marketing of its products was strengthened with investments in Indonesia and China.

SPC scored signifi cant successes in the E&P business in 2007.

SPC entered two new E&P markets – Australia and China, and its oil and gas production grew to an average of 10,000 boepd. The E&P business contributed $145.1 million in revenue and $52.4 million in operating profi t.

SINGAPORE PETROLEUMCOMPANY LIMITED

Exploration & ProductionSPC’s upstream activities include the exploration and production of crude oil and natural gas. Since 2000, it has grown its upstream to fi ve countries in the Asia-Pacifi c region. SPC will continue to extend its footprint as it positions itself to become an international E&P player.

Refi ning, Supply & Trading SPC is an established supplier of quality refi ned petroleum products. It has a 50% interest in SRC, a refi nery of 290,000 bpd nameplate capacity. SPC is one of the fi rst companies to be granted Approved Global Trader status. Its oil trading activities include the buying and selling of crudes, feedstocks and fi nished products to international customers.

MarketingSPC markets petroleum products to commercial, industrial and wholesale customers. With a co-owned lubricant blending plant, SPC markets a wide range of automotive, industrial and marine lubricants. SPC owns an island-wide network of retail services stations, providing round-the-clock products and services to the motoring public.

Singapore Petroleum Company Limited Report to Shareholders 200716 Group at a Glance

VISION AND FOCUS

Propel future growth by strengthening SPC’s E&P portfolio

• Venture to new frontiers and acquire high potential acreages

• Grow and enhance the value of existing assets

Enhance refi ning capabilities to keep pace with changing requirements

• Maintain reputation as a reliable supplier of quality products

• Operate all facilities safely and reliably

Leverage established networks to strengthen brand image and value offerings

• Differentiate product offerings

• Build presence in niche markets

RESULTS

• Extended footprint to China and Australia

• Increased oil production from 2,600 boepd to 10,000 boepd

• Initiated ultra-low sulphur diesel production project

• Posted 1 million man-hours of ‘no recordable injury’

• Introduced fi rst CNG in a service station

• Acquired stake in Indonesian fuels-marketing company

Singapore Petroleum Company Limited Report to Shareholders 2007 17Group at a Glance

BOARD OF DIRECTORS

CHOO CHIAU BENG, 60 ChairmanChairman of SPC and SRC. Chairman and Chief Executive Offi cer of Keppel Offshore & Marine Limited. Senior Executive Directorof Keppel Corporation Limited and Chairman of SMRT Corporation Ltd.

Mr Choo sits on the Board of Directors of Keppel Land Limited, k1 Ventures Ltd and is a Board Member of Singapore Maritime Foundation and Maritime and Port Authority of Singapore. He is Chairman of the Nanyang Business School’s International Advisory Board.

He is also Chairman of Det Norske Veritas South-east Asia Committee and Council Member of the American Bureau of Shipping and member of the American Bureau of Shipping’s Southeast Asia Regional Committee and Special Committee on Mobile Offshore Drilling Units.

He is Singapore’s Non-Resident Ambassador to Brazil.

Mr Choo holds a Bachelor of Science (First Class Honours), University of Newcastle upon Tyne (awarded the Colombo Plan Scholarship to study Naval Architecture), Master of Science in Naval Architecture, University of Newcastle upon Tyne. He attended the Programme for Management Development in Harvard Business School in 1982, and is a Member of the Wharton Society of Fellows, University of Pennsylvania.

KOH BAN HENG, 59Executive Director & Chief Executive Offi cerMr Koh is the Chief Executive Offi cer of SPC. He joined SPC in February 1974 and held several key positions in the company before being appointed CEO in August 2003. Mr Koh’s experience spans refi ning operations and planning, marketing and distribution, supply and trading, oil and gas exploration and production including the development and establishment of new businesses.

Mr Koh has delivered exceptional results over the last four years. He was instrumental in the landmark refi ning and retail acquisitions in 2004. He led and paved the way for several key capital investments in E&P. These have provided the strategic drive that has led to SPC’s current success and will be the foundation for the Group’s sustained growth.

He holds directorships in several SPC’s subsidiaries and associated companies.

Mr Koh has a Bachelor degree in Applied Chemistry and post-graduate diploma in Business Administration, University of Singapore.

Singapore Petroleum Company Limited Report to Shareholders 200718 Board of Directors

BERTIE CHENG SHAO SHIONG, 70 Independent DirectorMr Cheng was appointed Director of SPC in 1997.

Mr Cheng retired as Chief Executive Offi cer of POSBank in July 1997. He holds and has held directorships, in both listed and unlisted companies. Currently, he is the Chairman of TeleChoice International Limited. He is also a Director of Hong Leong Finance Limited, Pacifi c Andes (Holdings) Limited, Tee International Limited, SHC Capital Ltd, Thomson Medical Centre Limited and CFM Holdings Limited.

Other appointments include being the Chairman of the Medifund Committee, Singapore General Hospital.

Mr Cheng holds a Bachelor of Arts (Honours) Economics, University of Malaya (in Singapore). He received the Public Administration Medal (Silver) in 1984 and the Public Service Medal in 2001.

DR CHIN WEI-LI, AUDREY MARIE, 50Independent DirectorDr Chin is Chairman of Vietnam Investing Associates – Financials (S) Pte Ltd. Previously, she was Head, Investment Services, Fortis Private Bank and Partner – Asset Allocation Strategies at Pacifi c Asset Management (S) Pte Ltd, and Executive Director of Rossignol Pte Ltd, an investment adviser providing consulting services to institutional fund managers. Between 1994 and 1999, Dr Chin was Division Head, Asset Allocation in the Economics and Strategy Department of the Government of Singapore Investment Corporation.

Currently, Dr Chin is also a Director of K-REIT Asia Management Limited.

Dr Chin holds a Bachelor of Laws (Honours), Manchester University, a Master of Science, Public Policy, Oxford University, and PhD, Public Policy, Rand Graduate School.

Singapore Petroleum Company Limited Report to Shareholders 2007 19Board of Directors

DATO PADUKA TIMOTHY ONG TECK MONG, 54Independent DirectorDato Ong is the Acting Chairman of the Brunei Economic Development Board established by the Brunei government to create new industries in Brunei. His many business roles include being Chairman of BruCapital Holdings, Co-Chairman of The Edge Asia Inc, Chairman of Asia Inc Forum, Chairman of Hotel Associates, Deputy Chairman of National Insurance of Brunei and board member of Baiduri Bank, Brunei.

Dato Ong was the Chairman of the APEC (Asia-Pacifi c Economic Cooperation) Business Advisory Council in 2000 and currently sits on a number of international councils, including the Asian Advisory Board for Prudential Financial Inc, the East-West Centre and The Nature Conservancy. He is also a board member of the Asian Institute of Management in the Philippines. He represented Brunei in the APEC Eminent Persons Group from 1993 to 1995.

Dato Ong holds a Bachelor of Arts (Honours) Economics & Political Science, Australian National University, and Master of Science (with Distinction) in International Relations, London School of Economics.

BOARD OF DIRECTORS

GEOFFREY JOHN KING, 60Independent DirectorMr King has been a Director of SPC since 2000. He brings with him 34 years of diversifi ed administrative, legal and management expertise, covering employment with the Australian Government Public Service, Esso Australia Ltd and Ampolex Limited where he served as General Counsel and member of the Executive Committee.

Mr King is the principal of a New South Wales legal fi rm specialising in energy law and he provides legal services to energy businesses operating in Australia.

He is currently a Director of Vermilion Oil & Gas Australia Pty Ltd.

Mr King was engaged by the World Bank in early 2000 to provide legal consultation on oil and gas matters to the government of Papua New Guinea (PNG), and continues as legal adviser to the government on energy developments proposed for PNG, in particular the Gas to Australia project and recently the proposed major LNG development.

He was engaged by the Asian Development Bank (ADB) in 2006 to provide advice on legal issues relating to an energy project under review by ADB.

Mr King holds a Bachelor of Laws, Australian National University, Bachelor of Arts, University of New South Wales. He is a Barrister and Solicitor, Australian Capital Territory and Victoria.


GOON KOK-LOON, 65Independent DirectorMr Goon received both the Silver and Gold Public Administration Medals from the Singapore Government. He was Deputy Group President and President (International Business Division) of PSA Corporation Ltd (PSA). He has over 40 years of extensive experience in corporate management, operation and administration, both locally and internationally, from his service with PSA.

Currently, he is Chairman of Global Maritime & Port Services Pte Ltd and a Director of Grocery Logistics of Singapore Pte Ltd, Jaya Holdings Ltd, Singapore Offshore Petroleum Services Pte Ltd, Yongnam Holdings Ltd and Venture Corporation Ltd.

Mr Goon holds a Bachelor of Engineering (Electrical) (First Class Honours), University of Liverpool, UK, and attended Post-graduate Study Programme, Massachusetts Institute of Technology, USA.

TEO SOON HOE, 58DirectorMr Teo has been a Director of SPC since 1999. Currently, he is Senior Executive Director and Group Finance Director of Keppel Corporation Limited. He is Chairman of Keppel Telecommunications & Transportation Ltd and Keppel Philippines Holding Inc. In addition, he is a Director of Keppel Land Limited, Keppel Offshore & Marine Limited and k1 Ventures Ltd. He is also a Director of MobileOne Ltd.

Mr Teo commenced his career with the Keppel Group when he joined Keppel Shipyard Limited in 1975. He rose through the ranks and was seconded several times to various subsidiaries of the Keppel Group before assuming the position of Group Finance Director in 1985.

Mr Teo holds a Bachelor of Business Administration, University of Singapore, and is a Member of the Wharton Society of Fellows, University of Pennsylvania.

CHENG HONG KOK, 65DirectorMr Cheng joined the Economic Development Board (Singapore) in 1964 and was Chief of Projects Division from 1968 to 1970. He was also a board member of the Economic Development Board from 1987 to 1990 and a member of the Government Economic Planning Committee from 1989 to 1991.

Mr Cheng held various senior positions in SPC in corporate planning, fi nance, supply and trading, and marketing and distribution from 1970 to 1980, and was the President and Chief Executive Offi cer of the Company from 1981 to 1996. He was Executive Director from 1991 to 1996. Through SPC, he was involved in the founding and development of ASCOPE (ASEAN Council on Petroleum).

After the takeover of SPC by Keppel Corporation Limited, he was reappointed Director in 1999. Currently, he is a Director of Keppel Oil and Gas Services Pte Ltd, SRC, SPC Refi ning Company Private Limited, Orchard Parade Holdings Limited, Gul Technologies Singapore Limited, SP Corporation Limited and GITI Tire Company Ltd.

Mr Cheng holds a Bachelor of Science (First Class Honours) Chemical Engineering, University of London; and Advanced Executive Management Certifi cate at J.L. Kellogg Graduate School of Management, Northwestern University, USA. Mr Cheng was a Singapore State Scholar as well as an Eisenhower Fellow.

Singapore Petroleum Company Limited Report to Shareholders 2007 21Board of Directors

KEY EXECUTIVES

Chief Executive Offi cerMr Koh is the Chief Executive Offi cer of SPC. He joined SPC in February 1974 and held several key positions in the company before being appointed CEO in August 2003. Mr Koh’s experience spans refi ning operations and planning, marketing and distribution, supply and trading, oil and gas exploration and production including the development and establishment of new businesses.

Mr Koh has delivered exceptional results over the last four years. He was instrumental in the landmark refi ning and retail acquisitions in 2004. He led and paved the way for several key capital investments in E&P. These have provided the strategic drive that has led to SPC’s current success and will be the foundation for the Group’s sustained growth.

He holds directorships in several SPC’s subsidiaries and associated companies.

Mr Koh holds a Bachelor degree in Applied Chemistry and post-graduate diploma in Business Administration, University of Singapore.

KOH BAN HENG, 59

Senior Vice-PresidentExploration & ProductionDr Tan joined SPC in 2000. He was previously Chief Executive at Gaffney, Cline & Associates, Asia-Pacifi c based in Singapore. Prior to this, he was with a major oil company based in Calgary and Houston for 16 years. Dr Tan held several key positions in international exploration, production, operation and new ventures in Canada, Trinidad, Denmark, Southeast

JEE-THENG TONY TAN, 58

Asia and China. With over 29 years of international experience in E&P, he leads SPC’s efforts in development and acquisition, and establishment of joint ventures and strategic alliances for SPC’s E&P businesses.

He holds directorships in several SPC subsidiaries and associated companies, and was Chairman of the ASEAN Council on Petroleum, E&P Committee from 2003 to 2005.

Dr Tan holds a Bachelor of Science (First Class Honours, Geology), University of Malaya, Masters of Science, Carleton University, Canada, PhD (Geology), University of Calgary, and Certifi cate in Corporate Finance, Wharton-Singapore Management University.

Chief Financial Offi cerSenior Vice-PresidentFinance & Investor RelationsMr Lee has during his 27 years with SPC been responsible for the Group’s fi nance and accounting portfolios, which include accounting and reporting functions, treasury, banking and credit management. His current responsibilities include the investor relations and information technology portfolios.

He holds directorships in several SPC subsidiaries and associated companies.

Mr Lee holds a Bachelor of Business Administration and Masters of Social Science (Applied Economics), University of Singapore and Masters of Business Administration, University of New South Wales.

LEE CHIANG HUAT, 58

Senior Vice-PresidentMarketingMr Keong joined SPC in 2000. Prior to SPC, he held senior management positions in several Asia-Pacifi c affi liates of a major oil company.

He has over 28 years of extensive experience in the oil business covering refi ning, operations, technical services, sales, marketing, corporate planning, trading and supply, risk management and general management. Presently, he leads SPC’s efforts in sales, marketing and the development and execution of SPC’s strategic downstream initiatives to expand and grow its fuels, lubricants and special products businesses in the Asia-Pacifi c. Additionally, he has responsibility for several marketing support units including Operations and Logistics, Market Development and Ventures, and provides stewardship over EHSS matters of the Company.

Mr Keong is a Fellow of the Chartered Institute of Marketing (UK) and a Member of the Singapore Institute of Directors.


Mr Keong holds a Bachelor (First Class Honours) in Engineering, Chemical and Materials, University of Auckland, a post-graduate diploma in Business Administration, National University of Singapore and a post-graduate diploma in Management Accounting and Finance, National Productivity Board.

CHRIS KEONG POH GUAN, 54

Singapore Petroleum Company Limited Report to Shareholders 200722 Key Executives

Senior Vice-PresidentRefi ning, Supply & AviationMr Woo began his oil industry career in 1976 with a major oil company. He joined SPC in 1983. He has over three decades of experience in the industry with extensive exposure and knowledge in crudes and products trading, refi nery production planning and supply coordination and terminalling. Currently, he leads the Refi ning, Supply & Aviation business unit in aviation sales and the operation of the Pulau Sebarok terminalling facility.

He also has overall responsibility of SPC’s business interests in the jointly-owned refi nery, SRC. Mr Woo played a key role in the implementation of a SRC unitisation plan and system that has resulted in signifi cant effi ciency in crude purchases and refi ning optimisation.


Mr Woo holds a Bachelor of Science (Honours, Applied Chemistry), University of Singapore.

WOO SIEW CHENG, 57

Company Secretary Senior Vice-President Legal, Secretariat and InsuranceMrs Chong started her career in legal practice and worked in an insurance company prior to joining SPC in 1980 as its Company Secretary/Legal Counsel. She is responsible for the Group’s legal, corporate secretarial and insurance matters across all SPC businesses, from E&P to downstream activities.

She is a Member of the Singapore Institute of Directors.

Mrs Chong holds a Bachelor’s degree in Law (Honours), University of Singapore, and was admitted as an advocate and solicitor in Singapore.

MRS HELEN CHONG (NEE CHIA FOONG LAN), 54

Senior Vice-President Crude & Products TradingMs Foo started her career in the oil industry with SPC in 1982. During the last 25 years with SPC, she acquired extensive experience in a wide spectrum of activities including crudes & products trading, marine sales, derivatives trading, inventory risk management, supply operations, chartering and terminal operations. Ms Foo has managed and led the products trading team to position SPC as a signifi cant player in the oil industry.

Ms Foo’s international networking, together with extensive knowledge of oil markets, is advantageous in her current responsibility of heading the crudes & products trading group.

Ms Foo holds a Bachelor of Science in Chemical Engineering, National University of Singapore.

MS FOO JANG SEE, 48

Singapore Petroleum Company Limited Report to Shareholders 2007 23Key Executives

BOARD OF DIRECTORSPAST PRINCIPAL DIRECTORSHIPSIN THE LAST FIVE YEARS

CHOO CHIAU BENG

KOH BAN HENG

BERTIE CHENG SHAO SHIONG

DR CHIN WEI-LI, AUDREY MARIE

GEOFFREY JOHN KING

TEO SOON HOE

GOON KOK-LOON

DATO PADUKA TIMOTHY ONG TECK MONG

Alif Technologies Sdn Bhd; BruTechnology Sdn Bhd; Jasra Harrisons Sdn Bhd; Primrose Investment Sdn Bhd; Watkin Syndicate; Willis Insurance Brokers (B) Sdn Bhd.

Changi Airport Fuel Hydrant Installation Pte. Ltd.; FST Aviation Services Limited; SPC Shipping Company Limited; Singapore Petroleum (China) Private Limited; Singapore Petroleum (Thailand) Co. Ltd; Singapore Petroleum Trading Company Limited; SPC Cambodia Ltd.

Caspian Shipyard Company Ltd; EDB Investments Pte Ltd; FELS Property Holdings Pte Ltd; FELS Realty (Texas) Inc; FELS (USA) Inc; K1 Ebiz Holdings Private Limited; Kepital Holdings (Pte) Ltd; Kepmount Shipping Pte Ltd; Keppel Asia Limited; Keppel FELS (China) Ltd; Keppel FELS Invest (HK) Ltd; Keppel Infrastructure Pte Ltd; Keppel Marine Agencies Inc; Keppel Oil and Gas Services Pte Ltd; Keppel Offshore Investment Ltd; Keppel Power Systems Pte Ltd; Keppel Regional Infrastructure Pte Ltd; Keppel Telecoms Pte Ltd; Keppel-UAE Investment Pte Ltd; Keppel Vietnam Investment Pte Ltd; Kepventure Pte Ltd; Travelmore Pte Ltd; WIIG Global Ventures Pte Ltd; Waterfront Development Consultants Pte Ltd.

EPEX Industrial Pte Ltd; Mobile Solutions and Payment Services Pte Ltd; Nobel Design Holdings Limited; Performance Group Pte Ltd; Project Greenearth Pte Ltd; SembCorp Engineers and Constructors Pte Ltd; SHC Engineering Pte Ltd; SHC Technology Pte Ltd; Singapore Technologies Telemedia Pte Ltd; ST Mobile Data Pte Ltd; ST SunPage Pte Ltd; ST Teleport Pte Ltd; STT Communications Ltd; SunPage Communications Pte Ltd; The Nanyang Insurance Company Ltd; Thomson Global Healthcare Management Pte Ltd.

Gujarat Pipavav Port Ltd, India; Heesse Noord Natie (HNN), Belgium; Incheon Container Terminal Co Ltd, South Korea; iPBio Pte Ltd; iPMedia Pte Ltd; Jiwa Harmonia Sdn Bhd; PSA International Pte Ltd; PSA Muara Container Terminal Sdn Bhd, Brunei; PSA SICAL Terminals Ltd; PSA Sines Terminalds De Contentores SA, Portugal; PSA Yemen Ltd; SICAL CWT Distriparks Ltd, India; Singapore Dalian Port Investment Pte Ltd; Yemen Investment & Development (International) Ltd.

Wood, King & Associates Pty Ltd.

Rossignol Pte Ltd.

Centurion Bank Limited; Keppel Bank Philippines, Inc; Keppel Shipyard Limited; Southern Bank Bhd.


Past Principal Directorships in the Last Five Years

KEY EXECUTIVESPAST PRINCIPAL DIRECTORSHIPSIN THE LAST FIVE YEARS

KOH BAN HENG

JEE-THENG TONY TAN

WOO SIEW CHENG

MRS HELEN CHONG (NEE CHIA FOONG LAN)

CHRIS KEONG POH GUAN

LEE CHIANG HUAT

Changi Airport Fuel Hydrant Installation Pte. Ltd.; FST Aviation Services Limited; SPC Shipping Company Limited; Singapore Petroleum (China) Private Limited; Singapore Petroleum (Thailand) Co., Ltd.; Singapore Petroleum Trading Company Limited; SPC Cambodia Ltd.

No past directorships in the last fi ve years.

Singapore Petroleum Company (Hong Kong) Limited; Singapore Petroleum Dovechem Private Limited; SPC Shipping Company Limited; SPC Kakap Limited; SP-CYC Venture Pte. Ltd.; SPC Indo-Pipeline Co. Ltd.; SPC Cambodia Ltd; Jiangmen City Sinjiang Gas Co. Ltd.; Tiger Oil Corporation.

Petmal Oil Corporation Sdn. Bhd.; Singapore Petroleum Dovechem Private Limited; Jiangmen City Sinjiang Gas Co. Ltd.; Tiger Oil Corporation.

Singapore Carbon Dioxide Company Private Limited; Singapore Petroleum (China) Private Limited; Singapore Petroleum Venture Private Limited; Tiger Oil Corporation; Singapore Petroleum Dovechem Private Limited.

SPC Shipping Company Limited; Singapore Petroleum Trading Company Limited; Singapore Petroleum Company (Hong Kong) Limited.

MS FOO JANG SEE

Tiger Oil Corporation

Singapore Petroleum Company Limited Report to Shareholders 2007 25Key Executives

Past Principal Directorships in the Last Five Years

OPERATIONS REVIEWEXPLORATION & PRODUCTION

The expansion of the Group’s E&P will create and deliver sustainable future growth.

MAJOR DEVELOPMENTS IN 2007

• Expanded oil production from 2,600 boepd to 10,000 boepd • Extended footprint to China and Australia • Made largest acquisition to date, in Bohai Bay, China • Became operator for the fi rst time in the Pearl River Mouth Basin, China • Produced fi rst oil at Oyong oilfi eld, Indonesia

Singapore Petroleum Company Limited Report to Shareholders 200726 Operations Review

Exploration & Production

INTRODUCTIONSPC has further diversifi ed its E&P portfolio by entering into China and Australia. This expansion of the Group’s E&P will create and deliver sustainable future growth.

In China, SPC established its presence in the Bohai Bay through the acquisition of the Cao Fei Dian (CFD) producing oil fi elds. It also established its presence in the prolifi c Pearl River Mouth Basin through an award of a 100% operatorship interest in Block 26/18. SPC acquired its fi rst E&P acreage in Australia with the award of the exploration permit T/47P in the Bass Basin through a successful bid round.

Oil and gas production in 2007 was lifted by the commencement of oil production from the Oyong fi eld in Sampang PSC and further boosted by the purchase of the CFD producing fi elds. By the fourth quarter of 2007, SPC’s combined oil and gas production from Kakap, Oyong and CFD climbed from 2,600 boepd to approximately 10,000 boepd.

In addition to these producing assets, SPC has other assets at exploration and pre-development stages. It also holds interests in midstream gas pipeline assets in Indonesia.

PERFORMANCEIn 2007, SPC’s production from the Kakap PSC, the Sampang PSC and the CFD fi elds totalled 1.9 million barrels of oil equivalent (boe). At an average net realised price of US$70.61 per barrel, the E&P business contributed $145.1 million in revenue and $52.4 million in operating profi t.

BUSINESS HIGHLIGHTSKakap PSC, IndonesiaThe Kakap PSC presently has two blocks covering 2,000 km2. It is located

in the West Natuna Sea of Indonesia and 486 km northeast of Singapore. There are nine producing oil and gas fi elds integrated by four platforms and fi ve subsea tie-backs. Produced oil is processed by a Floating Production Storage and Offl oading (FPSO) vessel and gas is transported through the West Natuna Transportation System pipeline to Singapore.

SPC continued to enjoy healthy and stable production from the Kakap PSC. For 2007, the combined fi eld production was approximately 975,000 boe for SPC’s share. During the year, an exploration well Pancing-1X was drilled which resulted in a non-commercial oil discovery. Continued efforts to bring additional gas production onstream were carried out with the drilling of the KG West-1 well. This well and the Lukah gas discovery in 2006 are currently scheduled for tie-back to the existing platforms. The two wells will maintain the Kakap gas production for supply to Singapore.

Sampang PSC, IndonesiaOyongIn 2007, the fi nal milestone in the development of Oyong oil was completed with the successful conversion of the production barge and subsequent tie-in with the wells and the Floating, Storage and Offl oading (FSO) vessel. Oil started fl owing from the Oyong fi eld in September 2007. This is SPC’s second producing asset after the Kakap PSC. At the commencement, Oyong produced oil at approximately 8,000 to 10,000 bpd, which equates to 3,200 to 4,000 bpd for SPC’s 40% interest.

With the completion of the Oyong oil development, the Sampang partners have embarked on the second phase of Oyong development to monetise its gas reserves. Front End Engineering Design (FEED) 1. Oyong wellhead.

has been completed and tendering of the engineering, procurement, construction and installation (EPCI) contract for the second phase development is ongoing at the time of this report. Gas production is expected to commence in 2009. The gas to be produced will be transported through a 55 km pipeline to an onshore processing facility adjacent to the Grati Power Station in East Java. A gas sales agreement has been concluded with PT Indonesia Power for the entire gas reserves of the fi eld.

WortelThe partners are evaluating the full potential of the Wortel discovery located 7 km west of the Oyong fi eld. An appraisal well Wortel-3, located east of Wortel-1 well, is scheduled for drilling in 2008. The Wortel discovery is planned as a tie-back to the Oyong gas production.

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Singapore Petroleum Company Limited Report to Shareholders 2007 27Operations Review


OPERATIONS REVIEWEXPLORATION & PRODUCTION

1. CFD FPSO Vessel.

2. Oyong production barge.

JerukThe Sampang partners continue to examine possible development scenarios to commercialise Jeruk’s resources.

Bohai Bay, ChinaIn October 2007, SPC announced its successful US$223 million ($334.5 million) acquisition of two producing blocks in Bohai Bay, China. Through its wholly-owned subsidiary, SPC E&P (China) Pte Ltd, SPC won a competitive bid for 100% of Sino-American Energy Corporation shares with 18.2% (8.9% – producing fi elds) and 23% (7.8% – producing fi elds) working interest in Blocks 04/36 and 05/36, respectively.

Blocks 04/36 and 05/36 are located in western Bohai Bay, 190 km east of Beijing, covering a total of 3,080 km2. The blocks contain several CFD producing fi elds with a total gross production of approximately 50,000 bpd. Produced oil is gathered by six platforms and processed by a FPSO under a long term lease.

Effective 1 July 2007, the Bohai Bay assets contributed approximately 4,300 bpd to SPC’s production. Ongoing infi ll drilling and well workover are being conducted by the operator to maximise production from the fi elds. The Bohai Bay assets is currently SPC’s largest producing property.

Blocks 102 and 106, VietnamBlocks 102 and 106 cover approximately 14,000 km2 and contain the Yentu-1X and Thai Binh oil and gas discoveries. In 2007, the partners completed a 2,189 km 2D seismic survey in these blocks. The joint venture partners are currently planning to conduct a three-well exploration/appraisal drilling programme in 2008.

Block 101-100/04, VietnamBlock 101-100/04 is located in the Gulf of Tonkin, Northern Vietnam and adjacent to Blocks 102 and 106. This block covers approximately 6,174 km2 and has gas and condensate discovery.

Under the exploration phase of the PSC term, the joint venture partners are committed to the processing and interpretation of existing seismic data, acquisition of new 3D seismic surveys and drilling of one exploration well within the fi rst three years. To date, the 3D seismic survey covering 689 km2 has been completed. Exploration drilling is planned for early 2009.

Block B, CambodiaBlock B acreage is located 250 km offshore from Cambodia. The block lies on the southeast of the Khmer Basin where a number of oil and gas discoveries had been made.

In January 2007, SPC and its joint venture partners exercised their pre-emption rights to acquire the entire 10% participating interest of CE Cambodia B Ltd. As a result, SPC currently holds a 33.3% participating

interest in this block. A 3D seismic survey of 650 km2 was completed. Exploration drilling is planned for the second half of 2008.

Block 26/18, ChinaIn August 2007, SPC signed a petroleum contract with China National Offshore Oil Corporation (CNOOC) for a 100% operating interest in Block 26/18. The Block covers 4,961 km2 in the Pearl River Mouth Basin, South China Sea. It is 150 km from shore in water depths between 85 and 200 metres.

Block 26/18 contains the EP-20-3-1 discovery well drilled in 1998. Commercial oil production in the basin had been centred in the Wenchang, Penyu, Huizhou, Lufeng and Liuhua fi elds. Preliminary geological and geophysical indicate several prospects. Under the initial three-year exploration phase, SPC is responsible to carry out an agreed work commitment on this block which includes acquiring 2,000 km of 2D seismic survey and the drilling of one exploration well. Upon commercial hydrocarbon discovery, CNOOC has the right to participate up to an interest of 51% in the PSC.

T/47P, AustraliaIn March 2007, SPC together with Tap Oil and Jubilant Energy were awarded an exploration permit for Block T/47P. The Bass Basin block contains the Cormorant oil, condensate and gas discoveries.

In addition to the Cormorant discoveries, T/47P also contains

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Singapore Petroleum Company Limited Report to Shareholders 200728 Operations Review


Proven plus Probable Reserves (SPC Share) Based on Working Interest

Net Average 2007 Production (boepd) * 5,293

Estimated Net Reserves Year End 2007 (million of boe) ** 24.6

* Includes annualised production from Oyong and CFD (fourth quarter 2007 onwards)

** Based on in-house estimates

SPC Working Interest by Area

Location Working Interest Status [%]

Kakap PSC Indonesia 15.0 On Production

Sampang PSC Indonesia - Oyong 40.0 On Production (Gas on Development) - Jeruk 21.8 Pre-development - Wortel 40.0 Pre-development Block 04/36 China 8.9 On Production 18.2 Exploration Block 05/36 China 7.8 On Production 23.0 Exploration

Blocks 102 and 106 Vietnam 20.0 Exploration (2008: Exploration Drilling)

Block 101-100/04 Vietnam 45.0 Exploration (2008: Exploration Drilling)

Block B Cambodia 33.3 Exploration (2008: Exploration Drilling)

T/47P Australia 35.0 Exploration

Block 26/18 China 100.0 Exploration

several exploration prospects and leads within its 2,890 km2 acreage. It is located 200 km from Melbourne at a water depth of between 50 and 100 metres.

The joint venture partners are pursuing an aggressive exploration strategy to estimate the potential of the block. In January 2008, a 3D seismic programme covering 525 km2 was completed. The partners have secured a drilling rig to conduct exploration drilling in the permit area, commencing early 2009.

MidstreamSPC holds a 15% interest in Transasia Pipeline Company Pvt Ltd (Mauritius), which in turn holds a 40% interest in PT Transportasi Gas Indonesia (PT TGI). PT TGI owns and operates two major gas transmission lines: Grissik-Duri pipeline and Grissik-Batam-Singapore pipeline.

The 468 km Grissik-Batam-Singapore pipeline is the second direct gas pipeline transmitting gas from Indonesia to Singapore. Gas supply to Singapore

commenced in 2003 under a 20-year term contract between Singapore and Indonesia. The 536 km Grissik-Duri pipeline transfers gas from the Grissik gas fi elds to Caltex’s Duri facilities under long-term contracts commencing from 1998.

To support the yearly ramp up of the contractual gas volumes to be delivered to Singapore, PT TGI has begun the installation of a new compressor at Jabung in 2007. The Jabung compressor is expected to be ready by end 2008.

Singapore Petroleum Company Limited Report to Shareholders 2007 29Operations Review


OPERATIONS REVIEWREFINING, SUPPLY & TRADING

Operations ReviewRefi ning, Supply & Trading

Tight global refining capacity and favourable supply-demand fundamentals resulted in healthy refining margins.


• Realised record average refi ning margins of about US$7.00 per barrel

• Processed 51.5m barrels of crude• Initiated ultra-low sulphur diesel production project• Carried out successful turnaround of Crude Distillation Unit 1

• SRC achieved: – More than 97% utilisation – 4.3 million man-hours without any loss time injury – 1 million man-hours of “no recordable injury”

Singapore Petroleum Company Limited Report to Shareholders 200730

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MARKET ENVIRONMENTCrude and product prices increased sharply in 2007 due to perceived imbalances and uncertainties in supplies and availabilities. Global refi ning capacity remained tight in 2007.

In 2007, regional markets such as Indonesia and Vietnam took further steps toward cleaner fuel specifi cations. The buoyant energy market also witnessed the addition of new storage capacities in Singapore. The addition of refi ning capacity globally however continued to be constrained by high construction costs and the shortage of the right skill set. Project delays were therefore prevalent.

Global oil demand for 2007 was 85.7 million bpd, an increase of 1.2% over the 84.7 million bpd in 2006. The Asia-Pacifi c region accounted for 25.5 million bpd out of this global demand and contributed 60% of this incremental global demand of 1 million bpd. The demand growth was mainly

driven by China and India’s burgeoning appetite for energy. Consumption of energy in the Middle-East also grew as the high oil prices triggered a construction boom across the region.

The monthly average Dubai crude price in January was US$51.70 per barrel (bbl). This rose to an average of US$86.87/bbl in November due largely to lower crude inventory levels and geopolitical tensions.

Product prices in Singapore were wellsupported for most of the year. Gasoline demand was strong during the second and third quarters due to the US summer driving season and the anticipation of hurricanes in the US Gulf Coast. Naphtha demand was exceptionally high from the petrochemical sector. The kerosene and gas oil crack spreads peaked in the fourth quarter due to additional demand anticipated for heating during the winter season. Fuel oil demand was also healthy for most part of the year with increased demand

1. Unwavering vigilance to ensure safety and reliability.

2. Round-the-clock quality control.

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in the third quarter due to an unplanned shutdown of a Japanese nuclear power plant.

In the Asia-Pacifi c region, tight global refi ning capacity and favourable supply-demand fundamentals resulted in healthy refi ning margins. Average refi ning margins peaked at US$9.00 per barrel in the second quarter due to the extensive turnaround of regional refi neries. As a result of the positive refi ning environment, the Group achieved a record average refi ning margin of about US$7.00/bbl for 2007.

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Singapore Petroleum Company Limited Report to Shareholders 2007 31

OPERATIONS REVIEWREFINING, SUPPLY & TRADING


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CRUDE AND REFINERY The total crude throughput for 2007 was 51.5 million barrels (bbls). During the year, SRC upgraded its facilities to enhance its fl exibility to process a wider crude slate. The refi nery achieved maximum utilisation of its crude distillation and upgrading units, and operated safely and reliably throughout the year. SRC achieved a high utilisation rate of more than 97% for 2007. SRC’s Injury and Incident Free (IIF) culture has resulted in tangible benefi ts. The refi nery recorded 4.3 million man-hours without any loss time injury as of December 2007. It also achieved 1 million man-hours of “no recordable injury” in 2007.

SRC carried out a successful turnaround of the Crude Distillation Unit 1 and associated upgrading and auxiliary units during May and June 2007. About 1,300 contract workers were engaged during this month-long maintenance exercise which was completed safely without any incident.

As part of the Group’s environmental initiatives, SPC and its refi nery partners announced, an ultra-low sulphur diesel (ULSD) production project in May 2007. ULSD with a sulphur content of 50 parts-per-million would conform to Euro-IV specifi cations. For this project,

SPC’s sales volume at Changi was 15,500 bpd, 1.3% lower than in 2006. The total fuel throughput at the airport was approximately 80,000 bpd, a decline of 0.8% over 2006. SPC supplied fuel to 21 airline customers at this location.

At the Hong Kong International Airport, SPC achieved a sales volume of 3,000 bpd. SPC provided refuelling services to fi ve airline customers at this location.

At the Bangkok International Airport at Suvarnabhumi, SPC maintained its market share supplying fuel to fi ve airline customers.

At the Taiwan Taoyuan International Airport, SPC achieved a sales volume of 1,000 bpd. DISTILLATESThe Distillates unit is responsible for the sales and trading of products such as naphtha and motor gasoline (light distillates), jet fuel and gas oil (middle distillates). The unit actively traded distillate products from SRC and external sources.

2007 was a challenging year for distillates trading. Continuous price volatilities called for caution. The move to cleaner and lighter fuel specifi cations in the region posed a challenge for SPC to produce and sell fi nished products that meet the requirements of end-users. The Distillates unit captured a positive trading margin in the fast-changing environment by closely monitoring the market and taking advantage of the Group’s supply chain network. The Distillates unit achieved a turnover volume of 33 million bbls in 2007.

Many countries in the Asia-Pacifi c region are expected to tighten fuel specifi cations and impose stricter emission standards. The demand for environmentally friendly fuels will provide niche trading opportunities for suppliers able to meet such stringent specifi cations. The Distillates unit will continue to monitor such changes and keep pace with the evolving marketplace.

an existing hydro-desulphurisation unit would be revamped to produce ULSD. The revamp to enhance the existing capability would increase ULSD production volumes in 2009. In line with the commitment for a cleaner and greener environment, SPC continues to evaluate further similar projects. AVIATION SALESThe Aviation Sales unit markets and supplies aviation fuel to airlines at four international airports namely, Singapore, Hong Kong, Bangkok and Taipei. With more than 30 years of aviation fuel sales experience, SPC has built a solid reputation as a reliable supplier of quality aviation fuels.

Fuel sales at Singapore Changi Airport accounts for the largest segment of the Group’s aviation volume. Being an aviation hub, and Asia’s sixth busiest airport, Changi handled close to 40 million passengers and a cargo throughput of 1.8 million tonnes for 2007. Air passenger traffi c in Southeast Asia saw strong growth in 2007 from increased leisure travel and the proliferation of low cost carriers. Fuel effi cient aircraft and higher load factor however capped fuel consumption despite passenger growth.



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RESIDUEThe Residue unit is responsible for SPC’s fuel oil trading and marine sales activities. Fuel oil of various specifi cations, including standard bunker grades, is sourced directly from SRC, other oil companies and traders. Through the unit’s activities, SPC has maintained its reputation as a premier fuel oil and bunker supplier in the region.

The Singapore fuel oil market was marked by high prices and volatilities throughout 2007 with concerns over excessive credit exposure. The average monthly price of fuel oil peaked in November rising more than 80% compared to the beginning of the year. Supply and demand dynamics continued to be challenging. The Singapore market continued to attract supplies from India, the Middle-East and non-traditional sources such as South Korea and China in addition to arbitrage cargoes from the West. On the other hand, Chinese buying of fuel oil was cautious and at times dampened by the record prices. Much of the surplus fuel oil was channelled into the bunker market resulting in excess supplies and aggressive competition among the marine fuel suppliers.

In 2007, there were continuing pressures to improve product specifi cations to meet new emission standards. SPC’s focus to improve fuel quality and operational

performance standards was recognised by regulators. Throughout the year, SPC met the quality standards of Marpol (Marine Pollution) 73/78 Annex VI, and the specifi cations of ISO:9217 2005. In 2007, the Maritime Port Authority announced a new certifi cation process for bunker suppliers to be certifi ed by 1 June 2007. SPC was the fi rst company to successfully receive this QMBS (Quality Management for Bunker Supply Chain) SS 524: 2006 certifi cation in November 2006.

OPERATIONS AND LOGISTICS SPC‘s storage terminal for petroleum products at Pulau Sebarok supports its marine bunker operations, distribution and trading businesses. The 220,000 cubic metre terminal consists of 13 storage tanks and is equipped with a deepwater jetty for tankers up to 160,000 tonnes displacement. A smaller jetty for barges of up to 10,000 tonnes displacement is also available for smaller cargo sizes. The terminal has a comprehensive laboratory which has the SINGLAS (Singapore Laboratory Accreditation Scheme) accreditation and a highly advanced automated Distributed Control System to provide quick turnaround for tanker and barge operations.

In 2007, the terminal handled a product throughput of 2.6 million tonnes (2.9 million cubic metres).

RISK MANAGEMENT AND DERIVATIVESThe Risk Management and Derivatives unit is responsible for the management of SPC’s crude oil inventory and refi ning margin price risks through hedging activities. In 2007, the unit hedged against the volatile price risks for its physical crude oil and refi ned products inventory by engaging in “Over-The-Counter” crude oil and refi ned products derivatives. These transactions were normally of short-term tenures ranging from 3 to 12 months, and were done in tandem with physical barrels.

The record high oil prices and the price volatility in late 2007 is expected to persist, posing a challenging hedging environment for 2008. The unit will continue to proactively fi ne tune its strategies to manage the Group’s oil inventory and refi ning margin price risks in this environment.

1. Reliable supplier at Asia’s sixth busiest airport.

2. Bunkering operations at PST.

3. SPC’s storage terminal at Pulau Sebarok

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OPERATIONS REVIEWMARKETING

Operations ReviewMarketing

Being the first to offer CNG at a service station, SPC continues to offer a comprehensive range of products and services across its retail network.


• Acquired a majority stake in an Indonesian fuels-marketing company • Established a lubricant distribution network in China • First to offer CNG fi lling in a service station on mainland Singapore • First to launch a drive-through ATM in a Singapore service station • First service station network to promote out-of-home digital advertising• The engineering department successfully completed 45,000 safety man-hours without any “Loss Time Injury”


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MARKETING REVIEWThe Marketing Business Unit (Marketing) adopted a prudent approach in 2007 in the face of volatile oil prices. Managing risks and limiting credit exposures remained priorities even as Marketing sought further commercial opportunities. Domestically, the market remained highly competitive. This was further exacerbated by increasing construction, transportation and other operating costs.

Against this challenging backdrop, Marketing continued to capitalise on commercial opportunities to build long-term commitment and market presence while enhancing shareholder returns.

MARKET DEVELOPMENT AND VENTURES Market environmentIn line with SPC’s vision to build a premium regional brand name, the Market Development and Ventures unit seeks overseas marketing business opportunities. It focuses primarily on tapping Asian markets that are beginning to liberalise or are actively seeking foreign investments. The energy sector in most Asian markets is considered to be strategic to economic development. There may hence be regulatory, political or bureaucratic barriers that could impede SPC’s participation.

New investmentIn the third quarter of 2007, the unit successfully initiated the acquisition of a 60% shareholding in a local Indonesian fuels-marketing company, PT Solar Premium Central (PT Solar). This joint venture will build on and expand SPC’s presence in Indonesia through the marketing of fuels. PT Solar also marked

SPC’s physical presence for the fi rst time as a business entity in the country. Prior to this venture, SPC’s presence in Indonesia was represented by the marketing of lubricants through appointed distributors.

Preserving valueThe unit consistently monitored and reviewed Marketing’s investment portfolio to ensure an adequate return-on-investment. Investments that have become non-strategic or are under-performing would be divested if these could not be turned around. In 2007, SPC completed the divestment of its interest in Jiangmen City Sinjiang Gas Corporation, a liquefi ed petroleum gas (LPG) storage and marketing enterprise in China. SPC also divested its entire shareholding interest in Tiger Oil Corporation in Korea, a company with a network of service stations and petroleum distribution terminals. 1. Making Choices convenience store

your everyday choice.

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RETAIL SALES AND DEVELOPMENT Market environmentThe retail market remained competitive and challenging, with fl uctuating and high product prices throughout the year. Such high product prices were frequently not fully recovered at the pump. At the end of 2007, SPC had a network of 38 service stations. Two outlets, Market Street and Aljunied Road service stations, were closed when the leases expired. A new service station was opened in Punggol.

New service station at PunggolThe Punggol service station (PGSS) commenced business in September 2007. The station is fully outfi tted with fuel dispensers, a convenience store, a snack kiosk, an ATM machine and manual car wash facilities to meet the



OPERATIONS REVIEWMARKETING

needs of motorists and residents in the neighbourhood. This modern and fully-equipped station is currently the only service station in Punggol.

At the grand opening of the service station in November, SPC donated $10,000 to the Punggol 21 Community Club Building Fund, and sponsored prizes for a constituency photography competition themed “Fabric of Punggol”.

Retailing of compressed natural gasIn November, SPC announced the introduction of compressed natural gas (CNG) at its Jalan Buroh service station. This facility began operations in February 2008. The project is part of SPC’s corporate social responsibility to support clean fuels. Besides being the fi rst to retail CNG at a service station, SPC continues to offer a comprehensive range of products and services across its retail network.

COMMERCIAL SALESMarket environmentThe Commercial Sales unit is responsible for the marketing of petroleum products (except lubricants) to the domestic commercial, industrial and wholesale markets. It also markets, trades and exports special products such as

prices. The fi nished products market meanwhile lagged behind such base oil cost increases. SPC initiated timely marketing programmes to mitigate the impact of high costs and low margins to remain profi table.

AchievementsTo maintain its strategy of building market presence and strengthening earnings, SPC focused on the marketing of premium automotive and industrial lubricants. Improvements were made to SPC’s product mix with an increased proportion of premium lubricants marketed to maximise returns. To generate greater cost savings and effi ciencies, the unit also undertook initiatives with strategic distribution partners alongside improvements in internal processes.

2007 was an outstanding year for the Lubricant Sales unit. The Singapore distribution network was rationalised resulting in more focused marketing and new customers. SPC also entered into an Original Equipment Manufacturer lubricant supply partnership with a major European engine manufacturer. Continuing its growth in the region, SPC successfully entered the Vietnam and Bangladesh lubricant markets while improving its presence in existing overseas markets.

LPG, asphalt and sulphur within the Asia-Pacifi c region.

In 2007, the inland, commercial and industrial markets continued to be highlycompetitive. Market growth was modest as ample supplies were available. Nonetheless with the focus on service and reliability, SPC was able to secure new contracts with a number of key customers.

Marketing, trading and export of special products in the Asia-Pacifi c region contributed signifi cantly to the unit’s portfolio. In spite of volatile product prices throughout the year, the steady increase in regional demand enabled the unit to perform profi tably.

SPC Wearnes Pte LtdSPC retails bottled LPG to the domestic market through its joint venture company, SPC Wearnes Pte Ltd. The joint venture faced a challenging year of escalating product costs in a highly competitive marketplace in 2007, and this is expected to continue in 2008.

LUBRICANT SALESMarket environment The Lubricant Sales unit markets SPC-branded lubricants in Singapore and Asia-Pacifi c. In 2007, the market continued to experience high base oil

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1. Providing a one-stop service to motorists.

2. SPC has the largest chain of car wash outlets.

3. Working harder and smarter to deliver products and satisfaction.

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Singapore Petroleum (Guangdong) Private Limited (SP Guangdong)SPC’s newly-incorporated lubricant marketing company in China, SP Guangdong, successfully established a distribution network in more than 15 provinces. SP Guangdong set up an SPC “Image Lube Service Centre” in Shenzhen to boost brand awareness and market share. The Centre provided one-stop service for comprehensive automotive vehicle maintenance and repairs. It also acted as a model outlet and benchmark for SPC’s distributors in China.

TechnologySPC continued to keep pace with new technology to meet both market and environmental requirements. Its lubricant products were upgraded and new additive technology was used in both SPC automotives and industrial lubricants sold in the region.

The acceptance and effectiveness of the technology employed in SPC lubricants was demonstrated through the 25 cars from Hong Kong and China that used SPC’s SynAce Racing Pro to participate in a “drifting” competition in the third quarter of 2007.

OPERATIONS AND LOGISTICSOrganisationThe Operations and Logistics unit covers two portfolios. The Engineering department designs, implements and conducts feasibility studies, and manages engineering projects for all Marketing units. The Logistics department provides the product distribution link between the Company’s refi nery and its local and regional customers. Its activity hub is the Jurong Bulk Plant (JBP).

EngineeringThe Engineering department carried out several improvement projects for the service station network. This is part of the Company’s effort to achieve a consistent corporate image and to ensure that high EHSS standards are maintained throughout the network.

Several of the projects involved testing and upgrading of the underground storage and piping system at the service stations. All fuel dispensing pumps were tested and calibrated regularly for accuracy at all times.

CCTV systems were upgraded to improve security and safety. The CCTV resolutions were increased to facilitate face recognition and remote access monitoring capability.

The other key projects undertaken at service stations include the construction and commissioning of a new outlet at Punggol, major upgrading and improvement programme at Upper East Coast, and retrofi tting and construction of the CNG fi lling facility at Jalan Buroh.

In addition, Engineering provided technical support to the Commercial Sales unit. It assisted in offi ce planning projects for SPC’s offi ces in China, Indonesia as well as Singapore.

In 2007, the Engineering department successfully completed 45,000 safety man-hours and performed the year’s activities without any Loss Time Injury (LTI).

Jurong Bulk Plant OperationsSPC’s distribution hub, Jurong Bulk Plant (JBP) handled higher throughput volumes for most of the products in 2007. Among the products distributed or shipped, diesel, LPG and lubricant volumes were signifi cantly higher, with increases of up to 40%.

JBP continued to operate productively without compromising on safety. Having performed 125,000 man-hour operations this year, it maintained its zero LTI record for four consecutive years. There was also no fi re or major oil spill incident in 2007.


CORPORATE GOVERNANCE

SPC achieved a joint third placing for the ‘Best Managed Board Award for 2007’.

Corporate GovernanceSingapore Petroleum Company Limited Report to Shareholders 200738

Corporate Governance

The SPC Group believes in nurturing a strong corporate governance culture with the Board, management and staff, conscientiously ensuring that this underpins corporate behaviour. For SPC, corporate governance is not mere compliance, but embedding the right corporate mindset and culture. SPC believes it is people that will make corporate governance work.

To maintain high standards of corporate governance, SPC regularly reviews its organisational needs, internal structures and processes, in keeping with the latest corporate governance developments regionally and globally. Corporate governance was given greater emphasis at the Board level when the Board in January 2007 formally dedicated an agenda item to corporate governance issues. This segment preceded every scheduled Board meeting and was held without the presence of management. Decisions and guidelines arising from the sessions were subsequently conveyed to or discussed with senior management in the ensuing Board session.

As part of the Company’s ongoing efforts to foster good corporate governance, regular in-house corporate governance related forums were held in 2007, led by company offi cers, external advisers

or consultants. There were structured learning sessions on the Company’s corporate governance practices, policies, internal structures and processes. Specialists were also invited to share legal, regulatory and other market related developments to help keep the focus on corporate governance developments and compliance. SPC’s internal corporate governance principles and framework were cascaded to SPC nominated directors in its subsidiaries and associated companies via specifi c sessions for such purposes. All directors and employees were also encouraged to attend external courses on the subject.

SPC has won the SIAS’ Singapore Corporate Governance Award for fi ve consecutive years since 2003, achieving third place in 2007. SPC was also one of fi ve recipients of the ‘Most Transparent Company Award’ in the Non-Electronic Manufacturing category for 2007. At the beginning of 2008, SPC achieved a joint third placing for the ‘Best Managed Board Award for 2007’. Such awards are testimony to SPC’s corporate values and effort to build trust and confi dence as a strong and sustainable enterprise. SPC acknowledges with gratitude, the continued support and recognition of the investment community.

The Company confi rms that it has complied with the spirit and requirements of the Listing Manual (Listing Manual) of the Singapore Exchange Securities Trading Limited (SGX-ST) and the Code of Corporate Governance 2005 (the Code), unless otherwise stated. The table on page 40 provides an easy reference to the disclosure of our corporate governance arrangements.

The following describes SPC’s corporate governance practices in compliance with the Code. There are other sections in this Annual Report that are relevant to corporate governance and as such, this corporate governance report (Report) should be read in conjunction with those sections.




CODE OF CORPORATE GOVERNANCE 2005Principles and guidelines Principle or guideline Page(s) reference in this Report

Guideline 1.3Delegation of authority, by the Board to any Board Committee, to make decisions on certain board matters. 41

Guideline 1.4The number of board and board committee meetings held in the year as well as the attendance of 42 every board member at these meetings.

Guideline 1.5The type of material transactions that require board approval under internal guidelines. 41

Guideline 2.2Where the company considers a director to be independent in spite of the existence of a relationship 43-44 as stated in the Code that would otherwise deem him as non-independent, the nature of the director’s relationship and the reason for considering him as independent should be disclosed.

Guideline 3.1Relationship between the Chairman and CEO where they are related to each other. 44

Guideline 4.1Composition of nominating committee. 45-46

Guideline 4.5Process for the selection and appointment of new directors to the board. 42, 45

Guideline 4.6Key information regarding directors, which directors are executive, non-executive or considered 43-45 by the nominating committee to be independent.

Guideline 5.1Process for assessing the effectiveness of the Board as a whole, and the contribution of each 44-46 individual director to the effectiveness of the Board.

Guideline 9Clear disclosure of its remuneration policy, level and mix of remuneration, procedure for setting 48 remuneration and link between remuneration paid to directors and key executives, and performance.

Guideline 9.1Composition of remuneration committee. 48

Guideline 9.2Names and remuneration of each director. The disclosure of remuneration should be in bands of 48-50 $250,000. There will be a breakdown (in percentage terms) of each director’s remuneration earned through base/fi xed salary, variable or performance-related income/bonuses, benefi ts in kind, and stock options granted and other long-term incentives.

Guideline 9.2Names and remuneration of at least the top fi ve key executives (who are not also directors). 49-50 The disclosure should be in bands of $250,000 and include a breakdown of remuneration.

Guideline 9.3Remuneration of employees who are immediate family members of a director or the CEO, 49 and whose remuneration exceed $150,000 during the year. The disclosure should be made in bands of $250,000 and include a breakdown of remuneration.

Guideline 9.4Details of employee share schemes. 50-51

Guideline 11.8Composition of audit committee and details of the committee’s activities. 51-53

Guideline 12.2Adequacy of internal controls including fi nancial, operational and compliance controls, 53-54and risk management systems.



BOARD MATTERSThe Board’s Conduct of its AffairsPrinciple 1The functions and responsibilities of the Board are to:

• provide entrepreneurial leadership, set strategic goals, and ensure the Company has the necessary fi nancial and human resources to meet its objectives;

• review management performance; • establish prudent and effective

system of internal controls, values, fi nancial reporting, risk management, compliance and corporate governance processes;

• set standards and values to ensure that obligations to stakeholders are properly discharged at all times.

As stated above, SPC elevated onto the Board agenda, an item focused on corporate governance while another regular feature was a report on EHSS in the SPC Group, in recognition of the importance of such issues in the Group’s businesses and operations. SPC’s EHSS policy and practices are presented on page 58.

SPC has set its strategic vision to be an integrated oil and gas company with a premium brand. For the fi nancial year 2007, the Group achieved a record revenue of $8.8 billion resulting in its highest ever PATMI of $508.3 million.

In 2007, the goal to grow SPC’s upstream business was further enhanced through the acquisition of three PSCs in China; two in Bohai Bay and one in Pearl River Basin, and one exploration permit in Bass Basin, Australia. Added to the existing portfolio of producing assets, SPC has, in 2007, achieved a total production of about 10,000 boepd.

The upgrading projects in SRC, described elsewhere in this Annual Report, the formation of the Indonesian joint venture and the new service station and other downstream efforts were the result of the Board and Board Committee decisions based

on management recommendations. Such recommendations were subject to rigorous corporate governance processes at various levels within the organisation that ensured thorough assessment of fi nancial, economic, legal, country risks and other considerations.

The Board is conscious that accountability, performance and good management practices are necessary components of the Company’s processes and practices.

Board Meetings are open and constructive with the Chairman actively encouraging debates and discussions among directors and management. The CEO and senior management provide updates and information to the Board at the meetings involving business operations or projects. The Board receives fi nancial reports on the performance of each business unit including signifi cant developments.

Taking into account the information and knowledge of the business and fi nancials, the Board is expected to make informed decisions and exercise objective judgment in the best interests of the Company. The results of the Nominating and Remuneration Committee (NRC) managed annual peer and self assessment carried out by the directors on themselves and each other suffi ciently shows that the Board possesses objectivity and independence.

Corporate authority in SPC is defi ned through two sets of delegation of authority for the day-to-day operations of the Company. These delegations of authority are reviewed periodically and updated when required, to cater for changes in operations and organisational structure within the Group. The fi rst, an executive delegation of authority, sets out guidelines on matters requiring Board approval and authority limits for the Executive Committee (ExCo) and management. The second is an internal delegation of authority with differing authority limits for management and staff.

Matters that are specifi cally reserved for the Board are those involving annual budgets, fund raising proposals, investment and divestment proposals, strategic business initiatives and signifi cant corporate actions of the Company.

To assist the Board in its functions, the Board established and delegated specifi c responsibilities to three Board Committees namely the ExCo, the NRC and the Audit Committee (AC).

The Board also established the Enterprise Risk Management Committee (ERMC) comprising senior management under the leadership of the CEO, to review SPC’s risk profi le and mitigation strategy. This committee reports its work and recommendations to the ExCo.

The management team, headed by the CEO and comprising senior management, ensured the decisions and guidelines of the Board and Board Committees are implemented in the Group. The Board and, where appropriate, the Board Committees were consulted on urgent matters, in accordance with the delegation of authority and terms of reference of the committees. The respective roles and responsibilities of the ExCo, the NRC, the AC, ERMC, and Management Committee are presented below.

Following the 2007 Board performance review conducted by the NRC, the Board considered the risk profi le of SPC and decided in early 2008 to establish a new Board Risk Committee with oversight of risk management in the Group. The terms of reference of this committee and those of the ERMC, the ExCo and the AC will also be reviewed in tandem to ensure the growing operations of the Group are administered comprehensively.




In 2007, the Board met fi ve times. Four scheduled meetings coincided with the review and release of the quarterly results with one ad-hoc meeting called at short notice. Three ExCo, four NRC and fi ve AC meetings were held in the year. The quarterly NRC and AC meetings were held on the same day as the regular Board meetings.

Board and ExCo resolutions by circulation were passed using electronic and ordinary mail. Informal meetings of the Board and Board Committees were convened when required. The Company’s Articles of Association allow Board meetings to be conducted by telephone, radio, close-circuit television or other electronic means.

The Board members kept in regular communication with the management. Directors have access to management and were able to discuss and clarify business and related issues. Further elaboration is provided under the section titled “Access to Information” below.

New directors when appointed, as a practice, will be briefed in an orientation programme on the Company’s vision, mission, strategy and business. They will also be briefed on the Company’s corporate processes. Heads of each functional group will provide the briefi ngs. Corporate data is also given to

EXECUTIVE COMMITTEE

The ExCo comprises four Board members. They are Messrs Choo Chiau Beng (Chairman), Koh Ban Heng, Cheng Hong Kok and Goon Kok-Loon.

The ExCo reviews and recommends to the Board:

(1) Strategic business directions and plans of the SPC Group.(2) Substantial acquisitions and disposal of assets (including securities and business undertakings of the SPC Group).(3) Signifi cant joint ventures and matters requiring corporate disclosure under the Listing Manual.(4) Signifi cant matters requiring Board recommendations affecting shareholders’ interests in the Company.(5) SPC risk profi les, mitigation efforts and activities of the ERMC.

In addition, the ExCo acts as an intermediate forum between the Board and management, facilitating timely review and endorsement of recommendations on the above business matters, subject to the delegation of authority and the fi nal decision of the Board.

new directors to familiarise them with the Group’s business.

In line with the recommendation of the Code, the Company has practised the issuance of formal appointment letters to new directors setting out their duties and obligations. SPC has also compiled its own Corporate Governance Manual (SPC Manual) to assist directors and management in the exercise of their legal, fi duciary and statutory duties. This manual was issued to new directors and is updated to keep pace with the developments and amendments in the Code of Corporate Governance, best practices, the Singapore Companies Act, Singapore securities legislation, and the Listing Manual. It provides guidance on confl ict of interest issues and contains requisite forms and precedents for declarations of directors.

The SPC Manual is provided to the Board members as well as executives appointed to the various boards of the SPC Group of companies. This is to ensure that sound corporate governance principles and processes prevail throughout the Group. In addition, the Company conducts briefi ng sessions, to educate and update its executives on the boards of SPC’s subsidiaries, associated and joint venture companies on their duties and obligations and corporate governance principles.

SPC recognises director training and professional development of directors as important. As mentioned, nominee directors to SPC Group companies are encouraged to attend external courses and continuing education on the subject. Notwithstanding their wealth of experience, SPC’s directors have attended company-organised courses and conferences such as the Asia Pacifi c Petroleum and Energy Conference (APPEC), Australian Petroleum Production & Exploration Association (APPEA), Oil & Money, Asia Oil and Gas Conference (AOGC), Cambridge Energy Research Associates (CERA), Middle-East Petroleum and Gas Conference (MPGC) and Offshore Technology Conference (OTC) to network and update themselves with the views of energy players and consultants.

The CEO’s briefi ng to the Board includes strategic business updates in addition to the regular update on SPC operations. In addition to in-house strategy workshops, external consultants have been engaged to run workshops for the Board and management. Directors are updated on regulatory and compliance issues by attending courses like the Financial Reporting Standards training programme, Temasek learning sessions, Singapore Institute of Directors (SID) and legal workshops



Table 1 Board and Board Committees

The nature of directors’ appointments on the Board and details of their membership on Board Committees in 2007 are set out below:

Nominating &Director Board Membership Executive Audit Remuneration

Choo Chiau Beng Chairman Chairman – Member Non-Independent & Non-Executive

Koh Ban Heng Executive Director Member – –

Bertie Cheng Shao Shiong Independent & Non-Executive – Member Chairman

Geoffrey John King Independent & Non-Executive – Member Member

Timothy Ong Teck Mong Independent & Non-Executive – – –

Chin Wei-Li, Audrey Marie Independent & Non-Executive – Chairperson Member

Goon Kok-Loon Independent & Non-Executive Member Member –

Teo Soon Hoe Non-Independent & Non-Executive – – –

Cheng Hong Kok Non-Independent & Non-Executive Member – –

offered by law fi rms. Relevant material on developments and updates are regularly disseminated to directors.

In the previous in-house strategic workshops, the Board and senior management participated in joint and separate meetings to establish and fi ne tune the Company’s strategic business plan.

Enterprise Risk Management CommitteeThe role and functions of the ERMC are more fully described on page 56.

Management CommitteeThe Management Committee is headed by the CEO and comprises senior management. The committee meets weekly to review strategic, business and operational issues, and determines policies of the SPC Group. The committee implements and communicates the directions and guidelines of the Board and Board Committees to relevant committees, departments and employees. These meetings ensure the smooth functioning of the Group.

Board Composition and BalancePrinciple 2The Board comprises nine directors. The non-independent and non-executive directors are Messrs Choo Chiau Beng (Chairman), Teo Soon Hoe and Cheng Hong Kok. The majority of the Board comprises non-executive independent directors, and they are Messrs Bertie Cheng, Geoffrey King, Timothy Ong, Goon Kok-Loon and Dr Audrey Chin. The chairpersons of the AC and NRC are independent directors. All four members of the NRC are non-executive directors of whom three are independent,

while the AC has four non-executive and independent directors.

Mr Koh Ban Heng is the sole Executive Director of the Company.

The NRC annually determines the independence of Board members by having each of them complete a questionnaire crafted to test independence against standards

1. Active participation by shareholders at the AGM.

1




established by the Code. The NRC has reviewed the independence of each director for 2007 and is satisfi ed that more than 50% of the Board consists of independent directors based on the Code’s defi nition of independence and guidelines as to the existence of relationships which would deem a director to be not independent.

The NRC also examines the size and composition of the Board and along with the Board believes that the present Board size and composition is appropriate in facilitating effective decision making.

The NRC is of the view that the Board comprises directors capable of exercising objective judgment on the corporate affairs of the Company, independently of management. The NRC considers that the directors, as a group, possess core competencies of and more pertinently, the right balanced mix of background and competencies in fi nance, business, legal, human resource and managerial experience with industry knowledge, risk management and strategic planning experience. All directors have regional and international business exposure and dealings critical for the sustainability, growth and governance of SPC. This wealth of experience, affords the Board the ability to not only provide effective oversight

and strategic navigation but also the necessary checks and balances to facilitate effective governance.

The NRC noted that the non-executive directors had constructively challenged and assisted in developing proposals on strategy and reviewed the management’s performance in achieving agreed goals and objectives.

The non-executive directors have had the opportunity to meet informally before and after Board and Board Committee meetings with and without the presence of management and also communicated through electronic means and at company-organised events to develop and discuss strategy and to monitor the reporting of performance. They helped to monitor management performance in meeting strategic goals and objectives.

The profi les and key information of the Board members are found in the Annual Report section entitled “Information on Directors”.

Chairman and Chief Executive Offi cerPrinciple 3The roles and responsibilities of the Chairman and CEO in the Company are distinct and separate. The Chairman, Mr Choo Chiau Beng, is a non-independent

and non-executive director from the Keppel Group. He does not have any relationship with the CEO and SPC management that could interfere with his judgment and decision making.

The Chairman leads the Board in ensuring its effectiveness on all aspects of its function. To this end, he ensures that the Board receives accurate, timely and clear information. He also facilitates constructive relations between Board and management, and encourages the effective contribution of the other directors in their sessions, with or without the presence of management. The Chairman has openly engaged the shareholders of the Company at its general meetings.

The role of the CEO, Mr Koh Ban Heng, is governed by his employment contract with the Company. He leads the management team and directs the business of the Group in alignment with strategic decisions and goals.

The Chairman and the Board together approve the schedule of board meetings for the fi nancial year with additional meetings called as and when required. The Board agenda is prepared by the Company Secretary after consultation with the Chairman, the CEO and senior management.

Table 2 Attendance at Board and Board Committee Meetings

The directors’ attendance at Board and Board Committee meetings held in 2007 are disclosed below:

Committee

Nominating &Director Board Executive Audit Remuneration

Choo Chiau Beng 5 of 5 3 of 3 – 4 of 4

Koh Ban Heng 5 of 5 3 of 3 – –

Bertie Cheng Shao Shiong 5 of 5 – 5 of 5 4 of 4

Geoffrey John King 5 of 5 – 5 of 5 4 of 4

Timothy Ong Teck Mong 5 of 5 – – –

Chin Wei-Li, Audrey Marie 5 of 5 – 5 of 5 4 of 4

Goon Kok-Loon 5 of 5 3 of 3 5 of 5 –

Teo Soon Hoe 5 of 5 – – –

Cheng Hong Kok 5 of 5 3 of 3 – –



NOMINATING AND REMUNERATION COMMITTEE

The NRC has four Board members, majority of whom are independent. They are Messrs Bertie Cheng Shao Shiong (Chairman), Choo Chiau Beng, Geoffrey John King and Dr Chin Wei-Li, Audrey Marie.

The NRC’s principal functions are as follows:

(A) On evaluation, appointment, nomination and re-appointment of a director, the committee: (1) Reviews the background, academic and professional qualifi cations of nominees. (2) Ensures that all directors submit themselves for re-nomination and re-election at least once in every three years. (3) Determines the independence of the directors annually. (4) Evaluates the performance of each member of the Board and as a whole.

(B) On the remuneration of directors and key employees of the Company, the committee: (1) Establishes a competitive remuneration framework to attract, retain and motivate directors and key employees. (2) Reviews the Company’s relative performance and the performance of individual directors and key executives

and considers their remuneration in totality with long-term incentive schemes such as share option and share-based schemes.

(3) Assesses the performance of the Executive Director. (4) Administers and implements the share option and share-based schemes of the Company in accordance with the rules

of such schemes and determines offers of options or awards of share grants to directors and key employees.

The CEO keeps in regular communication with the Chairman to update him of corporate issues and developments.

Board MembershipPrinciple 4The NRC has the responsibility and objective of ensuring that there is a formal and transparent process in the nomination, appointment and re-appointment of directors to the Board. The NRC is also tasked to assess the effectiveness and contributions of the Board and its members, to the strategic growth and development of the Company. Consistent with the Code, the chairman of the NRC is an independent director, not associated with a substantial shareholder. The members of the NRC are named in Table 2.

In addition, the Company’s Articles of Association had, from the onset, provided that one-third of the directors are to retire from offi ce at its Annual General Meeting (AGM) every year.

Mr Koh Ban Heng, Geoffrey King and Dr Audrey Chin having served longest

since their last election, will retire at the AGM fi xed for 23 April 2008 and offer themselves for re-election. They were selected by lot in accordance with Article 110 of the Articles of Association of the Company.

Mr Bertie Cheng, who has reached 70 years of age, will also retire at the coming AGM and offer himself for re-election pursuant to Section 153(6) of the Companies Act.

The NRC has reviewed directors with multiple directorships and is of the view that suffi cient time and attention has been given to the affairs of the Company through attendance at Board and Board Committee meetings and other meetings held on a less formal basis including electronic and telephone communications.

The committee has encouraged directors to make every effort to attend Board and Board Committee meetings and other meetings either physically, or through electronic media, achieving a 100% attendance for Board and Board Committee meetings in 2007.

Throughout 2007, directors maintained dialogue with other Board members and management on matters within their purview, over and above their attendance at convened meetings.

Pursuant to its 2007 annual review of the performance of the Board and its skill set, the NRC is of the view that the current Board has the necessary mix of capabilities, expertise and work experience to serve the Company and its shareholders.

The NRC is charged with the responsibility to evaluate the nomination of new candidates to the SPC Board. The NRC continues to hold the view that additional directors could be invited to join and further strengthen the Board, taking into consideration the growth of the Company’s exploration and production sector. Several candidates have been considered and the matter continues to be under review. In accordance with the terms of reference of the NRC, new candidates will be assessed based on criteria such as background, academic and




professional qualifications, experience, independence and track record.

Pursuant to the annual NRC review on 2007 Board performance, a decision was made to rotate the roles of Board members. In January 2008, Mr Goon Kok-Loon was appointed Chairman of the Audit Committee in place of Dr Audrey Chin who in turn was appointed Chairperson of the new Risk Committee with Messrs Geoffrey King and Cheng Hong Kok appointed as members.

Board PerformancePrinciple 5At the close of fi nancial year 2007, the NRC reviewed the performance of the Board as a whole and the performance of each director through questionnaires tailored to the Company’s business and requirements. Each director was asked to return written responses on the Board’s performance for the year and of the performance of each of the other directors which is made known only to the NRC chairman, Mr Bertie Cheng and Board Chairman, Mr Choo Chiau Beng. As part of its ongoing efforts to keep current with corporate governance developments, for the 2007 Board performance review, the NRC updated the evaluation questionnaire with new

Table 3 Date of Directors’ Last Re-election Date of LastName Age Position Date of Initial Appointment Re-election

Choo Chiau Beng 60 Chairman 3 May 1999 26 April 2006

Koh Ban Heng* 59 Executive Director 21 August 2003 27 April 2004

Bertie Cheng Shao Shiong# 70 Director 18 July 1997 25 April 2007

Geoffrey John King* 60 Director 1 August 2000 27 April 2005

Timothy Ong Teck Mong 54 Director 1 August 2001 25 April 2007

Chin Wei-Li, Audrey Marie* 50 Director 1 August 2001 27 April 2005

Goon Kok-Loon 65 Director 30 July 2003 25 April 2007

Teo Soon Hoe 58 Director 3 May 1999 26 April 2006

Cheng Hong Kok 65 Director 3 May 1999 26 April 2006

Notes:* Mr Koh Ban Heng, Mr Geoffrey John King and Dr Chin Wei-Li, Audrey Marie will retire at the AGM fi xed for 23 April 2008 and offer themselves for re-election. They were selected

by lot in accordance with Article 110 of the Articles of Association of the Company.# Mr Bertie Cheng Shao Shiong, who has reached 70 years of age, will retire at the AGM fi xed for 23 April 2008 and offer himself for re-election pursuant to Section 153(6) of the

Companies Act.

questions focusing on the strength of the independence and objectivity of the Board.

A report of the fi ndings of the 2007 Board performance review was presented to the NRC by its chairman. Upon its endorsement, the report was presented to the Board for discussion and endorsement during the corporate governance segment of the Board meeting earlier described in this Report. The individual performance ranking of each director was advised separately to the Board Chairman.

The assessment parameters included overall contribution by each Board member, attendance and performance at Board and Board Committee meetings, knowledge of the industry and the Group’s business activities. The peer evaluation addressed issues such as whether a director continued to contribute effectively, the dedication and commitment demonstrated as well as whether insightful issues were raised. The evaluation parameters for the 2007 Board performance review had been updated to incorporate the guidelines and directions of the Code and the feedback received from the previous year’s evaluation exercise. These factors are also taken into consideration for re-appointments.

In its review, the NRC used a variety of fi nancial indicators to measure the Company’s performance and took into account the business environment for the year 2007. These included return on assets (ROA), return on capital employed (ROCE), total shareholder’s return (TSR), return on equity (ROE), return on investment (ROI), economic value added (EVA) and earnings per share (EPS).

In the 2007 Board performance review, it was found that the directors have made strong contributions to the Board. Directors scored well on areas such as commitment, industry awareness, providing valuable inputs, knowledge and understanding of fi nance and accounts, risk management, meeting preparation and raising insightful issues. The NRC also took note of the continued in-depth and open discussions at Board and Board Committee meetings. In addition to the above, the NRC assessed the performance of the CEO, Mr Koh Ban Heng, for the fi nancial year 2007 according to the performance criteria approved by the NRC earlier in the year. The NRC feedback on Mr Koh’s performance was considered against the backdrop of the business environment of 2007 before deciding on the variable component in his remuneration.



More information on the remuneration of Mr Koh and other key executives is on page 49.

Access to InformationPrinciple 6SPC’s management updated the Board regularly on the Group’s business and performance through fi nancial and other reports. Such updates and reports covered background and explanatory notes and included disclosure statements, documents, budgets and forecasts.

The Board was kept abreast of strategic business developments concerning the SPC Group at its quarterly meetings by the CEO and senior management. The information provided contained important business developments, signifi cant investments/divestments and projects including reports on fi nancial performance and other performance indicators. Directors had affi rmed in the 2007 Board performance evaluation that timely, clear, concise and pertinent information concerning the Board agenda items had consistently been provided to directors.

The reports were also intended to keep directors advised of key concerns and issues affecting the oil and gas industry including the challenges faced by and opportunities open to the SPC Group. Such information aided the Board in making informed, sound and appropriate decisions.

Board and Board Committee papers were sent to directors approximately seven days prior to the meetings for their review. SPC’s management was invited to attend and present their papers/updates at Board meetings and to discuss issues which the directors raised. Directors have access to management and briefi ngs or informal discussions on the Group’s operations and business.

In addition, the Board has separate and independent access to senior management including the Company Secretary, who attended all the scheduled Board meetings in the year 2007. The Company Secretary is also secretary to the ExCo and the NRC.

The Company Secretary has the responsibility to ensure that Board procedures are followed, that applicable rules and regulations established by the Board and Board Committees are complied with. The Board and Board Committees acknowledged in the 2007 Board performance review that there were good information fl ows within the Board, Board Committees and management. Directors were also invited from time to time to attend seminars pertaining to corporate governance and strategic business affairs.

On company matters, consistent with the delegation of authority of the Board, directors have the discretion, whether as a group or individually, to obtain or require independent professional advice. The NRC has sought professional advice from independent legal, fi nancial and audit consultants on various issues.

REMUNERATION MATTERSProcedures for Developing Remuneration PoliciesPrinciple 7

Level and Mix of RemunerationPrinciple 8

Disclosure on RemunerationPrinciple 9SPC’s Remuneration PolicySPC’s remuneration policy is focused on driving the Company’s workforce towards performance excellence for ongoing creation and enhancement of stakeholder value. It is anchored by key guiding principles of attracting, motivating and retaining high potential and high performing individuals as well as aligning employees’ interests with those of the Company’s stakeholders.




Role of NRC in SPC’s Remuneration PolicyThe NRC is responsible for determining SPC’s remuneration policy on executive remuneration and for setting the remuneration packages for individual directors and senior management. The committee undertakes a critical role in ensuring that the remuneration and pay compositions for individual directors and senior management are competitive and refl ect the varying degree of roles and contributions. In the spirit of good corporate governance, the NRC engaged an independent consultant in 2007 to undertake a review on the competitiveness of the remuneration package for the Company’s directors relative to related industry and companies with comparable market capitalisation. The NRC reviewed the consultant’s report and decided to retain the Company’s current remuneration structure for directors.

The NRC leverages the Group’s performance and assessment review to determine the performance reward for the CEO and senior management. The committee periodically engages external

consultants to advise and recommend the latest trends and best practices in executive remuneration philosophy. SPC’s management, in consultation with the NRC, plans and introduces new measures to the Company’s remuneration practices to enhance its competitiveness in attracting, motivating and retaining talent, and aligning employees’ interest to that of the Company’s stakeholders.

The NRC, in addition to its principal functions, also reviews appointments, promotions and succession plans of senior management. The NRC also reviews and endorses SPC management’s development plans of the Company’s high potential individuals. This is to ensure that the Company has a readily available pool of talents for future leadership renewal to ensure continued success of the Group.

Remuneration of Non-Executive DirectorsNon-executive directors do not have any service contracts with the Company. Their terms of appointment are governed by the Company’s Articles of Association and the requirements of the Listing Manual.

Table 4 Directors/Board Committees’ Fees*

Name 2007# 2006

Choo Chiau Beng 58,000 58,000

Koh Ban Heng∏ – –

Bertie Cheng Shao Shiong 38,000 38,000

Geoffrey John King 32,000 32,000

Timothy Ong Teck Mong 20,000 20,000

Chin Wei-Li, Audrey Marie 38,000 38,000

Goon Kok-Loon 32,000 32,000

Teo Soon Hoe 20,000 20,000

Cheng Hong Kok 26,000 26,000

Total 264,000 264,000

* Excludes share options and awards under the Restricted Share Plan which are disclosed in the Directors’ Report. # The total fee (rounded to the nearest thousand) is subject to shareholders’ approval at the AGM for the fi nancial year 2007.∏ The Executive Director is compensated in his executive compensation package.

Note: The proposed basic director’s fee is $20,000 per annum same as in 2006.

The policy is supported by the Company’s performance review and assessment programme. This programme provides a platform for the Company and its employees to set performance goals and targets at corporate, Group and individual levels; identify strengths and weaknesses of processes and capabilities as well as establish initiatives to address competency gaps. Goals and targets are set using the balanced scorecard (BSC) matrix comprising fi nancial imperatives, customer service values, internal processes and human resource capabilities. Managers and their respective group leaders meet regularly to discuss progress status and action plans towards achieving their performance goals and targets as well as setting directions for enhancements and modifi cations of business and corporate processes, models, and practices to keep pace with challenges in the market place. This will conclude in a formal year-end performance assessment for each employee across all levels. The performance ratings are built into the performance incentive matrix for consideration by the Company’s senior management for performance rewards purposes.



Non-executive directors are paid an annual basic retainer fee with additional fees for serving on Board Committees. They are participants in the Restricted Share Plan (RSP) of the Company. Non-executive directors are required to hold the awarded shares for three years or the duration of their term as Board members, whichever is shorter.

A breakdown, showing each director’s fee proposed for the year 2007 is in Table 4. The table also refl ects the fees paid to directors for the year 2006.

The CEO, Mr Koh Ban Heng, also an Executive Director, is remunerated as a member of management and does not receive director’s fees.

There is no employee in the SPC Group who is an immediate family member of a director on the SPC Board, or CEO, and whose remuneration exceeded $150,000 during the year.

Details of awards of share options and shares under the SPC Share Option Scheme 2000 (the Scheme) and the RSP and Performance Share Plan (PSP) (collectively, the Share Plans) to the CEO/Executive Director and non-executive directors are described in the Directors’ Report to the Financial Statements. The Scheme was suspended in 2004 with the launch of the RSP and PSP schemes.

Remuneration of Key ExecutivesThe NRC applies a stringent performance focused remuneration philosophy to the remuneration for key executives. The remuneration package for each fi nancial year varies and is largely governed by the extent to which performance targets of the Group are achieved. In essence, it comprises the fi xed and variable performance based components. This same principle is also applied across all levels of employees.

The fi xed component is made up of the base salary and the annual wage supplement of one month salary. The variable performance based component is made up of an annual performance bonus and share grants. The awards of

Table 5 Remuneration of Key Executives for the year ended 31 December 2007

Variable or Performance Restricted/Remuneration Band & Base/Fixed Related Income/ Share Options PerformanceName of Key Executive Salary Bonuses in 2007 § Share Plan* (%) (%) (%)

$2,500,000 to $2,749,999Koh Ban Heng 22 30 0 48

$1,250,000 to $1,499,999 Jee-Theng Tony Tan 31 29 0 40

$1,000,000 to $1,249,999 Lee Chiang Huat 28 26 0 46Chris Keong Poh Guan 28 25 0 46Woo Siew Cheng 28 25 0 47Helen Chong (nee Chia Foong Lan) 27 23 0 50

$500,000 to $749,999 Foo Jang See 22 30 0 48

§ In 2007, no share options were issued and vested pursuant to the Scheme.

* 2004 RSP awards – 1st tranche released in 2005, 2nd tranche in 2006 and 3rd tranche in 2007. Share valued at $4.20 on contingent award date.

2005 RSP awards – 1st tranche released in 2006, 2nd tranche in 2007 and 3rd tranche vests in 2008. Share valued at $5.75 on contingent award date.

2006 RSP awards – 1st tranche released in 2007, 2nd tranche vests in 2008 and 3rd tranche is scheduled to be vested in 2009. Share valued at $5.00 on contingent award date.

2007 RSP awards – 1st tranche released and vests in 2008, 2nd tranche is scheduled to be vested in 2009 and 3rd tranche in 2010. Share valued at $5.75.

2004 PSP contingent award – Vesting of the performance shares subject to achievement of pre-determined performance targets for the 3-year cycle (2004 – 2006). Vested in 2007. Share valued at $3.70 on contingent award date.

2005 PSP contingent award – Vesting of the performance shares subject to achievement of pre-determined performance targets for the 3-year cycle (2005 – 2007). Shares vest in 2008. Share valued at $4.98 on contingent award date.

2006 PSP contingent award – Vesting of the performance shares subject to achievement of pre-determined performance targets for the 3-year cycle (2006 – 2008). Shares are scheduled to be vested in 2009. Share valued at $5.00 on contingent award date.

2007 PSP contingent award – Vesting of the performance shares subject to achievement of pre-determined performance targets for the 3-year cycle (2007 – 2009). Shares are scheduled to be vested in 2010. Share valued at $5.75 on contingent award date.




these variable incentives are based on the extent of the corporate and individual performance achievements relative to pre-determined goals.

The level and mix of remuneration of key executives is disclosed in Table 5.

SPC Annual Performance Bonus, RSP and PSPSPC’s success in motivating employees and inculcating a mindset of engagement and ownership is largely attributed to the short-term, annual performance bonus and long-term share ownership incentive schemes adopted by the Company.

The annual performance bonus is intended to motivate employees to consistently deliver high levels of performance. Bonus payouts to employees are based on corporate and individual performance relative to the achievement of performance targets set at the start and during the course of the year. The performance incentive awards are managed and moderated at the corporate level by the CEO and members of senior management.

The RSP serves to encourage a culture of ownership and engagement amongst SPC employees. They are

awarded contingent restricted shares linked to corporate targets for PATMI and ROCE approved by NRC. The release of an award is determined by the extent to which the targets for these measures have been achieved and the contributions and performance of the individual in achieving these targets. The award is vested annually over a period of three years beginning in the year in which it is released.

The PSP is a long-term incentive to motivate and drive the CEO and key executives to grow the Company to the next performance level. As members of the Company’s management team, they are challenged to apply their leadership and business capabilities to grow and strengthen the Company’s fi nancial performance. The PSP awards are based on pre-determined performance targets, covering a three-year period, set on several fi nancial performance measures. For the 2007 PSP awards, the measures were weighted on the EVA spread, average EPS and absolute TSR as a multiple of Cost of Equity for the performance period of 2007 to 2009. The PSP awards would be determined by the extent to which the targets for the measures are achieved. The performance share awards would be confi rmed by

the NRC and would vest in the year immediately following the end of the performance period.

In line with the ownership philosophy, the CEO and key executives are required to hold a signifi cant percentage, ranging from 30% to 50% of the total PSP and RSP awards vested during their tenure with the Company, based on seniority.

The number of new shares to be issued under the Share Plans and the Scheme is subject to the existing maximum limit of 15% of the Company’s total issued share capital, as approved by shareholders.

The Share Plans were approved by shareholders on 27 April 2004 and will be in force for a period of up to 10 years unless extended for further periods with the approval of shareholders at a general meeting and subject to any other relevant approvals that may be required.

In February 2007, 1,047,600 shares were vested in tranches pursuant to the Company’s RSP awards in consideration of performance for 2004, 2005 and 2006. There were also 560,400 shares vested pursuant to the Company’s PSP awards in consideration for the

Table 6 RSP and PSP awards for employees vested in the year ended 31 December 2007

Remaining RemainingType of RSP/PSP For performance Tranche of No. of tranche of shares No. of sharesawards for employees in year shares vested shares vested* to be vested to be vested To vest

2004 RSP 2004 3rd (Final) 363,600 – – – 2005 RSP 2005 2nd 429,000 3rd (Final) 408,600 2008 2006 RSP 2006 1st 255,000 2nd and 3rd (Final) 479,200 2008 & 2009 1,047,600 887,800

2004 PSP 2004 – 2006 – 560,400 – – –

* Approximate representation of the Company’s issued share capital as at 31 December 2007: {based on 514,708,357 shares after deducting 1,598,000 treasury shares, i.e. 516,306,357 – 1,598,000 = 514,708,357}

2004 RSP = 0.0706%2005 RSP = 0.0833%2006 RSP = 0.0495%

2004 PSP = 0.1089%



performance period of 2004 to 2006. The Company applied treasury shares from its 2006 share buyback exercise to satisfy the RSP and PSP share awards vested in February 2007. Details of the share awards vested are disclosed in Table 6.

In 2007, the Company acquired 1,412,000 SPC shares from the market under its share buyback mandate for purposes of Share Plan awards in 2008.

A total of 51,300 share awards lapsed in 2007 due to attrition.

Details of awards under the Share Plans for the fi nancial year ended 31 December 2007 are described in Note 30(c) of the Notes to the Financial Statements.

Share Options SchemeThe grants of share options under the Scheme to employees have also been based on the individual’s BSC and competency ratings. No share options were granted to employees in 2007, as grants were suspended in 2004, in favour of RSP and PSP Share awards.

The Scheme was approved by shareholders of the Company on 16 May 2000 and will be in force for a period up to 10 years unless extended for further periods with the approval of shareholders at a general meeting and subject to any other relevant approvals that may be required. An option granted under the Scheme may, except in certain special circumstances, be exercised at any time after a vesting period of two years but no later than the expiry date. Options granted under the Scheme were made to all eligible employees of the SPC Group.

At the end of 2007, there were 351,000 options outstanding, details of which are shown in Note 30(b) of the Financial Statements. None of the employees and non-executive directors received 5% or more of the total number of share options available under the Scheme.

SPC Online Share Option and Share Plan SystemThe SPC Online Share Option and Share Plan System (System) has been effective in helping the Company to administer its share awards. In year 2007, the Company together with the System’s external developers, reviewed and enhanced the System’s capabilities to facilitate participants’ access and execution as well as tracking and reporting of Share Plans data.

ACCOUNTABILITY AND AUDITAccountabilityPrinciple 10The Board is committed to present a balanced and understandable assessment of the Company’s performance, position and prospects in order to inform and engage its stakeholders. The Board’s review of the Company’s quarterly, half-yearly and full year fi nancial results and its presentation is an integral part of its Board meetings and undergoes full review and discussion before fi nal approval and release.

The Company issues timely and balanced fi nancial information and announcements of important transactions to its shareholders via SGX-ST’s SGXNet to facilitate transparency and the building of greater trust and confi dence in the Company.

The Company continued to report quarterly fi nancial results in the year 2007. These results are available on the Company’s corporate website. Information on new initiatives of the SPC Group is disseminated via SGXNet and news releases.

Audit CommitteePrinciple 11The AC assists the Board through reviewing and recommending the release of the quarterly SPC fi nancial statements. It is vested with the authority to investigate matters with or without management’s knowledge including matters of impropriety in fi nancial reporting or other company related issues.




to report suspected reportable conduct including a direct channel to the General Manager, Internal Audit and/or the AC chairperson. This policy is intended to facilitate the reporting in good faith by employees and relevant external parties of suspected reportable conduct while maintaining confi dentiality of the information and the identities of the persons involved in resultant reviews. It also aims to protect, to the extent reasonably practicable, the whistleblower and persons involved in reviews initiated under this policy, against reprisals. This policy forms part of the SPC Code of Conduct.

The AC maintains open lines of communication among the Board members, management, the Company’s internal and external auditors, to exchange views and information as well as to affi rm their respective roles and responsibilities.

The AC is supported in its functions by the internal and external auditors. During the year, the AC reviewed the SPC Group’s Interested Person Transactions

(IPT) and quarterly, half-yearly and full year fi nancial statements.

SPC believes a periodic rotation of external auditors will serve to further enhance its corporate transparency while providing a fresh perspective in the review of the Company fi nancial statements and systems of internal control.

In selecting the external auditors for 2007, the AC evaluated four international accounting fi rms on the basis of pre-determined criteria and selected Deloitte & Touche. Pursuant to the requirements of the Code, the AC reviewed the non-audit services provided by the external auditors, Messrs Deloitte & Touche during 2007, and had received confi rmation of their independence. The AC was satisfi ed with the independence and the objectivity of the external auditors and had recommended to the Board their re-appointment as external auditors for the year 2008, at a fee to be determined at a later date.

AUDIT COMMITTEE

The AC comprises four independent directors, Dr Chin Wei-Li, Audrey Marie (chairperson), Messrs Bertie Cheng Shao Shiong, Geoffrey John King and Goon Kok-Loon. Effective 30 January 2008, as part of a rotational change, the Board appointed Goon Kok-Loon as the new chairman. The AC’s principal functions are summarised as follows:

(1) Reviews and ensures compliance with the requirements of the Listing Manual pertaining to the AC’s functions.(2) Follows the guidelines set out in the Code when performing its duties and responsibilities, wherever possible.(3) Reviews Interested Person Transactions.(4) Reviews reports received pursuant to the provisions of the SPC Whistleblower Policy and undertakes the proceedings

as prescribed. (5) Reviews with the internal and external auditors their respective audit plans, scope, reports, fi ndings and actions taken

by management.(6) Serves as an independent party to review the fi nancial statements presented by management to shareholders, regulators

and the general public.(7) Reviews the independence of the external auditors annually and recommends the appointment and remuneration of the

external auditors.(8) Maintains, by holding regular meetings, open lines of communication with the Board, the internal and external auditors to

exchange views and information as well as to affi rm their respective roles and responsibilities.(9) Investigates any matter within its terms of reference, with full access to and co-operation by management and full discretion

to invite any director or executive offi cer to attend its meetings, and reasonable resources to enable it to discharge its functions properly.

The AC reviews and ensures compliance with the requirements of the Listing Manual which pertains to the AC’s functions and follows the guidelines set out in the Code when performing its duties and responsibilities.

The AC meets four times annually and holds additional meetings when required, in order to assist the Board to fulfi ll its fi duciary and statutory responsibilities relating to fi nancial management and corporate accountability to the shareholders of SPC. The AC communicates through electronic methods in addition to their meetings. The Board has found the AC to possess the appropriate skills and qualifi cations to discharge its responsibilities. The members of the AC have fi nancial, accounting, business and legal backgrounds to fulfi ll their function and responsibilities. The AC met fi ve times in 2007.

The Company had in 2005, established a Whistleblower Policy for the SPC Group which provides whistleblowers with clearly defi ned channels and processes



The AC reviewed the external auditor’s 2007 statutory audit plan, scope, fi ndings and management’s responses to the fi ndings. It also reviewed the internal audit plans and the quarterly internal audit summary reports and ensured the adequacy of the internal audit function.

At year end, the AC met with the external and internal auditors without the presence of management, to discuss amongst other issues, the SPC Group’s internal controls. Internal controls include the Company’s system of fi nancial, operational and compliance controls established by the management. The external and internal auditors reported that the Group’s overall system of internal controls and procedures were functioning effectively.

Save as disclosed in the Notes to the Financial Statements on IPT, there were no material contracts involving the interests of the CEO, each director or the controlling shareholders and their subsidiaries.

Management reported that the methods and procedures for determining IPT had not changed since the date of the last AGM, at which time the shareholders’ mandate for IPT was last renewed. Management accordingly recommended that the Company not appoint an independent fi nancial advisor to review the IPT methods and procedures. Pursuant to the provisions under SGX-ST Listing Rule 920(1), the AC concurred with management’s recommendations.

Internal ControlsPrinciple 12The Company believes that the SPC Group’s framework of internal fi nancial controls, operational compliance controls and risk management policies are reasonable and well placed within a steadfast control environment to meet the needs of its operational requirements.

The SPC Group has a clearly delineated operating structure based

upon its delegations of authority and reporting structures, codes of conduct and other documented procedures in place that cover management accounting, fi nancial reporting, information technology systems security, project appraisal and business risk management.

The control systems in place are intended to provide reasonable assurance with regard to the safeguarding of assets, maintenance of proper accounting records, reliability of fi nancial information, compliance with applicable legislation, regulations and sound management of business risks.

The Company’s internal and external auditors conducted their 2007 review in accordance with their respective audit plans on the effectiveness of the Company’s system of internal controls including fi nancial, operational and compliance controls. Audit fi ndings, recommendations and actions taken by management on the recommendations were reported to the AC.

Based on the reviews performed by the internal and external auditors during the fi nancial year, the AC is of the opinion that there are adequate internal controls in the SPC Group.

Internal AuditPrinciple 13The Company has an Internal Audit Department (IAD) headed by the General Manager, Internal Audit. The General Manager, Internal Audit, reports directly to the chairperson of the AC on audit matters and to the CEO on administrative matters.

During the year, the IAD conducted its audit reviews based on the approved internal audit plans. Upon completion of each audit assignment, the IAD reported its fi ndings and recommendations to management who would respond on the actions to be taken. The IAD submitted quarterly internal audit summary reports to the AC on the status of the audit plan

and on audit fi ndings and actions taken by management on the fi ndings. The IAD reported that the Group’s overall system of internal controls and procedures functioned effectively during the year under review.

The IAD is a member of the Singapore branch of the Institute of Internal Auditors Inc (IIA), which has its headquarters in the United States. The IAD is guided by the Standards for Professional Practice of Internal Auditing developed by the IIA.

The AC annually reviews the adequacy of the internal audit function and is of the view that it is adequately resourced. The AC is also of the view that the internal audit function is of appropriate standing within the Company and continue to maintain its independence during the year under review.

COMMUNICATION WITH SHAREHOLDERSRegular, Effective and Fair Communication with ShareholdersPrinciple 14The SPC Group is committed to providing regular, effective and fair communication with its shareholders and the investing public. To this end, the SPC investor relations and communications unit actively plans, manages and handles communications with all stakeholders.

Disclosure of information by the SPC Group is made through communication channels such as corporate announcements via the SGX-ST’s SGXNet broadcast network, the publication of the Annual Report and circulars to shareholders and the holding of shareholders’ meetings including the AGM. In addition, SPC publishes the Group’s corporate announcements and publications on its corporate website to ensure that the latest corporate information is available to all interested persons.

All results, corporate announcements and shareholder reports are issued




portfolio, through corporate updates and information dissemination forums including SIAS Corporate Profi le Seminar. The SIAS’ programme successfully enabled SPC to elevate its corporate profi le among retail investors during the year.

Apart from the issuance of corporate updates and meetings held as part of its proactive communications platform with shareholders, SPC’s investor relations team is contactable by electronic mail or telephone to provide clarifi cations on corporate information in the public domain with due consideration to SGX-ST’s rules on fair disclosure and ensuring a level playing fi eld for investors. In 2007, SPC re-designed its corporate website and created a dedicated “Investor Centre” section to cater to the information needs of the investing public. Designed to ensure that investors and the interested public have good and regular access to information, the Investor Centre serves as a one-stop web-based communication centre complete with corporate press releases, annual reports, fi nancial calendar, corporate directory and corporate governance guidelines. SPC’s share price information is also provided here, with share price information and related security information displayed via a live data-feed from SGX-ST.

SPC recognises the importance of sound corporate governance in creating long-term stakeholder value. Emphasis on high corporate governance standards has been a key pillar in enhancing the status and position of the SPC Group in Singapore and internationally. Greater Shareholder ParticipationPrinciple 15The Company is guided by the provisions of the Code with regard to communication with shareholders.

Shareholders are given timely notice of the Company’s AGM and accordingly, the opportunity to attend or be represented at the Meeting. The Company’s Articles of Association allows a member of the Company to vote in absentia by appointing a proxy to attend and vote on his behalf while the Singapore Companies Act provides a corporate shareholder with the option to appoint a corporate representative to attend and vote on its behalf.

Each year, the Chairman presides over the AGM and is accompanied by fellow Board members, the CEO, the CFO, the Company Secretary, the Internal Auditor and other key executives. The external auditors, Messrs Deloitte & Touche are also present to address queries from the shareholders. The chairpersons of the AC and NRC have consistently been present at the AGMs.

At the Meeting, the Chairman discusses the progress and performance of the SPC Group and encourages meaningful and effective shareholders participation. Directors and management also endeavour to address all issues raised.

The Company adopts separate resolutions on each distinct issue presented to shareholders and voting is taken systematically with proper recording of the votes cast and the resolutions adopted. The Company’s practice is consistent with the Code’s recommendation that companies avoid “bundling” resolutions unless the resolutions are interdependent and linked so as to form one signifi cant proposal.

Minutes of general meetings of the Company are available to shareholders upon their requests as provided under the Companies Act.

Over the past years, SPC has witnessed an increase in attendance at its AGMs. In 2007, a total of 293 voting shareholders and proxies attended the meeting.

promptly and within the prescribed periods. In addition to the issue of the Notice of AGM together with the Annual Report, the Notice is also advertised in a major local newspaper and posted on the Company’s website.

In the spirit of corporate transparency, SPC voluntarily issues SGXNet announcements of signifi cant transactions, notwithstanding that some of these transactions may not require disclosure. These voluntary efforts are in line with the Company’s commitment to engage in open and fair communication with its stakeholders.

Apart from open and fair communication, SPC provides investors, both institutional and retail, with clear, balanced and useful information to aid them in their investment decisions. Specifi c to corporate development updates and direction, the Company furnishes project details, essential background information including future activities and plans. SPC’s fi nancial statements are accompanied by analyses of business performances, discussions of prevailing operating conditions as well as outlook for the year.

SPC has a proactive investor relations programme to foster rapport with analysts, fund managers and the investing community. The CEO, Chief Financial Offi cer (CFO) and the investor relations team conduct regular meetings and conference calls with analysts and investors, local and overseas, and participates in conferences organised by brokerage fi rms.

Actively engaging its retail investors as well, 2007 saw SPC partnering with SIAS in its Shareholder Communication Services Programme. This Programme is aimed at equipping retail investors with essential investment insights and skills to better manage their investment



Since its implementation in January 2007, the share registry analysis has been benefi cial in providing insight to the shareholding spread, shareholders’ investing styles and the basis of their support for SPC shares. The analysis may also highlight the investment portfolio, holding strength, value growth priorities and other investment concerns of the existing shareholders. With an appreciation of its shareholders, the Company is thus in a better position to meaningfully engage them in various forums including the forthcoming AGM. The Company has not implemented the suggestion in the Code that the Company allows absentia voting methods and proxies for shareholders who use nominee companies. The Company has to be confi dent that the integrity of any system catering for their use is assured.

OTHER CORPORATE GOVERNANCE MATTERSDealing in SecuritiesIn keeping with high standards of corporate governance, the Group has adopted the SGX-ST’s best practices guide with regard to dealings in the securities of the Company.

Directors and employees are advised not to deal in SPC’s securities during the period commencing two weeks before the SPC Group’s quarterly and half-yearly results and one month before the announcement of the SPC Group’s full year results and ending on the date of the announcement. Furthermore, when the Company is involved in major corporate activities such as investment or divestment that could be price-sensitive in relation to the Company’s securities, offi cers involved are advised not to deal in the Company’s securities.

Code of Conduct and PracticesSPC recognises the importance of fairness, integrity and professionalism in the conduct of its business activities. It has entrenched these values in the SPC Code of Conduct.

Employees are expected to embrace and practise these values in their everyday conduct especially with customers, suppliers and the public.

Employees are to act in the best interest of the SPC Group and avoid situations that may present a potential confl ict of their interests.

The policy also addresses the issues of dealings in securities, insider trading and compliance with the relevant legislations. Directors and employees are regularly reminded to observe best conduct practices, particularly in securities trading.


ENTERPRISE RISK MANAGEMENT

Enterprise Risk Management

A sound Enterprise Risk Management framework enables the Group to build value, deliver more and grow.

ENTERPRISE RISK MANAGEMENTA sound Enterprise Risk Management (ERM) framework enables the Group to build value, deliver more and grow while mitigating the associated risks and uncertainties appropriately.

Integral to the downstream refi ning business, SPC is involved in the sourcing and purchasing of crude oil, and the trading and marketing of refi ned petroleum products to intermediaries and end users. In addition, to deliver greater value and sustain growth, SPC has expanded its E&P activities. Consequently, SPC is exposed to a myriad of risks. Such risks need to be managed without unduly affecting the Group’s profi tability.

In 2007, as part of SPC’s continued enterprise risk review, the Company engaged an external consultant to review

the adequacy of the SPC ERM framework and to identify new risk elements. This exercise is expected to be completed by the fi rst quarter of 2008.

ENTERPRISE RISK MANAGEMENT COMMITTEE (ERMC)The ERMC is chaired by the CEO and comprises heads of business and service units. This Committee meets at least once a quarter to review risk issues. ERM is an integral part of the Company’s corporate governance framework and is essential to the Company’s decision-making process. The framework ensures that there is a process in place for the Group to review and identify risks, and to then mitigate these risks appropriately. Four ERMC meetings were held in 2007 to discuss pertinent issues relating to the Group’s enterprise risks. In particular, volatility of oil prices and refi ning

(1) Identify, measure and monitor the enterprise-wide risks profi le of the Company

(2) Identify risk mitigation efforts, their costs, and mitigate risk appropriately

(3) Report to the Exco the residual risk ofthe Company

(4) Recommend/advise the ExCo, on the appropriate risk parameters within which the Company should operate

(5) Monitor the implementation of ExCo’s decisions on the mitigation efforts and risk parameters

THE ERMC’S PRINCIPAL FUNCTIONS


margins, and the expansion of the E&P portfi lio have altered the Group’s risk profi le. The Group’s risk profi le and mitigation actions were accordingly reviewed and revised. Top risks were identifi ed in terms of probability of occurrence and fi nancial impact, both before and after mitigation.

In January 2008, the Board established a new Board Risk Committee that will have oversight of risk management in the Group. Dr Audrey Chin was appointed Chairman of this Board Committee with Geoffrey John King and Cheng Hong Kok being appointed members.

ENVIRONMENTAL, HEALTH, SAFETY AND SECURITY (EHSS) COMMITTEEThe EHSS Committee reports its activities to the ERMC quarterly. Information concerning EHSS issues, incidents, legislation, activities and performance are discussed and guidelines provided.

(see EHSS on page 58)

MARKET RISK STEERING COMMITTEE (MRSC)A Mark to Market Committee (MTMC), reporting directly to the CEO was formed in 2001 to monitor the price risks inherent in trading and hedging activities. In 2005, the MTMC reported to the ERMC.

In 2007, the MTMC was renamed the Market Risk Steering Committee to refl ect a wider role to review the Group’s market risks including the price risks associated with the expanded E&P portfolio.

Enterprise Risk Management

The MRSC ensures these activities are in compliance with SPC’s risk appetite, policies and procedures. The objectives of MRSC are:

a. Review the market price risk exposure of sales, purchases, trading and inventory activities of the Group. This review includes but is not limited to the review of mark to market reports, market outlook, price volatility, volumetric exposure as well as portfolio stress testing and possible remedial actions.

b. Oversee the establishment of effective controls and the reporting of these risk exposure activities. This includes the appraisal of policies, procedures and processes, evaluation of the methodologies and valuation models and the implementation of adopted recommendations of the MRSC.

c. Ascertain compliance and adherence to established policies, procedures and processes.

d. Promote an open dialogue culture where any risk exposure activities are identifi ed and discussed among its members.

e. Review any other matters, as and when deemed necessary, which will impact the market valuation of the Group’s activities.


ENVIRONMENT, HEALTH, SAFETY & SECURITY

Environment, Health, Safety & Security

EHSS issues and concerns are integral to SPC’s growth and development plans.



As an integrated oil and gas company, SPC has developed an Environment, Health, Safety and Security (EHSS) policy that sets the direction for achieving its business goals in a safe, secure and environmentally sustainable manner.

ENVIRONMENTEfforts to improve and sustain the environment remains foremost in the planning and operational practices of SPC. The company participates actively in industry efforts. SPC has developed best practices in EHSS that incorporate stringent administrative, engineering controls and standards. Embedded in such practices is a heightened awareness of the environment, local regulatory requirements and strict compliance.

SPC and its associated company, SRC, are members of the Oil Industry Environment Steering Committee (OIESC). OIESC has been collaborating with the Ministry of the Environment and Water Resources to address various environmental challenges faced by the oil industry. This includes greenhouse gas emissions through the Singapore Green Plan Air and Climate Change Focus Group.

SPC participates in and has access to oil spill response resources both locally and internationally. These resources will allow SPC to respond quickly to manage and mitigate any impact to the environment should incidents occur.

CLEAN FUELSSPC’s plans to offer clean fuels underscore its commitment to the environment. Through SRC, SPC is currently investing to increase production of diesel that meets the sulphur specifi cations of the Euro-IV standard. The project is scheduled to come onstream in 2009. SRC is also evaluatinga clean fuel gasoline desulphurisation project which will enhance its capability to produce Euro-IV gasoline.

Since February 2008, SPC has retailed CNG at its Jalan Buroh service station. CNG emits less particulates and emissions, thereby contributing to a cleaner environment.

ENERGY EFFICIENCYSPC works closely with its business partners to implement projects that improve energy effi ciency, recovery and conservation. This includes a joint effort via SRC to conserve work fuel through several initiatives such as the installation of energy-effi cient heating equipment.

HEALTH AND SAFETYSPC’s track record attests to a safety culture that has been embraced by all levels within the organisation. In 2007, SPC employees achieved two million man-hours without any loss time injury.

EMERGENCY RESPONSE AND CRISIS MANAGEMENTSPC regularly conducts emergency response exercises and drills with the authorities at the facility level.

In 2007, SPC began work with a consultant and expert in the fi eld to ensure its crisis management plan would be considered “fi t for purpose” based on the risks and hazards faced in its operating environment. The plan entails regular drills and exercises to ensure the organisation is operating at its optimum effectiveness. The crisis management plan will ensure SPC has the ability to react to emergencies, preserve business continuity, and at the same time, manage and contain environmental, health, safety or security impact.

SECURITYSPC communicates and works closely with various authorities on security- related issues. In 2007, SPC conducted joint security exercises with the Singapore Police Force at Jurong Bulk Plant.


ENVIRONMENT, HEALTH, SAFETY & SECURITY


EHSS IN THE COMMUNITYSPC is supportive of EHSS programmes in the community. In 2007, it sponsored the National Workplace Safety and Health Campaign, a high-profi le and activity-fi lled annual event to promote safety and health at workplaces throughout Singapore. Organised by the Workplace Safety and Health Advisory Committee, in collaboration with the Ministry of Manpower, the campaign was supported by more than 30 organisations, with over 50 talks and workshops held throughout the month of May. SPC actively participated and collaborated with various regulatory

authorities to promote industry EHSS. It was awarded the SCDF Strategic Partners Award by the Singapore Civil Defence Force for its support in promoting emergency preparedness within the community.

CONTINUOUS COMMITMENTThe proactive management of EHSS issues and concerns are integral to SPC’s growth and development plans. Sponsorships and collaborations will also provide important platforms for SPC to lend its support to community-based EHSS programmes.

1



SPC’s EHSS policy commitments are also embodied in SRC.

SRC was the fi rst oil refi nery in ASEAN to be ISO 9002 certifi ed in 1994. The refi nery was awarded the ISO 14001 certifi cation for its environmental management system in 1999 – the fi rst in Singapore’s oil refi ning industry to have an integrated ISO Quality and Environmental management system, covering its entire operations.

ENVIRONMENT SRC complies with all applicable regulations and standards pertaining to emission controls, effl uent standards and waste disposal. It operates a modern waste water treatment plant, and deploys technology and facilities in its manufacturing process for environmental control. It regularly monitors the refi nery’s emissions, including direct and indirect CO2

(carbon dioxide). It adopts a two-pronged approach of leveraging proven technologies and adopting best practices. Environment impact

assessment is a key metric in all project decisions which include due consideration of future developments and requirements beyond current regulatory emission standards. SRC sets targets and strategies to drive environmental performance and improvements as a part of its annual performance measure.

ENERGY EFFICIENCY SPC works closely with SRC to implement projects that improve energy effi ciency, recovery and conservation.

SRC is currently studying energy-effi cient technologies such as Cogeneration, a Combined Heat and Power application to improve power generation effi ciency. A cogeneration plant has higher energy effi ciency compared to conventional power generation systems. The improved effi ciency could translate to savings in operating expenses of about US$10 million a year. Besides the economics, such technologies lead to reduction in greenhouse gas emissions such as CO2 – a positive impact to the environment.

HEALTH AND SAFETY SRC fi rmly believes in the importance of safety excellence for continued business success. It focuses on achieving Injury and Incident Free (IIF) operation and promotes the IIF culture through Behaviour-Based Safety (BBS) and personal accountability. IIF and BBS programmes involve the active participation of employees and contractors. SRC and its contractors work to build safety into their company culture, with an emphasis on minimising workplace injuries.

Manager Safety Tours at SRC is designed to engage ground level staff and senior management to facilitate solutions on safety issues. A system has also been put in place to commend and affi rm employees and contractors who display exemplary safety practices.

SRC has achieved 4.3 million man-hours without any loss time injury as of December 2007, and 1 million man-hours of “no recordable injury” in the year. These milestones affi rm its rigorous safety systems and procedures.

SRC endeavours to achieve world-class safety performance and believes in practising not only occupational safety but also process safety. SRC adopts OSHA (Occupational Safety & Health Administration) standards which set stringent requirements for process safety management aimed at preventing major process-related incidents.

SRC carries out regular third-party audits and other HSEQ (Health, Safety, Environment, Quality) assurance reviews to ensure continued safe operations.

1. All geared up for safety.

2. Nurturing a committed EHSS culture.

2


RESPONSIBLE CORPORATE CITIZENSHIP THROUGH COMMUNITY OUTREACH

Responsible Corporate Citizenship Through Community Outreach

Corporate success is increasingly being measured by socially responsible behaviour. Successful companies today are required to fulfi ll their Corporate Social Responsibilty (CSR) role by demonstrating their commitment through concrete programmes.

SPC conscientiously participates in activities that demonstrates and exemplifi es its commitment to CSR. It actively engages the community through diverse means – cultural, environmental and philanthropical.

ENRICHING CULTURESince its early years, SPC has been an enthusiastic supporter of the Singapore Symphony Orchestra (SSO). Besides sustained support for the SSO’s musician chair, SPC also sponsored its China Tour in 2007 where local musicians performed in fi ve Chinese cities. Other cultural activities that SPC lends its support include the Singapore Chinese Orchestra and the Majlis Pusat Cultural Night.

Going green has become a deep-rooted SPC value.


For its efforts, SPC has consistently been recognised in the Patron of the Arts awards.

CARING FOR NATURESPC is committed to the environment and the conservation of wildlife. It is a long-time Corporate Friend of the Singapore Zoo, and has recently adopted the lion exhibit in keeping with its aspiration to be lion-hearted in both CSR as well as in business.

In July 2007, SPC participated in a six-part documentary series, which was aired over a regional news network. Called Saving Gaia, (“Gaia” means “Earth” in Greek), the programme examined Asia’s efforts to address environmental issues such as global warming and climate change. Members of the public were encouraged to pledge their commitment to protect the earth, during the screening of the documentary. The fi rst 5,000 pledgers each received a SPC biodegradable reusable shopping bag.

To reinforce its green efforts, SPC participated in Save the Earth, a recycling campaign aired on the local media. Leveraging SPC’s retail network, its service stations were designated collection centres for recyclable items such as old newspapers, drink cans and plastic bottles. The collection activity also helped raised funds for the Asian Women’s Welfare Association Special School.

Annually, SPC holds a Green Day where employees and their families do their part for the preservation of nature. Since planting 35 trees in commemoration of its 35th anniversary in 2004, SPC has continued to visit Bukit Timah Nature

1. Chairman Choo Chiau Beng sharing at the Singapore Women’s Association Annual Lunar New Year Lunch for the old folks.

11

Responsible Corporate Citizenship Through Community Outreach

Reserve to prune and upkeep the trees. Going green has become a deep-rooted SPC value.

SHARING WITH OTHERSEmployee volunteerism is a well-supported SPC core value. SPC volunteers participate in activities thatencourage and build community relations. In recent years, the enduring activities that inspire volunteerism include the Down Syndrome Association (Singapore) Charity Bowl, the Singapore Women’s Association Annual Lunar New Year Lunch for the Old Folks, and SPC’s Annual Charity Car Wash. SPC employees have consistently displayed dedication to social work and gave generously to make a difference to the community.

Over the years, SPC has developed an enriching community outreach programme. With CSR becoming increasingly relevant, SPC will continue to strengthen and step up its efforts to be a socially responsible corporate citizen.


HUMAN CAPITAL STRATEGY: MOVING AHEAD

Human Capital Strategy: Moving Ahead

Create and sustain a high performance culture with the goal of delivering more value.



In 2007, SPC continued to build on its human capital strategy to enhance business excellence and competitive advantage, and to deliver more through its people assets. This strategy incorporated four key elements:

• Corporate Cohesion and Alignment

• Talent Building and Development• Leadership Development and

Succession Planning• Performance and

Rewards Alignment

These were pivotal to the Group’s capacity to go beyond and deliver even more value to all stakeholders.

CORPORATE COHESION AND ALIGNMENTThe Company introduced initiatives to strengthen the integration and alignment of its HR strategies to its business needs. Orientation and induction programmes for new employees, town hall meetings, business units’ offsite brainstorming sessions and CEO lunch dialogue sessions provided employees with varied avenues to be updated and opportunities to contribute to the Company’s strategy. These initiatives enabled employees to better align their individual performance to the Group’s vision, strategic goals and business objectives.

In 2007, SPC commenced work on the development of an online employee interactive system. When completed, this system will enable employees to access and update personal particulars, as well as facilitate performance planning, development and assessment reviews.

TALENT BUILDING AND DEVELOPMENTSPC places emphasis on developing employees through a combination of in-house and external learning programmes.

In 2007, the Company’s technical experts from its E&P and RST business units conducted in-house lectures for staff. The lectures provided greater insight into the different business areas, and increased understanding of technical knowledge.

The Company also partnered external training providers to facilitate in-house development programmes for its employees. These programmes focused on equipping employees with best practice skill sets on personal mastery, team-building, business acumen and strategic thinking competencies.

Selected employees were offered overseas development opportunities at the Japan Cooperation Centre for Petroleum. The programmes facilitated experience,

knowledge and cultural exchanges, and allowed participants to build a network of peers from different countries.

SPC is committed to nurturing and deepening the local oil and gas industry talent pool. In 2007, the Company offered two scholarships to the Mechanical Engineering Department of the National University of Singapore to participate in student exchange programmes in Texas A&M University and University of Texas. On completion, these scholars will be offered internships with the E&P business unit. This was the second consecutive year that SPC offered these sponsorships. There are plans to continue working with the local tertiary institutions to build a pool of young petroleum and reservoir engineers.

LEADERSHIP DEVELOPMENT AND SUCCESSION PLANNINGThe Company recognises that nurturing its leaders and future leaders is paramount to sustaining its businesses and competitive excellence.

In 2007, as part of leadership development, a group of leaders enhanced their skills in business modelling, resource management, corporate planning and value creation processes through simulated management of virtual companies. This provided participants with an understanding of


HUMAN CAPITAL STRATEGY: MOVING AHEAD

the key fundamentals in leading and managing successful businesses.

The Company’s development of its potential future leaders was also effected through the rotation of several senior managers to manage different portfolios. These rotations exposed employeesto different business complexities and challenges, thus deepening the leadership and bench strength of the management echelon.

The Leadership Forum, launched in 2006, continued to gain momentum in 2007. Participants were focused on creating and defi ning the framework and core drivers to foster a highly engaged workforce in SPC.

The Company also reviewed its succession plan with the Nominating and Remuneration Committee. High potential staff were identifi ed for further leadership development.

PERFORMANCE AND REWARDS ALIGNMENTThe Company’s performance recognition philosophy and pay-for-performance incentive programmes continued to

motivate employees to strive for higher performance.

The Company’s performance management system was enhanced to enable more effi cient and effective review discussions between employees and their managers. This system will be further enhanced as the Company embarks on the online platform.

EMPLOYEE WELLNESSSPC emphasises the importance of employee engagement. The Company believes that work-life balance programmes enable employees to better manage work goals and family needs.

In 2007, the Company organised events such as the Dinner & Dance, Family Day at the Zoo, a weekend getaway to Phuket, movie treats for employees and family members, salsa dancing and wine appreciation classes to foster greater interaction and camaraderie in the SPC family.

SPC encouraged corporate social responsibility among employees through partnerships with charitable organisations. The Company collaborated

1

1. SPC’s Magical Dinner & Dance Nyte.


with the Singapore Cancer Society and held cancer awareness talks for staff. Employees donated generously to provide fi nancial assistance to needy cancer families and cancer survivors. Employees also sponsored and organised a successful and fun-fi lled weekend outing for 60 cancer patients to Sentosa. SPC also shared Christmas cheer through the Salvation Army donation programme.

SPC initiated and enhanced its HR strategies during the year to build, motivate and retain its people. The Group will continue to create and sustain a high performance culture to take SPC to the next level and deliver more value.


Notes:1. Singapore Petroleum Sampang Ltd (SPS) is a wholly-owned subsidiary

of SPC Production Company Ltd. SPC Production Company Ltd holds 100% in SPS through its two wholly-owned Cayman Islands subsidiaries – SP (Sampang) Ltd and Sampang Holdings Ltd, which each holds a 50% equity interest in SPS.

2. PT. Sumber Prestasi Cemerlang is a wholly-owned subsidiary of Singapore Petroleum Venture Private Limited (SPV). SPV holds 50% directly and the remaining 50% is held by SPV’s wholly-owned subsidiary, Singapore Petroleum (Indonesia) Private Limited.

3. Singapore Petroleum (Thailand) Co., Ltd. is a wholly-owned subsidiary of SPV. SPV holds 99.98% directly and the remaining 0.02% indirectly through its six wholly-owned British Virgin Islands subsidiaries namely Fullca Ltd., Glory Key International Limited, Orient Wise Group Limited, Prime Sea Limited, Straits Management Ltd. and Topwish Investments Ltd. Each of these BVI Companies holds one share (or 0.0033%) in Singapore Petroleum (Thailand) Co., Ltd, aggregating 0.02%.

4. Sino-American Energy Corporation has on, 30 October 2007, been converted into a limited liability company incorporated under the laws of the State of Texas with the new name – Sino-American Energy LLC.

CORPORATE STRUCTURE

Singapore Petroleum Trading Company Limited (Hong Kong)

Changi Airport Fuel Hydrant Installation Pte. Ltd. (Singapore)

SPC Refi ning Company Pte. Ltd. (Singapore)

SPC E&P Pte. Ltd.(Singapore)

Transasia Pipeline CompanyPvt. Ltd. (Mauritius)

Singapore Petroleum Company (Hong Kong) Limited (Hong Kong)

SPC Production Company Ltd (BVI)

Singapore Petroleum Venture Private Limited (Singapore)

Singapore Petroleum Sampang Ltd (Cayman) 1

Singapore Petroleum (China)Private Limited (Singapore)

FST Aviation Services Limited(Hong Kong)

SPC Cambodia Ltd (BVI)

ItalSing Petroleum Company Pte Ltd (Singapore)

Singapore Carbon Dioxide Company Private Limited (Singapore)

SPC Kakap Limited (BVI)

SPC Indo-Pipeline Co. Ltd. (BVI)

SPC Vietnam (Blocks 102/106)Co. Ltd (BVI)

SP (Sampang) Ltd (Cayman)

Sampang Holdings Ltd (Cayman)

Singapore Refi ning Company Private Limited (Singapore)

Tanker Mooring Services Company Private Limited (Singapore)

SP-CYC Venture Pte. Ltd. (Singapore)

SPC Wearnes Pte. Ltd. (Singapore)

Singapore Petroleum (Indonesia) Private Limited (Singapore)

Singapore Petroleum Vietnam Song Hong Co Ltd (BVI)

PT. Solar Premium Central(Indonesia)

SPC Bass Pty Ltd(Australia)

Singapore Petroleum (Guangdong)Private Limited (China)

Singapore Petroleum (Thailand)Co., Ltd. (Thailand) 3

PT. Sumber Prestasi Cemerlang (Indonesia) 2

Corporate Structure

SPC Shipping CompanyLimited (Hong Kong) 100%

12.5%

100%

100%

100%

100%

100%

100%

100%

15%

100%

100%

60%

100%

50%

40%

25%

50%

100%

100%

100%

100%

100%

100%

100%

100%

25%

50%

50%

SPC E&P (China) Pte. Ltd.(Singapore) 100% Sino-American Energy LLC

(Texas, USA) 4 100%

SINGAPORE PETROLEUM COMPANY LIMITED

50%

50%

50%

50%

Subsidiary companyAssociated/joint venture companiesAffi liated companies


Location Tenure Area (sq m) Description

41 Jalan Buroh Singapore 619488 Leasehold (23 years unexpired) 37,020.00 Bulk Storage Plant

52 Penjuru Road (Lot A13794) Singapore 600000 Leasehold (16 years unexpired) 3,969.00 Barge Ramp Facilities

Pulau Sebarok Leasehold (12 years unexpired) 75,126.00 Oil Storage Terminal

31 Adam Road Singapore 289896 Leasehold (20 years unexpired) 656.30 Service Station

462 Balestier Road Singapore 329837 Freehold 1,319.50 Service Station

331 Bukit Timah Road Singapore 259717 Freehold 1,449.80 Service Station

337 Changi Road Singapore 419810 Freehold 1,335.40 Service Station

260 Dunearn Road Singapore 299542 Freehold 1,552.80 Service Station

397 Havelock Road Singapore 169630 Leasehold (22 years unexpired) 1,980.70 Service Station

120 Hougang Avenue 2 Singapore 538858 Leasehold (25 years unexpired) 2,256.00 Service Station

3800 Jalan Bukit Merah Singapore 159464 Leasehold (26 years unexpired) 2,367.10 Service Station

1 Jalan Leban Singapore 577546 Freehold 1,343.00 Service Station

100 Jurong West Avenue 1 Singapore 649519 Leasehold (11 years unexpired) 1,774.10 Service Station

132 Killiney Road Singapore 239562 Freehold 752.50 Service Station

429 Macpherson Road Singapore 368140 Freehold 1,360.50 Service Station

710 Mountbatten Road Singapore 437734 Leasehold (21 years unexpired) 1,600.10 Service Station

158 Pasir Panjang Road Singapore 118555 Freehold 1,487.80 Service Station

11 Pasir Ris Drive 4 Singapore 519456 Leasehold (15 years unexpired) 2,020.00 Service Station

264 Queensway Singapore 149062 Leasehold (18 years unexpired) 1,207.80 Service Station

588 Sembawang Road Singapore 758448 Leasehold (999 years tenure) 948.40 Service Station

1 Swanage Road Singapore 437168 Freehold 1,548.10 Service Station

327 Thomson Road Singapore 307673 Freehold 1,296.00 Service Station

180 Toa Payoh Lorong 6 Singapore 319381 Leasehold (27 years unexpired) 2,322.00 Service Station

16 Tuas Road Singapore 637597 Leasehold (23 years unexpired) 2,400.00 Service Station

157 Upper East Coast Road Singapore 455253 Freehold 2,186.10 Service Station

849 Upper Serangoon Road Singapore 534686 Freehold 1,131.50 Service Station

98 Upper Thomson Road Singapore 574330 Freehold 955.80 Service Station

76 Yio Chu Kang Road Singapore 545570 Freehold 958.00 Service Station

599 Yishun Ring Road Singapore 768683 Leasehold (15 years unexpired) 1,993.00 Service Station

100 Punggol Central Singapore 828839 Leasehold (30 years) 1,999.00 Service Station

List of Properties

LIST OF PROPERTIES


statutory report and accounts


financial review

Financial Review

Income Statement ReviewThe achievement of $8.8 billion revenue in 2007 was a record high for the SPC Group. This was an improvement of about $200 million over the previous revenue of $8.6 billion in 2006.

The year saw continuing robust demand from China, India and increasingly from the Middle-East where an investment and construction boom fuelled demand. Global refining capacity remained constrained amid geopolitical tensions and supply uncertainties. Coupled with speculative hedge fund activities global crude and product prices climbed to unprecedented highs. The Group’s total crude and product sales volume was 78.3 million barrels in 2007, marginally lower than the 80.3 million barrels in 2006. Realisations were higher at an average US$74.37 per barrel compared to US$66.69 per barrel for 2006.

The Group’s activities are segmented into Downstream and Exploration & Production (E&P) businesses. With the principal operations headquartered in Singapore, Downstream continued to be the main contributor to the Group and recorded $8.6 billion and $523.2 million respectively in segmental revenue and operating profit. The E&P segment enlarged its footprint into China and Australia during the year. With first oil production from the Indonesian Oyong field and additional production from China’s Bohai fields, E&P segmental revenue increased from $49.2 million in 2006 to $145.1 million in 2007, while the segmental operating profit increased from $14.6 million in 2006 to $52.4 million in 2007. Refer to Note 37 to the Financial Statements for details of the Group’s segment information.

Gross profit of $747.1 million in 2007 was an unprecedented record achievement for the Group, 45.5% higher than the gross profit of $513.6 million in the previous year. Despite the scheduled maintenance of SRC CDU No. 1 during the second quarter, the refinery achieved an overall average utilisation of more than 97%. An average refining margin of about US$7.00 per barrel was achieved for the year. The Group managed to capture high margin sales and trading volumes despite the highly volatile oil market. As oil prices ended higher at the end of the year, the Group was not required to provide for inventory write-down as at year end 2007.

Along with business expansion, the Group maintained effective control over operating expenses amid rising costs. Operations, selling and marketing, as well as general administrative expenses increased 2.9% from 2006 to $194.7 million in 2007. A one-off divestment gain of $17.7 million was also recorded from the disposal of overseas business ventures in the first half-year.

Finance income increased 12.3% from the previous year to $13.4 million due to higher deposits while finance expenses increased 13.3% to $38.6 million due to higher borrowings. The Group’s borrowings were mainly denominated in US dollar on a short-term floating basis to match specific funding requirements which were mainly working capital in nature. With US dollar rates on the down trend and a weakening US dollar, the Group will maintain the bulk of its borrowings in US dollar as a hedge against the weak dollar.

The Group’s share of results of associates and joint ventures totalled $13.5 million in 2007, an improvement over $11.3 million in 2006.

The Group ended the year with a higher profit before tax of $581.4 million, an increase of 71.8% over $338.5 million for the preceding year. Tax expenses were higher on the back of higher pretax profits and also higher taxes for Exploration & Production revenue.

2007 marked the Group’s best performance to date with a record PATMI of $508.3 million. Basic earnings per share improved 78.5% to 98.79 cents. Diluted earnings per share after taking into account the dilution effect of share options under the SPC Share Option Scheme also improved 78.8% to 98.74 cents.

Singapore Petroleum Company Limited Report to Shareholders 2007 71Financial Review

Balance Sheet ReviewThe Group’s total assets increased 37.2% from the previous year to $4.3 billion as at 31 December 2007. The record performance and high oil prices as at year end contributed to the higher cash and bank balances, trade receivables and inventories. Non-current assets also increased with further investments in refining assets and the acquisition of upstream exploration and production acreages.

The Group’s total liabilities of $2.5 billion as at 31 December 2007 comprised mainly higher trade payables and higher short-term borrowings for working capital requirements and investments.

Shareholders equity of $1.8 billion at year-end was 14.0% higher compared to $1.6 billion as at 31 December 2006, due mainly to higher retained earnings. During the year, the Group paid an interim dividend of 20 cents per share amounting to $103.1 million (see Note 33). The Group bought back 1,412,000 ordinary shares and treated these as treasury shares for the SPC Share Plans. As at the end of the year, the Group held 1,598,000 treasury shares out of the issued share capital of 516,306,357 ordinary shares.

As at year end 2007, the Group’s current ratio (current assets over current liabilities) and net gearing ratio (net borrowings over shareholders equity) were 1.17 and 0.20 respectively, compared to 1.36 and 0.01 respectively for the previous year.

Cash Flow ReviewChanges in the cash flow reflected the operating, investing and financing activities of the Group during the financial year. During the year, the Group generated $386.9 million operating cash flow from its strong performance and working capital management of higher trade receivables, trade payables and inventories which were due to the high oil prices. The Group invested $392.8 million in refining and Exploration & Production assets. The financing activities included increased short-term borrowings to fund working capital requirements and investment activities, as well as dividend and interest payments. A Multicurrency Term Note was also established during the year to position the Group for ready access to the capital market when required.


directors’ reportfor the financial year ended 31 december 2007

The directors present their report to the members together with the audited consolidated financial statements of the Group, balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2007.

DirectorsThe directors of the Company in office at the date of this report are as follows:

Choo Chiau Beng, Chairman of the BoardKoh Ban Heng, Chief Executive Officer and Executive Director Bertie Cheng Shao ShiongGeoffrey John KingTimothy Ong Teck Mong Chin Wei-Li, Audrey Marie Goon Kok-Loon Teo Soon HoeCheng Hong Kok

Arrangements to enable directors to acquire shares and debenturesNeither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the directors of the Company to acquire benefits by means of an acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed in the financial statements and under the “Share options” and “Share plans” sections in this report. Shares were issued and vested to directors during the financial year pursuant to the Company’s share plans approved by shareholders at the Extraordinary General Meeting held on 27 April 2004, namely the Singapore Petroleum Company Restricted Share Plan and/or Performance Share Plan.

Directors’ interests in shares or debenturesAccording to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or related corporations, except as follows:

Holdings registered Holdings in which the directorName of directors in the name of the director is deemed to have an interest # At At At At At At 1.1.07 31.12.07 21.1.08 1.1.07 31.12.07 21.1.08

Singapore Petroleum Company Limited (Ordinary shares) Choo Chiau Beng 179,000 282,500 282,500 - - -Koh Ban Heng * 415,200 449,200 449,200 900,000 1,000,000 1,000,000Bertie Cheng Shao Shiong § 116,000 125,500 - - - 125,500Geoffrey John King 69,000 81,000 81,000 - - -Timothy Ong Teck Mong 33,000 38,000 38,000 - - -Chin Wei-Li, Audrey Marie 19,000 28,500 28,500 - - -Goon Kok-Loon 31,000 39,000 39,000 - - -Teo Soon Hoe 10,000 15,000 15,000 - - -Cheng Hong Kok 121,000 87,500 87,500 - - -

(Options to subscribe for ordinary shares) Koh Ban Heng 320,000 - - - - -Geoffrey John King 34,000 - - - - -

# Details of directors’ interest in share options are set out in the “Share options” section below.* Mr Koh Ban Heng is deemed to have an interest of up to an aggregate of 850,000 ordinary shares in SPC comprised outstanding awards granted under the Restricted Share

Plan and Performance Share Plan, and subject to certain pre-determined performance criteria and other terms and conditions being met. These ordinary shares have not been vested as at 31 December 2007. Mr Koh is also deemed to have an interest in 150,000 ordinary shares in SPC, held by his spouse.

§ Mr Bertie Cheng Shao Shiong is deemed to have an interest in 125,500 ordinary shares in SPC held in the name of Hong Leong Finance Nominees Pte Ltd.

Directors’ Report


Directors’ contractual benefitsSince the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except as disclosed in the financial statements and in this report, and except that Mr Koh Ban Heng has an employment relationship with the Company and has received remuneration in that capacity.

Share options(a) SPC Share Option Scheme 2000 (the “Scheme”) The Scheme is administered by the Nominating and Remuneration Committee (the “NRC”) whose members are:

Bertie Cheng Shao Shiong, Chairman Choo Chiau Beng Geoffrey John King Chin Wei-Li, Audrey Marie

There were no options granted during the financial year to subscribe for unissued shares of the Company. Particulars of options granted in 2000, 2001, 2002, 2003 and 2004 were set out in the Directors’ Reports for the respective financial years.

No other options were granted by the Company or any subsidiary during the financial year.

(i) Details of the movement of directors’ share options during the financial year are set out below:

At beginning Granted Exercised Forfeited At end SPC Share Option of the during the during the during the of the Exercise Scheme 2000 financial year financial year financial year financial year financial year price Exercise Period

Chief Executive Officer/ Executive Director Koh Ban Heng 320,000 - (320,000) - - $1.57 5.2.2006 – 3.2.2014 1/2004 Non-Executive Directors Geoffrey John King 34,000 - (34,000) - - $1.57 5.2.2006 – 3.2.2009 1/2004 354,000 - (354,000) - -

(ii) Details of directors’ share options since the commencement of the Scheme up to the end of the financial year are set out below:

Aggregate options Aggregate options Aggregate options granted since exercised since lapsed since Aggregate options

Options commencement commencement commencement outstanding granted of the Scheme of the Scheme of the Scheme as at during the to the end of the to the end of the to the end of the the end of the Name of directors financial year financial year financial year financial year financial year

Koh Ban Heng - 800,000 (800,000) - - Bertie Cheng Shao Shiong - 126,000 (126,000) - - Geoffrey John King - 87,000 (87,000) - - Timothy Ong Teck Mong - 65,000 (65,000) - - Chin Wei-Li, Audrey Marie - 118,000 (118,000) - - Goon Kok-Loon - 15,000 (15,000) - - Cheng Hong Kok - 78,000 (78,000) - - - 1,289,000 (1,289,000) - -

Directors’ Report


Share options (continued)(b) Share options outstanding The number of unissued ordinary shares of the Company under options outstanding at the end of the financial year are as

follows: Number of shares Options relating to SPC under options outstanding Share Option Scheme 2000 at 31.12.2007 Exercise price Expiry date

Senior Management and Employees 2000 18,000 $0.78 27 August 2010 1/2001 18,000 $0.68 16 April 2011 2/2001 20,000 $0.68 18 September 2011 1/2002 19,000 $0.75 2 April 2012 2/2002 29,000 $0.87 29 October 2012 1/2003 144,000 $0.92 16 February 2013 1/2004 103,000 $1.57 3 February 2014

351,000

The above-mentioned options do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.

(c) Other information required by the Singapore Exchange Securities Trading Limited (“SGX-ST”) and the Singapore Companies Act (“Companies Act”)

Pursuant to Rule 852 of the Listing Manual of the SGX-ST and Section 201(12)(a) of the Companies Act, other than as disclosed elsewhere in this report, it is reported that during the financial year:

(i) No options have been granted to controlling shareholders of the Company or their associates.

(ii) No key management or employee has received 5% or more of the total number of options available under the Scheme.

(iii) No director or employee of the Company and its subsidiaries has received 5% or more of the total number of options available to all directors and employees of the Company and its subsidiaries under the Scheme.

(iv) No options were granted at a discount during the financial year.

(v) No shares of the Company were allotted and issued by virtue of the exercise of options to take up unissued shares of the Company or any subsidiary.

Details regarding directors’ interest may be obtained in accordance with Section 164(8) and (9) of the Singapore Companies Act.

Share plans The NRC administers the SPC Restricted Share Plan (“RSP”) and Performance Share Plan (“PSP”) (collectively referred to as the “Share Plans” and each as a “Share Plan”) which were approved by shareholders of the Company on 27 April 2004.

(a) RSP The RSP is part of the Company’s share-based incentive scheme for employees. Contingent restricted shares are intended

to be awarded annually, based on pre-determined corporate targets. After the end of the annual period, the award of the restricted shares will be computed, based on the extent to which the performance targets at the corporate level, the individual’s Key Performance Indicator achievements and competency ratings have been achieved. The other terms and conditions include the prevailing personnel policies, the decisions and guidelines of the NRC and all other relevant factors and circumstances, including the performance record, and relevant laws and regulations. If the performance targets of the stipulated measures are fulfilled at the end of the annual period, generally, the duly determined quantum of shares is expected to vest annually in tranches over a three-year release schedule.

Refer to Note 30(c) of the notes to the financial statements for details on the RSP awards.

directors’ report

Directors’ Report


Share plans (continued)(b) PSP The PSP is part of the Company’s long-term incentive plan for key executives. Contingent performance shares are typically

awarded at the beginning of a three-year performance cycle and the final award will be subjected to the extent to which the performance conditions have been achieved after the end of the relevant cycle. The three-year stretched performance target is aligned to pre-determined performance measures. The other terms and conditions the NRC will take into consideration include not only the extent to which the performance targets have been achieved, but all other relevant factors and circumstances, including relevant regulations prevailing at the time of release of awards under the PSP. Upon review by the NRC the performance conditions being fulfilled after the end of each of the relevant three-year cycles, the duly determined quantum of shares under the PSP would be targeted for release in February of the year following the relevant three-year performance period.

Refer to Note 30(c) of the notes to the financial statements for details on the PSP awards.

Under both Share Plans, participants will receive fully paid shares, their equivalent cash value or combinations thereof, free of charge, provided that pre-determined performance targets, stipulated measures and conditions are met. Under the Share Plans, the NRC has the flexibility to allot and issue and deliver new shares or purchase and deliver existing shares upon vesting of the awards.

Awards to directors under the RSP and PSP

Restricted Share Plan

Award/ Contingent As at beginning Award granted Vested As at of the during the during the Forfeited/ end of theName of Director financial year financial year financial year cancelled financial year

Chief Executive Officer/Executive Director

Koh Ban Heng 300,000 150,000 (125,000) (75,000) 250,000

Non-Executive Directors

Choo Chiau Beng - 14,500 (14,500) - -Bertie Cheng Shao Shiong - 9,500 (9,500) - -Geoffrey John King - 8,000 (8,000) - -Timothy Ong Teck Mong - 5,000 (5,000) - -Chin Wei-Li, Audrey Marie - 9,500 (9,500) - -Goon Kok-Loon - 8,000 (8,000) - -Teo Soon Hoe - 5,000 (5,000) - -Cheng Hong Kok - 6,500 (6,500) - - 300,000 216,000 (191,000) (75,000) 250,000

Performance Share Plan

Contingent As at beginning Award granted Vested As at of the during the during the Forfeited/ end of theName of Director financial year financial year financial year cancelled financial year

Chief Executive Officer/Executive Director

Koh Ban Heng 600,000 200,000 (159,000) (41,000) 600,000

Shares awarded to non-executive directors are vested upon award.

Directors’ Report


directors’ report

Audit committeeThe Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, as well as the relevant sections of the Listing Manual, the Code of Corporate Governance and the Best Practices Guide of the SGX-ST.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche for re-appointment as external auditors of the Group at the forthcoming Annual General Meeting of the Company.

Corporate governanceThe Board has issued a Corporate Governance Report in the 2007 Annual Report of the Company.

On behalf of the directors

CHOO CHIAU BENG KOH BAN HENGChairman of the Board Chief Executive Officer and Executive Director

29 February 2008

directors’ report

Directors’ Report


statement by directors

In the opinion of the directors,

(a) the consolidated financial statements of the Group, balance sheet and statement of changes in equity of the Company as set out on pages 79 to 134 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007, the results of the business, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year then ended; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the directors

CHOO CHIAU BENG KOH BAN HENGChairman of the Board Chief Executive Officer and Executive Director

29 February 2008

Statement by Directors


independent auditors’ reportto the members of Singapore Petroleum Company Limited

Independent Auditors’ Report

We have audited the accompanying financial statements of Singapore Petroleum Company Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the balance sheets of the Group and the Company as at 31 December 2007, the consolidated income statement, the statements of changes in equity and the cash flow statement of the Group and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 79 to 134.

The financial statements for the year ended 31 December 2006 were audited by another auditor whose report dated 28 February 2007 expressed an unqualified opinion on those financial statements.

Directors’ Responsibility The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion,

(a) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2007 and of the results and changes in equity and cash flows of the Group and changes in equity of the Company for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Deloitte & ToucheCertified Public AccountantsSingapore

Aric Loh Siang KheePartnerAppointed on 25 April 2007

29 February 2008

Singapore Petroleum Company Limited Report to Shareholders 2007 79Consolidated Income Statement

consolidated income statementfor the financial year ended 31 december 2007

THE GROUP 2007 2006 Notes $’000 $’000

Revenue 4 8,766,712 8,574,214Cost of sales (8,019,638) (8,060,617)Gross profit 747,074 513,597 Other gains (net) - Other income 4 40,776 24,958 - Finance income 5 13,373 11,911 Expenses - Operations (67,941) (66,658) - Selling and marketing (6,829) (5,266) - General administrative (119,964) (117,322) - Finance 6 (38,604) (34,061) Share of results of associates 744 1,938Share of results of joint ventures 17(b) 12,770 9,379 Profit before income tax 581,399 338,476 Income tax expense 9(a) (73,058) (53,907) Net profit 8 508,341 284,569 Attributable to:Equity holders of the Company 508,391 284,569Minority interests (50) - 508,341 284,569 Earnings per ordinary share - Basic 10 98.79 cents 55.33 cents - Diluted 10 98.74 cents 55.23 cents

The accompanying notes form an integral part of these financial statements.


balance sheetsas at 31 december 2007

Balance Sheets

THE GROUP THE COmPANy 2007 2006 2007 2006 Notes $’000 $’000 $’000 $’000

ASSETS Current assetsCash and bank balances 11 475,090 421,218 412,945 383,477Trade and other receivables 12 1,357,532 997,426 1,786,902 1,121,279Inventories 13 901,301 534,689 877,622 514,422Financial assets 14 - 3,144 - 3,144Derivative financial instruments 15 7,753 4,575 7,753 4,575Other assets 16 22,465 20,072 4,343 3,974 2,764,141 1,981,124 3,089,565 2,030,871Non-current assetsRestricted cash deposit 11 4,324 - - -Investments in associates and joint ventures 17 126,674 141,154 107,925 107,925Investments in subsidiaries 18 - - 147,903 153,903Financial assets 14 30,199 8,430 25,116 4,340Intangible exploration assets 20 119,528 108,493 - -Property, plant and equipment 21 1,214,576 849,093 715,226 729,315Loan to an investee company 26 48,710 51,888 - - 1,544,011 1,159,058 996,170 995,483

Total assets 4,308,152 3,140,182 4,085,735 3,026,354 LIABILITIES Current liabilitiesTrade and other payables 27 1,428,679 977,539 1,415,935 1,001,111Current income tax liabilities 9(b) 79,591 30,985 69,190 29,116Derivative financial instruments 15 13,600 6,291 13,505 6,291Borrowings 28 836,760 443,952 826,329 405,655 2,358,630 1,458,767 2,324,959 1,442,173

Non-current liabilitiesProvision for asset retirement obligations 2,046 - - -Provision for retirement benefits 29 6,973 6,419 6,973 6,419Deferred income tax liabilities 9(c) 149,858 104,399 75,851 91,131Other non-current liabilities 152 162 - - 159,029 110,980 82,824 97,550

Total liabilities 2,517,659 1,569,747 2,407,783 1,539,723 NET ASSETS 1,790,493 1,570,435 1,677,952 1,486,631 EQUITYShare capital 30 618,139 617,278 618,139 617,278Treasury shares (8,397) (8,140) (8,397) (8,140)Capital reserve 31 1,182 1,182 - -Foreign currency translation reserve (29,813) (17,423) - -Other reserves 32 20,668 14,477 19,256 14,052Retained earnings 1,188,264 963,061 1,048,954 863,441Equity attributable to equity holders of the Company 1,790,043 1,570,435 1,677,952 1,486,631Minority interests 450 - - -Total equity 1,790,493 1,570,435 1,677,952 1,486,631


Singapore Petroleum Company Limited Report to Shareholders 2007 81Consolidated Statement of Changes in Equity

consolidated statement of changes in equityfor the financial year ended 31 december 2007


Foreign Attributable currency to equity Share Treasury Capital translation Other Retained holders of Minority Total Notes capital shares reserve reserve reserves earnings the Company interests equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance as at 1 January 2007 617,278 (8,140) 1,182 (17,423) 14,477 963,061 1,570,435 - 1,570,435Fair value gains on financial assets, available-for-sale 32 - - - - 2,909 - 2,909 - 2,909Currency translation differences - - - (12,390) - - (12,390) - (12,390)Net (losses)/gains recognised directly in equity - - - (12,390) 2,909 - (9,481) - (9,481)Net profit - - - - - 508,391 508,391 (50) 508,341Total recognised (losses)/gains - - - (12,390) 2,909 508,391 498,910 (50) 498,860 Purchase of treasury shares 30 - (7,583) - - - - (7,583) - (7,583)Employee share awards and share options scheme: - Value of employee services 32 - - - - 11,155 - 11,155 - 11,155 - Transfer between reserves for share awards/options - 7,326 - - (7,873) 547 - - -Arising on acquisition of a subsidiary company 18 - - - - - - - 500 500Issue of shares 30 861 - - - - - 861 - 861Dividend relating to 2006 paid 33 - - - - - (283,735) (283,735) - (283,735)Balance as at 31 December 2007 618,139 (8,397) 1,182 (29,813) 20,668 1,188,264 1,790,043 450 1,790,493

Balance as at 1 January 2006 571,216 - 1,182 (1,252) 11,228 843,478 1,425,852 - 1,425,852Fair value gains on financial assets, available-for-sale 32 - - - - 62 - 62 - 62Currency translation differences - - - (16,171) - - (16,171) - (16,171)Net (losses)/gains recognised directly in equity - - - (16,171) 62 - (16,109) - (16,109)Net profit - - - - - 284,569 284,569 - 284,569Total recognised (losses)/gains - - - (16,171) 62 284,569 268,460 - 268,460 - Purchase of treasury shares 30 - (8,140) - - - - (8,140) (8,140)Employee share awards and share options scheme: - Value of employee services 32 - - - - 10,926 - 10,926 - 10,926Issue of shares 30 44,126 - - - (5,803) - 38,323 - 38,323Convertible bonds - equity component 32 1,936 - - - (1,936) - - - -Dividend relating to 2005 paid 33 - - - - - (164,986) (164,986) - (164,986)Balance as at 31 December 2006 617,278 (8,140) 1,182 (17,423) 14,477 963,061 1,570,435 - 1,570,435

An analysis of the movements in each category within “other reserves” is presented in Note 32.


statement of changes in equity - companyfor the financial year ended 31 december 2007

Statement of Changes in Equity - Company

Share Treasury Other Retained Total Notes capital share reserves earnings Equity $’000 $’000 $’000 $’000 $’000

Balance as at 1 January 2007 617,278 (8,140) 14,052 863,441 1,486,631Fair value gains on financial assets, available-for-sale 32 - - 1,922 - 1,922Net gain recognised directly in equity - - 1,922 - 1,922Net profit - - - 468,701 468,701Total recognised gains - - 1,922 468,701 470,623

Purchase of treasury shares 30 - (7,583) - - (7,583)Employee share awards and share options scheme: - Value of employee services 32 - - 11,155 - 11,155 - Transfer between reserves for share awards/options - 7,326 (7,873) 547 -Issue of shares 30 861 - - - 861Dividend relating to 2006 paid 33 - - - (283,735) (283,735)Balance as at 31 December 2007 618,139 (8,397) 19,256 1,048,954 1,677,952

Balance as at 1 January 2006 571,216 - 11,316 752,312 1,334,844

Fair value losses on financial assets, available-for-sale 32 - - (451) - (451)Net losses recognised directly in equity - - (451) - (451)Net profit - - - 276,115 276,115Total recognised (losses)/gains - - (451) 276,115 275,664

Purchase of treasury shares 30 - (8,140) - - (8,140)Employee share awards and share options scheme: - Value of employee services 32 - - 10,926 - 10,926Issue of shares 30 44,126 - (5,803) - 38,323Convertible bonds - equity component 32 1,936 - (1,936) - -Dividend relating to 2005 paid 33 - - - (164,986) (164,986)Balance as at 31 December 2006 617,278 (8,140) 14,052 863,441 1,486,631

An analysis of the movements in each category within “Other reserves” is presented in Note 32.


Singapore Petroleum Company Limited Report to Shareholders 2007 83Consolidated Cash Flow Statement

consolidated cash flow statementfor the financial year ended 31 december 2007

2007 2006 Notes $’000 $’000

Operating activities Net profit 508,341 284,569Adjustments for: - Income tax 73,058 53,907 - Depreciation of property, plant and equipment 91,202 55,662 - Dividend income 4 (276) (301) - Finance income 5 (13,373) (11,911) - Interest expense 6 32,438 30,777 - Share-based payment expense 7 11,155 10,926 - Financial assets at fair value through profit and loss 4 (133) 133 - Impairment of investment in joint venture 8 - 5,344 - Loss on disposal and write-off of property, plant and equipment 4 1,048 280 - Gain on disposals of financial assets, at fair value through profit and loss 4 (256) (987) - Gain on disposals of financial assets, available-for-sale 4 (764) (646) - Gain on disposal of a joint venture company 4 (5,291) - - Gain on disposal of an associate company 4 (12,457) - - Goodwill arising from acquisition of a subsidiary, written off 8 165 - - (Write-back)/Impairment of trade receivables 8 (1,680) 951 - Drilling expense written off 8 4,414 - - Exploration expenditure written off 8 - 10,981 - Changes in fair value of derivative financial instruments 15 4,131 19,740 - Share of results of associates (744) (1,938) - Share of results of joint ventures 17(b) (12,770) (9,379)Operating cash flow before working capital changes 678,208 448,108

Changes in operating assets and liabilities - Trade and other receivables (353,175) (106,666) - Inventories (367,680) 58,791 - Other assets 1,065 3,124 - Trade and other payables 451,163 (15,722) - Foreign currency translation 18,846 7,043Cash generated from operations 428,427 394,678Income tax paid 9(b) (41,532) (19,842)Net cash provided by operating activities 386,895 374,836

Investing activities Purchases of financial assets, available-for-sale (31,005) (3,254)Purchases of other investments - (11,217)Purchases of exploration assets (21,320) (50,074)Purchases of property, plant and equipment (80,458) (57,835)Dividends received from associate/joint venture companies 11,234 8,310Dividends received from non-associate/joint venture companies 276 301Interest received 10,727 9,651Proceeds from disposals of property, plant and equipment 16 -Proceeds from sale of associate/joint venture 35,101 -Proceeds from sale of financial assets, at fair value through profit and loss 3,533 8,656Proceeds from disposals of financial assets, available-for-sale 12,915 699Proceeds from disposal of interests in production sharing contract - 32,937Acquisition of subsidiaries, net of cash acquired 18 (329,671) -Restricted cash deposits 11 (4,140) (17,102)Net cash used in investing activities (392,792) (78,928)

Financing activities Proceeds from issuance of ordinary shares 861 4,505Repayment of borrowings (short-term unsecured bank loans) - (30,000)Proceeds from short-term borrowings 395,153 80,699Purchase of treasury shares (7,583) (8,140)Interest paid (44,743) (28,940)Dividends paid (283,735) (164,986)Net cash provided by/(used in) financing activities 59,953 (146,862)

Net increase in cash and cash equivalents 54,056 149,046Cash and cash equivalents at beginning of the financial year 404,116 255,070Cash and cash equivalents at end of the financial year 11 458,172 404,116



notes to the financial statementsfor the financial year ended 31 december 2007

Notes to the Financial Statements

1. General Singapore Petroleum Company Limited (the “Company”) (Registration Number: 196900291N), is incorporated in Singapore

with its principal place of business and registered office at 1 Maritime Square, #10-10 HarbourFront Centre, Singapore 099253. The Company is listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”). The financial statements are expressed in Singapore dollars.

The principal activities of the Group and of the Company consist of exploring for, developing and producing oil and gas, petroleum refining, marketing, distribution and trading of crude oil and petroleum products and the provision of administrative support services.

2. Significant accounting policies2.1 Basis of preparation The financial statements have been prepared in accordance with the historical cost basis except for the revaluation of certain

financial instruments, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).

In the current financial year, the Group and the Company adopted all the new or revised FRSs and Interpretations to FRS (“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2007. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group’s and Company’s accounting policies and has no material effect on the amounts reported for the current or prior years except as disclosed below.

FRS 107 - Financial Instruments: Disclosures Amendments to FRS 1 Presentation of Financial Statements relating to capital disclosures The Group and the Company have adopted FRS 107 with effect from 1 January 2007. The new Standard has resulted in an

expansion of the disclosures in these financial statements regarding the Group’s financial instruments. The Group and the Company have also presented information regarding its objectives, policies and processes for managing capital (see Note 38) as required by the amendments to FRS 1 which are effective from 1 January 2007.

2.2 Revenue recognition Revenue for the Group and the Company is measured at the fair value of the consideration received or receivable for the

sale of refined petroleum products, oil and gas, net of goods and services tax, rebates and discounts. The revenue for the Group has been shown after eliminating sales within the Group.

The Group and the Company recognise revenue when the amount of revenue and related costs can be reliably measured, when it is probable that future economic benefits will flow to the entity and when the specific criteria for each of the sale transactions are met as follows:

(a) Sale of goods Refined petroleum products revenue is recognised upon delivery to customers or when the significant risks and

rewards of ownership of the products have been transferred to the buyer and there is no retention of continuing managerial involvement to the degree associated with ownership nor effective control over the products sold.

Oil and gas revenues are recognised when produced, lifted or delivered depending on when the title transfers. During the course of normal operations, the Group and other joint interest owners of oil and gas reserves may take more or less than their respective ownership share of the volume produced, lifted or delivered. The volumetric imbalances are monitored over the lives of the wells’ production capability. If an imbalance exists at the time the wells’ reserves are depleted, cash settlements are made among the joint interest owners under a variety of arrangements.

Revenues from oil and gas production from properties in which the Group has an interest with other producers are

recognised on the basis of the Group’s net working interest (entitlement method).

(b) Dividend income Dividend income is recognised when the shareholders’ rights to receive payment is established.

Singapore Petroleum Company Limited Report to Shareholders 2007 85Notes to the Financial Statements

2. Significant accounting policies (continued)(c) Interest income Interest income is recognised on a time basis by reference to the principal outstanding and at the effective interest

rate applicable.

2.3 Group accounting(a) Subsidiaries The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.

Subsidiaries are entities (including special purpose entities) over which the Company has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values of assets acquired, liabilities incurred or assumed, and equity instruments issued by the Group at the date of exchange for control, plus costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in income statement.

Minority interest is that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectly by the Group. It is initially measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets, liabilities and contingent liabilities at the date of acquisition by the Group and the minorities’ share of changes in equity since the date of acquisition, except when the losses applicable to the minority in a subsidiary exceed the minority interest in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minority are attributed to the equity holders of the Company, unless the minority has a binding obligation to, and is able to, make good the losses. When that subsidiary subsequently reports profits, the profits applicable to the minority are attributed to the equity holders of the Company until the minority’s share of losses previously absorbed by the equity holders of the Company have been recovered.

Please refer to Note 2.5 for the Company’s accounting policy on investments in subsidiaries.

(b) Associates Associates are entities over which the Group has significant influence, but not control, generally accompanying a

shareholding of between and including 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with FRS 105 Non-current Assets Held for Sale and Discontinued Operations.


2. Significant accounting policies (continued)(b) Associates (continued) Equity accounting involves recording investments in associates initially at cost, and recognising the Group’s share of

its associates’ post-acquisition results and its share of post-acquisition movements in reserves against the carrying amount of the investments. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where necessary, adjustments are made to the financial statements of the associates to ensure consistency with accounting policies of the Group.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Please refer to Note 2.5 for the Company’s accounting policy on investments in associates.

(c) Joint ventures Joint ventures are entities over which the Group has contractual arrangements to jointly share the control over the

economic activities of the entities with one or more parties, that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control.

Investments in joint ventures in the Exploration and Production segment of the Group are through taking participating interests in various Production Sharing Contracts (“PSC”) and are considered to be jointly controlled assets. Accordingly, the investments in such joint ventures are accounted for in the consolidated financial statements using proportionate consolidation method. The Group’s share of the assets, liabilities, income and expenses are combined with the equivalent items in the consolidated financial statements on a line-by-line basis. Accounting policies of the PSCs have been changed where necessary to ensure consistency with the accounting polices adopted by the Group.

Investments in other joint ventures are accounted for in the consolidated financial statements using the equity method of accounting.

Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a joint venture. Please refer to Note 2.4.

Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group’s interest in the joint venture.

Please refer to Note 2.5 for the Company’s accounting policy on investments in joint ventures.

(d) Transaction costs Costs directly attributable to an acquisition are included as part of the cost of acquisition.

notes to the financial statements



2. Significant accounting policies (continued)2.4 Goodwill Goodwill arising on the acquisition of subsidiaries, associates or joint ventures represents the excess of the cost of

acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised at the date of acquisition.

Goodwill on subsidiaries and joint ventures accounted for using the proportionate consolidation method is recognised separately as intangible assets and carried at cost less accumulated impairment losses. Goodwill on associated companies and joint ventures accounted for using the equity method is included in the carrying amount of the investment.

On disposal of the subsidiaries, associates or joint ventures, the attributable amount of the goodwill is included in the determination of the disposal gain or loss to be recognised in the income statement.

2.5 Investments in subsidiaries, associates and joint ventures Investments in subsidiaries, associates and joint ventures are stated at cost less accumulated impairment losses in the

Company’s balance sheet. On disposal of investments in subsidiaries, associates and joint ventures, the difference between the disposal proceeds and the carrying amounts of the investments is taken to the income statement.

2.6 Property, plant and equipment (a) Measurement Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment

losses. Property, plant and equipment under construction are classified as construction-in-progress.

Proved and producing oil and gas properties, as well as oil and gas development expenditure such as expenditure for the construction, installation or completion of infrastructure facilities, platforms, pipelines and drilling of development wells, are capitalised within property, plant and equipment. Oil and gas development expenditure are classified as construction-in-progress.

(b) Depreciation Depreciation is calculated on a straight-line basis to allocate the costs of property, plant and equipment over their

expected useful lives. The estimated useful lives are as follows: Leasehold land Lease period (5 to 30 years) Plant and equipment 31/3% - 331/3%

No depreciation is charged on freehold land and construction-in-progress.

The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision of the residual values and useful lives are included in the income statement for the financial year in which the changes arise.

Fully depreciated assets still in use are retained in the financial statements until they are no longer in use.

For proved oil and gas properties, the capitalised costs are depleted using the units-of-production method by reference to the ratio of production in the period and the related proved and probable reserves of the field, taking into account future development expenditure necessary to bring those reserves into production. The estimated reserves are reviewed at each year-end with changes in reserves being accounted for prospectively.

No depreciation is charged over the oil and gas development expenditure.



2. Significant accounting policies (continued)(c) Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the

carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Other subsequent expenditure is recognised as repair and maintenance expense in the income statement during the financial year in which it is incurred.

(d) Disposal The gain or loss arising on disposal of an item of property, plant and equipment is determined as the difference

between the sale proceeds and its net carrying amount and is taken to the income statement.

2.7 Intangible exploration assets Expenditure directly associated with exploration and evaluation activities are capitalised at cost as intangible exploration

assets. Such expenditure includes seismic acquisition and studies, drilling of exploration wells and other associated costs. If hydrocarbons are found in the exploration structure which will be subjected to further appraisal activities, which may include the drilling of further wells, all such costs associated with the exploration structure continue to be carried as an asset in this category. All such carried costs are subject to technical, commercial and management assessment / review annually, or as economic events dictate, for potential impairment and to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs associated with the exploration structure are written off. When development plans are approved, the relevant expenditure is transferred to property, plant and equipment.

2.8 Impairment of non-financial assets

(a) Intangible exploration assets Property, plant and equipment Investments in subsidiaries, associates and joint ventures

Intangible exploration assets, property, plant and equipment and investments in subsidiaries, associates and joint ventures are reviewed for impairment whenever there is any indication that these assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of the fair value less cost to sell and value in use) of the asset is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, the recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cash-generating unit (“CGU”) to which the asset belongs.

If the recoverable amount of the asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. The impairment loss is recognised in the income statement.

An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the assets’ recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment is also recognised in the income statement.




2. Significant accounting policies (continued)(a) Intangible exploration assets (continued) Property, plant and equipment Investments in subsidiaries, associates and joint ventures

Proved and producing oil and gas properties which are capitalised in property, plant and equipment are assessed annually or as economic triggering events dictate, for potential impairment. For this purpose, assets are grouped based on separately identifiable and largely independent CGUs. As changes in circumstances warrant, the net carrying values of proved oil and gas properties are assessed to ensure that they do not exceed future cash flows from use or disposal. Where impairment is indicated, the carrying values of proved oil and gas properties are written down to their fair values, usually determined as the estimated discounted future cash flows.

In the evaluation for impairment of proved oil and gas properties and construction-in-progress, future cash flows are estimated using risk assessments on field and reservoir performance and include outlooks on proved and probable reserves, which are then discounted or risk-weighted utilising the results from projections of reservoir characteristics, production, recovery and economic factors.

(b) Goodwill Goodwill is tested annually for impairment, as well as when there is any indication that the goodwill may be impaired.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s CGUs expected to benefit from synergies of the business combination.

An impairment loss is recognised when the carrying amount of CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of the CGU is the higher of the CGU’s fair value less cost to sell and value-in-use.

The total impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.

Any impairment loss on goodwill is recognised in the income statement and is not reversed in a subsequent period.

2.9 Financial assets(a) Effective interest method The effective interest method is a method of calculating the amortised cost of a financial instrument and of

allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those financial instruments “at fair value through income statement”.

(b) Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and

receivables, held-to-maturity, and available-for-sale. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. The designation of financial assets at fair value through profit or loss is irrevocable.

(i) Financial assets, at fair value through profit or loss This category has two sub-categories: financial assets held for trading, and those designated at fair value

through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months after the balance sheet date.



2. Significant accounting policies (continued)(b) Classification (continued)

(ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except those maturing later than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in trade and other receivables on the balance sheet (Note 12).

(iii) Financial assets, held-to-maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and

fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

(iv) Financial assets, available-for-sale Financial assets, available-for-sale are non-derivatives that are either designated in this category or not

classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the assets within 12 months after the balance sheet date.

(c) Recognition and derecognition Purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to

purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

On sale of a financial asset, the difference between the net sale proceeds and its carrying amount is taken to the income statement. Any amount in the fair value reserve relating to that asset is also taken to the income statement.

(d) Initial measurement Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value

through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit and loss are recognised in the income statement.

(e) Subsequent measurement Financial assets, available-for-sale and at fair value through profit or loss are subsequently carried at fair value.

Loans and receivables and financial assets, held-to-maturity are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of ‘financial assets, at fair value through profit or loss’, including interest and dividend income, are presented in the income statement within ‘other gains – net’ in the financial year in which the changes in fair values arise.

Changes in the fair value of monetary assets denominated in a foreign currency and classified as available-for-sale are analysed into translation differences resulting from changes in amortised cost of the asset and other changes. The translation differences are recognised in the income statement, and other changes are recognised in the fair value reserve within equity. Changes in fair values of other monetary and non-monetary assets that are classified as available-for-sale are recognised in the fair value reserve within equity, together with the related currency translation differences.

Interest on financial assets, available-for-sale, calculated using the effective interest method, is recognised in the income statement. Dividends on available-for-sale equity securities are recognised in the income statement when the Group’s right to receive payment is established. When financial assets classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in the fair value reserve within equity are included in the income statement as “gains and losses from investment securities”.




2. Significant accounting policies (continued)(f) Determination of fair value The fair values of quoted financial assets are based on current bid prices. If the market for a financial asset is not

active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

(g) Impairment The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group

of financial assets is impaired.

(i) Loans and receivables An allowance for impairment of loans and receivables, including trade and other receivables, is recognised

when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the allowance for impairment is recognised in the income statement within “Administrative expenses”

(ii) Financial assets, held-to-maturity If there is objective evidence that an impairment loss on held-to-maturity financial assets has incurred, the

carrying amount of the asset is reduced by an allowance for impairment. This allowance, calculated as the difference between the assets’ carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate, is recognised in the income statement in the period in which the impairment occurs.

Impairment loss is reversed through the income statement. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods.

(iii) Financial assets, available-for-sale In the case of an equity security classified as available-for-sale, a significant or prolonged decline in the fair

value of the security below its cost is considered an indicator that the security is impaired.

When there is objective evidence that a financial asset, available-for-sale is impaired, the cumulative loss that has been recognised directly in the fair value reserve is removed from the fair value reserve within equity and recognised in the income statement. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss on that financial asset previously recognised in income statement.

Impairment losses on debt instruments classified as available-for-sale financial assets are reversed through the income statement. However, impairment losses recognised in the income statement on equity instruments classified as available-for-sale financial assets are not reversed through the income statement.

2.10 Borrowing costs Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised to construction-

in-progress during the period of construction. Borrowing costs incurred after the completion of the property, plant and equipment is recognised in the income statement. Other borrowing costs are recognised on a time-proportion basis in the income statement using the effective interest method.



2. Significant accounting policies (continued)2.11 Borrowings

(a) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently

stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings which are due to be settled within 12 months after the balance sheet date are presented as current borrowings even though the original term was for a period longer than 12 months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the balance sheet date and before the financial statements are authorised for issue. Other borrowings due to be settled more than 12 months after the balance sheet date are presented as non-current borrowings in the balance sheet.

(b) Convertible bonds When convertible bonds are issued, net of deferred tax effect, the liability component and the equity component are

separately presented on the balance sheet. The liability component is recognised at its fair value, determined using a market interest rate for equivalent non-convertible bonds. It is subsequently carried at amortised cost until the liability is extinguished on conversion or redemption of the bonds.

The remainder of the proceeds of the bond issue is allocated to the conversion option (equity component), which is presented in the shareholders’ equity, net of the deferred tax effect. The carrying amount of the conversion option is not changed in subsequent periods. When a conversion option is exercised, the carrying amount of the conversion option will be taken to share capital. When the conversion option is allowed to lapse, the carrying amount of the conversion option will be taken to retained earnings.

2.12 Trade and other payables Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost, using the effective

interest method.

2.13 Derivative financial instruments and hedging activities A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into and is carried

at its fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); (2) hedges of highly probable forecast transactions (cash flow hedge); or (3) hedges of net investments in foreign operations (net investment hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives designated as hedging instruments are highly effective in offsetting changes in fair value or cash flows of hedged items.

(a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the

income statement, together with any changes in the fair value of the hedged asset or liability that is attributable to the hedged risk.

(b) Cash flow hedge The Group enters into crude oil swap contracts and freight forward contracts to hedge anticipated transactions.

These contracts do not qualify for hedge accounting and consequently, the changes in fair values of these contracts are included in the income statement in the period they arise (Note 2.13(d)).




2. Significant accounting policies (continued) (b) Cash flow hedge (continued) The Group also enters into interest rate swaps that are cash flow hedges for the Group’s exposure to interest rate

risk on its borrowings. These contracts entitle the Group to receive interest at floating rates on notional principal amounts and oblige the Group to pay interest at fixed rates on the same notional principal amounts, thus allowing the Group to raise non-current borrowings at floating rates and swap them into fixed rates that are lower than those available if it borrowed at fixed rates directly.

The effective portion of changes in the fair value of these interest rate swaps are recognised in the hedging reserve within equity and transferred to the income statement in the periods when the interest expense on the borrowings are recognised in the income statement. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

(c) Net investment hedge The Group has foreign currency borrowings that qualify as net investment hedge in foreign operations. These

hedging instruments are accounted for similarly to cash flow hedges. Any currency translation difference on the borrowings relating to the effective portion of the hedge is recognised in the currency translation reserve within equity. The currency translation difference relating to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in the currency translation reserve within equity are included in the income statement when the foreign operation is disposed of.

(d) Derivatives that do not qualify for hedge accounting Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised in the

income statement in the financial year when the changes arise.

2.14 Fair value estimation The fair value of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities

and derivatives) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows, discounted at actively quoted interest rates. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as estimated discounted cash flows, are used to determine fair values of the financial instruments.

The carrying amounts of cash and cash equivalents, trade and other current receivables and payables, provisions and other liabilities approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements.

2.15 Leases(a) Finance leases (When a Group entity is the lessee) Lease of assets in which the Group assumes substantially the risks and rewards of ownership are classified as

finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included as borrowings. The interest element of the finance cost is taken to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.



2. Significant accounting policies (continued)(b) Operating leases (When a Group entity is the lessee) Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are

classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to the income statement on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the financial year in which termination takes place.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

2.16 Income taxes Current income tax liabilities (and assets) for current and prior periods are recognised at the amounts expected to be paid to

(or recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax assets/liabilities are recognised for all deductible taxable temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax assets/liabilities arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting nor taxable profit or loss.

Deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are measured at:

(i) the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date; and

(ii) the tax consequence that would follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income tax are recognised as income or expenses in the income statement for the period, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax on temporary differences arising from the revaluation gains and losses on land and buildings, fair value gains and losses on available-for-sale financial assets and cash flow hedges, and the liability component of convertible debts are charged or credited directly to equity in the same period the temporary differences arise. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.




2.17 Provisions for other liabilities and charges Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, it is more likely

than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

The Group recognises the estimated costs of dismantlement, removal or restoration items of property, plant and equipment arising from the acquisition or use of assets. This provision is estimated using the best estimate of the expenditure required to settle the obligation, taking time value into consideration.

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the income statement for the period the changes in estimates arise except for asset dismantlement, removal and restoration costs, which are adjusted against the cost of the related property, plant and equipment unless the decrease in the liability exceeds the carrying amount of the asset or the asset has reached the end of its useful life. In such cases, the excess of the decrease over the carrying amount of the asset or the changes in the liability is recognised in income statement immediately.

2.18 Employee benefits(a) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into

separate entities such as Central Provident Fund in accordance with the Central Provident Fund Act. The Group’s contribution to defined contribution plans are recognised in the financial year to which they relate.

(b) Employees’ leave entitlement Employees’ entitlements to annual leave are recognised when they accrue to employees. A provision is made for the

estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

(c) Share-based compensation The Group operates a number of equity-settled, share-based compensation plans, namely the SPC Share Option

Scheme 2000, the Singapore Petroleum Company Restricted Share Plan and the Singapore Petroleum Company Performance Share Plan. The fair value of the employee services received in exchange for the grant of the options or shares is recognised as an expense in the income statement with a corresponding increase in the share awards and share options reserve over the vesting period. The total amount to be recognised on a straight line basis over the vesting period is determined by reference to the fair value of the options and shares granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets), on the date of the grant. Non-market vesting conditions are included in the estimation of the number of shares under options that are expected to become exercisable and shares that are expected to be issued on vesting date. At each balance sheet date, the Company revises its estimates of the number of shares under options that are expected to become exercisable and shares that are expected to be issued on vesting date. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to the share awards and share options reserve over the remaining vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised.

2.19 Retirement benefits The Company operates a retirement benefit scheme for employees who commenced employment with the Company on or

before 31 August 1998 based on 75% of the last drawn monthly salary as at 31 December 2005 for each completed year of service by the employee. Contributions to the scheme, determined by the accrued benefit valuation method, are charged to the income statement so as to spread the cost of retirement benefits over the employees’ working lives with the Company. Actuarial valuations which are applicable for three years are carried out.

Employees with at least 20 years’ of continuous service may be offered a service gratuity in lieu if they retire before the official retirement age.



2. Significant accounting policies (continued)2.20 Currency translation

(a) Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary

economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Singapore Dollar, which is the Company’s functional currency.

(b) Transactions and balances Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional

currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rate at the balance sheet date are recognised in the income statement, except for currency translation differences on net investment in foreign entities, borrowings in foreign currencies and other currency instruments qualifying as net investment hedges for foreign operations, which are included in the currency translation reserve within equity, in the consolidated financial statements (see Note 2.20(d)).

Changes in the fair value of monetary securities denominated in foreign currencies classified as available-for-sale are analysed into currency translation differences on the amortised cost of the securities, and other changes. Currency translation differences on the amortised cost are recognised in the income statement, and other changes are recognised in fair value reserve within equity.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined. Currency translation differences on non-monetary items, whereby the gain or loss are recognised in the income statement, such as equity investments held at fair value through profit or loss, are reported as part of the fair value gain or loss in “other gains/losses – net”. Currency translation differences on non-monetary items whereby the gains or losses are recognised directly in equity, such as equity investments classified as available-for-sale financial assets, investment properties and property, plant and equipment are included in the fair value reserve and asset revaluation reserve respectively.

(c) Translation of Group entities’ financial statements The results and financial position of all the Group entities (none of which operates in a hyperinflationary economy)

that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing rates at the date of that balance sheet;

(ii) Income and expenses for each income statement are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and

(iii) All resulting exchange differences are taken to the foreign currency translation reserve within equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after 1 January 2005 are treated as assets and liabilities of the foreign entity and translated at the closing date. For acquisitions prior to 1 January 2005, the exchange rate at the dates of acquisition were used.

(d) Consolidation adjustments On consolidation, currency translation differences arising from the net investment in foreign entities, borrowings

in foreign currencies and other currency instruments designated as hedges of such investments are taken to the foreign currency translation reserve. When a foreign operation is sold, such currency translation differences are recognised in the income statement as part of the gain or loss on sale.




2. Significant accounting policies (continued)2.21 Inventories Crude oil inventories are stated at the lower of cost, determined on a first-in first-out basis, and net realisable value. Refined

petroleum products are stated at the lower of cost, determined on a weighted average basis, and net realisable value. The cost of refined products includes fixed and variable refinery overheads. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Lubricants and base oil inventories are stated at the lower of cost, determined on a first-in first-out basis, and net realisable value.

2.22 Cash and cash equivalents Cash and cash equivalents include cash on hand, short-term deposits and bank overdrafts.

2.23 Segment reporting A business segment is a distinguishable component of the Group engaged in providing products or services that are subject

to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group engaged in providing products or services within a particular economic and political environment that is subject to risks and returns that are different from those of segments operating in other economic and political environments.

2.24 Share capital and treasury shares Ordinary shares are classified as equity.

Incremental costs directly attributable to the issuance of new equity instruments, other than for the acquisition of businesses, are taken to equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issuance of new equity instruments for the acquisition of businesses are included in the cost of acquisition as part of the purchase consideration.

When the Group purchases the Company’s ordinary shares (treasury shares), the consideration paid, including any directly attributable incremental costs, net of income taxes, is deducted from equity attributable to the Company’s equity holders and presented as “treasury shares” within equity, until they are cancelled, sold or reissued.

Treasury shares purchased or re-issued are considered on a weighted basis in the computation of the number of shares in issue.

When treasury shares are subsequently sold or reissued pursuant to the employee share awards and share options schemes, the cost of the treasury shares is reversed from the treasury share account and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is taken to the capital reserve of the Company.

2.25 Dividends Interim dividends are recorded in the financial year in which they are declared payable. Final dividends are recorded in the

financial year in which the dividends are approved by the shareholders.

3. Critical accounting judgements and key sources of estimation uncertainty In the application of the Group’s accounting policies, which are described in Note 2, management is required to make

judgements, estimates and assumptions about the carrying amounts of certain assets and liabilities that could not be measured by readily apparent sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant and reasonable under the circumstances, and are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimates is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

3.1 Critical judgements in applying the entity’s accounting policies Management is of the opinion that there were no critical judgements involved in the process of applying the Group’s

accounting policies that would have a significant impact on the amounts recognised in the financial statements other than those involving estimates and assumptions as described below.



3. Critical accounting judgements and key sources of estimation uncertainty (continued)3.2 Key sources of estimation uncertainty The key estimates and assumptions concerning the future that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year are as follows:

(a) Income taxes The Group is subject to income taxes in several jurisdictions. Significant judgment is required in determining the

capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will be recognised in the current income tax and deferred income tax provisions in the period in which such differences are determined.

(b) Proved oil and gas properties In determining whether the fair values of these assets should remain capitalised or were impaired, the Group was

required to estimate the discounted future cashflows expected to be generated from the oil and gas reserves based on certain economic assumptions. The reserve estimates were based on internal and external (where available) technical review and risked analysis of the natural reservoir production data and well performance.

(c) Intangible exploration assets The Group’s accounting policy follows the guidance of FRS 106 in determining if the costs pertaining to each

exploration structure should remain capitalised. The application of this policy requires the management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of commercial viability based on the technical assessment of the acreage under exploration.

(d) Operator’s monthly reports for upstream operations The Group has participating interest in Production Sharing Contracts (“PSC”) which are operated by third parties. It

relies on these operators’ monthly reports on revenues and costs to arrive at the appropriate accounting estimates used to report the Exploration and Production segment performance.

(e) Impairment of investment in subsidiaries, associates and joint ventures The Group follows the guidance of FRS 36 in determining when an investment is other-than-temporarily impaired.

The Group, evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and the near-term business outlook of the investment, including factors such as industry and sector performance, changes in technology as well as, operational and financing cash flow.

4. Revenue and other income

THE GROUP 2007 2006 $’000 $’000

Revenue from sale of refined petroleum products, oil and gas 8,766,712 8,574,214

Included in other income are the following items: Dividend income 276 301 Financial assets, at fair value through profit and loss 133 (133)

Gain on disposal of financial assets, at fair value through profit and loss 256 987 Gain on disposal of financial assets, available-for-sale 764 646 Gain on disposal of a joint venture 5,291 - Gain on disposal of an associate 12,457 - Loss on disposal and write-off of property, plant and equipment (1,048) (280)




5. Finance income

THE GROUP 2007 2006 $’000 $’000

Interest income - a related corporation 7,845 6,019 - an investee company - 1,146 - financial institutions 5,528 4,746 13,373 11,911

6. Finance expense

THE GROUP 2007 2006 $’000 $’000

Interest expense - bank loans 30,102 27,117 - convertible bonds - 3,660 - a related corporation 2,336 - 32,438 30,777 Net foreign exchange loss 6,166 3,284 38,604 34,061

7. Employee compensation

THE GROUP 2007 2006 $’000 $’000

Wages and other benefits 37,273 21,609 Employer’s contribution to defined contribution plans, including Central Provident Fund and retirement benefits scheme 2,375 1,290 Share awards granted to directors and employees (Note 32) 11,155 10,926 50,803 33,825



8. Net profit Net profit has been arrived at after charging (crediting):

THE GROUP 2007 2006 $’000 $’000

Auditors’ remuneration - auditors of the Company 190 202 - other auditors 13 11 Fees for non-audit services provided by auditors of the Company* 189 86 Depreciation of property, plant and equipment - leasehold land 6,049 6,173 - plant and equipment 38,490 37,694 - proved oil and gas properties 46,663 11,795 Drilling expense written off 4,414 - Employee compensation 50,803 33,825 Exploration expenditure written off - 10,981 Fair value losses on derivative instruments not qualifying as hedges 4,131 19,740 Write-down of inventories to net realisable value - 11,488 (Write-back)/Impairment of trade receivables (1,680) 951 Impairment of investment in joint venture - 5,344 Goodwill arising from acquisition of a subsidiary, written off 165 - Provision for retirement benefits 441 313 Rental on operating leases 5,099 4,996

* This include non-audit fees paid by a joint venture. The Group’s share of the non-audit fees amounted to $90,000 (2006: $Nil).

9. Income tax(a) Income tax expense

THE GROUP 2007 2006

$’000 $’000

Tax expense attributable to profit is made up of: Current income tax - Singapore 56,836 24,002 - Foreign 24,726 11,916 Deferred income tax - relating to the origination and the reversal of temporary differences 5,192 17,989 - relating to the changes in tax rate (8,301) - 78,453 53,907 Over provision in preceding financial years - deferred income tax (5,395) - 73,058 53,907




9. Income tax (continued)(a) Income tax expense (continued) The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax

due to the following:

THE GROUP 2007 2006

$’000 $’000

Profit before income tax 581,399 338,476

Tax calculated at a tax rate of 18% (2006: 20%) 104,652 67,695 Income taxed at concessionary rate (34,901) (22,731) Income not subject to tax (6,019) (1,678) Expenses not deductible for tax purposes 6,870 2,263 Effect of change in tax rates (8,301) - Effect of different tax rates in other countries 16,152 7,865 Over provision in preceding financial years (5,395) - Others - 493 Tax charge 73,058 53,907 Subject to the agreement of the relevant tax authorities, profits arising from activities that qualify under the Global

Trader Programme are taxed at a concessionary rate of 5% (2006: 5%) and profits from activities that do not qualify under the Global Trader Programme are taxed at 18% (2006: 20%).

(b) Movements in current income tax liabilities

THE GROUP THE COmPANy 2007 2006 2007 2006 $’000 $’000 $’000 $’000

At beginning of the financial year 30,985 14,909 29,116 14,291 Income tax paid (41,532) (19,842) (16,096) (8,915) Tax expense on profit for the current financial year 81,562 35,918 56,170 23,740 Acquisition of subsidiary 8,576 - - - At end of the financial year 79,591 30,985 69,190 29,116

(c) Movements in provision for deferred income tax liabilities


Balance at beginning of the financial year 104,399 88,385 91,131 73,462 Foreign currency translation difference (4,155) (1,655) - - Deferred tax for convertible bonds credited to equity - (320) - (320) Tax charge/(credit) to income statement 5,192 17,989 (1,584) 17,989 Changes in tax rate (8,301) - (8,301) - Over provision in preceding financial years (5,395) - (5,395) - Acquisition of subsidiary 58,118 - - - Balance at end of the financial year 149,858 104,399 75,851 91,131



9. Income tax (continued)(d) Deferred income taxes The movement in the Group’s and the Company’s deferred income tax assets and liabilities (prior to offsetting of

balances within the same tax jurisdiction) during the year is as follows:

The Group Deferred income tax liabilities Fair value adjustment of assets Accelerated acquired tax depreciation Other Total $’000 $’000 $’000 $’000

2007 At beginning of the financial year - 101,862 4,297 106,159 Foreign currency translation (3,447) (708) - (4,155) Credited to income statement - (3,355) (4,297) (7,652) Acquisition of subsidiary 48,212 9,906 - 58,118 At end of the financial year 44,765 107,705 - 152,470

2006 At beginning of the financial year 88,353 1,562 89,915 Charged to income statement 13,509 2,735 16,244 At end of the financial year 101,862 4,297 106,159

Deferred income tax assets

Provisions Total $’000 $’000

2007 At beginning of the financial year (1,760) (1,760) Credited to income statement (852) (852) At end of the financial year (2,612) (2,612)


The Company Deferred income tax liabilities

Accelerated tax depreciation Other Total $’000 $’000 $’000

2007 At beginning of the financial year 88,594 4,297 92,891 Credited to income statement (10,131) (4,297) (14,428) At end of the financial year 78,463 - 78,463 2006 At beginning of the financial year 73,430 1,562 74,992 Charged to income statement 15,164 2,735 17,899 At end of the financial year 88,594 4,297 92,891




9. Income tax (continued)(d) Deferred income taxes (continued) Deferred income tax assets

Provisions Total $’000 $’000



Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority.

10. Earnings per share

(a) Basic earnings per share Basic earnings per share is calculated by dividing the net profit attributable to members of the Company by the

weighted average number of ordinary shares in issue during the financial year.

THE GROUP 2007 2006

$’000 $’000

Net profit attributable to equity holders of the Company 508,391 284,569 Interest expense on convertible bonds (net of tax) - 111 Net profit used to determine diluted earnings per share 508,391 284,680

Weighted average number of ordinary shares in issue for basic earnings per share (‘000) 514,611 514,308

Adjustment for: - assumed conversion of convertible bonds (‘000) - 448 - assumed conversion of share options (‘000) 288 726 Weighted average number of ordinary shares of diluted earnings per share (‘000) 514,899 515,482

(b) Diluted earnings per share For the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the

weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: convertible bonds and share options.

The adoption of new or revised FRS did not affect the basic and diluted earnings per share for the current and preceding period.



11. Cash and bank balances


Cash at bank and on hand 103,172 116,116 57,945 95,477 Short-term deposits 355,000 288,000 355,000 288,000 Cash and cash equivalents 458,172 404,116 412,945 383,477 Restricted cash: - Cash held in trust 4,324 - - - - Pledged deposits 16,918 17,102 - - Total 479,414 421,218 412,945 383,477 Less: Current portion (475,090) (421,218) (412,945) (383,477) Non-current portion 4,324 - - -

The restricted cash deposits are held in trust in relation to the disposal of an associate company (Note 17).

Fixed deposit of a subsidiary amounting to $16,918,000 (2006: $17,102,000) was pledged as security for a short-term loan facility granted to another subsidiary (Note 28). Accordingly, this has been included under restricted cash deposits.

The carrying amount of cash and bank balances approximate its fair values.

Cash and bank balances are denominated in the following currencies:


Singapore Dollar 376,455 309,788 375,818 307,537 United States Dollar 91,578 103,328 37,127 75,940 Others 11,381 8,102 - - 479,414 421,218 412,945 383,477

Short-term deposits have an average maturity of 1 month (2006: 1 month) from the end of the financial year with the following weighted average effective interest rates per annum:


Singapore Dollar 1.44 3.25 1.44 3.25 United States Dollar 4.85 5.25 - - Others 3.55 3.80 - -

The exposure of cash and cash equivalents to interest rate risks is disclosed in Note 38(c).




12. Trade and other receivables


Trade receivables from third parties 909,481 726,475 796,723 656,053 Less: Allowance for impairment of receivables (3,131) (4,990) (2,119) (3,954) Trade receivables from third parties – net 906,350 721,485 794,604 652,099 Due from subsidiaries (trade) - - 503 - Due from subsidiaries (non-trade) (Note 22(a)) - - 542,200 197,169 Due from associates (trade) 657 806 657 806 Due from associates (non-trade) (Note 23) 32 29 32 29 Due from joint ventures (trade) 246,010 190,632 246,010 190,632 Due from joint ventures (non-trade) (Note 24) 198,288 70,995 198,288 70,995 Due from related corporations (trade) 3,840 2,075 3,840 2,075 Other receivables 2,355 11,404 768 7,474 1,357,532 997,426 1,786,902 1,121,279

Balance at beginning of the financial year 4,990 4,235 3,954 3,124 Foreign currency translation adjustment (179) (196) (116) (101) Allowance (written back) made during the financial year (1,680) 951 (1,719) 931 Balance at end of the financial year 3,131 4,990 2,119 3,954

Allowance for impairment made and allowance written back are included in “General administrative expenses” in the income statement.

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers who are internationally dispersed, covering a large spectrum of industries and having a variety of end markets in which they sell. Due to these factors, management believes that there is no anticipated additional credit risk beyond the amount provided for collection losses that is inherent in the Group’s and Company’s trade receivables.

The carrying amounts of trade and other receivables approximate its fair values.

Trade and other receivables are denominated in the following currencies:


Singapore Dollar 36,620 26,515 39,495 30,131 United States Dollar 1,314,807 968,340 1,747,407 1,091,148 Others 6,105 2,571 - - 1,357,532 997,426 1,786,902 1,121,279

The credit risks of trade and other receivables are disclosed in Note 38(d).



13. Inventories


Crude oil 456,987 262,426 456,987 262,426 Refined petroleum products 420,856 251,112 415,494 245,080 Lubes and base oil 19,005 16,280 2,225 3,951 Materials and supplies 4,453 4,871 2,916 2,965 901,301 534,689 877,622 514,422

The cost of inventories recognised as an expense and included in ‘Cost of sales’ in the income statement amounted to $7,915,791,000 (2006: $8,027,562,000).

During the financial year, the Group and the Company reversed $11,488,000, being part of an inventory write-down made

in 2006, as the inventories were sold above the carrying amounts in 2007. The reversal was included in ‘Cost of sales’ in the income statement.

14. Financial assets(a) Financial assets, at fair value through profit or loss Financial assets amounting to $Nil (2006: $3,144,000) comprised of listed equity securities held for trading. (b) Financial assets, available-for-sale


Balance at beginning of the financial year 8,430 4,992 4,340 1,590 Currency translation differences 6 175 - - Additions 31,005 3,254 31,005 3,254 Gains/(losses) transferred to equity (Note 32(b)(ii)) 2,909 62 1,922 (451) Disposals (12,151) (53) (12,151) (53) Balance at end of the financial year 30,199 8,430 25,116 4,340 Less: Non-current portion (30,199) (8,430) (25,116) (4,340) Current portion - - - -

Available-for-sale financial assets include the following investments:


At fair value: Listed equity shares 28,868 7,099 24,030 3,254 Unlisted equity shares 1,331 1,331 1,086 1,086 30,199 8,430 25,116 4,340 The market values of the quoted equity securities are determined by reference to the stock exchange listed closing

market prices on the last market day of the financial year.

The unlisted securities include a 12.5% (2006: 12.5%) equity interest in Changi Airport Fuel Hydrant Installation Private Limited, incorporated in Singapore, and a 6% (2006: 6%) equity interest in PT Transportasi Gas Indonesia, incorporated in Indonesia. The above companies are engaged in activities ancillary to the operations of the Company. There is no active market for the equity interests of these securities. As such, it is not practicable to determine with sufficient reliability the fair value of these unlisted securities. However, the directors do not anticipate that the carrying amount of the unlisted securities will be significantly different from their fair values.




14. Financial assets (continued)(b) Financial assets, available-for-sale (continued)

Available-for-sale financial assets are denominated in the following currencies:


Singapore Dollar 1,086 1,086 1,086 1,086 United States Dollar 245 245 - - Australian Dollar 22,737 3,254 22,737 3,254 New Zealand Dollar 1,293 - 1,293 - Thai Baht 4,838 3,845 - - 30,199 8,430 25,116 4,340

15. Derivative financial instruments


Balance at beginning of the financial year (1,716) 18,024 (1,716) 18,024 Losses on forward contracts - Included in income statement (4,131) (19,740) (4,036) (19,740) Balance at end of the financial year (5,847) (1,716) (5,752) (1,716)

Analysed as:

THE GROUP THE COmPANy Contract/ Notional Fair value Fair value Amount Assets Liabilities Assets Liabilities $’000 $’000 $’000 $’000 $’000

2007 Forward contracts - Oil swaps 366,049 2,135 (13,600) 2,135 (13,505) - Freight forwards 128,540 5,618 - 5,618 - Total 7,753 (13,600) 7,753 (13,505) Less: Current portion 7,753 (13,600) 7,753 (13,505) Non-current portion - - - -

2006 Forward contracts - Oil swaps 291,135 3,803 (1,487) 3,803 (1,487) - Freight forwards 276,953 772 (4,804) 772 (4,804) Total 4,575 (6,291) 4,575 (6,291) Less: Current portion 4,575 (6,291) 4,575 (6,291) Non-current portion - - - -



16. Other assets


Deposits 542 266 362 - Prepayments 18,576 16,092 1,665 1,337 Tax recoverable 3,347 3,714 2,316 2,637 22,465 20,072 4,343 3,974

The carrying amounts of deposits approximate their fair values.

17. Investments in associates and joint ventures


Investments in associates - 16,218 - - Investments in joint ventures 126,674 124,936 107,925 107,925 126,674 141,154 107,925 107,925

(a) Investments in associates

THE GROUP 2007 2006

$’000 $’000

The summarised financial information of associates are as follows: - Assets - 78,166 - Liabilities - (33,330) - Revenues - 448,237 - Net profit - 3,951

Details of associates are included in Note 19.

Disposal of associate During the year, the Group disposed its interest in Tiger Oil Corporation (“TOC”) for a cash consideration of $29.8

million. This divestment resulted in a net gain of $12.4 million.




17. Investments in associates and joint ventures (continued)(b) Investments in joint ventures The following amounts represented the Group’s share of the results, assets employed and liabilities of its joint

ventures. The Group’s interests in joint ventures are accounted for in the consolidated financial statements using the equity method of accounting.

THE GROUP 2007 2006

$’000 $’000

Assets: Current assets 85,632 81,486 Non-current assets 117,398 106,527 203,030 188,013

Liabilities: Current liabilities (52,752) (43,030) Non-current liabilities (23,604) (20,047) (76,356) (63,077)

Net assets 126,674 124,936

Sales 164,163 192,393 Expenses (150,408) (180,351) Profit before income tax 13,755 12,042 Income tax (985) (2,663) Profit after income tax 12,770 9,379 Capital commitments in relation to interest in joint ventures 52,519 40,988

The Company uses the production facilities of a joint venture, Singapore Refining Company Private Limited, and other production facilities, which are jointly owned by the Company with another party and for which a processing fee is payable by the Company.

Further details of joint ventures are included in Note 19.

Disposal of a joint venture During the year the Group divested its investment in Jiangmen City Sinjiang Gas Co Ltd for a cash consideration of

$5.3 million and recorded a gain of $5.3 million as a result. 18. Investments in subsidiaries

THE COmPANy 2007 2006

$’000 $’000

Unquoted equity investments at cost 166,194 172,194 Allowance for impairment (18,291) (18,291) 147,903 153,903

Details of subsidiaries are included in Note 19.



18. Investments in subsidiaries (continued) Acquisition of subsidiaries

1. PT Solar Premium Central (“PT Solar”) In 2007, the Group acquired a 60% equity interest in PT Solar for a total consideration of $914,000. This transaction

has been accounted for using the purchase method of accounting. The effective date of acquisition was 7 August 2007.

The net assets acquired in the transaction, and the goodwill arising, are as follows: Acquiree’s carrying amount Fair value before combination adjustments Fair value $’000 $’000 $’000

Net assets acquired: Bank 5 - 5 Receivable 1,244 - 1,244 Net assets 1,249 - 1,249 Minority interest (500) Goodwill 165 Total consideration, satisfied by cash 914 Net cash outflow arising on acquisition: Cash consideration paid 914 Cash and cash equivalents acquired (5) 909 PT Solar did not contribute revenue to the Group and reduced the Group’s profit before tax by $132,000 for

the period between the date of acquisition and the balance sheet date. PT Solar contributed to the Downstream segment.

If the acquisition had been completed on 1 January 2007, total Group revenue for the year would have been unchanged and total Group profit for the year would have been $507,944,000.

2. Sino-American Energy LLC (“Sino-American”) In 2007, the Group acquired 100% equity interest of Sino-American Energy LLC which owns Bohai Bay (Blocks 04/36 and 05/36) for a total consideration of $374,254,000. This transaction has been accounted for using

the purchase method of accounting. The effective date of acquisition was 1 July 2007.

The net assets acquired in the transaction are as follows: Acquiree’s carrying amount Fair value before combination adjustments Fair value $’000 $’000 $’000

Net assets acquired: Property, plant and equipment 173,086 224,515 397,601 Intangible exploration asset - 11,373 11,373 Cash and bank 28,586 - 28,586 Trade receivable 9,430 - 9,430 Inventory 115 - 115 Total assets 211,217 235,888 447,105 Accruals 4,064 - 4,064 Provision for taxation 8,576 - 8,576 Deferred taxation 9,906 48,212 58,118 Provision for asset retirement obligation 2,093 - 2,093 24,639 48,212 72,851 Net assets 186,578 187,676 374,254 Total consideration 374,254

Net cash outflow arising on acquisition: Total consideration 374,254 Purchase consideration payable (16,906) Cash and cash equivalents acquired (28,586) 328,762




18. Investments in subsidiaries (continued)Acquisition of subsidiaries (continued)

Sino-American contributed $61,451,000 revenue and $10,856,000 to the Group’s profit before tax for the period between the date of acquisition and the balance sheet date. Sino-American contributed to the Exploration and Production segment.

If the acquisition had been completed on 1 January 2007, total Group revenue for the year would have been $8,832,644,000 and total Group profit for the year would have been $524,117,000.

The Group has engaged an independent reserves certifier to determine the fair value of the proved oil and gas properties and intangible exploration assets. As at 31 December 2007, the fair value of the proved oil and gas properties and intangible exploration asset has been determined on a provisional basis as the results of the independent valuation report from the reserves certifier has not been received by the date the financial statements was authorised for issue.

19. Listing of companies/entities in the Group Details of companies in the Group are as follows:

Country of Name of companies Principal activities incorporation Equity holding

2007 2006 % %

Subsidiaries

(1) PT Solar Premium Central (c) Wholesaler and importer of Indonesia 60 - (Held via Singapore Petroleum petroleum products Venture Private Limited)

(2) PT. Sumber Prestasi Cemerlang (c) (f) Wholesaler and importer of Indonesia 100 100 (Held directly and indirectly via petroleum products Singapore Petroleum Venture Private Limited)

(3) Sampang Holdings Ltd (d) Investment holding Cayman 100 100 (Held via SPC Production Company Ltd) Islands (4) Singapore Petroleum (China) Investment holding Singapore 100 100 Private Limited (a)

(5) Singapore Petroleum Company Trading in petroleum Hong Kong 100 100 (Hong Kong) Limited (b) products (6) Singapore Petroleum (Guangdong) Marketing, distribution and China 100 100 Private Limited (c) trading of lubricants and (Held via Singapore Petroleum Venture automotive related products and Private Limited) provision of automotive services

(7) Singapore Petroleum (Indonesia) Investment holding Singapore 100 100 Private Limited (a) (f) (Held via Singapore Petroleum Venture Private Limited)

(8) Singapore Petroleum Sampang Ltd (d) (g) Exploration, development Cayman 100 100 (Held via SP (Sampang) Ltd and production of crude oil Islands and Sampang Holdings Ltd) and natural gas



19. Listing of companies/entities in the Group (continued)Subsidiaries (continued)


2007 2006 % %

(9) Singapore Petroleum (Thailand) Marketing, supply, distribution Thailand 100 100 Co., Ltd (c) (e) and trading of petroleum products (Held directly and indirectly via Singapore Petroleum Venture Private Limited)

(10) Singapore Petroleum Trading Investment holding Hong Kong 100 100 Company Limited (b)

(11) Singapore Petroleum Venture Investment holding Singapore 100 100 Private Limited (a)

(12) Singapore Petroleum Vietnam Exploration, development British Virgin 100 100 Song Hong Co Ltd (d) and production of crude oil Islands (Held via SPC Production Company Ltd) and natural gas

(13) Sino-American Energy LLC (d) Exploration, development Texas, USA 100 - (Held via SPC E&P (China) Pte. Ltd.) and production of crude oil and natural gas

(14) SP (Sampang) Ltd (d) Investment holding Cayman 100 100 (Held via SPC Production Company Ltd) Islands

(15) SPC Bass Pty Ltd (d) Exploration, development Australia 100 - (Held via SPC E&P Pte. Ltd.) and production of crude oil and natural gas

(16) SPC Cambodia Ltd (d) Exploration, development British Virgin 100 100 (Held via SPC Production Company Ltd) and production of crude oil Islands and natural gas

(17) SPC E&P (China) Pte. Ltd. (a) Exploration, development Singapore 100 - (Held via SPC E&P Pte. Ltd.) and production of crude oil and natural gas

(18) SPC E&P Pte. Ltd. (a) Investment holding Singapore 100 -

(19) SPC Indo-Pipeline Co. Ltd. (d) Investment holding British Virgin 100 100 (Held via SPC Production Company Ltd) Islands

(20) SPC Kakap Limited (d) Exploration, development British Virgin 100 100 (Held via SPC Production Company Ltd) and production of crude oil Islands and natural gas

(21) SPC Production Company Ltd (d) Investment holding British Virgin 100 100 Islands

(22) SPC Refining Company Pte. Ltd. (d) Dormant Singapore 100 100




19. Listing of companies/entities in the Group (continued)Subsidiaries (continued)


2007 2006 % %

(23) SPC Shipping Company Limited (b) Chartering and re-chartering Hong Kong 100 100 (Held via Singapore Petroleum Trading of shipping vessels for Company Limited) oil transportation

(24) SPC Vietnam (Blocks 102/106) Exploration, development British Virgin 100 100 Co. Ltd (d) and production of crude oil Islands (Held via SPC Production Company Ltd) and natural gas

Joint ventures

(1) FST Aviation Services Limited (c) Provision of warehousing, Hong Kong 25 25 (Held via Singapore Petroleum transporting and inspection Company (Hong Kong) Limited) services of aviation petroleum products for its shareholders

(2) ItalSing Petroleum Company Pte Ltd (a) Manufacturing and blending Singapore 50 50 of lubricants

(3) Jiangmen City Sinjiang Gas Co. Ltd (h) Processing, distributing and China - 50 (Held via Singapore Petroleum (China) marketing of LPG and lubricants Private Limited)

(4) Singapore Carbon Dioxide Company Sale of carbon dioxide products Singapore 50 50 Private Limited (c)

(5) Singapore Refining Company Refining crude oil Singapore 50 50 Private Limited (c)

(6) SPC Wearnes Pte. Ltd. (c) Bottling, storage, marketing, Singapore 50 50 (Held via Singapore Petroleum Venture distribution and sale of LPG Private Limited) (bottled and bulk)

(7) Tanker Mooring Services Company Provision of services for the Singapore 25 25 Private Limited (c) discharge of crude oil using the fixed berth jetty on Jurong Island

Associates

(1) Petmal Oil Corporation Sdn. Bhd. (d) (m) Marketing and distribution Malaysia 40 40 (Held via Singapore Petroleum Venture of petroleum products Private Limited)

(2) SP-CYC Venture Pte Ltd (c) Marketing, distribution and Singapore 40 40 (Held via Singapore Petroleum Venture trading of petroleum products and Private Limited) spare parts for motor vehicles, provision of ancillary services and investment holding

(3) Tiger Oil Corporation (i) Retailing of petroleum products Korea - 40.2 (Held via Singapore Petroleum Venture through service stations network Private Limited) and wholesaling to industrial, commercial and other retail customers



19. Listing of companies/entities in the Group (continued)The Group has the following interests which are held by the respective wholly owned subsidiaries:

PSCs/Exploration Permits Location Interest 2007 2006

% %

(1) Block B Petroleum Agreement (j) (Held via SPC Cambodia Ltd) Cambodia 33.33 30

(2) Block 04/36 (k) China 18.18 - (Held via Sino-American Energy LLC)

(3) Block 05/36 (k) China 23.08 - (Held via Sino-American Energy LLC)

(4) Block 26/18 China 100 - (Held via SPC E&P (China) Pte. Ltd.)

(5) Block 101-100/04 Vietnam 45 - (Held via Singapore Petroleum Vietnam Song Hong Co Ltd)

(6) Blocks 102 & 106 Vietnam 20 20 (Held via SPC Vietnam (Blocks 102/106) Co. Ltd)

(7) Exploration Permit T/47P Australia 35 - (Held via SPC Bass Pty Ltd)

(8) Kakap Production Sharing Contract Indonesia 15 15 (Held via SPC Kakap Limited)

(9) Sampang Production Sharing Contract (l) Indonesia 40 36 (Held via Singapore Petroleum Sampang Ltd)

Notes on auditors (a) Audited by Deloitte & Touche, Singapore.

(b) Audited by Messrs CWCC, Hong Kong. (c) Audited by other firms of certified public accountants.

(d) Unaudited

Notes on entities (e) Singapore Petroleum (Thailand) Co., Ltd. is a wholly owned subsidiary of Singapore Petroleum Venture Private

Limited (“SPV”). SPV holds 99.98% directly and the remaining 0.02% indirectly through its six wholly owned British Virgin Islands subsidiaries namely, Fullca Ltd., Glory Key International Limited, Orient Wise Group Limited, Prime Sea Limited, Straits Management Ltd. and Topwish Investments Ltd.

(f) PT. Sumber Prestasi Cemerlang is a wholly owned subsidiary of SPV. SPV holds 50% directly and the remaining 50% is held by SPV’s wholly owned subsidiary, Singapore Petroleum (Indonesia) Private Limited.

(g) Singapore Petroleum Sampang Ltd (“SPS”) is a wholly owned subsidiary of SPC Production Company Ltd. SPC Production Company Ltd holds 100% in SPS through its two wholly owned Cayman Islands subsidiaries namely, SP (Sampang) Ltd and Sampang Holdings Ltd each holding a 50% equity interest in SPS.




(h) Pursuant to a Sale and Purchase Agreement dated 29 November 2006, Singapore Petroleum (China) Private Limited had sold its 50% equity interest in Jiangmen City Sinjiang Gas Co. Ltd. The share sale transaction was completed in the first quarter of 2007.

(i) Pursuant to a Share Purchase Agreement dated 12 March 2007, SPV has sold its 40.16% interest in Tiger Oil Corporation. The share sale transaction was completed in the second quarter of 2007.

(j) SPC Cambodia Ltd (“SPC Cambodia”), and its co-venturers in Block B, PTTEP International Limited (“PTTEPI”) and Resourceful Petroleum Limited (“RPL”) have in the first quarter of 2007 jointly exercised their pre-emption rights to acquire the entire 10% participating interest of CE Cambodia B Ltd. Upon completion of the acquisition in the third quarter of 2007, SPC Cambodia and RPL each hold a 33.33% participating interest in Block B and PTTEPI the remaining 33.33%.

(k) Sino-American Energy LLC has a participating interest of 8.91% for existing producing fields CFD 11-1, CFD 11-2 and CFD 11-3/5 located in Block 04/36, and a participating interest of 7.82% for the unitised producing fields CFD 11-6, CFD 12-1 and CFD 12-1S which straddle between Block 04/36 and Block 05/36.

(l) Pursuant to the terms of the Sampang Production Sharing Contract (“PSC”), the Indonesian Government was entitled and had nominated PT Petrogas Oyong Jatim (“Petrogas”) to participate in a 10.0% undivided interest in the Sampang PSC. Petrogas has decided not to acquire the interest and SPC’s participating interest in the Sampang PSC therefore remains at 40.0%.

(m) SPV had on 23 March 2005 terminated the joint venture agreement dated 2 August 1993 entered into with Petmal Oil (Malaysia) Sendirian Berhad in respect of Petmal Oil Corporation Sdn. Bhd. (in liquidation) (“POC”). By an order of the Kuala Lumpur High Court dated 3 March 2007, POC has been ordered to be wound up.

20. Intangible exploration assets

The Group $’000

Cost At 1 January 2007 108,493Foreign currency translation adjustment (7,299)Additions 21,320Acquired on acquisition of a subsidiary 11,373Transfer to proved oil and gas properties (Note 21) (8,625)Transfer to construction-in-progress (Note 21) (5,734)At 31 December 2007 119,528

Cost At 1 January 2006 -Effect of retrospective adoption of FRS 106 104,454As restated 104,454Foreign currency translation adjustment (8,552)Additions 50,074Disposals (26,502)Exploration expenditure written off (10,981)At 31 December 2006 108,493

Exploration expenditure written off of $Nil (2006: $10,981,000) was included in operation expenses in the income statement.



21. Property, plant and equipment

Proved Freehold Leasehold Plant and oil and gas Construction- land land equipment properties in-progress Total $’000 $’000 $’000 $’000 $’000 $’000

The Group

Cost At 1 January 2007 62,842 134,095 1,091,195 96,329 69,240 1,453,701Foreign currency translation adjustment - - (6) (28,790) (4,157) (32,953)Additions - - 355 11,649 68,454 80,458Acquired on acquisition of subsidiary - - - 397,601 - 397,601Transfer from construction-in-progress - 8,754 9,860 91,892 (110,506) -Reclassifications (Note 20) - - - 8,625 5,734 14,359Disposals - - (2,966) - - (2,966)Drilling expense written off - - - - (4,414) (4,414)At 31 December 2007 62,842 142,849 1,098,438 577,306 24,351 1,905,786 Accumulated depreciation At 1 January 2007 - 31,427 528,437 44,744 - 604,608Foreign currency translation adjustment - - (9) (2,689) - (2,698)Depreciation charge - 6,049 38,490 46,663 - 91,202Disposals - - (1,902) - - (1,902)At 31 December 2007 - 37,476 565,016 88,718 - 691,210 Net book valueAt 31 December 2007 62,842 105,373 533,422 488,588 24,351 1,214,576

The Company

Cost At 1 January 2007 62,842 134,095 1,091,044 - 1,105 1,289,086Additions - - - - 31,490 31,490Transfer from construction-in-progress - 8,754 9,860 - (18,614) -Disposals - - (2,966) - - (2,966)At 31 December 2007 62,842 142,849 1,097,938 - 13,981 1,317,610 Accumulated depreciation At 1 January 2007 - 31,427 528,344 - - 559,771Depreciation charge - 6,049 38,466 - - 44,515Disposals - - (1,902) - - (1,902)At 31 December 2007 - 37,476 564,908 - - 602,384 Net book valueAt 31 December 2007 62,842 105,373 533,030 - 13,981 715,226




21. Property, plant and equipment (continued)

Proved Freehold Leasehold Plant and oil and gas Construction- land land equipment properties in-progress Total $’000 $’000 $’000 $’000 $’000 $’000

The Group

Cost At 1 January 2006 62,842 134,095 1,054,182 94,716 73,914 1,419,749Foreign currency translation adjustment - - (7) (8,188) (6,282) (14,477)Additions - - 36 9,555 48,244 57,835Transfer from construction-in-progress - - 39,955 - (39,955) -Disposals - - (2,971) - - (2,971)Adjustments - - - 246 (6,681) (6,435)At 31 December 2006 62,842 134,095 1,091,195 96,329 69,240 1,453,701 Accumulated depreciation At 1 January 2006 - 25,550 493,439 36,464 - 555,453Foreign currency translation adjustment - - (7) (3,515) - (3,522)Depreciation charge - 6,173 37,694 11,795 - 55,662Disposals - - (2,689) - - (2,689)Adjustments - (296) - - - (296)At 31 December 2006 - 31,427 528,437 44,744 - 604,608 Net book valueAt 31 December 2006 62,842 102,668 562,758 51,585 69,240 849,093

The Company

Cost At 1 January 2006 62,842 134,095 1,054,060 - 1,241 1,252,238Additions - - - - 39,819 39,819Transfer from construction-in-progress - - 39,955 - (39,955) -Disposals - - (2,971) - - (2,971)At 31 December 2006 62,842 134,095 1,091,044 - 1,105 1,289,086 Accumulated depreciation At 1 January 2006 - 25,550 493,348 - - 518,898Depreciation charge - 6,173 37,685 - - 43,858Disposals - - (2,689) - - (2,689)Adjustments - (296) - - - (296)At 31 December 2006 - 31,427 528,344 - - 559,771 Net book valueAt 31 December 2006 62,842 102,668 562,700 - 1,105 729,315



22. Due from/(to) subsidiaries (non-trade)(a) Due from subsidiaries The non-trade amounts due from subsidiaries consist of the following (Note 12):


$’000 $’000

Interest bearing loan, unsecured, repayable within 12 months from the balance sheet date 22,379 17,761 Other (interest-free, unsecured and repayable upon demand) 519,821 179,408 542,200 197,169

The weighted average interest rate at the balance sheet date on interest-bearing balances due from the subsidiaries is 4.71% (2006: 5.26%) per annum.

(b) Due to subsidiaries The non-trade amounts due to subsidiaries consist of the following (Note 27):


$’000 $’000

Interest bearing loan, unsecured, repayable within 12 months from the balance sheet date 11,570 6,235 Other (interest-free, unsecured and repayable upon demand) 60,635 54,058 72,205 60,293

The weighted average interest rate at the balance sheet date on interest-bearing balances due to subsidiaries is

3.92% (2006: 6.11%) per annum.

23. Due from associates (non-trade) The non-trade amounts due from associates are unsecured, interest-free and repayable upon demand. The Directors believe

that the carrying amount of the amount due from associates approximates their fair value.

24. Due from/(to) joint ventures (non-trade) The non-trade amounts due from/(to) joint ventures are unsecured, interest-free and repayable upon demand. The Directors

believe that the carrying amount of the amount due from/(to) joint ventures approximates their fair value. 25. Due to related corporations (non-trade) The non-trade amounts due to related corporations are unsecured, interest-free and repayable upon demand. The directors

believe that the carrying amount of the amount due to related corporations approximates their fair value.

26. Loan to an investee company The loan to an investee company is unsecured, bears interest at 10% (2006: 10%) per annum and has no fixed terms of

repayment. However, interest will be recognised on a receipt basis due to uncertainty over collectability. This loan is in turn provided by the investee company to PT Transportasi Gas Indonesia, incorporated in Indonesia and of which the Group has a 6% equity interest, for its pipeline infrastructure construction projects. This loan is in proportion to the Group’s equity interest and is denominated in United States dollar. The loan is not expected to be repaid within the next 12 months. Accordingly, this has been presented as non-current. The Directors believe that the carrying amount of the loan to the investee company approximates its fair value.




27. Trade and other payables


Trade payables to third parties 1,071,533 826,639 996,645 792,747 Due to subsidiaries (trade) - - - 187 Due to subsidiaries (non-trade) (Note 22(b)) - - 72,205 60,293 Due to joint ventures (trade) 114,616 54,620 114,525 54,533 Due to joint ventures (non-trade) (Note 24) 198,161 73,126 198,161 70,626 Due to related corporations (non-trade) (Note 25) 63 74 63 74 Other creditors 35,595 17,472 26,057 17,369 Accruals for operating expenses 8,711 5,608 8,279 5,282 1,428,679 977,539 1,415,935 1,001,111

The carrying amounts of trade and other payables approximate their fair values.

Trade and other payables are denominated in the following currencies:


Singapore Dollar 119,944 85,574 118,653 82,345United States Dollar 1,278,530 883,559 1,297,282 918,766Other 30,205 8,406 - - 1,428,679 977,539 1,415,935 1,001,111

28. Borrowings (unsecured)


Short-term loans 836,760 443,952 826,329 405,655

In 2006, short-term bank loans amounting to $15,430,000 was secured by a pledge of a fixed deposit of another subsidiary (Note 11). The amount was fully repaid in 2007.

Included in the Company’s short-term borrowings is an amount of $299,100,000 (2006: $Nil) from a subsidiary of a substantial shareholder contracted at normal commercial terms.

(a) Maturity of borrowings The current borrowings are unsecured and have an average maturity of 2.5 months (2006: 2 months) from the end

of the financial year.

(b) Currency risk The carrying amounts of total borrowings are all denominated in the United States dollar.

(c) Interest rates risks The weighted average effective interest rates per annum of total borrowings at the balance sheet date are as follows:

THE GROUP THE COmPANy 2007 2006 2007 2006 % % % %

United States Dollar 5.35 5.79 5.34 5.75

(d) Carrying amounts and fair values The carrying amounts of current borrowings approximate their fair values. The fair values are determined from a

discounted cash flow analysis, using a discount rate based upon the borrowing rates which the directors expect would be available to the Group and the Company at the balance sheet date.



29. Provision for retirement benefits

THE GROUP AND THE COmPANy 2007 2006 $’000 $’000

Balance at beginning of the financial year 6,419 6,199 Provision for the financial year 441 313 Payment for the financial year - (93) Adjustments – in liability 113 - Balance at end of the financial year 6,973 6,419 Present value of obligation 6,973 6,419 The principal actuarial assumptions used for accounting purposes as at 31 December 2007 are as follows:

THE GROUP AND THE COmPANy 2007 2006 % %

Discount rate applied to retirement obligations 3.0 3.0 Future salary increases* - -

* With effect from 1 January 2006, the Group calculates the retirement benefits based on the last drawn salary as at 31 December 2005. Any salary increases thereafter will not be included for the computation of the retirement benefits.

The amounts recognised in the income statements are as follows:


Current service expense 264 140 Interest expense 177 173 Expense recognised in the income statement 441 313

During the financial year, the Company engaged an independent professional valuation firm to conduct an actuarial valuation of the retirement benefit scheme to determine the retirement benefit expenses to be charged for the financial years ended/ending 31 December 2007, 2008 and 2009. The actuarial valuation was conducted based on the principal rules of the retirement scheme and actuarial assumptions.

30. Share capital

THE GROUP AND THE COmPANy No. of shares Share issued Capital ’000 $’000

2007 Balance at beginning of the financial year 515,685 617,278 Exercise of options 621 861 Balance at end of the financial year 516,306 618,139

2006 Balance at beginning of the financial year 502,580 571,216 Exercise of options 3,111 4,504 Restricted Share Plan 895 5,803 Conversion of convertible bonds 9,099 35,755 Balance at end of the financial year 515,685 617,278




30. Share capital (continued) All issued shares are fully paid.

In 2007, the Company issued 621,000 (2006: 3,111,000) ordinary shares upon the exercise of 621,000 (2006: 3,111,000) share options granted under the SPC Share Option Scheme 2000 at the exercise price of between $0.68 and $1.57 (2006: $0.68 and $1.57) per share.

The newly issued shares rank pari passu in all respects with the previously issued shares.

In 2006, the Company issued:

(i) 895,200 ordinary shares under the SPC Restricted Share Plan.

(ii) 9,098,921 ordinary shares were issued upon the exercise of conversion under the Company’s 5 year convertible bonds. The bonds were converted at the exchange rate of US$1: S$ of 1.6898 and at a conversion price of $3.90 per ordinary share.

(a) Treasury shares The Company acquired 1,412,000 shares (2006: 1,860,000) in the Company through purchase on the Singapore

Exchange during the year. The total amount paid to acquire the shares was $7,583,000 (2006: $8,140,000) and this was deducted against shareholders’ equity.

(b) Share options Share options were granted to employees and non-executive directors under the SPC Share Option Scheme 2000

(“2000, 1/2001, 2/2001, 1/2002, 2/2002, 1/2003 and 1/2004 Options”) which commenced on 28 August 2000. Movements in the total number of shares under options outstanding are as follows:

2007 2006 Number Number of shares of shares under options under options

Balance at beginning of the financial year 972,000 4,083,000 Exercised (621,000) (3,111,000) Balance at end of the financial year 351,000 972,000

The exercise price of the granted options is equal to the average of the closing prices of the Company’s ordinary shares on the SGX-ST for the three market days immediately preceding the date of grant. The vesting of granted options is conditional on the participants being in the service of the Company on vesting date.

Once the options are vested, they are exercisable for a contractual option term of 8 years for senior management and employees and 3 years for non-executive directors. The options may be exercised in full or in part in respect of 100 shares or a multiple thereof, on the payment of the exercise price. The persons to whom the options have been issued have no right to participate by virtue of the options in any share issue of any other company. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

No share options were granted during the financial year.



30. Share capital (continued)(b) Share options (continued) Movements in the number of shares under options outstanding at the end of the financial year and their exercise

prices are as follows:

The Group and the Company

Financial year ended 31 December 2007

At beginning Granted Exercised Forfeited At end of the during the during the during the of the Exercise financial year financial year financial year financial year financial year price Exercise period

Senior Management and Employees 2000 Options 18,000 - - - 18,000 $0.78 29.8.2002 – 27.8.2010 1/2001 Options 18,000 - - - 18,000 $0.68 18.4.2003 – 16.4.2011 2/2001 Options 21,000 - (1,000) - 20,000 $0.68 20.9.2003 – 18.9.2011 1/2002 Options 24,000 - (5,000) - 19,000 $0.75 4.4.2004 – 2.4.2012 2/2002 Options 60,000 - (31,000) - 29,000 $0.87 31.10.2004 – 29.10.2012 1/2003 Options 279,000 - (135,000) - 144,000 $0.92 18.2.2005 – 16.2.2013 1/2004 Options 518,000 - (415,000) - 103,000 $1.57 5.2.2006 – 3.2.2014

Non-Executive Directors 1/2004 Options 34,000 - (34,000) - - $1.57 5.2.2006 – 3.2.2009

972,000 - (621,000) - 351,000


At beginning Granted Exercised Forfeited At end of the during the during the during the of the Exercise financial year financial year financial year financial year financial year price Exercise period

Senior Management and Employees 2000 Options 18,000 - - - 18,000 $0.78 29.8.2002 – 27.8.2010 1/2001 Options 18,000 - - - 18,000 $0.68 18.4.2003 – 16.4.2011 2/2001 Options 25,000 - (4,000) - 21,000 $0.68 20.9.2003 – 18.9.2011 1/2002 Options 140,000 - (116,000) - 24,000 $0.75 4.4.2004 – 2.4.2012 2/2002 Options 100,000 - (40,000) - 60,000 $0.87 31.10.2004 – 29.10.2012 1/2003 Options 668,000 - (389,000) - 279,000 $0.92 18.2.2005 – 16.2.2013 1/2004 Options 2,922,000 - (2,404,000) - 518,000 $1.57 5.2.2006 – 3.2.2014

Non-Executive Directors 1/2004 Options 192,000 - (158,000) - 34,000 $1.57 5.2.2006 – 3.2.2009

4,083,000 - (3,111,000) - 972,000

Out of the outstanding options of 351,000 shares (2006: 972,000), options on 351,000 ordinary shares (2006: 972,000) were exercisable as at 31 December 2007.




30. Share capital (continued)(c) Restricted Share Plan (“RSP”) and Performance Share Plan (“PSP”) Details of the awards under the two share plans are as follows:

The Group and the Company

Financial year ended 31 December 2007 ¤ RSP 2006 RSP 2004 RSP 2005 RSP 2006 (non-executive RSP 2007 (employees) (employees) (employees) directors) (employees)

Balance at beginning of the financial year 363,600 858,100 1,559,100 - - Number of contingent shares awarded during the financial year - - - - 1,667,100 Number of contingent shares under awards cancelled/forfeited during the financial year - - - - (41,700) Number of contingent shares under awards adjusted at release of awards cancelled/ forfeited during the financial year - - (794,100) - - Number of contingent shares released during the financial year # # 765,000 # # Number of contingent shares awarded but not released during the financial year # # # # 1,625,400 Number of shares awarded during the financial year - - - 66,000 - Number of shares under awards vested during the financial year (363,600) (429,000) (255,000) (66,000) - Number of shares under awards forfeited during the financial year - (20,500) (30,800) - - Balance at end of the financial year - 408,600 479,200 - 1,625,400

Targeted vesting period 2005 – 2007 2006 – 2008 2007-2009 # 2008 – 2010 * Fair values at grant date $4.20 $5.75 $5.00 $5.00 $5.75

PSP 2004 PSP 2005 PSP 2006 PSP 2007 (key executives) (key executives) (key executives) (key executives)

Balance at beginning of the financial year 705,000 730,000 730,000 - Number of contingent shares awarded during the financial year - - - 730,000 Number of contingent shares under awards cancelled/forfeited during the financial year (144,600) - - - Number of contingent shares released during the financial year 560,400 # # # Number of contingent shares awarded but not released during the financial year - 730,000 730,000 730,000 Number of shares awarded during the financial year - - - - Number of shares under awards vested during the financial year (560,400) - - - Number of shares under awards forfeited during the financial year - - - - Balance at end of the financial year - 730,000 730,000 730,000

Targeted vesting period 2007 2008 2009 2010 * Fair values at grant date $3.70 $4.98 $5.00 $5.75

¤ Shares awarded to non-executive directors are vested upon award. # Not applicable * The fair values are based on the market price of the shares at the grant date.



30. Share capital (continued)(c) Restricted Share Plan (“RSP”) and Performance Share Plan (“PSP”) (continued)


¤ RSP 2005 RSP 2004 RSP 2005 (non-executive RSP 2006 (employees) (employees) directors) (employees)

Balance at beginning of the financial year 761,400 1,477,500 - - Number of contingent shares awarded during the financial year - - - 1,581,000 Number of contingent shares under awards cancelled/forfeited during the financial year - (27,000) - (21,900) Number of contingent shares under awards adjusted at release of awards cancelled/ forfeited during the financial year - (104,900) - - Number of contingent shares released during the financial year # 1,345,600 # # Number of contingent shares awarded but not released during the financial year # # # 1,559,100 Number of shares awarded during the financial year - - 66,000 - Number of shares under awards vested during the financial year (380,700) (448,500) (66,000) - Number of shares under awards forfeited during the financial year (17,100) (39,000) - - Balance at end of the financial year 363,600 858,100 - 1,559,100

Targeted vesting period 2005 – 2007 2006 – 2008 # 2007-2009 * Fair values at grant date $4.20 $5.75 $5.75 $5.00

PSP 2004 PSP 2005 PSP 2006 (key executives) (key executives) (key executives)

Balance at beginning of the financial year 705,000 - - Number of contingent shares awarded during the financial year - 730,000 730,000 Number of contingent shares under awards cancelled/forfeited during the financial year - - - Number of contingent shares released during the financial year # # # Number of contingent shares awarded but not released during the financial year 705,000 730,000 730,000 Number of shares awarded during the financial year - - - Number of shares under awards vested during the financial year - - - Number of shares under awards forfeited during the financial year - - - Balance at end of the financial year 705,000 730,000 730,000

Targeted vesting period 2007 2008 2009 * Fair values at grant date $3.70 $4.98 $5.00

¤ Shares awarded to non-executive directors are vested upon award. * The fair values are based on the market price of the shares at the grant date. # Not applicable.




31. Capital reserve The balance relates to an amount of retained profits of a related corporation capitalised by way of a bonus issue of shares.

The capital reserve is non-distributable.

32. Other reserves THE GROUP THE COmPANy 2007 2006 2007 2006 $’000 $’000 $’000 $’000

(a) Composition: Share awards and share options reserve 17,186 13,904 17,186 13,904 Fair value reserve 3,482 573 2,070 148 20,668 14,477 19,256 14,052

(b) Movements: (i) Share awards and share options reserve Balance at beginning of the financial year 13,904 8,781 13,904 8,781 Employee share award and share option scheme: - Value of employee services (Note 7) 11,155 10,926 11,155 10,926 - Share issue (7,873) (5,803) (7,873) (5,803) Balance at end of the financial year 17,186 13,904 17,186 13,904

(ii) Fair value reserve Balance at beginning of the financial year 573 511 148 599 Fair value gains/(losses) on available-for-sale financial assets (Note 14) 2,909 62 1,922 (451) Balance at end of the financial year 3,482 573 2,070 148

(iii) Equity component of convertible bonds Balance at beginning of the financial year - 1,936 - 1,936 Movement arising from conversion of convertible bonds into ordinary shares of the Company - (1,936) - (1,936) Balance at end of the financial year - - - -

Other reserves are non-distributable. 33. Dividends THE COmPANy 2007 2006 $’000 $’000

Dividends paid: Interim one-tier tax exempt dividend of 20 cents per share for the financial year ended 31 December 2007 103,119 -

Final one-tier tax exempt dividend of 20 cents per share for the financial year ended 31 December 2006 (2006: 20 cents) 103,209 103,116

Special one-tier tax-exempt dividend of 15 cents per share for the financial year ended 31 December 2006 (2006: 12 cents) 77,407 61,870 283,735 164,986

In respect of the current financial year, the directors have proposed a final one-tier tax-exempt dividend for 2007 of 40 cents (2006: 20 cents) per share amounting to $205,883,000 to be paid to shareholders on 12 May 2008. These

financial statements do not reflect this dividend payable, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2008 when it is approved and declared in the next Annual General Meeting.



34. Commitments As at the end of financial year, the Group and the Company have the following outstanding commitments:

(a) Operating – Exploration Commitments Certain joint ventures are required to incur minimum exploration costs of which the Group’s share amounted to

$25,475,000 (2006: $8,772,000) to maintain the PSCs.

(b) Capital commitments Capital expenditures not contracted for at the balance sheet date and not recognised in the financial statements

(excluding those relating to investments in associates and joint ventures (Note 17)) relating to plant and equipment are as follows:

THE GROUP AND THE COmPANy

2007 2006 $’000 $’000

Approved by the directors but not contracted for at the balance sheet date 274,045 251,150

(c) Operating lease commitments The Group and the Company leases land and building and various plant and machinery under non-cancellable

operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The lease expenditure charged to the income statement during the financial year is disclosed in Note 8.

The future aggregate minimum lease payable under non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities, are analysed as follows:

THE GROUP AND THE COmPANy

2007 2006 $’000 $’000

Not later than one year 11,718 5,093 Between two and five years 41,092 11,701 Later than five years 25,145 27,762 77,955 44,556




35. Interested person transactions In compliance with Rule 920(1) of the Listing Manual of the SGX-ST, a shareholders’ mandate was obtained for the

following types of interested person transactions (as defined in Chapter 9 of the Listing Manual). The aggregate value of these transactions conducted pursuant to the shareholders’ mandate during the financial year is as follows:

THE GROUP AND THE COmPANy Aggregate value of all interested person Aggregate value of transactions during the all interested person financial year (excluding transactions conducted transactions less than under shareholders’ $100,000 and mandate pursuant transactions conducted to Rule 920 during under shareholders’ the financial year mandate pursuant (excluding transactions Name of interested person to Rule 920) less than $100,000) 2007 2006 2007 2006 $’000 $’000 $’000 $’000

Sales of goods and services Keppel Corporation Group - - 11,675 10,592 PSA Corporation Group - - - 703 SembCorp Marine Group - - 29,719 21,090 Singapore Airlines Group - - 463,425 464,588 Temasek Holdings Group (Other than the above) - - 36,830 68,333

Purchases of goods and services Keppel Corporation Group - - 485 - PSA Corporation Group - - 9,850 10,368 Temasek Holdings Group (Other than the above) - - 17,527 29,245 Treasury transactions (interest income) Keppel Corporation Group - - 7,845 6,019

Management and support services Keppel Corporation Group - - 500 500 36. Related party transactions In addition to the related party information disclosed elsewhere in the financial statements, the following transactions took

place between the Group and the Company and related parties during the financial year on terms agreed by the parties concerned:

(a) Sales and purchases of goods and services


Sales to associates and joint ventures 29,148 31,194 29,148 31,194 Sales to related parties 165,873 139,226 11,400 8,051 Purchases from a joint venture 13,229 15,479 13,172 15,211 Purchases from related parties 1,666 74 1,666 74

Sales to associates, joint ventures and related parties and purchases of materials from the joint venture and related parties were carried out on commercial terms and conditions and at market prices. Related parties above refer to companies related to a substantial shareholder of the Company.

Outstanding balances at 31 December 2007, arising from sale/purchase of goods and services, are set out in Notes 12 and 27 respectively.



36. Related party transactions (continued)(b) Share options granted to key management No share options were granted to key management of the Group during the financial year. The total outstanding

number of share options granted to key management of the Group at the end of the financial year was Nil (2006: 320,000).

(c) Key management personnel compensation Key management personnel compensation is as follows:


Salaries and other short-term employee benefits 5,498 6,731 Post-employment benefits – contribution to CPF 53 55 Share awards and share options granted 5,654 6,285 11,205 13,071

Included in the above was total compensation for the Group and the Company, including share awards and deemed interest in share options for the executive director of the Company, amounted to $1,437,500 (2006: $1,750,000).

37. Segment information Primary reporting format – business segments

Exploration & Downstream Production Others Group $’000 $’000 $’000 $’000


Revenue 8,621,585 145,127 - 8,766,712 Segment result 523,165 52,363 16,291 591,819 Net unallocated income 1,297 593,116 Finance income 13,373 Finance expenses (38,604) Share of results of associates 744 Share of results of joint ventures 12,770 Profit before income tax 581,399 Income tax expense (73,058) Net profit attributable to equity holders of the Company 508,341

Segment assets 3,361,934 779,137 10,208 4,151,279 Unallocated assets 156,873 Consolidated total assets 4,308,152

Segment liabilities 1,399,060 50,054 2,336 1,451,450 Unallocated liabilities 1,066,209 Consolidated total liabilities 2,517,659

Other segment items Capital expenditure 34,584 67,194 - 101,778 Depreciation 44,538 46,664 - 91,202 Drilling expense written off - 4,414 - 4,414




37. Segment information (continued) Primary reporting format – business segments (continued)

Exploration & Downstream Production Others Group $’000 $’000 $’000 $’000


Revenue 8,525,043 49,171 - 8,574,214

Segment result 338,184 14,558 (5,366) 347,376 Net unallocated income 1,933 349,309 Finance income 11,911 Finance expenses (34,061) Share of results of associates 1,938 Share of results of joint ventures 9,379 Profit before income tax 338,476 Income tax expense (53,907) Net profit attributable to equity holders of the Company 284,569

Segment assets 2,652,565 334,503 3,550 2,990,618 Unallocated assets 149,564 Consolidated total assets 3,140,182

Segment liabilities 970,286 18,547 2,508 991,341 Unallocated liabilities 578,406 Consolidated total liabilities 1,569,747

Other segment items Capital expenditure 39,855 68,054 - 107,909 Depreciation 43,861 11,795 6 55,662 Write-down of inventories to net realisable value 11,488 - - 11,488 Exploration expenditure written off - 10,981 - 10,981

The Group has segmented its activities into downstream, exploration and production and others. The downstream activities include petroleum refining, marketing of products to airlines, commercial accounts, utilities, shipping accounts, operation of retail service stations, trading activities and the storage and terminalling of finished oil products. The exploration and production activities involve the exploration, development, production and sale of oil and gas.

Secondary reporting format - geographical segments

The Group’s two business segments operate in four main geographical areas:

Singapore The Group is headquartered and its principal operations include petroleum refining, marketing, trading and distribution of crude oil and petroleum products and the storage and terminalling of

refined products.

Hong Kong & China The operations in this area are principally bunkering and aviation sales activities, as well as exploration and production activities.

Indonesia The operations in this area are principally exploration, development, production and sale of oil and gas.

Other countries The business activities are principally aviation sales, product trading and distribution, as well as exploration activities.



37. Segment information (continued) Secondary reporting format - geographical segment (continued) With the exception of Singapore, Hong Kong and China, no other individual country contributed more than 10% of

consolidated sales and assets. Sales are based on the country in which the customer is located. Total assets and capital expenditure are shown by the geographical area where the assets are located.

Sales Total assets Capital expenditure 2007 2006 2007 2006 2007 2006 $’000 $’000 $’000 $’000 $’000 $’000

Singapore 7,996,930 8,024,013 3,423,614 2,711,933 31,489 39,819Hong Kong & China 586,975 410,656 468,910 72,432 3,716 36Indonesia 58,659 49,171 328,273 302,694 39,368 54,242Other countries 124,148 90,374 87,355 53,123 27,205 13,812 8,766,712 8,574,214 4,308,152 3,140,182 101,778 107,909

38. Financial risk management Financial risk management policies and objectives

The Group’s activities expose it to a variety of financial risks: market risk (including price risk, foreign currency risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the volatility in the oil and financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. As appropriate, the Group uses derivative financial instruments such as oil paper swaps, oil options, physical oil contracts, interest rate caps as well as freight forward contracts, foreign exchange contracts to hedge certain exposures.

The Refinery, Supply and Trading Business Unit of the Group carries out risk management for oil price risks whilst the Group Treasury and Middle Office manages the financial risks, with authority as delegated by the Board of Directors. The Group does not hold any derivative financial instruments for speculative purposes.

There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures these risks.

(a) Price risk The Group is exposed to price risk (due to volatility of oil prices) arising from its derivatives portfolio which comprises

of paper oil swaps and freight forward contracts (Note 15). The derivatives portfolio is marked-to-market with reference to quoted market prices at the balance sheet date.

The Group systematically quantifies and manages this risk exposure by implementing a Value-At-Risk (“VAR”) framework which measures the worst expected loss over a given time horizon under normal market conditions at a given confidence level. With the VAR framework, all trading business units are allocated a VAR limit which in turn dictates the trading units’ open position and stop-loss limits. These limits are monitored closely by the Middle Office. The Risk Management and Derivative Unit is responsible for hedging the Company’s oil inventory and refining margin price risks.

A sensitivity analysis has been performed based on the exposure to oil prices as at settlement date for the Group’s derivatives portfolio as at 31 December 2007, assuming that this portfolio is held till settlement date and there is no change in this derivatives portfolio in 2008. A 5% increase or decrease is used when reporting price risk internally to key management personnel and represents management’s assessment of the possible changes for the prices as at settlement date.

If the quoted market prices used to mark-to-market the derivatives portfolio had been 5% lower or higher and all other variables were held constant, the Group’s profit for the year ended 31 December 2007 would increase/decrease by $15,308,000 (2006: $6,079,000).

As the Group practises a flexible hedging ratio within a range endorsed by the Board of Directors, the derivatives portfolio will change during the year and hence, the sensitivity analysis is unrepresentative of the risk exposure during the year.




38. Financial risk management (continued)(b) Foreign exchange risk The Group is exposed to foreign exchange risk arising from business transactions in foreign currencies, mainly the

United States dollar.

The Group’s risk management principles with regard to its foreign currency denominated monetary assets, liabilities, commitments and cash flows is to match as far as possible the values of such assets and cash flows against similarly denominated liabilities and cash flows. Decisions on either holding net short or long positions in foreign currency denominated monetary assets or liabilities are taken on a case-by-case basis and by taking into consideration the amount and duration of the exposure, market volatility, economic trends and the requirements of the business.

In addition, the Group Treasury is responsible for hedging the net position of each foreign currency by using external currency borrowings, spot and forward currency contracts as appropriate.

The Company has a number of investments in foreign subsidiaries, whose net assets are exposed to currency translation risk. The Group currently designates certain foreign currency borrowings as a hedging instrument for the purpose of hedging the translation of its foreign operations.

At the reporting date, the carrying amounts of monetary assets and monetary liabilities denominated in foreign currencies other than the respective Group entities’ functional currencies are as follows:

THE GROUP THE COmPANy Assets Liabilities Assets Liabilities 2007 2006 2007 2006 2007 2006 2007 2006 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

US dollar 1,812,062 1,185,444 2,137,116 1,330,711 1,792,814 1,174,104 2,137,116 1,330,711 Others 24,121 3,382 - - 24,030 3,254 - -

Included in the above table, is an amount of $43,455,000 (2006 : $46,290,000) of United States dollar borrowings which is designated as a net investment hedge by the Company.

A sensitivity analysis has been performed based on the outstanding foreign currency denominated monetary items as detailed in the above table, based on a 5% increase and decrease in the United States dollar against the functional currency of each Group entity. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible changes in foreign exchange rates.

If the United States dollar strengthen or weaken by 5% against the functional currency of each Group entity and all other variables were held constant:

i) the Group’s and Company’s profit for the year ended 31 December 2007 would decrease/increase by $14,080,000 and $15,042,000 respectively (2006: $4,646,000 and $5,178,000).

ii) the Group’s and Company’s other equity reserves, due to net investment hedge, would decrease/increase by $2,173,000 (2006: $2,314,000).

As other foreign currencies denominated monetary items are not significant, accordingly a sensitivity analysis has not been performed.



38. Financial risk management (continued)(c) Cash flow and fair value interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

As the Group has no significant interest-bearing assets and balances its short-term borrowings with short-term cash deposits, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. In addition as at balance sheet date, the Group has not entered into any interest rate derivative contracts.

The tables below set out the Group and the Company’s exposure to interest rate risks. Included below are the assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.

Variable rates Fixed rates Non- Less than Less than 6 to 12 1 to 5 interest 6 months 6 months months years bearing Total $’000 $’000 $’000 $’000 $’000 $’000

The Group At 31 December 2007 Cash and bank balances 68,499 371,918 - - 34,673 475,090 Trade and other receivables - - - - 1,357,532 1,357,532 Restricted cash deposit - - 4,324 - - 4,324 Other assets - - - - 2,471,206 2,471,206 Total assets 68,499 371,918 4,324 - 3,863,411 4,308,152

Borrowings - 836,760 - - - 836,760 Other liabilities - - - - 1,680,899 1,680,899 Total liabilities - 836,760 - - 1,680,899 2,517,659

At 31 December 2006 Cash and bank balances 97,998 305,102 - - 18,118 421,218 Trade and other receivables - - - - 997,426 997,426 Available-for-sale assets - - - - 8,430 8,430 Other assets - - - - 1,713,108 1,713,108 Total assets 97,998 305,102 - - 2,737,082 3,140,182

Borrowings - 403,988 39,964 - - 443,952 Other liabilities - - - - 1,125,795 1,125,795 Total liabilities - 403,988 39,964 - 1,125,795 1,569,747

The Company At 31 December 2007 Cash and bank balances 41,832 355,000 - - 16,113 412,945 Trade and other receivables - - - - 1,786,902 1,786,902 Other assets - - - - 1,885,888 1,885,888 Total assets 41,832 355,000 - - 3,688,903 4,085,735

Borrowings - 826,329 - - - 826,329 Other liabilities - - - - 1,581,454 1,581,454 Total liabilities - 826,329 - - 1,581,454 2,407,783

At 31 December 2006 Cash and bank balances 83,330 288,000 - - 12,147 383,477 Trade and other receivables - - - - 1,121,279 1,121,279 Available-for-sale assets - - - - 4,340 4,340 Other assets - - - - 1,517,258 1,517,258 Total assets 83,330 288,000 - - 2,655,024 3,026,354

Borrowings - 365,691 39,964 - - 405,655 Other liabilities - - - - 1,134,068 1,134,068 Total liabilities - 365,691 39,964 - 1,134,068 1,539,723




38. Financial risk management (continued)(d) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial

loss to the Group. The Group’s Credit and Receivables Policy provides guidelines to transact with creditworthy counterparties and to obtain sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and credit reviews of the counterparties are reviewed by the Credit Committee and the credit limits revised where appropriate. The Group has no significant concentration of credit risk.

The carrying amount of financial assets recorded in the financial statements, grossed up for any allowance for losses, represents the Group’s maximum exposure to credit risk without taking into account the value of any collateral obtained.

The aging analysis of trade receivables that are past due but not impaired is as follows:


Past due: Less than 3 months 26,292 25,144 339,278 41,648 3 to 6 months - 340 9,961 1,803 Over 6 months 1,145 881 186,339 167,148 Total 27,437 26,365 535,578 210,599

Impaired receivables, individually assessed: Overdue debtors assessed with high risk of non recoverability 3,131 4,990 2,119 3,954 Less : Provision for impairment (3,131) (4,990) (2,119) (3,954) Total - - - -

(e) Liquidity risk The Group Treasury manage liquidity risk by maintaining sufficient cash and marketable securities to enable the

Group to meet normal operating commitments, having an adequate amount of committed credit facilities and the ability to close market positions at a short notice.

At 31 December 2007, the Company had in place a Multicurrency Debt Issuance Programme of US$1.0 billion which was yet to be drawn down.

(f) Capital risk The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while

maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, which includes the borrowings (Note 28), cash and cash equivalents (Note 11) and equity attributable to equity holders of the parent, comprising issued capital (Note 30), reserves (Note 31 and Note 32) and retained earnings.

Management reviews the capital structure regularly and manages the overall capital structure through the payment of dividends, share buy-backs as well as the issue of new debt or the redemption of existing debt.



39. New accounting standards and FRS interpretations Certain new accounting standards, amendments and interpretations to existing standards have been published and they

are mandatory for accounting periods beginning on or after 1 January 2008. The Group and the Company do not expect the adoption of these accounting standards, amendments and interpretations to have a material impact on the financial statements for the financial year ended 31 December 2007, except for the following:

FRS 108 Operating Segments FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the financial performance of its

operating segments based on the information used internally by management for evaluating segment performance and deciding on allocation of resources.

The Group will apply FRS 108 from 1 January 2009 and provide comparative information that conforms to the requirements of FRS 108.

Revised FRS 23 Borrowing Costs The revised standard removes the option to recognise immediately as an expense borrowing cost that are attributable to

qualifying assets, except for those borrowing costs on qualifying assets that are measured at fair value or inventories that are manufactured or produced in large quantities on a repetitive basis.

The Group will apply the revised FRS 23 from 1 January 2009. As the Group has been capitalising the relevant borrowing costs, the revised standard is not expected to have any impact on the Group.

40. Authorisation of financial statements These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Singapore

Petroleum Company Limited dated 29 February 2008.



Singapore Petroleum Company Limited Report to Shareholders 2007 135Corporate Directory

corporate directory

BOARD OF DIRECTORSChoo Chiau Beng (Chairman)Koh Ban Heng Bertie Cheng Shao ShiongGeoffrey John KingTimothy Ong Teck MongChin Wei-Li, Audrey MarieGoon Kok-LoonTeo Soon HoeCheng Hong Kok

ExECUTIvE COmmITTEEChoo Chiau Beng (Chairman)Koh Ban HengCheng Hong KokGoon Kok-Loon

NOmINATING & REmUNERATION COmmITTEE Bertie Cheng Shao Shiong (Chairman)Choo Chiau Beng Chin Wei-Li, Audrey Marie Geoffrey John King

AUDIT COmmITTEE Goon Kok-Loon (Chairman)*Chin Wei-Li, Audrey Marie Bertie Cheng Shao ShiongGeoffrey John King

RISK COmmITTEE (FORmED ON 30 JANUARy 2008)Chin Wei-Li, Audrey Marie (Chairperson)Cheng Hong KokGeoffrey John King

REGISTERED OFFICE1 Maritime Square #10-10HarbourFront CentreSingapore 099253

REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd. 3 Church Street #08-01Samsung HubSingapore 049483

AUDITORSDeloitte & Touche6 Shenton Way #32-00DBS BuildingSingapore 068809Partner-in-charge: Aric Loh Siang KheeDate of appointment: 25 April 2007

SOLICITORSRajah & Tann LLP4 Battery Road #26-01Bank of China BuildingSingapore 049908

Allen & GledhillOne Marina Boulevard #28-00Singapore 018989

* As part of a rotational change, Mr Goon Kok-Loon was appointed Chairman of the Audit Committee with effect from 30 January 2008 in place of Dr Chin Wei-Li, Audrey Marie, who remains as a member of the committee.

Singapore Petroleum Company Limited Report to Shareholders 2007136 Financial Calendar

financial calendar

End of Financial Year 31 December 2007

Announcement of 2007 Full Year Results 30 January 2008

Despatch of Report to Shareholders 9 April 2008

Announcement of 2008 First Quarter Results 22 April 2008

Annual General Meeting 23 April 2008

2007 proposed final dividend - Book Closure Dates 5 p.m., 29 – 30 April 2008 - Payment Date 12 May 2008

Announcement of 2008 Second Quarter and Half Year Results 29 July 2008

Announcement of 2008 Third Quarter and Nine Months Results 21 October 2008

Singapore Petroleum Company Limited Report to Shareholders 2007 137Shareholdings Statistics

shareholdings statisticsas at 10 march 2008

Total Issue Shares : 516,318,357Class of Shares : Ordinary sharesVoting Rights : One vote per share

Distribution of Shareholdings*

No. of No. ofSize of Shareholdings Shareholders % Shares %

1 - 999 281 3.09 87,497 0.021,000 -10,000 7,982 87.87 22,441,248 4.3510,001 - 1,000,000 806 8.87 40,933,452 7.931,000,001 and above 15 0.17 452,653,060 87.70

Total: 9,084 100.00 516,115,257 100.00

Twenty Largest Shareholders*

No. ofName Shares %#

1. Keppel Oil and Gas Services Pte Ltd 234,522,797 45.442. DBS Nominees Pte Ltd 79,578,474 15.423. HSBC (Singapore) Nominees Pte Ltd 40,314,107 7.814. Citibank Nominees Singapore Pte Ltd 25,629,568 4.975. DBSN Services Pte Ltd 18,889,007 3.666. United Overseas Bank Nominees Pte Ltd 18,058,020 3.507. Raffles Nominees Pte Ltd 16,654,575 3.238. Morgan Stanley Asia (S’pore) Securities Pte Ltd 8,023,840 1.559. DB Nominees (S) Pte Ltd 3,334,854 0.6510. Merrill Lynch (S’pore) Pte Ltd 1,753,698 0.3411. OCBC Nominees Singapore Pte Ltd 1,369,100 0.2712. Royal Bank Of Canada (Asia) Ltd 1,172,000 0.2313. Phillip Securities Pte Ltd 1,145,000 0.2214. SBS Nominees Pte Ltd 1,121,000 0.2215. BNP Paribas Nominees S’pore Pte Ltd 1,087,020 0.2116. HL Bank Nominees (S) Pte Ltd 929,000 0.1817. UOB Kay Hian Pte Ltd 855,000 0.1718. Kim Eng Securities Pte. Ltd. 789,000 0.1519. DBS Vickers Securities (S) Pte Ltd 777,000 0.1520. OCBC Securities Private Ltd 707,040 0.14

Total: 456,710,100 88.51

Note: * Based on CDP Records as at 10 March 2008# Based on 516,115,257 issued shares (excluding 203,100 shares held as treasury shares, representing 0.04% of the total issued shares of the Company).

Substantial Shareholders

No. of SharesShareholders Direct Interest Deemed Interest % of Shares

Temasek Holdings (Private) Limited 235,861,797 45.70Keppel Oil and Gas Services Pte Ltd 234,522,797 45.44Keppel Corporation Limited 234,522,797 45.44

Notes:(i) By operation of Section 7 of the Companies Act, Temasek Holdings (Private) Limited is deemed to be interested in the 235,861,797 shares held by the DBS group

of companies and the Keppel group of companies.(ii) By operation of Section 7 of the Companies Act, Keppel Corporation Limited is deemed to be interested in 234,522,797 shares held by the Keppel Oil and Gas

Services Pte Ltd.

Free Float Based on the information available to the Company as at 10 March 2008 and in compliance with Rule 723 of the SGX-ST Listing Manual, approximately 54% of the issued ordinary shares of the Company is held by the public

Singapore Petroleum Company Limited Report to Shareholders 2007138 Share Performance

share performance

Share prices 2007Last Transacted 7.57High 9.05Low 4.04Average 5.93

Total volume for year 2007 719,036,000

100,000

80,000

60,000

20,000

0

Volume (’000) Share prices ($)

Turnover High and Low Prices

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

40,000

0

2

4

6

8

10

Singapore Petroleum Company Limited Report to Shareholders 2007 139Notice of Annual General Meeting/

Closure of Books

notice of annual general meeting/closure of books

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the shareholders of the Company will be held in the Olivia Room, Level Four, Raffles City Convention Centre, Singapore 178882 on 23 April 2008 at 3 p.m. to transact the following business:

AS ORDINARy BUSINESS

1. To receive and adopt the Directors’ Report and Audited Accounts for the year ended Resolution 1 31 December 2007.

2. To declare a final tax exempt one-tier dividend of 40 cents per share for the financial year ended Resolution 2 31 December 2007 (2006: 35 cents per share).

3. To approve Directors’ Fees of $264,000 for the year ended 31 December 2007 (2006: $264,000). Resolution 3

4. To re-elect the following Directors each of whom will retire pursuant to Article 109 of the Company’s Articles of Association and who, being eligible, will offer themselves for re-election: (a) Mr Koh Ban Heng Resolution 4(a) (b) Mr Geoffrey John King Resolution 4(b) (c) Dr Chin Wei-Li, Audrey Marie Resolution 4(c)

5. To re-elect Mr Bertie Cheng Shao Shiong who, having attained the age of 70 years after the date Resolution 5 of the last Annual General Meeting will retire pursuant to Section 153(2) of the Companies Act (Cap. 50) (the “Companies Act”) and who, being eligible, will offer himself for re-election pursuant to Section 153(6), to hold office from the date of this Annual General Meeting until the next Annual General Meeting. 6. To re-appoint Auditors and authorise the Directors to fix their remuneration. Resolution 6

AS SPECIAL BUSINESS

To consider and, if thought fit, to approve, with or without modification, the following resolutions as Ordinary Resolutions:

7. That:

(a) for the purposes of the Companies Act, the exercise by the Directors of the Company of Resolution 7 all the powers of the Company to purchase or otherwise acquire the shares in the capital of the Company (the “Shares”) not exceeding in aggregate the Prescribed Limit (as hereinafter defined), at such price(s) as may be determined by the Directors of the Company from time to time up to the Maximum Price (as hereinafter defined), whether by way of:

(i) market purchases (each a “Market Purchase”) on the Singapore Exchange Securities Trading Limited (“SGX-ST”); and/or

(ii) off-market purchases (each an “Off-Market Purchase”) effected otherwise than on the SGX-ST in accordance with any equal access scheme(s) as may be determined or formulated by the Directors of the Company as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with all other provisions of the Companies Act and listing rules of the SGX-ST as may for the time being be applicable, be and is hereby authorised and approved generally and unconditionally (the “Share Buyback Mandate”);



Notice of Annual General Meeting/Closure of Books

(b) unless revoked or varied by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Buyback Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the passing of this Resolution and expiring on the earlier of:

(i) the date on which the next Annual General Meeting of the Company is held or required by law to be held;

(ii) the date on which the share buybacks are carried out to the full extent mandated; or

(iii) the date on which the authority contained in the Share Buyback Mandate is revoked or varied;

(c) in this Resolution:

“Prescribed Limit” means ten per cent of the total number of issued Shares excluding treasury shares as at the date of the last Annual General Meeting or at the date of the passing of this Ordinary Resolution whichever is higher unless the Company has effected a reduction of the share capital of the Company in accordance with the applicable provisions of the Companies Act, at any time during the Relevant Period (as hereinafter defined), in which event the total number of issued Shares shall be taken to be the total number of issued Shares as altered (excluding any treasury shares that may be held by the Company from time to time); and “Maximum Price” in relation to a Share to be purchased, means an amount (excluding brokerage, stamp duties, applicable goods and services tax and other related expenses) not exceeding:

(i) in the case of a Market Purchase: 105 per cent of the Average Closing Price;

(ii) in the case of an Off-Market Purchase: 120 per cent of the Average Closing Price,

where:

“Average Closing Price” means the average of the closing market prices of a Share over the last five market days (a “market day” being a day on which the SGX-ST is open for trading in securities), on which transactions in the Shares were recorded, in the case of Market Purchases, preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant five-day period, or in the case of Off-Market Purchases, before the Day of the Making of the Offer (as hereinafter defined) pursuant to the Off-Market Purchase; “Relevant Period” means the period commencing from the date on which the last Annual General Meeting was held and expiring on the date the next Annual General Meeting is held or is required by law to be held, whichever is the earlier, after the date of this Ordinary Resolution; and “Day of the Making of the Offer” means the day on which the Company announces its intention to make an offer for the purchase of Shares from shareholders of the Company stating the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and

Singapore Petroleum Company Limited Report to Shareholders 2007 141Notice of Annual General Meeting/

Closure of Books

(d) the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated by this Resolution.

8. That authority be and is hereby given to the Directors of the Company to: Resolution 8

(a) issue Shares (as defined in Resolution 7 above) in the capital of the Company whether by way of rights, bonus or otherwise, including any capitalisation pursuant to Article 151 of the Company’s Articles of Association of any sum for the time being standing to the credit of any of the Company’s reserve accounts or any sum standing to the credit of the profit and loss account or otherwise available for distribution; and/or (b) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares;

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and (notwithstanding that the authority so conferred by this Resolution may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the Directors while the authority was in force, provided that:

(i) the aggregate number of Shares to be issued pursuant to this Resolution (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution and including Shares which may be issued pursuant to any adjustments effected under any relevant Instrument), does not exceed 50 per cent of the total number of issued Shares excluding treasury shares, in the capital of the Company (as calculated in accordance with sub-paragraph (ii) below), of which the aggregate number of Shares to be issued other than on a pro rata basis to existing shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution and including Shares which may be issued pursuant to any adjustments effected under any relevant Instrument) does not exceed 20 per cent of the total number of issued Shares excluding treasury shares in the capital of the Company (as calculated in accordance with sub-paragraph (ii) below); (ii) For the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (i) above, the percentage of total number of issued Shares excluding treasury shares in the capital of the Company shall be calculated based on the total number of issued Shares excluding treasury shares in the capital of the Company as at the date of the passing of this Resolution after adjusting for:

(aa) new Shares arising from the conversion or exercise of convertible securities or employee share options on issue as at the date of the passing of this Resolution; and

(bb) any subsequent consolidation or sub-division of Shares; (iii) in exercising the power to make or grant Instruments (including the making of any adjustments under the relevant Instrument), the Company shall comply with the provisions of the listing manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and



(iv) (unless revoked or varied by the Company in general meeting), the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting is required by law to be held whichever is the earlier.

9. (a) That approval be and is hereby given to the Directors to offer and grant options in Resolution 9 accordance with the provisions of the SPC Share Option Scheme 2000 and/or to grant awards in accordance with the provisions of the SPC Restricted Share Plan and/or the SPC Performance Share Plan; and (b) That approval be and is hereby given to the Directors to exercise full powers of the Company to issue, allot or otherwise dispose of Shares in the capital of the Company as may be required to be issued, allotted or disposed, in connection with or pursuant to the exercise of the options granted under the SPC Share Option Scheme 2000 and/or such number of Shares as may be required to be issued or allotted pursuant to the vesting of awards under the SPC Restricted Share Plan and/or the SPC Performance Share Plan; Provided that the aggregate number of Shares to be issued and allotted pursuant to the SPC Share Option Scheme 2000, the SPC Restricted Share Plan and the SPC Performance Share Plan shall not exceed 15 per cent of the total number of issued Shares excluding treasury shares in the capital of the Company from time to time. 10. (a) That approval be and is hereby given, for the purposes of Chapter 9 of the listing manual Resolution 10 (“Chapter 9”) of the SGX-ST, for the Company, its subsidiaries and target associated companies or any of them, to enter into any of the transactions falling within the types of Interested Person Transactions, as set out in the Company’s Circular to Shareholders dated 30 May 1997 (the “Circular”) and as amended by shareholders’ resolutions on 21 June 1999 and 14 May 2003 (collectively the “Updates to the Circular”), with any party who is of the class of Interested Persons described in the Circular as amended by the Updates to the Circular, provided that such transactions are carried out in the ordinary course of business, on normal commercial terms and in accordance with the guidelines and review procedures for Interested Person Transactions as set out in the Circular and amended by the Updates to the Circular (the “Shareholders’ Mandate”); (b) the Shareholders’ Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting is required by law to be held whichever is the earlier; and (c) the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including, without limitation, executing all such documents as may be required) as they may consider expedient or necessary or in the interests of the Company to give effect to the Shareholders’ Mandate and/or this Resolution. 11. To transact such other business which can be transacted at an Annual General Meeting. Resolution 11



NOTICE IS ALSO HEREBY GIVEN that the Transfer Books and the Register of Members of the Company will be closed from 5 p.m., 29 to 30 April 2008, both days inclusive, for the preparation of dividend warrants. Duly completed transfers received by the Company’s registrar, Boardroom Corporate & Advisory Services Pte Ltd, 3 Church Street #08-01, Samsung Hub, Singapore 049483, up to the close of business at 5 p.m. on 29 April 2008 will be registered to determine shareholders’ entitlement to the proposed dividend. The proposed final tax exempt one-tier dividend if approved at the Annual General Meeting will be paid on 12 May 2008.

BY ORDER OF THE BOARD

HELEN CHONG/LEE SEOK HIANSecretariesSingapore, 9 April 2008


Singapore Petroleum Company Limited Report to Shareholders 2007144 Singapore Petroleum Company Limited Report to Shareholders 2007

Note:

A member of the Company is entitled to appoint a proxy to attend the meeting and vote in his stead. A proxy need not be a member of the Company.

The instrument appointing a proxy must be deposited at the registered office of the Company, 1 Maritime Square #10-10, HarbourFront Centre, Singapore 099253, not less than 48 hours before the time appointed for holding the Annual General Meeting. Members intending to deposit their instrument appointing a proxy on Saturdays, Sundays or after office hours, will have to deposit the same in the Company’s mail box located next to Lift Lobby A on the ground floor of HarbourFront Centre.

Explanatory Notes on:

Special Business:

Ordinary Resolution No. 2, relates to the proposal for the payment of a final total tax exempt one-tier dividend of 40 cents per share (further to the interim tax exempt one-tier dividend of 20 cents per share paid to shareholders on 22 August 2007).

Ordinary Resolution Nos. 4 and 5, relating to the retirement and re-election of Directors, details and information of these Directors may be found in the Board and Directors section in the Company’s Annual Report.

Ordinary Resolution No. 7 is to renew the Share Buyback Mandate, which was originally approved by the shareholders on 26 April 2006. Please refer to Appendix 1 to this Notice of Annual General Meeting for details.

Ordinary Resolution No. 8 if passed, will empower the Directors from the date of the Annual General Meeting until the date of the next Annual General Meeting to issue further Shares and Instruments in the Company, including a bonus or rights issue. The maximum number of Shares, which the Directors may issue under this Resolution shall not exceed the quantum set out in the Resolution.

Ordinary Resolution No. 9 if passed, will empower the Directors to take certain actions relating to the SPC Restricted Share Plan, the SPC Performance Share Plan and the SPC Share Option Scheme 2000. Directors may exercise their power to issue and allot Shares in the Company pursuant to the aforesaid grant or release of share awards and/or exercise of options, provided that the aggregate number of Shares to be issued and allotted shall not exceed 15 per cent of the total number of issued Shares excluding treasury shares in the capital of the Company from time to time. This authority is in addition to the general authority to issue Shares sought under Ordinary Resolution No. 8.

Ordinary Resolution No. 10 if passed, will renew the mandate given by shareholders to the Company on 23 June 1997 (last amended on 14 May 2003 and approved on 25 April 2007) to allow the Company and its subsidiaries and target associated companies to enter into transactions with Interested Persons as defined in Chapter 9 of the listing manual of the SGX-ST. Please refer to Appendix 2 to this Notice of Annual General Meeting for details.


Singapore Petroleum Company LimitedCo Reg No: 196900291N

(Incorporated in the Republic of Singapore)

ANNUAL GENERAL mEETING

I/We__________________________________________________________________________________________________________ (name)

of___________________________________________________________________________________________________________(address) being a member/members of SINGAPORE PETROLEUM COMPANY LIMITED (the “Company”) hereby appoint:

and/or (delete as appropriate)

as my/our proxy/proxies to attend and vote for me/us and my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held on 23 April 2008 at 3 p.m. in the Olivia Room, Level Four, Raffles City Convention Centre, Singapore 178882 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/their discretion. Only one joint proxy may vote on a Resolution put to the vote and decided by a show of hands.

* Please indicate your vote “For” or “Against” with an “X” within the box provided.** If you wish to exercise all your votes “For” or “Against”, please indicate with an “X” within the box provided. Alternatively, please indicate the number of votes as appropriate.

Dated this _______ day of ____________ 2008

_____________________________________Signature(s) or Common Seal of Member(s)

ImPORTANT: Please read the notes on the overleaf.

proXy form

ImPORTANT1. For investors who have used their CPF moneys to buy shares in the capital

of Singapore Petroleum Company Limited, this Circular is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Annual General Meeting as observers have to submit their requests through their respective agent banks so that their agent banks may register, within the specified timeframe, with Singapore Petroleum Company Limited. (Agent banks: please refer to Note No. 7 below on the required details).

Proportion of Shareholdings %

NRIC/Passport Number

Name Address

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total number of shares held

Proportion of Shareholdings %

NRIC/Passport Number

Name Address

To be used in the event of a poll

To be used ona show of hands

ResolutionsFor* Against*

Number of votes

For**

Number of votes Against**

Ordinary Business1. Adoption of Directors’ Report and Accounts.2. Declaration of Dividends. 3. Approval of Directors’ Fees.4(a) Re-election of Mr Koh Ban Heng.4(b) Re-election of Mr Geoffrey John King.4(c) Re-election of Dr Chin Wei-Li, Audrey Marie.5. Re-election of Mr Bertie Cheng Shao Shiong.6. Re-appointment of Auditors.Special Business 7. Shareholders’ Mandate for Share BuyBack.8. Authority to issue additional Shares in the Company and make/grant/offer

Instruments.9. Grant of options and/or share awards and issue of additional Shares pursuant

to the SPC Share Option Scheme 2000, SPC Restricted Share Plan and/or SPC Performance Share Plan.

10. Shareholders’ Mandate for Interested Person Transactions.11. Any Other Business.

Notes:

1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act of Singapore, Cap 50), you should insert that number of shares. If you only have shares registered in your name in the Register of Members, you should insert that number of shares. However, if you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members.

2. A Member may appoint not more than two (2) proxies to attend and vote at the same General Meeting. A Member appointing more than one (1) proxy shall specify the percentage of shares to be represented by each proxy and if no percentage is specified, the first named proxy shall be deemed to represent one hundred (100) per cent of the shareholding and the second named proxy shall be deemed to be an alternate to the first named. The Company shall be entitled (i) to reject any instrument of proxy executed by a Depositor if the Depositor’s name does not appear in the Depository Register forty eight (48) hours prior to the commencement of the relevant General Meeting as certified by CDP to the Company, and (ii) for the purpose of a poll, to treat an instrument of proxy executed by a Depositor as representing the number of shares equal to the number of shares appearing against his name in the Depository Register referred to in (i) above, notwithstanding the number of shares actually specified in the relevant instrument of proxy.

3. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 1 Maritime Square #10-10, HarbourFront Centre, Singapore 099253 not less than 48 hours before the time appointed for the Annual General Meeting. Members intending to deposit their instrument appointing a proxy on Saturdays, Sundays or after office hours, will have to deposit the same in the Company’s mail box located next to Lift Lobby A on the ground floor of HarbourFront Centre.

The Company SecretarySingapore Petroleum Company Limited

1 Maritime Square #10-10HarbourFront CentreSingapore 099253

4. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

5. A corporation which is a Member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act of Singapore (Cap. 50).

6. The Company shall be entitled to reject the instrument appointment a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Members whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such Members are not shown to have shares entered against their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company.

7. Agent banks acting on the request of CPF investors who wish to attend the Annual General Meeting as observers are required to submit in writing, a list with details of the investor’s name, NRIC/Passport number, address and number of shares held. The list, signed by an authorised signatory of the agent bank, has to reach the Company Secretary at the registered office of the Company not less than 48 hours before the time appointed for holding the Annual General Meeting.

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Singapore Petroleum Company Limited(Incorporated in the Republic of Singapore)

1 Maritime Square #10-10HarbourFront CentreSingapore 099253Tel: (65) 6276 6006 Fax: (65) 6275 6006 Website: www.spc.com.sgEmail: [email protected]

Co Reg No: 196900291N

This annual report is printed on recycled paper

spc ar 07 full

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