The situation in the oil industry remains quite challenging.

　　In the fourth quarter of 2015, international oil prices continued their downward trend at low levels, putting further pressure on the oil and gas industry. Although industry production remained generally stable, profit margins declined even more sharply, and businesses faced increasingly severe operational challenges.

　　Looking at the full year as a whole, the industry is facing the major challenge of persistently low oil prices, which have led to a significant decline in exploration and upstream production profits. At the same time, demand for natural gas and downstream refined oil products—especially diesel—has slowed markedly, driving down prices and significantly impacting the industry's overall profitability. In 2015, oil and gas extraction profits fell by approximately 69% year-on-year, reaching a historic low.

　　Since 2015, suppressed by factors such as oversupply and a strengthening U.S. dollar, the annual average WTI price stood at $48.76 per barrel, down $44.15 per barrel year-on-year—a decline of 47.52%. Meanwhile, the average Brent price reached $53.6 per barrel, falling $45.85 per barrel compared to the previous year, representing a drop of 46.11%. Notably, international oil prices experienced a sharp decline in December, with WTI and Brent averaging $37.3 and $38.9 per barrel, respectively. These figures marked month-on-month decreases of $5.6 and $7.1 per barrel, corresponding to declines of 13% and 15.3%, respectively.

　　In 2016, the oil industry continued to face a rather challenging situation. From an oil price perspective, during the first quarter of 2016, the global oil supply and demand fundamentals remained relatively loose, causing international oil prices to fluctuate at low levels. It is expected that in 2016, WTI and Brent crude oil prices will converge, with average prices ranging from $40 to $50 per barrel.

　　Influenced by declining prices and favorable environmental policies, natural gas demand is expected to pick up slightly, though the overall sales outlook remains challenging. In 2015, driven by factors such as a slowing macroeconomic environment, mild weather conditions, and the relatively weak price advantage of natural gas compared to alternative energy sources, domestic natural gas demand continued to languish. As a result, China's total natural gas consumption grew by 3.6% year-on-year for the entire year—representing a 3.4-percentage-point slowdown from the previous year's growth rate. However, in 2016, the introduction of new natural gas pricing policies and enhanced environmental regulations by the government is likely to boost market demand. At the same time, major gas-consuming sectors like power generation, transportation, steel production, and construction materials continue to face significant overcapacity issues, leaving gas demand lacking strong internal growth drivers.

　　Affected by the increase in refining capacity and government policies such as easing restrictions on independent refineries' access to crude oil imports and usage rights, China's domestic refined oil market is expected to face an even more pronounced supply-demand imbalance in 2016. It is forecast that the apparent growth rate of domestic refined oil consumption in 2016 will slow down by 1.8 percentage points compared to the previous year. Among these, gasoline consumption is anticipated to continue growing at a relatively robust pace year-on-year, thanks to the ongoing implementation of the policy offering a 50% reduction in purchase tax for vehicles with engine displacements below 1.6 liters. Meanwhile, diesel demand is likely to remain weak, as industries like transportation and construction—key drivers of diesel consumption—continue to struggle. As a result, diesel consumption is expected to keep declining, with the rate of decline possibly widening further. Kerosene, on the other hand, is projected to maintain its strong growth momentum, supported by the sustained rapid expansion of passenger traffic and air cargo volumes in the civil aviation sector. Meanwhile, refined oil production is set to rise by around 5% year-on-year, driven by the concentrated release of new refining capacity and the government's decision to grant independent refineries greater flexibility in importing crude oil, accessing import rights, and exporting refined products. According to calculations, the gap between refined oil production and consumption is expected to surpass 30 million tons, reaching a historic high. This surplus can only be addressed by expanding export quotas.

　　Faced with an unprecedentedly challenging situation, the oil and gas industry must respond proactively and rise to the occasion. On one hand, it needs to shift its growth model entirely—abandoning the old approach of pursuing scale through indiscriminate project expansion—and strive to minimize capital expenditures while maximizing the efficiency of fund utilization. Investment and capital management must be firmly aligned with a focus on quality and profitability. Limited resources should be directed primarily toward core business operations and high-performing projects, while rigorously controlling non-productive and inefficient investments. We must resolutely avoid off-budget investments, sharply reduce capital expenditures, maintain tight financial balance, aggressively manage debt levels and interest costs, and actively pursue innovative capital strategies to unlock value across multiple channels. On the other hand, every possible effort must be made to boost revenue streams while cutting costs, enhancing efficiency, and strengthening the rigidity of budget management. This includes tightly controlling procurement and labor expenses, significantly slashing non-productive spending, and relentlessly addressing inefficiencies such as waste and leakage. Through meticulous operational practices and a multi-pronged approach, the industry aims to drive down key cost metrics—including unit oil and gas operating costs and the full processing cost per ton of oil—while maintaining excellence in performance and profitability.