China BlueChemical : CONTINUING CONNECTED TRANSACTIONS P...

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(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 3983)

CONTINUING CONNECTED TRANSACTIONS PROPOSED ANNUAL CAPS FOR

CONTINUING CONNECTED TRANSACTIONS AND

CONTINUING CONNECTED TRANSACTION AND DISCLOSABLE

TRANSACTION IN RELATION TO THE FINANCE LEASE AGREEMENT

CONTINUING CONNECTED TRANSACTIONS AND PROPOSED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

Certain continuing connected transactions of the Group are required to be conducted with its connected persons in the ordinary and usual course of business of the Group, on normal commercial terms and on terms that are fair and reasonable as far as the Shareholders as a whole are concerned.

As some of the agreements governing the continuing connected transactions entered into by the Group and their respective annual caps will expire on 31 December 2017, the Group proposes to (1) enter into new agreements in respect of the above-mentioned continuing connected transactions, and (2) set the annual caps for 2018 to 2020 for certain types of continuing connected transactions.

CONTINUING CONNECTED TRANSACTION AND DISCLOSABLE TRANSACTION IN RELATION TO THE FINANCE LEASE AGREEMENT

The Group proposes to enter into the Finance Lease Agreement with CNOOC Leasing due to business requirement. Given the highest applicable percentage ratio in respect of the Proposed Caps for the transactions contemplated under the Finance Lease Agreement is more than 5% but less than 25%, the transactions contemplated thereunder also constitute disclosable transactions to the Company under Chapter 14 of the Listing Rules and is therefore subject to announcement requirement under Chapter 14 of the Listing Rules.

EGM

The Company will convene the EGM to obtain the approval from the Independent Shareholders of, among other things:

1. the Dongfang 13-2 Gasfield Group Natural Gas Sale and Purchase Agreement entered into among the Company, CNOOC Fudao and CNOOC China Limited;

1. the Proposed Caps for 2018 to 2020 for the continuing connected transactions contemplated under the Natural Gas Sale and Purchase Agreements entered into between the Group and CNOOC China Limited;

2. the Comprehensive Services and Product Sales Agreement entered into between the Company and CNOOC and the Proposed Caps for 2018 to 2020 for the provision of services and supplies and sale of products by the Group to CNOOC Group contemplated thereunder; and

3. the Finance Lease Agreement entered into between the Company and CNOOC Leasing and the Proposed Caps for 2018 to 2020 for the finance leasing services between the Group and CNOOC Leasing contemplated thereunder.

A circular containing, among other things, details relating to the Non-exempted Continuing Connected Transactions, the recommendation of the Independent Board Committee, the advice of the Independent Financial Adviser and a notice of the EGM will be despatched by the Company to the Shareholders on or around 13 November 2017.

CONTINUING CONNECTED TRANSACTIONS

Certain continuing connected transactions of the Group are required to be conducted with its connected persons in the ordinary and usual course of business of the Group, on normal commercial terms and on terms that are fair and reasonable as far as the Shareholders as a whole are concerned.

As some of the agreements governing the continuing connected transactions entered into by the Group and their respective annual caps will expire on 31 December 2017, the Group proposes to (1) enter into new agreements in respect of the above-mentioned continuing connected transactions, and (2) set the annual caps for 2018 to 2020 for certain types of continuing connected transactions.

A summary of the above-mentioned continuing connected transactions is set out below.

Continuing connected transactions with CNOOC and its associates

Properties Leasing Agreement

The Group is required to lease certain properties from CNOOC Group as well as lease certain properties to CNOOC Group in the ordinary and usual course of its business. On 3 November 2017, the Company entered into the Properties Leasing Agreement with CNOOC on normal commercial terms, pursuant to which: (1) CNOOC Group may provide properties leasing services and relevant property management services to the Group; (2) the Group may provide properties leasing services and relevant property management services (if needed) to CNOOC Group.

The term of the Properties Leasing Agreement will commence on 1 January 2018 and expire on 31 December 2020, but may be renewed upon agreement provided that the requirements of the Listing Rules in relation to connected transactions are complied with.

The transactions under the Properties Leasing Agreement are being conducted on normal commercial terms and conditions which shall not be less favorable to the Group than those offered to third parties and priced in accordance with the following principles:

the property rent and management fees for each leased property shall be determined by both parties by taking into account factors including locations of the properties, the state of the properties and the property management service scope;

1. As to provision of properties leasing services and relevant property management services by CNOOC Group to the Group:

2. property rent

3. shall not be higher than the property rent payable by other third party lessees of other properties owned by CNOOC Group or other owners (if any) in the same building; and

4. shall not be higher than the property rent for the same or similar types of properties in the same area or the adjacent areas.

5. property management fees

6. shall not be higher than the standard property management fees approved by the state pricing regulatory authorities (if any);

7. shall not be higher than the property management fees payable by other third party lessees of other properties owned by CNOOC Group or other owners (if any) in the same building; and

8. shall not be higher than the property management fees for the same or similar types of properties in the same area or adjacent areas.

9. As to the provision of properties leasing services and relevant property management services by the Group to CNOOC Group:

10. property rent

11. shall not be lower than the property rent payable by other third party lessees of other properties owned by the Group or other owners (if any) in the same building; and

12. shall not be lower than the property rent for the same or similar types of properties in the same area or the adjacent areas.

13. property management fees

14. shall not be lower than the standard property management fees approved by the state pricing regulatory authorities (if any);

15. shall not be lower than the property management fees payable by other third party lessees of other properties owned by the Group or other owners (if any) in the same building; and

16. shall not be lower than the property management fees for the same or similar types of properties in the same area or adjacent areas.

The Group may, from time to time when the situation requires, enter into specific agreements which will set out the specific scope of services, terms and conditions of providing such services according to the principles laid down by the Properties Leasing Agreement.

In order to effectively implement the Properties Leasing Agreement, when determining the pricing standard, to the extent practicable, the relevant department of the Group will obtain property rent and management fees payable by other third party lessees of other properties owned by CNOOC Group and other owners (if any) in the same building, and property rent and management fees for the same or similar types of properties in the same area or adjacent areas to make sure the price and terms offered by CNOOC Group are in compliance with the above-mentioned principles as set out in the Properties Leasing Agreement.

Natural Gas Sale and Purchase Agreements

1. Existing natural gas sale and purchase agreements

   We refer to the Prospectus of the Company, the announcements of the Company dated 5 November 2008, 9 November 2011, 28 March 2012 and 28 October 2014 and the circular

   of the Company dated 14 November 2008, 31 December 2008, 15 November 2011 and 7 November 2014 in relation to, among other things, the continuing connected transactions of the Company.

   The Group entered into four natural gas sale and purchase agreements with CNOOC China Limited, the summary of which are listed as follows:

2. Dongfang 1-1 Offshore Gasfield Natural Gas Sale and Purchase Agreement between the Company and CNOOC China Limited dated 28 July 2003, under which CNOOC China Limited has committed to supply natural gas to the Company for Fudao Phase II Urea Plant at prices that are subject to adjustments on a quarterly basis by reference to the prices of Four Major Types of Crude Oil quoted on Platts Crude Oil Marketwire during the preceding quarter. The natural gas delivery period under this agreement is 20 years, commencing on 1 October 2003 and will expire on 30 September 2023.

3. Dongfang 1-1 Offshore Gasfield Natural Gas Sale and Purchase Agreement between CNOOC Jiantao and CNOOC China Limited dated 10 March 2005, under which CNOOC China Limited has committed to supply natural gas to CNOOC Jiantao for Hainan Phase I Methanol Plant at prices that are subject to adjustments on a monthly basis by reference to the prices of Four Major Types of Crude Oil quoted on Platts Crude Oil Marketwire during the preceding month. The natural gas delivery period under this agreement is 20 years, commencing on 16 October 2006 and will expire on 15 October 2026.

4. Natural Gas Sale and Purchase Framework Agreement between the Company and CNOOC China Limited on 1 September 2006, under which CNOOC China Limited has committed to supply natural gas for the Company's future plants. This agreement does not include the transactions conducted under the two pre-existing agreements mentioned above. Under this framework agreement, CNOOC China Limited will sell natural gas to the Company and/or the Company's subsidiaries at a price which is