1.Project Site

The Western Area of Yantai Port is situated in the west of the city proper, as well as besides the northeast sea of DajijiaVillage in Yantai Economic & Technological Development Zone (YETDZ), with a distance of 35 km on the sea and a distance of 30 km on land to ZhifuBay. The proposed crude oil terminal is located in the northeast of the western port area.

2. Project Scope

Two crude oil berths (also can be utilized for oil products) of 300,000 DWT and 100,000 DWT respectively, with a wharf length of 820 m and a bridge length of 370 m. The annual throughput volume is 21 million tons for crude oil and 6 million tons for oil products. The construction period of the abovementioned project is 2 years.

The tank zone covers an area of 700,000 square meters, which is within 1,000 m behind the crude oil terminals and can be further expanded in the future. In this area, tanks are be constructed respectively for crude oil (600,000 cubic meters, 8 tanks) and oil products (240,000 cubic meters, 12 tanks).

3. Project Progress

The project has been included in the general planning of Petroleum Transshipment and Reserve Base as well as the 11th Five-Year Plan of Shandong Province. Up to now the Feasibility Study Report of this project has been completed, which will be subject to the review and approval by the government.

4.Traffic Analysis

Along with the booming-up of auto industry and the fast economic growth on the rim of BohaiSea and YantaiCity, the refineries and chemical industries in ShandongProvince are witnessing a continuous development. As a result, there is an increasing demand on crude oil and refined oil. Many large-sized chemical corporations are planning to invest in the region of BohaiSea, and one of them has determined to invest in a petroleum transshipment facility and the related industries in YantaiPort, with an annual throughput of 4 million tons. It is forecasted that the traffic of crude oil in YantaiPort will be 5 million tons in 2010 and 15 million tons in 2020. After the project completion, the handling capacity of crude oil and refined oil in YantaiPort will be up to 26 million tons per annum.

5.Distribution and Transportation Conditions

Railway:The inner-port railway, connecting with the national railway network through Lancun-Yantai railway, possesses an outstanding transport capacity. Meanwhile two additional railway lines (i.e. Dezhou-Longkou-Yantai and Huanghua-Longkou-Yantai) are under construction and will be fully completed for operation in 2008.

Road: According to the planning, several port access roads will be integrated with the provincial road network by direct connection with Tongjiang-Sanya Expressway, Weihai-Wuhai Expressway and No. 206 National Road.

6.Investment and Economic Analysis

The total investment of the project is estimated to be RMB 1.3 billion yuan. The Economic Internal Return Ration of the project is evaluated as 17.69%, and the FIRR (after tax) turns out to be 11.09%. The investment recovery period is anticipated to be 9.52 years (including the construction period).

7.Cooperation Partners

For the purpose of this project, we are willing to cooperate with the famous petro-chemical corporations, chemical industries, logistic service providers, shipping companies, terminal operators and investment companies all over the world.

8.Cooperation Mode

The cooperation modes are proposed as follows:

-Terminal

A limited company shall be established by relevant parties for the construction and operation of the terminals.

-Tanks

(i)A limited company shall be established by relevant parties for the construction and operation of all or part of the storage/transportation facilities; or

(ii)A limited company shall be solely established by the foreign partner for the construction and operation of all or part of the storage/transportation facilities.