June 25, 2018 By Mark Aspelin
Today we’ll look at the profitable conservation strategies for the #3 company on the Fortune Global 500 list – Sinopec Group, the state-owned Chinese oil and gas company formerly known as the China Petroleum and Chemical Corporation. Headquartered in Beijing, Sinopec‘s 446,225 employees are scattered across the company’s operations in 43 countries. As of the end of 2017, Sinopec has 30,633 service stations, with its main oil and gas assets located in China, Kazakhstan, Russia, Colombia, and Angola. The Company engages in the following activities:
- Oil & gas exploration, production, transportation and marketing
- Refining and marketing of petroleum products
- Manufacturing and sales of chemicals, petrochemicals, coal chemicals
- Petroleum and petrochemical engineering services
- Technology research
Sinopec’s Mission statement is “Powering Better Life”. The Company strives to “achieve green growth and contribute to clear waters, green land and a blue sky” and is guided by a principle of “Making Every Drop Count”.
Sinopec has focused its recent efforts on promoting growth and efficiency, while fulfilling its social responsibility mission. To help prioritize where to focus its CSR and sustainability efforts, Sinopec sends a survey to internal and external stakeholders that includes representatives from government, investors, employees, consumers, NGOs, and the media. The results help the Company identify the highest priority issues in terms of their significance to stakeholders and their impact on Sinopec’s sustainability. The prioritized survey results from the 2015 CSR are summarized in the graph below.
As you can see from the list above, Sinopec ranked biodiversity protection and ecosystem remediation as number 14 (out of 25) on its list of priorities. However, it also ranked Clean Energy Supply as number 11, Climate Change efforts as #12, and Water Management as #13, all of which play a role in biodiversity and conservation.
In the 2017 CSR, Sinopec went through a similar exercise, but also aligned its business operations with 17 Goals (SDGs) in the 2030 Agenda for Sustainable Development (The UN 2030 Agenda) and referred to the Recommendations Report issued by Task Force on Climate-related Financial Disclosures. From this analysis, Sinopec outlined 13 material issues to include in its report, which included climate change, energy conservation and emission reduction, and biodiversity.
With that brief introduction, let’s take a look to see what profitable conservation activities Sinopec is undertaking in the areas of biodiversity and wildlife conservation. We’ll focus on the steps that Sinopec is taking to address four of the biggest threats to biodiversity: habitat destruction, invasive species, pollution, and overharvesting. Even though climate change is a major contributor to habitat destruction, we’ll cover that topic in the pollution section, since the actions that companies take to address climate change are similar to other pollution prevention initiatives.
Avoidance and Minimization: Avoidance refers to the strategy of avoiding development or operations in areas with a high-quality habitat for species that are classified as endangered, threatened, or vulnerable to extinction. Minimization refers to a broad range of strategies that are designed to reduce the duration, intensity, and extent of impacts to habitat for biodiversity and wildlife. Sinopec is putting avoidance and minimization strategies into practice through the following means:
- Taking steps to avoid environmentally fragile areas and ecological conservation zones.
- Integrating biological diversity protection in the assessment, decision making, production, and operation of project construction.
- Evaluating the impact of proposed projects by assessing ecological reserves, forests, wetlands, fauna, and flora, and formulating measures to mitigate or eliminate the impacts during the preliminary project appraisal process, construction, and operation.
- Focusing on the requirements of biodiversity conservation in the working areas, taking various measures to protect local ecosystems.
- Strengthening the identification and analysis of environmentally sensitive areas and environmental risks.
- Promoting clean production.
- Restoring and rehabilitating habitat around abandoned oil and gas wells and along oil and gas pipelines to reduce the environmental impact of the Company’s production and operations.
Here are a few examples of how Sinopec puts avoidance and minimization strategies into practice.
- YASREF protects local mangroves: The Yanbu Aramco Sinopec Refining Company Ltd. (YASREF) is a joint venture between Saudi Aramco and Sinopec in Yanbu, Saudi Arabia. YASREF spent additional time and money to modify the direction and construction of pipes and other infrastructure to avoid harming local mangroves in natural reserves that are located near its production area along the Red Sea. The Red Sea mangrove image below is from Saudi Aramco’s 2014 Facts and Figures document.
- Soil remediation and land restoration: Sinopec and its subsidiaries create ecological impact prevention and treatment plans which may include a variety of soil remediation and land restoration efforts. For example, Sinopec’s Fuling Shale Gas Company used a pad drilling design that reduces the amount of occupied land by 30% compared with normal operations. After completing platform construction, the Company implemented a variety of plantation restoration, water and soil maintenance, and soil restoration initiatives that resulted in a land conservation rate of 57%.
- Quingning Gas Transmission Pipeline project: When Sinopec’s natural gas branch deployed a 553-kilometer gas transmission pipeline connecting Shandong
and Jiangsu province, they analyzed fauna and flora in national reserves, nine city and county-level reserves, seven water conservation districts, and 51 ecologically vulnerable rivers, Ecological Red Line Areas, and areas within 500 meters of the project. The Company then assessed pipeline routes and widths to identify the approach that would have the least adverse impact on local plants and wildlife.
There is no mention of any efforts to address invasive species in CPNC’s various reports and website.
In 2013, Sinopec launched its Clear Water and Blue Sky Campaign, which focused primarily on the control of air pollution, water contamination, and solid waste. In 2014, the campaign won the “Care for Climate and Environmental Protection Best Practice” from the China Network of United Nations Global Compact. The Clear Water and Blue Sky Campaign is no longer mentioned in the Company’s 2017 CSR so it appears to have come to an end, but Sinopec is still actively pursuing a variety of pollution prevention and energy saving initiatives. Here are a few examples:
- Pollution prevention: Sinopec pollution prevention efforts include implementing de-sulfur, de-NOx, and dust removal projects for boilers, improving the recycling of drilling fluid and reduced solid drilling waste by 31,000 m3, installing vapor recovery projects for 265 oil tanks and 17,600 service stations, and significantly reducing the sulfur content of Sinopec gasoline from < 800ppm in January 2003 to a target of < 10ppm in December 2016. The Company is also engaged in research of development of cutting-edge technologies that support its green development goals.
- Chemical product design: Sinopec’s Chemicals segment is actively developing products that focus on high-end, eco-friendly materials. Here are a few product development examples from 2017:
- Green propylene and butene copolymer products.
- Eco-friendly, high-crystallized and high-impact polypropylene products.
- Non-dyed fibers to alleviate textile dyeing pollution at the source and reduce wastewater discharge.
- Performance improvement for non-heavy metal polyester catalysts.
- Increased production and sales of eco-friendly polyester and the development of high-performance fiber.
- Saving energy and reducing emissions and carbon intensity: Sinopec has created clean production processes that save energy, reduce emissions, and decrease carbon intensity. For example, in 2014, Sinopec launched its “Doubling Energy Efficiency” Program which commits the Company to doubling its energy efficiency by 2025. The program is expected to save 42 million tons of coal equivalent (equal to planting 900 million trees) and reduce 81 million tons of CO2 emission (equal to the annual emission of 20 million economy cars). In 2015, Sinopec implemented 484 projects under the “Doubling Energy Efficiency” initiative, which saved 980,000 tons of coal equivalent, and the Company also launched efforts to encourage energy efficiency among its subsidiaries. In 2017, a total of 452 programs were implemented with an expected annual energy savings that are expected to equal to 949,000 tons of standard coal. In addition, Sinopec’s oilfield and refining & chemical subsidiaries captured 270,000 tons of carbon dioxide, of which 190,000 tons were used by oilfield subsidiaries for flooding.
- Recycling and Reusing Resources: The Company looks for opportunities to recycle and reuse resources such as waste heat and pressure, slurry, refinery gas, flare gas, hydrogen, used catalysts, and oilfield gas. In 2015, these efforts enabled Sinopec to recover 200 million cubic meters of methane, equivalent to cutting 3 million tons of CO2 emission, and recover 70 tons of noble metal. In 2017, Sinopec reduced methane emission in pipeline storage and transportation by 4.26 million cubic meters. The Company’s oilfield subsidiaries implemented recovery measures for natural gas during production and testing processes, casing gas and oil tank gas when necessary and possible. This resulted in the recovery of 220 million cubic meters of methane, which is equal to a reduction of 3.3 million tons of carbon dioxide emissions.
- Renewable energy: Sinopec is exploring and experimenting with the industrial application of solar power. In 2017, the Company completing three distributional photovoltaic
power generation projects. Sinopec is also making progress on developing non-grain bio-fuels as it strives to become a leader in the bio-fuel industry in China.
- Protecting Water: Sinopec has improved its water use efficiency by strictly enforcing practices that reduce water use and avoid water loss and waste during production and auxiliary production processes. From 2010 – 2015, Sinopec reduced its industrial water consumption by an average of 1.22%, with a 1% drop in water use year-on-year in 2015. In 2017, Sinopec’s industrial water intake declined by 1.27 % from 2016 levels, saving an additional 12 million cubic meters of water. In one success story, Tianjin Petrochemical has been using desalinated sea water as supplement to circulating water, using 10 million tons of desalinated water since the program started in 2010. By the end of 2015, the total value of enterprise output increased nearly four times, while the overall fresh water consumption was reduced by 50%. In addition, the company takes a number of different measures to protect groundwater during drilling. For example, Sinopec took the following steps in one project that involved the exploration and development of shale gas:
- Before constructing the drilling platform, Sinopec conducted hydrologic explorations of subterranean rivers and caves 100 meters below the earth’s surface so that well locations could be optimized, and contamination could be avoided.
- Storage tanks of sewage and other wastes were built according to the local conditions. Environmental protection utilities, including diversion ditches and intercepting ditches, were put into use after penetration tests and pressure tests.
- Casing pipes for cementing were of high quality, and cement was paved up to the ground, effectively isolating the boreholes from natural waters and shallow rocks.
- Technological innovation in pollution treatment: Sinopec was one of the first companies in China’s petrochemical industry to recycle industrial sewage. For example, Sinopic Zhenhai has constructed three sewage recycling units, with a total capacity of 31,200 cubic meters per day. As of the end of the 2017, the site recycled over 76 million cubic meters of discharged sewage. Sinopic Zhenhai has been awarded eight national invention patents related to its pollution treatment efforts.
Climate Change: Sinopec is committed to taking proactive steps to tackle climate change through the following means:
- Energy conservation and efficiency: The Company has determined that energy conservation and efficiency improvement are the most important carbon reduction measures given the nature of its operations. Sinopec measures the consumption of comprehensive energy per RMB 10,000 of production value and looks for opportunities to reduce that amount. The company reduces greenhouse gas emissions by reducing flaring emissions and through carbon dioxide capture and methane recovery in its oilfield, refining, and chemical subsidiaries.
- Carbon Accounting and Trade: Sinopec has been involved in carbon accounting and verification activities for five consecutive years, and it has become the leading company in China for carbon asset management. Over the past 5 years, Sinopec has completed full carbon accounting for over 100 oil field gathering and transportation stations, 2,000 petrochemical facilities, and 30,000 service stations under 89 subsidiaries. In December of 2017, China announced the launch of a national carbon market, and the power generation industry was selected as the first industry to participate. In the future, its expected that the trading system will be expanded to include the refining and chemical industries, which will encompass all of Sinopec’s refining and petrochemical subsidiaries. Sinopec is taking steps to prepare for this by implementing a carbon assets information system, completing carbon accounting and verification for subsidiary equipment, measuring carbon emissions data, and identifying which enterprises to include in the market. In 2017, some of Sinopec’s subsidiaries participated in a pilot carbon trading program. Each of these subsidiaries completed the carbon quota in time, with a carbon trading volume of 1.35 million tons, and a carbon trading turnover of RMB 19 million.
Sinopec doesn’t specifically address the biodiversity threat of overharvesting in its website or reports.
While Sinopec’s CSRs focus primarily on providing data related to the level of investment in specific activities, the Company does provide some return on investment figures as well. To help put these investment figures in perspective, Sinopec reported total sales revenue of RMB 2,047.3 billion in 2015 and RMB 2,360.2 billion in 2017.
- Employee Feedback: Under the guiding principle that “every single piece of advice from employees counts”, Sinopec actively engages and motivates employees to provide operations and management improvement suggestions. This approach has worked well for the organization, with Sinopec employees providing 36,475 pieces of advice in 2015. The company adopted 26,217 of the suggestions, which resulted in a cost reduction and profit increase of approximately RMB 605 million. The CSR does not specify what portion (if any) of these suggestions were related to environmental issues.
- Environmental Protection Investments: In CY2015, Sinopec invested RMB 6.8 billion in environmental protection efforts. From CY2013 – CY2015, Sinopec implemented 809 “Clear Water and Blue Sky” projects, with a total investment of RMB 21.47 billion. As an example, Sinopec Yangzi Petrochemical successfully installed a wastewater reuse unit (850 tons per hour) that operates with an annual treatment capacity of 7 million tons, making it the “largest enterprise of high-purity reuse of waste water home and abroad.” In 2017, Sinopec implemented new standards, completed the treatment of sewage and flue gas, and conducted the comprehensive treatment of VOCs, with a total expenditure of environmental protection of RMB 7.85 billion.
- Energy Efficiency Technologies: In 2015, Sinopec implemented 128 energy-saving projects in its subsidiaries, which saved 270,000 tons of coal equivalent annually, reduced CO2 emissions by 660,000 tons, and generated RMB 360 million in economic benefits.
- Diesel Vehicle Exhaust Treatment Liquid: Sinopec created a “Yuetaihailong” Diesel vehicle exhaust treatment liquid for heavy-duty diesel vehicles that reduces NOx and PM emissions for BH-IV standard diesel vehicles and has a good economic return. Third party inspection data shows that NOx and PM emissions of GB-IV standard diesel vehicles are 41.7% and 89.7% lower respectively than GB-III standard diesel vehicles. The current price for 10 kg of this exhaust treatment liquid is 50 yuan, which can be used to treat 2000 liters of diesel at a blending ratio of 5%. This translates to an additional average cost of only 0.02 yuan per liter, with the benefits of reducing diesel consumption by 6% as well as significantly reducing exhaust emissions. Sinopec provided 800,000 barrels of the liquid, free of charge, for heavy-duty diesel vehicles operating within its system.
- Remediating exhaust emission treatment and electronic data accounting: In April 2017, the Ministry of Environmental Protection detected problems with Sinopec Yanshan’s exhaust emission treatment and electronic data accounting. An investigation was conducted to determine the root cause, and the employees responsible for the issues were dismissed from their positions. To remediate the issues, Sinopec invested RMB 600 million to complete VOC treatment projects, which included the construction of 46 automatic VOC monitoring sites. In addition, Yanshan constructed an 80,000 square meter wetland park in the Niukouyu Ecological Center where the site operations were located. The park is open to the public for free.
- Charitable Giving: In 2017, Sinopec’s total “Social Contributions” was RMB 457.4 billion with RMB 151.88 million in donations. In 2015, Sinopec’s total donations of “charity activities and poverty-lifting work” was RMB 200 million, with a significant part of this amount focused on the Company’s “Lifeline Express” charity project. The “Lifeline Express” is a unique mobile hospital that was built on a train, traveling to three different impoverished regions within China each year to treat cataract patients, free of charge. By the end of 2015, Sinopec Lifeline Express had traveled to 29 cities/counties in 18 provinces with a total of 32 stopovers. In 2015, the program cured 3,286 patients, bringing the total to 34,798 cataract patients cured since its inception in 2004, at a total cost of RMB 127 million. By the end of 2017, the program had cured over 40,000 cataract patients.
- Improving local living conditions and building livable communities: In 2015, Sinopec spent RMB 1.7 billion on renovating old communities and shanty towns, relocating remote residential communities, and providing better access to basic necessities and community services. In 2017, Sinopec invested RMB 128 million in targeted poverty alleviation focusing on infrastructure construction, industrial assistance, educational support, and the provision of healthcare.
Biodiversity & Wildlife Conservation Performance Assessment
Sinopec has come a long way since 2004 when it used dynamite and heavy machinery for exploration and road construction in Loango National Park in Gabon. Today, Sinopec is committed to using more environmentally friendly methods in its operations and being a leader in China in adopting sustainability best practices.
To strengthen its efforts around biodiversity and wildlife conservation, Sinopec may want to set quantifiable land use and biodiversity conservation goals, address the biodiversity threats of invasive species, and consider voluntary compensatory actions such as conserving a certain number of acres of wildlife habitat for every acre of land developed. To address the biodiversity threat of overharvesting, Sinopec may have opportunities to green its supply chain through the use of supplier scorecards and audits that include biodiversity as part of the assessment criteria.
Sinopec deserves praise for its efforts to be transparent in sharing its environmental performance information, in the form of CSRs and other media, for the past eleven consecutive years. I look forward to reading about Sinopec’s continued progress in biodiversity and wildlife conservation in the years to come.
For our next post, we’ll still be in Beijing where we’ll take a look at the profitable conservation strategies for the #4 company on the Fortune Global 500 List – The China National Petroleum Corporation.
Thanks for reading!