July 9, 2018 By Mark Aspelin
Today we’ll explore the profitable conservation strategies of the fourth largest company in the world, the China National Petroleum Corporation, or CNPC for short. CNPC is a Chinese state-owned corporation with 1.46 million employees and oil and gas assets that are scattered across 38 countries in Africa, Central Asia-Russia, America, the Middle East, Asia-Pacific, and other regions. The Company’s operations include petroleum exploration and production, natural gas and pipelines, refining and marketing, oilfield services, engineering construction, petroleum equipment manufacturing, new energy development, capital management, finance, and insurance services.
CNPC’s tagline is “Caring for Energy, Caring for You”, with a mission to “strive for harmonious relationships between operations and safety, energy and the environment, corporate and community interests, and employers and employees”. The Company has also stated its commitment to “protecting the environment and saving resources, promoting the research, development and application of environmentally friendly products, fulfilling our responsibilities to society and promoting development that benefits all.”
With such an environmentally-friendly mission statement I was very interested to learn more about what CNPC is doing in the areas of biodiversity and wildlife conservation. CNPC’s sustainability report and website mention a broad range of initiatives that directly or indirectly have an impact on biodiversity and wildlife, although climate change, energy efficiency, and pollution prevention are the key areas of focus.
In this post, I’ll provide an overview of the various activities that CNPC is engaged in to address the following four major threats to biodiversity and wildlife: habitat destruction, invasive species, pollution, and overharvesting.
Avoidance: 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. Here are two examples of how CNPC puts an avoidance strategy into practice.
- Protecting Euphrates Poplars in China: In the Tuha Oilfield of China, the most desirable site for new wells was located within a Euphrates poplar forest. However, given that Euphrates poplars (pictured below) are considered rare in the area, the Tuha Oilfield Company took steps to minimize the impact on the trees by relocating well sites, detouring roads, and reducing the size of station yards. For example, in 2007, the Company relocated 10 well sites and used extended reach drilling, which increased project costs by over US$ 3 million. To avoid poplars, CNPC also spent an additional US$ 500,000 to re-rout a nine-mile section of gas pipeline, which extended the pipeline length by over a mile and extended the length of a parallel road by over two miles. The number of gathering stations in new exploration areas was reduced from nine to six, and over 322,000 square feet of land remained undisturbed. Throughout the process of developing the oilfield, no single Euphrates poplar was damaged in the area’s 13,000 acres of Euphrates poplar forests.
- West-East Gas Pipeline and the Alkin Wild Camel Nature Reserve: During the construction of the nearly 2,500-mile West-East Gas pipeline, CNPC made the decision to spend an additional US$ 30.8 million to avoid cutting across the buffer zone of the Alkin Wild Camel Nature Reserve, which is home to a variety of rare animals such as wild camel, wild yak, antelope, and black-necked crane.
Minimization: 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. Corporate minimization strategies include the creation of wildlife corridors, installing green roofs, rehabilitating or restoring land, and purchasing biodiversity offsets or other voluntary compensatory actions. While it doesn’t appear that CNPC is engaged in the creation of wildlife corridors, installing green roofs, or pursuing biodiversity offsets, the Company has implemented a variety of policies and procedures to modify its operations near environmentally-sensitive areas to protect wildlife and biodiversity. CNPC is also engaged in a variety of land rehabilitation and restoration strategies. Restoration of an ecosystem refers to an attempt to return it to its original landscape, while rehabilitation focuses on repairing ecosystems processes, services, and productivity, but not to the pre-existing, historical condition. Here are some examples of CNPC’s minimization strategies:
Policies and procedures near environmentally-sensitive areas
- Wetland conservation at the Liaohe Oilfield: CNPC’s Liaohe Oilfield is located in the Liaohe delta wetland (pictured below), a national nature reserve that is considered to be one of China’s largest and best-preserved wetlands that provide habitat for 236 bird species such as the Saunder’s Gull (Vulnerable) and Red-Crowned Crane (Endangered). Rather than use vertical wells, CNPC uses horizontal and cluster wells to help protect wildlife habitat and the natural landscape. Thirty years ago, the total area of reed marsh in the Liaohe Delta was approximately 200,000 acres. Today, through joint efforts of the Liaohe Oilfield and the local government, the total area of the marsh has reached nearly 250,000 acres, making it one of the world’s largest reed marshes. The area also serves as China’s biggest heavy oil and super-heavy oil production base.
- Reduced footprint for the Russia-China Oil Pipeline: When constructing the Mohe-Daqing Section of the Russia-China Oil Pipeline, CNPC reduced the width of its operational area from 92 feet to 59 – 66 feet, which decreased its footprint in the virgin forest by 1,352 acres. The Company also implemented “extremely high requirements” to protect soil, vegetation, and wildlife during construction.
- Reduced land use at the Changqing Oilfield: In 2016, the Changqing Oilfield was able to save 15,000 acres of land by using cluster wells and horizontal wells, optimizing the arrangement of well patterns, and through the integrative planning of stations.
- Wetland conservation practices in Iran: In Iran, CNPC’s environmentally-sensitive road construction practices and efforts to maintain the wetland water flow for its North Azadegan project resulted in the Company becoming the first foreign enterprise to win an award for environmental protection.
- “Giving Way to Animals” in Kenya: During the construction of an oil pipeline in Kenya, CNPC adopted a construction principle of “giving way to animals”. This included “Rules on Protecting Wild Animals during Construction” within National Parks of Nairobi and Nakuru to confirm that no wild animals were present before operating in the area, and to ensure that construction equipment moved at a slow pace to minimize noise.
- Operational Changes to protect wildlife: During the contraction of the Mohe-Daqing Section of the Russia-China Oil Pipeline, CNPC reduced its operations at night and avoided construction during the breeding season to help protect wildlife.
- 3-D seismic exploration technology to reduce tropical rainforest impacts in Ecuador: In the tropical rainforests of Ecuador, CNPC used 3-D seismic exploration technology to avoid damage to rainforest vegetation, and drilled new wells in old well sites to minimize operational land use in order to protect biodiversity. CNPC chose to adopt European or US environmental protection standards, rather than less stringent local regulations, to minimize its waste discharges from power generation, oil refining, and water treatment.
Restoration and rehabilitation of land
- Wetland restoration and bird conservation: In 2012, the Yingtai Oil Production Plant of Jilin Oilfield in China planted sedge and grasses to improve wetland habitat within the oil recovery zones of the Jilin Momoge National Nature Reserve. The Nature Reserve serves as habitat for the greatest variety of cranes in China, including the endangered red-crowned crane and critically endangered white crane (aka Siberian crane). By the end of 2012, the Yingtai Oil Production Plant had invested more than US$ 4.6 million in six phases of comprehensive treatment projects, restored 6.6 million square feet of wetland vegetation, and created nearly 1.4 million square feet of woodland. Over the past five years, the number of waterfowl increased by 15%-20%, the population of Siberian cranes increased from about 500 to 3,000, and the number of bird species increased from 296 to over 320.
- Ecological restoration for the Western Pipeline project: CNPC pursued an ecological restoration effort as part of the Western Pipeline project in China. As soon as the new pipes were laid down and buried, CNPC planted vegetation in an attempt to restore the original landscape. As part of this effort, CNPC adopted a higher design grade, increased the pipeline burial depth, enhanced the anti-corrosion grade of the pipes, and installed cut-off valves to prevent oil leakage in the event of any accidents. Since the project was launched in 2004, CNPC has followed up with monitoring and remediation measures on an annual basis to ensure that the restoration effort is a success.
- Soil remediation and restoration of freshwater fish: As part of the project to implement the Mohe-Daqing Section of the Russia-China Oil Pipeline, which runs across several nature reserves and environmentally sensitive rivers, CNPC invested US$ 15.4 million on soil and water conservation efforts. These efforts included remediating over 2,000 acres of arable land and over 24 million cubic feet of soil covering, and building a 2,784 acre green area. CNPC also spent US$ 2.9 million to build fish breeding stations, conduct research on the artificial reproduction of burbots (freshwater fish, pictured below), and monitor water quality and aquatic life along the pipeline. Through these fish breeding efforts, 200,000 – 500,000 cold-water fish are released into the river each year.
- Southwest Oil and Gas Field remediation: From 2011, to 2016, the Southwest Oil and Gas Field in China reclaimed a total of 7,419 acres of land and turned it into grassland or forest.
- Soil restoration research: CNPC is engaged in soil restoration research, exploring the use of “microorganism repair technology” for polluted soil. Research trials in the treatment of solid waste were conducted at two old wells, and the study was successful in rehabilitating over 21,500 square feet of land that was once used as a solid waste pool. The new technology transforms harmful substances in wastes into carbon dioxide and water, and makes the soil cultivable again with the metabolites from microbial growth. The Company plans to continue to develop and improve this technology and promote its wide application.
- Marine and fisheries restoration: After completing the Shenzhen-Hong Kong subsea pipeline, CNPC launched a marine environment and fishery resources restoration project to return two million young black seabream to the sea in the effort to improve the marine ecological environment.
There is no mention of any efforts to address invasive species in CPNC’s various reports and website.
Pollution Prevention: CNPC is engaged in a wide variety of pollution prevention and energy saving initiatives. Here are some of the more unusual examples:
- Shelter-Forest project to protect highway from sand: In an interesting example of a green infrastructure project, CNPC partnered with the Chinese Academy of Sciences to complete a Shelter-Forest project for the Tarim Desert Highway (pictured below), which serves as an important road to access oil and gas resources in the area. The Tarim Desert Highway was constructed in 1995, however the original mechanical sand-defense system (a sand-catching checkerboard mesh of straw) to protect the road from encroaching desert and sand dunes had become obsolete. The three-year Shelter-Forest project created a green corridor that was 236 – 256 feet wide along 270 miles of the 349-mile highway that travels across the Taklimakan Desert. The US$ 33.5 million project involved covering a total area of 7,729 acres with 20.74 million drought-resistant plants such as Chinese tamarisk, saxaul (Haloxylon ammodendron), and Calligonum. Pilot tests uncovered a way to successfully (80% survival rate) irrigate the plants with high salinity groundwater in the desert, and research found that wind speed and sediment transport in the shelter-forest decreased by 64% – 99%. This approach may be deployed in future large-scale projects to protect desert highways from sand.
- Creating artificial islands to minimize impacts: To minimize the environmental impact caused by drilling and oil production on the surrounding waters of the Dagang Oilfield located in Huanghua Shoals of the Bohai Bay, CNPC built three artificial islands and used an “onshore production of offshore oil” approach. The artificial islands include oil pollution treatment facilities and sewage treatment systems that operate in a closed-loop system. Wellhead-slot wastewater and summer rainwater are collected and recycled, reusable drilling fluid is used in place of oil-based mud, and all industrial and domestic waste is collected for centralized processing.
- Wastewater pool is transformed into a reed pond in Sudan: In Sudan, CNPC invested US$ 13.8 million to build biodegrading pools, and adopt advanced biodegradation technology to treat water produced from oilfields. The treated water contains no oil, has a pH value of 8.90-8.97, and a dissolved oxygen level of 0.5-0.6 mg/L. The 1.9 square mile wastewater pool has become a reed pond that provides habitat for 68 species of birds and fish.
- Creation of the CNPC Pollution Sources Online Monitoring System: This system can accurately monitor, calculate, and analyze the emission data of each monitoring point in real time; monitor emissions from key sources in real time; assess the operating results of environmental protection facilities; and collect and analyze the alarm data. By the end of 2015, data networking was completed for 298 key monitoring points.
- Energy Conservation: In 2015, CNPC implemented 54 energy-saving projects, and developed 148 optimization programs that reduced energy consumption by 1.16 million tons of standard coal. Compared with 2010 data, the emission intensity per unit of crude oil production for four major pollutants, chemical oxygen demand, ammonia nitrogen, sulfur dioxide and NOx, decreased by 31.5%, 23.1%, 33.6% and 28.3% respectively, and the emission intensity per unit of crude oil processing decreased by 27.8%, 28.8%, 54.8% and 32.0% respectively. The Company continued to make progress in 2016 by reducing energy consumption by 950,000 tons of standard coal. Overall energy consumption was reduced by 1.42% year-on-year.
- Water Resource Conservation: CNPC has implemented a variety of water use efficiency initiatives in its production and operation activities. For example, it has reduced freshwater consumption through the adoption of wastewater treatment and reclaimed water reuse technologies. The company also launched an online management system for energy and water conservation. This helps standardize processes that save water and enables the company to collect and analyze data associated with its water management activities. In 2015, water use efficiency initiatives have saved 20.61 million cubic meters of water. In 2016, the Company saved an additional 13.39 million cubic meters of water throughout the year.
Climate Change: Climate change is a primary focus of CNPC’s environmental efforts and the Company is committed to green and low-carbon development, accelerating the upgrading of oil products, promoting the utilization of natural gas to meet the need for clean energy. The Company also invests heavily in R&D for low-carbon technologies and increased carbon sequestration to minimize GHG emissions and mitigate global warming. In 2016, CNPC joined the Oil and Gas Climate Initiative and signed the Joint Collaborative Declaration on low-carbon development. CNPC has also set development goals and emission reduction measures, with a primary focus on carbon footprint verification, carbon emission reduction, and the construction of near-zero carbon emission demonstration projects. Here are some examples of CNPC’s efforts to address climate change.
- Forestry Carbon Sequestration: One of the measures that CNPC has taken in response to climate change is to plant a large number of trees to help reduce and control greenhouse gas emissions. To support China’s carbon-sequestration forest construction and forestation activities in 2015, CNPC invested US$ 22.9 million in public-welfare forestation funds and planted over one-million trees. The Company encourages voluntary tree planting programs and some facilities have enthusiastically embraced the cause. CNPC describes a project in the Changqing Oilfield where “we joined hands with the local government to carry out the construction of Qingyang carbon sequestration forestry base in Gansu province, and have completed over 100,000 mu of carbon sequestration forestry since 2008.” In 2012, employees from the Changging Oilfield planted more than 600,000 trees and shrubs. In the Karamay Oilfield of Xinjiang oil province, CNPC has a 10-year plan to create a 65,977 acre forest for carbon sequestration and emission reduction, and along the northwestern boundary of the Junggar Basin, the Company will create another 164,819 acre forest. These forests will serve as green carbon pools for CO2 sequestration. In addition, in cooperation with the State Forestry Administration, CNPC planted 8,229 acres of an experimental oil crop called yellowhorn (Xanthoceras sorbifolium), which is adaptive to the climate in Xinjiang. One million units of this crop can yield 3,307 pounds of fruit, with an oil yield rate of 30%. Important medical ingredients can first be extracted from the squeezed oil, and 93% of the remainder can be converted into biodiesel fuel.
- Natural Gas: CNPC has increased the development and utilization of natural gas. In 2015, natural gas accounted for 40.6% of its total domestic oil and gas equivalent production, compared to 35.9% in 2011.
- Geothermal and Renewable Energy: CNPC mentions that it’s exploring the development and utilization of geothermal and other renewable energy, although it sounds like this is in the early stages.
- Aviation Biofuel: CNPC is also actively engaged in research and development activities for aviation biofuel. Research suggests that aviation biofuel emits 50% – 90% less greenhouse gas during its life cycle compared with traditional aviation kerosene.
Supply Chain Sustainability: CNPC doesn’t specifically address the biodiversity threat of overharvesting in its website or reports. However, CNPC does promote the sustainable development of its supply chain through the establishment of a contractor management group led by CNPC’s top executive and attended by heads of related departments and specialized subsidiaries. The Company has created a supplier quality management process which covers quality approval, inspection, supervision and spot-checking, and on-site supervision of the manufacturing of major products. CNPC has also implemented clear supplier requirements related to business ethics, human rights, health, safety, environment, quality standards, and public responsibility, in an effort to build a responsible supply chain in the petrochemical industry.
CNPC’s website and reports provide a lot of environmental investment data in terms of how much money was spent for various initiatives, but it’s difficult to calculate an overall return on investment. Similar to my previous blog post about the State Grid Corporation of China, the best I can do is highlight some of the investments that CPNC is making in areas that are related to environmental conservation. I have already highlighted many of these dollar amounts throughout this post. Most of the efforts shared in this blog post are likely to yield a high financial return on investment as these activities enable CNPC to access lucrative oil reserves.
One area that I haven’t yet covered in this post, is how the CNPC allocates its spending for charitable giving. CNPC invested more than RMB 1.3 billion (~US$ 200 million) in public welfare undertakings globally. Approximately RMB 76 million (~US$ 11.7 million) of this money was spent on projects in China, which has benefitted 100 million people across 8 provinces. The breakdown of charitable giving is as follows:
- Poverty Alleviation: RMB 341 million (~US$ 52 million)
- Disaster-relief: RMB 6 million (~US$ 920,000)
- Education: RMB 238 million (~US$ 37 million)
- Charity donations: RMB 632 million (~US$ 97 million)
- Environmental charity: RMB 149 million (~US$ 23 million). This money was primarily directed towards forestry carbon sequestration efforts.
Biodiversity & Wildlife Conservation Performance Assessment
I originally wrote an article about CNPC’s profitable conservation efforts back in early 2016. However, after researching CNPC’s activities since that time, I ended up deleting my original article because I found that the Company is now sharing a lot more information about its biodiversity conservation efforts on its website. So that’s a positive sign.
Most of CNPC’s efforts related to biodiversity and wildlife conservation are focused on climate change and pollution prevention. This makes sense since climate change is a major initiative for China, and pollution prevention efforts often yield win-win outcomes from both an economic and environmental perspective. Many of the other practices that I shared in this post, such as altering operating policies and procedures in areas of high conservation value, likely generate very high financial returns on investment, but the jury is out in terms of the costs and benefits for biodiversity and wildlife. While CNPC does provide us with some success stories, such as expanding the size of the Liaohe Delta from 200,000 acres to 250,000 acres, and increasing the number of bird species from 296 to 320 at the Jilin Momoge National Nature Reserve, we obviously need more before-and-after data to asses the overall impact (positive or negative) to local biodiversity and wildlife.
Some locations are so valuable from a biodiversity and wildlife perspective that is raises the obvious question of whether CNPC should be drilling and operating there in the first place, no matter what kind of mitigation measures are put in place. However, since the various Government agencies have given CNPC permission to drill and operate in these areas, the Company is obviously going to pursue it. From that perspective, I am glad that CNPC is spending the extra millions of dollars to implement measures that minimize harm to biodiversity and wildlife in exchange for access to new oil sources.
In terms of possible improvement opportunities, CNPC could benefit from setting and communicating clear performance targets. To its credit, CNPC is in the process of setting development goals and emissions reduction measures, however, I hope that the Company also considers setting goals related to land use and biodiversity conservation. This could come in the form of voluntary compensatory actions such as conserving a certain number of acres of wildlife habitat for every acre of land developed, similar to Walmart’s Acres for America program. These land purchases may serve a dual purpose of conserving biodiversity and wildlife while also supporting CNPC’s forestry carbon sequestration efforts.
Another possible improvement opportunity is to discuss efforts to combat invasive species on CNPC land. CNPC’s thousands of miles of pipelines and roads create pathways for the spread of invasive species. With all of the remediation, restoration, and rehabilitation work that CNPC is engaged in, it seems like invasive species would be an important topic of conversation.
Overall, CNPC is to be commended for being an early adopter of CSRs, publishing its first CSR in 2006, and for taking steps to share more information about biodiversity and wildlife conservation efforts on its website. I look forward to learning about the company’s new goals and reading more about the company’s efforts in the area of biodiversity and wildlife conservation in the coming years.
For our next post, I have a special announcement that I look forward to sharing with you.
Thanks for reading!