Too Big to Comply: Chinese Oil Major Sinopec Slammed for Environmental Degradation
By Tim Daiss
China’s big three oil majors are used to getting their way. After all, they are the companies instrumental in securing both domestic and international hydrocarbon supplies needed to keep the juggernaut Chinese economy pressing forward as well as preparing them for the market at their refineries. However, there may finally be a limit to just how much they can get away with.
The drama unfolded before a national audience on China Central Television (CCTV) in late September.
“They [Sinopec] always threaten the government by claiming that what they do is for the national economy and the people’s livelihood,” Zhou Quan, director of the environment inspection bureau of the Guangdong Environmental Protection Department, shouted at the meeting being broadcast on CCTV.
“Well, the environment is the people’s livelihood,” he added.
The Guangdong agency said that three [South China] Sinopec subsidiaries have openly disregarded local government calls to stop their polluting practices for “the past few years.”
The Sinopec subsidiaries have been accused of serious environmental violations and safety hazards at their refineries. China’s Ministry of Environmental Protection (MEP) carried out an audit of the Guangzhou based plants in the first half of the year and released the results on September 26. The three subsidiaries have a combined oil refinery capacity of more than 18 million metric tons a years, according to a China Daily report.
The next day Sinopec ordered the three plants to shut down operations for 20 days to correct the violations. The company issued a statement promising to set up a special team to investigate its subsidiaries.
“People who are responsible for the subsidiaries will be severely punished according to the investigation result,” the statement also said.
Lü Dapeng, a Sinopec spokesperson, told China’s Global Times “over the years we have managed to keep the pollution problem under control.” He added that this incident represented an isolated case.
However Ma Jun, a prominent Chinese environmentalist disagrees.
“Sometimes the local environmental protection authorities give out fines of just 10,000 Yuan ($1,586) to 20,000 Yuan to the refineries, just to show they have done the required work,” Ma said.
He said that enterprises like Sinopec wouldn’t be bothered by that kind of fine and that the end result is that the refineries will keep pouring polluted water into the country’s rivers.
“The government needs to increase the severity of penalties and show determination in regard to environmental protection,” he added.
Yet, the oil giant has a “social responsibility” section on their corporate website.
While lauding Sinopec’s environmental practices, it states: “Relying on technology innovation and application, we use less energy, give out less GHG, cause less impact on the environment, and make greener and cleaner products. It is our aspiration to develop into a resource-efficient and environment-friendly company.”
Sinopec may know how to spin a story and claim that they are environmentally friendly, but the facts dictate otherwise.
In the first half of the year, the MEP reported 26 pollution cases in China with nine of them related to Sinopec or its subsidiaries.
In late 2009 international environmental watchdog group Greenpeace reported that eighteen multinational and Chinese corporations, including Sinopec, violated new Chinese environmental regulations.
“It is shocking that these companies that are leaders in their respective industries did not even manage to obey the most basic environmental regulations in China,” Tianjie Ma, Senior Campaigner for Greenpeace China said at the time.
Too big to comply
Two problems persist. The first is Sinopec’s size. Sinopec is massive and is ranked number five on the Fortune 500 list as of July 2012, the highest of any Chinese corporation on the list. The company reported 2.55 trillion Yuan ($402 billion) in revenue in 2011. Sinopec is China’s largest petroleum refiner and oil products producer, with its refining capacity ranked second in the world.
In fact, Sinopec is so big that they often strike fear in the hearts of local government environmental agencies that are often no match for the oil company’s financial muscle and political clout.
“As one of the leading State-owned enterprises, Sinopec has grown so powerful and influential that even provincial governments may find it hard to challenge it,” Ma Jun said.
At the meeting broadcasted on CCTV Zhou said “some local government departments did not dare to inspect or supervise Sinopec even after they found the company was discharging excessive pollution.”
“District departments have been inspecting the three companies [Sinopec subsidiaries] many times but why had they never found any problem?” Zhang Zhimin, a leader of one of the campaign’s inspection teams, asked at the meeting.
Not only does Sinopec intimidate but local authorities are often complaint as well.
According to a 2010 study: “Issues for Responsible Water in China” by Responsible Research.com, many local Chinese governments’ monitoring and enforcement entities are constrained by inadequate budges, and local officials are forced to play a balancing act between promoting local industrial growth and enforcing strict water quality standards.
“The dominance of state-owned enterprises in certain regions and industries poses further enforcement complications,” the report states.
Greenpeace’s Ma said that local governments must hold companies accountable for violating regulations and that they are virtually allowing these companies to disrespect the central government’s policies.
However the tide may be finally turning. The Chinese populace is striking back. Chinese media reports weekly, sometimes daily, frustration, even rage, with subsequent protests and demonstrations over industrial air and water pollution.
People protesting against the building of a coal-fired power plant in Yinggehai, on China’s Hainan Island, hurled bricks at police on October 21. Police responded by firing volleys of teargas and detained several dozen protestors.
CCTV reported that the Sinopec broadcast in September “stirred anger” among viewers. Interestingly, the day after the meeting, Sinopec’s stock dropped 5.1 percent on the Shanghai Stock Exchange.
On October 21, Sinopec restarted one of the plants, a 104,000-bpd crude processing unit at its Guangzhou refinery, Reuters reported. An industry official claimed that the refinery restarted after passing environmental checks and winning approval from Sinopec headquarters.