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Corporate Social Responsibility and Sustainable Development

Theme speech at the Sino-Swedish Senior-Level Forum on Corporate Social Responsibility, Beijing
Vice President
April 14, 2008

China National Petroleum Corporation (CNPC) is a world-leading integrated energy company with businesses covering a broad spectrum of oil & gas exploration and production, refinery & chemicals, pipeline transportation, sales & marketing, oil and gas field engineering & technical services, petroleum materials and equipment manufacturing and supply. It has total assets of RMB 1.5 trillion. In 2007, the company's operating income totaled more than RMB 1 trillion, and total profits and taxation payments both reached up to RMB 190 billion. CNPC ranks 24th and 7th respectively among the 500 top global companies and 50 top global oil companies.

As a leading state-owned company, CNPC regards the fulfillment of its corporate social responsibilities (CSR) as the basic guideline for its operations. Following the principle of "Caring for Energy, Caring for You", CNPC has been pursuing the goals of satisfying demand for gas and oil and achieving harmony between energy and the environment, operation and safety, employers and employees, and corporate and community interests.

CNPC recognizes CSR as an integral part of its development strategy. While creating profit and returns for its investors, CNPC should also honor its social responsibilities to its staff, society and the environment through compliance with business ethics, safe operation, healthcare, protection of workers' legitimate rights and interests, and the conservation of resources. Adhering to legal and honest operations, CNPC is also focusing on the following four aspects in terms of its CSR:

First, CNPC has established providing quality products and services to society and the public as its major responsibility. CNPC has been investing more in order to increase oil and gas supplies, develop clean and renewable energy, and provide better services to maintain market stability. In 2007, CNPC invested more than RMB 100 billion in domestic exploration and development. Throughout the year within China, CNPC newly discovered 830 million tons of oil and 429.4 billion cubic meters of natural gas, the second peak in proven oil reserves in history after the discovery of the Daqing Oilfield. With a newly added production capacity of 13.66 million tons of crude oil and 10.3 billion cubic meters of natural gas, CNPC's domestic production of crude oil and natural gas reached 107.65 million tons and 54.2 billion cubic meters, 1.01 million tons and 22.6 percent more respectively on a year-on-year basis. Domestic production of oil and gas accounted for 58 and 78 percent of the national total. To meet robust demand for oil and gas, CNPC maximized its production capacity to ensure ample supplies to the market. With the processing load rate of refining facilities reaching 98%, CNPC processed 120 million tons of crude oil in 2007, 5.86 million tons more than the previous year. Inspite of difficulties in resource, market, climate and transportation, CNPC put 82.8 million tons of refined products onto the domestic market, a year-on-year incresing of 10 percent, through strengthening the coordination between production, transportation and distribution while increasing imports of refined products. Meanwhile, CNPC sold 45.3 billion cubic meters of natural gas to ensure stable supplies to 26 provinces and municipalities and other major consumers such as fertilizer producers.

Second, CNPC has put safe and clean development high on its agenda in order to achieve sustainable development. CNPC also aims to achieving zero injuries, zero accidents and zero pollution, and promoting the use of clean energy and developing environmentally friendly products. Some CNPC oil and gas exploration projects and long-distance pipelines are located in water source regions and vulnerable ecosystems, while most oil refining facilities are close to rivers, lakes, seas. As a result, CNPC is under enormous pressure to manage environmental risks and avoid environmental accidents. CNPC believes that safe operation and environmental protection is a key strategy and responsibility, so while promoting production and increasing returns, CNPC places a high premium on the control of hidden risks and environmental protection, and makes great efforts to develop clean energy and environmentally friendly products, so as to build itself into a environmentally friendly and resource-efficient company. In 2007, CNPC invested RMB 11.7 billion in safe operation and environmental protection, eradicating 2,102 hidden risks and serious environmental accidents in its industrial operation, and achieved substantial results in environmental protection. With the help of 10 Major Energy Saving Projects and 10 Major Emission Reduction Projects such as the energy system optimization, substitution for interl oil utilization, associated gas recovery and building and reconstruction of desulphurization equipment, CNPC saved 1.4 million tons of coal equivalent, 55 million cubic meters of water and 500 hectares of land throughout the year. Emissions of waste gas, wastewater and solid waste met the target set by the State. Emissions of COD and oil pollutants dropped 4.3 and 13.2 percent respectively. CNPC proactively supports and implements China's National Climate Change Program and has worked with the State Forestry Administration to set up the China Green Carbon Fund. CNPC also signed a cooperation framework agreement with local governments to develop biomass energy and launch an integrated forestry-oil project in order to initiate the construction of energy forest bases and reduce carbon emissions in response to help tackle global climate change.

Third, CNPC will continue to put people first to achieve the overall development of its staff. Promoting the overall development of its staff is an important goal for CNPC, which has established a good career platform to ensure this. CNPC has also strengthened the development of its human capital and improved its mechanism to cultivate, attract and use human resources. CNPC now has a two-tier team of technical experts in place and an innovative mechanism to hire chief experts for scientific research projects and skilled experts. CNPC has hired more than 1,000 technology experts and some 800 technical experts who fall into the two-tier category. At present, CNPC has 16 academicians, 60 specialists making an outstanding contribution to the state, 800 professor-level engineers and 1,300 specialists who receive government subsidies. At the same time, CNPC provides vocational education and training to its staff to increase their professional knowledge and skills, and has created an important force of excellent talents who are playing vital roles in different fields and at different levels in the promotion of CNPC's growth.

Finally, CNPC gives back to society in order to promote the socio-economic prosperity where it operates. Therefore, CNPC spares no efforts to facilitate the socioeconomic development of host regions in order to ensure that CNPC's growth benefits the whole of society. The CNPC principle of cooperating with local governments on the basis of mutual benefit accelerates the development of local oil-related industries and creates job opportunities, which has imropved people's living standards. With the development of Daqing Oilfield, Daqing in Heilongjiang province has now become a Model National Environmental Protection City with a population of more than one million. Karamay, hailed as the Sub-Yangtze Area in the Gobi desert, is now the second-largest city in Xinjiang thanks to the development of the Xinjiang Oilfield. In Xinjiang, CNPC also built a 436-km paved road in the Tarim Desert, the longest road to cross a shifting desert. CNPC is also fully involved in public welfare projects by participating in poverty alleviation, providing financial assistance to education and relief funds to disaster-relief activities to contribute back to society with the fruits of its development. In 2007, CNPC allocated RMB 1.03 billion to public welfare, including the China Green Carbon Fund and poverty alleviation in Xinjiang and Tibet. Another endeavor by CNPC to benefit public welfare was providing information-based assistance to some remote and undeveloped counties and making donations to education such as establishing CNPC scholarships. CNPC has donated to 149 Hope Primary Schools and helped nearly 3,000 students to finish their college education. In its overseas operations, CNPC's philosophy is that the development of an area must improve the wellbeing of the local people. For example, in Kazakhstan, CNPC has donated a total of more than 30 million USD to hospitals, schools and agriculture. In its international cooperation, CNPC facilitates the socioeconomic development of the host country through honoring its social responsibilities, which has increased mutual understanding and friendship and guaranteed CNPC's position as a socially responsible major corporation.

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