Friday, 1 July 2011

CASE 316 - Sinopec

Li Yizhong, fifty-nine in 2003, he is Chairman of the Board of Directors of Sinopec as well as the President of Sinopee Group. Mr Li graduated from Beijing Petroleum Institute in 1966 specialising in refining engineering. From January 1985 to October 1987, Mr Li was President of Qilu Petrochemical Company under the old Sinopec. From October 1987 to August 1997, he was the Vice President and then Managing Vice President of the old Sinopec. From August 1997 to April 1998, Mr Li was the Chairman and President of China East United Petrochemical Group Ltd. (Dong Lian), responsible for the experiment which demonstrated that ‘merging companies under the administration of different government ministries can work’. Li Yizhong has been the President of Sinopec Group since April 1998 and became the Chairman of Sinopec when the company was created in 2000.

Within just one year, Mr Li led Sinopec Group through the separation of core businesses from the non-core businesses and listing Sinopec on the international market. He implemented a series of measures to centralize control over capital investment and financial operations. He is highly enthusiastic about information technology. He decided to invest 994 million yuan to develop the ERP (Enterprise Resource Planning) system, which he hopes will make the financial data, procurement, production, and marketing activities transparent and cost-effective. His ambition is to build Sinopec into ‘a world-class integrated energy company with strong core businesses, high-grade assets, technological innovation, scientific management, stringent financial control, and international competitiveness’. However, Li Yizhong is under no illusion about the scale of the challenges posed by direct competition from global giants such as BP, Shell and Exxon Mobil after China’s entry into the WTO.

Environmental record

In 2004, Sinopec prospected for oil in the 1,550 square kilometers of Loango National Park in southern Gabon and encountered criticism for what domestic and foreign environmental critics said were poor and damaging methods.[17] Primatology professor Christophe Boesch of the US-based environmental organization, the Wildlife Conservation Society (WCS), criticized the use of dynamite and heavy machinery in exploration and road construction by Sinopec through park, noting that it might drive native Gorillas deeper into the jungle, where they would be outside legal restrictions on hunting.[18] Gabonese law states that industries can extract oil from national parks, but must rehabilitate them to the prior condition. Boesch, and other international experts, have suggested that Sinopec use other methods such as horizontal drilling to minimize its environmental footprint.[15] Sinopec's activities in Gabon's national parks were suspended in September, 2006, by the Gabonese national parks council.[15] In 2007, Sinopec redid its earlier environmental study, this time in conjunction with the Gabonese environmentalist group Enviropass and the World Wildlife Foundation, winning high marks from Gabonese, Western, and Chinese conservation experts. Shortly thereafter, Sinopec resumed production with more environmentally friendly methods.[19]

China's top environmental watchdog warned Sinopec in 2007 to stop operations at one of its oil fields due to chronic river pollution. Zhongyuan Oilfields Petrochemical Company, a unit of Sinopec, had failed to meet waste water treatment requirements and had been ordered to pay a pollution fine and operations had to be halted, according to the State Environmental Protection Administration (SEPA).[20]

Guangdong Provincial Environment Bureau (GPEB had also issued a red sign warning to 19 companies, including Sinopec Guangzhou, in February 2008. By GPEB’s standard, the companies that have involved in excessive emissions or caused serious environmental pollution accidents will be given the red sign warning and will be placed under strict supervision.[21]

On Wednesday, July 28, 2010, an explosion at an abandoned Sinopec plastics and chemicals factory in the Qixia District of Nanjing, China killed at least 12 people and seriously injured 15 more.

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