CNPC in Latin America A Responsible Investor

By staff reporter AN XINZHU

CHINA National Petroleum Corporation （CNPC） acquired in November 2014 the entire Peruvian assets of Petrobras， Brazils state-controlled oil company. The deal marked CNPCs biggest ever acquisition in Peru. The worlds fourth largest petroleum company， CNPC has carried out oil and natural gas investment business in 38 countries. In Latin America， CNPC has launched oil and natural gas cooperation projects with such countries as Venezuela， Ecuador， Peru， Costa Rica， Columbia， and Cuba.

Its market share aside， CNPCs outstanding management， technology， and social responsibility have earned trust and commendations from both its oil sector counterparts and host communities in Latin America. The companys conscientious protection of rainforest throughout its Andes oil project in Ecuador also won CNPC the HSE （Health， Safety， and Environment）/Sustainable Development Award from World Oil magazine.

Commitment to Safety and Environmental Protection

The Amazon rainforest， the largest of its kind on Earth， is the habitat of many indigenous peoples. The rainforests special geographic location and diverse eco-environment make it the focus of prominent international environmental protection organizations.

Some CNPC Latin American projects are in the Amazon rainforest hinterland， whose annual precipitation exceeds 5，000 mm. The Ecuador and Peru ventures are also located amid rainforests， and the Venezuela oilfield is on Lake Maracaibo. These fi eld operations exert high demands on CNPC workers.

Stringent eco-environment and environmental protection policies obligate CNPC to abide by local laws and meticulously implement international standards in this respect. The company has gradually established project operations and perfected the HSE management system to suit local conditions， according to Wang Yana， researcher at the CNPC Research Institute of Economics and Technology. CNPC uses the best electrical machinery possible to minimize air pol-lution and so achieve “zero pollution，”“zero discharge，” and “zero accidents.”

Half of the CNPC-Sinopec Andes Petroleum joint-venture oilfi eld in Ecuador is in a national nature reserve – one of the worlds environmentally sensitive areas. CNPC formulated a three-year rainforest pollution control plan upon undertaking management of fi eld operations. It stipulated that Andes Petroleum submit environmental reports at every link of its production. Specifi c measures included safe disposal of waste mud， reinjection after appropriate treatment of all water produced into underground formations， the use of associated gas produced to generate electricity， and the guaranteed restoration of landforms in the shortest possible time after field operations. To achieve the maximum cyclic utilization of resources， CNPC con- structed a comprehensive waste disposal center. Its functions include converting organic waste into organic fertilizer earmarked for local vegetation， collection and appropriate disposal of inorganic waste prior to dispatching it to government-designated recycling centers， and application of integrated wastewater treatment works that achieve zero discharge of oilfi eld sewage. CNPC has also set up nursery gardens in nearby communities to cultivate seedlings that will restore vegetation.

CNPC discovered high safety and environmental protection risks when it started work on the Lake Maracaibo oilfield in Venezuela. There was thick sludge at the bottom of the lake， and on its surface lay a jumble of pipelines， electrical cables and other equipment. After assessing the risks at every link of production， CNPC laid down risk prevention regulations， so putting an end to blowouts and at the same time achieving proper waste disposal. Lake Maracaibo is now crystal clear from surface to bed.

Win Trust with Technology

Talara oilfi eld in Peru has a 100-year history of exploration， and is hence one of the oldest in existence. The Talara fi eld stopped production for an extended period， during which it teetered on the brink of abandonment. Up until 1994， when CNPC took over its operation， five petroleum companies using various technologies had run the oilfield. But experts were generally agreed that it had no tappable potential. There were at that time 5，000-odd wells in blocks No. 6 and No. 7. Only one-10th were in production， with an average daily output of just three barrels per well， most of them buried in weeds， sand， and rubble.

The geological conditions of the Talara oilfi eld are similar to that in Chinas Bohai Bay Basin. CNPC utilized the comprehensive and mature mining technology used in Chinas older oilfields and made distinct achievements. Workers successfully drilled Talaras deepest oil well and developed many others， producing a daily output in excess of 1，000 barrels each， and built Perus first horizontal well. CNPC also took measures to restore and tap the potential of wells that had long since stopped production.

All these efforts greatly boosted Talara oilfield yields. In just three years the old， virtually abandoned Talara oilfield had been revived. Its annual output of crude oil increased from 600，000 barrels to 2.2 million barrels.

This was CNPCs first overseas oilfield project in Latin America. The situation of most oilfields on the continent is similar to that of Talara， in that their late stage of development makes further exploitation difficult. Raising their output is hence a big challenge.

CNPC successively took over many old oilfields in Venezuela and Ecuador. Having figured out the distribution of the remaining oil， the company formulated a system of integrated mining and technology management to resolve the complicated conditions in old oilfields in order to regenerate them. One outstanding result was the restored output of the as good as abandoned Caracoles Oilfield in Venezuela to around that of its historical high， in less than three years.

Chinese technology thus revived many old oilfields and created more job opportunities. The proportion of local staff in CNPC branch companies in Latin America， including field workers and administrative staff， now exceeds 88 percent.

CNPC has gradually earned the approval of its Latin American peers in the oil sector. Many have indeed benefited from sharing CNPCs experience and technology， as regards prospecting and exploitation of complicated oil and natural gas deposits， increasing the reserves and output of old oilfields， super heavy oil production， and construction of horizontal wells. In July 2014 during President Xi Jinpings four-nation visit to Latin America， CNPC signed new oil and natural gas cooperation agreements with Venezuela and Cuba.

Improve Local Life

The coming of this Chinese company has brought both job opportunities and a better community life to residents living near CNPC oilfields.

CNPC， together with local governments and non-governmental organizations in such countries as Venezuela， Ecuador， and Peru， has launched public welfare activities in education and health care， and construction projects to improve local infrastructure.

In light of the situation of some indigenous communities living in remote areas deep in the rainforest， CNPC sent mobile medical teams to provide medical treatment and medicine. CNPC also established communication stations to help residents in remote areas maintain contact with their nearest cities. The CNPC joint venture in Venezuela played a proactive role in housing construction by sending its staff to work as volunteers on government-organized housing projects， so benefiting more than 10，000 local residents.

Casio Ceco is a small Indian village in El Tigre， a key oil city in eastern Venezuela. CNPC fostered a local cassava planting project， so helping the village develop into an important processing area.

The village， which houses over 50 families， used to be a relatively poor area. In 2005， after carrying out an evaluation， CNPC included the village in its community development plan. The company invited agricultural experts from Guangxi Agricultural Reclamation Bureau to study the natural environment， soil， and local labor resources. It then decided to promote the development of local cassava cultivation and processing industry.

Cassava cake is the staple food of local inhabitants. In May 2005， in a joint venture with Venezuelas PDVSA， CNPC invested in the construction of a 30-hectare cassava growing demonstration zone in Casio Ceco. A family member from each local household participated in this project， and villagers elected their own managers to ensure its efficient operation. In 2007， CNPC allocated a further US $240，000 towards construction of a cassava processing factory. It is now the second largest cassava processing factory in Anzoátegui State， whose output is the third highest in Venezuela.

The project has benefited more than 300 local residents， so helping the majority of local families escape from poverty. “Currently villagers have high expectations of the factorys future development. We intend to reinvest the profits in expanding the factory and cultivation area， and feel confident we can market our products，” said Julio Correa， manager of the cassava processing factory.

Dialogues with Local Communities

Today， more and more Chinese enterprises are entering Latin America. Their competitive advantages include technologies that surpass international standards. They moreover strictly abide by local laws and regulations and， compared to time-honored Western multinational companies， are willing to shoulder more social responsibility.

In 2006 Andes Petroleum bought all of EnCanas oil and gas assets in Ecuador. Near the oilfield live seven ethnic groups of indigenous peoples in more than 100 communities. As frequent conflicts occurred among these communities， the security situation was dubious.

Andes Petroleum， like other resource enterprises， encountered strong resistance from local residents at the outset of its operations. The company sent deputies to visit local tribal chiefs， listen to what they had to say， and explain to them that CNPC projects could improve the lives of local inhabitants.

Andes Petroleum made innovations in its communications with local communities， building bridges among government， enterprises， communities， and company workers， so establishing relationships among interests-related parties， Wang Yana said. The company has provided job opportunities to local residents and business opportunities to community organizations. It is also proactive in local infrastructure construction and developing agricultural projects.

CNPC has moreover provided funds for the running of school buses， so resolving the commuting problems of 500 or more students whose homes are far from their schools. CNPC has subsidized more than a dozen plantations， so indirectly creating more than 1，500 job opportunities. Meanwhile， Andes Petroleum has made donations to many local foundations and non-governmental organizations in support of juvenile education， health care， disease prevention and treatment， and also community construction.

CNPCs dedication has won the approbation of local residents. In 2007， through the efforts of Andes Petroleum， local communities started dialogues with one another and reached a “perpetual peace” agreement. Today， Andes Petroleum is regarded as a “dream”foreign enterprise in which to work. The qualification certification workers earn during the time they are part of the Andes Petroleum workforce is recognized by companies throughout the country.

In 2009， the president of Petroecuador， the national oil company of Ecuador， commended Andes Petroleum for the special attention it pays to sustainable development and for being the sole foreign oil company in Ecuador to excel in social development. Residents in the Tarapoa Community， located north of the oilfield， say that CNPC is the first enterprise to enter local communities and diffuse a sense of sincere friendship.