The Sinopec File

Pollution, bribes, more. Nikiforuk pries open the record of China's oil giant, business partner for Northern Gateway pipeline.

By Andrew Nikiforuk, 18 Feb 2012,

China Flag Oil

Ruthlessly building a new oil empire: China's Sinopec is world's seventh largest corporation.


Sinopec, Enbridge's Chinese business partner for the Northern Gateway Project, has a long record of corruption, human rights violations, environmental pollution and doing business with terrorist-linked governments.

A Tyee investigation found that the world's seventh largest corporation has been the subject of major bribery scandals at home and has systemically invested in rogue petro states from Angola to Myanmar.

The state-owned company has tried to improve its image in recent years with a series of multi-billion dollar investments in North America and the oil sands.

Yet Sinopec's earlier deals in Syria and Iran now are the subject of intense global controversy as the United States and European Union intensify sanctions against both countries.

"Today, energy is already the main driver of China's international behavior. Its energy needs have brought Beijing to turn a blind eye to human rights violations in Sudan, Myanmar and Uzbekistan," testified oil analyst Gal Luft before the U.S. House Committee on Foreign Affairs last year. "China's energy deals with Iran have already brought Beijing to block U.S. attempts to the UN Security Council to impose crippling sanctions against Tehran for continuing to develop nuclear weapons."

Sinopec also stands accused of violating Canadian law. In 2007 the collapse of several storage tanks at Canadian Natural Resources Horizon oil sands mine site killed two temporary Chinese workers and injured several others. A subsidiary of Sinopec flew the workers in for the job yet may have defrauded many of their wages, according to the Alberta government.

Two years later, the Alberta government served Sinopec and CNRL with an unprecedented 53 charges for failing to ensure worker health and safety. (Each charge comes with a maximum fine of $500,000.) Ever since then, Sinopec has stubbornly fought the charges, saying that its subsidiary has no presence in Canada and that the charges weren't served properly.

Sinopec's legal team now wants the Supreme Court of Canada to overturn a ruling that would force it to stand trial for ignoring Alberta's health and safety regulations.

"I've been watching Sinopec ever since the tank farm collapse and nothing has lessened my concern about this company. It's not my idea of a good corporate citizen," says Gil McGowan, president of the Alberta Federation of Labour.

He says that Canadians should be asking if Sinopec's investments in the country are "in Canada's interest or in China's best interest?"

Biggest refinery complex in Asia

Transparency International and Revenue Watch gives Sinopec one of the lowest rankings for fighting graft and corruption (32 per cent) in their most recent report on oil companies. Sinopec ranks ninth out of 44 leading oil and gas companies. 

Formed in 1998 by the Communist Party of China, Sinopec (China Petrochemical Corporation) now operates the greatest refinery complex in Asia with annual operating revenues of nearly US$290 billion and some 600,000 employees.

Yet the firm, whose 30,000 filling stations make it a familiar brand among Chinese citizens, reports meagre profits due to state subsidization of gasoline and diesel fuel prices.

Sinopec is one of three Chinese national oil companies that went public in 2000. The China National Petroleum Corp (CNPC) is now the world's fifth largest oil company while Sinopec is the largest state-owned firm in terms of revenue. The China National Offshore Oil Corporation (CNOOC) remains the smaller of the three monopolies.

Directors of all three companies are appointed by Chinese Communist Party (CCP) through its Organization Department, an agency created by Chairman Mao in 1924. The CCP still holds 80 per cent of the company's shares. Every executive of China's three oil monopolies are, as the Economist magazine puts it, "cadres first and company men second."

Aided by state banks that provided soft loans and supported by China's "Going Abroad" policy, Sinopec and CNCP went on a global prowl for energy to feed China's growing economy. China, the world's second largest energy consumer, now imports half its oil.

In recent years Sinopec has amassed more overseas assets (oil fields and refineries) than any other Chinese company and recently conducted more mergers and acquisitions (74 deals worth nearly $50 billion since 2004) than Exxon Mobile.

'Human rights? We care about oil'

After Canada weakened its foreign investment rules in 2010, Sinopec bought a nine per cent stake in Syncrude (Canada's largest bitumen producer) for $4.5 billion. The controversial deal gave the refining giant the right to veto any Syncrude decision on where to upgrade and refine bitumen.

Sinopec, which also partnered with Total on another oil sands project, is also a key financial backer of the Northern Gateway pipeline.

The $6-billion proposal would pump raw bitumen from Alberta to the port of Kitimat and expose the pristine waters of British Columbia's Pacific coast to massive supertanker traffic and potential oil spills.

The Canadian government backs the project, but First Nations, environment groups, labour unions and other civic groups oppose it for a variety of economic, political and environmental reasons.

But Sinopec began its dramatic climb in the global oil business by systematically acquiring assets in troubled petro states throughout Africa and the Middle East, including Myanmar, Sudan and Iran.

"No matter if it's rogue's oil or a friend's oil, we don't care," explained one Chinese energy advisor to the Washington Post in 2005. "Human rights? We don't care. We care about oil. Whether Iran would have nuclear weapons or not is not our business. America cares, but Iran is not our neighbor. Anyone who helps China with energy is a friend."

Michael Klare, a U.S. oil expert at Hampshire College, says Sinopec choose "the pariah states because that's where there was an opening. The good stuff was already locked up by western companies." 

Multi-billion dollar investments in Myanmar's oil and gas fields in 2004 financially strengthened that nation's brutal military junta. Church groups and non-governmental organizations have strongly criticized CNCP and Sinopec for cooperating closely with the Burmese military rulers.

Darfur and other investments

The Sudan has been another hotspot. Sinopec's investments combined China's weapons sales to Sudan's genocidal government even prompted Harvard University to divest its stock in the company in 2006 due to "deep concerns about the grievous crisis that persists in the Darfur region of Sudan and about the role of Sinopec Corporation."

Investments in extreme political environments for oil has been part of a coordinated overseas investment strategy that often includes political support for petro states at the United Nations, says a 2007 report published in the Australian journal Security Challenges.

"China is securing deals with the kinds of sweeteners that only its state-controlled entities can provide: billions of dollars in economic and military aid; access to China's growing markets; and diplomatic support at the United Nations where China can wield its veto power in the Security Council."

In 2004, Sinopec bought $2-billion worth of oil assets in worn-torn Angola and then invested billions more in the country (China now gets third of its oil from Africa). Although western oil companies (Chevron and Exxon Mobile) and governments have benefited from rampant corruption in the petro state, Sinopec has not raised the bar.

Human Rights Watch reported in 2010: "The rise of China as Angola's main trading partner has helped the Angolan government resist reforms, not least because China and Chinese companies do not call for good governance."

In another Africa controversy, Sinopec seismic crews dynamited wildlife habitat, hunted bush meat and contaminated rivers with oil waste in Gabon's famous Loango National Park.

The incident even prompted a reprimand from the European Union. After the government of Gabon stopped the exploration program, the company explained that they were just acting like other oil companies and weren't aware of Loango's sensitive ecological status.

"China is wrecking international efforts to bring economic and political sanity to impoverished and conflict-ridden communities in Africa by bankrolling corrupt and repressive regimes," declared a 2007 report by AfricaPractice.

Libya, Iran and Syria

Sinopec's investments in the Libya, Iran and Syria have also drawn widespread criticism.

After Sinopec purchased $2-billion worth of heavy oil assets from a Canadian firm (Tanganyika Oil) in 2008, China has steadfastly defended the regime of President Bashar al-Assad. Last week its Security Council members blocked a UN resolution that called for Syrian President Bashar al-Assad to step aside.

Back in China, a country without a free press, a variety of corruption scandals and chronic environmental violations have quietly dogged the company.

In one celebrated case, a bribery scandal involving the company's former chairman Chen Tonghai put a spotlight on the extreme level of corruption in China's powerful state-owned companies.

In 2010, Beijing No. 2 Intermediate People's Court convicted Chen, former chairman of Asia's largest oil refiner, for taking $29-million yuan in bribes (US$4 million) between 1999 and 2007. Chen allegedly helped individuals "seeking illegal interests." The verdict did not name the bribers.

According to the China Times, the Sinopec chairman confessed to his crimes and received a suspended death sentence. Sinopec did not comment on the case at the time but later urged Beijing to crack down on "corrupt" foreign business practices.

What have we missed? What do you think? We want to know. Comment below. Keep in mind:


  • Verify facts, debunk rumours
  • Add context and background
  • Spot typos and logical fallacies
  • Highlight reporting blind spots
  • Ignore trolls
  • Treat all with respect and curiosity
  • Connect with each other

Do not:

  • Use sexist, classist, racist or homophobic language
  • Libel or defame
  • Bully or troll
  • Troll patrol. Instead, flag suspect activity.
comments powered by Disqus