The Chinese National Petroleum Company

Oil and gas production, supply and engineering construction companies don’t come much bigger than the Chinese National Petroleum Company (CNPC, or 中國石油天然氣集團公司).

CNPC is the state-owned and largest oil and gas company in the People’s Republic of China. It was established by China’s Ministry of the Petroleum Industry on September 17, 1988, and today works in almost 70 countries worldwide with oil and gas operations in 29 countries. On November 5, 1999, the company established its sub-group, PetroChina, to contain the majority of its domestic assets, leaving CNPC to focus on its ever-growing international portfolio.

CNPC has seen a great deal of media attention over the past couple of years. The company’s various projects in the politically-fraught region of Kazakhstan, the wider country of Iraq, the Middle East to Xinjiang pipeline and recently an oil spillage in China’s Shaanxi province, make up just a few examples of CNPC’s headline-hogging involvements.

CNPC and Iraq

Talks for Iraq oilfield contracts have taken place between CNPC and the Iraq government since 1997.

This was the year in which CNPC, through the Al-waha Petroleum Company, a joint venture of CNPC and the China North Industries Corporation, signed a deal with Hussein’s government to develop the al-Ahdab oilfield.

This deal was postponed by UN sanctions and the following United States-led invasion of Iraq, then in November 2008, CNPC’s presence in the country was cemented when CNPC and the Iraq Oil Ministry signed a Development Service Contract for al-Ahdab.

Just one year later, CNPC and British Petroleum (BP) signed with the Iraq Oil Ministry on a deal to develop Rumalia; the 17 billion barrel oil super-field and the largest oilfield in Iraq. Not long later, on January 27, 2010, CNPC signed as the major partner on Iraq’s 4.1 billion barrel Halfaya oilfield.
While this succession of high profile contracts suggests a great relationship between CNPC and the Iraq nation, news announcements made on February 2 surprised, impressed and promised to greatly change the landscape of Chinese governmental ties with Iraq. Ma Zhaoxu, a foreign ministry spokesperson from China’s Beijing government (owners of CNPC), announced that China will cancel 80 per cent of the debt Iraq owes to the country. This debt, totalling $8.5 billion dollars, was cancelled under a bilateral agreement that was signed in Beijing.

“China and Iraq have reached an agreement not long ago...to substantially cancel the debts Iraq owes to Chinese companies,” Zhaoxu told the Associated Foreign Press (AFP).

“China has long been assisting Iraq to realise stability and development by offering aid, cutting debts and helping its economic restoration.”

CNPC and Kazakhstan

CNPC’s involvement with oil and gas projects in Kazakhstan also dates back to 1997, when CNPC acquired a 60.3 per cent stake in AktobeMunaiGas, the fourth-largest oil company in Kazakhstan. In May 2003, the company upped this by another 25.12 per cent, taking CNPC’s shareholding in AktobeMunaiGas up to 85.42 per cent. This new holding includes production licenses for the Zhanazhol, Kenkiyak Oversalt and Kenkiyak Subsalt oilfields and a contract for an exploration block.

In October 2005, CNPC acquired PetroKazakhstan. Other acquisitions include 50 per cent holdings in the North Buzachi Oilfield (with the remaining 50 per cent held by Lukoil), and the joint venture Kazakhstan-China Crude Oil Pipeline in which CNPC and partner KazMunaiGaz each own 50 per cent.

Although there are numerous high profile Kazakhstan-located projects in CNPC’s portfolio, the 2003 acquisition deal for AktobeMunaiGas appears to be the one currently revisited by the news media.

Mukhtar Ablyazov, the fugitive banker, former Kazakh former trade, industry, and energy minister and former head of Kazakhstan’s BTA Bank, has claimed that Timur Kulibaev, the son-in-law of Kazakh President Nursultan Nazarbaev, received huge bribes from Chinese oil companies back in 2003.

Ablyazov says that in 2003, 35 per cent of AqtobeMunaiGa was valued at 350 million; however CNPC managed to acquire the shares for the lesser sum of $150 million. Ablyazov claims that Kulibaev received bribes of $170 million from CNPC as part of this acquisition. Ablyazov, who has been based in London since the BTA Bank was taken over by the government and he fled the country in 2009, made these claims on his official website. The Kazakh Communist Party has demanded an immediate investigation into these claims. The allegations continue.

CNPC and the 2009 Chishui River spillage

On January 2, 2010, reports broke that an oil pipeline leak which began on December 30, 2009, had polluted a 20-mile stretch beginning at the Chishui tributary of the Wei River in the Shaanxi province, northern China. This pipeline was operated by CNPC.

Three counties surrounding the Shaanxi province were warned against using the river for water supplies and fears escalated that the contaminated water might stretch to the Yellow River. On January 3, 2010, reports surfaced that water monitoring facilities of the Sanmenxia reservoir on the Yellow River had picked up pollution in the supply. CNPC acted quickly and contained this damage, but the company had already become a media example for the contentious topic of water pollution in China. It is estimated that over 200 million Chinese nationals do not have access to safe drinking water, and many of China’s lakes and waters are said to be heavily polluted.

The company installed 15 containment belts along the Chishui River, and a further 17 containment belts along the Wei River, in addition to 20,000 tonnes of fuel thickener which CNPC inserted into Chishui.

CNPC’s commitment to environmental responsibility is both well-established and wide ranging. From tackling climate change by jointly-establishing the China Green Carbon Fund in July 2007, to spearheading the construction of China’s first biomass forestry bases in seven provinces by the end of 2007, to the way in which the Chishui River spillage was dealt with, it is clear that CNPC acts quickly, effectively and is braced to deal with such events.

CNPC states that the company goal is, “Focusing on oil and gas business supplemented by oilfield engineering and technical services, integrating upstream and downstream operations, developing our domestic and overseas businesses in a coordinated way and promoting the orderly development of new energy.”
The company’s latest business ventures, track record of international growth and its ability to tackle environmental, political and media challenges suggest that CNPC is well on its way to achieving this aim.

www.cnpc.com.cn/en