Optimize energy structure, significantly reduce energy and resource consumption Intensify development of low-carbon technology and proactively respond to climate change Change ways of production, life and consumption

1.Optimize energy structures and significantly reduce energy and resource consumption

Sinopec pushes forward optimization and upgrading of industrial structures for the purpose of minimization of resource and energy consumption, working hard to realize a business model featuring low input, low consumption, low emission and high efficiency.

Optimize and upgrade industrial setup

Sinopec continuously improves the technical and economic indicators of its petrochemical businesses by phasing out outdated capacities, advancing capacity expansion and technical renovation and requiring new refineries to meet the latest international standards for energy and material consumption.

In 2005, Sinopec began shutting down a number of energy-consuming, heavily polluting, and high-risk small refineries and chemical plants, replacing outdated processes, technologies and equipments with new ones, and actively optimizing and upgrading its industrial setup. Meanwhile, technical innovation was conducted at key refineries and chemical plants for greater scale economy and a higher degree of concentration.

The average capacity of Sinopec refineries rose from 5.15 MTA in 2005 to 7.05 MTA between 2005 and 2009, and ethylene production capacity from 5.55 MTA to 7.29 MTA during the same period.

Greatly save energy and improve energy efficiency

Energy conservation is the most immediate and effective way to reduce carbon dioxide emissions at present. Sinopec regards energy conservation as a top priority and places equal emphasis on energy development and conservation, in an effort to do business with minimum resources.

More investment was made in key projects of energy saving and emission reduction. Between 2005 and 2009, 14.5 billion RMB was pumped into projects of energy saving and emission reduction across the company. Energy efficiency projects are a focal area of investment in exploration and development. Energy saving investment in refining business concentrated on low-temperature heat utilization projects, plant heat integration and feeding projects, reduced pressure deep cut projects, hydrogen resource optimization technology development and coking plant absorption stabilization programs. Chemicals segment focused investment on implementation and extensive application of ethylene cracking furnace air preheating technology and twisted sheet heat transfer enhancement technology, as well as process optimization, equipment modification and low-temperature waste heat utilization.

We intensified efforts in energy saving technology development and transfer. Technical innovation is a driving force behind energy conservation efforts. Sinopec made greater efforts to develop energy saving technology, and thus increased the number of its proprietary technologies in energy saving, safety and environmental protection from 23 in 2007 to 40 in 2009. Meanwhile, eight proven energy saving technologies recommended by National Development and Reform Commission were widely applied.

Between 2005 and 2009, although Sinopec’s crude oil output and throughput grew each year, its energy and material consumption in production process dropped remarkably from year to year. Comprehensive energy intensity per 10,000 RMB output value dropped from 0.91 ton standard coal in 2005 to 0.77 in 2009 (calculated on the basis of the 2005 price level), a drop of 15.38% or saving 13.27 million tons standard coal. Comprehensive energy intensity for oil and gas production dropped by 8.54%.

Comprehensive energy intensity for oil refining dropped by 10.57%. Comprehensive energy intensity for ethylene production dropped by 8.23%. Energy consumption for power supply from cogeneration plants dropped by 3.86%. Fresh water consumption per 10,000 RMB output value dropped by 29.4%.

Develop low-carbon energy and optimize energy structure

Sinopec actively develops alternative and new energy sources and optimizes its energy structure. A relatively complete renewable and alternative energy business value chain that covers technology development, industrial production and product distribution took initial shape.

We strived to increase natural gas output and imports. Natural gas has the lowest carbon heat ratio (i.e. carbon dioxide emissions resulting from generation of per unit heat value) compared with the other two primary fossil energy sources of coal and oil. Therefore, Sinopec is accelerating the construction of Sichuan-East China gas transmission pipeline project while working hard on the construction of LNG receiving terminals for larger LNG imports.

We will establish cooperation to develop coal-seam gas. Sinopec owns 1.1 billion cubic meters geological reserves of coal-seam gas, of which 375 million cubic meters are recoverable. We are setting up a specialized organization for greater exploration and development of coal-seam gas in collaboration with interested companies. We began to study on commercial application of geothermal resources. Sinopec started to develop geothermal resources as early as 2000. In October 2006, Sinopec Xinxing Co., Ltd worked with Iceland-based Geysir Green Energy to pursue commercial-scale development and exploitation of geothermal resources. Until the end of 2009, three markets were successfully established in Xianyang, Wugong and Xiongxian respectively, with a heating capacity of over 2 million square meters and heated floorage of 1.6 million square meters.

2.Intensify low-carbon technology development and proactively respond to climate change

Reduce greenhouse gas emissions and proactively respond to climate change

At Sinopec, GHG emission reduction is one of the top priorities. We reduce carbon dioxide emissions in response to climate change through a long string of measures, including energy conservation, flare gas recovery, carbon dioxide flooding and carbon dioxide reutilization.

Energy conservation is one of major ways to reduce carbon dioxide emissions. Between 2005 and 2009, Sinopec achieved a total of 13.27 million tons standard coal savings and reduced 33.15 million tons of carbon dioxide emissions in total.

We actively reduced carbon dioxide emissions by extinguishing flares and recovering flare gas. Sinopec formulated and implemented “Extinguish Flares” program. As at the end of 2009, 95% of flares at all Sinopec refineries were extinguished. With this program, over 4 million tons of carbon dioxide emissions can be avoided and 800,000 tons of gas recovered every year.

Carbon dioxide flooding projects were implemented to raise the oilfield recovery rate. Sinopec conducted three small-scale site tests of carbon dioxide flooding at three oilfields respectively, namely, Zhongyuan Pucheng Oilfield, Huadong Caoshe Oilfield and Shengli high 89 low-permeability oil pool. 62,900 tons of carbon dioxide can be sequestrated every year as a result of these three projects.

Greater efforts were made in carbon dioxide recovery. Sinopec Shanghai Petrochemical Ltd processed carbon dioxide emissions from its glycol plants into 106,600 tons of food-grade carbon dioxide between 2007 and 2009. A glycol-based carbon dioxide recovery plant built by Yanshan Petrochemical in 1998 reduces carbon dioxide emissions by 16,000 tons each year, with a carbon dioxide recovery plant using exhaust gases from hydrogen production plant currently being built with annual recovery capacity of 270,000 tons. Sinopec Yangzi Petrochemical is currently building a glycol-based carbon dioxide recovery plant with annual capacity of about 100,000 tons.

Intensify R&D efforts to better cope with climate change

GHG emission reduction technologies currently being developed at Sinopec include energy saving and efficiency technology, renewable and new energy technology, GHG emission control, disposal and utilization technology, biological and engineering carbon fixation technology, technology for clean and efficient development and utilization of coal, oil and natural gas, carbon dioxide capturing, utilization and sequestration technology.

China’s largest carbon dioxide sequestration and purification plant built in Dongying

In December 2009, construction of China’s largest coal-fired power plant carbon dioxide sequestration and purification device started at Shengli Power Plant at Sinopec’s Shengli Oilfield, which, once put into operation in 2010, will reduce over 30,000 tons of carbon dioxide emissions every year.

This device can process captured carbon dioxide to a purity level of over 99.5% and all processed carbon dioxide can be used in a pilot test of low-permeability oil pool carbon dioxide sequestration, which is currently underway at Shengli Oilfield.

3.Chang ways of production, life and consumption

Sinopec actively educates its employees on climate change using books, newspapers and audiovisual materials, and encourages employees and consumers to change their ways of production, life and consumption and to become more socially responsible and environmentally friendly.

Over the years, Sinopec people proactively engaged in tree planting and forestation in an effort to increase carbon sequestration capacity. Sinopec has always been regarding company-wide voluntary tree planting, landscaping and environmental protection as an important dimension to its social responsibility, a cornerstone of sustainable development, and an important measure to improve the working and living environment of Sinopec people. Aiming at building Sinopec into an environmentally friendly petrochemical business, Sinopec encourages all of its employees and management to engage in voluntary tree planting and landscaping activities whenever possible, contributing to the creation of an ecological environment characterized by green mountains, clean waters and blue sky. Roughly estimated, 598,500 Sinopec employees participated in nationwide voluntary tree planting campaigns in 2009 and about 1.79 million trees were planted as a result.

Sinopec’s Shengli Oil & Gas Collection and Transmission Plant built a green workplace

In 2009, Shengli Oil & Gas Collection and Transmission Plant regarded environmental protection as an important part of the company-wide movement to pursue environmental excellence and to build a harmonious business, making greater environmental control efforts and investing more in environmental infrastructure improvements. Noise control measures were taken at many workplaces and toxic and hazardous substances were monitored periodically. Lawns and flowerbeds were laid down throughout the plant and landscaping efforts were made to create an agreeable, tranquil and refreshing environment where there are beautiful sceneries all year long.

Concluding remarks

Climate change is posing grave threats to the environment where people live. Sinopec believes actions should be taken right now instead of arguing. Sinopec will unswervingly follow the road of low-carbon development and proactively take every possible measure while building its own capacity, endeavoring to reduce GHG emissions and contributing to the global response to climate change.

Employees are the cornerstone of sustainable development of any business. We always put people first, respect and care about employees and faithfully fulfill our responsibility for employee development. We strive to create an enabling and coherent work environment, maintain a career path equally accessible and available to all employees, provide as many career opportunities as we can, help all employees grow both personally and professionally.

Faced with the daunting challenges brought by the global financial crisis, Sinopec people worked as a team to turn stress into motivation and challenges into opportunities, with progressive and innovative spirit and down-to-earth work style. We fought through adversities and difficulties and pushed ourselves to and beyond our limits in response to the crisis, building an excellent moral example of coherence and fortitude, and demonstrating our commitments to business excellence and sustainability.

Employee development

Respect employees and protect employee rights and interests

Maintain a career path equally accessible and available to all employees

Put people first and make employees feel at home.