3.1 HSE Management System

We attach great importance to HSE and implement the HSE management system throughout the company.

We keep improving the HSE management system that covers the whole production process and everyone from top management to grassroots operators. The person at the post, who is required to sign a letter of commitment, answers for safe operation of the post. We organize annual HSE examination and ad-hoc inspection to review HSE performance of key subsidiaries.

In 2011, we developed and implemented four regulations including management onsite guidance. We put into practice "Seven Remembers and Seven Don'ts" for site operations, invited foreign HSE experts to help identify safety problems and work on solutions, and sent expert groups to subsidiaries that were newly-established or weak in HSE management, to provide tailor-made support and advice.

3.2 Intrinsic Safety

For high risk industries like energy industry, any neglect of work, irregular operation, potential hazard might cause accidents, leading to lose of properties or even people's lives. We have made enormous efforts to enhance safety awareness among staff, site safety management and potential hazard control, in order to develop into an intrinsically safe company. In 2011, there were 6 reported accidents, one fewer than last year and there was one death, the same as last year. There were no accidents that needed to be reported to State Administration of Work Safety, Ministry of Environmental Protection or State-owned Assets Supervision and Administration Commission of the State Council.

◎ "I Safe"

People are the most critical link in production and operation. Focusing on forging a safety-oriented corporate culture, we make major efforts to motivate staff involvement in ensuring safe production.

The year of 2011 is the third year of "I Safe" campaign. We compiled a collection of good examples during the past three years for every employee to follow, and encouraged searching of weak links, with 170,000 weak links found out and nearly 120,000 pieces of advice given. By participating in "I Safe" activities, staff's safety awareness has been enhanced, their sense of responsibility sharpened, and unsafe behavior enormously reduced. In 2011, the number of reported accidents and that of reported deaths fell by 38.9% and 57.1% respectively compared with 2008.

◎ On-Site Safety Management

After analyzing past accidents, we have found out that command and operation against rules and violation of labor discipline are the primary causes of accidents, and most accidents take place in direct operations. To address these problems, we have developed and put into practice Sinopec Ban on Irregular Behavior in Production. We strictly follow regulations on operation license and safety checking, and have taken concrete measures to guard against occurrence of accidents.

In 2011, we continued to strengthen site supervision of key facilities and locations during special period and special operations. In refining and petrochemical subsidiaries, we set 240 positions of grassroots safety supervisors. Requirements of "Seven Remembers and Seven Don'ts" were introduced to site operations. The emphasis of safety management shifted to the grassroots level. Efforts were made to ensure thorough investigation and proper handling of accidents. Two heads of subsidiaries were held accountable for accidents.

◎ Potential Hazard Control

Potential hazards, if happening, could undermine safe production. Therefore, potential hazard control is one of our principal ways to lower accident rate. We always ensure funding for potential hazard control in making the annual budget. We have formulated Regulations on Potential Hazard Control Project and strictly follow it in daily work. We apply 4W management to potential hazard control projects, which means to define what to be done to improve safety management, where the fund comes from, who is in charge and when the project should be completed. With many years of input of manpower and funding, all production facilities have realized safe, stable, longtime and optimal operation, and we have achieved a higher level of intrinsic safety.

In 2011, the focus of potential hazard control was placed upon well control devices, liquid hydrocarbon spheres, instruments, emergency response system, tank depot fire-fighting system, thermal oil pump sealing, loading of light oil and chemical products, and long-distance pipelines.

3.3 Safety Management of the Supply Chain

Safety management of the supply chain can generate synergy with that of production and helps to reduce accidents. That is why we extend safety management from inside the company to the supply chain.

◎ Suppliers

To realize safe production, it is important to purchase high quality materials. We have implemented online procurement in an all-round way, and keep tight control of suppliers with a mechanism of supplier admittance, assessment, alternation and disqualification.

◎ Contractors

Contractors are covered by Sinopec HSE management system. We used the concept of "Three Unified" to regulate contractors' behavior, which means unified management, unified standards and unified requirements for contractors. In 2011, we organized HSE training for heads of contractors. Group President Wang Tianpu's lecture that detailed Sinopec HSE concept and management has greatly motivated contractors to voluntarily get involved in the system.

We exercise closer and stricter supervision of contractors' HSE performance, following the principle that "he who lets the contract will be held responsible for the contractor's behavior". Jointly liability is applied to accident settlement. No contractors are allowed access to the construction site without safety education. Based on the principle that the employer answers for behavior of the employed, we keep intensifying HSE management of labor force of all kinds.

In 2011, the number of accidents and deaths of contractors dropped by 42.9% and 47.1% respectively.

◎ Logistics Providers

We have established a logistics provider admittance and management system. All logistics providers are encouraged to deepen awareness of intrinsic safety and develop complete operation procedures and emergency plans. Key and strategic logistics providers are required to develop HSE management system in accordance with ISO14000 and OHSAS 18000 standards. Safety examination and certification system and operation site safety inspection standards have been set for vehicles carrying hazardous chemicals and chemical vessels to ensure safe chemical logistics.

3.4 Emergency Response

We have developed a unified emergency command system with focus on prevention. In 2011, we revised the emergency plans for major accidents and finished the inspection and record-keeping of 1,038 emergency plans of 83 affiliates. We have also improved emergency management, fire control, regional collaboration, and set up the fire emergency management system.

Based on the principle of sharing and well allocating resources of our own and the society, we have built up an effective emergency response system and professional multifunctional rescue teams. In 2011, we expanded offshore oil spill and emergency rescue teams. We invested almost RMB 200 million in improving fire control equipments of some subsidiaries. Besides the existing seven regional emergency collaborative teams, we added two fire control collaborative teams in northeast and northwest of Sichuan Province. All teams organized joint fire drills on a regular basis to enhance the level of collaboration among subsidiaries in geographical proximity.

3.5 Public Security

Our HSE management system is characterized by the alignment of target deployment, inspection and assessment inside and outside China on regular basis.

Inside China, HSE is focused on oil and gas fields and pipelines. In 2011, we developed and sent out Notification of Building Secure Oilfields and Notification of Building Secure Pipelines, and worked out anti-terrorist guidelines. Oil-related criminal cases went down by 20.5%. Cases of drilling into pipelines to steal oil and to steal fuel products fell by 8.3% and 71.6% respectively.

Outside China, we are constantly improving overseas safety management system. In 2011, we formulated regulation on overseas HSSE management, and revised regulations on overseas public security management and training. We designated organizations in charge of public security in 52 countries and regions. We continued to keep high attention on and make study of the security situation in high risk regions, promulgate risk assessment reports and HSSE bulletins. There were no incidents outside China that caused loss of human life.

Conclusion

The importance of safety can never be emphasized too much. It is both our duty and objective to ensure safe and stable operation. We will keep safety as top priority and continue to improve safety management.

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