Journal of Petroleum Technology July 2012 : Page 38

TECHBITS Workshop Focuses on Critical Issues of Social Responsibility Social responsibility (SR) is the newest element within the health, safety, secu-rity, environment, and social responsi-bility (HSSE SR) field of the oil and gas industry. SR is a nontechnical risk, and its professionalization requires multi-disciplinary teams with specialists in capacity building, resolution of con-flicts, and human rights. Appropriate SR management aims to increase cost effectiveness, minimize legal and finan-cial liabilities, build reputational capi-tal, drive innovation, and capture busi-ness opportunities. A connection between HSSE and SR is essential, but few organizations have clearly defined what constitutes excellence in SR performance or pro-grams, especially in project develop-ment. As one of the many “business risks” that the industry faces, it is likely that social pressures will force addition-al action and attention on SR. Organi-zations must understand and commu-nicate SR risks to internal stakeholders to effectively address them during project development. SPE recently held its first Social Responsibility Workshop in Paris. The workshop explored the key SR challeng-es facing the oil and gas industry, sought to establish a common understanding about terms and practices, and provid-ed an opportunity for participants to learn from the operational experiences of major industry players. The workshop was divided into seven sessions. ◗ Social issues compliance and the value of social risk management ◗ Stakeholder engagement in the life cycle of an exploration and production (E&P) project ◗ Opportunity and risk analysis ◗ Operating in conflict-affected or high-risk areas ◗ Working together: the range of players and their roles ◗ Challenges during the project development’s life cycle ◗ Success stories: overcoming challenges in implementing SR in operations Best practices for corporate man-agement of social issues and regula-tory compliance have evolved greatly over the past 10 years. The first session explored current thinking on best prac-and change come new demands from leadership that requires new, proactive positions on such risks. Part of the chal-lenge is to recognize that new sources of risk exist and that new approaches to risk management are required. The second session presented examples of stakeholder engagement and discussion of best practices within the E&P sector. Stakeholder engagement intersects the full life cycle of a project, helping to reduce project risk and pro-mote sustainability. It is becoming a part of the core upstream business from government and business to local com-munities and civil society. Good stake-holder engagement covers stakeholder identification and analysis, disclosure, consultation, grievance management, project monitoring, reporting, and man agement. Integrating stakeholder engagement into project planning and execution allows developments to be adapted to the local context and assures the company a license to operate. The topic of the third session was on growing expectation that large-scale oil and gas investments will bring broad-based benefits to local communities. In order to be a good neighbor, manage high expectations, and access land and manage risks, many companies invest heavily in local sustainability programs such as infrastructure development, vocational training, skills development, and support for local institutions and stakeholder groups. These sustainabil-ity investments can create and bring benefits to the local communities and significant business value to firms. Companies and their investors are pay-ing more attention to the challenges and opportunities of doing business in conflict-affected and high-risk areas. Part of the chal lenge is to recognize that new sources of risk exist and that new approaches to risk management are required. tices in the industry. In a changing world with no more “easy oil,” there is a shift in the size of projects, from a typical USD 3 billion to 5 billion price tag in the early 2000s to an impressive USD 35 bil-lion this year for a project in Australia. There is also a change in project time frame, which has nearly doubled in the past decade. The average project delay is 1 year, and 73% of delays are caused by nontechnical risks. With this growth 38 JPT • JULY 2012

Techbits • Workshop Focuses On Critical Issues Of Social Responsibility

Social responsibility (SR) is the newest element within the health, safety, security, environment, and social responsibility (HSSE SR) field of the oil and gas industry. SR is a nontechnical risk, and its professionalization requires multidisciplinary teams with specialists in capacity building, resolution of conflicts, and human rights. Appropriate SR management aims to increase cost effectiveness, minimize legal and financial liabilities, build reputational capital, drive innovation, and capture business opportunities. A connection between HSSE and SR is essential, but few organizations have clearly defined what constitutes excellence in SR performance or programs, especially in project development. As one of the many "business risks" that the industry faces, it is likely that social pressures will force additional action and attention on SR. Organizations must understand and communicate SR risks to internal stakeholders to effectively address them during project development. SPE recently held its first Social Responsibility Workshop in Paris. The workshop explored the key SR challenges facing the oil and gas industry, sought to establish a common understanding about terms and practices, and provided an opportunity for participants to learn from the operational experiences of major industry players. The workshop was divided into seven sessions. • Social issues compliance and the value of social risk management • Stakeholder engagement in the life cycle of an exploration and production (E&P) project • Opportunity and risk analysis • Operating in conflict-affected or high-risk areas • Working together: the range of players and their roles • Challenges during the project development's life cycle • Success stories: overcoming challenges in implementing SR in operations Best practices for corporate management of social issues and regulatory compliance have evolved greatly over the past 10 years. The first session explored current thinking on best practices in the industry. In a changing world with no more "easy oil," there is a shift in the size of projects, from a typical USD 3 billion to 5 billion price tag in the early 2000s to an impressive USD 35 billion this year for a project in Australia. There is also a change in project time frame, which has nearly doubled in the past decade. The average project delay is 1 year, and 73% of delays are caused by nontechnical risks. With this growth and change come new demands from leadership that requires new, proactive positions on such risks. Part of the challenge is to recognize that new sources of risk exist and that new approaches to risk management are required. The second session presented examples of stakeholder engagement and discussion of best practices within the E&P sector. Stakeholder engagement intersects the full life cycle of a project, helping to reduce project risk and promote sustainability. It is becoming a part of the core upstream business from government and business to local communities and civil society. Good stakeholder engagement covers stakeholder identification and analysis, disclosure, consultation, grievance management, project monitoring, reporting, and man agement. Integrating stakeholder engagement into project planning and execution allows developments to be adapted to the local context and assures the company a license to operate. The topic of the third session was on growing expectation that large-scale oil and gas investments will bring broadbased benefits to local communities. In order to be a good neighbor, manage high expectations, and access land and manage risks, many companies invest heavily in local sustainability programs such as infrastructure development, vocational training, skills development, and support for local institutions and stakeholder groups. These sustainability investments can create and bring benefits to the local communities and significant business value to firms. Companies and their investors are paying more attention to the challenges and opportunities of doing business in conflict-affected and high-risk areas. Guidance on responsibility for companies of all sizes that operate a business unit in a high-risk area poses a number of challenges with no easy answers. The fourth session dealt with using early proactive measures to handle difficulties in the core business, government relations, local stakeholder engagement, and strategic social investment. Within the industry, there are distinct differences among the companies in areas of responsibility and influence. These differences are mainly attributable to the degree of risks undertaken and the correlation between risk and reward. The nature of the contracts under which they operate is also diverse. These differences shape the nature of SR in each company and should be kept in mind. However, the terrain is shifting and it is becoming clearer that there are good cases for increased collaboration and alignment along the value chain, particularly if the sector wants to be known for excellence in SR. In the fifth session, discussions centered on where each stakeholder's responsibility and influence begin and end; how to build partnerships and what effective working practices have successfully been employed; how current approaches cause distortions that undermine ultimate goals; and what the key priorities are. The characteristics of each developmental stage, including the transition and interaction between stages, were discussed in session six. The workshop participants' experiences were drawn upon to chart the SR issues associated with the various stages of project development. During the final session, sustainability efforts were considered from a regional perspective, with a focus on Africa, South America, and Asia. Presenters provided background on the local context, including areas in which there are potential or existing conflicts. Exploring the roles that different sustainability initiatives play, including social investment and those that address social and environmental impacts of operations, the presenters discussed challenges, successes, and the anticipated results of the initiatives.

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