Environmental and Social Challenges Eng

7/28/2019 Environmental and Social Challenges Eng

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TITLEUNDP Discussion Paper No. 6

Fuelling Poverty Reduction

143

Environmental and social challenges in

oil sector management

Thomas W. Stephens, Ph.D.Managing Director

The Prescient 360 Group

Introduction

Historically, many new oil-exporting countries failed to give adequate attention to

the environmental and social aspects of the petroleum sector in its early development

stages. At a later point, it was precisely the overlooked environmental and social

impacts of petroleum production that had the greatest negative political and economic

ramifications for the government, the oil industry, and society as a whole.

Many developing country governments have enacted laws and policies for environmental

and social standards. However, the government institutions and agencies for their

regulatory oversight and compliance have often been under-funded and ineffectual.

Laws and policies alone are insufficient to manage environmental and social standards.

Environmental and social issues touched by the oil sector are best addressed through

joint collaboration by the oil industry and government, based on respect, mutually agreed

objectives and a clear delineation of roles and responsibilities. It is in the best business

interests of reputable international oil companies to achieve this level of collaboration.

Environmental and social issues should not be compartmentalised into separate

functions, but should be recognised as overlapping and interlinked domains that are

best addressed holistically.

The evolving context for environmental and social standards

Over the past 10-15 years, governments and international oil companies (IOCs) have

given increasing attention to the environmental and social aspects of oil operations.

They have recognised that the reputation and credibility of both governments and

private companies are jeopardised if these issues are not handled well. At the risk of

over-simplification, this growing awareness of environmental and social issues grew

out of initial attention to health, safety and environment (HSE) by oil companies for

internal operational practices and technical processes. Over time, greater and greater

attention was given to external factors affecting company performance, including

explicit concern about social issues and the importance attached to corporate social

responsibility (CSR). International media attention to oil spills and pollution, adverse

social impacts on local communities and displaced peoples, and inequitable economic

growth associated with oil revenues prompted private companies and governments

alike to reconsider where their responsibilities to environmental and social concerns

begin and end as well as the wider context in which they must act.


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UNDP Discussion Paper No. 6144

This broader context for assessing environmental and social issues is shown in the

following graphic. The graphic makes a distinction between the internal operational

ecosystem of a company and the external ecosystem which combines both the

physical environment and social and economic considerations of affected or contiguous

populations. The graphic further notes the oversight and regulatory ecosystem ofgovernment in both the internal and external activities of petroleum operations.

Social and environmental ecosystems o petroleum operations

This oversight role for government is common in developed and middle-income

countries where standards are set for the protection of workers and employees

regardless of the industrial sector. It is also common for this oversight function to

ensure environmental safeguards at the site of major industrial or manufacturing

operations. It is less common to see this oversight function being effectively carried out

in developing countries, due to a lack of financial resources and institutional capacity.

A second key point about the evolving nature of environmental and social

considerations in the oil sector is that the number of stakeholders and interestedparties has grown considerably25. No longer are environmental and social issues of

bilateral concern only to the government and the oil companies or consortium involved.

Instead, the number of stakeholders and constituent groups has grown considerably,

now requiring much higher levels of proactive participatory decision-making and

transparency. This situation has arisen as a result of increasing media and local non-

governmental organisation (NGO) scrutiny of oil operations in developing countries,

in addition to more vocal demands by local communities that expect to be involved in

the decisions that affect their lives and livelihoods.

Internal corporate ecosystemCompany Operations

Health, safety and environment

Company external social andenvironmental policies, including

corporate social responsibility

External operational ecosystem

Physical environment Society

Flora Local communitiesFauna Cultural norms

Government oversight ecosystem

PoliciesLaws

25For a discussion of the convergence of environmental and social considerations and the growing number of involvedstakeholders, see Michael Hopkins, The Planetary Bargain: Corporate Social Responsibility Matters, Second Edition, London,

Earthscan Publications, 2003.


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145

The table below highlights some of the new stakeholder groups apart from national

government agencies and oil companies that have emerged and the different kinds

of perceptions and interests they may have about the environmental and social

implications of oil sector operations.

New environmental and social stakeholders

Stakeholder group Function, role or interest

Local communities, civil

society organisations

Employment opportunities and local developmenttProtection of local customs, traditionstAvoiding environmental damage to family ortcommunal lands

Media and advocacy groups

(domestic and international)

Protect/defend local rights and valuest

Promote transparent decision-makingt

Report unethical behaviour or business practicest

Local development NGOs Potential partner with oil companies in carryingtout their community engagement programmes

Some NGOs may also be critics of oil companytoperations

Donor agencies Provide technical assistance, training and policytadvice

Promote public-private partnershipst

Domestic companies Seek to provide goods and services to internationaltoil companies (local content)

Learn new business practices and skills fromtworking with international companies and

contactors

Regional or local government Expect to participate in decision-making thattaffects local issues and community programmes

Expect to be recipients of some portion of oiltrevenues

May have regulatory and oversight role, alongsidetnational government


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Environmental and social issues in the project life cycle of petroleum operations

As the Royal Government of Cambodia (RGC) seeks to achieve the highest levels of

environmental and social safeguards and services in the oil sector, it is important to

keep in mind how the governments roles and responsibilities change over time,depending upon where the specific oil operation is in its project life cycle. The levels

of investment by an oil company and its environmental footprint are quite different,

for example, in the early stages of exploration and negotiation, compared to the later

stage if and when the site or block reaches full commercial exploitation and the

operations physical presence is significantly larger. In effect, the requirements and

expectations of both government and the oil companies vary throughout this life

cycle, including financial and institutional commitments, policy and regulatory

obligations, and other concerns.26

Most oil companies use some variation of the project life cycle below as part of theirbusiness and financial planning to develop a potential site.

Oil sector project lie cycle

The screen/negotiate phase is normally associated with the preliminary discussions

between government and oil companies to explore potentially promising sites orblocks for their possible commercial viability. Usually, financial transfers and physical

intrusion at the prospective site is relatively quite small.

During the drill/appraise phase, the oil company or the consortium steps up tests to

determine which of the previously screened blocks or sites have the potential for full

commercial development. At this stage, the company requires greater financial

commitments and the physical footprint of the operations may increase proportionally.

Based on an appraisal that a site has full commercial value and an acceptable expected

return on investment, the develop/produce phase generally associated with oilproduction begins. This phase signifies the beginning of major revenue flows to the

government and the oil companies, places communities and the environment at the

greatest potential risk when the operation reaches full-scale production, and exposes

both the oil companies and the government to increased public expectations and

perceptions of acceptable performance. The develop/produce phase may last anywhere

from 5-40 years depending on the size of the reserves at the wellhead.

26For a useful overview of environmental and social considerations, see International Finance Corporation (World Bank),Procedure or Environmental and Social Review o Projects, Washington, D.C., December 1998.

Screen/Negotiate Drill/Appraise Develop/Produce Dispose


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147

The final dispose phase represents the point in time at which the block has lost or is

losing its commercial viability for the oil company or the consortium. The site may be

either closed down completely or sold to another investor who is willing to extract

any remaining oil or gas resources. The dispose phase is generally considered to have

potentially major environmental risks. Likewise, there may be social ramificationswhen local communities lose oil-related jobs and social benefits.

In short, each of these four phases entails distinct environmental/social challenges

and requirements for both governments and the private oil companies concerned.

Contractual issues in environmental and social oversight

Emerging oil economies initially address the environmental and social aspects of oil

management with the contractual commitments between the government and the

oil company or the consortium responsible for developing the hydrocarbon resource.While a countrys national laws and policies form the backdrop, contractual agreements

are an important factor. Most government attention in the contractual process, however,

is usually focused on negotiating the revenue sharing formulas, taxes, royalties or

production sharing agreements that determine the level and flow of funds paid to the

government for the exploitation of the hydrocarbon resource.

The negotiating and contracting process should also be an occasion in which explicit

attention is given by the government to the environmental and social ramifications of

the site or block to be developed. The contracting process allows for specific

environmental and social standards, procedures and requirements to be articulated.

Issues to be negotiated could include, for example:

Environmental and social planning tools and methodologies to be used during thetexploration and development phase (such as environmental impact assessments,

social impact assessments, resettlement action plans, public consultations, etc.)

Workplace/workforce standards expected in congruence with international andtnational labour standards

ISO guidelines to which the company should adhere during development and op-t

eration of the block, such as construction standards

Guidelines for corporate social responsibility programmes during the differenttphases

Fines and remedies as well as appellate or arbitration procedures to be followed intthe event of environmental damage or spills

By including these kinds of issues during the negotiation, the RGC can avoid later

unforeseen problems. In most negotiations, reputable IOCs are more than willing to

share with host governments the environmental and social policies and regulations thatthey follow, and thus allow for win-win negotiations on environmental and social issues.


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Environmental aspects of oil management

Four aspects of specific environmental issues are found in the upstream oil sector:

environmental management systems, environmental impact assessments, regulation and

compliance, and CO2 emissions and climate change.

Environmental management systems

It is in the best interests of the RGC to ensure that its own agencies, as well as the

international and domestic oil companies with which it partners, develop and use

relevant and practical environmental management systems to oversee oil operations.

Environmental management systems (EMS), as commonly deployed in companies and

government agencies, are an outgrowth of ISO 14001 one of many environmental

standards prepared by the International Standards Organisation in Geneva, Switzerland

aimed at promoting continual improvement in organisations environmental performance.

ISO/DIS 14001 defines an overall environmental management system, closely modelled

on the ISO 9000 quality systems standard, and covers the following key elements:

Establishment o an appropriate environmental policyt that is documented

and communicated to employees and made available to the public, and which

includes a commitment to continual improvement and pollution prevention,

regulatory compliance and a framework for setting objectives.

A planning phaset that covers the identification of the environmental aspects of

the organisations activities, identification and access to legal requirements,establishment and documentation of objectives and targets consistent with

the policy, and establishment of a programme for achieving said targets and

objectives (including the designation of responsible individuals, necessary means

and timeframes).

Implementation and operation o the EMSt including the definition,

documentation and communication of roles and responsibilities, provision of

appropriate training, assurance of adequate internal and external communication,

written management system documentation, as well as appropriate document

control procedures.

Checking and corrective action procedures, including procedurest for regular

monitoring and measurement of key characteristics of the operations and

activities, procedures for dealing with situations of non-conformity, specific

record maintenance procedures and procedures for auditing the performance of

the EMS.

Periodic management reviews o the overall EMSt to ensure its suitability,

adequacy and effectiveness in light of changing circumstances.


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149

The EMS as outlined in ISO 14001 provides a structured process for the achievement of

continuous improvement, the rate and extent of which is determined by the organisation

in light of economic and other circumstances.27

Environmental impact assessment

An environmental impact assessment (EIA) is both a specific planning tool and a

process used to identify the environmental impacts of a project prior to decision-

making. It aims to predict environmental impacts at an early stage in project planning

and design, find ways and means to reduce adverse impacts, shape projects to suit

the local environment and present the predictions and options to decision makers.

By using EIA, both environmental and economic benefits can be achieved, such as

reduced cost and time of project implementation and design, avoid treatment/clean-up

costs and impacts of laws and regulations. A recent study by the United Nations

Environment Programme (UNEP) recommended that an EIA process should be usedduring the entire project cycle, from planning through operation to eventual closure.

EIA should also be closely integrated with the environmental management systems as

described above.

UNEP defines the keys elements of EIA as:

Scoping:t identify key issues and concerns of interested parties

Screening:t decide whether an EIA is required based on information collected

Identiying and evaluating project alternatives:t list alternative sites and

techniques and the impacts of each

Mitigating measures dealing with uncertainty:t review the proposed actionsto prevent or minimise the potential adverse effects of the project

Issuing environmental statements:t report the findings of the EIA28

From a regulatory perspective, EIA requirements should indicate as clearly as possible

which kinds of projects are subject to EIA procedures and which are not, so as to avoid

bureaucratic constraints on minor activities. Rules governing an EIA should always be

documented. Generally speaking, any large-scale upstream oil operations would be

expected to undergo an EIA. The EIA legislation should also establish effective review

and dispute settlement procedures to avoid unnecessary delays in decision-making and

progress in developing the project.

27For a useful overview of EMS, see ISO 14001: Environmental Management System Sel-Assessment Checklist, GlobalEnvironmental Management Initiative (GEMI), Washington, D.C., 2000. Another potentially useful GEMI reference source for

Cambodian decision makers is Measuring Environmental Perormance: A Primer and Survey o Metrics in Use. See www.gemi.org.

Some companies also follow industry standards from the American Petroleum Institute and the International Petroleum Industry

Environmental Conservation Association, both of which focus on sound engineering to reduce regulatory compliance costs.28See UNEP, Environmental Impact Assessment Training Resource Manual, Second Edition, Nairobi, 2002.


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Environmental compliance and enorcement

The basic starting point for environmental compliance is writing environmental laws

that are enforceable.29 To a certain extent, the contractual obligations signed between

the RGC and its international oil partners are key building blocks in upholding a complianceand enforcement regime. Behind this seeming straightforward principle, however, are

several critical tasks involving planning and institutional development.30 It is useful

to mention six elements for designing compliance strategies and enforcement

programmes:

1. Identifying the regulated community in the oil sector and establishing programme

priorities. This includes coordinating with other environmental programmes and

requirements for other sectors.

2. Promoting compliance to include building public support, publicizing successstories, designing economic incentives, and securing relevant educational and

technical assistance to meet overall compliance goals.

3. Monitoring compliance to include determination of inspection types, self-

monitoring and self-reporting by the regulated community, as well as the use of

area and/or ambient monitoring.

4. Enforcement responses to violations which entail the range of relevant response

mechanisms and authorities, articulation of the enforcement process, the role

of informal and formal mechanisms, the use of creative settlements to leverage

enforcement for broader results, and the selection of appropriate enforcementresponses (civil or criminal, sanction, assuring impartiality).

5. Clarifying roles and responsibilities including division of responsibilities among

government agencies and levels of government, the role of other government

institutions such as the legislature, and the role of non-governmental groups

(trade unions, universities, public interest groups) and third-party consulting

organisations.

6. Evaluating programme success and ensuring accountability refers to the metrics

used to determine if the compliance and enforcement process is working. Thesemetrics might include environmental results, compliance rates, progress in

returning violators to compliance, number of enforcement responses, timeliness

of enforcement responses, and monetary penalties assessed.

These six elements constitute the basic building blocks upon which a more detailed and

extensive compliance and enforcement regime should be constructed.

29An excellent reference on environmental law is UNEP, Judicial Handbook on Environmental Law, Nairobi, 2005.30

A valuable information source is the Network for Environmental Compliance and Enforcement (INECE), a partnership of

government and non-government enforcement and compliance practitioners from more than 150 countries. INECEs goals are:

raising awareness to compliance and enforcement; developing networks for enforcement cooperation; and strengthening

capacity to implement and enforce environmental requirements. Web site: www.inece.org.


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CO2

emissions and climate change

A final environmental concern is the growing attention being given by both

governments and oil companies to the global challenge of CO2

emissions and climate

change. The scientific proof is now irrefutable that global warming is adversely affectingour planet; thus governments and companies are individually and collectively exploring

ways that they can address this problem. Oil-producing economies and both national and

international oil companies have a particularly important role, given the relatively high

carbon emissions that petroleum operations can potentially entail.

A key objective for the RGC should be to work closely with its oil company partners to

agree on an achievable level of reduction of CO2

and other greenhouse gas emissions.

For example, one of Cambodias main oil partners, Chevron, valuates carbon emissions

and the possibilities for offsetting or reducing them for all capital projects over US$5

million. Analyses of projects over US$50 million go to the executive committee and theboard, which sometimes reworks them based on future risks and liabilities. This sort of

carbon emissions valuation should be encouraged with all of Cambodias oil partners.

Another area of focus should be on reducing gas flaring. For example, methane flaring

has 21 times more of an impact on atmospheric temperatures than carbon dioxide.

In this regard, Cambodia should consider, if it has not already done so, joining the

Global Gas Flaring Reduction (GGFR) initiative, a public-private partnership of

governments, national and international oil companies, and donor agencies. Launched

at the World Summit on Sustainable Development in August 2002, the GGFR

partnership brings together governments of oil-producing countries, state-owned

companies and major international oil companies so that together they can overcomethe barriers to reducing gas flaring by sharing global best practices and implementing

country specific programmes. Poverty reduction is also an integral part of the GGFR

programme, which is developing concepts for how local communities close to the

flaring sites can use natural gas and liquefied petroleum gas (LPG) that may otherwise

be flared and wasted. The programme has already evaluated opportunities for small-

scale gas utilisation in several countries.31

Social aspects of oil management

Some of the common tools and methodologies for the social aspects of oil managementwere mentioned previously, notably social impact assessments (SIA), resettlement

action plans (RAP), and public consultations.

The CSR relationship between governments and oil companies is changing and

growing in complexity. Historically, CSR was commonly called corporate philanthropy,

corporate donations, or charitable giving. Companies of all sizes, across virtually

all industries and sectors, practised CSR. As these names imply, companies viewed

donations as philanthropy based on giving away a certain percentage of company

31A useful report from the GGFR is A Voluntary Standard or Global Gas Flaring and Venting Reduction, World Bank,Washington, D.C., 2004.

The CSR

relationship

between

governments

and oil

companies is

changing and

growing in

complexity.


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profits. In many instances, there may not have been any link between the kinds of

donations that a company made and the kind of business activities or sector in which

it was engaged. Corporate philanthropy units were often managed by separate,

autonomous foundations or within public and government affairs departments that

had limited interaction with operational business units.

Today, however, this situation has changed dramatically. CSR has grown considerably

in both scope and importance, as more and more companies recognise the business

value of using CSR as a strategic component in how the company is perceived by

investors, employees, local communities, governments and the media. Senior executives

and boards of directors are now keenly interested in their companies policies on CSR.

Compare the old philanthropy model with what are now thought of as legitimate

components or categories of CSR listed below:32

EconomicMonetary flows to the public sectortEmployment and human resource developmenttProcurement and supply chain managementtTechnology transfer and intellectual property rightst

Environmental

Environmentally safe production, products and servicestEnvironmental impact assessment and managementtEnvironmental reporting and management systemst

SocialHealth and safety of employeestLabour standardstCorruption and briberytHuman rightstViolence and conflicttSocial impact assessments and managementtCommunity and stakeholder engagement (non-commercial)tCharitable givingtSocial investmentt

Social reporting and management systemst

Corporate governanceRights and treatment of shareholderstGovernance policies and business principlestInformation disclosure and reportingtResponsibilities of the BoardtCustomer/end-user caret

32This list is derived from the World Bank, but similar lists can found based on an Internet search under the topic of corporatesocial responsibility. See World Bank, Public Sector Roles In Strengthening Corporate Social Responsibility (CSR): A Diagnostic

Framework and Options Appraisal Tool, Compiled and written by the Overseas Development Institute for the Private Sector

Advisory Services Department, December 2003.


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This list demonstrates what has now come under the umbrella of CSR, which includes

the intermingling of environmental and social issues along with business ethics and

governance, as well as business operations and supply chain considerations.33

In designing a government policy toward CSR, it is perhaps helpful for the RGC tounderstand the emerging business case logic used by oil companies and some of the

elements associated with CSR best practice.

With regard to the CSR business case (or why it is in the self-interest of oil companies

to invest significant time and resources in good CSR programmes), there are essentially

four overlapping components:

Enlightened corporate sel interest and beneftst

o Not simply an operational cost, not simply philanthropyo Capturing business and reputation value calls for a more comprehensive and longer-

term approach to community outreach

o A capital investment with an expected return on investment (ROI)

Operationalt

o Increased competitiveness

o Maximise production and therefore revenue

o Improved workforce performance

Strategict

o Reduce risk

o Increase value of company social investments

External relationst

o Create political capital with host governments

o Enhance investor relations

o Tangibly demonstrate companys corporate citizenship philosophy

And finally, the emerging best practice in CSR, as seen by oil companies and leading

companies in other sectors, encourages: CSR supported by business unit senior

management, and backed by corporate endorsement at the headquarters level; a

long-term perspective; collaboration among multiple parties or stakeholders, leadingto public-private partnerships and local ownership; transparency and accountability;

joint decision-making; monitoring and evaluation of programmes; third-party auditing;

treating communities as active decision makers; and linking expectation management,

physical security for operations, environment, and community engagement.

33To demonstrate how CSR has come circle, see IBM,Attaining Sustainable Growth through CSR, IBM Institute for Business Value,IBM Global Business Services, Somers, New York, 2008.


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The growing complexity and scope of what constitutes good CSR places additional

responsibility on both the RGC and its oil company partners to ensure that CSR

policies and resources are well used and with the long-term interests of the Cambodian

people in mind. CSR is not a substitute for effective environmental and social

programmes undertaken by the RGC itself, but well conceived CSR programmes caneffectively complement government programmes and services and help to ensure

that the benefits of the oil sector are enjoyed by all of Cambodian society.

Selected case studies

The following case studies highlight some successful examples of how environmental

and social considerations are being addressed by oil-exporting governments in

collaboration with their international and national partners. The examples come from

Indonesia, Equatorial Guinea, Qatar and the trans-boundary pipeline project across

Azerbaijan, Georgia, and Turkey.

Indonesia Environmental and social saeguards or West Papua

West Papua constitutes 22 percent o Indonesias total land area and is one o the poorestprovinces in the country. It is also one o the most sparsely populated provinces, with only 5.6persons per square kilometre, and a population o only 2.4 million. At the same time, West Papuahas one o Indonesias largest natural gas sites, with reserves estimated at 38.1 trillion cubic eet.

The Indonesian government has embarked on a major initiative to develop one o the major gasfelds in partnership with British Petroleum (BP). The BP Tanugguh project, with an investment

o US$5 billion, will extract the gas and convert it into liquefed natural gas (LNG) or export toglobal markets.

The Indonesian government and BP have worked together closely to ensure both environmentaland social protection or the aected area. The project site is located in the vicinity o one othe worlds largest mangrove ecosystems, covering over 300,000 hectares on land and another60,000 hectares immediately oshore. This area directly supports approximately 3,000 households.

Based on the Special Autonomy Law o 2001, 70 percent o the post-tax revenues rom theproject will be returned to the province. By 2016, revenues o around US$100 million per yearwill be available to the province, with this sum rising to as much as US$200 million annuallyater 2019. These revenues will be used to improve inrastructure and government services aimedat providing lasting socio-economic benefts.

The Indonesian government and BP, in collaboration with UNDP, have also ormulated aDiversifed Growth Strategy (DGS) or the province and aected project area. Some o the keycomponents o the strategy call or dampening in-migration and unchecked growth in areasclose to the project; strengthening local business capacity; and promoting development onew enterprises to provide goods and services to the project. The DGS also places special emphasison linking Millennium Development Goal (MDG) 1, poverty reduction, and MDG 7, protectiono the environment.

CSR is not a

substitute or

efective

environmental

and social

programmes.


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Marathon Oil: Malaria eradication in Equatorial Guinea

Marathon Oil has had operations on Bioko Island, Equatorial Guinea since January 2002.Malaria was identifed as a key issue or Marathons employees and the local community. It

became clear that by addressing malaria to provide a sae and healthy working environmentor company employees, Marathon could also make a signifcant dierence in the lives o allcitizens living on the island. Marathon and its partners looked or a long-term health solutionthat could eliminate or signifcantly reduce the transmission o the malaria parasite, thushaving both environmental and social benefts. The outcome was a public/private partnershipthat involves the Ministry o Health and Social Well-being, Medical Care DevelopmentInternational, One World Development Group, the Medical Research Council o South Arica,Yale University Medical School and the Harvard School o Public Health. A fve-year, US$8 millionmalaria transmission reduction programme was rolled out in August 2003.

To date, the initial results have been very encouraging:

Data rom monitoring sites showed a signiicant reduction in the number o disease-ttransmitting mosquitoes captured by window traps installed in local houses.The estimated number o malaria-inected mosquitoes ell by 80 percent as a result o thetfrst round o spraying.The relative risk o receiving an inective bite is estimated to be only 20 percent o the leveltbeore spraying began.2005 data on the number o children aged 2-15 with malaria parasites in their blood,tsuggests an improvement o more than 25 percent compared to a 2004 baseline.


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Qatar Petroleum and global warming

Qatar Petroleum (QP) is one o the major national oil companies in the Middle East, with crudeoil production o 850,000 barrels per day expanding to over 1 million barrels per day by late 2009,

as well as current gas production o 6.2 billion cubic eet per day approaching 25 billion cubiceet per day by 2012.

In alignment with the Qatar governments commitment to sustainable development and aspart o the companys business strategy, QP has obligated itsel to address global warming aspart o its current and uture business practices. This management decision was based on therecognition that climate change has become an important element o the global businessenvironment with political, economic, technological, social and environmental dimensions.

Toward this end, QP is tackling climate change on several ronts:

Developing a national emissions inventory in conjunction with the Qatar governmentt

Setting a zero gas laring target or all o QPs oil and gas ieldstDeveloping co-generation and waste heat recovery projectstUndertaking energy eiciency studies o QP operationstInvestigating alternative energy options or uture businesst

In designing its climate change policy and programme, QP researched and analysed severalkey questions related to its current business operations:

What kind o direct and indirect greenhouse gas emissions are being produced rom QPst

operations? What are the key sources o these emissions?What is the projected growth rate o QPs emissions? Is this growth rate locked in or can itt

be changed?

How does the emissions intensity o QPs operation compare to others in the industry?t

As a country, how does Qatars emissions compare with other countries? How do per capitatemissions compare? What about emissions per US$ o gross domestic product (GDP)? Whatabout Qatars cumulative emissions?

With respect to policies and programmes or uture operational targets, QP asked itseladditional questions:

What opportunities exist to reduce emissions? What do they cost?t

Would any o these opportunities be eligible or the Carbon Development Mechanism (CDM)t

under the Kyoto Protocol? Are there agreed CDM methodologies that could be utilised?What technologies/approaches are available to increase energy eciency? What is the cost ot

these technologies/approaches?

Is QPs investment strategy dierent under alternative post-Kyoto rameworks (scenariotplanning)?

These questions were used as part o the process or ormulating QPs eventual policy and programmatic

choices mentioned above.


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The Baku-Tbilisi-Ceyhan (BTC) pipeline

The BTC pipeline runs or 1,760 kilometres rom Baku, Azerbaijan through the Republic oGeorgia and ends in Ceyhan, Turkey on the Mediterranean Sea. A consortium o oil companies

and investors, headed by British Petroleum, constructed the pipeline. It was fnished in 2006 atan investment cost o US$3.7 billion to bring high quality oil and gas ound in the Caspian Sea(in Azerbaijan territorial waters) or refnement and sale in European and global markets. At ulloperational capacity, the pipeline is able to trans-ship one million barrels o oil per day.

The BTC pipeline was built and is operated in accordance with stringent international environmental

and social standards. The pipeline is buried along its entire length. At its highest point, where itcrosses the Caucasus Mountains, the pipeline climbs to an altitude o 2,800 metres. Three separateenvironmental and social impact assessments (ESIAs) were completed to cover the length o the

pipeline and associated acilities through Azerbaijan, Georgia and Turkey. The three ESIAs wereled by international teams o independent consultants, with signifcant input rom nationalconsultants and scientists in all three countries.

Underpinning the ESIAs was a set o goals to minimise the project ootprint (including the righto way, temporary acilities and access roads), to achieve no net damage to protected ecologicalareas or archaeological sites, to require no resettlement o people, and to result in no permanentdisruption to the livelihoods o local populations. As a result o the meticulous route selection

process or the pipeline, not a single person was required to move rom their home because othe BTC project.

The ESIAs were made available or public comment and consultation beginning in mid-2002.Consultation and dialogue with all stakeholders including government and NGOs, as well as

potentially aected communities and interest groups at the local, regional and internationallevels played a vital role in the assessment. The communication and consultation process

continued throughout pipeline construction, with locally recruited community relations stameeting and sharing inormation with community members on a regular basis.

Summary

Proactively addressing environmental and social issues at the very early stages in the

development of the oil sector can help avoid later unforeseen problems. Recognizing

the different social and environmental requirements that must be addressed at each

stage in the lifecycle of an oil project from screen/negotiate through the dispose

phase is essential. There is also growing convergence and inter-linkage between

environmental and social issues, requiring their holistic treatment.

Collaboration and clear delineation of roles and responsibilities between the RGC and

its oil company partners is required to achieve optimal environmental and social

programmes with cost-effective use of available resources. This trend is evident in

the growing complexity and scope of CSR and the accompanying demands placed on

oil companies and the CSR oversight function of government.

Environmental and Social Challenges Eng

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