Striking a Balance - First Report 2002

Foreword Michel Contie, Managing Director, TotalFinaElf Exploration UK, Oil & Gas UK President John McDonald, Managing Director, ChevronTexacoUpstream Europe, UKOOA Vice President and Executive Officer - champion for sustainability strategy Mark Hope, External Affairs Director, Shell U.K. Exploration and Production, Chairman of UKOOA Sustainability Policy Group The publication last year of 'Striking a Balance' was a milestone for the UK oil and gas industry. It was our first attempt at setting out a strategy for sustainable development in the upstream (exploration & production) industry and our first step towards defining our relationship with society at large - our interactions, impacts and responsibilities. The oil and gas industry makes a massive contribution to the UK economy in terms of jobs, revenues, technology development, exports and security of energy supply. Modern economies are built upon energy and so the health of our industry is important to everyone. This has come at a cost, however, and scientific evidence shows that use of our products contributes to climate change. Progressive reductions in CO2 emissions will require substantial energy efficiency improvements and a progressive transition from fossil fuels towards a new energy mix which will include renewables and, probably, hydrogen technology. Unless energy use is to be radically curtailed, reductions in CO2 emissions - required by the Kyoto protocol and adopted by the United Kingdom - will need to come from progressively de-carbonising energy. This will mean moving increasingly, towards gas which is roughly twice as carbon-efficient as coal and with substantially less other pollutants (NOx and SOx) and using improved technology to achieve an acceptable range of alternative energy sources. This transition, which arguably started several decades ago with the move towards gas in many developed countries, will take many decades to accomplish and will need concerted action across all parts of the economy. Our upstream sector has its role to play in this transition - through continually improving environmental performance, more transparent social accountability and increased collaboration with the industrial sectors using our products. We have been encouraged by the Sustainable Development Commission's [http://www.sd-commission.gov.uk/] appraisal of "Striking a Balance". The Commission has been supportive of our work to date and helpful in suggesting areas for improvement. Its review of the strategy acknowledges the industry's understanding of sustainability principles, recognition of the benefits of sustainable practices. It also acknowledges our clear commitment to identifying opportunities for improvement through innovation and technological development and maximising benefits through working together within the industry and with other sectors. It recognises the inclusion of good case studies but is critical that they are anonymous - a point that we have taken on board in this progress report. It also notes that we have further to go in establishing a sector-wide set of indicators and targets. This is a difficult area and we have in place a programme to work this issue by the end of the year, conclusions of which will be reported in our next sustainable development update. The strategy document set out 58 commitments in the categories of Economy, Environment, Society and Stewardship, with an additional five relating to key processes for delivery - performance measurement and reporting, stakeholder engagement and best practice sharing throughout our industry. Our commitment to reporting promised annual progress reviews and the report that follows sets out our industry's first report on performance to date against the commitments made, our successes, gaps, and our plans for improvement. We are pleased to report that significant progress is being made against most of these commitments, with 90% of our committed actions either achieved or well in hand, but with important areas still to address. Good progress has been made in achieving our oil-in-water targets, with the industry consistently achieving figures within the 30ppm limit on a company annual average basis. New OSPAR regulations to be in effect by 2006 are even more stringent and will present a number of technical challenges, as well as challenges that ensure that a valuable energy resource is not lost to the nation. We are also making good progress with offshore gas flaring reductions through the year and a new emissions trading scheme that will achieve reductions in CO2 over the period to 2006. There have also been some notable successes in the areas of shared logistics, engagement with the supply chain and initiatives to improve recruitment, skills and workforce training. Measures to bring forward essential new technology have progressed well with some £8 million committed in 2001 to joint industry project brokered by the Industry Technology Facilitator, over and above R&D initiatives by individual companies. A further £5 million has been committed in venture capital through the NOVA fund to finance development of innovative technology ideas in Small and Medium Sized Enterprises (SMEs). We fear, however, that efforts to stimulate exploration and development activity, successful through 2001, are likely to be significantly affected by recent changes to the fiscal regime. We urge collaboration going forward between industry, Treasury and DTI on this issue. Other key areas, however, have not progressed as we well as we wanted and these are being tackled. Safety performance falls short of our expectations and further improvements are required in our environmental performance. Safety performance is recognised as top priority for the industry but we accept that while we compare well with many other UK industrial sectors, we are not achieving 'best in class' standards for offshore oil and gas activity. We are therefore setting new safety performance targets, as well as working towards additional targets set by the Health & Safety Executive and our progress in achieving these will be reported upon in the next report. It is also disappointing that the industry target for independently verified environmental management systems has not been fully met; however we believe we will be close to our 2002 target with 97% of oil and gas production accredited by the end of year. In conclusion, we are confident that our industry is making good progress. We have developed and communicated our strategy, provided greater transparency in reporting, and delivered performance improvements over the past year. We also recognise the need for continued improvement and are committed to building an industry-wide understanding of the importance of sustainability. We hope readers of this progress report will see it as an honest attempt to assess achievements, shortfalls and work to be done, and recognise that this is an evolving process and that, with help, we are learning as we go. As always, feedback is important to us, and comments and suggestions are welcome - you can contact us at info@oilandgasuk.co.uk