Transcript EHS Governance at Occidental Petroleum Corporation

Occidental Petroleum’s
Worldwide Standard of Care
--------------------------------------Presented by Richard A. Swan
Vice President Health, Environment and Safety
November 4, 2003
Occidental Petroleum Corporation
Oxy Business Segments
• Occidental Oil and Gas Corporation
– Worldwide Oil and Gas Exploration and
Production Activities
– 2002 Sales - $4.6 billion
• Occidental Chemical Corporation
– U. S. Chemical Manufacturing Activities
– 2002 Sales - $2.7 billion
• Glenn Springs Holdings, Inc.
– Centralized Site Remediation
Occidental Petroleum Corporation
2002 Daily Production
Occidental Petroleum Corporation
United States
2002 Production
Elk Hills
37 Million BOE
Hugoton
13 Million BOE
OXY Permian
60 Million BOE
THUMS
9 Million Barrels
Occidental Petroleum Corporation
Horn Mountain
December Startup
Corporate Governance
• Key governance items at Occidental
– Annual election of Board of Directors
– 10 of 12 Board members are independent outsiders
– Lead outside Director
– Confidential voting by shareholders
– No poison pill
– Formal “code of business conduct”
– Stock ownership guidelines for officers
– Performance-based incentives for senior executives
• Occidental’s governance highly rated
– Rated 10.0 by GovernanceMetrics International
Occidental Petroleum Corporation
HES Functional Organization
BOARD OF DIRECTORS
ENVIRONMENTAL, HEALTH AND
SAFETY COMMITTEE (ECOB)
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
EVP, GENERAL COUNSEL
AND SECRETARY
PRESIDENT AND SENIOR
OPERATING OFFICER
HES COUNSEL
CHIEF FINANCIAL OFFICER &
EXEC.V.P.-CORP.DEVELOPMENT
GLENN SPRINGS HOLDINGS, INC.
(SITE REMEDIATION)
VICE PRESIDENT,
HEALTH, ENVIRONMENT AND
SAFETY
Rick Swan
DIRECTOR,
ENVIRONMENTAL
AFFAIRS
Carl Wirdak
CORPORATE DIRECTOR,
SAFETY AND PROCESS
RISK
George Buxton
DIRECTOR, HES - REGULATORY
AFFAIRS (OCCIDENTAL INT’L)
Al Collins
HES STEERING TEAM
VP - HEALTH, ENVIRONMENT & SAFETY
OCCIDENTAL PETROLEUM (Swan)
CORP. MGR., HES
COMPLIANCE ASSURANCE
Coni Manders
MANAGER,
SAFETY AND PROCESS RISK
Harold Schambach
DIRECTOR, HES and SECURITY
OCCIDENTAL OIL & GAS (Scott)
VP - HEALTH, ENVIRONMENT & SAFETY
OCCIDENTAL CHEMICAL (Kemp)
DIRECTOR - HES REGULATORY AFFAIRS
OCCIDENTAL INTERNATIONAL (Collins)
DIRECTOR – HEALTH, ENVIRONMENT & SAFETY
GLENN SPRINGS HOLDINGS (Terwilliger)
MANAGER – SAFETY & SECURITY SERVICES
CORPORATE HQS AND SERVICES (Hallen)
Occidental Petroleum Corporation
EHS Committee (ECOB)
• Established in 1981
• Four “independent” Board members
• Meets 5 – 6 times annually with OPC
HES staff, OPC President (senior
operating officer), and General
Counsel (Chief Compliance Officer)
Occidental Petroleum Corporation
EHS Committee
• Reviews status of HES issues,
company compliance, remediation
projects and significant incidents
• Provides written reports to full Board
• Reviews all facility HES audit and
assessment reports
Occidental Petroleum Corporation
OPC HES Policy
Roles and Responsibilities
OPC
OIL & GAS
OXYCHEM
OPC ROLE
•Strategy
•Policy
•Oversight
•Consultation
•Coordination
GSHI
Industry Segments
•Implement industry specific HES programs that
achieve a consistent worldwide standard of care
•Plan, measure and report performance
•Assess and improve HES management system
Occidental Petroleum Corporation
HES Strategic Objective
To protect people and the
environment, while creating
stockholder value through
efficient Health, Environment and
Safety (HES) management.
Occidental Petroleum Corporation
HES Strategic Goals
• To have effective and efficient HES
management systems in place in all
business segments
• That enable the company to achieve
continual improvement in HES
performance, and thereby
• Be recognized as a company committed
to responsible HES management
Occidental Petroleum Corporation
Problem: Establishing
Worldwide Standards
• Oxy’s first approach – Meet the intent
of U. S. laws
• U. S. laws may be to prescriptive for
foreign locals
• U. S. laws may require excess paperwork
• U. S. laws may require technology or
management practices unavailable in
foreign locals
• Foreign requirements may exceed U. S.
Occidental Petroleum Corporation
Worldwide Standard of Care
Definition: “The set of HES
performance expectations and goals
established by an Industry Segment that
provide people and the environment a
consistent level of protection from HES
risks inherent in the various similar
business activities of the Industry
Segment, wherever located.”
Occidental Petroleum Corporation
Worldwide Standard of Care
“Beyond Compliance”
• Compliance with all applicable HES laws
and regulations is a minimum
• Correct or stop any activities with an
unacceptable risk to people’s health and
safety or the environment
• Set worldwide business segment HES
performance objectives
• A risk evaluation and mitigation program
that achieves consistent results worldwide
Occidental Petroleum Corporation
HES Management System
Inherent Risks
HES
Risk
Mgmt.
(arising from chemicals,
process technology,
siting, etc.)
Residual Risks
(remaining after
appropriate HES
programs are in place)
Legal Risks (arising
from need to comply
with laws, etc.)
Program Review
Operations
Risks
(arising from
operating
practices,
maintenance
practices, HES
programs, etc.)
QA/QC
Program
Incident
Investigation
(management
system
performance
feedback)
assesses how well each Segment is managing
the above programs (Policy 89:10:00)
Occidental Petroleum Corporation
HES QA/QC Program
• 50+ major facility locations worldwide
• Risk-based audit frequency (2 - 3 yrs.)
• Reports include:
– Assessment of status of facility’s HES
compliance and programs
– Specific audit findings
– Impact of findings on facility’s risk level
– Corrective action plans
• Each full audit report provided to ECOB
Occidental Petroleum Corporation
HES Risk Management
• Structured process for assessing HES
risks and mitigation opportunities
• Provides information for risk mitigation
decisions and resource allocation
• Establishes a system of authorities for
risk acceptance
• Facility can not accept risks above a
certain level without annual review by
senior Segment management
• Annual risk status review verifies that a
consistent SOC is being achieved
Occidental Petroleum Corporation
Process for Evaluating Risks
Methodology consists of:
– Identifying potential failure scenarios
– Determining the potential consequences
– Determining the likelihood that each
consequence will occur
– Using a consequence-probability matrix to
determine the response level
– Determining appropriate risk response
Occidental Petroleum Corporation
Identify Scenarios
• Typical scenarios:
– Failure of piping or process vessels
– Loss of utilities (electricity, water, air, etc.)
– Failure of control systems
• Hypothetical scenario:
– A natural gas pipe breaks causing an
explosion/fire in a facility
– Natural gas is clean (no Hydrogen Sulfide)
– No neighbors within a mile radius
– Facility is occupied part-time by two
employees
Occidental Petroleum Corporation
Define Consequences
POTENTIAL CONSEQUENCE TABLE
Potential Consequence Type*
Onsite Permanent
Incapacitating Injury
Environmental impairment
a) Cleanup/remediation
b) Food chain/terrestrial
life/aquatic life impacts
Offsite property damage
Offsite human impact
Onsite property damage or loss
of production revenue
Public reaction
Level 3
1
Adverse
a) < 1 year
b) Minor
Level 4
2 or 3
Serious
a) >1 year
b) Moderate
Minor
Minor
Moderate
Moderate
$10MM to $25MM
$25MM to $100 MM
Adverse
Serious
*Criteria for Potential Consequence Levels 1 and 2 are to be defined by IS.
Occidental Petroleum Corporation
Level 5
>3
Extensive
a) Not possible
b) Extensive
Extensive
Permanent
Incapacitating Injury
or significant health
impact
>$100MM
Threatens continued
Facility operation
Probabilities
• Stated as a frequency based on the number
of years between events (1 in X years)
• General categories are:
– >1/100 years (>1 x 10-2)
– 1/1,000 years to 1/100 years
– 1/10,000 years to 1/1,000 years
– 1/1,000,000 years to 1/10,000 years
– < 1/1,000,000 years (<1 x 10-6)
Occidental Petroleum Corporation
Determine Probabilities
• Probability of pipe breaking (past experience,
age, maintenance & inspection program, etc.)
• Probability of the gas being ignited (typical wind
speed and direction, ignition sources, etc.)
• Probability of two people being within the radius
of an explosion or fire (percent of time during a
year that two or more people are in the area)
• Example: Use 1/5000 years as our probability
Occidental Petroleum Corporation
PROBABILITY (1X)
Identify Response Category
-2
>10
D
E
E
D(C**)
D
E
-3
-2
-4
-3
*
D
D
-6
-4
*
*
D
3
4
5
10 to 10
10 to 10
10 to 10
POTENTIAL CONSEQUENCE
LEVEL
* Risk Response Category defined by IS.
** If no Permanent Incapacitating Injury.
Occidental Petroleum Corporation
Determine Response
CATEGORY
RESPONSE
A-C
Responses to HES Risks below Level D should be defined by the IS HES Risk
Management program and addressed as continuous improvement opportunities.
D
Perform appropriate qualitative or quantitative risk analysis to verify risk level and
document risk studies, potential hazards and relevant risk reducing measures.
Facility management shall implement appropriate measures to achieve the IS
Worldwide Standard of Care and inform senior IS management if risk can not be
reduced to a lower category in a timely manner.
E
Utilize opportunities identified in risk analysis to implement mitigation measures to
achieve the IS Worldwide Standard of Care. If the risk can not be reduced to a
lower category in a timely manner, perform quantitative risk analysis to verify risk
level and assess mitigation opportunities. If a lower risk level is not achieved,
concurrence of IS executive management is required. Opportunities to reduce risk
should be reviewed annually.
Occidental Petroleum Corporation
Interface with QA/QC Program
• Risk levels are used to set audit
and assessment frequencies
• Risk inventories and profiles are
the basis for the risk discussion in
the executive summaries of
audit/assessment reports
Occidental Petroleum Corporation
HES Program Review
• Corporate review of Segment HES
programs and management systems
• Six to nine month process of interviews
and site visits
• Assesses whether consistent worldwide
standard of care is being achieved
• Report prepared for Segment CEO,
OPC management and ECOB
• Segment CEO presents findings and
response plans to ECOB
Occidental Petroleum Corporation
Health & Safety Performance
Occidental’s 2002 Injury & Illness Rates
Industry Comparisons*
0.62
3.3
4.0
5.7
7.9
8.1
Occidental Petroleum
Corporation
* U.S.
Bureau
of Labor Statistics
Comparative Total Returns
3 Years (1/1/00 - 12/31/02)*
(Percent)
Occidental Petroleum Corporation
* Data
Source: Bloomberg
Market Indexes
Comparative Stock Performance
12/31/01
Index: Dec. 31, 2001 = 100
Occidental Petroleum Corporation
12/31/02
Summary
• Occidental’s HES program has
contributed to continuous improvement
in HES and financial performance.
• Success attributable to a strong HES
governance program, coupled with
“beyond compliance” objectives.
Occidental Petroleum Corporation
Questions?
Occidental Petroleum Corporation