Panelists Urge Industry To Take Sustainability Seriously Published November 4, 2014
The oil and gas industry has to intensify its efforts in terms of sustainability and integrating sustainability factors into the industry’s daily operations, according to panelists at the Sustainability Task Force special session at SPE’s Annual Technical Conference and Exhibition in Amsterdam.
The session, titled People, Profit, Planet: Advancing Practices That Balance Economic Growth, Social Development, and Environmental Protection Today and in the Future, featured panelists who touted the importance of sustainability for the world and particularly for the oil and gas industry.
2014 SPE President Jeff Spath speaks at the Sustainability Task Force special session. Credit: Conference Photography.
Jeff Spath, 2014 SPE President, said in his presentation entitled Sustainability—Why SPE Has Begun Work in This Area, that the oil and gas industry has been thinking about and “doing” sustainability for nearly 20 years, since the Shell Brent Spar decommissioning event in 1995 when both social and environmental incidents gave the industry a sustainability wake up call, much like Piper Alpha gave oil and gas professionals a safety wake up call just more than 25 years ago.
But, unlike Piper Alpha, the decommissioning of the Brent Spar and the
execution of Ogoni activists in Nigeria in the same period did not lead to a commission being formed and regulations being drafted and enacted. Instead, activists outside the industry led campaigns to which industry at first responded through public-relations campaigns and then, increasingly, with efforts to understand the concerns and improve performance. “In other words, our industry did not initially take control of its own performance,” Spath said.
Twenty years after the incident, the industry is still struggling with how to define sustainability performance, who would define it, and how it could be measured in the absence of regulation.
“Over time, practices emerged, industry groups formed, sustainability disciplines matured, best practices emerged, and sustainability professionals joined the industry,” Spath said.
Moreover, the industry still has not “moved the needle,” or integrated sustainability factors into daily operations, processes, or business models. “We are still struggling with aboveground risk in a significant way,” he said.
But, in 2010, SPE decided this activity was not a passing fad and that it was time to start contributing more proactively. “We formed a strategic task force and began to analyze how we could best accelerate the integration of sustainability practices to the operations of our industry,” Spath said.
The SPE Task Force of more than 20 sustainability professionals homed in on a gap for which the SPE mission is a perfect fit—that of competency development. “We have the ambition to be the go-to place for sustainability training in our industry,” Spath said.
A competency program business plan has been approved by the SPE Board of Directors and will be piloted at the SPE E&P Health, Safety, Security, and Environmental Conference—Americas in Denver next March. “The initial audience is sustainability professionals, but, by 2016, our ambition is to have an offering for nonpractitioners—operational decision makers like many of yourselves,” Spath said. “In the meantime, we are bringing you sustainability content and practitioners to our core SPE events—like ATCE today,” he added.
Alyson Warhurst, founder and CEO of Maplecroft, analyzed risk, opportunity, and sustainability in the global growth landscape and how to get them to flourish long term. Warhurst blamed governments for political instability because of an unequal distribution of wealth, which leads to social unrest and instability. “Countries where disparity between relatively high social gains with oppressive governance create potential for societally forced regime change and resource nationalism and depicts areas of business risk,” she said.
Economic growth is sustainable when it meets the needs of the present without compromising the ability of future generations to meet their own needs. For business, sustainability refers to “an organization’s activities that demonstrate the inclusion of social, environmental, and corporate responsibility concerns in business operations and interactions with stakeholders,” she said.
Warhurst said that corruption and poor governance are sources of instability, highlighting the experience of several oil and gas producing countries where corruption hinders all efforts of investment.
“When government is corrupt, this means that they don’t invest back into the society,
which leads to instability,” she said.
Stephen Newton, chief executive officer of Equitable Origin, said in his presentation that the oil and gas industry has made incredible technical advancement where the biggest investor concern is the industry’s ability to manage aboveground risk. Newton said that problems at the beginning translate to issues over the life of a project.
“About two-thirds of projects worldwide are late and over budget,” Newton said. “Communities including indigenous people have increasing power by virtue of obligatory and extensive consultation processes,” he added.
For future success, Newton said that managing aboveground risks through transparent communication with all stakeholders, particularly local communities, is very important. “Being open to third-party certification as a way to independently verify best operating practices and gain the trust of all stakeholders is also critical for future success,” he said.
Egbert Imomoh, nonexecutive chairman and cofounder of Afren and 2013 SPE President, discussed the opportunities and challenges related to the local content. Imomoh said that the local content emerged because natural resources belonged to the state, where national government has no leverage or wherewithal to change the thrust of policy.
“Progressively, capital flight, slower than expected economic growth, increase in trained local manpower, and high unemployment made a case for change,” he said.
Speaking about stakeholders and what they bring, Imomoh said that government brings resources, laws, security and fiscal terms, while community brings land, local customs, and people. “The industry bring knowledge, capital, people, and equipment,” he said. “In return, government wants maximum economic growth, while community wants employment and minimum impact on their environment,” he said. “The industry wants maximizing value, and sanctity of contracts, as well as access to local staff,” Imomoh said.
Despite all the challenges, many international service companies have formed alliances with local companies.
“Banks are more ready to grant loans as they understand the risks and opportunities better, which leads IOCs (international oil companies) to accept paying a premium to accommodate local companies,” he said.