occidental petroleum 2006 Social Responsibility


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occidental petroleum 2006 Social Responsibility

  1. 1. Occidental Petroleum Corporation Good neighbor. Good business. Social Responsibility Report 2006
  2. 2. Oxy GOOD NEIGHBOR. GOOD BUSINESS. SOCIAL RESPONSIBILITY REPORT 2006 CONTENTS Introduction to Worldwide Social Responsibility 1 º Message from the Chairman 2 One Management System 4 º Integrating Social Responsibility and Health, Environment and Safety º HES Principles Responsible Workplace Practices 6 º Compliance Commitment and Responsible HES Management º A Safe and Healthy Workplace º Environmental Performance º Energy Efficiency and Climate Change º Compliance º Employment Practices º Developing Expertise in Our International Workforce Ethical Business Practices 24 º Commitment to Human Rights º Responsibility and Integrity in Conducting Our Business Good Neighbor Practices 28 º Educational Enrichment º Encouraging Safe and Healthy Communities º Helping People Help Themselves º Stimulating Local Development Tomorrow 36 Business Overview 37 GLOSSARY ACC American Chemistry Council NGO Nongovernmental Organization API American Petroleum Institute Occidental Occidental Petroleum Corporation BLS U.S. Bureau of Labor Statistics (Oxy), together with its affiliates and CHP Combined Heat Power (Cogeneration) subsidiaries EPA U.S. Environmental OSHA U.S. Occupational Safety and Protection Agency Health Administration GHG Greenhouse Gas SEC U.S. Securities and Exchange HES Health, Environment and Safety Commission IIR Injury and Illness Incidence Rate SR Social Responsibility (Incidents per 100 worker-years) TRI Toxics Release Inventory M Thousand WHC Wildlife Habitat Council MM Million ON THE COVER: In Arauca, Colombia, school children enthusiastically greet an Oxy representative. Through the A Crecer literacy and adult education program, illiteracy rates have been reduced to near zero.
  3. 3. WORLDWIDE SOCIAL RESPONSIBILITY Occidental Petroleum Corporation (Oxy) is committed to being an outstanding and responsible corporate citizen, as we strive for continual improvement in our worldwide Health, Environment and Safety (HES) systems and Social Responsibility (SR) performance. Our responsible workplace practices combined with ensures that we are both supporting our business our good neighbor initiatives motivate our employees, goals and making the most effective contributions to minimize our operating risks, lower our costs and the communities where we operate. enhance our reputation. These activities directly Our report profiles many of our activities around affect our business success and stockholder value. the world. These include safeguarding the health Previously, we have reported separately on our of our employees and stakeholders, protecting, annual HES and SR activities. This year, we are preserving and enhancing the environments in which combining these two reports into one as part of our we operate as well as contributing to the enhance- process of integrating SR into our comprehensive ment of the quality of life in communities near our HES management system. The process will allow operations. These profiles provide insight into the us to design, implement and measure SR activities people and processes that help make Oxy a good using standards similar to those we have long neighbor and a highly successful oil and gas and applied to our HES programs. This integration chemical company. In our operations In the communities where we work In the environment United States Colombia Oman 1 1
  4. 4. Message from the Chairman Generating profits for our stockholders while operating a socially responsible company is challenging, rewarding and absolutely necessary for Oxy’s success. Fueling human progress and economic growth while focusing on operational integrity requires a solid, well-designed approach to social responsibility. Over the years, we have implemented sound, well thought out social responsibility programs to ensure the safety of our employees, maintain high environmental standards and to support social programs in the communities in which we operate. Social responsibility is not just a fashionable term — it is one of Oxy’s core values. We believe it. We live it. Our values shape everything we do in business. Our strong performance in 2006 was due in large part to our successful Dr. Ray R. Irani implementation of strategic investments and being a good Chairman, President and Chief Executive Officer corporate citizen. Not only is Oxy delivering good returns to our shareholders, we are also one of the safest companies in both the oil and gas and chemicals industries. Oxy’s continued commitment to safety and social responsibility benefits our bottom line by reducing risk, improving employee productivity, reducing operating costs and lost production time, while enhancing our reputation. We are proud to report our progress in this year’s report. In 2006 we significantly increased our employee human rights training programs worldwide. Oxy formalized our corporatewide human rights program more than three years ago and we will continue expanding our efforts. Insight to our progress appears throughout this report and includes examples of our activities in Chile, Colombia, Libya and Oman. The graphs, statistics and numbers in this report are one measurement of our social responsibility accomplishments. But, the satisfaction of helping a community take advantage of the opportunities created by natural resource development is measured more by the human factor. Our “Homes for Houston” project illustrates our commitment to being a good neighbor and is one of Oxy’s success stories. This report also provides highlights and insights into our efforts in several additional areas. 2 2
  5. 5. For example, our coral reef protection study in We remain fully committed to HES and Social the Arabian Gulf will help preserve and protect a Responsibility policies that are responsible, ethical sensitive ecosystem for future generations. We and accountable. We recognize the need to maintain also implemented an emissions reduction system a balance between financial and operational in our Hugoton gas field operations in Kansas performance. Our responsibility to our stockholders, by retrofitting production wells with electric our communities and the future depends upon our motors and eliminating the need for gas-fired success in building a stable platform for sustainable engines. Our accomplishments have earned growth economically, socially and environmentally. us numerous awards. Being a good neighbor is simply good for business. We are also highlighting some of our significant community activities, including our participation and support of Best Buddies; an “Opportunities Ray R. Irani Bank” in Colombia supporting small businesses; Chairman, President and the Safe T. Turtle program — a child safety Chief Executive Officer education program in our Permian operations; and a Petroleum Technology Academy near our Elk Hills, California operation. Elk Hills is one of seven Oxy sites certified by the Wildlife Habitat Council. 3
  6. 6. ONE MANAGEMENT SYSTEM Integrating Social Responsibility and Health, Environment and Safety Sustainable success demands strong systems and performance. More than 25 years ago, Oxy implemented a comprehensive HES management system, which has helped us achieve continual improvement. We are now extending this rigorous approach to promote improvement in our SR performance, creating a social responsibility standard that defines the requirements business units must meet in their stakeholder relations, social risk management activities and quality of social programs. In 2006, Occidental Oil and Gas Corporation established inter- disciplinary SR teams to assess SR performance and serve as champions of social responsibility by determining areas for improvement and promoting effective action planning. HES Principles As a fundamental business element, Oxy’s goal is 4. Reduce pollutant releases to the environment. continued HES system and performance improve- 5. Make efficient use of nonrenewable natural ment. Our corporate HES vision statement and resources. guiding principles give direction to Occidental HES activities. 6. Use energy efficiently. These principles, as implemented through Oxy’s 7. Provide information on the safe use and HES policies and procedures, incorporate disposal of Occidental’s products. the following commitments. 8. Maintain a dialogue with neighboring 1. Protect the environment and the health and communities about HES concerns. safety of people using design procedures, 9. Keep Oxy’s Board of Directors informed work practices and employee training. about HES issues. 2. Correct operating conditions that have 10. Report annually on Oxy’s HES performance. a significant adverse health, safety or environmental impact. The full text of these principles is included in the Health, Environment and Safety section of our 3. Reduce waste generation and responsibly Internet site, www.oxy.com. manage waste disposal. Workers at Oxy’s offshore Qatar unit are reminded each day that “Safety Comes First.” 4 4
  7. 7. RESPONSIBLE WORKPLACE PRACTICES Compliance Commitment and Responsible HES Management Oxy is committed to operating in compliance with all applicable HES laws by employing stringent internal programs that often exceed prevailing legal requirements. In addition, our businesses endeavor to achieve a a process for implementing and monitoring change worldwide standard of care that provides the same exists. It assures compliance with applicable legal degree of protection to employees, contractors, the requirements and company policy and confirms that public and the environment, wherever we operate management systems and physical controls are in the world. Oxy’s Board of Directors has a compre- maintaining operations in compliance with these hensive view of HES activities and leadership. HES requirements. HES professionals and non-HES performance is considered in employee annual personnel who are selected for their management performance review and compensation. potential are staffed on review teams to further their understanding of Oxy’s HES programs and Oxy diligently works to strengthen existing programs requirements. Resulting action plans are tracked by benchmarking against leading corporations and from conception to completion. During 2006, HES tracking developing issues and HES management audits for 25 operating locations were completed trends. Oxy also actively participates in progressive and reviewed by senior management. organizations, such as the Global Environmental Management Initiative, the World Environment Center, Oxy sets high standards of HES performance aimed ORC Worldwide, the Auditing Roundtable and the at ensuring responsible environmental stewardship Wildlife Habitat Council. and sustainable operations. We challenge ourselves to conduct business in a manner that creates value Oxy’s HES quality assurance and quality control for society — including our employees, neighboring (QA/QC) processes measure program effectiveness. communities, partners, suppliers, host governments Our multifaceted QA/QC process, which ranges and stockholders. We believe Oxy’s exemplary from frequent facility-level inspections and audits performance provides a competitive advantage to comprehensive audit team reviews, verifies in today’s complex global marketplace. necessary program elements are in effect and that From the Long Beach shoreline, THUMS islands are often mistaken for resorts, when in fact, they are active oil and gas operations. THUMS, Long Beach is one of six Oxy sites certified by the Wildlife Habitat Council. 6 6
  8. 8. OSHA Star OSHA Star status is the highest recognition for excellence in safety from the U.S. government’s Occupational Safety and Health Administration (OSHA). OXYCHEM OSHA STAR SITES Nationwide, less than one-hundredth of one percent (INITIAL APPROVAL YEAR) of approximately six million work sites have attained Chicago, Illinois (2006) OSHA Star status. OxyChem has achieved OSHA Wichita, Kansas (2005) Star recognition at 34 facilities with 18 currently Cincinnati, Ohio (2000) operating (16 of the 34 sites have been sold or shut Mobile, Alabama (1998) down). Contractors at seven OxyChem sites also OxyChem Headquarters — Dallas, Texas (1998) have received OSHA Star awards. Muscle Shoals, Alabama (1996) An OSHA Star work site (or state equivalent) must Delaware City, Delaware (1996) have comprehensive and successful safety and Niagara Falls, New York (1996) health programs that achieve total reportable and Taft, Louisiana (1994) lost workday injury rates below private industry’s Taft On-site Contractor (1998) national average. OSHA criteria for Star status Dallas, Texas (1993) strongly encourages management and employee Convent, Louisiana (1991) commitment to meet or exceed all regulatory Convent On-site Contractor (2000) requirements. Once a facility meets the OSHA Star Ingleside, Texas (1991) criteria, it must be recertified every three to five OXYVINYLS, LP years to retain its OSHA Star status. No Occidental Pedricktown, New Jersey (2004) facility has ever lost its OSHA Star designation Deer Park, Texas (two sites: 1997–2001) OxyChem’s strong safety programs contribute Deer Park On-site Contractor (two sites in 2003) to ongoing recognition under the federal govern- La Porte, Texas (two sites in 1997) ment’s prestigious OSHA Voluntary Protection La Porte On-site Contractor (two sites in 2003) Program (VPP). Pasadena, Texas (1991) Pasadena On-site Contractor (2003) OxyChem’s Ingleside, Texas facility has earned the OSHA Star designation since 1991. 7
  9. 9. RESPONSIBLE WORKPLACE PRACTICES Safe and Healthy Workplace Oxy is demonstrably committed to providing a safe and healthy workplace. Rigorous policies at every work site help to protect our employees, contractors and neighboring communities. normal duties the day after an occupational injury or CONTINUED SAFETY EXCELLENCE Oxy has consistently ranked as one of the world’s illness. Occidental’s performance, which includes all safest companies with 11 consecutive years of Injury of its worldwide operations, compares favorably with and Illness Incident Rates (IIR — recordable injuries the 2.4 rate for all U.S. private industry based on the and illnesses per 100 worker-years) of less than one. most recent BLS data. Oxy’s employee Lost Time The most recently published (2005) U.S. Bureau of Case Rate has improved about two percent per year Labor Statistics (BLS) Industry average is 4.6. In over the last 10 years. 2006, Oxy’s employee IIR of 0.47 reflects a 4-percent Our business segments rely on service contractors per year improvement trend over the past 10 years for specialized or short-term work. Occidental and indicates that injuries to Oxy’s employees occur expects its contractors to share its commitment about one-tenth as often as injuries to the average to workplace safety and reinforces this expectation U.S. worker. by including it in its contractual agreements. HES Oxy also is one of the top performers among its performance is an important factor in the selection industry competitors. The most recent data available of contractors. Oxy monitors the performance of its from the American Petroleum Institute (API) show contractors during the contract period by requiring that the average IIR for all U.S. exploration and that the company be notified of all injuries along with production company employees is 0.55, while plans to prevent recurrence. The data indicate that the average for American Chemistry Council (ACC) contractors working full time for Oxy perform far peer companies is 1.27. better than those doing similar work for other companies. Oxy’s 2006 consolidated worldwide The same commitment to safety that has reduced full-time contractor IIR was 1.24, reflecting a 4-percent the number of recordable injuries also has led to improvement over the past 10 years. Based on fewer severe injuries. This is indicated by the Lost 2005 BLS data, Oxy’s contractor results were Time Case Rate, which represents the total annual approximately five times better than the average number of cases per 100 workers that resulted in an for the U.S. construction industry. employee being unable to return to work or perform Occidental Employee Injury and Illness Occidental Contractor Injury Incidence Rate and Lost Time Case Rate and Illness Incidence Rate Per 100 Workers Per 100 Workers 0.88 0.73 0.68 0.65 0.83 0.69 0.62 0.68 0.34 0.47 0.47 IIR 2.08 1.93 2.17 1.10 1.67 1.28 1.15 1.55 1.09 1.18 1.24 0.39 0.33 0.23 0.29 0.35 0.33 0.43 0.26 0.22 0.25 0.26 Lost Time 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 8
  10. 10. Responsible Care at OxyChem Occidental Chemical Corporation’s (OxyChem) active participation in the ACC’s Responsible Care® initiative is an excellent example of this commitment. The Responsible Care® program requires member companies to conform their practices to a set of industry-wide metrics that often go well beyond government mandates. The Responsible Care® program has not only helped significantly reduce emissions, but also contributed to raising safety performance to a level well above the overall manufacturing sector. As a testimonial to the sustained excellence of Occidental’s safety and environmental performance, the ACC in 2005 awarded OxyChem the Responsible Care® Leadership Award — one of the industry’s most prestigious awards. Injury and Illness Incidence Rates for Selected Industries (Source: U.S. Bureau of Labor Statistics – 2005) Per 100 Workers Dentists 0.20 Stock Brokers 0.30 Occidental (year 2006) 0.47 Insurance Agents and Brokers 0.70 Legal Services 0.70 Computer & Electronic Products 2.00 Oil & Gas Extraction 2.10 Basic Chemicals 2.40 Mgmt. of Companies & Enterprises 2.40 Paper Mills 3.70 All Industries 4.60 Coal Mining 5.10 Construction 6.30 Grocery Stores 6.30 Meat Processing 7.80 Saw Mills 9.60 Steel Foundries 10.70 Motor Vehicle Manufacturing 12.90 9
  11. 11. RESPONSIBLE WORKPLACE PRACTICES Environmental Performance SUSTAINED ENVIRONMENTAL PROGRESS Oxy seeks continuous improvement in resource conservation, release reduction, pollution prevention and energy efficiency. SPILL PREVENTION Strong HES programs are designed and Oxy’s HES program addresses spill prevention in implemented to meet specific business and a variety of ways, including investing in technology environmental objectives, and to enable resource to detect and prevent pipeline corrosion, making allocations to be made in accordance with HES extensive use of secondary containment, operator risk management priorities. training programs, auditing and inspection. If an oil For example, OxyVinyls’ Louisville PVC plant was spill occurs, liquids typically are quickly recovered designated an American Chemistry Council’s Energy and impacted soil is treated by natural bioremedia- Efficiency/Environmental Impact Award site for 2005 tion methods. Generally, the primary contaminant in for implementing a project that annually conserves a produced water release is salt, which is usually 45 million gallons of potable water and reduces sewer addressed by rinsing the soil with fresh water. discharges by an equal amount. The Louisville facility Despite increasing oil production by more than 150 achieved these results by installing automated equip- percent since 1995, the ratio of oil unintentionally ment that replaced city water with recycled water. released into the environment versus production is Oxy also makes progress in land and habitat only one-thousandth of one percent. In 2006, less conservation. As a member of the Wildlife Habitat than 30 percent of Oxy’s oil spill incidents involved Council (WHC), Oxy’s efforts at the 102nd Street releases of more than 10 barrels. Excluding three Landfill in Niagara Falls, New York received certifica- produced water spills, which accounted for more tion in 2006 for the implementation of a successful, than 75 percent of the total amount of produced comprehensive wildlife habitat management program. water released during the year, worldwide releases Since 1988, the nonprofit, nonlobbying WHC has averaged less than 25 barrels per incident. Even worked to increase biodiversity, create and protect though these amounts spilled are very low, Oxy habitats and expand environmental awareness. strives to achieve a goal of zero spills. Oxy has six additional sites certified by the WHC. Oxy’s other WHC certified sites are located in Long Beach, California; Montague, Michigan; Copper Basin, Tennessee; Elk Hills, California; Wichita, Kansas; and Geismar, Louisiana. All sites have cooperative efforts involving management, Liquids Unintentionally employees, community members, local conserva- Discharged Compared tion groups, and local, state or federal agencies. to Production Barrels Per Million Barrels of Oil Equivalent Oil 4.8 6.3 6.4 20.1 3.3 5.4 7.3 Water 1.4 33.1 4.9 3.3 4.1 4.5 18.0 2000 2001 2002 2003 2004 2005 2006 10
  12. 12. TRANSFERS AND WASTE REDUCTION Although its vinyl chloride emissions are well below Oxy’s HES Principles and policies require a constant permitted levels, OxyVinyls, LP voluntarily entered focus on waste reduction and resource conservation. into an enforceable commitment (discussed further Within Oxy’s wide range of operations, different on page 18) in 2006 to reduce its combined vinyl approaches are used to achieve continuous improve- chloride emissions by almost 50 percent from four ment. Pollution prevention and release reduction manufacturing facilities. The company will undertake projects are included in the annual budget process. emission reduction projects at a cost of approxi- mately $1.1 million to redesign stripper columns and Toxics Release Inventory (TRI) data submitted by reactor vessels, and install vacuum systems for OxyChem to the U.S. Environmental Protection railcar unloading. Agency (EPA) are shown in the table and graph below. For 2005 (the most recent report year), total OxyChem waste generation data include activity reportable releases and transfers to off-site facilities related to ongoing production operations at OxyChem for destruction or disposal were 7.8 million pounds. plants and its 74-percent owned OxyVinyls, LP This is approximately 50 percent lower than in 1998. chemical plants. In 2005, total waste generation The increase from 2004 was due to the acquisition increased due to the addition of manufacturing of additional manufacturing capacity. Total releases are capacity. Hazardous waste generated in 2005 was less than 0.2 pound per ton of production capacity, or equivalent to less than 0.3 percent of the amount approximately one-hundredth of one percent. The of OxyChem production capacity and reflects a majority of TRI reportable chemicals were inciner- 53-percent decline in waste generation since ated, treated, recycled or burned for energy 1998. OxyChem’s well-established waste minimi- recovery. The remainder was safely disposed of in zation program is a structured approach to refine permitted deep well injection facilities. and improve manufacturing processes, operating protocols and maintenance procedures. Waste In 2005, OxyChem used the mercury cell chlor-alkali minimization projects entail significant engineering process at two of its U.S. manufacturing locations, effort, extensive process modifications and capital one in Delaware City, Delaware, another in Muscle expenditures. In 2005, more than 90 percent of Shoals, Alabama. OxyChem permanently shut down OxyChem’s solid hazardous waste was incinerated, the Delaware City facility in 2005 and in early 2006, treated, recycled or burned to recover energy. Most of announced plans to close its Muscle Shoals, Alabama this material was processed at OxyChem’s on-site mercury cell chlor-alkali operation in 2008. incineration facilities. The remainder was disposed of off-site at licensed commercial incinerators or landfills. OxyChem Releases Waste Generation from and Transfers OxyChem Operations Millions of Pounds Thousands of Tons (Data Excludes Wastewater) 10.0 8.9 0.7 Land 0.6 0.2 3.3 0.0 0.0 0.1 0.3 0.2 Underground Injection 0.4 0.5 0.7 0.8 1.3 <0.1 <0.1 <0.1 Water <0.1 <0.1 <0.1 <0.1 <0.1 1.0 1.3 1.0 Air 1.2 1.2 1.2 1.0 1.1 Total Releases Nonhazardous 11.2 10.5 1.9 192 155 161 142 62 55 54 66 2.2 1.9 2.3 1.8 2.4 Transfers Hazardous 4.6 21.9 10.8 51 53 55 51 48 51 43 45 7.5 4.1 4.1 4.4 5.4 1998 1999 2000 1998 1999 2000 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 11
  13. 13. PIPELINE MAGAZINE’S “EXCELLENCE IN ENERGY” ENVIRONMENTAL AWARD Pipeline Magazine awarded Dolphin Energy Limited (24.5 percent owned by Oxy) the 2006 “Excellence in Energy” Environmental Award for its participation in an ongoing coral reef study in the Arabian Gulf between Abu Dhabi and Qatar. The award encom- passes the Middle East energy sector. The coral reef study is a joint initiative sponsored by Dolphin Energy, the Emirates Wildlife Society, World Wide Fund for Nature, the Environmental Agency — Abu Dhabi and Qatar’s Supreme Council for the Environment and Natural Reserves. The study’s goal is to establish methods of protecting coral reefs in the Arabian Gulf via a thorough evaluation of coral cover, species diversity, degraded reef recovery levels, as well as to confirm the accuracy of reef mapping. Results revealed that most reefs in the area are in good health and that those that have suffered damage from past temperature fluctuations can recover provided they are not subjected to further disturbances. Following completion in 2007, the study will be used to prepare a conservation plan to preserve and restore reefs in the Gulf. Oxy and Dolphin Energy Limited are sponsoring a comprehensive study on the coral reefs offshore between Abu Dhabi and Qatar to gather specific data needed for a conservation plan to preserve and protect the coral reef habitats. “Best in Class” Storebrand Investments, a Norway-based international investment and insurance firm, honored Oxy in February 2007 with its “Best in Class” award in recognition of the company’s industry-leading environ- mental and social performance. As part of its investment strategy, Storebrand conducts periodic analyses of the environmental and social responsibility performance of companies listed in the Morgan Stanley Capital International World Index. Each company analyzed is benchmarked against others in its industry sector. Companies ranking in the top 30 percent earn Storebrand’s “Best in Class” designation. Oxy was the only U.S. oil company to make the list. The environmental and social responsibility analysis criteria for the oil and gas industry include environmental risk management, human rights, labor rights, governance and labor relations. 12
  14. 14. Near the southern boundary of Oxy’s Colorado acreage, geoscientists Nicki Atkinson and Steve Slauson take a moment to appreciate the natural environment.
  15. 15. RESPONSIBLE WORKPLACE PRACTICES Energy Efficiency and Climate Change The Environmental, Health and Safety Committee of the Board, together with Oxy’s management, staff and operations personnel, consider climate change-related issues and seek cost-effective methods for minimizing the greenhouse gas (GHG) emissions from our operations. Numerous inquiries into this subject by universities, have been implemented by national governments think tanks and independent researchers provide in the areas where we operate. Recently, some insight into the complexities of the climate system U.S. states have adopted laws establishing GHG and its drivers, the difficulty of modeling this system, emission inventories and eventual reduction goals. the challenges involved in predicting future tempera- Oxy is participating in the development of these laws. ture effects and related consequences, and the When the California Global Warming Solutions Act adaptation and emission mitigation options that of 2006 was adopted, Oxy was the first upstream oil may be available. and gas producer in California to join the voluntary California Climate Action Registry, committing to While Oxy conducts no independent climate tracking and publicly reporting GHG emissions. Oxy change research, we closely monitor the scientific is actively preparing emissions estimates and and public research to better understand the working to obtain third-party expert certification. impact of GHG emissions and how adaptation and emission mitigation options may influence or Although the impact of climate change on Oxy’s impact our operations. Management, staff and line operations is uncertain, new regulatory controls may operations personnel are engaged in developing affect costs, demand and market prices. We believe GHG emission estimates, evaluating the impact our business plans are consistent with the goal of of proposed regulations, assessing carbon credit mitigating GHG emissions. Furthermore, Oxy is well trading markets and voluntary climate change positioned because of our leadership in carbon activities, and discussing these topics with dioxide (CO2) injection for enhancing oil recovery. stakeholders and the public. This process is viewed by the Intergovernmental Panel on Climate Change (IPCC) as the way in Principal industry trade associations, including which wide-spread sequestering of CO2 emissions the API and the ACC developed voluntary climate could occur. change programs consistent with the U.S. Department of Energy’s ‘Climate VISION’ effort in Carbon dioxide is the principle GHG related to Oxy’s which Oxy participates. Also, the company has activities and is a product of hydrocarbon combus- responded to inquiries by the Carbon Disclosure tion to generate power for our operations. Methane, Project (www.cdproject.net), a consortium of another GHG, is the main constituent of natural gas institutional investors that surveys the world’s that sometimes is flared during oil production in largest companies on this topic. operations where no local gas markets or transpor- tation facilities exist. Oxy is pursuing various methods While many climate advocates urge aggressive for delivering natural gas — the fossil fuel with the action to reduce worldwide GHG emissions and lowest GHG emissions — such as our programs in some initial steps have been taken, essentially Oman and the United Arab Emirates. OxyChem no regulations requiring GHG emissions controls also uses natural gas extensively in many of its production activities. 14
  16. 16. Oxy estimates GHG emissions for our oil and Scope 1 plus Scope 2 greenhouse gas emissions gas, chemicals and other operations using the would increase by 5.5* million metric tons of CO2 Greenhouse Gas Protocol developed by the World equivalents. GHG Protocol Scope 3 emissions are Business Council for Sustainable Development and not estimated because the largest amounts would the World Resources Institute, supplemented by be related to the ultimate use by others of our more detailed, business-specific protocols prepared crude oil and natural gas products, of which Oxy by the ACC and the API. We continually refine has no knowledge. our GHG estimation methodology. For consolidated Oxy’s emissions estimates between 2006 and 2005 reporting purposes, we adjust all compounds indicate a 15-percent increase in direct emissions to CO2 equivalents. and a 16-percent increase in indirect emissions, We estimate that Oxy’s share of GHG Protocol reflecting the acquisition of additional oil and gas Scope 1 (direct) emissions from facilities operated in assets and chemical manufacturing capacity and 2006 was approximately 10.23 million metric tons of higher operating rates to satisfy market demands. CO2 equivalents. Carbon dioxide is the predominant Oxy believes that the most effective way to reduce component, with the remainder being methane. GHG emissions is to become more efficient. Consistent Other GHG emissions: nitrous oxide, hydrofluoro- with our business focus on being an efficient, low- carbon compounds, perfluorocarbon compounds cost producer, Oxy has been implementing new and sulfur hexafluoride are insignificant. Oxy’s share maintenance and operating practices, installing of Scope 2 (indirect) emissions (those associated more energy-efficient equipment and constructing with electricity purchased from off-site suppliers) efficient natural gas and hydrogen-fired cogeneration for facilities we operate, totaled 5.99 million metric facilities and investigating methods of capturing and tons of CO2 equivalents. selling natural gas. The GHG emissions estimates in the graph below Oxy is proud to participate in the EPA’s Natural Gas are based on Oxy’s share of equity ownership in the STAR Program to evaluate, implement and report facilities we operate (excluding emissions from cost-effective technologies and practices to reduce natural-gas flaring where required by contracts with methane emissions from our oil and gas operations. certain state-owned oil companies). If the basis This innovative program is a voluntary, non-regulatory reflected 100 percent of emissions from facilities Oxy partnership between the EPA and oil and gas industry, operates instead of equity share, Oxy’s estimate of which provides a forum for companies to share Occidental Estimated GHG Emissions Occidental Estimated GHG Emissions for 2006 (Equity Share Basis) (Equity Share Basis) Million Metric Tons CO2 Equivalents Million Metric Tons CO2 Equivalents 10.23 Direct 8.14 8.10 8.87 Direct 7.75 0.92 1.55 Indirect 5.99 Indirect 5.85 0.01 4.75 5.00 5.18 0.14 North South Middle 2003 2004 2005 2006 America America East 15 *Correction of figure published in 2006 printed report.
  17. 17. technical knowledge for efficiently reducing methane investments in energy conservation and cogenera- emissions, and recognize best practices. As a tion projects. Oxy’s 2006 oil and gas operations result of our STAR Program participation, Oxy has reported a 5-percent energy use reduction on a implemented a broad spectrum of projects — some production-weighted basis even as operations grew. traditional and some innovative — which have More than 25 years ago, Oxy began investing in produced sustainable annual methane reductions building several highly efficient cogeneration plants for estimated to be more than 1.5 billion cubic feet. electrical power and steam to supply Oxy oil and gas In 2006, at EPA’s invitation, Oxy joined the new and chemicals operations. Cogeneration, or combined EPA-sponsored Natural Gas STAR International heat and power (CHP), significantly increases electrical Program, where significant reductions in methane power generation efficiency over traditional methods emissions that were achieved in Oxy’s international while reducing CO2 by as much as 66 percent. CHP is assets (primarily by capturing gas for sale) are being the simultaneous production of electrical energy and recognized and best practices shared. another form of useful thermal energy from the same Occidental Oil and Gas’ Worldwide Environmental fuel source. The thermal energy, when converted to Manager, Krish Ravishankar, was recognized by EPA steam, can drive turbines to generate more electrical as the Natural Gas STAR “Implementation Manager power without additional GHG emissions. of the Year.” Working to promote best practices in The GHG emission reduction benefits from Oxy’s Oxy’s oil and gas operations, he led the effort in cogeneration facilities are substantial. Using typical 2006, which resulted in EPA’s first international assumptions for the national electrical grid average “Methane to Markets” workshop in Colombia. CO2 emission factor, installed capacity of the Oxy evaluates energy efficiency using an energy cogeneration units, steam boiler thermal efficiencies intensity index that employs revenue as a normal- and steam quality and usage, Oxy’s cogeneration izing factor. The index illustrates a 39-percent facilities at full utilization are estimated to reduce improvement in energy efficiency since 1996. GHG emissions by more than four million metric OxyChem has decreased its energy use per pound tons per year, or 20 percent of what the company’s of production by 20 percent since 1995 with combined equity share basis Scope 1 and 2 emissions otherwise would be. Occidental Oil and Gas’s Worldwide Environmental Manager, Occidental Energy Intensity Factor Krish Ravishankar, was Base Year 1995 = 1.0 recognized by EPA as the Natural Gas STAR “Implementation Manager of the Year.” 1.00 1.28 0.97 0.97 0.92 0.73 0.70 0.90 1.18 0.98 0.82 0.78 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 16
  18. 18. EMISSION REDUCTIONS/INCREASED PRODUCTION The average production rate from the newly equipped Oxy’s electrification and automation program in wells has risen by approximately four percent. In the Hugoton gas field in Kansas and Oklahoma is addition, the reduction in daily running time has reducing CO2 emissions and is just one example reduced wear and tear on the equipment and is of similar efforts in several Oxy operations. In addition expected to extend the average time between shut to GHG reductions, the program is expected to reduce downs for maintenance — resulting in lower operating time and costs associated with well monitoring and costs and increased production from the field. maintenance while increasing field production. Corollary benefits have been observed; for example, The project involves retrofitting production wells with lease operator driving time has been reduced by electric motors and eliminating the need for gas-fired extending well-maintenance schedules. This means engines, thereby reducing emissions. Electric motors reduced risk of traffic accidents and lower vehicle can operate intermittently, unlike gas engines that fuel and maintenance costs. work best when operating on a 24-hour basis. As Full electrification and automation of more than a result, Oxy has been able to market the gas that 1,000 wells in the Hugoton field is scheduled to be otherwise would have been burned in the engines. completed during 2007 and will result in estimated Pump-off controls have been automated and annual cost savings of more than $1 million due to At completion of connected to a computer system so that lease Hugoton’s retrofit reduced maintenance and downtime. At completion operators can more efficiently monitor production project, it is estimated of the retrofit project, we estimate additional annual rates and operating conditions, respond to well that CO2 emissions net reductions of more than 20,000 tons of CO2 will be reduced by problems more quickly and, in some cases, anticipate emissions and that 365 million cubic feet of methane more than 20,000 and correct operating anomalies before they occur. will flow into the sales pipeline annually. tons per year. 17
  19. 19. RESPONSIBLE WORKPLACE PRACTICES Compliance ENFORCEMENT AND PERFORMANCE Throughout Oxy’s operations there are hundreds of thousands of HES-related legal and permit requirements. Oxy seeks strict adherence to these requirements, citations are summarized according to the applicable addresses required corrective actions in a timely environmental media: air, water, land or other. The manner and seeks ways to further strengthen “other” category includes administrative, product- compliance. As a result of this effective HES related and employee safety issues. One trend management system, compliance is high and Oxy is apparent — enforcement activity relating to the receives very few citations, especially considering Title V operating permit program under the U.S. Oxy’s size and scope. Clean Air Act is increasing. Citation and penalty data reflect the level and focus In 2006, total penalties paid by Oxy were $557,032, of agency enforcement activity, which varies from a small amount as compared to other large industrial year to year with agency priorities. As a result, these companies. In 2006, the OxyVinyls partnership data do not necessarily serve as good leading concluded voluntary discussions with federal, state indicators of any company’s HES management and local environmental agencies with jurisdiction systems’ performance. However, enforcement over four manufacturing facilities, with Oxy agreeing priorities can present additional opportunities to to reduce vinyl chloride emissions and to resolve strengthen HES management systems. Oxy strives disputed administrative claims and allegations of to capitalize on these opportunities even as the environmental violations at those facilities. In addition regulatory framework becomes more complex to emission reduction projects, OxyVinyls paid and restrictive. penalties of $340,000 to resolve the matter. Excluding the OxyVinyls matter, the average penalty amount in Citations, which are actions initiated by a govern- 2006 was just over $7,000. Another method for mental agency, include notices of violation, warning assessing performance trends is the amount of notices, administrative orders, consent orders/ penalties paid by the year in which the notice of agreements and civil actions or court orders. Often, the alleged deviation was received, as shown on citations focus on administrative matters. Citations the graph below (this data excludes commitments are tracked by Oxy worldwide and may include by Oxy for Supplemental Environmental Projects). health, environment, safety, process risk management and transportation activities. In the table below, Occidental Citations Occidental Penalties Paid* Number of Occurrences Thousands of Dollars 8 12 7 24 22 32 26 32 54 Air 5 4 9 7 2 8 13 5 2 Water 1 3 1 4 2 9 4 — 8 Land 150 149 67 152 314 325 129 180 417 15 3 16 4 5 3 2 3 — Other Total 29 22 33 39 31 52 45 40 64 1998 1999 2000 2001 2002 2003 2004 2005 2006 1998 1999 2000 2001 2002 2003 2004 2005 2006 * Through 2006, reported by year in which notice was received. 18
  20. 20. ENVIRONMENTAL EXPENDITURES performance of remediation and, in some cases, Oxy’s U.S. business operations are subject to compensation for alleged property damage, punitive stringent laws and regulations relating to improving or damages and civil penalties. In most of these maintaining the quality of the environment. Likewise, proceedings, Oxy is one of many companies that have international operations subject to environmental shared in the costs involved. With all such environ- protection laws. Environmental expenditures related mental proceedings, Oxy accrues reserves when it to current operations are factored into overall business is probable that a liability has been incurred and the planning. Operating expenses are incurred continu- amount of loss can be reasonably estimated. ously, while capital expenditures relate to longer-lived To enhance efficiency and effectiveness, Oxy improvements in currently operating facilities. manages its environmental remediation efforts Oxy’s 2006 environmental operating expenses and through a wholly owned subsidiary, Glenn Springs capital expenditures for projects related to environ- Holdings, Inc., which reports its results directly to mental protection are shown in the table below. Oxy’s corporate management. Cash expenditures Oxy’s commitment to maintaining compliance and related to site remediation activities in 2006 were improving HES performance means that significant approximately $71 million. The table below presents expenditures will continue. Although total costs may Oxy’s environmental remediation reserves at year- vary in any one year, over the long-term, segment end 2006, 2005 and 2004 grouped by three operating and capital expenditures for environmental categories of environmental remediation sites: compliance are expected to increase. $ amounts in millions 2006 2005 2004 # of Reserve # of Reserve # of Reserve ENVIRONMENTAL EXPENDITURES RELATED TO BUSINESS SEGMENTS Sites Balance Sites Balance Sites Balance In millions 2006 2005 2004 CERCLA & OPERATING EXPENSES equivalent sites 105 $226 128 $236 125 $239 Oil and Gas $ 95 $ 65 $ 51 Active facilities 21 116 18 114 16 75 Chemical 73 67 59 Closed or sold $168 $132 $110 facilities 40 70 39 68 39 61 CAPITAL EXPENDITURES Total 166 $412 185 $418 180 $375 Oil and Gas $55 $43 $44 Chemical 25 21 12 $80 $64 $56 As of December 31, 2006, Occidental or certain of its subsidiaries have been named in 105 CERCLA or REMEDIATION state equivalent proceedings, as shown below. Laws that require or address environmental remediation $ amounts in millions #of Reserve may apply retroactively to past waste disposal practices Sites Balance and releases of substances to the environment. In Minimal/No exposure (a) 85 $ 6 many cases, the laws apply regardless of fault, legality Reserves between $1–10 MM 14 55 Reserves over $10 MM 6 165 of the original activities or current ownership or control of sites. Oxy and certain of our subsidiaries are Total 105 $226 currently participating in environmental assessments (a) Includes 32 sites for which Maxus Energy Corporation has retained the and cleanups under these laws at federal Superfund liability and indemnified Occidental, 5 sites where Occidental has denied liability without challenge, 15 sites where Occidental’s reserves are less sites, comparable state sites and other domestic and than $50,000 each, and 33 sites where reserves are between $50,000 foreign remediation sites, including currently owned and $1 million each. and previously owned sites. Also, the company and In determining the environmental remediation certain of our subsidiaries, have been involved in a reserves, Oxy refers to currently available information, number of governmental and private proceedings including relevant past experience, available technol- involving historical practices at various sites including, ogy, regulations in effect, the timing of remediation in some instances, having been named in proceedings and cost-sharing arrangements. For a complete under the Comprehensive Environmental Response, discussion of these factors and other information Compensation, and Liability Act (CERCLA) and similar concerning the environmental remediation reserves, federal, state and local environmental laws. These see our 2006 Annual Report on SEC Form 10-K. environmental proceedings seek funding or 19
  21. 21. RESPONSIBLE WORKPLACE PRACTICES Employment Practices EMPLOYER OF CHOICE Oxy strives to be an employer of choice in the oil and gas, and chemical industries. During the past three years, the number of New Oxy employees and their mentoring partners Occidental Oil and Gas employees has grown work together formally for a year, but many choose significantly through acquisitions and the staffing of to continue their relationship beyond that point. new projects. The rapid growth of our workforce has More than 100 employees, at all levels of the required the enhancement of the traditional key company, have attended mentoring training human resource management programs such workshops to enhance their mentoring skills. as Employee Empowerment and Mentoring, DEVELOPING LEADERS AT ALL LEVELS Leadership at All Levels and Training. Oxy’s future depends on strong leadership and new Through the development of these programs and employees are not the only ones to receive profes- employee activities identified through the TeamOxy sional development training. Developing employees employee association, Oxy was named one of as leaders at every level of the organization is a Houston’s Best Places to Work in 2006. The annual cornerstone of Oxy’s success. Our employees make Houston Business Journal award is given based on decisions every day that impact the business, the an employee satisfaction survey, with nominated community and the environment. We want to ensure companies required to have a certain percentage of that they have the skills and resources to make and their employees respond to the survey. Employees manage their decisions effectively; therefore a variety were asked to identify reasons why they believe they of employee development programs are in place to work at one of the best workplaces in Houston. Oxy support their effort. is one of the first companies in the oil and gas The “Leadership Development Program” (LDP) industry to receive this prestigious award. is focused on developing the current and future To help new employees adapt more quickly to generation of senior leaders across the organization. their new jobs and to the company’s The LDP provides current and future leaders with culture, we have redesigned our “On the tools to implement and drive business strategy Boarding Program.” This system helps and manage challenges. Since 2001, more than integrate new employees into the organization, 175 participants from every Oxy business unit so they can become highly productive and respon- and operational location around the world have sible members of the workforce in the shortest completed the program. possible timeframe. “OxyChem Leadership Essentials” (LE) was created The On Boarding program activities include “New by OxyChem, which recognized the need for Employee Luncheons” where new employees have continuous development of the organization’s the opportunity to meet company leaders and learn leadership talent. OxyChem is implementing its LE more about the business, and technology exchange training program by targeting first-line manufacturing conferences where they can network with leading supervisors and managers. The LE training comple- technical experts across the company. ments other programs developed for leaders at all levels and is designed to be delivered internally Our “Mentoring Program” provides technical mentors by OxyChem employees. The modular curriculum to new employees. This program is designed to develops leaders who are entrusted to execute accelerate the learning and acculturation process the organization’s strategies and meet its goals by among new employees by providing a support building and maintaining a high-performing workforce. system to enhance their potential for success. 20
  22. 22. TECHNICAL TRAINING worldwide. Most of the courses are designed Occidental’s global employee technical training to encourage a multidisciplinary approach to program emphasizes the development and ongoing reservoir description and characterization. More enhancement of the critical workforce competencies than 370 individuals participated in 2006. needed to execute our strategic plan. Training takes “Oil and Gas Engineering Development Program” º many forms including formal classroom, distance (EDP) was created in 2006 as a formal engineer- learning, on-the-job work experience and job rotations. ing development program to address the Oxy is focused on training employees to gain the increasing need for high-quality engineering talent. skills necessary to adjust to the changing demo- Increasingly, Oxy is hiring more engineering graphics of our workforce. In addition, existing students from college campuses around the world training programs, procedures and guidelines are and EDP, supplemented with a combination of being reviewed and combined with feedback focused formal training and early job rotations, from various technical assessments to identify accelerates their ability to rapidly reach core actions for improving the quality and effectiveness competency. More than 100 engineers are of technician training. currently enrolled in the program. Examples of employee development efforts: “OxyChem Technician Training” ensures OxyChem’s º º “Oil and Gas Geoscience Functional Training superior HES knowledge is transferred to new Initiative” (FTI) is a focused effort to improve employees. Oxy trains employees in HES processes the ability of Oxy geoscientists and engineers to and procedures, job fundamentals, and the safe understand and predict reservoir quality. Formal and effective handling of the chemicals used in training and associated field trips are offered the business. At the 2006 Functional Training Initiative Carbonate Reservoir Characterization course, engineers Ravi Sharma and Robert Kramm examine a modern carbonate core from a tidal flat environment with geoscientists Natalia Aristizabal and Alexandra Webster. Sixty Oxy geoscientists and engineers studied a modern carbonate environment to learn more about facies predictabil- ity, reservoir properties and geologic risk.
  23. 23. RESPONSIBLE WORKPLACE PRACTICES Developing Expertise in Our International Workforce RESPECTING DIVERSITY An influential factor in Oxy’s success is the broad cultural diversity of its multinational, multiethnic workforce. A WORKPLACE FREE FROM DISCRIMINATION, As our business has expanded around the world, HOSTILITY AND HARASSMENT we have attracted thousands of employees of exceptional talent from numerous countries and Any hostility or harassment of any employee based cultures, bringing a broad world perspective to the on age, color, gender, sexual orientation, national corporate culture. Oxy’s ability to work effectively in origin, religion, or any racial, ethnic or other personal highly diverse cultural environments enhances value characteristic is a violation of Oxy’s policies. Every for Oxy’s partners, employees and stockholders. Oxy manager is responsible for the communication, implementation and enforcement of this policy at Oxy has established comprehensive programs to their location and for complying with all applicable hire national employees in the different countries anti-discrimination laws and regulations. where we operate, and train them in all operational and professional disciplines. This program has PROTECTING EMPLOYEE RIGHTS contributed to our operating efficiencies, and Oxy has a long-standing policy of respecting expanded the overall technical and management employees’ voluntary freedom of association with expertise of the workforces in emerging countries respect to causes, organizations or political parties where we have operations. they wish to support or join. Oxy encourages employees to participate in the political process on In Oxy Oman, we maintain our strong commitment their own time. Employees have a right to make to the “Omanization” program at all levels of our political contributions in their own name and from Oman operations — from executive management to their own assets. Employees are not required by the entry-level positions. This program is designed to company to make any political contributions. replace foreign expatriates with Omani citizens in all job positions. Aside from the new Mukhaizna EQUAL OPPORTUNITY EMPLOYER operations, Omani employees comprise 90 percent We provide equal opportunity to all individuals in every of Oxy’s workforce in Oman. As our operations aspect of employment without regard to race, color, continue to expand in Oman, so will our efforts to religion, ethnicity, gender, national origin, disability, train and recruit local employees. age, sexual orientation or veteran status. This applies In Latin America, we continue our long-standing efforts to maintain a predominantly national workforce in each of our operations. In addition to building the workforces in our inter- Supervisory Positions Worldwide national operations through the hiring and training Within Oxy’s Oil and Gas, and Chemical operations of local employees, Oxy also assigns these Out of 691 supervisory employees to responsible positions throughout our positions held in Oxy’s Oil worldwide operations as part of our comprehensive and Gas and Chemical career development process. operations worldwide, 547 or about 79 percent of these positions are held PROVIDING FAIR COMPENSATION AND BENEFITS by non-US employees. Oxy’s wages, benefits and employment terms are designed to attract and retain top-quality talent. Compensation is targeted to be competitive within the respective labor markets and to provide 144 U.S. employees 547 non-U.S. employees significant opportunity for personal growth based on performance. 22