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Oil Plc Oil Plc
www.heritageoilplc.com
Head Office and Directors’ Business Address:Fourth Floor, Windward House La Route de la Liberation JE2 3BQ Jersey Channel Islands
Tel +44 1534 835 400Fax +44 1534 835 412
Heritage Oil PlcCorporate Social Responsibility 2009
InteRnatIOnal exPlORatIOn, lOCal ReSPOnSIbIlIty
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Heritage’s Corporate Social Responsibility (“CSR”) encompasses our management of relationships with shareholders, employees, contractors and the communities in areas where we work, together with our impact on society and the environment. We recognise we have specific responsibilities in each of these areas and consider adherence to CSR values to be a key factor in securing our long-term success.
Our Vision
Our areas of Impact & Opportunity
Our approach
We aim to be a responsible and transparent business in all the areas of the world in which we operate
Environment & Sustainability
Community & Human Rights
Health & Safety
Business Conduct
Employees
Corporate Governance
Set policiesDevise & maintain systems
Measure & monitor performance
Communicate & report to stakeholders
Apply stakeholder feedback
In 2009 Heritage engaged with four schools local to the Miran West-2 drilling site and ran a competition for the schoolchildren to draw a picture of the drilling rig. As part of this exercise donations were made to the schools that participated. These donations varied from school to school depending on the requirements for various educational tools. The top three individuals from each school also won a personal prize and the overall winner was selected by Anthony Buckingham to appear on the cover of this year’s annual report. Congratulations to Hawnaz Wahab!
On this page we have a collection of the drawings submitted.
Contents
Overview01 Chief Executive’s Letter02 About this Report03 Targets for 201004 CSR Policy Framework06 Company Overview08 Highlights, Risks and Opportunities
Key Areas10 Environment & Sustainability12 Health & Safety14 Employees 16 Community & Human Rights18 Business Conduct20 Corporate Governance
Additional Information22 GRI Table24 Glossary
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We are proud of the legacy that we will leave in Uganda and are confident that it will be maintained and developed by the businesses that will manage these assets in the future. We will continue to apply the knowledge and experience that we have obtained by working with the Ugandan people in our activities in different parts of the world.
Heritage is an independent oil and gas exploration and production company with a track record of successfully discovering previously untapped resources. Nearly all of the areas in which we operate are located in developing countries. We recognise that a fundamental aspect of our licence to operate is our approach to corporate social responsibility (“CSR”) matters.
The Development of our ApproachWhilst CSR has always played a role in the day-to-day running of our business, our understanding of CSR issues and its place in Heritage’s strategy has developed and matured since we entered Uganda in 1997. We have recently initiated a process to formalise our CSR approach into a comprehensive policy framework which is detailed on pages 4 to 5. We have also established a Board level CSR committee, comprising myself, our Chairman, Michael Hibberd, and our CFO, Paul Atherton. The committee is tasked with developing, implementing and overseeing our CSR strategy, systems and performance in line with our overall business aims and objectives.
Key Areas of Risk and OpportunityWe have identified six key areas of risk and opportunity, specific to the CSR aspects of our activities. They are: environment and sustainability, health and safety, employees, community and human rights, business conduct and corporate governance. All of these areas present issues that we need to be aware of, both in terms of our exposure to risks that may damage the Company, and
also regarding opportunities to strengthen our business and enhance our reputation. We strive to ensure that all of our business is conducted responsibly; we aim to meet the challenges presented by climate change, we respect the environment, we maintain the highest possible safety standards, we work closely with our communities to address important aspects of local need and we ensure that our activities are performed in a manner which prohibits any form of bribery or corruption.
CSR affects every part of our business, from the first stages of planning and being awarded a licence through to the exploration, development and production from a field. We believe that by developing and applying the highest standards we gain access to better business opportunities as we will be top of the list of chosen partners for governments, business collaborations and communities local to our potential operations. We are committed to developing our reputation as a responsible and trustworthy company in the eyes of all our stakeholders.
Our Legacy in UgandaAt the time of writing we are in the process of disposing of our Ugandan interests. It is with sadness that we leave Uganda, where we have built excellent relationships with the authorities and the communities around us. These relationships have allowed us to undertake business in an efficient and productive manner and undoubtedly contributed to Heritage’s success within the region. Although our presence in Uganda is coming to an end the benefits that the
country will derive from our discoveries of oil are just beginning. We have helped establish Uganda as an oil-producing nation and we believe that this will be by far our largest contribution to the wellbeing of the country.
We are proud of the legacy that we will leave in Uganda and are confident that it will be maintained and developed by the businesses that will manage these assets in the future. We will continue to apply the knowledge and experience obtained by working with the Ugandan people in our future activities in different parts of the world.
Feedback and DialogueThis is our second annual CSR report and as our activities continue to expand our policies will continue to evolve. We are keen to develop our transparency levels and the quality of our reporting over time. We welcome feedback from, and dialogue with, our stakeholders concerning any aspect of this report and our approach to this important area. Contact details are recorded on our website and on the back of this report.
I am grateful to everybody in the Group for their commitment and adherence to applying our core values across all of our business activities.
Anthony BuckinghamChief Executive Officer29 April 2010
Chief Executive’s Letter
GROWinG RespOnsiBly
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Overview
ABOUT This RepORT
in this report we aim to disclose our policies, document the systems that we have put in place to ensure that they are being maintained and to report our performance applying key performance indicators that are pertinent to our industry and sector.
This report relates to the period 1 January 2009 to 31 December 2009 and should be read in conjunction with the information recorded in our annual report, in particular the corporate governance information, and the Company website, www.heritageoilplc.com.
It also records case study examples that have been included to illustrate our approach in the parts of the world where the Company operates. In addition, we have detailed our future aims, targets and objectives.
Materiality and CompletenessWe have applied the guidelines indicated by the Global Reporting Initiative (“GRI”) and those produced by the International Petroleum Industry Environmental Conservation Association (“IPIECA”) to shape our reporting. The GRI table on pages 22 to 23 refers to the information within it that corresponds with these criteria. We also determine materiality by assessing the significance and relevance of the information by considering;
Heritage’s policy position on the issue; >its impact on shareholder value in the >short, medium and long-term;the level of stakeholder interest in the >matter (assessed by dialogue with customers, employees, suppliers, shareholders, research organisations, Non-Governmental Organisations (“NGOs”), Governments and advisers); andthe degree of interest in the issue >emanating from the wider society that is reflected by reporting in the media.
The CSR committee will review the scope of the information in this report prior to the publication of next year’s report. We intend to refine our reporting process over time, taking into account the issues noted above and changes in our business activities.
external AssuranceThe information within this report has not been externally verified as we do not believe that this exercise would assist the readers of this report materially at this time. Every effort has been made to ensure that the information contained in this report is accurate. The CSR committee intends, prior to the production of our next CSR report, to review this matter and to assess whether a change is required.
stakeholder Feedback and Future Reporting DevelopmentsWe hope that all of our material stakeholders will have the opportunity to supply feedback concerning the information within this report and our approach to CSR. We have designed a dissemination exercise that we will follow by offering these audiences the opportunity to supply feedback. We intend to apply this information to shape our future CSR reporting in conjunction with the future changes in our business, the development of the reporting guidelines and advice that we receive from our advisers.
Right: school buildings donated to villagers in Buhuka, Uganda
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TARGeTs FOR 2010
We aim to apply our targets to focus our employees and enable our stakeholders to assess our performance.
We have developed our CSR targets after formalising our CSR policy framework. We have identified six specific areas of impact for our CSR approach. We aim to use our targets to focus our employees and management on these areas and to enable our stakeholders to understand and appreciate our performance statistics.
Additionally, we are setting ourselves certain aims and objectives related to our communications and reporting. We appreciate that the growth of Heritage and the geographical expansion of our activities means that our stakeholders will require more information about this aspect of our business. The publication of this report will be followed by the development of the CSR information we record online. We shall also be seeking dialogue and feedback proactively from a number of different stakeholders. We aim to apply the results of this activity to enhance our understanding of their views and to develop our CSR strategy, policies, systems and performance.
enViROnMenT& sUsTAinABiliTyNo spills or environmentalincidents.No fines or sanctions related to our environmental management.
eMplOyeesMajority of employees to be drawn from each country of operation.
heAlTh & sAFeTyNo fatalities or LTIs.No fines or sanctions related to our health & safetymanagement.
COMMUniTy& hUMAn RiGhTsNo human rights violations.No fines or sanctions related to our community & human rights management and activities.
BUsiness COnDUCTNo fines or sanctions related to poor business conduct.
CORpORATe GOVeRnAnCeReport publicly the findings and decisions of the CSR committee.
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Overview
CsR pOliCy FRAMeWORK
Our Approach to environmental and sustainability MattersenvironmentWe strive, particularly through our use of innovative technologies, to meet the challenges presented by climate change. Wherever possible we will prevent, or otherwise minimise, mitigate and remediate, harmful effects of our operations on the environment. We will promote, encourage and prioritise reuse and recycling methods throughout all of our operations.
sustainable BusinessWe strive to contribute positively to global sustainability through our operations, the development of our fields, our adoption of new technologies, and the conduct of our relationships with all of our stakeholders.
Our Approach to health and safety Mattershealth and safetyHealth and safety is a natural priority and a core element of all of our activities. Our goal is zero injuries and fatalities, and we will strive to ensure that important factors, such as an understanding of cultural differences in host countries, and the use of external contractors, are addressed in the development of our systems and procedures. We strive to construct, maintain and develop further world-class safety systems across all of our operations.
Our Approach to employee MattersemployeesHeritage strives to ensure that relationships between our employees are safe and effective. Our Group and all our employees respect our different cultures, traditions, and employment practices. We share
common goals, in particular the elimination of workplace injuries, and are committed to good corporate values and ethical behaviour. We strive to recognise achievement and to create opportunities for individuals at all levels of our businesses. In dealing with our employees we act in compliance with national regulatory requirements and our obligations under relevant national and international laws.
ilO Declaration on Fundamental principles and Rights at WorkHeritage supports the four fundamental principles contained within the International Labour Organisation (“ILO”) Declaration. In accordance with local legislation and practice, we respect freedom of association, the right to collective bargaining, employment will be freely chosen with no use of forced or child labour and we do not discriminate on the basis of gender, colour, ethnicity, culture, religion, sexual orientation, or disability.
equal OpportunityHeritage values all employees for their contribution to our business. Their opportunities for advancement are equal, and not influenced by considerations other than their performance and aptitude. Employees are also provided with the opportunity to develop their potential and, where appropriate, to develop their careers further within our Group.
Occupational HealthWe strive to protect the physical health of all of our employees and contractors whilst they are in the workplace. In particular, we strive to meet the challenges presented to
our employees, and the wider communities in which they live, by HIV/AIDS and by diseases such as malaria.
Our Approach to Community and human Rights MattersCommunitiesWe always strive to ensure that our relationships with our neighbours and local communities are conducted sensitively and with mutual respect. These relationships apply active and enduring partnerships as a central and fundamental element. We aim to promote the sharing of economic value created by our activities through the conduct of our community relationships.
Universal Declaration of human RightsWe support human rights, consistent with the stipulations contained within the Universal Declaration of Human Rights, and remain committed to upholding these principles through the conduct of our activities throughout the world.
We endeavour to ensure that these commitments extend to all of our supply chains, and work with our customers to ensure that they are part of our contractual requirements.
land AccessWe ensure that we receive the widest possible support for our proposals throughout the life cycle of all of our activities. We do this by working in partnership with our stakeholders, to optimally and sensitively co-ordinate the relevant economic, technical, and sustainable development factors, in an integrated process.
heritage strives to be a good corporate citizen in everything it does.
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Our Approach to Business Conduct Matterspolitical involvementHeritage does not, directly or indirectly, participate in party politics. Heritage does not provide financial support to political parties or politicians.
Bribery and CorruptionWe are resolutely opposed to bribery and corruption in whatever forms they may take. Gifts or entertainment may only be offered to a third party if they are consistent with usual business practice in the relevant territory, are modest in value, and cannot be interpreted as a form of inducement.
It is Heritage’s policy that sales of the Group’s products or services, and purchases and services from suppliers, are made solely on the basis of price, quality, performance, value, and for the benefit of our Group. Sales, purchases, or award of licences should never be made as the result of giving or receiving inducements in the form of gifts, money, or entertainment from third parties, or favours in any other form.
Employees should not accept gifts, money, or entertainment from third party organisations or individuals, where these might reasonably be considered likely to influence business transactions. Gifts, other than trivial ones of low value, should not be accepted. In a culture where such an action might cause offence, the gift should be declared to the Company and, if practical, donated to an appropriate charity.
Treatment of our CustomersWe regard mutual trust and confidence between our companies, customers and suppliers as very important. We require employees to strive to deliver high levels of service consistently, surpassing customer expectations, and meeting their changing requirements.
Relations with our suppliersWe ensure that all of our suppliers are treated fairly and responsibly. All potential suppliers will have a reasonable opportunity to win business
with us. We strive to pay our suppliers on time and in accordance with agreed terms of trade. Suppliers will conduct their activities in accordance with our own policies.
CompetitionWe always aim to compete vigorously with our competitors, but in a fair and ethical way. We strive to ensure that our success is built upon excellence. When in contact with our competitors, employees will be required to avoid disclosing confidential information. We will not make improper attempts to acquire competitor trade secrets or other confidential information. Employees will not undertake any arrangements or practices that may conflict with the laws applicable to the conduct of our business.
Our Approach to Corporate Governance MattersCompliance with the law and Relevant RegulationsHeritage is committed to protecting the interests of its shareholders and other stakeholders, through compliance with relevant legal and regulatory environments, and similarly through effective management of business risks.
We comply fully with all relevant national and international laws, and act in accordance with local guidelines and regulations, including those that are industry specific – that govern our operations.
It is the responsibility of our managers to ensure, by taking legal or other advice where appropriate, that they are aware of all local laws and regulations that may affect the area of the business in which they are engaged.
Accounting and RecordsHeritage must maintain accounting documentation that identifies clearly the true nature of all business transactions, assets and liabilities, in line with the relevant regulatory, accounting, and legal requirements. No record or entry may be false, distorted, incomplete, or suppressed.
All Group reporting must be accurate and complete and in compliance in all material respects with stated accounting policies and procedures. Employees must not materially misstate, or knowingly misrepresent, management information for personal gain or any other reason.
external ReportingOur businesses may be required to make statements or provide reports to regulatory bodies, government agencies or other government departments. Our businesses will take care to ensure that such statements or reports are correct, timely, and not misleading. Senior management must be made aware of any sensitive disclosure before it is made.
Heritage ensures that statements made to the media are correct and not misleading. Media enquiries are referred to our media experts and/or advisers, and statements will only be made by designated spokespersons.
Heritage provides, through its Group website, www.heritageoilplc.com, its annual report, other statements and appropriate information, including this report, to enable shareholders and stakeholders to assess the performance of its businesses. Heritage always complies with the applicable laws and regulations concerning the disclosure of information about the Group.
Right: ferry rebuilt by Heritage for the Ugandan Wildlife AuthorityFar Right: meeting with stakeholders at the launch of the ferry
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Overview
COMpAnyOVeRVieW
sTRATeGiC pOsiTiOninG
Focus on core areas where we >have technical understanding
First mover advantage – as >demonstrated in Uganda and Kurdistan
Focus on high impact exploration >targeting regions with significant hydrocarbon reserves potential, such as Kurdistan and Malta
strong balance sheet giving >heritage the ability to grow through acquisitions and farm-ins
OUR AsseTs
Kurdistan remains a core area of >focus with near-term exploration and appraisal drilling
high impact exploration drilling >to commence in Malta in 2010
Geographical diversification >across Africa, the Middle east and Russia
Diverse portfolio of assets >encompassing a mix of exploration, development and production
OUR BUsiness MODelOur business model is underpinned by our core values
Business ModelProduction and Commerciality
exploration and Development
Acquire and invest
Vision and identification
StrategyAccess to Capital
Balanced portfolio
strategic positioning
Key partnership and Relationships
Responsible Business
Experience & Knowledge
Operational success has transformed heritage dramatically but its strategy remains unchanged. The Company typically focuses on regions which may have been overlooked and where it can be an early entrant. heritage will seek out opportunities for high impact exploration, targeting the potential for significant hydrocarbon reserves.
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GeOGRAphiCAl pResenCe
Significant discovery announced in 2009 with the Miran West discovery well. Exploration and appraisal drilling continues in 2010. The Miran West-2 well has intersected hydrocarbon-bearing intervals over approximately 1,800 metres within the Cretaceous formations. The well is drilling to the deeper Jurassic and Triassic exploration targets with the potential to contain substantial volumes of additional hydrocarbons.
Planned to acquire 1,000 kilometres of seismic in 2010 with the first exploration well in the area planned for the fourth quarter. The well will target a structure with a potential 500 mmboe.
Production set to increase over the year with additional development drilling. The Zapadno Chumpasskoye Field development project was approved in 2009 to develop the field utilising horizontal drilling technology and expand the current production facilities.
Currently awaiting Presidential Decree. Management considers the DRC side of the Albert Basin to be potentially as prospective for significant oil accumulations as the Ugandan side.
Pioneering company with entry into Uganda in 1997. Six successful wells drilled. Proved up a multi-billion barrel basin. Commercial threshold for development achieved. Proposed sale of the assets for up to $1.5 billion expected to complete within the first half of 2010.
RUssiA 7 UGAnDA 8
Seismic data shows the presence of tilted fault blocks. Previous drilling in the region encountered oil and gas shows indicating the potential for a working hydrocarbon system. An infill seismic programme of approximately 1,000 kilometres is planned for this year to identify potential drilling targets.
Seismic data was acquired in 2009. The data is currently being analysed and will be used as the basis for a drilling programme.
4 TAnzAniA MAli 6
DeMOCRATiC RepUBliC OF COnGO (“DRC”) 5
A number of structural leads have been mapped in the Zamzama North Block. Further seismic data is being acquired with the first exploration well planned for the fourth quarter of 2010.
KURDisTAn ReGiOn OF iRAq (“KURDisTAn”) 1 MAlTA 2 pAKisTAn 3
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Heritage achieved an excellent health and safety record in 2009 and made significant corporate governance developments.
Overview
hiGhliGhTs, RisKs AnD OppORTUniTies
In 2009, we strengthened our relationships with the local communities in which we operate through the conduct of a number of projects. We also maintained our focus on local employment and achieved an excellent health and safety record. We have also formed a CSR board committee and developed a comprehensive policy framework. We are striving to obtain an enhanced understanding of our CSR related opportunities and risks and have detailed many of them in this report for the purposes of feedback and dialogue with our stakeholders.
0enViROnMenT& sUsTAinABiliTy
environmental incidents, fines or sanctions; all operations
eMplOyeesMain operations continue to employ large numbers of locals:
Russia 98%Uganda 90%Kurdistan 65%
1heAlTh & sAFeTy
lost time incident,all operations
1,174,075COMMUniTy& hUMAn RiGhTsHeritage constructed a fresh running water system to provide for the needs of
6,000 in Uganda.
0BUsiness COnDUCT
breaches in business conduct policies
CORpORATe GOVeRnAnCe
Developed and adopted formal CSR policy framework
Formed Board level CSR committee.
hours worked
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Threats to licence to operate, financial penalties and reputational harm as a result of accidents or spills leading to pollution and environmental damage. Similar consequences resulting from a failure to return sites to their natural state.
Opportunities to work in new territories following strong track record from existing activities.
The Group conducts environmental impact assessments before commencing any activities, has systems in place to ensure that sites are properly restored and aims to minimise any negative impacts of our activities during our project life cycles.
Opportunities to attract or difficulties in attracting and retaining the best employees to enable us to maintain our outstanding growth record.
Heritage offers competitive remuneration packages, professional training, promotes equal opportunities and provides a positive working environment.
Threats to licence to operate, day to day operational difficulties, financial penalties and reputational harm as the result of campaigning activity and poor local relations.
Opportunities to develop brand and reputation and improve the overall effectiveness of Company projects.
We employ a high percentage of our personnel from ourlocal regions of operation. We also consult local communities and stakeholders throughout all stages of our operations so that we can best work in partnership, for mutually beneficial outcomes, with them.
Threats to licence to operate, production disruption, financial penalties and reputational harm resulting from a poor health and safety record.
Opportunities to develop brand and reputation and improve the overall effectiveness of Company projects.
The Company provides health and safety training at all levels of our operations, and continually monitors performance and risks. The Company strives to maintain health and safety management systems of the highest standard.
Threats to licence to operate, financial penalties and reputational harm as a result of a poor business conduct record. Risks concerning the retention of individual key members of staff.
Opportunities to work in new territories following a strong track record from existing activities.
Our overall CSR risks are minimised and our opportunities are maximised.
We develop close, positive and transparent working relationships with host governments and business partners. Our business conduct policies and procedures are robust. In particular, we prohibit improper business behaviour.
We have established a CSR board committee that is tasked with ensuring that we have a comprehensive policy framework and effective management systems. The committee also monitors, reviews and acts upon our CSR performance.
CSR affects every part of our business from the first stages of planning and being awarded a licence through to the exploration, development and production from a field
Risk ManagementCSR related risk and opportunity, and our strategy and systems for dealing with them
Description of Risks and Opportunities Strategy and Systems
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Our impactOil and gas operations have the potential to cause harm to the environment but, if managed well, we can minimise any negative impacts of our activities.
Key Concerns:Climate ChangeHeritage’s operations contribute both directly and indirectly to climate change. Because of the nature of exploration activities, Heritage often works in remote locations without access to grid electricity, where we are reliant on generators to power our equipment.
To minimise our impact in this area, we are focusing on restricting and reducing flaring, switching diesel generators for gas where possible and using the highest standard, most energy efficient equipment available, which also has the effect of reducing our energy costs. Additionally, our camps and sites are planned to minimise our environmental footprint.
Water UsageWater can be a limited resource around our areas of operation and, as such, we have a duty to minimise our usage. We also believe it is our responsibility to improve water access in areas in which we operate, making it easier for us to do business, and improving relations with local communities.
At our production site in Russia, initiatives to reduce water use in 2009 included replacing steam heating of well effluent for water separation with an inline gas-fired heater. We also began to recycle produced water, using it as an injection fluid.
BiodiversityWe operate in varied terrains, with their own unique set of biodiversity considerations. It is our express policy to protect, as best we can, the local environment during operations and to restore it to the same standard that we found it once activities are completed. This is explored further in the case study overleaf.
We strive to contribute positively to global sustainability through our operations, the development of our fields, our adoption of new technologies and the conduct of our relationships with all our stakeholders.
enViROnMenT & sUsTAinABiliTy
Key Areas
quick Factsfor the second year running, Heritage had >no environmental incidents, such as spills, and we are determined to continue this tradition;
environmental impact assessments were >conducted for all new projects and major items of work programmes;
all Heritage sites in Uganda, Kurdistan, >and Russia (our principal operations) have environmental management systems in place; and
going forward, we will be reviewing our >environmental management systems, as well as our reporting mechanisms, and aim to provide more thorough disclosure of data in this area.
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StewardshipHeritage works closely with local authorities to ensure that when we leave an area we restore it to the condition in which we found it.
Before commencing work in Uganda, environmental impact assessments (“EIAs”) were conducted at all prospective drilling locations. These EIAs were conducted by independent environmental consultants (licenced by the National Environment Management Authority – “NEMA”). The EIA reports are then reviewed by Heritage’s Environment Officer before being submitted to NEMA for review and approval. The approval process involves various stakeholders,
such as the Petroleum Exploration and Production Department, Water Directorate, Uganda Wildlife Authority and district environment teams who work closely with NEMA before final approval is granted. This process has allowed us to both conduct our activities sensitively, and to plan for the restoration of each area. These bodies then ensure that a site has been restored to its original state once the work programme has been completed.
This stewardship is a key element in our effort to minimise our impact on the environments in which we work, and the same level of care is applied across all our operations.
Above: inspection of site restoration in Block 1, Uganda
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Responsibility to employeesIt is the Company’s responsibility to minimise our employees’ exposure to health and safety risks of any kind. In implementing health and safety systems, we need to balance the need to protect our workers with the knowledge that working practices and traditions vary by location and so we amend or tailor where necessary. All sites are covered by safety management systems with site General Managers responsible for overall safety measures. We are proud of our health and safety performance overall.
Sadly, one sub-contractor at our Uganda operations died in a motor vehicle accident in 2009. The accident was not related to our drilling or camp operations and we have since imposed more stringent guidelines which, so far, are working very well.
injuries Reported, Uganda 2009 Block 1 Block 3A
January 2 2February 0 1March 2 0April 9 2May 0 2June 0 0July 0 1August 0 2September 0 0October 0 0November 0 2December 0 0
The health and safety of our employees and stakeholders is a natural priority and a core element of all our activities. Our goal is zero injuries and fatalities, and to minimise exposure to health and safety risks.
Key Areas
heAlTh & sAFeTy
quick Factsduring 2009, Heritage Uganda >appointed an HIV/AIDS Coordinator who leads the HIV/AIDS related training at our operations. Services rendered include daily toolbox talks, advice and counselling, and referral to the relevant screening and testing centres;
employees have received training in >safety regulations, technical codes, field safety, handling dangerous materials and fire safety; and
we provided over $100,000 in medical >assistance to employees at our Russian operations over the last two years. All employees at our Russian site have a basic medical plan and are provided with regular check-ups, flu shots, and immunisations.
Clinics, UgandaAs is standard across our operations, we provide our workers and local communities with free access to health clinics. In Uganda, the biggest threat to employee and community health is malaria. We have provided preventative measures, such as mosquito nets, as well as treatment. No malaria related deaths were reported in the areas around our operations.
Clinic statistics, Uganda 2009 Total Malaria patients positive
Block 1 149 34
Block 3A 354 83
Below: checking names and coupons for mosquito nets in Bisiki Village, Uganda
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Malaria ControlIn early 2009, Heritage sponsored the UAE Charity Challenge to raise funds for important local issues including supporting malaria control interventions near Lake Albert, Uganda. Malaria is the leading cause of illness and death in Uganda and the most efficient way of preventing malaria is through the use of Long Life Insecticide treated Nets (“LLIN”). These mosquito nets have a special insecticide repellent that can last for up to six years making them very effective and low maintenance.
In the vicinity of Block 3A only 10% of the households in the Buhuka parish owned a LLIN. To help protect the residents from malaria, the UAE charity, supported by Heritage, funded a LLIN distribution programme. This was carried out by the Malaria Consortium and achieved a 100% coverage across the villages in the catchment area. Heritage also provided all the logistical support to the LLIN distribution programme including trucking from Entebbe to Lake Albert, boats to access remote villages and flights for Malaria Consortium personnel.
0457,235 hours worked
Lost Time Incidents,Kurdistan, 2009
081,116 hours worked
Lost Time Incidents,Russia, 2009
1635,724 hours worked
Lost Time Incident,Uganda, 2009
Above: contractor at Miran West-1 well, Kurdistan
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Our ApproachTraining of employees and contractors received high priority in 2009. We believe that there is a strong business case for investing in the development of our workforce as this can result in efficiency savings, reduce time lost through injury and the identification of opportunities for improving our business.
We take it as our responsibility to train workers in such a way as to increase their value within their communities. We emphasise transferable skills and a broad range of learning, as well as the basic aim of developing a knowledgeable, productive, and happy workforce.
Occupational health and safety Training, UgandaTo comply with the stipulations of Heritage Uganda’s Oil Spill Plan, we have trained several camp/drill based personnel in the management of hazardous materials and items (“HAZMAT”) situations and oil spills. During 2009, the majority of security personnel and other contractor personnel received basic fire fighting training, through courses presented by professional fire fighters.
quick Factswe continued to operate with a high >percentage of workers drawn from our areas of operation, using expatriates only when their particular skill sets were required; and
local sourcing is also important to our >business practices and we aim to contract services to local firms whenever possible. Many of our transport and security needs have been fulfilled using local firms.
local employment in heritage Operated licences
2009 2008
Russia 98% 100%
Uganda 90% 75%
Kurdistan 65% 71%
Tanzania 90% 100%
Mali 100% 100%
Malta 100% 50%
Pakistan 100% 100%
heritage values all employees for their contribution to our business. Opportunities for advancement are equal and not influenced by considerations other than performance and aptitude. employees are also provided with the opportunity to develop their potential and, where appropriate, to further their careers within the Group.
Key Areas
eMplOyees
Above right: building a water system in Bugoma, Uganda Right: operations in Kurdistan
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Training Courses Delivered to Heritage Employees and Contractors 2009
Employee Statistics, Russia 2009
Staff Numbers Office: 26 Field Operations: 14 98% of employees are Russian
Employee turnover 3 employees added, 2 employees left
Training Office: $4,195 – 70 hours Field Operations: $15,760 – 588 hours
Cholera preventionCrane operationsDealing with HAZMAT situations and oil spillsDefensive drivingEnvironmental sanitationEvacuation planning and proceduresFire fighting and fire safety
First aidMalaria preventionMeningitis preventionSafe handling of weapons (security personnel)Safe loading practicesSafety regulations Technical codesWorking at heights
Above: operations at Miran West-1 well, Kurdistan
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Our ApproachPart of developing a new project involves consultation with local communities as well as government, to identify ways in which Heritage’s expertise can be best put to use. Our licence to operate is dependent on our Company being viewed as a positive force by those most directly affected by our operations and therefore, it is in the Company’s interest to consult its stakeholders and find ways to be a trusted and useful presence.
For many companies operating in developing countries, there is a danger that local stakeholders will come to rely on them to provide basic services, which ideally would be provided by the national government. This worry is more pertinent for larger and older companies than Heritage, but nevertheless, we believe that by partnering with other organisations – non-governmental organisations (“NGOs”), governments (local and national), other companies – we stand less chance of creating this situation. It is our intention to improve conditions around our operations and we try to invest in projects where the local communities have a sense of ownership, thus increasing their long-
term effects. However, in terms of having the greatest impact, we believe this is best achieved through helping countries realise their natural resource potential.
Working with the Uganda Wildlife AuthoritySince 1997 Heritage has worked closely with the Uganda Wildlife Authority to ensure that its operations are conducted in an environmentally sensitive manner. We have chosen to invest some of our time and money to help develop the UWA’s equipment. We helped refit and refurbish a ferry used by the UWA on Lake Albert and donated vehicles to be used by UWA rangers in their work.
quick Factswe drilled several water wells in Uganda, >providing safe drinking water for various communities around our operations;
we had no instances of human rights >violations by employees or contractors; and
we donated $30,000 to the Administrative >Districts of Surgut and Nizhnevartovsk for social programmes in 2009.
We ensure that relationships with our neighbours and local communities are conducted sensitively and with mutual respect. enduring partnerships are a central and fundamental element of these relationships. We aim to promote the sharing of the economic value created by our activities, through the conduct of our community relationships, and are firmly committed to upholding the principles of the Universal Declaration of human Rights.
Key Areas
COMMUniTy & hUMAn RiGhTs
Above right: schoolchildren in Kurdistan, including the winner of our art competitionRight: donating football kits to local children in Kurdistan
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Carl Nefdt Memorial Primary School, Buhuka, UgandaHeritage built and upgraded the former Buhuka Primary School, plus construction of teacher’s quarters at the now renamed Carl Nefdt Memorial Primary School in Buhuka Parish where Heritage’s Kingfisher discovery wells are located. The former school accommodated only classroom space for primary one to four levels, whereas the new classroom blocks provide space up to primary seven level as well as accommodating all of the teachers at the school. Subsequently, the number of students has increased from about 400 to more than 700 in the school, and those who had earlier dropped out when class levels were only to primary four, eventually came back to continue
with their studies. After the upgrade, the Ministry of Education also posted five more teachers to the school bringing the number of teachers to eight, thus the pupils get more lessons and are able to stay longer for classes.
As the school is so remotely located in an area with very limited social services, Heritage also pays the teachers a hardship allowance, to help retain staff. We also pay four casual labourers as cleaners and gardeners at the school, to keep the buildings and grounds in the best possible state and provide a positive environment for the students and teachers. The school is fully managed by the Ministry of Education, to whom we provide whatever support we can when necessary.
Above: opening of the Carl Nedft Memorial Primary School, Uganda
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Key Areas
BUsinessCOnDUCT
Heritage conducts its activities in a number of predominantly developing countries around the world. The Company’s licence to operate both within the territories where it is currently based, and in the parts of the world where we may wish to conduct business in the future, is dependent upon how our business relationships are conducted. We are, in particular, resolutely opposed to bribery and corruption in whatever form this may take. Our policies also preclude financial support for political parties, require that relationships are conducted with mutual trust and confidence, and that suppliers and competitors are treated fairly. We strive to ensure that this fundamental aspect of our business extends to all of our relationships with our host governments and local authorities, suppliers, customers, business partners, employees, contractors, and other key stakeholders.
Maintenance and Development of our policies and proceduresThe responsibility for this aspect of our activities lies with our CSR Board Committee. It is tasked with the maintenance and development of our business conduct policies and procedures, monitoring our performance in this area and instigating
changes to prevent breaches of Company policies. These were recently extended and developed with the approval of the Committee and are documented at the front of this report.
Whistle-Blowing proceduresThe Company has whistle-blowing procedures and systems that have been in place for a number of years. They aim to ensure that employees and other parties connected with the Company have the opportunity to confidentially report breaches of the Company’s business conduct policies. Details of these procedures are available to all of our employees at all of our offices. The Chairman or the Chief Executive Officer receives these reports and is responsible for their follow-up. The outcomes of these instances are reported to and monitored by either the Audit Committee or the Board.
The Audit Committee aims to discuss regularly the effectiveness of our whistle-blowing procedures and these will be reviewed again during the coming financial year to ensure that they are sufficient to maintain our Company’s policies.
We uphold the highest standards of business conduct across our Group. We are resolutely opposed to bribery and corruption in whatever forms they may take, and do not participate in, or finance, party politics.
performance During the year and plans for the FutureWe are pleased to report that the Company is not aware of any material breaches of its policies in this important area during the calendar year. This aspect of our business is of increasing interest to a number of our stakeholders (including NGOs, certain investors, and research companies). We will endeavour over the coming year to enter into dialogue with these organisations with a view to increasing their understanding of our approach and to apply their feedback to further develop our systems and procedures.
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1919Above: preparation for seismic operations, Tanzania
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Key Areas
CORpORATeGOVeRnAnCe
Board CsR CommitteeOur corporate governance structure has recently been strengthened by the establishment of a CSR Board Committee. Its members are Tony Buckingham (CEO), Michael Hibberd (Chairman) and Paul Atherton (CFO).
The Committee is tasked with maintaining the Company’s CSR policy framework in line with best practice and appropriate international standards and guidelines.
It reviews the following aspects of Company, peer group and sector activity and applies this information to make recommendations to the Board concerning future developments and programmes:
our CSR strategy, plans and approach to >sustainable development;reports of CSR progress and, where >performed, audits of CSR performance applying the key performance indicators that apply to the Company and appropriate industry benchmarks;relevant internal communication, business >unit liaison, knowledge sharing and training processes;our external communications and >reporting concerning our CSR policies, systems and performance; and
heritage is committed to protecting the interests of its shareholders and other stakeholders, through compliance with the relevant legal and regulatory environments and through the effective management of risk.
We comply fully with all relevant national and international laws and act in accordance with local guidelines and regulations (including those that are industry specific) – which govern our operations.
the integration of CSR processes with >our broader business risk management programme and reputation assurance priorities.
The Committee is responsible for ensuring that our annual CSR report is a fair reflection of our policies, systems and performance, is coherent and published in a timely manner. It is also responsible for ensuring that our website communicates and reports our CSR approach and performance in a timely, complete and coherent manner.
The Committee is empowered to request any information it requires from any employee of the Company in order to perform its duties. It may call any employee to be interviewed at a meeting of the Committee as and when requested. It is also authorised to obtain outside legal or other professional advice and support on any matter that is within its terms of reference.
The full terms of reference of our CSR Board Committee are available for download at our website.
stakeholder engagementHistorically, Heritage has viewed stakeholder engagement as being a very important element of the way that it conducts its
business. The success of our projects in the different parts of the world in which we operate is dependent on our relationships with governments, local authorities and the communities where the Company’s activities are based. This area has always been a priority for us and examples of our activities over the past year are showcased within this report.
The Company’s profile has increased significantly over the past twelve months and this has led to an increase in the interest shown in our activities from a variety of third parties. We view these developments as an opportunity to improve and enhance our approach through dialogue and feedback. Over the coming year we shall seek to engage proactively with our stakeholders to aid their understanding of our business and to enhance our approach to CSR and sustainable development.
This report is an important element of our engagement process and we aim to enhance our CSR reporting and communications both in this form and online in the future. We welcome comments and feedback to the information that it contains. This can be supplied by applying the contact information on our website, www.heritageoilplc.com.
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21Above: operations at Miran West-1 well, Kurdistan
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GlOBAl RepORTinG iniTiATiVe (“GRi”) TABle
Area Indicator Description of Indicator Commentary/Data Page
Economic Performance Indicators
EC4 Significant financial assistance received from government.
No assistance from any government was received during 2009.
n/a
EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.
Heritage uses local suppliers whenever possible.
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EC7 Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation.
Local hiring is a key element of our policies.
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EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.
See case studies, Community & Human Rights section.
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EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts.
Chief indirect economic impact of Heritage's presence in Uganda will be the revenues generated from hydrocarbon reserves discovered by the Company, together with the development of supporting infrastructure, including roads, rail, pipeline and a refinery.
1
Environmental Performance Indicators
EN3 Direct energy consumption by primary energy source.
Russian production operations: 1,251,600 kwh.
n/a
EN7 Initiatives to reduce indirect energy consumption and reductions achieved.
Plan to replace diesel gensets with gensets powered by associated gas, Russian operations.
n/a
EN8 Total water withdrawal by source. 30 barrels per day for steam, 2 barrels per day potable, Russian operations.
n/a
EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.
Certain operations in Lake Albert area, Uganda, are within protected areas.
n/a
EN13 Habitats protected or restored. See Stewardship case study. 11
EN14 Strategies, current actions, and future plans for managing impacts on biodiversity.
See Stewardship case study. 11
EN16 Total direct and indirect greenhouse gas emissions by weight.
1,770.9 tonnes gas flared in 2009 by the Russian operations. Greenhouse gas emissions from this flaring not calculated.
n/a
EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved.
Plan to replace diesel gensets with gensets powered by associated gas, Russian operations.
n/a
EN22 Total weight of waste by type and disposal method.
Russian operations: Class 1 – 0.011 tonnes (hazardous), Class 2 – 0.022 tonnes (medium hazard), Class 3 – 0.335 tonnes (low hazard), Class 4 – 6.625 tonnes (low hazard), Class 5 – 3.471 tonnes (non-hazardous). All waste trucked to a government approved disposal site.
n/a
In preparing this report, we have for the first time made reference to the third version of the GRI Sustainability Reporting Guidelines, also known as “G3”. We have been guided by its principles of materiality, stakeholder inclusiveness, sustainability context and completeness. We have also striven to provide information which is balanced, comparable, accurate, timely, coherent and reliable.
We aim to pursue full adoption of the GRI guidelines over time and to apply the forthcoming sector supplement relating to the oil & gas industry to enhance our future reporting.
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Area Indicator Description of Indicator Commentary/Data Page
Environmental Performance Indicators
EN23 Total number and volume of significant spills.
None. n/a
EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.
No fines or sanctions. n/a
Labour Practices and Decent Work Performance Indicators
LA7 Rates of injury, occupational diseases, lost days and absenteeism, and number of work-related fatalities by region.
See Health & Safety section. 12-13
LA8 Education, training, counselling, prevention, and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases.
See Health & Safety section, HIV/AIDS counselling and advice.
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Human Rights Performance Indicators
HR4 Total number of incidents of discrimination and actions taken.
None. n/a
HR6 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour.
No operations identified as having significant risk. CSR Policy Framework prohibits the use of child labour.
n/a
HR7 Operations identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of forced or compulsory labour.
No operations identified as having significant risk. CSR Policy Framework prohibits the use of forced or compulsory labour.
n/a
HR9 Total number of incidents of violations involving rights of indigenous people and actions taken.
None. n/a
Society Performance Indicators
SO4 Actions taken in response to incidents of corruption.
None. n/a
SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.
No contributions made. n/a
SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes.
None. n/a
SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.
None. n/a
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Biodiversity The number and variety of organisms found within a specified region
CEO Chief Executive Officer, Anthony Buckingham, responsible for implementing the business strategy and initiatives agreed by the Board
CFO Chief Financial Officer, Paul Atherton, responsible for Heritage’s financial controls, and the second most senior role in the executive team
Environmental impact assessment/EIA A study to determine the impact our operations may have on the environment
Environmental management system/EMS A system for managing our impact on the environment, designed to minimise any negative effects our operations may have
Global Reporting Initiative/GRI An organisation that has developed the most widely used sustainability reporting framework
Greenhouse gas A gas, such as carbon dioxide or methane, which re-emits infrared radiation and is responsible for the greenhouse effect
HAZMAT Hazardous materials, solids, liquids and gases that can harm people, other living organisms, property, or the environment
Heritage/The Group/The Company These terms are used interchangeably, and signify the entirety of Heritage’s operations and employees
HIV/AIDS Human Immunodeficiency Virus, Acquired Immune Deficiency Syndrome
HR Human Resources
Hydrocarbon An organic compound containing only carbon and hydrogen, such as acetylene, benzene, or butane, often occurring in petroleum, amongst other natural resources
International Labour Organization/ILO The International Labour Organization (“ILO”) is the tripartite UN agency that brings together governments, employers and workers of its member states in common action to promote decent work throughout the world
IPIECA The International Petroleum Industry Environmental Conservation Association
Lost time incident/LTI An accident that results in personnel not being able to work due to their injury
Natural resource(s) A naturally occurring resource, or resources, such as oil, coal, and gas
NGO Non-Governmental Organisation
Stakeholder A person or group with a direct interest, involvement, or investment in our activities. Heritage’s stakeholders include employees, shareholders, local communities, NGOs, the media, governments, regulatory authorities, and research organisations
Uganda Wildlife Authority/UWA UWA’s mission is to conserve and sustainably manage the wildlife and Protected Areas of Uganda in partnership with neighbouring communities and stakeholders for the benefit of the people of Uganda and the global community
GlOssARy
2
Heritage’s Corporate Social Responsibility (“CSR”) encompasses our management of relationships with shareholders, employees, contractors and the communities in areas where we work, together with our impact on society and the environment. We recognise we have specific responsibilities in each of these areas and consider adherence to CSR values to be a key factor in securing our long-term success.
Our Vision
Our areas of Impact & Opportunity
Our approach
We aim to be a responsible and transparent business in all the areas of the world in which we operate
Environment & Sustainability
Community & Human Rights
Health & Safety
Business Conduct
Employees
Corporate Governance
Set policiesDevise & maintain systems
Measure & monitor performance
Communicate & report to stakeholders
Apply stakeholder feedback
In 2009 Heritage engaged with four schools local to the Miran West-2 drilling site and ran a competition for the schoolchildren to draw a picture of the drilling rig. As part of this exercise donations were made to the schools that participated. These donations varied from school to school depending on the requirements for various educational tools. The top three individuals from each school also won a personal prize and the overall winner was selected by Anthony Buckingham to appear on the cover of this year’s annual report. Congratulations to Hawnaz Wahab!
On this page we have a collection of the drawings submitted.
Contents
Overview01 Chief Executive’s Letter02 About this Report03 Targets for 201004 CSR Policy Framework06 Company Overview08 Highlights, Risks and Opportunities
Key Areas10 Environment & Sustainability12 Health & Safety14 Employees 16 Community & Human Rights18 Business Conduct20 Corporate Governance
Additional Information22 GRI Table24 Glossary
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Oil Plc Oil Plc
www.heritageoilplc.com
Head Office and Directors’ Business Address:Fourth Floor, Windward House La Route de la Liberation JE2 3BQ Jersey Channel Islands
Tel +44 1534 835 400Fax +44 1534 835 412
Heritage Oil PlcCorporate Social Responsibility 2009
InteRnatIOnal exPlORatIOn, lOCal ReSPOnSIbIlIty
