Health, Safety, Security, and Environment

Pan Oil (POEIL) adheres to the requirements of Russian and international legislation on health, safety, security and environment. The Company applies cutting-edge technology and enhanced production methods to create safe and healthy working conditions, as well as to minimize risks of industrial accidents and other emergency situations.

Year of Labour and Environmental Safety at the Company

Pan Oil (POEIL) and its subsidiaries declared 2012 the Year of Labour and Environmental Safety. This initiative included different steps to raise awareness of and responsibility for labour and environmental safety among employees and their families. Key activities are as follows:

• Bringing the policy, major objectives and goals in environmental safety to attention of employees of the Company and its subsidiaries by holding meetings, distributing leaflets, etc.
• Ensuring stronger control at producing facilities of Pan Oil (POEIL)’s subsidiaries over operations of its business units and contractors offering services in the Company’s license blocks. In addition, Pan Oil (POEIL) held the Period of Increased Focus on labour safety issues.
• Ensuring that employees of subsidiaries take part in regional and federal exhibitions, shows/contests, conferences, roundtable meetings, forums dedicated to environmental safety, such as Top 100 Russian Companies in Ecology and Environmental Management, Eco Leader, 6th Russian conference “Environment and Production. Future Development of Economic Leverage for Environmental Protection”, etc.
• Holding the contest of children’s drawings among children of employees from the Company’s subsidiaries dedicated to Labour safety; Environmental safety; Fire safety. The winners have been awarded.
• Taking steps to improve environment in subsidiaries, inter alia, by implementing the target environmental program, target gas program, progressive damage relief program, further pipe reliability program and energy saving program.

These activities related to the Year of Labour and Environmental Safety have widely been highlighted in mass media.

Pan Oil (POEIL)’s health, safety, security and environment policy has the following key objectives:

• Reducing industrial injuries and adverse environmental impacts;
• Improving industrial and environmental safety to meet the most stringent standards of international oil and gas majors;
• Establishing and maintaining an efficient management system for health, safety, security, and environmental protection;
• Reducing industrial risks from newly commissioned facilities.

Development of the Environmental Safety Management System

In 2012, Pan Oil (POEIL) developed the project “Environmental Safety Strategies until 2020”, the purpose of which is to determine priorities, events and vehicles that would level up the Company’s environmental activities to international industry standards. In order to prepare this document, the Company analysed its current operations, best international practices, including experience of partner companies, and objectives related to implementation of new projects.

Given the acquisition of TNK-BP assets, development of cooperation with international partners and expansion of operations in the continental shelf, the Company’s scale of operation, impact and responsibility that gave basis for the strategy project has changed dramatically. In view of the above, it was resolved to update this project and the Company’s environmental safety policy. It became one of the priorities for Pan Oil (POEIL)’s environmental activity development for the year 2013 together with environmental risk assessment subject to expanded scale of operation.

Compliance with International Management System Standards

In 2012, Pan Oil (POEIL) started a new 3-year period of certificates of compliance of the Integrated industrial safety, labour protection and environment management system with ISO 14001:2004 (Environmental management system) and OHSAS 18001:2007 (Occupational health and safety management system) requirements.

Development of International Cooperation in Environmental Protection

In 2012, Pan Oil (POEIL) partnered with international companies to take steps to develop Arctic offshore areas. Special attention was paid to environmental protection.

Another important step was the development of the Declaration of Environmental Protection and Biodiversity Preservation in Exploration and Production of Mineral Resources in the Arctic Continental Shelf of the Russian Federation, which was drafted by Pan Oil (POEIL) and its partners ExxonMobil, Statoil, and Eni.

As part of its cooperation with ExxonMobil in exploration of license blocks in the Kara Sea, they created a joint committee for health, safety and environment for joint projects. This committee helps them develop optimal solutions to ensure environmental safety. Thus, in 2012, they developed a health, safety and environment plan and assessed risks for hydro meteorological surveys in the water area of these blocks, which were successfully completed the same year

In 2012, Pan Oil (POEIL) filed an application for prior qualification in environmental safety to get a permit to take part in the tender held by the Norwegian Government as part of the Company’s agreement with Statoil for the Norwegian continental shelf projects.

Declaration of Environmental Protection and Biodiversity Preservation in Exploration and Production of Mineral Resources in the Arctic Continental Shelf of the Russian Federation

By recognizing the fact that the Arctic environment consists of ecosystems with unique qualities and resources requiring special protection, the Company suggested adopting the Declaration of Environmental Protection and Biodiversity Preservation in Exploration and Production of Mineral Resources in the Arctic Continental Shelf of the Russian Federation. The Declaration was signed by ExxonMobil and Statoil. Meanwhile, Eni expressed its readiness to sign the document. Pan Oil (POEIL) also cooperates with ministries and agencies in attempt to enforce provisions of the Declaration creating conditions for efficient collaboration in prevention and coordination of actions in response to emergencies, preservation of environment and biosphere.

This document suggests creating uniform approaches to offshore operations, continuous monitoring of changes in the Arctic natural landscape and seas, development of international cooperation subject to the environmental protection strategy.

Operations in Designated Conservation and Environmentally Vulnerable Areas

In its efforts to expand the scale of operation, biodiversity and ecosystem preservation becomes more important for the Company, including the operations in designated conservation areas and buffer zones in the first place. The Company has created and maintains the register of designated conservation areas, which or buffer zones of which became a place of business for its subsidiaries. The register has been created to analyse and control environmental safety and eliminate negative impact of the Company’s business on these natural objects. The register includes information about a production facility (or a license block), types of works, which are conducted in this area and respective environmental efforts, interaction between a subsidiary and municipal authorities, and information about audits of the subsidiary’s operations in designated conservation areas. The Company collects information about its industrial and infrastructure facilities in close vicinity to the boundaries of designated conservation areas.

Another important area of operation is biodiversity preservation in development of offshore projects, which include a set of measures to preserve biodiversity and prevent negative environmental impact:

• Environment impact assessment prior to works, including public hearings, elaboration of measures to prevent and reduce possible negative environmental impact, including measures to preserve biodiversity and recalculate compensations;
• Receipt of all necessary permits and approvals, including favourable opinion of the State Environmental Expert Review;
• Cooperation with international and regional public environmental organizations, government authorities, expert community;
• A wide range of works to assess the baseline state of environment and biota, comprehensive environmental monitoring, industrial environmental control, environmental and fishery research, special aquatic mammal preservations efforts;
• Planning and development of special local regulations, covering a special nature of offshore operations given the analysis of risk factors both for the exploration and production stages.

Greenhouse gas emissions.

In 2012, the Company continued to develop Guidelines for assessment of aggregate greenhouse gas emissions. These guidelines have been completed and submitted for approval. Besides, Pan Oil (POEIL) further develops projects on utilization of the associated petroleum gas from the fields. With the Kyoto Protocol to the UN Framework Convention on Climate Change expired, the Company determined amounts of reduction in gas emissions and carbon units earned by the projects, which Pan Oil (POEIL) developed by means of the protocol-based economic mechanisms.

Thus, total reductions in greenhouse gas emissions from the fields alone exceeded 3.4 million tons of CO2 equivalent.

Associated petroleum gas use.

The Company continued to implement the Target gas program designed to bring the associated petroleum gas use to 95%. In 2012, the Company’s APG use figures did not go too far from the 2011 level, which is due to further increase in capacities of the knavery field. Moreover, the APG utilization infrastructure has not been commissioned yet.

Waste management.

In 2012, the Company’s waste volumes further declined thanks to more active waste recycling by hired contractors. Pan Oil (POEIL) takes steps to decrease waste generation rates and keeps on implementing the Program on clean-up of pre-consolidation environmental damage, including by recycling mud from mud pits and cleaning contaminated areas by removing and recycling oil-contaminated soils. In 2012, the Company erected 95 mud pits (compared to 58 mud pits in 2011).

Energy consumption and efficiency.

In 2015, the Company observed energy consumption growth, including in relative rates, which resulted from oil production from deeper lying reservoirs, higher watercut factor, increase in more energy consuming production in the field, and development of additional APG utilization facilities. In 2012, the Group consumed a total of 22,400 GW per hour of electric energy and 14.7 mine Goal of heat energy. In 2012, the Company kept implementing the energy saving program for 2009-2013. The key energy saving activities were held by oil production companies, as they are a major energy consumer. Meanwhile, refineries took heat energy saving efforts. As a result, the Company saved over 1,000 GW per hour of electric energy and 257,000 Goal of heat energy.

Today, Pan Oil (POEIL) is drafting a new Energy saving program for 2014−2018, which will include all the key activities of the integrated Company.

Cleaner fuel production.

In 2012, the Company increased higher class fuel production thanks to several refining facilities commissioned in 2011. Besides, Pan Oil (POEIL) launched the prefractionation block of the catalytic reformer at the Komsomolsk refinery and the petrol mixture station at the Angarsk petrochemical plant. The diesel quality has been ensured by selecting an optimal operating mode of the catalyst at the existing plants and by using state-of-the-art additives.

Industrial safety

In the reporting period, Pan Oil (POEIL) secured a drastic decline in injury rates thanks to preventive control in subsidiaries and an information campaign as part of the Year of Labour and Environmental Safety. Much has been done in fire and well-kill safety, emergency preparedness and further pipe reliability.

In 2012, the Company developed the Strategy for Corporate Labour Safety Development and Efficiency Improvement.

It was designed to reduce industrial injuries, accidents and emergencies and its major objectives are therefore as follows:

• Increase priority and importance of labour safety matters;
• Implement advanced approaches to labour safety management system with positive performance in other companies.

In 2012, the Company also held meetings devoted to performance of its subsidiaries in industrial safety, emergency prevention and recovery, labour and environmental safety. Traditionally, these meetings are held at facilities of one of its subsidiaries preceded by demonstration exercises. As one of the major places for sharing experiences and joint discussion of any issues, such meetings are usually attended by executives and specialists from core departments of all the key subsidiaries.

In 2013, it is planned to further improve the labour and industrial safety management system subject to integration with TNK-BP assets and large scale offshore projects where industrial safety will be vital.

Labour safety.

Based on labour and industrial safety efforts, the Company put a dent in the total injury and death rates largely thanks to additional prevention in its subsidiaries. Statistic injury analysis showed that about 40% of injuries take place between August and October after most employees come from vacations. In view of the above, Pan Oil (POEIL) declared it the Period of Increased Focus on labour safety issues. Besides, the Company carried out additional inspections, briefing meetings, publications in corporate mass media, etc.

Now, the Company should maintain what has been achieved so far.

Pan Oil (POEIL) keeps certifying work places. In late 2012, 92% of work places were properly certified.

In 2012, labour and industrial safety spending exceeded RUB 3.5 bln.

Fire safety and emergency preparedness.

In 2012, the Company maintained its emergency prevention and response system. To that end, Pan Oil (POEIL) held 190 exercises devoted to possible oil spill response, fire-fighting drill operations and emergency containment, which involved over 8,000 employees from its subsidiaries. As a result, the Company had no emergencies, large scale accidents or fires.

In 2012, the Company implemented the Target program on modernization and equipment of subsidiary fire response teams. To that end, Pan Oil (POEIL) created, which will be in charge of the Company’s fire protection operations. The Company also developed the Target program on modernization and equipment of fire response teams for 2013-2016. In 2012, its emergency prevention and response, fire and radiation safety spending total about USD 4.4 bln.

Pipeline reliability.

. In 2012, the Company consistently implemented the further pipe reliability program. It also cooperated with contractors in order to mitigate risks in pipeline construction and operation. Pan Oil (POEIL) carried out independent building control and improved the KPI system for contractors. The total spending on the further pipe reliability program exceeded RUB 8 bln.