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Occidental Petroleum Corporation Occidental Petroleum’s Worldwide Standard of Care --------------------------------------- Presented by Richard A. Swan Vice President - Health, Environment and Safety November 4, 2003
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Occidental Petroleum Corporation Oxy Business Segments Occidental Oil and Gas Corporation –Worldwide Oil and Gas Exploration and Production Activities –2002 Sales - $4.6 billion Occidental Chemical Corporation –U. S. Chemical Manufacturing Activities –2002 Sales - $2.7 billion Glenn Springs Holdings, Inc. –Centralized Site Remediation
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Occidental Petroleum Corporation 2002 Daily Production
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Occidental Petroleum Corporation United States Elk Hills 37 Million BOE 2002 Production THUMS 9 Million Barrels Hugoton 13 Million BOE OXY Permian 60 Million BOE Horn Mountain December Startup
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Occidental Petroleum Corporation Corporate Governance Key governance items at Occidental –Annual election of Board of Directors –10 of 12 Board members are independent outsiders –Lead outside Director –Confidential voting by shareholders –No poison pill –Formal “code of business conduct” –Stock ownership guidelines for officers –Performance-based incentives for senior executives Occidental’s governance highly rated –Rated 10.0 by GovernanceMetrics International
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Occidental Petroleum Corporation ENVIRONMENTAL, HEALTH AND SAFETY COMMITTEE (ECOB) BOARD OF DIRECTORS DIRECTOR, ENVIRONMENTAL AFFAIRS Carl Wirdak CORP. MGR., HES COMPLIANCE ASSURANCE Coni Manders MANAGER, SAFETY AND PROCESS RISK Harold Schambach PRESIDENT AND SENIOR OPERATING OFFICER VICE PRESIDENT, HEALTH, ENVIRONMENT AND SAFETY Rick Swan HES STEERING TEAM DIRECTOR, HES - REGULATORY AFFAIRS (OCCIDENTAL INT’L) Al Collins GLENN SPRINGS HOLDINGS, INC. (SITE REMEDIATION) VP - HEALTH, ENVIRONMENT & SAFETY OCCIDENTAL PETROLEUM (Swan) DIRECTOR, HES and SECURITY OCCIDENTAL OIL & GAS (Scott) VP - HEALTH, ENVIRONMENT & SAFETY OCCIDENTAL CHEMICAL (Kemp) DIRECTOR - HES REGULATORY AFFAIRS OCCIDENTAL INTERNATIONAL (Collins) DIRECTOR – HEALTH, ENVIRONMENT & SAFETY GLENN SPRINGS HOLDINGS (Terwilliger) MANAGER – SAFETY & SECURITY SERVICES CORPORATE HQS AND SERVICES (Hallen) CORPORATE DIRECTOR, SAFETY AND PROCESS RISK George Buxton CHAIRMAN AND CHIEF EXECUTIVE OFFICER EVP, GENERAL COUNSEL AND SECRETARY CHIEF FINANCIAL OFFICER & EXEC.V.P.-CORP.DEVELOPMENT HES COUNSEL HES Functional Organization
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Occidental Petroleum Corporation EHS Committee (ECOB) Established in 1981 Four “independent” Board members Meets 5 – 6 times annually with OPC HES staff, OPC President (senior operating officer), and General Counsel (Chief Compliance Officer)
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Occidental Petroleum Corporation EHS Committee Reviews status of HES issues, company compliance, remediation projects and significant incidents Provides written reports to full Board Reviews all facility HES audit and assessment reports
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Occidental Petroleum Corporation OPC HES Policy Roles and Responsibilities OIL & GASOXYCHEM OPC OPC ROLE Strategy Policy Oversight Consultation Coordination Industry Segments Implement industry specific HES programs that achieve a consistent worldwide standard of care Plan, measure and report performance Assess and improve HES management system GSHI
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Occidental Petroleum Corporation To protect people and the environment, while creating stockholder value through efficient Health, Environment and Safety (HES) management. HES Strategic Objective
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Occidental Petroleum Corporation To have effective and efficient HES management systems in place in all business segments That enable the company to achieve continual improvement in HES performance, and thereby Be recognized as a company committed to responsible HES management HES Strategic Goals
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Occidental Petroleum Corporation Oxy’s first approach – Meet the intent of U. S. laws U. S. laws may be to prescriptive for foreign locals U. S. laws may require excess paperwork U. S. laws may require technology or management practices unavailable in foreign locals Foreign requirements may exceed U. S. Problem: Establishing Worldwide Standards
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Occidental Petroleum Corporation Worldwide Standard of Care Definition: “The set of HES performance expectations and goals established by an Industry Segment that provide people and the environment a consistent level of protection from HES risks inherent in the various similar business activities of the Industry Segment, wherever located.”
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Occidental Petroleum Corporation Worldwide Standard of Care “Beyond Compliance” Compliance with all applicable HES laws and regulations is a minimum Correct or stop any activities with an unacceptable risk to people’s health and safety or the environment Set worldwide business segment HES performance objectives A risk evaluation and mitigation program that achieves consistent results worldwide
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Occidental Petroleum Corporation HES Management System Program Review assesses how well each Segment is managing the above programs (Policy 89:10:00) Inherent Risks (arising from chemicals, process technology, siting, etc.) Residual Risks (remaining after appropriate HES programs are in place) Operations Risks (arising from operating practices, maintenance practices, HES programs, etc.) Legal Risks (arising from need to comply with laws, etc.) QA/QC Program HES Risk Mgmt. Incident Investigation (management system performance feedback)
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Occidental Petroleum Corporation HES QA/QC Program 50+ major facility locations worldwide Risk-based audit frequency (2 - 3 yrs.) Reports include: –Assessment of status of facility’s HES compliance and programs –Specific audit findings –Impact of findings on facility’s risk level –Corrective action plans Each full audit report provided to ECOB
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Occidental Petroleum Corporation HES Risk Management Structured process for assessing HES risks and mitigation opportunities Provides information for risk mitigation decisions and resource allocation Establishes a system of authorities for risk acceptance Facility can not accept risks above a certain level without annual review by senior Segment management Annual risk status review verifies that a consistent SOC is being achieved
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Occidental Petroleum Corporation Process for Evaluating Risks Methodology consists of: –Identifying potential failure scenarios –Determining the potential consequences –Determining the likelihood that each consequence will occur –Using a consequence-probability matrix to determine the response level –Determining appropriate risk response
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Occidental Petroleum Corporation Identify Scenarios Typical scenarios: –Failure of piping or process vessels –Loss of utilities (electricity, water, air, etc.) –Failure of control systems Hypothetical scenario: –A natural gas pipe breaks causing an explosion/fire in a facility –Natural gas is clean (no Hydrogen Sulfide) –No neighbors within a mile radius –Facility is occupied part-time by two employees
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Occidental Petroleum Corporation Define Consequences
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Occidental Petroleum Corporation Probabilities Stated as a frequency based on the number of years between events (1 in X years) General categories are: –>1/100 years (>1 x 10 -2 ) –1/1,000 years to 1/100 years –1/10,000 years to 1/1,000 years –1/1,000,000 years to 1/10,000 years –< 1/1,000,000 years (<1 x 10 -6 )
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Occidental Petroleum Corporation Probability of pipe breaking (past experience, age, maintenance & inspection program, etc.) Probability of the gas being ignited (typical wind speed and direction, ignition sources, etc.) Probability of two people being within the radius of an explosion or fire (percent of time during a year that two or more people are in the area) Example: Use 1/5000 years as our probability Determine Probabilities
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Occidental Petroleum Corporation Identify Response Category
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Occidental Petroleum Corporation Determine Response
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Occidental Petroleum Corporation Interface with QA/QC Program Risk levels are used to set audit and assessment frequencies Risk inventories and profiles are the basis for the risk discussion in the executive summaries of audit/assessment reports
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Occidental Petroleum Corporation HES Program Review Corporate review of Segment HES programs and management systems Six to nine month process of interviews and site visits Assesses whether consistent worldwide standard of care is being achieved Report prepared for Segment CEO, OPC management and ECOB Segment CEO presents findings and response plans to ECOB
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Occidental Petroleum Corporation Health & Safety Performance 4.0 5.7 8.1 7.9 3.3 0.62 Occidental’s 2002 Injury & Illness Rates Industry Comparisons* * U.S. Bureau of Labor Statistics
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Occidental Petroleum Corporation Comparative Total Returns 3 Years (1/1/00 - 12/31/02)* (Percent) * Data Source: Bloomberg
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Occidental Petroleum Corporation Market Indexes 12/31/0112/31/02 Comparative Stock Performance Index: Dec. 31, 2001 = 100
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Occidental Petroleum Corporation Summary Occidental’s HES program has contributed to continuous improvement in HES and financial performance. Success attributable to a strong HES governance program, coupled with “beyond compliance” objectives.
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Occidental Petroleum Corporation Questions?
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