BP Annual Report and Form 20-F 2011 - Company Reporting

Corporate governancechairs and secretaries, to ensure that the agendas did not overlap or omitcoverage of any key risks during the year.In addition to the committee membership, each SEEAC meetingwas attended by the group chief executive, the executive vice presidentfor safety and operational risk, the general auditor and the external auditors.The general counsel also attended most meetings. The committee heldprivate sessions for the committee members only (without the presenceof executive management) at the conclusion of its meetings to discussany issues arising and the quality of the meeting. Between meetings,committee members took opportunities to visit company sites andreceived informal briefings through the committee chair, the secretary,the external auditor’s lead partner, the general auditor and executivemanagement.SEEAC processesInformation and adviceThe committee receives specific reports from the business segmentsbut also receives cross-business information from the functions. Theseinclude but are not limited to the safety and operational risk function,internal audit, group ethics and compliance and group security. During theyear, the main external input into the committee has been from L. DuaneWilson, the independent expert (for further information, see the sectionon independent expert below). As for the board and other committees,SEEAC can access any other independent advice and counsel if it requires,on an unrestricted basis.Training and visitsThe committee extended its coverage and number of visits this year byencouraging members to participate individually, or in groups, and reportback to the next full meeting. Members have also presented at stafftraining events, such as the operations academy at MIT in Boston. A keyarea of focus has been following up on the implementation of the BlyReport’s 26 recommendations and on the progress of the new S&ORfunction. In March the chairman and secretary visited Houston to discusshow S&OR management was being embedded in the upstream productionand development divisions and committee members made a furthervisit to Houston in January 2012. In 2011, a committee member alsoparticipated in an S&OR leadership event in London. Another committeemember accompanied the executive vice president for developments ontwo inspection visits to oil and gas wells leadership teams. In May thecommittee travelled offshore to the Atlantis platform in the deepwater Gulfof Mexico, and also visited the upstream learning centre in Houston to seethe capability development activity being undertaken and its global reach.Considerable focus also continues to be placed on the downstreamand on the company’s response to the BP US Refineries IndependentSafety Review Panel recommendations. In March two members of thecommittee visited the Whiting refinery, accompanied by the independentexpert, Mr Wilson, to review progress in risk management systemsand OMS implementation. In January 2012 members of the committeerevisited Texas City refinery, again accompanied by Mr Wilson. Thisfollowed previous committee visits in March 2010, April 2008 andSeptember 2007. During this visit, committee members also visitedthe nearby petrochemicals facility to follow up on presentations it hadreceived in May and October and to gain plant level experience, as wellas to observe the extent to which the BP US Refineries IndependentSafety Review Panel recommendations had been implemented in thepetrochemicals context.In addition to the extensive learning experiences provided by thesevisits and meetings with executive management, induction programmesare organized for new members of SEEAC. Frank Bowman, who joinedthe committee in November 2010, completed his induction programmein 2011.2011 SEEAC activitiesSafety, operations and environmentThe committee receives regular reports from the S&OR function, includingquarterly reports prepared for executive management on the group’shealth, safety and environmental performance and operational integrity.These include quarter-by-quarter measures of personal and process safety,environmental and regulatory compliance and audit findings. Operationalrisk and performance forms a large part of the committee’s agenda.In 2011, the committee put particular focus on gaining assurance thatthe new S&OR organization was developing as envisaged. The S&ORfunction has intervention rights in all aspects of the group’s technicaland operational activities, including key investment decisions and thecommittee sought evidence that this was working in practice. Thecommittee’s visits, as mentioned above, provided opportunities to discusswith local staff the interaction between line managers and embeddedS&OR staff, and where change had occurred as a result. The committeewas satisfied with the progress being made but will continue to monitorthis in 2012 along with the enhancement of standard practices andprocesses within OMS.Monitoring the company’s progress in implementing the 26recommendations in the Bly Report is a key task for the committeeand it received regular updates, including written reports from theexecutive vice president for developments, at five of its 2011 meetings.The BP board has identified an independent expert to provide furtheroversight and assurance regarding the implementation of the Bly Reportrecommendations. The engagement of the independent expert is expectedto commence in the latter half of May 2012. The independent expert willreport directly to the board. He will track BP’s progress in implementingthe 26 recommendations from the company’s internal investigation of theDeepwater Horizon oil spill and will independently assess the safety, healthand environmental work of global drilling operations. He will give regularupdates directly to the SEEAC.During the year the committee received specific reports on thecompany’s management of risks in shipping, wells and pipelines. Thepotential environmental consequences of loss of containment in theseactivities gave particular focus to the approaches to risk managementemployed. These included design, such as double bottomed hullsin tankers, and training, such as drilling simulators and naval cadettraining programmes. The committee noted that all new projects inenvironmentally sensitive areas are submitted to the requirements of thecompany’s environmental and social review process.When a fatality in the workforce occurs the committee reviews theincident in depth before reporting back to the board. The committee alsoreviews specific incidents to understand root causes and actions beingtaken to prevent recurrence. There has been a particular focus on ensuringlessons learned are communicated widely across the company and not justwithin the business segment in which the incident occurred.Independent expertSince L. Duane Wilson’s appointment by the board in 2007 as anindependent expert to provide an objective assessment of BP’s progress inimplementing the recommendations of the BP US Refineries IndependentReview Panel, he has presented to the committee at least four timesa year in person. His role has been to assist the company in improvingprocess safety performance at BP’s five US refineries. Annually thecommittee approves his work plan for the year ahead and receives a fullwritten report which is made public on the company’s website. In his lastverbal report Mr Wilson advised that he had observed continued progressin process safety performance at each visit he has made to the fiverefineries. He also discussed work remaining to be completed and areasrequiring special emphasis. As process safety performance has reachedhigher levels in recent years, he noted that the rate of change has naturallyslowed, but site metrics continued to demonstrate improvements.Mr Wilson also noted that some aspects of implementing the Panel’s10 recommendations require ongoing activity and hence could never becomplete, but he considers the company to have appropriate systemsand processes to continue its work towards process safety leadership.Mr Wilson’s reports are published in full and available on our website atbp.com/independentexpert.Regional and functional reportsEach year the committee receives a report on the progress made in HSEat TNK-BP, noting however that formal oversight of HSE performance andpolicies is exercised by TNK-BP’s own HSE committee. It was reportedthat, whilst significant areas for improvement remained, TNK-BP hadCorporate governanceBP Annual Report and Form 20-F 2011 129