Tullow Oil plc Annual Report 2011 - The Group

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Corporate responsibility continuedENVIRONMENT, HEALTH & SAFETY (EHS)Keeping our people safe and minimising ourenvironmental footprint2011 highlights Achieved the lowest Lost Time Injury Frequency Rate (LTIFR)in the Group’s history Reorganised the EHS function to reflect Tullow’s newregional business structure, including the recruitmentof three senior Regional EHS Managers Introduced Tullow Safety Rules Undertook a detailed review of EHS KPIs and made somesignificant changes for 2012 to reflect the changing natureof Tullow’s activities and EHS risksEHS is a priority in all that we do, based on our desire to ensurewe do no harm to our colleagues, our neighbours or the diverseenvironments in which we work. In 2011, we deliveredan excellent EHS performance with our lowest Lost Time InjuryFrequency Rate (LTIFR) despite the increasing scale anddiversity of our assets and activities.To ensure we can consistently deliver this superior performancewe have continued to enhance our EHS capability throughimprovements to our EHS resources and reporting structuresand with the introduction of new standards. We havereorganised our EHS function to reflect our new regionalbusiness structure with the recruitment of three seniorRegional EHS Managers. These EHS managers and theirRegional Business Managers provide EHS leadership in theirarea and are the conduit for EHS reporting to the Executive.We have also implemented a number of new standards andprocedures across the business, the most important being theintroduction of the Tullow Safety Rules. In addition, in 2011we set up a strategic EHS Strategy Forum, which includes bothExecutive Directors and Senior Management, to ensure that weEHS operators carrying out safety checks on facilities at theBangora field in Bangladesh.continue to look for new ways of thinking about how to improveEHS performance. The EHS Strategy Forum team has alreadygenerated some innovative thinking and ideas of how we canensure that we maintain a dynamic and fresh approach to EHS.EHS Key Performance IndicatorsWe manage our EHS performance through a combinationof leading and lagging KPIs. Leading indicators are qualitativeand focus on achieving improvements in performance intargeted areas. Lagging indicators show how we haveperformed based on quantitative data and preset targets.2011 lagging indicatorsIn 2011, over 13 million hours were worked across Tullowincluding a significant number of higher risk activities such asdeepwater drilling offshore French Guiana and the ramp-up ofproduction and delivery of oil to tankers from the FPSO inGhana. During 2010, we held a Group-wide safety stand-downto raise the profile of our performance targets and reaffirm theGroup’s commitment to making the safety of people paramountin our operations. We reinforced this in 2011 with theintroduction of Tullow Safety Rules. These are a set ofrequirements designed to manage high-risk activities that havethe potential to adversely affect our personnel, surroundingcommunities and the environment. They were established usingindustry practices, guidelines and standards and are intendedto reinforce Tullow standards and applicable host countryregulatory requirements. In 2011, we had an excellent safetyperformance and achieved our stretch target for LTIFR.We achieved our baseline target for Total Recordable InjuryFrequency Rate (TRIFR) and our stretch target for HighPotential Incident Frequency Rate (HiPoFR). Full details areoutlined in the lagging indicator table on page 67.Vehicle accidentsIn 2011, we did not achieve our Vehicle Accident Frequency Rate(VAFR) which at 1.46, exceeded our target of 1.0. There were 12recordable vehicle incidents during the year, all in Africa. Therewere no fatalities, although three were high potential incidentsand three caused minor injury. Unfortunately since year-endthere has been one third party fatality in Ghana and anotherthird party fatality in Kenya. Full investigations of all incidentshave been carried out and a series of key actions are beingundertaken as a matter of urgency. In the first instance, anexternal review of Tullow’s journey management plans anddriving policy will be conducted and further driver trainingwill be provided.Uncontrolled releasesWe did not achieve our Uncontrolled Releases targets, whichwas a KPI we introduced in 2011. This KPI reflects the fact thatTullow’s operations are mainly based in sensitive environmentalareas and it is important to demonstrate good practice and theintegrity of our equipment. In adopting this KPI we havesignificantly improved our reporting of environmental incidentsand as a result we have collected valuable data which will helpus improve our processes.66Tullow Oil plc 2011 Annual Report and Accounts
3The effect of Uncontrolled Releases to the environmentdepends on two vital components – the volume released andthe receiving environment. For example, while the releaseof contaminated water is often thought to pose a lower riskto the environment, it may contain oilfield chemicals whichcould be detrimental. Equally onshore releases can be asdamaging as offshore releases both from the perspective ofsensitive habitats (ecology and tourism) and the perceptionof stakeholders to accidental spills or releases; hence theneed to have a strong KPI.In 2011, Tullow had 14 incidents of uncontrolled releases,over four times our target. All of those incidents occurred inAfrica, with eight in Uganda and six in Ghana. Over 50% of theincidents related to drilling fluids. While none of the incidentswere significant a key focus for 2012 will be integritymanagement across all our operations, with a particular focuson drilling fluid storage and management in Uganda.2011 leading indicatorsIn 2011, we achieved three of our leading indicators, which areoutlined on this page. Activity to improve the management ofEHS contractor processes is ongoing, with the recruitment ofdedicated supply chain EHS resources planned. We reviewedthe independent EHS audit indicator and replaced this with afocus on operating in environmentally sensitive areas, which isincreasing every year for Tullow. The management of ourenvironmental footprint and the process we adopt for evaluatingour activities in protected/sensitive areas is very important. Asa consequence we are developing guidelines for new countryentry in 2012, which will be followed as part of New Ventures’planning processes.2012 KPIsHistorically the Group’s EHS KPIs were defined each year insupport of driving improvement in certain areas of EHSperformance. Towards the end of 2011, the new EHS StrategyForum undertook a detailed review to ensure that EHS KPIsreflect the changing nature of Tullow and the critical EHS risksacross the business. The objective is to encourage the rightEHS and leadership behaviours. In 2012, leading indicators willbuild on the 2011 performance with a refined focus on actiontracking, safety critical equipment, contractor management,toes and EHS leadership. A more significant change wasundertaken with lagging indicators because of a concern thatthese focused too much on statistics and incidents rather thanlearning and improving. The 2012 lagging indicators havetherefore been changed to ensure that we learn from thoseincidents that could have a significant impact on Tullow’sbusiness including High Potential Incidents, significant spillsthrough uncontrolled releases and malaria management. Wewill continue to track and report industry standard KPIs as amatter of good practice.Lagging indicatorsLTIFR
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Production operators in the central
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2011 highlightsRECORD RESULTSIndust
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In Ghana, we have experienced techn
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More informationPageStrong organisa
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CLEARVISIONSPECIAL FEATURETO BE THE
Page 17 and 18: 1Exploration& appraisal7Sharedprosp
Page 19 and 20: EXPLORATION& APPRAISALStrategic pri
Page 21 and 22: DELIVERING MATERIALPRODUCTIONGROWTH
Page 23 and 24: 21www.tullowoil.com
Page 25: RISKMANAGEMENTStrategic priority: E
Page 28 and 29: MAINTAINING OURENTREPRENEURIALCHARA
Page 30 and 31: SHAREDPROSPERITYStrategic priority:
Page 32 and 33: DELIVERINGSUBSTANTIAL RETURNSOur st
Page 34 and 35: Key Performance Indicators continue
Page 36 and 37: Financial reviewFUNDING FUTURE GROW
Page 38 and 39: Financial review continued2011 Grou
Page 40 and 41: Financial review continuedDividendT
Page 43 and 44: Regional business management unitsI
Page 45 and 46: LONG-TERMPERFORMANCE RISKSWe group
Page 47 and 48: 1Operational risk continuedKey deve
Page 49 and 50: 482011 operations overviewOverall,
Page 51 and 52: 2OPERATIONS REVIEWEurope,South Amer
Page 53 and 54: DEVELOPMENT & OPERATIONSA new scale
Page 55 and 56: Senior DrillingSupervisor withtrain
Page 57 and 58: Mauritania & SenegalProduction from
Page 59 and 60: periods for Kasamene, Wahrindi, Kig
Page 61 and 62: 2West African and South American ex
Page 63 and 64: 62Creating shared prosperityCreatin
Page 65 and 66: More informationPageSpecial feature
Page 67: Social performance standardsWe are
Page 71 and 72: 3Future talent poolIn October 2011,
Page 73 and 74: 3LOCAL CONTENTCreating real opportu
Page 75 and 76: 3Key corporate responsibility polic
Page 77 and 78: 76Chairman’s introductionAt Board
Page 79 and 80: 4In order to provide the human and
Page 81 and 82: I am delighted to have taken on the
Page 83 and 84: Board of DirectorsEXPERIENCED LEADE
Page 85 and 86: 4CORPORATE GOVERNANCEAnn GrantNon-e
Page 87 and 88: Audit planning and update on releva
Page 89 and 90: Directors in their place. On 12 May
Page 91: CONTENTS89 Introduction89 Remunerat
Page 94 and 95: Directors’ remuneration report co
Page 102 and 103: Corporate governanceThe UK Corporat
Page 104 and 105: Corporate governance continuedThe f
Page 106 and 107: Corporate governance continuedAccou
Page 108 and 109: Other statutory informationResults
Page 111 and 112: All employees are helped and encour
Page 113 and 114: As part of our Code of Business Con
Page 115 and 116: Independent Auditor’s Reportto th
Page 117 and 118: Group balance sheetAs at 31 Decembe
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Group cash flow statementYear ended
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The principal accounting policies a
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5Finance costs of debt are allocate
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5Commercial reserves estimates (not
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5Note 2. Business combinationsOn 24
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5Europe,South Americaand Asia$mWest
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5Non-current assets by originGhana
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5Note 6. Staff costsThe average mon
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5The Group’s profit before taxati
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5Note 12. Property, plant and equip
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5Note 13. Investments2011$m2010$m20
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5Note 18. Trade and other payablesC
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5The $3.5 billion Reserves Based Le
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5Note 20. Financial instrumentsFina
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5Oil and gas pricesThe Group uses a
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5Financial derivativesThe Group int
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5Deferred tax assets are recognised
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5Note 27. Share-based payments2005
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5UK & Irish Share Incentive Plans (
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Independent Auditor’s Reportto th
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Company balance sheetAs at 31 Decem
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Notes to the Company financial stat
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5Note 6. Bank loansCurrentShort-ter
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5Note 9. Shareholders’ fundsShare
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2010 Share Option Plan (2010 SOP) a
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5Note 13. Subsequent eventsSince th
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Commercial reserves and contingent
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Area TullowLicenceFieldssq km inter
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Licence / BlocksFieldsAreasq kmTull
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ContactsSecretary & registered offi
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KKenya 6, 7, 57Key financial metric
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MmmbblmmboemmscfdMoUMTMMillion barr
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This report is printed on Heaven 42
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