No. 2, 2010
Ravil Maganov
,
First Executive Vice-President of LUKOIL
A MIGHTY MODERNIZATION RESOURCE
The geopolitical and economic potential of the whole of Russia, the prospects for its development and its socio-economic stability depend on how successfully the oil and gas companies will meet the challenges they face in promoting energy security. In turn, the Russian oil and gas complex will only be able to fulfill these functions truly efficiently given an understanding of its vital role, support from the state and closer co-ordination of efforts within the public-private partnership.
Strategic priorities
The efforts of the biggest oil and gas companies to promote security may be arbitrarily split into two groups: international and domestic ones. The first category includes integration of Russian companies into the global economic system, their participation in designing a global mechanism for energy supplies, expansion of international presence, an improvement of the key performance indicators and their establishment among the world oil and gas majors.
All these efforts relate directly to maintenance of the country's security, not only with respect to raw materials and energy, but also safety proper.
In this situation, the international activity of the leaders of the Russian oil and gas business is a direct continuation of the state policy of consolidating the country's positions and strengthening its participation in the formation of a multi-polar world, including by making use of its mighty energy potential.
In this respect, LUKOIL in conjunction with the other major Russian and world energy companies, is striving to operate within the scope of a unified global strategy. Its principles were formulated in the document "Global Energy Security" adopted at the meeting of the G8 in St. Petersburg in 2006 and, in particular, containing the tools the global community believes can be used to attain interrelated strategic goals: energy security, economic growth and environmental well-being.
The LUKOIL strategy on these matters coincides fully with the global and national ones, as is confirmed by the fact that, in 2008, we joined the voluntary UN initiative for a Global Compact declaring the 10 key principles behind responsible conduct of businesses. These principles, among other things, oblige the parties to the compact to defend human rights and labor relations, combat corruption and protect the environment.
Accelerated innovation
In essence, all the lines of activity of a big oil and gas company, such as LUKOIL, from raising investments to protecting individual production facilities against criminal offences, are in one way or another related to aspects of the country's stable and progressive development - and its security.
The focus on increasing the competitiveness of all business segments, creation and maintenance of the conditions for effective use and expansion of human capital, use of models of social and environmental responsibility of business - in a word, all the principles by which LUKOIL abides in its work, are directly related to the country's progressive development and implementation of plan to modernize its industry. Both are unthinkable without the efforts by the company to achieve economic and social stability, active participation in reorientation of society on reaching new horizons, reform of the legislation, and the support for reforms currently in progress in various fields.
At the same time, the priority challenge is that of ensuring the country's energy security - timely replenishment of reserves, the search for new fields, rational use of existing ones and a pragmatic mix of different types of energy source. This is clearly understood within LUKOIL - a company which always combined optimization of field developing processes with expanded prospecting for new reserves.
LUKOIL also contributes to diversification of energy sources, allowing it to respond flexibly to changes in demand and to eliminate energy resource deficits at the regional level. One example of this is provided by the work to implement the program for developing the gas section of the business. Within its framework, LUKOIL is developing plans for selling gas in the south of Russia, where there is an energy shortage, is expanding its network for selling liquefied and compressed gas, and reorganizing some of its filling stations into multi-fuel outlets. Another step in this direction consists in development of the electric power business segment through purchasing facilities and creating new capacities at the Company's fields and refineries.
Another integral component of raw material security is rational use of resources, in particular, associated gas, which, if lost, will cost the company and society as a whole more and more with each passing year. LUKOIL is already actively taking steps in this direction. As a result, thanks to implementation of a special corporate program, in 2010, it is planned to utilize 95% of the associated gas at the company's producing fields.
Similar importance is attached to the Company's efforts to prepare the ground for application of the mechanisms of the Kyoto Protocol to the UN Framework Convention on climate change, cut greenhouse gas emissions and introduce at its facilities technologies and solutions relating to use of alternative energy sources.
In addition, within the scope of efforts to manage energy resources more efficiently, LUKOIL is continuing to modernize its oil refineries in order to bring refining depth up to world levels as soon as possible. For several years now, the depth of refining at the company's refineries has been above the average Russian level and the share of ecologically clean fuel in its total output is constantly growing.
Focus on the environment
Nature protection is, for LUKOIL, one of the key aspects of ensuring safety. The company has a modern, well thought out and effective system for industrial safety, labor and environmental protection. It covers all stages of operations and the entire top-to-bottom management system, from the head office to the most remote enterprises and facilities. This system provides environmental support for any project at all stages, from the original concept to implementation.
Our priorities in this work are future-oriented. They are formulated in a special document - "Policy in the Sphere of Industrial Safety, Labor and Environmental Protection in the 21st Century", which sets out the Company's strategic goal: to ensure stable development through balanced attainment of socio-economic objectives and maintenance of a favorable environment.
The Company is striving to achieve this by constantly improving environmental management. The chief mechanism for implementing the company's environmental policy consists in target programs that, in turn, are made up of individual sub-programs - "Clean Air", "Clean Water", "Recultivation", "Waste", "Emergency Prevention and Response", and others. Without going into detail or recounting the multitude of individual projects being implemented by the Company in its regions of operation, among which territories with extremely vulnerable and unique ecosystems predominate, it should be noted that LUKOIL's experience confirms the significant environmental and social effect of investment in green programs.
The Company's current environmental program, covering the period from 2009 to 2013, envisages over 500 different measures to an aggregate cost of about 60 billion rubles, which is almost double the cost under the previous program. The inevitable result of such large-scale financing and the serious attention focused on the environmental component of business is that most indicators of the Company production units' environmental footprint are gradually falling by the year and are a third or a half lower than the industry's average.
With and for people
LUKOIL believes another very important obligation toward society to be labor protection and industrial safety. To maintain the health of the Company's personnel and the inhabitants of the territories on which its production facilities are situated is an equally important objective for us as the economic "health" of the Company itself.
The Company's system for managing labor protection and industrial safety undergoes an annual supervisory audit to confirm its compliance with the highest international standards. Thanks to regular work to prevent and eliminate industrial emergencies, the LUKOIL Group injury statistics are on a level with the world's leading oil and gas companies and are dropping year by year, even though more and more new enterprises experiencing certain difficulties in implementing corporate requirements are joining the holding company.
Within the scope of special investment programs for industrial safety, equipment is being rebuilt at all LUKOIL enterprises.
In order to inculcate a more responsible attitude in this sphere, we are applying different approaches and models: a system of corporate supervision, training of personnel and their knowledge and skills assessment, interaction with trade union leaders, and competition between work teams.
Moreover, in accordance with the requirements of international standards, work is constantly under way in the company to identify, assess and prevent occupational risks. They are entered into a register that is updated annually in order to reduce the possibility of emergencies occurring and mitigate their consequences if they occur.
In addition to the Company's businesses that affect directly various aspects of security on a country-wide scale, there are those whose impact is less obvious, but still equally significant.
LUKOIL's activities designed to modernize the legislation, including laws that are only indirectly related to security, and the company's human resources policy, guaranteeing personnel a job, a worthy standard of living and substantial social guarantees, various social and charitable programs implemented by LUKOIL companies, and even the latest information technologies introduced all help ensure security in one way or another - and not only of LUKOIL itself, but also entire regions of the country.
This is no exaggeration. After all, efforts to promote regional development or, for instance, the Company's legislative activities directly affect, among other things, the public mood. They give people the main thing: confidence that they and their children will enjoy normal living standards and opportunities for self-realization and that the country's natural wealth will be used for the benefit of its inhabitants and facilitate a leap forward in its development.
