PETROLIAM NASIONAL BERHAD (Company No. 20076-K) Registered O ce: Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur Malaysia T : +603 2051 5000 F: +603 2026 5050 www.petronas.com

Sustainability Report 2012 reimagining energy TM

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 1 OUR BUSINESS

Crude Oil Natural Gas A

C B D

E

F G H I J

A Exploration, Development F Petroleum Products • Transportation Sector and Production -Diesel, Gasoline, Jet Fuel and Lubricants

B Refining G Petrochemical Plant • Industrial Sector -Ethylene, Methanol, MTBE, Polyethylene, Propylene, Urea and VCM

C Processing H Liquefied Petroleum Gas (LPG) • Residential; and Commercial Sectors D Liquefaction I Processed Gas / Peninsular • Power Sector Utilisation (PGU) System • Industrial Sector E Liquefied Natural Gas (LNG) J Regasification Terminal • Export Sector

2 PETRONAS SUSTAINABILITY REPORT 2012 Our Presence

E&P Gas & Power Downstream

Exploration & Production (E&P) Africa • Algeria – Development • Cameroon – Exploration & Development • Chad – Development & Production • Egypt – Exploration, Development & Production • Mauritania – Exploration & Production • Mozambique – Exploration • Republic of South Sudan – Exploration, Development & Production • Republic of Sudan – Exploration, Development & Production • Sierra Leone – Exploration Asia Pacific • Australia – Exploration, Development & Production • Brunei – Exploration • Indonesia – Exploration, Development & Production • Malaysia – Exploration, Development & Production • Malaysia-Thailand Joint Development Area – Exploration, Development & Production • Myanmar – Exploration, Development & Production • Vietnam – Exploration, Development & Production Central Asia • Turkmenistan – Exploration, Development & Production • Uzbekistan – Exploration, Development & Production Latin America • Cuba – Exploration • Venezuela – Development Middle East • Iraq – Exploration, Development & Production • Oman – Exploration & Development North America • Canada – Development & Production Gas & Power Africa • Egypt – LNG Asia Pacific • Australia – LNG • Indonesia – Infrastructure • Malaysia – LNG, Infrastructure, Utilities & Power, Trading • Singapore – Power • Thailand – Infrastructure Central Asia • Uzbekistan – Gas-to-Liquid Europe • Ireland – Infrastructure • United Kingdom – Infrastructure, Utilities & Trading North America • Canada – LNG Downstream* Africa • Botswana – Oil Business • Burundi – Oil Business • Democratic Republic of the Congo – Oil Business • Gabon – Oil Business • Ghana – Oil Business • Guinea Bissau – Oil Business • Kenya – Oil Business • Lesotho – Oil Business • Malawi – Oil Business • Mauritius – Oil Business • Mozambique – Oil Business • Namibia – Oil Business • Réunion – Oil Business • Rwanda – Oil Business • Swaziland – Oil Business • South Africa – Oil Business • Republic of South Sudan – Lubricants & Oil Businesses • Republic of Sudan – Lubricants & Oil Businesses • Tanzania – Oil Business • Zambia – Oil Business • Zimbabwe – Oil Business Asia Pacific • China – Lubricants & Petrochemical Businesses • India – Lubricants & Petrochemical Businesses • Indonesia – Lubricants, Oil & Petrochemical Businesses • Malaysia – Lubricants, Oil & Petrochemical Businesses • Philippines – Lubricants, Oil & Petrochemical Businesses • Thailand – Lubricants, Oil & Petrochemical Businesses • Vietnam – Lubricants, Oil & Petrochemical Businesses Europe • Austria – Lubricants • Belgium – Lubricants • Denmark – Lubricants • France – Lubricants • Germany – Lubricants • Italy – Lubricants • Netherlands – Lubricants • Poland – Lubricants • Portugal – Lubricants • Spain – Lubricants • Turkey – Lubricants • United Kingdom – Lubricants Latin America • Argentina – Lubricants • Brazil – Lubricants North America • United States of America – Lubricants

*Includes Engen subsidiaries and marketing and trading offices. ©2013 PETROLIAM NASIONAL BERHAD (PETRONAS) All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner. PETRONAS makes no representation or warranty, whether expressed or implied, as to the accuracy or completeness of the facts presented. PETRONAS disclaims responsibility from any liability arising out of reliance on the contents of this publication.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 3 Table of Contents

Our Business 37 Awards & Recognition

3 Our Presence 42 Our Approach to Reporting

5 Corporate Statements

6 Company Profile 18 Safety & Health

8 Key Sustainability Indicators & Financial Performance

9 President & Group CEO Message

12 about this Report

14 Sustainability & 24 Environment PETRONAS

16 Sustainability Leadership

30 Society

4 PETRONAS SUSTAINABILITY REPORT 2012 Vision To Be A Leading OIL AND GAS MULTINATIONAL OF CHOICE

Mission Shared Values

We are a business entity Loyalty Loyal to the nation and corporation Petroleum is our core business Integrity Our primary responsibility is to develop and Honest and upright add value to this national resource Professionalism Our objective is to contribute to the well-being Committed, innovative and proactive and of the people and the nation always striving for excellence

Cohesiveness United in purpose and fellowship

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 5 Company Profile Petroliam Nasional Berhad is Malaysia’s National Petroleum Corporation wholly-owned by the Malaysian Government. Established in 1974, PETRONAS is now ranked among the largest companies in the world with a proven track record in integrated oil and gas operations spanning the entire hydrocarbon value chain.

PETRONAS’ business activities include (i) the of petrochemical products; (vi) the trading of exploration, development and production of crude oil, petroleum, gas and LNG products crude oil and natural gas in Malaysia and overseas; and petrochemical products; and (vii) shipping (ii) the liquefaction, sale and transportation of and logistics relating to LNG, crude oil and Liquefied Natural Gas (LNG); (iii) the processing petroleum products. Committed to ensuring and transmission of natural gas, including power business sustainability, PETRONAS also strives to generation, and the sale of natural gas products; responsibly manage natural resources in a way (iv) the refining and marketing of petroleum that contributes holistically to the well-being of products; (v) the manufacturing and selling the people and nations wherever it operates.

Exploration & Production

PETRONAS Exploration & Production (E&P) aims for Safe and Profitable Growth through effective domestic resource management and highgrading and acquiring assets/ventures across the exploration, development and production value chain.

The Petroleum Management Unit of PETRONAS manages domestic oil and gas assets, by pioneering innovative solutions to drive business growth in the Malaysian oil and gas industry. This includes Enhanced Oil Recovery, small field development and intensifying exploration activities.

Its E&P subsidiary, PETRONAS Carigali Sdn Bhd (PCSB) is a hands-on operator with an established track record of successful oil and development projects. These include deepwater gas developments. Actively strengthening the and unconventional resources. nation’s upstream resource base and production, PCSB works alongside a number of petroleum PETRONAS continues to harness and implement multinational companies through Production new technologies to reap the benefits of every Sharing Contracts to explore, develop and produce hydrocarbon molecule recovered in its vision to oil and gas in Malaysia. Abroad, PETRONAS become a leading global E&P player. continues to build on its E&P portfolio, securing new acreages while undertaking various

6 PETRONAS SUSTAINABILITY REPORT 2012 Gas & Power

PETRONAS is positioning itself to be a The Infrastructure, Utilities & Power leading gas, Liquefied Natural Gas (LNG) business is focused on ensuring long-term and power player through two major security, sustainability, and utilisation of portfolios under its Gas & Power business; natural gas in Malaysia while continuing to Global LNG business and Infrastructure & expand its portfolio of infrastructure and Utilities business. power in various international markets. This encompasses gas processing, PETRONAS’ Global LNG business transportation, regasification as well as commands a significant international equity participation in power generation. market share; owing to three decades of experiences and proven capability Since the 1980’s, the Peninsular Gas along the LNG value chain. PETRONAS Utilisation pipeline system has been is committed to continue strengthening delivering gas to the power and non- its market position and preserve its power sectors in Peninsular Malaysia as reputation as a preferred LNG supplier well as to the power industry in Singapore. distinctive for its quality and reliability In addition, gas processing has also through strategic expansion projects, spurred Malaysia’s petrochemical industry. venturing into unconventional plays in PETRONAS is committed to continue Australia and Canada, as well as growing growing its infrastructure and power its international LNG trading portfolio. business including renewables power business.

Downstream lubricants manufacturing and marketing arm of PETRONAS, with presence in more Business than 50 countries and five continents. PLI is responsible in setting PETRONAS PETRONAS’ ambitious downstream global lubricant strategic direction and expansion through its integrated growth with a product range that includes operations in refining & trading, marketing lubricants and functional fluids for both & retailing as well as in the petrochemicals the automotive and industrial markets as sector plays a strategic role to increase well as a range of car care products. the value of every molecule extracted through its exploration activities. The integrated development of Malaysia’s petrochemical industry is expected PETRONAS owns and operates three to promote the development of the refineries in Malaysia, two in Melaka and country’s industrial base, especially the another in Kertih. The PETRONAS refining plastics and chemical based component portfolio is also complemented by its manufacturing industry. The Company’s refining presence in Africa through its consolidated petrochemical business 80% owned subsidiary, Engen Petroleum under the PETRONAS Chemicals Limited, a leading African refining and Group Berhad is the largest integrated marketing company which owns and petrochemical producer in Malaysia and operates a refinery in Durban, South among the largest in South East Asia. Africa. PETRONAS’ robust development of its In the Malaysian market, PETRONAS downstream portfolio is expected to Dagangan Berhad manages all domestic further enhance Malaysia’s economic, marketing and retailing activities for a wide industrial and knowledge base. In the range of petroleum products. PETRONAS long-term, this augurs well to support also operates service stations in various Malaysia’s growth agenda and the international markets such as South Company’s integrated plan to become a Africa and Sudan. PETRONAS Lubricants key downstream player in the region. International Sdn Bhd (PLI) is the global

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 7 Key Sustainability Indicators

2012 PE2011* 2011 PETRONAS 2012 PE2011* 2011 Domestic Lost Time Injury 0.39 0.32 0.40 Greenhouse Gas 43.99 31.48 40.52 million tCO e million tCO e million tCO e Frequency Emissions 2 2 2

Refer to page 21 Refer to page 27 2012 PE2011* 2011 2012 PE2011* 2011 Percentage of Fatal Accident 3.91 2.86 2.58 Women 27% 27% 27% Rate Employees

Refer to page 21 Refer to page 34 2012 PE2011* 2011 2012 PE2011* 2011 Dividend Payment Loss of Primary 33 23 38 to the Malaysian 28 30 30 Containment Incidents Incidents Incidents RM billion RM billion RM billion Government Refer to page 21

* Note: PE2011 covers a period of nine months from 1 April 2011 to 31 December 2011. 2011 covers a period of 12 months from 1 April 2010 to 31 March 2011.

Five-Year Group Financial Highlights

PETRONAS’ KEY FINANCIAL INDICATORS In RM billion FY2012 +/-(%) CY2011* PE2011** FY2011*** FY2010 FY2009

Revenue 291.0 0.9% 288.5 222.8 241.2 210.8 264.2 EBITDA 119.9 -2.5% 123.0 95.7 107.9 83.3 105.7 Profit Before Taxation 89.1 -14.2% 103.8 83.0 90.5 67.3 89.1 Net Profit Attributable to PETRONAS Shareholders 49.4 -17.3% 59.7 49.1 54.8 40.3 52.5 Total Assets 488.3 2.8% 475.1 475.1 436.3 410.9 389.8 Equity Attributable to PETRONAS Shareholders 303.8 5.9% 286.9 286.9 262.3 242.9 232.1

PETRONAS’ Key Financial Ratio FY2012 PE2011 FY2011 FY2010 FY2009

Return on Revenue 30.6% 37.1% 37.5% 31.9% 33.7% Return on Total Assets 18.2% 23.0% 20.7% 16.4% 23.0% Return on Average Capital Employed 17.2% 21.9% 17.6% 15.9% 22.0% Debt/Assets Ratio 0.09x 0.11x 0.11x 0.13x 0.11x Gearing Ratio 12.2% 15.5% 15.4% 17.6% 15.9% Dividend Payout Ratio 55.6% 61.3% 54.7% 74.4% 57.1% Overall Resource Replenishment Ratio (ORRR)**** 2.0x 1.7x 2.5x 1.1x 1.8x

* Calendar Year (CY) 2011 - unaudited twelve-month period from 1 January 2011 to 31 December 2011. Included for comparative purpose. ** Audited nine-month period from 1 April 2011 to 31 December 2011. Total Assets and Equity Attributable to PETRONAS Shareholders have been restated due to adoption of Malaysian Financial Reporting Standards (MFRS). Corresponding ratios have also been restated. Ratios were calculated based on annualised figures, where applicable.

*** Certain financial information has been restated due to the adoption of MFRS. Corresponding ratios have also been restated.

**** ORRR FY2012 excludes Progress Energy Resources Corp.

8 PETRONAS SUSTAINABILITY REPORT 2012 TAN SRI DATO’ SHAMSUL AZHAR ABBAS President & Group CEO

I am delighted to disclose PETRONAS’ An External Hindsight Sustainability Report which highlights In 2012, the global financial recession deepened social disparity as businesses our sustainability focus and performance continued to grapple for recovery. The geopolitical unrests in natural resource in the Financial Year ending 2012. We rich countries resulted in operational disruptions and heightened security embarked on this journey in 2005 risks. Measures such as tightening of international legislation inadvertently following the launch of PETRONAS’ suppressed business growth. The expanding world population whereas Corporate Sustainability Framework. implies that demand for raw materials and energy will rise in tandem. For Then on, we strived to gradually progress us, this translated into a higher quest for hydrocarbon resources and our sustainability practices Groupwide investments in cleaner technologies. Namely, to dutifully and responsibly in accordance with globally accepted revitalise production rates. industry best practices.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 9 While it was a challenging year, we scrutinised our Retrospective View sustainability performance in various business aspects on Defying the Odds As a responsible and versatile energy with gap closure activities following suit. A key highlight multinational, PETRONAS endeavors was working towards identifying carbon and water to ensure long term commercial viability of hydrocarbon resources. The commitments for PETRONAS. complexities, if strategically managed, present opportunities that prolong business growth. Our second lease Consequential of life thus entailed us to venture into newer business fronts. This Realities included foraying into unconventional The increasing inter-dependencies resources such as shale gas in Canada among the financial, human, natural, as well as developing deep-water social and technological elements and marginal fields in Malaysia, whilst call for more pragmatic and ingenious implementing techniques such as solutions. Addressing this complex Enhanced Oil Recovery (EOR), where matrix in a time when energy feasible. PETRONAS’ other significant security is fundamental for sustained undertakings in the year included socioeconomic prosperity is a tough large petrochemical investments; the balancing act. Refinery and Petrochemicals Integrated Development (RAPID) project and Low hanging fruits are replaced Sabah Ammonia Urea (SAMUR), by hydrocarbon resources that including construction of the Sabah are technically challenging and Oil and Gas Terminal in addition to geologically complex. Monetising Malaysia’s first regasification terminal such resources requires operational as well as two Floating Liquefied competence and a foresight of future Natural Gas projects. trends affecting the industry. Leading on is talent crunch with energy players In the Sustainability Report for period competing for skilled personnel. ending 2011, I expressed PETRONAS’ motive to strengthen our sustainability In a nutshell, these issues facing the governance, likewise footprint global energy industry are of equal management, namely in the areas of concern to us. As a commercial entity, greenhouse gas emissions and fresh PETRONAS is committed to maximise water conservation. Echoing this focus, shareholder value by pursuing in this document, we talked about operational sustainability that balances the roll-out of the HSE Mandatory environmental and societal well-being. Control Framework across the Group. Supporting the PETRONAS Corporate Enhancement Programme, the period under review also saw enforcement of the revised PETRONAS Code of Conduct and Business Ethics as well as Policies such as No Gift and Whistleblowing to achieve the highest standards of integrity in the conduct of our businesses and operations.

While it was challenging year, we scrutinised our sustainability performance in various business aspects with gap closure activities following suit.

10 PETRONAS SUSTAINABILITY REPORT 2012 We acknowledge that in attaining The Journey the desired results to champion our sustainable development agenda, we Continues still have much left to do. As such, a The next chapter of growth will be key step for us was to identify strategic tougher, but exciting as the energy carbon and water commitments for sector faces greater pressure to fulfill PETRONAS, among others. the incredible demand for hydrocarbon Our intent for commercial resources. viability is a prerequisite Addressing the issue of aging facilities and operational efficiency, process Embodying the spirit of reimagining for sustained business safety measures were monitored and energy™, we are determined to push improved to intensify asset integrity, our performance boundaries to growth. Nevertheless, infrastructure maintenance and continuously upscale our sustainability we strive to heed reservoir management. practices. expectations and needs What we do and how we do it is This includes to reduce flaring at important to us. We choose to shape all facilities where operationally of host governments, our future by developing and deploying and economically feasible, as well local communities and technologies, among others. Aligned as designing new facilities for Zero to this focus, we established an E&P continuous flaring. our business partners Technology Centre to instutionalise capabilities in EOR and high carbon Simultaneously, we aim for better at large. Among our dioxide management technologies. stakeholder inclusiveness and major stakeholders, cooperation to remain a competitive and reliable business partner. As such, our personnel, are our In the Quest for to improve our Sustainability Reporting Excellence through enhanced clarity in addressing strongest pillars of support We believe that in today’s highly concerns of our various stakeholders. for whom we strive to interconnected society, HSE and Sustainable operations are no longer At PETRONAS, we are determined to provide an enriching ticket at play; but are passport to exist. take control of our destiny, and in that, working experience. striving for excellence on all fronts. Undoubtedly, the leadership and guidance of the Corporate Thank You. Sustainability Council is vital in fortifying our business practices on all fronts.

Our intent for commercial viability is a prerequisite for sustained business growth. Nevertheless, we strive to heed expectations and needs of host governments, local communities and our business partners at large. Among TAN SRI DATO’ SHAMSUL AZHAR ABBAS our major stakeholders, our personnel, President and Group CEO are our strongest pillars of support for whom we strive to provide an enriching working experience.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 11 ABOUT THIS REPORT

PETRONAS has been reporting Stakeholders and Materiality voluntarily since 2007, and this report As a global Company, PETRONAS’ represents an ongoing commitment various stakeholders include host to conduct our business in a safe, governments, financial institutions, responsible and ethical manner. investors, communities in areas of operations, employees and the media. The content of our report is shaped In 2012, PETRONAS held engagements by the Seven Result Areas of the on Health, Safety and Environment PETRONAS Corporate Sustainability (HSE) as well as related matters of Framework, representing issues mutual interest. This contributed material to our stakeholders and towards the development of improved the Company. It focuses on three policies and guidelines, including core themes; Safety and Health, strengthened working relationships Environment and Society. with stakeholders such as Regulatory authorities. This Report features PETRONAS’ key sustainability initiatives and Stakeholder engagements and performance achieved in the financial feedback channels enabled PETRONAS year ending 2012. It also makes to receive, analyse and address reference to initiatives that began concerns which are reflected in this before or just after the period under Report. This was complemented by review, where applicable. our internal assessment to define material issues and priorities.

Scope and Data Collection The scope of data covers outfits where PETRONAS has operational control in our Businesses of oil and gas production, unless otherwise stated, in Malaysia and abroad. The Company is continually improving our information collection procedure to accurately reflect PETRONAS’ sustainability performance. Our sustainability data is collated through a centralised web- based system.

The PETRONAS Group Sustainability Report for 2012 was prepared in accordance with the International Petroleum Industry Environmental Conservation Association (IPIECA) and the Global Reporting Initiative (GRI) guidelines (GRI G3.1).

12 PETRONAS SUSTAINABILITY REPORT 2012 Contact This Report is accessible on PETRONAS corporate website at www.petronas.com.my. For further comments or queries, please write to us at: [email protected]

PETRONAS Sustainability Reporting Group Sustainable Development Department Group Health, Safety and Environment Division Petroliam Nasional Berhad Level 45, Tower 1, PETRONAS Twin Towers Kuala Lumpur City Centre 50088 Kuala Lumpur Malaysia

Elevating Sustainability Reporting Practices We focus our efforts on strengthening Governance mechanisms Groupwide in the realisation of PETRONAS’ Sustainability Agenda. Relevant measures for improved sustainability performance and enhanced operational sustainability as well as stakeholder stewardship are being identified. Established working groups thoroughly reviewed PETRONAS’ processes and practices in categories material to our stakeholders and the Company. Key focus areas included carbon and water management, as well as product stewardship. Findings and mitigation plans were deliberated at the top level, corresponding to the HSE Mandatory Control Framework and relevant standards which were established and rolled out Groupwide.

In the period under review, we streamlined accounting procedures for better data robustness and baselining. Concurrently, initiated the development of relevant skills and capabilities among our personnel. In this report, we also provide clearer description pertaining to Disclosure on Management Approach for identified aspects from an industry standpoint, embedding internal and external considerations.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 13 SustainabILITY & PETRONAS

Sustainability to PETRONAS Our focus in the short means carrying out our to medium term is to business in a socially strengthen PETRONAS’ responsible and holistic operational excellence by: manner. This is to ensure • Managing carbon continued growth as well emissions in upstream as success for the benefit operations and of present and future promoting efficient use generations where we of energy in downstream operate. plants. Designing new facilities for zero PETRONAS is committed continuous venting and to strengthening our flaring. sustainability agenda in • Encouraging prudent line with industry and use of water in our stakeholder expectations. operations. Integrating We embrace responsible the concept of 3R management and (Reduce, Reuse and operational practices, Recycle) in the model of policies and procedures new capital projects. that complement as well • Strengthening product as accelerate business stewardship practices in performance and delivery. the Company. Essentially, this is to create business value by effectively managing risks.

14 PETRONAS SUSTAINABILITY REPORT 2012 PETRONAS Corporate Sustainability Framework We focus on the following seven key areas:

Shareholder Sustaining the Company’s profitability through value creation, Value efficient extraction and manufacturing processes. Natural Promoting efficient use of hydrocarbons and water, and supporting Resource Use the use of renewable energy. Climate Change Limiting emissions of greenhouse gases into the atmosphere. Ensuring projects and operations do not have significant effect on Biodiversity the diversity of animals and plants. Health, Safety & Preventing and eliminating injuries, health hazards and damage to Environment property and communities, including conserving the environment. Product Ensuring that products conform to quality and HSE standards Stewardship throughout the product lifecycle and meet the needs of society. Safeguarding human rights within our sphere of influence, contributing to community needs, investing in training and Societal Needs education, promoting arts and sports and conducting our business in a transparent manner.

Collectively Promoting Industry We also support events to encourage Growth capability and capacity development of the PETRONAS is a member of several industry oil and gas industry. In 2012, PETRONAS associations that collectively deliberate on hosted the 25th World Gas Conference best practices and experiences in response (WGC) in Kuala Lumpur, Malaysia, themed to business needs. This includes the Gas: Sustaining Future Global Growth. Our ASEAN Council on Petroleum (ASCOPE), participation also extended to support the International Gas Union (IGU), International inaugural WGC Youth Conference. Petroleum Industry Environmental Conservation Association (IPIECA), In addition, we co-sponsored the 9th Malaysian Gas Union (MGA), Malaysia Oil International Occupational Hygiene & Gas Services Council (MOGSC) and Association (IOHA) Conference themed Petroleum Industry of Malaysia Mutual Growing the Seeds of Occupational Hygiene Aid Group (PIMMAG). Furthermore, we which was held in Malaysia. are a Subscribing Member of the Oil Spill Response Limited (OSRL).

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 15 Sustainability Leadership

In 2012, PETRONAS fortified our governance practices across the management and operational fronts.

PETRONAS’ senior management personnel The diverse business representation of through relevant Councils guide and closely PETRONAS’ senior leadership in the HSE monitor the implementation of Sustainable Executive Council and CSC enable insightful Development (SD) oriented policies and and in-depth discourses. This extends to framework in the Company. advising on recommended SD strategies and identifying potential opportunities for The involvement of PETRONAS’ top business growth locally, regionally and management is a critical factor in driving the internationally. The support and commitment desired implementation of relevant sustainability of top management also raises the bar for our skewed initiatives Groupwide. employees and business alliances to uphold HSE and SD excellence in all that we do. The leadership, direction as well as oversight of the Health, Safety and Environmental (HSE) Executive Council and PETRONAS’ Corporate Sustainability Council (CSC) has elevated the standard of SD in PETRONAS.

16 PETRONAS SUSTAINABILITY REPORT 2012 HSE Executive Council Chaired by PETRONAS President/Group Chief Executive Officer (CEO), the Executive PRESIDENT/GROUP Council provides leadership on HSE CEO PETRONAS governance and approves strategies as well as initiatives for Groupwide implementation. The Council meets at least twice a year and it is supported by the Group HSE (GHSE) Division. SECRETARIAT Group Health, Safety & Environment Division

EVP COO & VP EVP EVP PRESIDENT/CEO MD/CEO Exploration & EVP Technology & Gas & Power Finance MISC Bhd KLCC (Holding) Production Downstream Engineering

Corporate Sustainability PETRONAS Council EXCO Chaired by the Executive Vice President (EVP) of Exploration and Production, CHAIRMAN the Council meets every quarterly and is represented by the Head of respective EVP Exploration & businesses. The Council serves as a Production SECRETARIAT governance and deliberation platform to GROUP SUSTAINABLE spearhead, operationalise and monitor DEVELOPMENT sustainability strategies. The CSC is DEPARTMENT supported by the Group Sustainable Group Health, Safety & DEPUTY CHAIRMAN Environment Division Development Department. SENIOR GENERAL MANAGER Group Corporate Affairs Division

MEMBERS

SENIOR GENERAL VP VP MANAGER HEAD VP Production, VP Production, VP VP Petroleum Group Health, Infrastructure Malaysia, Corporate International, Technology & Downstream Operations Safety and & Utilities, PETRONAS Strategic PETRONAS Engineering Operations Management, Environment Gas & Power Carigali Planning Carigali Petroleum Division Sdn Bhd Sdn Bhd Management Unit

Governance in HSE In 2012, frequent engagement Our HSE policy further demonstrates Mechanisms were put in place to sessions were held to spur better our commitment to HSE excellence focus on strengthening operational understanding in driving the successful in all our business activities where we measures and risk management implementation of the HSE MCF operate. practices Groupwide. The roll out of framework across the Company. This the HSE Mandatory Control Framework in turn enabled proactive identification (MCF) was vital to enhance systematic and execution of effective control implementation and assurance of plans. HSE practices throughout PETRONAS’ operations.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 17 Safety & Health

In ensuring safety and health at the workplace, PETRONAS stipulates stringent requirements in our operations and projects to reduce and address potential risks. Safeguarding our employees, stakeholders and assets is imperative in the continuous pursuit of creating tangible and intangible business value. Our business and operational decision making focuses on: • Process Safety • Occupational Health & Industrial Hygiene • Product Stewardship

18 PETRONAS SUSTAINABILITY REPORT 2012 HSE and Technical The i-AIR system which provides The P-IPF is an engineering solution Governance holistic assessment on Technical that ensures that our facilities’ Our efforts strive to continuously Integrity of assets was developed to automatic protective functions are strengthen technical and operational manage our upstream facilities more correctly designed, operated and integrity in identified risk areas. These effectively. Intervention programmes maintained to prevent excursions include Capability Building in Health, are being established and deployed to beyond safe operating limits. The P-IPF Safety and Environment (HSE), Process assure the integrity of these assets. is being applied across the Upstream Safety and HSE Controls in projects. and Downstream businesses’ existing The P-RBI™ software for plant facilities as well as in new projects The implementation of the PETRONAS maintenance and inspection was such as the PETRONAS Floating HSE Mandatory Control Framework rolled out at domestic upstream and LNG 1 (PFLNG1), PFLNG2 and Sabah (MCF) in 2011 fortifies governance on downstream facilities, and will be Ammonia Urea Project (SAMUR). safety and health in the Company. In implemented at our international the period under review, our Operating facilities. A significant highlight is the HSE Controls in Projects Units undertook gap assessment introduction of an online approval PETRONAS published a new technical activities, which is scheduled for module of PRBI™ for the Department standard on Project HSE Management. completion in 2015. of Safety and Health (DOSH) in It outlines the mandatory requirements Malaysia. This enables virtual approval to safely manage HSE risks throughout Enforcement of PETRONAS’ Zero and issuance of certificate of fitness the lifecycle of a project. Assurance Tolerance (ZeTo) Rules was also (CF) for DOSH-registered equipment exercises have been conducted at tightened to ensure all activities are at our Downstream plants. The online different stages of projects to identify carried out safely always, with a strong module, which is a key element of and address gaps through relevant emphasis on high risk tasks. In 2012, DOSH’s Specific Scheme of Inspection interventions. Projects leveraging on we enhanced the implementation of in Malaysia, shortens the CF approval this standard include Sabah Oil and Gas ZeTo Rules through the development process from six months to several Terminal (SOGT), SAMUR as well as the of an interactive learning courseware weeks. The PRBI™ was also adopted Refinery and Petrochemical Integrated as well as a smartphone application. In in developing the Offshore Self Development (RAPID) Project. addition, an electronic Permit to Work Regulation (OSR) programme. The (e-PTW) system has been implemented OSR would eventually allow DOSH to at the PETRONAS LNG Complex in provide surveillance of equipment at Bintulu, Sarawak, Malaysia. our offshore facilities in Malaysia.

PETRONAS developed several other tools to improve the management and implementation of safety measures at our facilities. These include an Independent Asset Integrity Review (i-AIR); PETRONAS Risk-Based Inspection (P-RBI™) and PETRONAS Instrumented Protective Function (P-IPF).

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 19 PROCESS SAFETY Regular management safety Other efforts included Downstream Technical governance is PETRONAS’ walkabouts has proactively identified Business’ Felt Leadership and priority in managing major hazards and addressed HSE concerns in the Process Safety workshops which associated with our business and day-to-day working environment, are held since 2011 to promote operational activities. Process safety across the Exploration and Production ownership and accountability at all leadership at all levels is critical to (E&P), Gas and Power (G&P), as well as levels. Furthermore, PCG’s Strive for ensure that business operations and Downstream Businesses. Zero campaign initiated since 2011 activities are carried out safely and reinforces efforts aimed at shaping a consistently. Safety Stand Down was implemented safety culture and mindset that strives to fortify operational discipline and for zero incidents at all times. Driving Process Safety promote a proactive learning culture Leadership & Culture in PETRONAS. It involves immediate Similar Process Safety efforts were The ‘Process Safety Leadership Field actions to resolve safety issues and also rolled out at our international Guide’ was developed for improving timely sharing of lessons learnt post operations. For example, in Myanmar, a site engagement and inspection an incident, within a period of two Process Safety Management awareness activities to nurture a desired HSE working days. PETRONAS Chemicals session was conducted to raise culture and mindset in the Company. Group Berhad (PCG) has initiated this awareness among staff. through its Safety Pause programme. In addition, leaflets were produced on the following: • Process Safety Information - Outlines requirements on process safety information in phases such as design, construction, exploration and drilling, commissioning and start-up, operations, maintenance as well as decommissioning and abandonment. • Management of Change - Identifies and evaluates potential risks, introduced by an intended change to people, environment, assets and Company reputation. • Operating Procedures - Defines desired actions and limits in operating our facilities. • Mechanical Integrity - Ensures risks arising from accidental release of highly hazardous chemicals and energy is prevented or minimised through testing, inspection, maintenance and operation programmes, as well as procedures.

20 PETRONAS SUSTAINABILITY REPORT 2012 Safety & Health Performance Fatal Accident Rate LTIF and TRCF for the Group Regrettably in 2012, we recorded 12 Reportable Fatalities per 100 million man No of cases per one million man hours fatalities in project construction and hours fire incidents. PETRONAS continues 0.39 0.68 to strengthen our HSE management 12 3.91 12 controls and crisis management 0.34 0.81 practices. CY11 3.32 CY11 PE11* 2.86 PE11* 0.32 1 0.4 0.78 11 2.58 11

0.31 0.68 10 3.36 10

0.44 0.88 09 3.75 09

LTIF TRCF * Note: PE2011 covers a period of nine months from 1 April 2011 to 31 December 2011. 2011 covers a period of 12 months from 1 April 2010 to 31 March 2011.

Major LOPCs and Fire incidents for the Group 09 10 11 *PE11 12

Loss of Primary Containment 37 46 38 23 33 (LOPCs) Fires 5 12 7 6 7

Building Capability Our Downstream Business also In addition, a workshop on Training and development programmes conducted a series of leadership ‘Recognising Catastrophic Incident were implemented across PETRONAS training programmes that encourage a Warning Signs in the Process Industries’ to equip our personnel with the safety culture and mindset. The intent was organised for Senior Plant required levels of competency and was to provide clearer understanding Management to promote a more knowledge to perform their respective and practical guidance on desired proactive approach in managing functions. Namely, in the areas of safety as well as leadership behaviours process safety. process, risk management, operations, through programmes, such as: maintenance, safety practices and • Felt leadership for Plant Leadership HSE elements are also incorporated crisis management. These include the Team (PLT)/Managers in the training modules for new Hazard and Operability Study (HAZOP) • Process Safety Leadership for PLT/ entrants during their early stages of Leader Certification Programme and Managers employment. Instrumented Protective Systems • Process Safety Leadership for First Study Facilitator Certification Line Supervisors and Front Liners Programme, among others. Overall, the implementation of these efforts These initiatives were implemented at nurtured better understanding among several Downstream operating units in our personnel on process safety Malaysia, as well as the Engen Refinery requirements to prevent potential in Durban, South Africa. incidents.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 21 Emergency Preparedness & OCCUPATIONAL HEALTH & INDUSTRIAL HYGIENE Response We have put in place stringent occupational health and safety processes, PETRONAS engaged with Government guidelines and requirements which are in line with internationally accepted authorities including the National standards. We also took appropriate actions to ensure optimum fitness levels of Security Council of Malaysia to our personnel working in different businesses and facilities. enhance emergency preparedness and response for land as well as sea based Addressing Health Risks oil spill exercises, among others. We embarked on efforts to intensify and elevate our employees’ awareness on the importance of health, fitness and well-being. In East Malaysia, PETRONAS Sabah Operations (SBO) conducted a Shoreline Clean-Up Technique (SCAT) Health Risk A structured and consistent assessment of Health Assessment Workshop for the Sabah Assessment (HRA) Risks at the Workplace had identified chemicals, Gas Terminal to enhance capabilities ergonomics and noise as key health risks. Targeted in responding to oil spill emergencies. interventions were developed to address these The session was facilitated by risks; Hearing Conservation, Management of Petroleum Industry of Malaysia Mutual Hazardous Chemicals at the workplace and Indoor Aid Group (PIMMAG) and PETRONAS. Air Quality Assessment. Those who attended the event included SBO’s Emergency Response Fitness to Work Initiatives implemented were Fitness assessments Team (ERT) members and staff, with for specific workgroups such as the Emergency participation of representatives from Response Team (ERT) personnel across our Sabah’s Environment Protection businesses. Deparment and Department of Substance Misuse We focused on reducing risks of accident/injury/ Environment (DOE), respectively. illness caused by impaired performance due to potential misuse of drugs and alcohol. A similar SCAT programme was also conducted by our Sarawak Operations Health Promotions We continued efforts to elevate staff’s personal (SKO). The State’s DOE representatives, health and fitness levels to control the prevalence including members of the Natural of lifestyle illness such as hypertension, diabetes Resources and Environment Board, mellitus and high cholesterol. This included talks alongside individuals from the local and workshops on topics of concern such as community and SKO’s ERT personnel healthy lifestyle, stress management and fitness participated in this effort. enhancement programmes.

At our Downstream Business, Employee health and fitness assessments were also PETRONAS Dagangan Berhad (PDB), held across the businesses. held a total of six exercises to assess PETRONAS also aligned our health practices to and improve the readiness of its ERT international standards for effectively managing in managing crisis relating to Liquefied health issues such as HIV/AIDS management and Petroluem Gas operations. prevention.

22 PETRONAS SUSTAINABILITY REPORT 2012 PRODUCT STEWARDSHIP PETRONAS continuously identifies, assesses, controls and communicates HSE risks throughout our products’ life cycle. The development of an internal product stewardship framework allows for better compliance with internationally accepted regulatory requirements. We remain focused to minimise product risks by reviewing product performance across its value chain. Relevant mitigation plans were implemented to maintain product safety while concurrently managing environmental impacts.

Product Risk Assessment Product Safety Product Safety We enhanced efforts aimed at The PETRONAS Safety Datasheet Communication addressing, adopting and implementing (SDS) Guidelines were strengthened Our Downstream Business, through Product Stewardship activities in by streamlining internal processes and PCG, held engagement sessions with our Downstream Business, namely, procedures on managing chemical internal employees, key customers petrochemicals. Preliminary product products. The SDS was revised for and end users to raise awareness on risk assessments were conducted to greater compliance with the Globally product handling and application to identify and prioritise products based Harmonised System of Classification ensure adherence to safety protocols. on its varying compositions. This and Labeling Chemicals (GHS). We resulted in further evaluations of highly also synergised internal operational Capability Building complex products. mechanisms for greater consistency, We boosted our personnel’s expertise effectiveness and efficiency. Our in Product Life Cycle Assessment product stewardship and SDS review to elevate the competitiveness and teams comprising Industrial Hygiene, knowledge of PETRONAS’ product Occupational HSE and Toxicology stewards. This aimed to review and experts collectively deliberated to improve internal practices to reduce improve product safety levels. product risks.

External Certification In the period under review, our polymers and chemicals products were certified HALAL by Malaysia’s Department of Islamic Development. This signifies compliance by our product offerings to Islamic regulations.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 23 Environment

PETRONAS strives to protect the environment and use natural resources more effectively. We had strengthened our focus in 2012 to strategically pursue footprint reduction through better operational excellence Groupwide, at plants and other facilities which we operate. Our areas of interest included: • Climate Change • Water • Biodiversity • Waste Minimisation

24 PETRONAS SUSTAINABILITY REPORT 2012 Strengthening Governance We also enhanced water specific- and Strategy initiatives following the issuance of a In the period under review, we put PTS on Water Conservation Guidelines in place measures to strengthen for Onshore Facilities. Efforts were environmental governance across our centered on the development of various businesses. site specific water conservation programme for existing operations and Extensive deliberation sessions were new projects. This included improving also undertaken with the Corporate water management practices for Sustainability Council (CSC) to on-shore sites. identify and endorse strategic carbon commitments for the Group in areas In the area of waste minimisation, we such as flaring, venting, energy shifted our focus from conventional efficiency and water conservation end-of-pipe approach to front-end efforts. management at planning and design stages. We revised the PETRONAS Technical Standards (PTS) on Greenhouse Gas (GHG) Monitoring, Reporting and Verification Standard to enhance data quality and reliability.

The PTS redefined organisational and operational boundaries according to IPIECA’s GHG Accounting & Reporting Guidelines. Furthermore, organisational changes were introduced to govern carbon management practices and climate change mitigation activities.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 25 CLIMATE CHANGE Flare Reduction and Recovery Improving Energy Efficiency We strive to lower carbon dioxide in Gas & Power Business Operations at selected Centralised

(CO2) emissions across our various In 2012, the PETRONAS LNG Utility Facilities (CUF) in Peninsular operational facilities. This is achieved Complex in Bintulu, Sarawak, Malaysia Malaysia achieved combined energy by maximising equipment capacity and spearheaded Flare Reduction and savings of 916,562 Gigajoule (GJ). improving reliability as well as energy Recovery initiatives that resulted in efficiency. total flared gas reduction of 109,760 Several efforts were also undertaken at tonnes of carbon dioxide equivalent the PETRONAS Refinery in Melaka and

Enhanced GHG Emission (CO2e), accumulatively since 2010. these achieved total energy savings of Accounting and Reporting 269,955 GJ in the period under review. Mechanism We are also pursuing a Flare Gas We improved the monitoring, reporting Recovery Unit Project at a selected Gas Ban and Control of and verification of GHG emissions Processing Plant to reuse flared gas. Environmental Hazardous in line with IPIECA’s reporting Substance (EHS) standards. The revised accounting Following the implementation of the and tracking methodology aimed for Guideline on EHS, the use of selected better data consistency, reliability and Ozone Depleting Substances (ODS) comprehensiveness in measuring were banned in PETRONAS’ operations. our performance levels throughout These include ODS that were used as PETRONAS. Training sessions were refrigerants, fire retardants, industrial held across the various Operating Units chemicals and propellants. (OPUs) and Business Units (BUs) to create awareness on the streamlined In addition, prudent oversight and data calculation technique. We also management of several Persistent established the GHG and Energy Data Organic Pollutants (POPs) were Management work processes as well mandated under the guidelines to as GHG Reference Manuals for the minimise its use wherever possible. Exploration and Production (E&P), Gas and Power (G&P) and Downstream Businesses, respectively.

Managing CO2 in Upstream Business PETRONAS’ Exploration and Production Technology Centre (EPTC) established in 2011 integrates Research & Development, Field Development Planning and technology deployment

to manage high CO2 gas fields. PETRONAS has also been engaging with relevant Government Authorities to address climate change.

26 PETRONAS SUSTAINABILITY REPORT 2012 GHG Emissions Total (Group) GHG Emissions

In 2012, PETRONAS’ total GHG million tonnes of CO2e emission from operations in Malaysia was 44 million tonnes 12 43.99 of CO2e. PE11* 31.48 We incorporated emissions data from PETRONAS Carigali- 11 40.52 operated blocks (COB) to * Note: PE2011 covers a period of nine months improve reporting on our 10 38.06 from 1 April 2011 to 31 December 2011. footprint for operations outside 2011 covers a period of 12 months Malaysia . Collectively, emissions 09 35.72 from 1 April 2010 to 31. March 2011. from COBs in Myanmar, Mauritania, Turkmenistan and 08 42.60 Vietnam stood at 2.56 million tonnes of CO2e. E&P Business Emissions Gas & Power Business Emissions

million tonnes of CO2e million tonnes of CO2e

12 15.05 12 16.97

PE11* 10.26 PE11* 11.56

11 13.25 11 14.70

10 12.68 10 14.61

09 10.80 09 14.11

08 15.03 08 14.58

Downstream Business Emissions MISC Bhd

million tonnes of CO2e million tonnes of CO2e

12 8.05 12 3.92

PE11* 4.89 PE11* 4.77

11 7.88 11 4.69

10 6.92 10 3.85

09 6.74 09 4.07

08 6.79 08 6.20

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 27 WATER Embedding Water BIODIVERSITY Fresh water is extensively utilised Conservation Practices in PETRONAS recognises that conserving across the oil and gas value chain. At New Projects biodiversity is a key issue globally. We PETRONAS, we constantly monitor Efforts were identified to reduce support and partner with others on water usage in our business activities. water consumption and wastewater initiatives with a long term objective This is to reduce potential economic generation from the Refinery to conserve the natural heritage for and social risks that could result in and Petrochemical Integrated the benefit of present and future water scarcity in high risk areas by Development (RAPID) Project using generations. identifying conservation and recycling the 3R concept of Reduce, Reuse and opportunities. Recycle. These efforts aim to address Mangrove Conservation water sustainability risks at the early The ecoCare programme is Improved Water Accounting stages of project implementation and PETRONAS Chemicals Group Berhad’s Methodology throughout its lifecycle. (PCG) long standing and signature In the period under review, initiative carried out together with PETRONAS streamlined our water We pursued proactive assessments the Malaysian Nature Society (MNS), accounting methodology in line with and identification of relevant alongside involvement from the local internationally accepted standards. action plans that include necessary community. It focuses on reforestation The revised calculation technique processes, technology and and rehabilitation of ecologically incorporated information on fresh infrastructure into project design. This sensitive mangrove habitat along the water withdrawn, including the is to uphold elements outlined in the Kertih River, which is located closely percentage of fresh water recycled PETRONAS Project HSE Management. to PCG’s facilities in Terengganu, and reused in our operations. In Malaysia. Since its inception in 2005, promoting effective utilisation of Fresh Water Withdrawal more than 11,000 square metres of water, PETRONAS also conducted In 2012, total fresh water withdrawn in mangrove forest have been replanted an international water availability risk our operations was approximately 170 with over 6,600 mangrove seedlings. assessment for selected operations. million m3. The rehabilitated mangrove area Fresh Water Reduction supports a thriving fish population, Total Fresh Water Withdrawal PETRONAS Gas Berhad achieved a by Business which presents local fishermen with two percent reduction in fresh water million cubic meter per year opportunities to generate increased consumption at selected production levels of income. and operational sites. Workshops, 163.37 audits and feasibility studies were An Environmental Education Centre, conducted to assess supply and scheduled for launch at the end of consumption patters. Additionally, Downstream 2013, would be the first of its kind in a reverse osmosis membrane G&P the East Coast of Malaysia to provide E&P improvement initiative was undertaken integrated environmental education at selected CUF plants to improve awareness for the local communities. water recovery and this reduced water It is also expected to open up new job 6.40 consumption by 518,400 million cubic 0.39 opportunities for individuals living in metres (m3). the surrounding area.

Forest Conservation This involved building the Imbak Village Jetty to benefit individuals residing along In June 2011, PETRONAS launched a the river who also use boats as mode conservation partnership with Yayasan of transportation. A Porter and Guide Sabah for the Imbak Canyon Conservation Association was also formed as a means Area. PETRONAS’ contribution of RM6 to provide job opportunities for members million over a three-year period is aimed of the local communities. Relevant to help conserve the unique biodiversity capability building training sessions were in Imbak Canyon while promoting public provided to identified persons. awareness, environmental education and community outreach. In 2012, the Alongside the local authorities and partnership witnessed the establishment universities, PETRONAS also embarked on of Imbak Canyon’s Information Centre an ethno-botanical survey to catalogue for visitors to obtain information on the use of traditional medicine with the conservation efforts of the rich biodiversity aim of preserving the knowledge and species at this Class 1 Forest Reserve. practices of local communities.

28 PETRONAS SUSTAINABILITY REPORT 2012 WASTE MINIMISATION We are striving to strengthen waste minimisation practices at the front-end by enhancing and strengthening our assessment of waste management options in the Environmental Impact Assessment (EIA) as well as in the design and engineering stages.

Waste minimisation practices were rolled out at our various operating units’ (OPUs) facilities in Malaysia since 2010. It resulted in the reduction of hazardous material disposal through efforts that enable reuse, recycle and recovery of waste.

Renewable Energy: Solar Photovoltaic (PV) Technologies In 2012, we officially launched our first solar venture which marked Malaysia’s single largest rooftop solar PV system at Suria KLCC’s shopping mall. The collaborative effort is a 685 kilowatt peak Solar PV system utilising six different technologies. The solar panels produced more than 600 megawatt-hours of solar energy annually and supplied about 30 per cent of Suria KLCC’s power requirements. The clean energy generated from the system mitigates GHG release by

approximately 360 tonnes of CO2 per year.

Subsequently, solar PVs were also installed at our first-of-its-kind twin service stations in Malaysia, namely, PETRONAS Solaris Putra and PETRONAS Solaris Serdang. These stations adopt four key energy efficient features, namely, Solar PV panels, LED light fittings, Energy Management System and rain water harvesting system.

The combined energy generated by these locations amounted to 830 megawatt-hours of solar energy annually. The

clean energy generated also reduces GHG emissions by 500 tonnes of CO2 annually.

The LED lighting provides better illumination at night and reduces electricity consumption. Other key differentiator included a nitrogen tyre inflator, which is an environmental-friendly alternative that helps to increase fuel economy and tyre life.

Simultaneously, we are pursuing a Solar Independent Power Plant (Solar IPP) at Gebeng, Malaysia with an expected capacity of 10.02 megawatt peak is scheduled for completion at the end of 2013. The Solar IPP is estimated to produce about 12 gigawatt-hours of energy annually, which can power up to 4,500 households. The system will contribute to a

reduction of GHG footprint amounting to about 8,000 tonnes of CO2 annually.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 29 Society

PETRONAS places importance on balancing business and societal needs in contributing to the wellbeing of local communities where we operate. This includes channeling the value created through our business activities to spur socioeconomic developments. The strategic growth of our multinational workforce is another area of importance through which we offer distinctiveness in thought, experience and knowledge. We responsibly assess and implement societal efforts in the following areas: • Corporate Governance • Talent Management • Capability Development & Local Content • Community Investments

30 PETRONAS SUSTAINABILITY REPORT 2012 CORPORATE GOVERNANCE TALENT MANAGEMENT PETRONAS is committed to the highest We inculcate and strengthen a high standards of integrity, openness performing culture based on the and accountability throughout our principles of competency, merit and businesses and operations. In the performance. This is to continuously period under review, policies governing develop and ensure the availability of businesses were enhanced in line with a talent pool that is equipped to meet global best practices. We strive to the challenges and needs of the energy conduct our undertakings in an ethical industry. and responsible manner through the following policies, among others: We bolstered our leadership • PETRONAS Code of Conduct and management by classifying talents Business Ethics (CoBE) for business growth. In addition, • Whistleblowing Policy and enhancements were made in the Procedure recruitment process to ensure • Competition Law Compliance talent strength by assessing past Programmes performances, soft skills and leadership • PETRONAS Anti-Bribery potential. and Corruption Compliance Programme Enhanced Promotion Policy This policy aims to support meritocracy For more information on these policies, in all aspects of talent management, please refer to our 2012 Annual Report including in the selection process, available at while supporting employees’ career www.petronas.com development plans. Staff Engagement Compensation and Benefits Engagement sessions were held across the Group to keep staff A new grade structure was SOCIAL PERFORMANCE abreast of PETRONAS’ growth As a responsible multinational, we introduced to reinforce the tenets aspirations. These sessions strive to elevate the standards of our of differentiation, following which, were a platform for staff to societal performance in adherence staff is remunerated based on their have direct and meaningful to internationally accepted standards. specific accountability, capability and interaction with the Company’s In 2012, the PETRONAS Project contribution demonstrated. This new senior leadership team on Health, Safety and Environment (HSE) structure focuses on performance various issues and concerns. Management Standard was enhanced and deliverables instead of job grades, PETRONAS’ President and Group to include components of social hence, nurturing a High Performance Chief Executive Officer cascaded performance at various phases of culture. the Management’s direction for project development and execution, sustainable business operations, for example, cultural heritage, The annual leave entitlement and leave strategies and targets for the indigenous people, labour conditions without pay criteria were enhanced Group at the Company’s annual and ecosystem services. during the period under review. Management Townhall. Similar townhall sessions were also held We also developed guidelines on across the various businesses led Environmental, Social and Health by the respective Executive Vice Impact Assessment (ESHIA) that clearly Presidents, including listed entities outlined measures for embedding such as PETRONAS Chemicals Sustainable Development practices in Group Berhad and PETRONAS PETRONAS. Gas Berhad, to communicate key messages deliberated at the Management Townhall.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 31 CAPABILITY BUILDING We made significant investments The Technical Authority (TA) AND LOCAL CONTENT in staff training programmes, both implementation framework was Our human capital development internally and externally, that focus adopted to ensure the integrity of efforts follows a structured on specific technical as well as PETRONAS’ engineering designs and framework focusing on technical, leadership and management skill operations. leadership and management sets. Internal training programes are programmes, whilst promoting a offered via our learning institutions culture of continuous learning. We such as the PETRONAS Leadership Technical Capability Building aim to nurture staff with the right Centre (PLC) and Institut Petroleum No of appointed staff to date knowledge, skills and capabilities PETRONAS (INSTEP). that encourage career growth. In turn, developing a pool of motivated Technical capability building is TAs 160 and empowered individuals for ongoing in PETRONAS to ensure the TPs 1000 PETRONAS, our partners, host availability of competent personnel nations and communities where we locally and internationally. Our TTSs 114 operate. ongoing structured programmes include: Staff Training and • Accelerated Capability Development Programmes Development (ACD) for junior We continue to leverage on technical executives collaborations with global • Technical Professional Career multinationals for staff exchange and Progression (TPCP) for technical attachment programmes. This allows professionals (TP) for on-the-job training and capability • PETRONAS Competency building efforts focusing on sharing assessment System (PECAS) of best practices and knowledge • Technical Trade Specialist (TTS) exchange.

32 PETRONAS SUSTAINABILITY REPORT 2012 International Workforce Resources The Global Workforce and Leadership Mobility (GWLM) initiative was launched to facilitate international expansion through efficient allocation of manpower resources in areas of our operations. This effort allowed for the roll out of more leadership products at our operational locations abroad.

Local Content Development In Sabah, we facilitated the licensing and registration of over 180 local vendors to support the burgeoning growth of the State’s oil and gas industry. At a session held, local companies enquired and clarified matters on PETRONAS’ licensing and registration process as well as marketing and distribution of fuel and Liquefied Petroleum Gas.

PETRONAS’ upstream and shore development projects in Sabah include the development of Gumusut-Kakap, Kinabalu NAG and Kebabangan fields. Our other undertakings include the Sabah Oil & Gas Terminal (SOGT), Kimanis Petroleum Training Centre Developing Talent in Areas of non-technical positions, including 88 (KTC), Kimanis Power Plant Operations Production Operation Technicians (KPP), Sabah Ammonia Urea The establishment of PETRONAS’ (POT). The Iraqi POTs underwent about (SAMUR) and the Sabah- Garraf operations positively one and a half years of training at PLC Sarawak Gas Pipeline (SSGP) contributed towards socioeconomic and INSTEP in Malaysia. that connects the SOGT growth in Iraq by offering employment to the PETRONAS LNG opportunities to local talents and Furthermore, since 2010, more than Complex in Bintulu, Sarawak. businesses. 260 personnel from the Iraqi Ministry of Oil and South Oil Company received These projects are expected More than 2,800 jobs were allocated training in the areas of leadership, to create spin-off effects in to members of the local communities, management and energy development the areas of construction, of which, over 2,200 jobs were filled in Malaysia. The identified personnel engineering, services, by locals living within the Garraf were also trained on basic English procurement, downstream Operations area. This also included communications, people management manufacturing, logistics and PETRONAS’ local workforce that and personal development. transportation. consisted 135 Iraqis in technical and

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 33 WORKFORCE In 2012, PETRONAS’ total workforce consisted 46,145 employees at both our Total Number of Employees domestic and international operations. This represents an increase of 6.7% compared to 2011. 46,145

Malaysian & Non-Malaysian Employees Above Employees Gender Distribution and Below Age of 35 79% 21% 73% 27% 48% 52% Malaysian Non-Malaysian Male Female Above 35 Below 35

Percentage (%) of Malaysian and Host Country Nationals Number of Staff (HCN) in Selected Countries No of Under Collective Other Employees Bargaining Country HCN Malaysians 10,260 Nationals Agreements in FY2012 Egypt 33.33 66.67 - 24 Indonesia 84.11 14.95 0.93 107 Myanmar 85.52 11.72 2.76 290 Sudan 30.76 30.26 38.16 608 Turkmenistan 77.86 19.39 2.75 691 Malaysia 99.60 - 0.36 36,849

New Hires New Hires 2012 A total of 5,428 new permanent and contract direct hires were recruited in 2012, including by third party agencies, compared to 2,166 in 2011. Malaysians 4,864

Other Nationals 564

Total 5,428

34 PETRONAS SUSTAINABILITY REPORT 2012 COMMUNITY INVESTMENTS Spurring Education In the period under review, 53 primary Empowering individuals with the right Excellence schools participated in this programme knowledge and skills is fundamental for In Malaysia, the Program Bakti benefiting over 3,000 Year 4 to Year realising one’s potential. We choose to Pendidikan PETRONAS (PBPP) is one 6 pupils. Over 1,000 academic and evoke thought creativity that nurtures of our signature educational initiatives fun learning sessions were conducted self-development through education held in partnership with selected at identified schools throughout sponsorships. Similarly, we pursue schools nationwide. Established in Malaysia. Over 700 PETRONAS staff strategic community programmes that 2002, this outreach programme volunteers collectively participated in address the needs of those residing provides education assistance to this programme, alongside professional within our sphere of operations. underprivileged and academically- teachers to provide coaching activities. weak students. PETRONAS Scholarship Programme In 2012, schools adopted under PBPP Every year, PETRONAS provides recorded a 7% improvement in the educational sponsorships to deserving number of borderline students scoring students locally and internationally. 3As to 5As in their UPSR exams. SK In 2012, PETRONAS awarded Wangsa Maju, a PBPP adopted school, scholarships to 318 students, of obtained 100% passes in English, which 79 scholarships were for Mathematics and Science. international universities and 239 scholarships for Malaysian universities. These scholarships covered various disciplines that catered to PETRONAS’ business needs and that of the industry.

In the period under review, 563 students graduated under PETRONAS scholarship programme.

Scholarships Awarded 2012 Recruitment of 2012 PETRONAS Scholars International Universities 25% Recruited by PETRONAS 62.9% Malaysian Universities 75% Recruited by Others 37.1%

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 35 Abroad, in Republic of the Sudan, More than 1000 students also In Mauritania, renovation works of more than 600 students received benefited from the refurbishment primary schools had enabled 400 PETRONAS’ Top 100 Achievers awards works at the Kuajok Secondary School, students to resume classes. Similarly, for exceptional performance in the located in the capital state of Warrap in Mozambique, approximately 300 Sudan Secondary School Certificate in the Republic of South Sudan. School underprivileged children from the Examinations. Additionally, the bags and library books were also Anglican Primary School of Nacala PETRONAS Debate and Quiz Trophy contributed to more than 900 school received assistance in the form of (PDQT) Competition assisted in children at two schools in Juba. In stationaries and books. Whereas in improving public speaking skills of addition, PETRONAS donated a bus to Egypt, PETRONAS sponsored school more than 400 secondary school the University of Juba. fees for over 800 less fortunate students. children and orphans.

PETRONAS STREETSMART Road Safety PROGRAMME Delving into the science behind road safety, the PETRONAS StreetSmart is an interactive travelling exhibition that has touched over one million lives in Malaysia since 2001. This exhibition has travelled to every state in Malaysia, including to remote locations. It had encouraged children and youth to become advocates of road safety by empowering them to influence those within their reach in becoming more respectful, responsible and courteous road users. In 2012, the PETRONAS StreetSmart was held in Petrosains, located at Suria KLCC, Kuala Lumpur from January to June and in Malacca from September – December, reaching out to approximately 180,011 individuals. A variety of additional programs such as PETRONAS StreetSmart Camp, PETRONAS StreetSmart Challenge, PETRONAS StreetSmart Sketch Competition, PETRONAS StreetSmart Visit to School and PETRONAS StreetSmart-Formula One (F1) Event were also held, providing an enriching experience to close than 230,783 visitors, namely, students.

The key highlight of the PETRONAS StreetSmart was the F1 Road Safety workshop held in collaboration with PETRONAS Motorsports during the PETRONAS Malaysian Grand Prix 2012. The session included MERCEDES AMG PETRONAS Formula One Team drivers such as Nico Rosberg. Close to 500 participating students, including adults had the opportunity to meet and gather first hand insights from the internationally renowned drivers on the importance of road safety.

36 PETRONAS SUSTAINABILITY REPORT 2012 Awards & Recognitions

PETRONAS Group was recognised for its accomplishments and continuous pursuit of excellence with numerous awards and recognitions received in 2012.

Royal Society for the Malaysian Society for Prevention of Accidents Occupational Safety and (RoSPA) Awards Health (MSOSH) Awards

RoSPA, which is based in United Kingdom, organises its The MSOSH Awards are presented annually to companies prestigious national award scheme to recognise excellence in Malaysia that have outstanding Occupational Safety in work-related health and safety performance by private and Health (OSH) performance. Identified companies and public sector organisations. The scheme is based on are subjected to stringent document and site verification the assessment of a broad portfolio of evidences about audits from the MSOSH Panel of Auditors in order to be the level of development and performance of an entrant’s considered for the awards. The panel members comprise occupational health and safety management system, and representatives from the Department of Occupational also takes into account the entrant’s reportable accident Safety and Health (DOSH), Social Security Organisation rate and enforcement experience. (SOCSO), National Institute of Occupational Safety and Health (NIOSH), Standards and Industrial Research Sector Awards Institute of Malaysia (SIRIM) Berhad, QAS International and Gold Award Federation of Malaysian Manufacturers (FMM). • PETRONAS Chemicals Ammonia Sdn Bhd • PETRONAS Chemicals Fertiliser Kedah Sdn Bhd Grand Award • BP PETRONAS Acetyls Sdn Bhd Occupational Health & Safety (OHS) • Kertih Terminals Sdn Bhd Oil & Gas Commendation Award • PETRONAS Chemicals Methanol Sdn Bhd • PETRONAS Penapisan (Melaka) Sdn Bhd • PETRONAS Chemicals MTBE Sdn Bhd • PETRONAS Gas Berhad, Export Terminal

Gold Merit • PETRONAS Carigali Sdn Bhd (Sabah Operations), Sabah Gas Terminal (SBGAST) • PETRONAS Carigali Sdn Bhd – Peninsular Malaysia (Terengganu Crude Oil Terminal (TCOT)) • PETRONAS Chemicals Ethylene Sdn Bhd • PETRONAS Gas Berhad – Pusat Operasi Penyaluran Gas & Segamat Regional Office • PETRONAS Penapisan (Melaka) Sdn Bhd

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 37 Gold Class I Silver Award • ASEAN Bintulu Fertilizer Sdn Bhd Process Safety Code • BASF PETRONAS Chemicals Sdn Bhd (BDO Complex) • PETRONAS Chemicals Derivatives Sdn Bhd • PETRONAS Carigali Sdn Bhd • PETRONAS Chemicals Fertilizer Kedah Sdn Bhd – Peninsular Malaysia (Onshore Gas Terminal (OGT)) • PETRONAS Carigali Sdn Bhd (Sabah Operations), Distribution Code Labuan Gas Terminal (LGAST) • PETRONAS Chemicals LDPE Sdn Bhd • PETRONAS Chemicals Ammonia Sdn Bhd • PETRONAS Chemicals Derivatives Sdn Bhd Product Stewardship • PETRONAS Gas Berhad – Kuantan Regional Office • PETRONAS Chemicals LDPE Sdn Bhd • PETRONAS Gas Berhad – Seremban Regional Office • PETRONAS Gas Berhad – Shah Alam Regional Office Community Awareness and Emergency Response Code • PETRONAS Chemicals Polypropylene Sdn Bhd • PETRONAS Penapisan (Melaka) Sdn Bhd

Pollution Prevention Code Gold Class II • PETRONAS Penapisan (Melaka) Sdn Bhd • PETRONAS Chemicals Polypropylene Sdn Bhd Employee Health and Safety Code • PETRONAS Penapisan (Melaka) Sdn Bhd

Merit Award Community Awareness and Emergency Response Code Chemical Industries • PETRONAS Chemicals Ammonia Sdn Bhd Council of Malaysia • PETRONAS Chemicals Derivatives Sdn Bhd • PETRONAS Chemicals LDPE Sdn Bhd (CICM) Responsible Care Awards 2011/12 Pollution Prevention Code • PETRONAS Chemicals Aromatics Sdn Bhd • PETRONAS Chemicals Derivatives Sdn Bhd Responsible Care is one of CICM’s flagship activities, launched • PETRONAS Chemicals LDPE Sdn Bhd by the Council in 1994. More than 100 signatories or chemical • PETRONAS Penapisan (Terengganu) Sdn Bhd companies have pledged their commitment to Responsible Care. The CICM Responsible Care Committee and its Regional Process Safety Code Committees, namely the Central, Eastern, Northern and • PETRONAS Chemicals Ammonia Sdn Bhd Southern Zone Committees, have been established to further • PETRONAS Chemicals LDPE Sdn Bhd enhance the promotion and implementation of Responsible • PETRONAS Penapisan (Melaka) Sdn Bhd Care among the chemical industry players in Malaysia. Employee Health and Safety Code Category – Petrochemicals • PETRONAS Chemicals Ammonia Sdn Bhd Gold Award • PETRONAS Chemicals Derivatives Sdn Bhd Community Awareness and Emergency Response Code • PETRONAS Chemicals LDPE Sdn Bhd • PETRONAS Chemicals Fertilizer Kedah Sdn Bhd

Employee Health and Safety Code • PETRONAS Chemicals Fertilizer Kedah Sdn Bhd

38 PETRONAS SUSTAINABILITY REPORT 2012 National Council for Sarawak Chief Minister’s Occupational Safety Environmental Award (CMEA) and Health (NCOSH) Excellence Award

The National Occupational Safety and Health Sarawak Chief Minister’s Environmental Award (CMEA) Excellence Award is an initiative by the National The CMEA is presented to exemplary organisations that Council of Occupational Safety and Health, Ministry have made tremendous effort to improve environmental of Human Resources. It is intended to give credit and performances in its organisation with a view to boosting acknowledgement to organisations, employers and sustainable development in the state. It is jointly organised employees in various sectors in the industry that have by the Natural Resources and Environment Board (NREB) achieved excellence in managing safety and health systems Sarawak and the Sarawak Chamber of Commerce and in their workplace. Industry. The Award is one of the incentives given to business and industries to encourage stewardship in Petroleum/Gas/Chemicals Category environmental protection and management in the state. • PETRONAS Penapisan (Melaka) Sdn Bhd It also aims at providing organisations with the opportunity of an independent evaluation for their environmental Gas Facility Category commitment. The award is also organised to stimulate • PETRONAS Gas Berhad Gurun Regional Operations business and industry initiatives in assuming a proactive Office role in environmental protection throughout the state, by taking the winning participants of this award as their Storage Category example. • Kertih Terminals Sdn Bhd Large Enterprise: Oil and Gas British Safety Council Gold • Asean Bintulu Fertilizer Sdn. Bhd. International Safety Awards • PETRONAS Carigali Sdn. Bhd.

The British Safety Council International Safety Awards Small Enterprise: Gas/Petrol Station recognise commitment to good health and safety • PETRONAS Service Station Samarahan Expressway management. Only companies that achieve accident incidence rates, which are better than the industry average for their sector, are eligible to apply. Winners must also demonstrate board level commitment to health and safety as well as details of significant health and safety advances for the qualifying year. The British Safety Council has led the way in promoting health, safety and environmental best practice in society for more than 50 years.

Occupational Health & Safety (OHS) Oil & Gas Merit Award • PETRONAS Penapisan (Melaka) Sdn Bhd

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 39 Etylene Institut Kimia Malaysia • PETRONAS Chemicals Group Laboratory Excellence (Centralized Laboratory Services) Award Polyethylene • PETRONAS Chemicals Group (Centralized Laboratory Services)

Institut Kimia Malaysia (IKM) Laboratory Excellence Methanol Award is organised by Malaysian Institute of Chemistry, a • PETRONAS Chemicals Methanol Sdn Bhd professional body which regulates the Chemists Act 1975. It was designed to ensure the laboratory’s commitment Environmental Samples to achieve excellence in providing quality and competent • PETRONAS Chemicals Methanol Sdn Bhd testing services pertaining to local legislation especially in the fields of health, safety and the environment. Polypropylene • PETRONAS Chemicals MTBE (M) Sdn Bhd / In addition to the needs of analytical laboratories to operate Polypropylene (M) Sdn Bhd a quality system according to the requirements as stipulated in MS ISO/IEC 17025, the award also requires laboratories to operate with safety and health features in the workplace. MTBE and Propylene • PETRONAS Chemicals MTBE (M) Sdn Bhd / Polypropylene (M) Sdn Bhd Area of Testing Gas Catalyst • ASEAN Bintulu Fertilizer Sdn Bhd • PETRONAS Chemicals MTBE (M) Sdn Bhd / • PETRONAS Chemicals Methanol Sdn Bhd Polypropylene (M) Sdn Bhd • PETRONAS Gas Berhad (Laboratory GPPA) • PETRONAS Gas Berhad (Laboratory GPPB) Petroleum • PETRONAS Penapisan (Terengganu) Sdn Bhd • PETRONAS Penapisan (Melaka) Sdn Bhd • PETRONAS Penapisan (Terengganu) Sdn Bhd Water • ASEAN Bintulu Fertilizer Sdn Bhd Petroleum Products • PETRONAS Chemicals Group • PETRONAS Penapisan (Terengganu) Sdn Bhd (Centralized Laboratory Services) • PETRONAS Chemicals Methanol Sdn Bhd Aromatics-Benzene and p-Xylene • PETRONAS Chemicals MTBE (M) Sdn Bhd / • PETRONAS Penapisan (Terengganu) Sdn Bhd Polypropylene (M) Sdn Bhd • PETRONAS Gas Berhad (Laboratory GPPA) Utilities (Water) • PETRONAS Gas Berhad (Laboratory GPPB) • PETRONAS Penapisan (Terengganu) Sdn Bhd • PETRONAS Penapisan (Melaka) Sdn Bhd Natural Gas Wasterwater • PETRONAS Research Sdn Bhd aSEAN Bintulu Fertilizer Sdn Bhd • PETRONAS Chemicals Group Formation water and Drinking water (Centralized Laboratory Services) • PETRONAS Research Sdn Bhd • PETRONAS Gas Berhad (Laboratory GPPB) • PETRONAS Penapisan (Terengganu) Sdn Bhd Crude Oil, Fuel and Polyol Ester • PETRONAS Research Sdn Bhd • PETRONAS Research Sdn Bhd

Urea • ASEAN Bintulu Fertilizer Sdn Bhd

40 PETRONAS SUSTAINABILITY REPORT 2012 Prime Minister’s Hibiscus Award

The Prime Minister’s Hibiscus Award has been the premier national environmental award in Malaysia, aims to recognize business and industry which portray excellent environmental commitment in reducing impact of their operations to the Environment.

Notable Award • PETRONAS Penapisan (Melaka) Sdn. Bhd. • Malaysian Refining Company Sdn. Bhd.

Melaka State Award • PETRONAS Penapisan (Melaka) Sdn. Bhd. • Malaysian Refining Company Sdn. Bhd.

PETRONAS SUSTAINABILITY REPORT 2012 reimagining energy 41 Our Approach To Reporting Our sustainability reporting is guided by the International Petroleum Industry Environmental Conservation Association/American Petroleum Institute (IPIECA/API) Oil and Gas Industry Guidance on Voluntary Sustainability Reporting 2nd Edition, 2010. This index is also cross-referenced with the Global Reporting Initiative (GRI) indicators defined in the Sustainability Reporting Guidelines, Version 3.1.

PETRONAS SUSTAINABILITY REPORT: IPIECA/API AND GRI INDEX

Section IPIECA GRI Where Reported (page)

Profile Disclosure: Corporate Statements 2,3,5,6,7,9,10,11 Strategy and analysis Key Sustainability Indicators E1, E2, E8, HS3, SE4, SE13, EC1, EN5, EN16, LA1, 8 and 5-Year Financial Highlights SE15, SE17 LA7, LA10, EN23 About This Report and Profile Disclosure: 12,13,14,15,16,17 Sustainability and PETRONAS Strategy and analysis

Safety and Health:

Approach DMA 18,19 Safety Performance HS3 LA7 21 Process Safety HS5, E8 DMA, EN23 20 Occupational Health and HS2 DMA, LA8 22 Industrial Hygiene Product Stewardship HS4 DMA, EN26 23

Environment:

Approach 24,25 Climate Change DMA 26 Greenhouse Gas Emissions E1, E4 EN16, EN18 27,28,29 Energy Savings E2 EN5, EN7 26 Alternative Energy E3 E6, OG3 31 Biodiversity E5 DMA, EN13, EN14 28 Waste Minimisation E10 DMA, EN22 29

Society:

Approach DMA 30,31 Corporate Governance SE11, SE12, SE13 DMA 31 Talent Management SE6, SE11, SE15, SE16, SE17, SE18 DMA, LA1, LA2, LA4, LA11,LA13 31,34 Capability Development and SE5, SE7 DMA, EC6, EC9 32,33 Local Content Community Investments SE1, SE4 DMA 35,36

42 PETRONAS SUSTAINABILITY REPORT 2012

PETROLIAM NASIONAL BERHAD (Company No. 20076-K) Registered O ce: Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur Malaysia T : +603 2051 5000 F: +603 2026 5050 www.petronas.com

Sustainability Report 2012 reimagining energy TM