SAKHALIN ENERGY Sustainable Development Report 2014 Sustainable Development Report 2014 Sakhalin Energy Investment Company Ltd. Yuzhno-Sakhalinsk Head Office: 35 Dzerzhinskogo St., Yuzhno-Sakhalinsk, 693020, Russian Federation Moscow Representative Office: 31 Novinsky Blvd, Moscow, 123242, Russian Federation www.sakhalinenergy.com TO BE THE PREMIER ENERGY SOURCE FOR ASIA-PACIFIC CONTENT 1. MESSAGE FROM THE CHIEF EXECUTIVE OFFICER 6 8. ENVIRONMENTAL IMPACT MANAGEMENT 72 2. ABOUT THE REPORT 8 8.1. INDUSTRIAL ENVIRONMENTAL CONTROL 73 2.1. GENERAL 9 8.1.1. Air Emissions Control 74 2.2. PRINCIPLES OF REPORT CONTENT AND QUALITY DEFINITION 10 8.1.2. Water Use and Discharge Control 74 2.3. DEFINING MATERIAL SUBJECTS TO BE INCLUDED IN THE REPORT 10 8.1.3. Waste Management Control 75 2.4. DEFINITION OF THE REPORT SCOPE 12 8.1.4. Energy 76 2.5. GRI APPLICATION LEVEL AND PUBLIC ENDORSEMENT 12 8.1.5. Greenhouse Gas and Ozone-Depleting Substance Emissions 77 2.6. LIST OF ACRONYMS AND ABBREVIATIONS 13 8.1.6. Utilisation of Associated Gas in Production 78 3. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT 14 8.1.7. Environmental Protection Costs and Environmental Pollution Payments 78 3.1. INTRODUCTION 15 8.2. ENVIRONMENTAL MONITORING AND PRESERVING BIODIVERSITY 79 3.2. SAKHALIN ENERGY’S CSR SYSTEM 15 8.2.1. Local Environmental Monitoring 80 3.3. PERFORMANCE STANDARDS 17 8.2.2. Conservation of Biodiversity 87 3.4. SUSTAINABLE DEVELOPMENT POLICY 18 8.3. PIPELINE RIGHT-OF-WAY MAINTENANCE 91 3.5. HSE AND SOCIAL PERFORMANCE MANAGEMENT 19 9. SOCIAL IMPACT MANAGEMENT 92 3.5.1. HSE and Social Performance Management System 19 9.1. PERSONNEL: MANAGEMENT AND DEVELOPMENT 93 3.5.2. Impact Assessment 20 9.1.1. HR Management and Policy 93 3.5.3. Checks and Audits 21 9.1.2. General Information 93 4. ABOUT THE COMPANY 22 9.1.3. Personnel Recruitment and Adaptation of New Employees 95 4.1. SAKHALIN ENERGY 23 9.1.4. Remuneration and Bonus System 96 9.1.5. Social Guarantees, Benefits and Compensations 97 4.2. MAIN PRODUCTION RESULTS IN 2014 24 9.1.6. Company’s Employees’ Performance Appraisal 99 4.2.1. Assets 24 9.1.7. Staff Learning and Development 100 4.2.2. Development Projects 31 4.2.3. Hydrocarbon Production and Export 31 9.2. LABOUR SAFETY AND PROTECTION 107 4.2.4. Sanitary Protection and Safety Zones 33 9.2.1. General Information 107 9.2.2. Road Safety 109 4.2.5. Oil Spill Prevention and Response Preparedness 33 9.2.3. Industrial Safety 110 4.3. OPERATIONAL EXCELLENCE PROGRAMME 36 9.2.4. Labour Safety Culture 111 5. CORPORATE GOVERNANCE 38 9.3. OCCUPATIONAL HEALTH 113 5.1. COMPANY’S MISSION, VISION, VALUES, AND PRINCIPLES 39 9.4. HUMAN RIGHTS 114 5.2. CORPORATE GOVERNANCE SYSTEM AND STRUCTURE 40 9.4.1. Human Rights: Principles and Management System 114 5.3. CORPORATE GOVERNANCE MODEL 42 9.4.2. Community Grievance Procedure 116 5.4. CORPORATE CULTURE 45 9.4.3. Grievance Handling in 2014 117 5.5. CODE OF CONDUCT 46 9.5. SOCIAL INVESTMENT AND CONTRIBUTION TO SUSTAINABLE DEVELOPMENT 118 5.6. RISK MANAGEMENT 46 OF THE HOST REGION 5.7. ANTI-BRIBERY AND CORRUPTION 51 9.5.1. Social Investment and Sustainable Development: Sakhalin Energy’s Principles and Approaches 118 6. ECONOMIC IMPACT MANAGEMENT 52 9.5.2. Five Centuries of Russian Art Exhibition 120 6.1. IMPORTANCE OF THE SAKHALIN-2 PROJECT FOR THE RUSSIAN FEDERATION 53 9.5.3. The Energy Social Initiatives Fund 120 AND THE SAKHALIN OBLAST 9.5.4. What to Do in Emergency Situations Programme 122 6.2. FINANCIAL BENEFITS TO THE RUSSIAN FEDERATION AND THE SAKHALIN OBLAST 53 9.5.5. Hurry Up for Good Deeds 123 6.3. RUSSIAN CONTENT 55 9.5.6. Korsakov Sustainable Development Partnership Council 125 6.4. SUPPLY CHAIN MANAGEMENT 56 9.5.7. Victory Day Project 126 6.5. VENDOR DEVELOPMENT PROGRAMME 57 9.5.8. Sakhalin Road Safety Council 126 7. STAKEHOLDER ENGAGEMENT MANAGEMENT 58 9.5.9. Sakhalin Salmon 128 7.1. STRATEGY, PRINCIPLES, MECHANISMS AND ENGAGEMENT TOOLS 59 9.5.10. Sakhalin Indigenous Minorities Development Plan 128 7.2. STAKEHOLDER ENGAGEMENT PERFORMANCE IN 2014 60 10. 2015 PLANS AND DEVELOPMENT STRATEGY UP TO 2019 132 7.3. ENGAGEMENT WITH PERSONNEL 61 APPENDIXES 7.4. LOCAL COMMUNITIES ENGAGEMENT THROUGH THE COMPANY INFORMATION CENTRES 62 APPENDIX 1. GRI GUIDELINES COMPLIANCE TABLE (REV. 3.0) 137 7.5. COOPERATION WITH THE SAKHALIN INDIGENOUS MINORITIES (SIM) 63 APPENDIX 2. COMMENTS AND SUGGESTIONS OF STAKEHOLDERS ON INDIVIDUAL ASPECTS, 144 7.6. ENGAGEMENT WITH NON-GOVERNMENT AND NON-PROFIT ORGANISATIONS 65 INDICATORS AND/OR PROGRAMMES, AND COMPANY’S RESPONSE AND COMMITMENTS 7.7. ENGAGEMENT WITH JAPANESE STAKEHOLDERS 65 APPENDIX 3. THE LIST OF PARTICIPANTS OF DIALOGUES WITH STAKEHOLDERS FOR PREPARATION OF 158 7.8. ENGAGEMENT WITH CUSTOMERS 66 THE 2014 SUSTAINABLE DEVELOPMENT REPORT 7.9. ENGAGEMENT WITH STATE AND LOCAL GOVERNMENT AUTHORITIES 67 APPENDIX 4. USEFUL LINKS 160 7.10. INTERNATIONAL AND REGIONAL COOPERATION 67 APPENDIX 5. COMPANY’S INFORMATION CENTRES LIST 162 APPENDIX 6. FEEDBACK FORM 163 APPENDIX 7. CERTIFICATE OF PUBLIC ENDORSEMENT 164 APPENDIX 8. CONCLUSION ON THE REVIEW OF SAKHALIN ENERGY`S 2014 SUSTAINABLE 165 DEVELOPMENT REPORT BY THE RUIE COUNCIL FOR NON-FINANCIAL REPORTING FOR THE PURPOSE OF PUBLIC ENDORSEMENT 4 5 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER Dear colleagues and friends, In 2014, we shipped 59 cargoes of oil and 164 for environmental management, minimising cargoes of LNG. environmental impacts, as well as openness The document you are holding in your hands is and transparency. the Sakhalin Energy’s 2014 Sustainable Development As in the past, we continued to work with our LNG Report. As with previous reports, it was prepared in and oil customers. In 2014, we focused on building One of the most important areas of the company’s compliance with the Global Reporting Initiative (GRI) close relationships with Chinese companies. Despite social responsibility practice is the development of standards and was made available to the public. the challenging geopolitical situation combined our personnel. Sakhalin Energy’s management makes While creating it, we strove to take into account with falling hydrocarbon prices, this work helped us every effort to offer professional growth opportunities. the opinions of our stakeholders to the fullest secure favourable terms for our oil and LNG sales. I would like to specifically mention that in 2014 we extent possible. radically changed our Succession Pool Programme. We continued to actively develop our production It is also worth noting that we provide our personnel The past year was a memorable one for Sakhalin facilities throughout the year. For example, with very competitive package of social benefits. Energy. Over the 20 years since our company was the Sakhalin-3 condensate line was successfully tied founded in 1994, we have realised goals that were in, and gas condensate from the Kirinskoye field began In the 20-year period that Sakhalin Energy has been once just bold dreams. We have been implementing to flow into our pipeline. Reserve wells’ capacity was operating on the Sakhalin Island, the company has one of the most innovative and large-scale oil created at the Lunskoye field that exceeded targets, made a significant contribution to the socio-economic and gas projects in compliance with the most which will provide a reliable resource base for LNG growth of the region. Thanks in no small part to our advanced industrial, environmental and social production. We significantly reduced the drilling time inputs and industry firsts, Sakhalin is developing into a standards and have paved the way for Russian and expense without any loss in quality. Looking into world energy hub. The island has experienced positive offshore developments in a challenging natural the long term, an expert group was created within the economic trends for many years, helping improve the environment. Our facility, the only of its kind in Russia company to work on the LNG Plant Train 3 project. overall quality of life for the people who live here. for producing liquefied natural gas, propelled Russian LNG onto the world market. Today, we as a company To be able to maintain our high production levels We are proud to have played and continue to play remain ambitious, continuing to grow and setting and keep moving forward, we need to ensure our our part in developing the region where we live and ourselves new goals. assets’ integrity and reliability. In 2014, Sakhalin-2 work. Just as before, Sakhalin Energy continues to be became the first of the projects with Shell one of the leaders in corporate social responsibility. Sakhalin Energy owes its success to our unique participation whose production facilities complied Our social programmes continue to receive international team of employees who actively with Shell standards for third-level operating recognition both at home and abroad. promote the company’s priorities that underpin integrity. The audit of the change management our operations: safety, reliability, cargoes, control processes introduced by Sakhalin Energy We will describe all this and more in the Sakhalin costs and growth. resulted in high appraisal scores from Energy’s 2014 Sustainable Development Report. our English-Dutch shareholder. Safety always was and will remain our first priority. We are making this report available to the public, The company has continuously met production goals, The strategy of sustainable development, which as in previous years, to increase transparency while complying with all industrial and environmental is at the core of all our decisions, helps us to meet and openness of Sakhalin Energy. We also hope it safety requirements and adhering to the highest our business goals while taking into consideration will provide you with another instrument of objective occupational safety standards.