Sustainable Development Report – Baseline

Performing Today. Preparing for Tomorrow. About This Report

This report is the first ConocoPhillips Sustainable Development Report, and therefore contains baseline information about its policies and programs. This information provides an overview of ConocoPhillips for its stakeholders. Examples of how ConocoPhillips is performing today, and preparing for tomorrow include (from left to right): This report covers the time period from August 2002 – when ConocoPhillips was formed with the merger of Conoco Inc. and Phillips Petroleum Company Angel Xiao of ConocoPhillips China talks with elementary school students about environmental responsibility. (the merger) – through 2004. Select performance metrics are provided for 2003 and 2004. Performance data for 2002 could not be aggregated for some indi- ConocoPhillips participates in research efforts to restore habitat for cators due to the different reporting practices of the two companies prior to the the woodland caribou in Canada. The company strives to minimize impact on the environment. (photo courtesy of Terry Antoniuk) merger, and therefore is only given for some metrics. ConocoPhillips’ safety goal is zero injuries, illnesses and incidents. The social and environmental data in this report covers businesses for which Abdul Rasyid Gunawan, a field operator in the Belanak oil and gas ConocoPhillips was the operator in 2003 and 2004. field, is part of ConocoPhillips Indonesia, where employees have set a record, working 29.1 million hours with no lost-time accidents Striving for sustainability is a continuous effort, and as since January 1989 through the end of 2004. this diagram shows, ConocoPhillips takes a Identify & Khalid Soofi is the principal scientist in charge of the remote thoughtful approach to addressing issues Learn About the Issue sensing lab of the Integrated Geological Analysis team. The presented by its commitment to team’s maps, created using sophisticated satellites and aerial sustainable development. This report Approach to cameras, assist in exploration and in managing the environmental Assess addressing Develop impact of a project. discusses the core areas of Performance sustainability Approach issues sustainable development that have Venezuela’s Gulf of Paria is home to a variety of species, including been addressed to date. Future reports the Scarlet Ibis. ConocoPhillips Venezuela partners with diverse Implement will be focused on updating the company’s Action Plans organizations to protect the biodiversity in this region. sustainability performance. Jianhua (Jane) Yao in the ConocoPhillips technology division was recognized by the company for her work on the development of ConocoPhillips has actively participated in an ongoing joint effort of the high-yield catalysts for renewable fuels. American Petroleum Institute and the International Petroleum Industry ConocoPhillips engages with residents surrounding our operations Environmental Conservation Association to develop voluntary sustainability on issues that affect their lifestyle, land and culture, particularly reporting guidelines specific to the oil and gas industry. In developing this when there is the potential to impact indigenous communities. On the Alaska North Slope, the company employs subsistence report, ConocoPhillips has drawn on these and many additional resources. representatives and village liaisons to promote clear and open communication, and consult with elders and subsistence hunters, Additional information about the company and its sustainable development scientists and traditional experts. activities can be found at http://sd.conocophillips.com. Pete Kyle Jr. and Brandon Stevens are operators at ConocoPhillips’ Los Angeles, California, refinery. ConocoPhillips is investing about $2 billion over five years to meet clean fuels regulations. This icon identifies This icon identifies a Web site where more feedback from external information is available. The link to that stakeholders. Web site is provided at the bottom of the page on which the icon appears. Table of Contents Letter to Stakeholders 2 Social Performance 14 A message from J.J. Mulva, Chairman and ConocoPhillips’ approach toward ensuring Chief Executive Officer. ethical behavior, and an overview of its relationship with its employees, local About ConocoPhillips 4 communities and global society. An overview of the company and the purpose, Health, Safety & Environmental Performance 23 values and position that are the foundation of its approach to sustainable development. An overview of the company’s health, safety and environmental policies, programs and performance. Performance Summary 6 A snapshot of ConocoPhillips’ environmental Economic Contribution 38 and social performance and an overview of its progress and future objectives regarding Highlights and examples of how ConocoPhillips sustainable development. contributes to the global economy.

Technology for Sustainable Energy 8 Appendix 39 How ConocoPhillips uses technology to Web sites for additional company information, extend the sustainability of hydrocarbons and environmental data assumptions and the Safe prepare for an alternative future. Harbor statement.

Accountability 11 An overview of the company’s corporate governance and methods for accountability in its sustainability performance.

http://sd.conocophillips.com 1 Letter to Stakeholders

ConocoPhillips’ commitment to sustainable develop- These and other expectations are in addition to ment stems from our fundamental intent to thrive our essential requirements to operate safely, remain as an enterprise and to contribute to a better world competitive and contribute toward meeting the long into the future. We recognize that our sustain- growing global demand for energy. ability as a company is determined by the choices we make in growing our business and in meeting the The International Energy Agency has predicted that varied needs of our stakeholders. Our success the world’s energy needs will grow by 60 percent over depends on it. the next three decades. That energy must be avail- able and affordable to its end user, provide adequate For years, the oil and gas industry has contributed to returns to its producer, and have minimal impacts on better living standards and a vigorous world economy environment and society. Even with an expanding by reliably providing supplies of affordable energy. contribution from renewable resources, most of the Today, our company and our stakeholders are raising projected demand growth will have to be met by expectations. Specifically, stakeholders are challenging cleaner-burning fossil fuels. A full portfolio of energy our industry to: options from across the energy industry will be • Provide increasingly cleaner fuels to address necessary to responsibly meet demand. concerns for local air quality and climate change. ConocoPhillips is working to provide solutions to • Further minimize the environmental impacts of some of today’s critical sustainable development our operations. challenges, as seen throughout this report. We have • Help safeguard indigenous cultures. a substantial presence in the major oil basins of the • Contribute to improved health, education and world, and have pioneering technologies to provide economic conditions everywhere we do business. cleaner fuels and processes. We also are among the

• Encourage greater transparency in how producing leading companies developing a global market for J. J. Mulva nations account for their energy revenues; and liquefied natural gas, providing both established and Chairman and Chief Executive Officer • Ensure that our corporate reporting meets the emerging economies with a cleaner energy source for highest standards. heat and power generation.

2 http://sd.conocophillips.com We are building a solid foundation to help us meet the Striving for sustainability is a continuous effort, of future challenges that face us. In 2003, we published which we are just at the beginning. We have defined our positions on sustainable development and climate for ourselves a clear goal: To conduct our business in a “We recognize that change. At the heart of both positions are commit- way that promotes economic growth, a healthy environ- ments that lead to measurable actions from which to ment and vibrant communities, now and in the future. our sustainability judge our performance. The positions are built on our as a company is core values, which must guide our behavior. This first report is a compilation of our company policies, business activities, and progress to date in determined by the Safety is one of our core values. We are deeply meeting our sustainable development commitments. saddened that there were four fatalities of employees It also outlines our sustainability strategies going choices we make and contractors during operational activities in 2003. forward. Future reports will provide updates on our We strive to achieve our goal of zero injuries, and we performance and our evolving understanding of in growing our have increased our efforts to ensure that safety is the sustainable development. We invite you to tell us how business and in top priority for everyone at ConocoPhillips. We are you think we are doing through our Web site at pleased that in 2004 there were no work force fatalities. http://sd.conocophillips.com or via the mailing address meeting the varied listed on the back cover of this report. We continue to build on our knowledge of sustainable needs of our stake- development. For example, we are currently studying Since our inception as a new company, we have the issues of human rights, water management and taken important steps to achieve our goals. As we holders. Our success biodiversity to weigh company and stakeholder continue to rise to the challenge, we are confident we depends on it.” perspectives, benchmark best practices and determine can accomplish even more in the years ahead. appropriate future steps. We also are increasing our ability to factor sustainability into our project planning Sincerely, and execution.

J.J. Mulva Chairman and Chief Executive Officer

http://sd.conocophillips.com 3 About ConocoPhillips

Who We Are Sustainable Development Position ConocoPhillips is an international, integrated energy company. It is the third-largest integrated For ConocoPhillips, sustainable development Our Approach… energy company in the United States, based on is about conducting our business to promote To deliver on these commitments, we will economic growth, a healthy environment and market capitalization, and oil and gas proved prioritize issues, establish plans for action vibrant communities, now and into the future. reserves and production; and the largest refiner with clear goals and monitor our performance. We believe that this approach to business In addition, we will enhance the following in the United States. Among nongovernment- will enable us to deliver long-term value company-wide competencies to successfully controlled oil and gas companies worldwide, and satisfaction to our shareholders and promote sustainable development: ConocoPhillips had the eighth-largest total of our stakeholders. • Integration – Clearly and completely proved reserves and was the fifth-largest refiner integrate economic, social and environmental Sustainable development is fully aligned with at year-end 2004. considerations into strategic planning, our purpose “to use our pioneering spirit to decision-making and operating processes. responsibly deliver energy to the world,” and • Stakeholder Engagement – Engage our Headquartered in Houston, Texas, ConocoPhillips helps translate our core values – Safety, stakeholders to understand their diverse and operates in more than 40 countries. As of People, Integrity, Responsibility, Innovation evolving expectations and incorporate that and Teamwork (SPIRIT) – into action. year-end 2004, the company had approximately understanding into our strategies. 35,800 employees worldwide and assets of Our Commitments… • Life-Cycle Management – Manage the full life-cycle impacts of our operations, assets $93 billion. ConocoPhillips stock is listed • Increase the availability of ever-cleaner energy and products, utilizing such processes as on the New York Stock Exchange under the • Be transparent and accountable by measuring front-end loading, staged decision analysis symbol “COP.” and reporting both our financial and non- and product stewardship. financial performance • Knowledge Management – Share our successes Purpose Values • Operate to the highest safety standard and failures to learn from our experiences. & • Innovation – Create a culture that brings new, ConocoPhillips’ purpose and values guide its • Positively impact communities wherever we operate innovative thinking to the challenges of our employees and represent “the spirit of performance” • Minimize the environmental impact of evolving business environment. that the company strives to deliver. our operations Our Expectations… • Invest in the well-being and development of our employees Through delivering on our commitments to Purpose sustainable development, we will be the best Use our pioneering spirit to responsibly deliver • Constantly improve the energy and material efficiency of our operations company to invest in, to work for, to partner energy to the world. • Practice and uphold the highest ethical with, to have as a supplier and to have as standard a neighbor. Values • Ensure the long-term financial viability of The values of ConocoPhillips are embodied in the company the word SPIRIT, an acronym for Safety, People, Integrity, Responsibility, Innovation, and Teamwork.

4 http://sd.conocophillips.com About ConocoPhillips

Worldwide Activities

The following table describes ConocoPhillips core worldwide activities. The impacts and benefits described are not an exhaustive list, but represent some of the issues dealt with in each business.*

Exploration and Production (E&P) Midstream** Refining and Marketing (R&M)

Explores for and produces crude oil, natural Gathers natural gas, extracts and sells the Refines crude oil and markets and transports petroleum gas and natural gas liquids worldwide and natural gas liquids products, including ethane, products. Along with selling gasoline and diesel fuel to Business mines oil sands to upgrade to Syncrude. butane, propane and natural gasoline, which motorists, sells fuels, lubricants and specialty products to Description Customers and partners include other major are marketed as chemical feedstock, fuel or industrial and commercial customers. oil companies, large industrial energy users, refinery blend stock. Gas is sold to utilities, host nations and national oil companies. industrial users and gas marketing companies.

Produced approximately 1.54 million barrels In addition to an interest in Duke Energy • At year-end 2004, owned 12 U.S. refineries, owned or had of oil equivalent (BOE) per day in 2004, Field Services, LLC (DEFS), owned or had an interest in five European refineries and one in Malaysia, excluding Syncrude production of 21,000 an interest in five gas processing plants totaling a combined net crude oil refining capacity of barrels per day. Total proved reserves were and five natural gas liquid fractionators at 2.6 million barrels of oil per day. Refinery utilization was 7.6 billion BOE at year-end 2004, excluding year-end 2004. 94 percent in 2004. Financial and • Owned or had an interest in approximately 32,500 miles of Operating 258 million barrels of Syncrude, and 880 million BOE from LUKOIL. pipeline systems in the United States at year-end 2004. Highlights • At year-end 2004, gasoline and distillates marketed through approximately 16,400 branded outlets in the United States, Europe and Southeast Asia.

• Land impact during seismic or construction activities • Carbon dioxide, nitrogen oxide, sulfur oxide, and particulate • Drilling mud, produced water and sulfur byproducts matter emissions to air Environmental • Methane, carbon dioxide, volatile organic compounds, nitrogen oxide, and sulfur emissions • Energy efficiency Impacts to air • Hydrocarbon releases to air, land, sea or groundwater • Energy efficiency • Hazardous waste • Hydrocarbon releases to land or water • Fresh water use

• Reserves replacement and reporting • Worker health and safety Social and • Worker health and safety • Community health and safety Economic • Community health and safety Impacts • Indigenous communities • Transparency of flows of revenue from extractive companies to host country expenditures

• Royalties and taxes to host nations and communities Social and • Energy for heat, mobility and power • Energy to the wholesale market place • Products for industrial, commercial and retail applications Economic • Global and local economic contribution through jobs, capacity building and procurement Benefits • Global and local economic contribution through jobs, taxes and procurement

* ConocoPhillips also participates in the chemicals and plastics production and distribution business through a 50 percent interest in ChevronPhillips Chemical Company LLC (CPChem), a joint venture with ChevronTexaco. Performance results from DEFS and CPChem are only reflected in financial data presented in this report. This information also excludes the impacts of ConocoPhillips’ equity investment in LUKOIL. At year-end 2004, ConocoPhillips’ investment in LUKOIL was 10 percent.

** At year-end 2004, Midstream included a 30.3 percent interest in Duke Energy Field Services, LLC.

1 For more information about operations, see the ConocoPhillips Fact Book at http://www.conocophillips.com/about/Company+Reports/ConocoPhillips+Fact+Book.htm http://sd.conocophillips.com 5 Performance Summary

Key Performance Indicators

Select Indicators 2004 2003 Operating Worldwide production on a BOE(1) basis, excluding Syncrude (MBD) (2), (3) 1,582 1,590 Production from natural gas and natural gas liquids 35% 41% Total proved reserves at year-end (billion BOE, excluding Syncrude) 7.6 7.8 R&M refinery utilization rate (3) 94% 95% Worldwide petroleum products sales (MBD) (3) 3,141 3,046 Social Employees at year-end 35,800 39,000 Combined work force on-the-job fatalities 0 4 Combined work force TRR (4), (5) 0.78 0.96 Estimated philanthropic investment (millions of dollars) 37.1 36.5 Environmental Liquid hydrocarbons spilled (in barrels; greater than 1 barrel) 11,833 10,882 Percent of spilled hydrocarbons recovered (in barrels; greater than 1 barrel) 53% 70% (6), (7) Greenhouse gas emissions (million tonnes CO2 equivalent) NAV 53 Hazardous wastes (thousand tonnes) (6), (7) NAV 64

(1) BOE = barrels of oil equivalent (2) MBD = thousand barrels per day (3) Includes ConocoPhillips’ share of equity affiliates, other than LUKOIL (4) TRR = Total Recordable Rate is expressed in occupational injuries and illnesses per 200,000 hours worked (5) Data revised as of March 15, 2005 (6) Tonnes = A metric measure of weight. One tonne equals 2,205 pounds or 1.1 English tons. (7) NAV = Not available. 2004 environmental data will be published on http://sd.conocophillips.com by the end of the third quarter 2005.

6 http://sd.conocophillips.com Performance Summary

Progress and Objectives Summary

In ConocoPhillips’ 2003 published statement of Commitment to Sustainable Development, the company outlined the action items listed in the table below, which also describes progress to date and the company’s next steps.

Action Item Progress to Date Next Steps

Establish corporate-level goals • Exploration and production (E&P) business units are • Implement E&P and R&M goals. for each commitment listed developing action plans for implementing sustainable • Implement upgraded project approval processes in which in the company’s sustainable development commitments and E&P also is developing goals sustainability commitments have been integrated. development position and for for reducing greenhouse gas emissions. • Study the issues of human rights, including further building key competencies. • Refining and marketing (R&M) has created a sustainable devel- incorporating the values promoted by the Voluntary Principles on opment strategy that includes focus areas of reducing emissions Security and Human Rights; water management; biodiversity; Identify priority issues for from greenhouse gasses, sulfur oxides and nitrogen oxides; diversity within leadership; and endemic diseases. regions and business units in managing water quality and supply, and stakeholder engagement. • Develop corporate-wide principles for effective stakeholder preparation for development of • Integrating sustainable development into key corporate project engagement. commitments at these levels. approval processes. • Implementation of supply base diversity plan. • Corporate support tools are being developed for approaches to • Implement requirement that major projects assess their stakeholder engagement and sustainable social investment. environmental and social impacts.

Identify tools and metrics to The company has included in this report many measurements of Include additional metrics in future reports as the company measure performance against the company’s performance. data matures. commitments.

Publish a sustainable • The company has published this corporate sustainable Prepare for independent third-party verification of our development report and development report and will publish updates regularly. non-financial data processes. communicate the company’s • Several businesses have produced local reports. (page 39) position on key sustainability issues to stakeholders.

Create an action plan for • Began to identify greenhouse gas reduction objectives for Continue implementation of the company’s climate change implementing the company’s E&P and R&M. position statement. position on climate change. • Began to incorporate climate change issues into business decision processes. • Affected businesses are preparing for upcoming greenhouse gas regulations. (See Climate Change section, page 32.)

Benchmark sustainability In 2003, the company conducted a gap analysis of its The company plans to continue to determine how well it is performance against leading sustainability efforts using criteria typically considered by performing compared to its peers and selected third-party sustainability indices. socially responsible investment analysts. Areas for improvement indices. ConocoPhillips intends for its Sustainable Development suggested by the assessment included more systematic and Report and the accompanying information on its Web site to strategic approaches to stakeholder engagement, alternative be the primary resources for those wishing to compare the energy, addressing the potential risks and opportunities company’s sustainability performance with that of others. associated with the carbon content of products and operations, employee development, and social investment. The assessment also recommended policies addressing human rights, publishing targets externally, verifying data, and integrating sustainability into the value chain. Many suggested improvements are addressed within this report, while others are still being explored.

http://sd.conocophillips.com 7 Technology for Sustainable Energy

Extending the Sustainability Liquefied Natural Gas (LNG) of Hydrocarbons LNG is natural gas that has been cooled to minus 260 degrees Fahrenheit. This condenses Extending the role of hydrocarbons in meeting the gas to a liquid that occupies only 1/600 of energy demand includes lowering operating the space required for the same weight of gas. costs and the environmental impact of finding and processing energy, as well as improving the This allows the LNG to be transported by ships ability to economically bring cleaner fuels to to viable markets. ConocoPhillips has been a market. ConocoPhillips acquires or develops global leader in LNG innovation for more than technologies, in-house and with partners, to be four decades, having built the first LNG carrier implemented internally and/or marketed and used for international trade in 1959. The com- licensed externally. pany also built the first successful commercial liquefaction facility in 1969 in Kenai, Alaska, Reducing the Cost of Production which it continues to safely operate today. In ConocoPhillips continues to develop improved addition to the Kenai facility, ConocoPhillips’ methods for reducing the cost of exploration and LNG technology is employed in Trinidad and production, along with associated environmental planned for use in Egypt, Equatorial Guinea, Casing drilling in operation at Lobo field, south Texas. and safety impacts. Areas of emphasis include Australia and Nigeria. reservoir performance prediction, improved production platform. In a recent well, the bit drilling technologies, and advancements in was steered on a 30-degree diagonal path with a While LNG has a role in satisfying worldwide operating excellence and project execution, 180-degree turn. At the same time, this well energy needs, it has a particularly important particularly in arctic development (see page 30) also used casing-while-drilling (CWD) technology. application in the United States, where energy and heavy oil. Instead of using drill pipe, CWD uses casing demand is quickly outpacing energy supply and that is cemented in place when drilling wells. By infrastructure. An example of improved drilling technology can eliminating the need to remove a drill pipe from be found in ConocoPhillips’ Lobo field in south a well to retrieve or change a bit or fix a prob- ConocoPhillips has moved closer to bringing Texas, where two innovations have been com- lem, which is generally the point where injuries LNG to the United States. Construction has bined to take a step forward in directional are most likely to occur, CWD can improve safety. begun on a regasification terminal in Freeport, drilling. Rotary-steerable directional drilling CWD also has significantly reduced the lost Texas, that will connect with the Texas intrastate allows drillers to accurately direct the well path, circulation and well bore instability problems gas pipeline system. The company will have ensuring that the maximum amount of the that frequently lead to significant time and cost rights for approximately 1 billion cubic feet highest-quality reservoir is penetrated. The overruns. Coupling CWD with rotary-steerable per day of the terminal’s capacity. The Freeport technology also enables safe navigation around technology can enhance the use of this safer, terminal is estimated to start up in 2008. obstacles, such as infrastructure beneath a more efficient technology.

8 http://sd.conocophillips.com Technology for Sustainable Energy

But there have also been challenges. For example, Technology Laboratory in a cooperative Department of Energy stated: “Even when in Harpswell, Maine, residents voted against a agreement to perform a comprehensive study operating on relatively high-sulfur coal, the proposal to lease a former U.S. Navy fuel of new ultra-clean fuels produced from remote Wabash River project is the cleanest coal-fired depot site for the purpose of building a LNG sources of natural gas. Completed in 2004, this power plant in the world of any technology.” regasification facility. Siting of LNG facilities is study, called the Ultra Clean Fuels Life Cycle an important issue for the energy industry, as Assessment, consisted of a life cycle inventory S Zorb™ Sulfur Removal Technology (SRT) the ability to site terminals in locations that and life cycle impact assessment for GTL S Zorb SRT reduces sulfur content in gasoline to meet both industry and stakeholder needs is a transportation fuels, namely Fischer-Tropsch ultra-low levels – below 15 parts per million in vital step toward providing the United States diesel and naphtha. This study estimated, with many instances. It yields nearly 100 percent of with much needed supplies of natural gas. available data and within available study the original feed stream, without sacrificing resources, the energy utilization and emissions quality or octane. ConocoPhillips refineries in Gas-to-Liquids (GTL) life cycle profiles of ConocoPhillips’ GTL fuels Borger, Texas, and Ferndale, Washington, have There are approximately 3,500 trillion cubic feet and selected competitive fuels in the future. installed and are operating S Zorb SRT, and its of known gas reserves in the world today that Lake Charles, Louisiana, refinery is well under are economically “stranded,” because their E-Gas Technology construction on its installation of S Zorb SRT. locations do not favor construction of a pipeline In 2003, ConocoPhillips acquired E-Gas, a to connect them to markets. In addition to LNG, technology that gasifies coal and petroleum coke ConocoPhillips has developed GTL technology to produce electric power, while co-producing that enables natural gas to be converted to safe, hydrogen and steam. In addition to being easily transportable liquid products like diesel cost-efficient, the system reduces sulfur fuel and naphtha. dioxide emissions to less than one-tenth of that required by U.S. Clean Air Act standards. It A demonstration plant at the company’s Ponca also lowers nitrogen oxide emissions and City, Oklahoma, refinery enabled ConocoPhillips reduces particulate emissions to negligible to refine the new technology prior to commer- levels. Carbon dioxide emissions from facilities cialization. Results from the plant led to the using gasification technologies are 20 percent signing of a Statement of Intent for a GTL lower than those from typical pulverized coal plant in Qatar. plants currently in operation. In addition, these facilities can be upgraded for carbon dioxide It is important and necessary to understand removal in the future at a fraction of the cost life cycle, environmental and human health and performance impact that would be seen in potential impacts of GTL products in comparison conventional coal and coke power plants and with alternatives. ConocoPhillips, in conjunction natural gas-fueled plants. In discussing the with Nexant Inc. and others, joined with the Wabash River Coal Gasification Repowering The company’s largest low-sulfur gasoline unit to date is at U.S. Department of Energy’s National Energy Project, which employs E-Gas, the U.S. the Ferndale, Washington, refinery.

For 1additional information on how the company is working to reduce the environmental impact of hydrocarbon production, see the Environmental Performance section of this report beginning on page 30, particularly2 the Climate Change section on page 32. http://sd.conocophillips.com 9 Technology for Sustainable Energy

ConocoPhillips’ Role in an Alternative Energy Future ConocoPhillips’ role in the project is to provide Renewable Energy Position up to six of the 24 California fueling stations at which multiple approaches to distributing In alignment with our purpose to “use our pioneering • Competency and Asset Leveraged. We plan to spirit to responsibly deliver energy to the world,” focus our efforts on renewable fuels and other hydrogen will be explored. Fueling stations and consistent with our positions on sustainable technologies that directly leverage our experience will be provided hydrogen produced from both development and climate change, ConocoPhillips in hydrocarbon chemistry and processing. natural gas and renewable energy sources. is evaluating and developing technologies for • Ongoing Awareness. We plan to continue to Some stations will be able to dispense both renewable energy. We are leveraging our expertise, evaluate renewable energy technologies to intellectual property and physical assets in gaseous and liquid hydrogen. proactively identify new opportunities. We pursuit of economically viable, renewable energy business opportunities. have invented and own rights to renewable technologies, and we also understand the Freedom Car and Fuel Partnership economic drivers, strengths and weaknesses of Our Commitments... This collaborative effort consists of the U.S. the alternative technologies available. Department of Energy (DOE), automakers and • We plan to continue to develop technology • Sustainable Solutions. We remain open to options with the potential to enable renewable developing renewable energy as a component energy companies. This partnership energy and, in particular, renewable fuels. of our portfolio of energy offerings, as and provides a structure and process for dialogue • Investments in technology development will be when these technologies can be deployed in disciplined and commensurate with the likely on hydrogen returns, market size, timing of development a sustainable manner for our stakeholders. research, with and technology risk inherent in renewable a focus on energy projects. Our Expectations... pre-competitive, Our work will assist in the development of viable, high-risk Our Approach... sustainable and environmentally responsible energy • Business Leveraged. Renewable energy for existing and future customers. research that opportunities that complement our existing addresses technology breakthroughs needed processes will be prioritized. to realize the National Hydrogen Energy Roadmap. Additionally, the group explores the energy, environmental and economic Controlled Hydrogen Fleet and Infrastructure California’s South Coast Air Quality attributes of various pathways to hydrogen Demonstration and Validation Project Management District, and automakers Toyota production, as well as the merits of hydrogen- ConocoPhillips is involved in an effort to fur- Motor Sales USA, American Honda Motor, powered fuel cell vehicles relative to other ther demonstrate and validate advancements in Nissan North America Inc. and BMW. The advanced fuel-vehicle systems. ConocoPhillips hydrogen-based transportation infrastructure. ambitious five-year program, announced in joined the partnership in 2003 and participates This project team includes ConocoPhillips, Air 2004, is funded in part by a grant from the in the executive steering group, fuels opera- Products, the National Fuel Cell Research DOE, as part of its national Controlled tions group and additional technical teams. Center at the University of California at Irvine, Hydrogen Fleet and Infrastructure the University of California at Davis, Demonstration and Validation Project.

1 http://www.eere.energy.gov/hydrogenandfuelcells/pdfs/draftrev3_g036010gfo.pdf 2 http://www.eere.energy.gov/vehiclesandfuels/about/partnerships/freedomcar/index.shtml 3 http://www.eere.energy.gov/hydrogenandfuelcells/pdfs/national_h2_roadmap.pdf 10 http://sd.conocophillips.com Accountability

Corporate Governance Positions, Policies and Management Systems ConocoPhillips’ board of directors provides oversight of the company’s policies, practices Among ConocoPhillips’ positions, policies and In locations where the work force is not fluent in and performance. At March 31, 2005, the board management systems, the following help to English, key elements of these policies have been govern the sustainability aspects of its business. translated into the predominant local language. For consisted of 13 independent directors and one example, the Code of Business Ethics and Conduct employee director – the chairman of the board This is not a complete list of the company’s has been translated for operations in Azerbaijan, and chief executive officer (CEO). policies, but represents those that are most China, Norway, Venezuela, Indonesia, as well as relevant to sustainable development issues. countries in the Middle East.

In December 2002, the company established a disclosure committee, comprised of members of senior management and chaired jointly by the chief financial officer (CFO) and the general counsel. The disclosure committee establishes and monitors the company’s disclosure controls and procedures, as well as reviewing and supervising the company’s reporting to the SEC, financial press releases and presentations to analysts and the investment community. Prior to signing certifications of financial responsibility, the CEO and CFO meet with the disclosure committee and review each U.S. Securities and Exchange Commission (SEC) filing.

Accountability for Sustainable Development Position Corporate Contributions Philosophy Sustainability Issues Code of Business Ethics and Conduct Health, Safety & Environment Policy Members of ConocoPhillips’ senior management, Corporate Governance Guidelines Renewable Energy Position each reporting directly to the CEO, own the ultimate responsibility for developing corporate Equal Employment Opportunity Policy Climate Change Position strategy, reporting company performance, and assisting the businesses with implementation of

1 See the Corporate Governance section of ConocoPhillips’ Web site at http://www.conocophillips.com/about/Corporate+Governance/index.htm for more information on the company’s board of directors. 2 See the Company Reports section of ConocoPhillips’ Web site at http://www.conocophillips.com/about/Company+Reports/index.htm for the company’s annual report, proxy statement and SEC filings. http://sd.conocophillips.com 11 Accountability

sustainability issues. Progress on Board of Directors Committees (with sustainability issue oversight) sustainability-related issues is reported Compensation Public to the appropriate committees of the Committee Policy Committee Audit & Finance Committee

board of directors. (See diagram at right.) Chief Executive Officer

Planning, Human Health, Safety Legal & General General The company’s businesses are responsi- Operations Strategy & Finance Resources & Environment Counsel Auditor ble for integrating sustainability issues Corporate Affairs into day-to-day operations and held Employee Health, Safety Integration & Planning & Financial accountable through an annual goal- Well-Being & Environmental Performance on Compliance Ethics Strategy Performance setting process. In 2004, E&P business & Development Issues All Issues units began preparing sustainable Sustainable Fuels & development action plans. Also, the Development Emerging Strategy & Technologies leadership teams of both E&P and R&M Emerging Issues have set business-wide goals for 2005 Community, for implementation of their highest Government & External priority sustainable development issues. Relations

Integration of Assessing Impacts Sustainability One example of how ConocoPhillips evaluates The assessment outlined the existing physical, Commitments into potential social and environmental impacts is biological and social environment, and the the effort undertaken to gain approval for the potential impacts of the project. It also described Business Processes liquefied natural gas (LNG) liquefaction plant commitments the company has made to manage ConocoPhillips’ project authorization on Wickham Point near the city of Darwin impacts, such as air-quality monitoring, green- guidelines, which establish corporate in the Northern Territory of Australia. The house gas emissions reduction, minimizing development team evaluated impacts for the wastewater discharge, waste disposal management, guidelines for capital project approval, life cycle of the project during construction and minimizing impacts on mangrove ecological and due diligence standards require operations phases. communities, dry climate rainforest mitigation, that any new business venture identify protecting fauna corridors, minimizing public risks, ongoing monitoring, and emergency health, safety, environmental, and response preparedness. For example, the company social risks, in addition to technical, is working with the local regulators to mitigate the commercial and political constraints. impact to the portions of the rainforest disturbed during construction work. The company plans to The company is revising the project participate in the Australian Greenhouse authorization guidelines to address its Challenge Programme as part of its greenhouse sustainable development commitments. gas management strategy. Also, the Aboriginal traditional owners of the Wickham Point area, as In addition, any new venture must one of the key stakeholders, have been involved demonstrate that those risks and with the approval process of the project and the constraints can be addressed, in order on-going plans for future development. The full listing of impacts and management commitments for the project to be approved. are detailed in a public environmental report Construction of the Darwin LNG facility in Australia. available on the project’s Web site.

1 http://www.darwinlng.com 12 http://sd.conocophillips.com Accountability

Stakeholder Engagement meetings, information on ConocoPhillips’ Web communities in a variety of ways, including ConocoPhillips engages with its stakeholders to site, and annual presentations to securities consultations on specific projects, regular understand their diverse and evolving expecta- analysts. The board of directors maintains public forums and ongoing conversations. tions and to incorporate that understanding into a process for shareholders and interested • Customers, Partners, Suppliers and Contractors – the company’s strategies and actions. Key stake- parties to communicate with the board, as The company has a variety of avenues for holders include: described on the company’s Web site. communicating with its customers, partners, • Employees – The company seeks employee • Government – ConocoPhillips engages with suppliers, and contractors. For example, input via an employee opinion survey, governments in the key areas of public policy U.S. Marketing business partners can take through town hall meetings, and in employee that affect the company (see page 15), advantage of BizLink, a proprietary extranet development discussions and business unit business development activities, and in Web site, to access financial information, and function efforts. permitting and managing the company’s interactive processes and fuel purchasing • Shareholders – The company communicates operations in accordance with regulations. procedures, and submit e-mail questions and with its shareholders through company reports • Communities – The company’s major projects feedback. With the company’s contractors, and SEC filings, annual shareholders’ and business unit facilities engage with safety is an important issue, one that several operations address via contractor safety training and education programs. Stakeholder Engagement Through Community Advisory Councils • Interest Groups – In addition to the information Thirteen of the company’s 14 company-operated community leaders. ConocoPhillips, we believe, available in company reports and on the Web refineries have established community advisory gained even more insight into the communities site, ConocoPhillips connects with project- councils (CACs) that meet regularly and promote surrounding their refineries. Other corporations specific interest groups as part of its project dialogue between the local community and refinery could learn from ConocoPhillips’ outreach to the management. The one refinery without a CAC communities in which they operate.” engagement activities. engages its local community by working through established local organizations. Comprised of a ConocoPhillips recognizes that it can improve cross-section of the community, CACs provide its stakeholder engagement competency by input regarding community opinions, discuss upcoming refinery plans and their impact on the developing principles for effective stakeholder community, and plan activities that further develop engagement that will establish company the refineries’ relationships with the community. expectations for such activity. The company CACs also can provide input into the company’s is drafting the principles based on the results broader activities. For example, representatives of an internal workshop in which practitioners from the majority of ConocoPhillips CACs of stakeholder engagement from a wide cross- discussed the company’s sustainable development section of businesses and regions around the plans with corporate and refinery managers at a recent meeting. Regarding the experience, Bonnie world came together to share experiences. Christensen, a member of the CAC for the Los ConocoPhillips’ E&P and R&M businesses Angeles refinery said, “We were most are evaluating their stakeholder engagement certainly impressed with the company activities as they begin implementing their representatives, and the candor with which Jay Churchill, refinery manager at Billings, Montana, leads a they answered the questions from the various discussion for a community advisory council meeting there. sustainable development action plans.

1 http://www.conocophillips.com/investor/communications/index.htm http://sd.conocophillips.com 13 Social Performance

Ethics training by international employees is on-going. In addition, the United States and many Code of Business Ethics and Conduct Supervisors or managers may recommend or countries have laws and regulations regarding ConocoPhillips’ Code of Business Ethics and require completion of additional courses, espe- business gratuities that may be accepted by Conduct summarizes the standards for cially for employees whose work requires training government personnel. Because entertainment ethical conduct and compliance with the law for a particular compliance area, such as the and business gifts are an important part of expected of the company’s employees, contractors U.S. Foreign Corrupt Practices Act (FCPA), doing business in some cultures, it requires and other individuals who work on the company’s insider trading, sanctions, export controls, special training to determine to what extent behalf. The code sets forth the company’s antitrust or antiboycott. these are permitted by law. position on respect for the individual, maintaining safety and health, protecting the environment, Employees may report ethical violations In 2003, ConocoPhillips enhanced its training observing the law and upholding honest business anonymously, either by an international, toll-free program for both FCPA and government sanction practices. The code is available on the Web, has hotline or by e-mail. The company’s corporate laws. In addition to Web-based training, numerous been translated into multiple languages, has been compliance and ethics committee, composed of in-person training sessions were conducted distributed to all employees and is provided to all senior executives and attorneys, provides regular throughout the company. The sessions were new hires. Employees are required to annually reports to the chief executive officer (CEO), conducted by attorneys who assisted employees in certify their personal compliance with the code. as well as to the audit and finance committee understanding how the FCPA applies to their work. In addition, periodic ethics reminders are sent to of the board of directors, regarding the results all employees via e-mail. of annual code certifications, the state of Human Rights compliance activities, and the handling of Many of ConocoPhillips’ existing policies To help employees familiarize themselves with reports of violations. and practices for equal opportunity, anti- the code, ConocoPhillips offers online courses discrimination, and health and safety protect on a wide range of compliance and ethical Foreign Corrupt Practices Act human rights wherever the company operates. issues relative to ConocoPhillips and its Compliance with the FCPA, as well as similar The company continues to study the changing business operations. These courses provide statutes enacted by some member countries of global work environment to further expand its background information on each issue, answer the Organization for Economic Co-operation and understanding of that environment and better frequently asked questions, and offer brief Development, are particularly vital to define the company’s roles and responsibilities. self-administered quizzes to ensure that the ConocoPhillips, since the company operates in employee has mastered the information. more than 40 countries. FCPA prohibits giving United by their commitment to human rights Mandatory courses in 2004 included ethics, anything of value, directly or indirectly, to offi- and corporate social responsibility, the preventing workplace harassment and e-mail cials of foreign governments or foreign political governments of the United States and the use for U.S. employees. Ethics and e-mail use candidates in order to obtain or retain business. United Kingdom, companies in the mining and

1 http://www.conocophillips.com/about/Corporate+Governance/index.htm 14 http://sd.conocophillips.com Social Performance

energy sectors, and nongovernmental organiza- U.S. Customs and Border Protection of the U.S. Spirit PAC, the U.S. employee political action tions collaboratively developed the Voluntary Department of Homeland Security recently committee (PAC), are guided by the following Principles on Security and Human Rights certified ConocoPhillips’ supply chain security criteria: the candidate’s integrity and character; (the Principles). The Principles provide guidance processes as fully compliant with the provisions leadership potential; positions on issues and to companies attempting to ensure the safety of the voluntary Customs-Trade Partnership voting record; relevance to company operations; and security of their operations within a frame- Against Terrorism program. nature and strength of the candidate’s election work that respects human rights and fundamental opposition; and the candidate’s access to other freedoms. The company subscribes to the values Participation in Public Policy sources of financial assistance. Contributions go the Principles promote. Recognizing there is ConocoPhillips engages in public policy directly to the candidate, generally avoiding: always room for improvement, the company plans discussions through different means, including • Independent expenditures in support or to continue to identify additional opportunities membership in trade associations involved in opposition of a candidate for expanded implementation of the Principles. public policy issues, research, and direct lobbying • Out-of-election-cycle contributions campaigns on specific issues. The company’s • Contributions to presidential campaigns Security current public policy areas of emphasis are • Contributions to leadership PACs ConocoPhillips has responded to the increased energy policy, fuel standards, climate change • Contributions to national political parties risk of terrorism and other threats to its and clean air issues, and industry health, • Large contributions to trade association PACs operations with a program to identify, prevent, environment, safety and social issues. detect, deter and mitigate potential attacks All corporate political contributions are reviewed against company personnel and facilities. All key ConocoPhillips belongs to a number of by either internal or independent counsel prior facilities and operations are subjected to periodic organizations related to sustainable to being issued and are reported to the public security vulnerability assessments in which development, including: policy committee of the board of directors. The specially trained security professionals determine • World Business Council for Sustainable Spirit PAC treasurer reports all receipts and likely threats and develop appropriate Development disbursements to the Federal Election countermeasures. These assessments provide the • United Kingdom Business Council for Commission and appropriate state agencies. foundation for investments in security system Sustainable Development upgrades at company facilities around the world. • International Petroleum Industry In 2004, corporate contributions to state and Environmental Conservation Association local candidates in the United States and ConocoPhillips works closely with local, national • American Petroleum Institute Canada (the only countries in which and international governmental agencies to • Several climate change-related associations ConocoPhillips makes political contributions) understand the unique security risks present in (see pages 32-33) totaled $202,800. Spirit PAC contributions each of the countries in which it operates. The totaled $316,200. ConocoPhillips also makes company also works closely with public and ConocoPhillips’ Code of Business Ethics and corporate political contributions in states where private sector entities to develop security Conduct regulates its interactions with public it is allowed, to address issues significantly measures to minimize risk to employees, officials. Corporate contributions, made in impacting its operations. facilities and nearby communities. For example, accordance with U.S. law, and contributions from

1 http://www.voluntaryprinciples.org 2 http://www.customs.ustreas.gov/xp/cgov/import/commercial_enforcement/ctpat/ 3 http://www.fec.gov http://sd.conocophillips.com 15 Social Performance

Relationship with Employees Developing a Local Work Force in Indonesia A motivated, talented work force is a key asset The company’s Indonesia business unit takes a safety, as well as important business skills such as for ConocoPhillips. To sustain that work force, multi-faceted approach to contributing to the devel- communication, teamwork, time management, and the company must protect employees’ rights, opment of a skilled work force in the country of leadership. The program includes classroom reward hard work, encourage employee develop- Indonesia. The company has developed a one-year presentations, site visits, apprenticeships in the ment and provide opportunities for dialogue. new engineer training program for engineering field, and mentoring from ConocoPhillips employees. The company’s employee policies and programs graduates wishing to prepare for careers in the oil Participants have completed the program and are and gas industry, whether with ConocoPhillips or now company employees. are global, and with operations in over 40 coun- another organization. Trainees learn the technical tries around the world, are implemented in ways aspects of the industry and the importance of ConocoPhillips also has established a program to that respect the local laws and culture. All are teach high school students about drilling and other consistent with the underlying principle of skills required to work in the oil and gas industry ConocoPhillips’ “people” value: respecting offshore. This roustabout training program teaches safety, English, first aid, basic operations, and everyone in ConocoPhillips’ work force. drilling, rigging and loading/unloading skills.

Global Work Force Development To diversify the options available to the local work ConocoPhillips strives to place the right people, force, ConocoPhillips has joined with a group of with the right skills, to create the right business companies to create a vocational training workshop in Natuna. A training house and dormitory are being results. Today, the energy industry faces two key constructed to house students and equipment such as a welding set and a wood lathe. Today’s Future Participants in the 2003 Indonesia new engineer training program. Work Force Work Force

challenges: attracting a skilled work force that Local and Global Opportunities Work force and Almost reflects the population of global operations, 57% of work leadership are In all company locations, ConocoPhillips is force are U.S. diverse in and providing a flexible yet productive work committed to developing local employment nationals experience and environment that attracts, develops and retains opportunities that provide not only local jobs perspectives, high-performing employees. but also opportunities for development into 72% of and managers reflect the potential global career assignments. To support are U.S. countries Leadership this goal, the company has developed talent Caucasian in which ConocoPhillips has developed a leadership management teams to ensure consistent males the succession management process and engages in development and staffing opportunities world- company mentoring to help identify and cultivate the next wide for key disciplines in each business and operates generation of talented leaders. The company is corporate function. The teams create consistent currently exploring how best to add to these career maps that outline the skills and expecta- efforts and to encourage leadership diversity tions for each career path. The teams evaluate into its succession management process. staffing on a global basis, to consider qualified

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candidates from all regions, and review career and continued learning, while the company development, transportation, marketing, map promotions, along with training and devel- is responsible for providing development and commercial, finance, global information services, opment, to ensure global consistency. learning opportunities that encourage employee legal and human resources, among others. success while helping the company reach its For employees not covered by a talent In addition to managing the existing talent pool, strategic goals. management team, development goals can be E&P has developed a global recruiting and achieved by working with supervisors through development strategy scheduled to be fully In addition to participating in global work the performance management process. implemented by the fall of 2005. The program force planning and staffing as described above, will include training programs and rotational ConocoPhillips’ talent management teams ConocoPhillips is developing a global learning assignments, and the opportunity for select new identify critical skill sets and create develop- and development framework that will provide hires to have an international development ment tools such as career guides to help tiers of programs for the different needs assignment designed to encourage global employees and supervisors manage functional employees have at different times in their mobility early in an employee’s career. career development. Functional-based talent careers, such as new hires, front-line supervisors management teams, which cover about or more senior leaders. All of the offerings Employee Development Through Talent 40 percent of ConocoPhillips’ work force, center around key themes of delivering results, Management include engineering, geosciences, business managing change and developing relationships. Talent management is ConocoPhillips’ approach to developing people and driving business results. Development is a joint responsibility – Local Opportunities in California all employees are responsible for managing their In 2002, the Los Angeles, California, refinery own careers through performance management implemented a program designed to increase local recruitment. The program is jointly spon- 360 de g • gre sored by the refinery, the PACE labor union, an in e r fe to e area community college and trade school, and a n d e b a local community resource center. The high school M EXPERIENCE c k • graduates in the program receive a full-time • Pro g ~70% ject n s summer internship, college classes during the i •

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a i c n g education and job opportunities to local l ACQUIRE i • e g d e u at community members, the program gives the ca tr tio s participants a good sense of the realities of n delivering the job, and provides management an Participants in the Los Angeles, California, refinery scholarship Employee development is roughly 10 percent acquiring knowledge effective way to assess participants’ performance program. through training and formal education, 70 percent applying that and potential. knowledge, and 20 percent learning and adapting from feedback and coaching. http://sd.conocophillips.com 17 Social Performance

Employee Dialogue elaborate on how these elements of the Code of As mentioned on page 14, ConocoPhillips is in ConocoPhillips conducts regular employee Business Ethics and Conduct will be put into the process of deepening its understanding of its opinion surveys that are open to all employees practice according to local law. role with respect to human rights. In that effort, and available in multiple languages. the company plans to examine what additional ConocoPhillips utilizes the survey feedback to ConocoPhillips has a global open door policy for provisions need to be addressed to ensure improve the effectiveness of the organization. resolving work place issues. The policy outlines protection of employee rights in its work places steps employees can take to resolve conflicts, around the world. beginning with working with the other party, enlisting the help of the employee’s supervisor, Employee Wellness and, as needed, gaining assistance from human ConocoPhillips values the health of its resources personnel and company management. employees, and knows that a healthy work force There may be times when employees feel they is productive and lowers health care costs for cannot take issues to supervisors. Should this be employer and employee alike. The company has the case, employees may discuss the more than 40 clinics in 10 countries in order to situation directly with a human resources respond to employee health needs that arise representative, who can pursue the issue at during the work day. For employees in higher the appropriate level in the organization. health-risk situations, either due to the remote- ness of their location (such as offshore) or the All employees also have access to the company’s ethics hotline through which they may anony- mously share information, raise questions or lodge complaints regarding violation of policy.

ConocoPhillips offers training programs that help Chairman and CEO Jim Mulva greets employees at a town hall meeting. employees understand work place policies and help them handle difficult situations. In 2004, Promoting a Positive Work Environment all U.S. employees were required to complete ConocoPhillips’ Code of Business Ethics and training on preventing work place harassment Conduct sets global standards for equal and all supervisors must complete the module employment opportunities in recruiting, on equal employment opportunity. In addition, compensation, professional development and courses are being piloted in the United States promotion; promoting a harassment-free work and adapted for other regions as requested by place; and respecting employees’ rights to the local operation, on crucial conversations, bargain collectively. The company also has civil treatment for employees and guiding established regional policies that further conflict resolution. Employee receives a health screening.

1 http://www.conocophillips.com/about/Corporate+Governance/index.htm 18 http://sd.conocophillips.com Social Performance

potential for exposure (such as emergency worldwide. Many businesses also sponsor lives, family or work. EAP counselors are mental response personnel), the company conducts physical activity and nutrition challenges that health professionals who have special training risk-based pre-placement and periodic medical motivate employees to pursue healthy lifestyles. and skills to assist in assessing problems, examinations. In countries where the company identifying choices and developing plans of operates and has clinics and where medical Endemic Diseases action. EAP services are available in the majority infrastructure is lacking, the company partners ConocoPhillips recognizes the effects endemic of ConocoPhillips’ locations and employ local with the community to make clinic services diseases, such as malaria, HIV/AIDS, tuberculosis counselors that are native speakers and under- available to the public. and others, can have on the company employees stand the local culture. and the surrounding communities. The company Focusing on Preventive Health currently is exploring approaches to address Staff Reductions Through Periods of Change ConocoPhillips has launched a global wellness issues surrounding endemic diseases relevant to ConocoPhillips reduced staff in the United States program – MyHealth – which helps individuals its employees, their families and the communities by approximately 22,600 positions from August identify potential health risk factors and the where they live and work. 2002 to December 31, 2004. As the graph shows, actions they can take to reduce them, learn the approximately 80 percent of those reductions necessary steps to improve and protect their Employee Assistance Program involved the sale of assets to other companies. In health, and make positive lifestyle choices. ConocoPhillips’ Employee Assistance Program most cases, employees were offered positions by (EAP) provides an additional behavioral health the new owners of those assets at the time of sale. MyHealth Wellness Program educational benefit and resource for all ConocoPhillips Approximately 10 percent of the reductions were resources, seminar and health fair kits, and employees and their dependents experiencing other merger-related severances. Those employees wellness information are provided to employees mental health problems affecting their personal were eligible for severance benefits, including outplacement support. The remainder are employees who have left the company through Teaming Up for Health in the North Sea normal attrition, such as retirement or resignation. The company’s North Sea business unit formally established a goal of 70 percent workforce Staff Reductions participation in its 2004 Health Challenge. August 2002-December 31, 2004 Launched in the spring, employees and contractors formed four to six-person teams 10% and received an initial health screen for height, Asset Sales weight, waist measurement, blood pressure and 10% 80% Other Merger Reductions cholesterol. Following three months of individual Normal Attrition and group activities focused on increased physical activity, healthy eating and lifestyles, workers received a follow-up screening. More During periods of reorganization, a change than 3,000 employees and contractors formed a management toolkit is available to assist employees total of 485 teams and overall participation and managers. Counselors from EAP are available exceeded 70 percent, with several work groups to help employees with the emotional effects of surpassing 90 percent. In addition to individual change, and offer training classes on coping with incentives for participating workers, rewards were A team from Greater Britannia, part of the North Sea business presented for team progress. unit, help with the upkeep of park land under the National Trust change as well as individual counseling. for Scotland, combining community service with exercise.

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Relationship with the a component to assess the key community interact with indigenous communities have Community stakeholders in the region and determine their programs and practices in place to maintain As part of ConocoPhillips’ core value of main interests and concerns. good relationships with their communities. “responsibility,” the company has committed Representative examples include guidelines for to be a valued member of the community. Indigenous Communities employee and contractor relationships with the Many of the company’s major projects have Respecting indigenous communities is an Warao community in Venezuela; working with undertaken assessments of community impact. important part of addressing the company’s aboriginal communities in Canada to expand The company’s due diligence guidelines include community impact. Company businesses that their capacity to engage in discussions about, and receive local benefits associated with, company activities; and working with the Development and Tradition Working Together artisanal fishing community in Cameroon to ensure seismic data acquisition ships and At the Alpine field on Alaska’s Western North between native residents, ConocoPhillips and Slope, ConocoPhillips operates the first oil its contractors. fishing boats safely coexist. production facility located and developed on Native Alaskan land. As part of the land access KSOP efforts are yielding benefits. The panel’s Community Investment negotiations prior to development, ConocoPhillips attention to detail has helped minimize impacts to ConocoPhillips invests in community programs that and the community of Nuiqsut created a Surface the environment and reduced misunderstandings Use Agreement that defines the responsibilities with the community. The result is both parties tend are aligned with its strategic business objectives and obligations of both parties. to work on solutions rather than problems. and that reflect its vision and values. The company looks for programs that provide sustainable com- Given Alpine’s close proximity to the village of munity development and build self-sufficiency Nuiqsut, and that fish and game are key elements of local social and cultural traditions, the instead of creating dependency. ConocoPhillips agreement contains provisions for a Kuukpikmiut believes in capacity building – investing in skills Subsistence Oversight Panel (KSOP) to help and systems that empower communities to identify and minimize conflict between Alpine operations and traditional practices. The KSOP improve their quality of life – and more and more board, comprised of Nuiqsut residents who are this is where the company focuses its efforts. active hunters, is charged with monitoring the ConocoPhillips’ investments in the community take health of subsistence resources on Kuukpik lands many forms, such as cash contributions, in-kind and identifying any impact that exploration, development or production activities might have on giving, infrastructure developments, training those resources. The panel meets periodically with programs and employee volunteerism. the company and prepares reports on observations, complaints, concerns and recommendations Philanthropic Giving brought to the panel by local residents. In 2004, ConocoPhillips donated an estimated With help from local residents, panel members $37.1 million to charitable organizations. Of that, monitor and evaluate progress on issues such as Mark Ahmakak, a summer environmental field monitor with 8 percent was given outside the United States. access for hunters and fishermen; wildlife impact; KSOP, assists ConocoPhillips researchers with fyke nets around These donations are in addition to the project tundra damage; impact on lakes that supply water the Alpine field. As part of the company’s fish monitoring funds allocated to major community infrastructure for ice road construction; waste and trash disposal; program to help ensure operations do not negatively impact the and interaction, communication and cooperation fish populations harvested by the community of Nuiqsut. and environmental improvements that are part of the operating budget for company projects.

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Capacity Building Business is increasingly shifting from strict philanthropy to a more proactive form of community development and capacity building (investing in skills and systems that empower communities to improve their quality of life). As E&P activities take the company more and more into countries with deep social needs, the company is evolving its social investment guidelines to an approach that will focus on projects that address the most important needs of the community, provide opportunities for local economic development, and result in long-term, sustainable benefits. Some examples of how company businesses already address capacity building are provided below.

The ConocoPhillips Indonesia business unit challenged itself to The ConocoPhillips Nigeria business unit has focused its The North Sea business unit – together with Scotland’s University implement a community development program that would be community efforts on “the needs of children, the future of of St. Andrews – annually presents the St. Andrews Prize for the targeted specifically at economic empowerment objectives. In Nigeria” for the sustainable provision of essential basic Environment, aimed at helping ordinary people from all walks of life addition, the company and the Indonesian government were infrastructure and support to less privileged children in identify innovative solutions to environmental problems. Launched interested in addressing the serious issue of deforestation in society, to ensure a better future for the country. For in 1998, the annual competition is now recognized internationally Indonesia. It was determined that rubber trees provided an example, ConocoPhillips responded to the Nigerian and attracts entries from approximately 50 countries. Winners opportunity to rehabilitate degraded land, while also providing government’s request for assistance for the Motherless receive a US$30,000 prize, with US$5,000 each going to two earning potential for local villagers. While the rubber tree is not Babies Home in Lagos, which had recently moved to a runners-up. In each case, winning the prize has led to further a native species to Indonesia, it has proven to be able to adapt new, larger location to accommodate the growing number financial backing or recognition. to conditions similar to the marginalized soil of the Indonesian of children they needed to assist, and to provide better deforested areas, planting stock is readily available, provides living and recreational space for the children. Their new A high-level panel of trustees representing science and academia economic value to the farmer, and provides a micro climate con- building could not be used, however, as the area was (to assess and evaluate ideas), industry (to look at economics and ducive for enhancing colonization of native species, increasing prone to flooding. Apart from the sanitary problems practicality), and government (to consider political feasibility) the ability to improve native species biodiversity in reforestation caused by the floodwater, it was an open invitation to judge more than 100 applications each year. Past winning entries when compared with other non-native commercially viable mosquitoes and thus malaria. include programs to reverse environmental damage done by old options. In 2002, the company started recruiting local farmers mining works in South Africa (1999); turn waste from olive oil to provide specialized training in rubber cultivation for an ConocoPhillips improved the area surrounding the home production to valuable byproducts in Palestine (2000); use average of 50 to 80 farmers per year from villages near company by constructing a fun-wall, as well as an all-season song, dance and drama to educate rural communities about facilities in South Sumatra province. Each participant manages playground and drainage to channel the floodwater away environmental hazards in Kenya (2001); persuade rice farmers 20,000 square meters of their own land during the training from the home. The company also drilled a water borehole/ in Vietnam to use safer, more productive ways of working (2002); period. With current total participants of 235 farmers, the pro- treatment plant with a submersible pump and replaced train semi-illiterate young people to install solar power in remote gram is in the third year and planned to last for five years, with old louver windows with aluminum-framed windows. Himalayan villages (2003); and use mapping technology to further the first harvest expected in the sixth year. The participants protect the traditional culture and biodiverse lands of a remote receive training in improved cultivation techniques, as well as The ConocoPhillips Nigeria business unit staff recently tribe in Peru (2004 award recipient pictured above). horticultural materials including seeds, fertilizer and cultivation chose to spend one work day at the Motherless Babies tools. To ensure sustainability of the program, as the farmers Home, washing, weeding, landscaping and disinfecting According to Sir Crispin Tickell, an international sell their harvest they begin reimbursement of the cost of their different areas of the facility. Todd Creeger, president of environmentalist and former British Ambassador to the training and supplies, funds that are then employed for the next the company’s West Africa operations said, “Anyone can United Nations who chairs the panel of trustees, “The Prize has years’ trainees. The program participants also are active in assist financially, but it takes real commitment to get given a start to many excellent environmental initiatives around monitoring agricultural activities for five years to help ensure out and help hands-on.” the world that otherwise might never have gotten off the ground.” sustainable practices are being employed. http://sd.conocophillips.com 21 Social Performance

As indicated below, the company focuses on organizations in which they volunteer their time. The Search for Solutions education and youth, civic and arts, safety and Employee volunteerism also is fostered through social services, and the environment. company programs that encourage involvement Produced in conjunction with the National in local charitable activities, such as support Science Teachers Association, the Search for Estimated Cash Contributions Solutions video series explores the key elements for the United Way and Special Olympics. 2004 of science – creativity, modeling, application, theory and argument – and how these processes Estimated Millions of Dollars Community Input are practically applied. Multiple winner of the 22.6 ConocoPhillips’ businesses strive to incorporate Telly Award for outstanding programming, the Education & Youth community input into the process of deciding videos are designed to capture the attention and Safety & Social Services imagination of junior high and high school stu- Civic & Arts where company contributions can be most valu- 7.2 dents. The videos are accompanied by online 2.8 Environment able. For example, the ConocoPhillips Azerbaijan teaching guides that help reinforce concepts 4.5 business unit employed a stakeholder process through discussion, hands-on exercises and to gain input from local nongovernmental experiments. ConocoPhillips funds production Education and Youth is the cornerstone of organizations, representatives of vulnerable costs for the 10-part video series, as well as distribution to more than 20,000 science ConocoPhillips’ giving portfolio. By supporting groups, government and other members of the teachers in the United States. education, the company helps communities community into the operation’s giving strategies strengthen their economic base and trains its and volunteer efforts. One project that resulted To impart a global view of the practice and future work force. In 2004, ConocoPhillips from such consultation was the Baku Exhibition application of science, the series features provided $16.5 million to universities around and Sale of Arts and Handicrafts of Azeri distinguished scientists and research centers in the United States, Australia and Chile. the world. ConocoPhillips also matches gifts disabled artists. Consultations with the disabled Feedback from teachers validates the effective- from U.S. employees, directors and retirees to artists helped identify specific needs, while ness of this approach. elementary and secondary schools, universities consultations with government agencies helped and technical institutes. In 2004, approximately determine the best ways to contribute. Rather Brent Rusert, a high school science $1.8 million of the corporate educational than simply making a cash donation, teacher from Fort Bragg, California, said, “I have been teaching science for over 20 years, spending was contributed through this program. ConocoPhillips provided materials to the artists, and I want to thank you for Search for Solutions. so that they could produce and sell their works I have found no better way to explain the Employee Volunteerism is another key emphasis at the exhibition, thereby gaining income, diversity of people and ideas that comprise the for the company. One-on-one involvement in recognition and self-esteem. world of science.” communities develops employee skills, facilitates teamwork, and helps employees understand and After the success of the first exhibit, appreciate the interdependence between the com- ConocoPhillips was contacted by the Azerbaijan pany and the communities where it does business. Embassy in the United Kingdom to exhibit works ConocoPhillips supports the efforts of employees of the disabled artists in London. The exhibition who volunteer in their communities through the drew international attention to the problem of company’s Employee Volunteer Grant Program. the disabled in Azerbaijan. Through the money U.S. employees may apply for grants of up to and recognition earned from the exhibitions, the $3,000 for capital improvements and up disabled artists founded artistic and sewing An image from Search for Solutions, which helps students to $500 for planning projects for charitable workshops and have gained new commissions. connect with science.

22 http://sd.conocophillips.com Health, Safety & Environmental Performance

HSE Policy, Management the standard result in a nonconformance that year, environment the second year, and System & Audits requires the business to develop a corrective management systems the third year. Company- action plan. Plans are updated at least every six wide, in 2004, corporate auditors performed 60 ConocoPhillips’ Health, Safety and Environment months, at which time a business with a prior compliance audits for health, safety and (HSE) policy applies to all owned and nonconformance must report to management environment and 15 management system operated locations and commits the company whether it has been corrected. Large, complex audits. Sites also perform their own HSE and to working with its subsidiaries, affiliates, facilities are audited annually, alternating management system self-assessments regularly. contractors and governments worldwide to gain emphasis between health and safety the first their support in adhering to the company policy. ConocoPhillips’ Health, Safety and Environment HSE Data Assumptions Policy commitment reads as follows: The HSE metrics presented in this report are Select environmental data for 2003 is provided. ConocoPhillips is committed to protecting based on the following assumptions. Environmental data for 2004 will be published on http://sd.conocophillips.com by the end of the the health and safety of everybody who For most indicators, data are presented for three third quarter of 2005. plays a part in our operations, lives in the geographic regions: North America, Europe and communities in which we operate or uses Asia Pacific/Other. “Other” includes Venezuela, The total E&P emissions are normalized using Middle East and Africa. barrels of oil equivalent (BOE) as a factor of our products. Wherever we operate, we will production operations. For gas production and conduct our business with respect and care The business sector charts reported for most liquefied natural gas, 6,000 cubic feet of gas is for both the local and global environment parameters depict the top three sectors in the assumed to be equal to one BOE. For gas processing company for that parameter, plus a category named plants, the BOE normalizer includes only liquid pro- and systematically manage risks to drive “Other,” which includes all other sectors com- duction of ethane, propane, butane and condensate. sustainable business growth. We will not be bined. For each indicator, the top three sectors satisfied until we succeed in eliminating all may be different, as can the sectors in the “Other” The R&M normalized data are presented for refining category. These charts illustrate which business only, which is the major sector of R&M operations. injuries, occupational illnesses, unsafe sectors are most significant for a particular Refining data are normalized based on million practices and incidents of environmental HSE indicator. barrels of oil equivalent (MMBOE), which repre- harm from our activities. sents the number of barrels of crude oil and other The HSE pro forma data for 2002 is presented as hydrocarbon feedstock input to the refineries. if the merger had occurred on January 1, 2002. ConocoPhillips has instituted an HSE Due to different reporting practices of the two management system standard as a tool for All reported HSE data are based on operated companies prior to the merger, metrics are not assets only. Environmental data are represented available for some HSE issues of interest to implementing the HSE policy and ensuring as 100 percent ownership interest regardless of stakeholders. The company is refining its HSE effective HSE programs. actual share owned by ConocoPhillips. Data is data systems and will report additional indicators reported in metric tons (referred to as tonnes). in the future.

The company audits its facilities against the Reported data for air emissions, hydrocarbon HSE policy. Any gaps in performance against spills and waste are broken down into two groups: E&P and Midstream, and R&M.

1 The full HSE policy can be viewed at http://www.conocophillips.com/hse/index.htm http://sd.conocophillips.com 23 Health, Safety & Environmental Performance

ConocoPhillips employs an incident notification ergonomics program. On the behavior side, use Safety in Motion’s proven training and standard and system for failures and situations employees learn safety auditing skills – action system to reduce the incidence of that can cause the potential for failure (or near observing people while they work, reinforcing musculoskeletal pain and injury, including misses). The computerized system ensures that safe work practices, and correcting unsafe acts common and costly strains, sprains, back pain, senior management is notified within one and conditions. On the ergonomic side, employees tendonitis, slips and trips. The five-module business day for significant incidents and are telephoned immediately for the most serious Safety Performance Data* incidents. Investigations seek to identify the root cause of the incident or near miss, and The employees and contractors that make up the were serious enough that the worker had to lose company’s global work force improved their total time from work, compared to 19 percent in 2002. key learnings are communicated within the recordable rate (TRR) 31 percent from 1.13 Four of the injuries proved fatal in 2003, as did company to help prevent recurrence. injuries per 100 workers in 2002 to 0.78 in 2004. two in 2002. There were no fatalities in 2004. In both 2003 and 2004, 21 percent of all injuries Work Force Recordable Occupational Safety & Health Work Force Total Employee and Injuries by Business Safety Performance Recordable Rate (TRR) Contractor TRR Sector ConocoPhillips’ safety goal is zero injuries, 2004 2004 31% illnesses and incidents. Improvements in Company Company company safety statistics in 2003 and 2004 are 11% Corporate a start toward achieving these goals. However, Corporate E&P and 6% 52% the company acknowledges its performance in Midstream E&P and safety must improve further. Midstream R&M R&M Global Refining 00.5 1.0 1.5 In 2004, 40 percent of the ConocoPhillips busi- 00.5 1.0 1.5 Global E&P 2004 Global Marketing ness and support organizations for which safety Contractor 2003 Global Other statistics are reported achieved the goal of zero Employee 2002 recordable employee injuries. Sixteen percent also achieved zero recordable contractor injuries. Work Force Lost Workday Employee and Work Force TRR by A key to improving safety performance is focusing Case (LWC) Rate Contractor LWC Rate Geographic Region 2004 on safe behavior. ConocoPhillips’ operations Total Company Company develop programs that emphasize a worker’s Company Total North personal responsibility for working safely and Corporate America encourage a culture of watching out for each other. Corporate E&P and Total Supervisors are encouraged to “walk the talk,” Midstream E&P and Europe ensure their behavior sets an example, and identify Midstream Total Asia R&M Pacific/Other R&M ways to reinforce safety messages with employees. 00.25 0.5 01.0 2.0 00.25 0.5 2004 2004 Several ConocoPhillips’ operations employ Safety 2003 Contractor 2003 in Motion, a behavior-based safety process and 2002 Employee 2002 *Data revised as of March 15, 2005. 24 http://sd.conocophillips.com Health, Safety & Environmental Performance

program emphasizes shifting forces to parts of Industrial Hygiene and Occupational the body designed to handle those stresses. Medicine Standard Training gives employees practical techniques to ConocoPhillips has instituted an industrial reduce physical stress and strain, boost balance hygiene and occupational medicine standard, and strength, and improve productivity. which establishes overall requirements for assessment and control of work place health The company has implemented several programs hazards, medical surveillance to monitor and to drive contractor safety improvements, including: validate the effectiveness of the control measures employed, and the determination Contractor Health & Safety Standard – This of applicable exposure limits. This standard is standard, instituted in April 2004, supplements included in the company’s HSE audit process. the HSE management system standard by (See page 23 for more on the audit process.) establishing minimum expectations for health and safety management of contractors. Ergonomics The company’s Borger, Texas, refinery earned the OSHA Voluntary Ergonomics is the science of studying people at Protection Program “Star” rating, along with the technology E&P and R&M Contractor Safety Functional work, and then designing tasks, jobs, tools, centers in Ponca City and Bartlesville, Oklahoma. Excellence Team – This team works on contractor equipment, facilities and the environment so that assessment tools are available for office-related safety issues common across all businesses. people can be safe, healthy, effective, productive work situations. Field-related programs are The team is standardizing the contractor and comfortable. Guidance documents and risk being piloted in ConocoPhillips’ businesses. pre-qualification process and assessing incident trends to identify and address root causes. Health Care is a Priority Everywhere The team also helps share best practices across the company. Each ConocoPhillips business unit is prepared Employees who become ill offshore are usually to address employee health needs. In remote brought onshore for treatment, unless they are locations, that often requires extra consideration. likely to recover quickly without medical help. If Refining Contractor Safety Network – Refining Basic medical facilities are provided in areas the health issue is serious or requires surgery, the representatives have started a contractor safety where medical help is absent or lacking. These company admits employees to a hospital and network with monthly conference calls to share facilities vary according to need and may include monitors their condition. While recovering, the provision of first-aid posts, ambulances and employees are housed at ConocoPhillips’ onshore information, including contractor pre-qualification, medics. Where local medical facilities are present, complex near its clinic so that a nurse or doctor performance auditing, management incident extra equipment or medications may be donated to can visit daily, speeding recovery. reviews, HSE management system implementation those facilities, enhancing care for ConocoPhillips employees, as well as local residents. When chronic illness or injury prevents someone for contractors, injury analysis, action plan from continuing work in his or her current job, development, and security background evaluations. A look at the company’s processes in the Middle attempts are made to accommodate the employee. East provides an example. Employees working off- Discussions are held with the employee’s managers, shore Dubai must have pre-placement and annual and job restrictions are established. Although not E&P Best Practices Benchmarking – E&P is in the physical examinations. The pre-placement exam practical in all cases, employees are often able early stages of establishing an internal gap identifies employees with medical conditions that to utilize their skills – temporarily and sometimes analysis based on lessons learned from industry could jeopardize their health if medical care was permanently – elsewhere in the company. delayed due to remote operations or increase the leaders in contractor safety. risk of accident or injury at work.

http://sd.conocophillips.com 25 Health, Safety & Environmental Performance

Safe Handling of Chemicals assist program, in which employees visit (Percentages present pro forma as if the merger ConocoPhillips is an active partner in the U.S. other locations to share ideas for improving had occurred on January 1, 2000.) Environmental Protection Agency’s high production mechanical integrity. volume chemical testing program. The Several significant events occurred at company purpose of the program is to provide information During 2001 and 2002, the consulting firm facilities between late 2002 and mid-2004. on potential health and environmental impacts Det Norske Veritas performed mechanical In all major incidents, the company conducts of chemicals produced in large volumes in the integrity audits of the company’s U.S. and U.K. full investigations to identify root causes and United States, but for which impact data is not refineries and major E&P assets. Areas suggested steps to prevent a recurrence. The following publicly available. Through testing groups for improvement include elevating the incidents attracted particular public concern: set up by the American Petroleum Institute organizational focus on mechanical integrity; • An explosion and fire at the Ponca City, and the American Chemistry Council, the development of mechanical integrity Oklahoma, refinery resulted in injuries to five ConocoPhillips is sponsoring health and metrics; strengthening management of change employees and one contractor. One of the environmental effects testing on nearly 400 processes and auditing programs; and enhanced employees died as a result of his injuries. products and refinery intermediate streams. training. The improvement opportunities were prioritized after being divided into site or global Safety a Benefit to Propane Customers Being a Safe Neighbor issues. Each refinery and E&P asset, along with ConocoPhillips’ commercial propane marketing The company must ensure that its presence does support from the company’s technology groups, group administers the Safety Circle program, which offers propane marketers in the United not compromise the safety of the community – has developed plans to address the key areas. States and Canada opportunities to earn rebate not only for employees, but also for neighboring dollars for each gallon of propane they buy from residents and the local environment. The company In 2003 and 2004, key mechanical integrity ConocoPhillips. Marketers spend their rebates on a wide variety of safety-related educational does so by strengthening the integrity of its metrics were established to measure materials and programs, including seasonal facilities and equipment to prevent incidents, performance and track improvement progress. customer fliers, bulletins and propane safety preparing for emergencies, and responding Also, the mechanical integrity portion of the brochures. Rebates also help marketers defray the cost of employee training, as well as quickly. ConocoPhillips also seeks to share its corporate HSE auditing process was updated to postage charges for customer safety mailings. safety values with the community at large. ensure additional focus on mechanical integrity. Participation has been outstanding – The mechanical integrity program for the com- ConocoPhillips ships about 2 million brochures Mechanical Integrity per year to propane marketers. In addition to Part of reaching the company’s safety goal pany’s crude oil gathering system has yielded promoting safety, the Safety Circle program of zero is to eliminate unplanned events by significant results. The program involves imple- builds customer loyalty and has become an effective selling tool for the company’s propane strengthening mechanical and operating menting measures beyond current regulations to sales representatives. integrity programs. ConocoPhillips follows reduce leaks and spills, including additional Propane marketers industry standards on managing equipment and testing and cleaning of the gathering lines and appreciate the flexibility to spend the money in the has established additional internal standards upgrading components to materials with greater way that best suits their for fixed assets and equipment. All company- corrosion protection. These efforts have company. The program can owned and -operated refineries and many contributed to reducing the number of pipeline also benefit customers by satisfying their insurance upstream assets are participating in a peer releases by more than 40 percent since 2000. requirements for a documented formal safety program.

1 http://www.epa.gov/chemrtk/volchall.htm 26 http://sd.conocophillips.com Health, Safety & Environmental Performance

• A storage tank in Glenpool, Oklahoma, • Mechanical failures occurred in a boiler at • Fires occurred at: an out-of-service tank caught fire, spilling diesel fuel and crude oil. the Carson, California, refining facility, and a undergoing mechanical repairs at the Sweeny, As a precautionary measure, residents power failure occurred at the Lake Charles, Texas, refinery; a product terminal struck by within a one-mile radius were evacuated for Louisiana, refinery. The Lake Charles incident lightning in East St. Louis, Illinois; a naphtha two days. resulted in a release of sulfur dioxide. hydrotreater unit at the Alliance refinery in Belle Chasse, Louisiana; and a catalytic feed Strengthening Community Relationships hydrotreater at the Wood River refinery in Roxana, Illinois. In these cases, company In 2001, the Humber refinery’s relationship with the neighboring community was tested when an emergency response or operations personnel explosion and fire in the saturate gas plant caused expediently brought the situation under damage to area homes. Although the plant was control and minimal injuries were sustained. quickly and safely shut down and no major injuries resulted, relationships with the local community were seriously affected. As a result of the incident, Key learnings from incidents are shared to a community liaison team was formed to help prevent like or similar incidents. residents repair property damage and to reassure them of the refinery’s commitment to safety. Marine Integrity In an effort to further strengthen the relationships Combined, ConocoPhillips and its subsidiary, built by the community liaison team, the Killingholme Area Advisory Group (KAAG) was Polar Tankers, own a total of 13 tankers. formed in 2003. The group is comprised of a Eleven of the 13 tankers are double-hulled, mixture of local citizens and representatives from with one additional double-hulled vessel to refinery management, who meet monthly. The KAAG members voice any community concerns or be completed by early 2006. The full issues to the refinery management, who also keep the KAAG updated on operations.

The KAAG members disseminate to the community the information discussed in the meetings and provide an opportunity for other neighbors to ask questions by producing a quarterly newsletter and erecting a KAAG village notice board. The newsletter promotes awareness of the refinery’s The KAAG identified an opportunity for Humber employees to help operations, any problems that may have arisen increase community pride. Local school children were provided and how they were solved, and includes questions with seeds, taught how to help them grow, then with Humber asked and answered. The group continues to work employees planted them in village flower beds. on better means of communication. For example, they have launched their own extranet site has contributed in 2004 toward community effort (www.kaag.co.uk), administered by one being included in the Humber refinery’s key focus representative each of the ConocoPhillips areas. A total of 614 community projects were refinery and the community. carried out by refinery employees during 2004, many of which center around employees’ volunteer The KAAG also has leveraged the refinery’s efforts in the community. As a result, relationships investment in community projects. The group has with the local community have dramatically helped to identify where the refinery’s involvement improved, achieving a key community goal identi- in the community can be of greatest benefit, which fied by the KAAG – increasing neighborhood pride. The Polar Discovery is a double-hulled ship in ConocoPhillips’ fleet. http://sd.conocophillips.com 27 Health, Safety & Environmental Performance

ConocoPhillips and Polar Tankers tanker fleet Crisis Management & Emergency Response ConocoPhillips is a member of the tier three oil will be double-hulled in 2008. All of the ConocoPhillips has developed an integrated global spill response organizations that cover the regions of company’s 14 barges also are double-hulled. emergency response process. The process includes the world in which it operates. Membership in these The company has a ship vetting plan – a review response capabilities and crisis management cooperatives extends company access to resources of a vessel’s safety management, security and plans at the corporate, regional and local level. both equipment and trained personnel – that can maintenance history, and procedures that take All plans include regular training, equipment provide immediate emergency assistance. place before a vessel may carry its product – maintenance and review of procedures. for both ConocoPhillips’ fleet and contracted vessels, including barges. And the company has Community Safety expanded its management system audit process to include contracted ships and barges, as well The company’s concern for safety extends to its as the company fleet. employees’ families and the communities in which it operates, and many company locations have safety outreach programs. For example, employees in ConocoPhillips has upgraded its marine Ponca City, Oklahoma, have created an Off-the-Job environmental impact policy to treat all oceans, Safety Committee (OTJSC) to promote individual value for a safe lifestyle to reduce off-the-job not just those designated by the International incidents and perpetuate the understanding and Convention for the Prevention of Pollution from practice of safety procedures for all employees and Ships (MARPOL), as MARPOL Annex V their families. Some of the activities the committee undertakes include: special areas by 2006. This means being • A Safety Store that provides safety items to capable of retaining oily wastes on board or employees and retirees at cost. discharging them to onshore reception facilities. • Safety tips in employee newsletters. • “Lunch and Learn” brown bag sessions – professional emergency responders in the community present updates/changes to emergency plans (including environmental shelter-in-place) for the Ponca City area. • Safety presentations by OTJSC members given at local schools. • A week-long Summer Safety Day Camp for ConocoPhillips OTJSC employees dressed up as crash test employees’ children. dummies at the local high school to encourage students to • Partnering with Oklahoma Safe Kids Coalition “Please Buckle Up.” and other local agencies to check the safety of children’s car seats and distribute information • Displaying eye protection items from the Safety on child passenger safety. Store and distributing information about saving • Distributing bicycle safety information along vision during Save Your Vision week. with bicycle helmets for National Safe Kids • Talk-back television – continuous loop safety Week. presentations are displayed on various monitors • Conducting boating safety classes that are open around the Ponca City complex, including During a SONS drill, incident commander Jay Jones (second from to the community. the refinery. right) discusses response plans with colleagues from the U.S. • Providing information to employees on home Coast Guard and the California Department of Fish & Game. fire escape planning and fire safety during National Fire Prevention week.

1 http://www.londonconvention.org/marpol_73.htm 28 http://sd.conocophillips.com Health, Safety & Environmental Performance

ConocoPhillips participates in and helps coordi- efforts of the U.S. government and the petroleum nate Spill of National Significance (SONS) drills – industry. The drills, funded jointly by government mandated by the Oil Pollution Act of 1990 – and industry, typically involve a year of planning by which are conducted every two to three years the major public and private sector participants. under the direction of the U.S. Coast Guard. One of several emergency response exercises In April 2004, trained ConocoPhillips personnel ConocoPhillips engages in, SONS drills are joined more than 1,100 other incident respon- designed to foster significant improvements in the ders from the U.S. Department of Homeland preparedness, prevention and oil spill response Security, the U.S. Coast Guard, the government

Hydrocarbon Spills Metrics An oil spill response vessel deploys a boom and skimmer as part of ConocoPhillips records and reports information on from 14,673 to 9,244 barrels. Spill volume a drill. liquid hydrocarbon spills from primary containment in this category increased by 15 percent to that are one barrel (42 gallons) or greater. While 10,662 barrels from 2003 to 2004, while the of Mexico, the U.S. and Mexican Navies, the comparative data for spills over one barrel is not number of spills increased from 126 to 135, available for 2002, data for 2003 and 2004 are or 7 percent. state of California, another oil company and shown below. In the greater than one barrel numerous spill response contractors to practice category, the volume of spilled liquid hydrocarbon Improvement was seen in reductions of the implementing their oil spill contingency plans. increased by 9 percent from 2003 to 2004, while number of significant spills (greater than the number of spills decreased by 15 percent. 100 barrels) from 2002 to 2004. The number The scenario was a vessel collision, a ship Of the total volume spilled in 2003, about of spills greater than 100 barrels was reduced by explosion and two major oil spills – all in the 70 percent was recovered. In 2004, 53 percent 33 percent from 2002 to 2003 and by another same morning, off the California coast. of the total volume spilled was recovered. 6 percent from 2003 to 2004. The volume spilled was reduced by 56 percent from 11,126 barrels in Between 2002 and 2003, the volume of spills 2002 to 4,951 barrels in 2003, but increased in Drill participants staffed local unified command greater than 10 barrels decreased by 37 percent 2004 to 7,084 barrels. posts in San Diego and San Pedro, California, Volume of Spills >1 Bbl Volume of Spills >10 Bbls supplemented by a national incident command Numbers inside colored portions of bars Numbers inside colored portions of bars center in Los Alamitos, California, and a represent number of spills. represent number of spills. response center in Ensenada, Mexico. According 2004 320 214 E P and Midstream 76 59 & 2004 E&P and Midstream to Dale Summerlin, emergency response manager 2003 399 226 2003 62 64 R M at the time for ConocoPhillips, feedback has 0155 10 & 2002 66 61 R&M Thousands of Barrels 0155 10 been very positive. “I heard from state and Thousands of Barrels federal agencies that the industry response was outstanding, and our integration into the various Volume of Spills >10 Bbls Volume of Spills >10 Bbls Business Sector Geographic Distribution response groups was seamless.” 2004 2004 27% 4% ConocoPhillips’ crisis management and Global Refining emergency response planning extends to the Global E P & Total North America community. For example, company fire schools Global Transportation 9% 28% & Terminals Total Europe are open to members of the municipalities’ 41% Global Other 7% Total Asia Pacific/Other 84% emergency responders. http://sd.conocophillips.com 29 Health, Safety & Environmental Performance

Environmental Performance wells from ice pads, placing the well site facilities As stated earlier, ConocoPhillips’ approach to on piles, restricting the physical size of production protecting the environment is guided by its HSE equipment, automating support of remote Policy and monitored through the management operations, and limiting surface access in system standard, audits, incident notification non-winter periods to helicopter travel only. processes and performance reporting. Air Emissions Select environmental data for 2003 is provided Clean Fuels in this section. Environmental data for 2004 will In 2004, refiners were required to start lowering be published on http://sd.conocophillips.com by the sulfur content of gasoline sold in the United the end of the third quarter of 2005. States. Most refiners must reach an average of 30 parts per million (ppm) by January 1, 2006. Treading Lightly in the Arctic Prior to this new regulation, average conventional The tundra of the Alaska North Slope and gasoline in the United States contained northwest Russia hold vast oil reserves and also 330 ppm of sulfur. are important and sensitive ecological systems. In 2004, the Lomonosov Foundation and the Arkhangelsk Oblast ConocoPhillips recognizes stakeholders’ interest By June 2006, the U.S. Environmental Protection Environment Committee recognized the Polar Lights Company Agency (EPA) rules will require a 97 percent (50 percent owned by ConocoPhillips) for its environmentally- that any development be done in a manner that friendly technology and processes used in building the Ardalin protects the environment. One way the company reduction in the sulfur content of highway Satellite field facilities. treads lightly in arctic regions is by using the diesel fuel (from its current maximum level of concept of padless exploration and development, 500 ppm) to 15 ppm. According to the EPA, use budget was allocated toward clean fuels programs which uses ice and packed snow in place of of this fuel in buses and trucks in conjunction in its U.S. and international operations. gravel well pads and gravel roads. It also with emission controls reduces criteria pollutant includes drilling exploration and/or production emissions at the tailpipe by almost 95 percent. During 2003, the company completed projects This will have significant environmental to produce low-sulfur gasoline at the Ponca benefits. Another EPA rule will reduce the City, Oklahoma; Roxana, Illinois; and Ferndale, sulfur standard for non-road diesel from 5,000 Washington; refineries. The Ferndale refinery to 500 ppm in 2007, to 15 ppm for farm and project installed the proprietary ConocoPhillips construction vehicles by 2010, and to 15 ppm S Zorb™ Sulfur Removal Technology – the for locomotive and marine uses by 2012. largest unit built with this technology to date – which will comply with stringent government The U.S. sulfur phase-down exemplifies the gasoline sulfur regulations. Construction of a worldwide trend toward cleaner petroleum fuels. new diesel hydrotreater has begun at ConocoPhillips is investing about $2 billion ConocoPhillips’ Rodeo facility at the San over five years to meet clean fuels regulations. Francisco Area refinery and is expected to The insert shows an exploratory well on an ice pad in the Alpine field In 2004, approximately one-third of produce ultra-low sulfur highway diesel one in Alaska. The surrounding picture shows the same site six months ConocoPhillips’ refining and marketing capital year ahead of the EPA June 2006 deadline. later. All that remains is an 8-foot square well house (the white cube).

30 http://sd.conocophillips.com Health, Safety & Environmental Performance

Criteria Pollutants company’s 2003 SOx emissions were about projects at E&P operations and two refineries Sulfur Oxides (SOx) are acidic gases produced 85,000 tonnes compared with 91,000 tonnes contributed to the net SOx reduction. during the combustion of fuels that contain sulfur in 2002. However, when adjusted for asset compounds. The majority of SOx emissions acquisitions and divestitures, operating Nitrogen Oxides (NOx) are the sum of nitric originate from sulfur contained in fuel and occur fluctuations, and data improvements, the 2003 oxide and nitrogen dioxide. Nitrogen oxide as sulfur dioxide. SOx and nitrogen oxide SOx emissions were about 3,000 tonnes lower emissions occur almost exclusively from the together contribute to acid rain. Overall, the than the comparable 2002 results. Reduction combustion of fossil fuels in boilers, heaters, engines, flares and turbines, and are a function SOx and NOx Metrics of the type and quantity of fuel burned and the type of combustion device in which they are Total SOX Total NOX burned. Nitrogen oxides can lead, in the presence of volatile organic compounds and 2003 2003 E&P and Midstream E&P and Midstream sunlight, to the formation of smog. 2002 R&M 2002 R&M 0 20 40 60 80 100 0 20 40 60 80 100 120 Overall, total 2003 NOx emissions were Thousands of Tonnes Thousands of Tonnes about 104,000 tonnes, compared with 2002 emissions of about 100,000 tonnes. However, SOX Geographic Distribution NOX Geographic Distribution when adjusted for acquisitions and divestitures 2003 2003 and data improvements, 2003 NOx emissions 3% 11% 7% were unchanged, compared with 2002. 11% Total North America Total North America Other Criteria Pollutants. ConocoPhillips is Total Europe Total Europe Total Asia Pacific/Other Total Asia Pacific/Other collecting and validating Volatile Organic 90% 78% Compounds and particulate matter emission data and is refining its systems so that it can NOX by Business Sector SOX by Business Sector report this data in the future. 2003 2003 52% 23% Global Refining Global Refining EPA Consent Decree. ConocoPhillips signed an 10% 14% Global Specialties Global E&P agreement with the U.S. Environmental Protection Global Transportation Global Transportation Agency (EPA) on Jan. 27, 2005, to reduce 14% & Terminals 14% & Terminals Global Other Global Other air emissions at nine of ConocoPhillips’ U.S. 24% 49% refineries in seven states. The settlement is expected to reduce emissions from these facilities SOX Tonnes per unit of Production NOX Tonnes per unit of Production by approximately 65 percent through the installation of more than $500 million of state- 2003 2003 E&P and Midstream E&P and Midstream of-the-art pollution control technologies. The 2002 Global Refining 2002 Global Refining company’s other three U.S. refineries were 06010 20 30 40 50 08010 20 30 40 50 60 70 included in a similar settlement reached in 2001. Tonnes/MMBOE Tonnes/MMBOE http://sd.conocophillips.com 31 Health, Safety & Environmental Performance

Climate Change in a number of joint industry projects that are As stated in its 2003 Climate Change Position focused on increasing its understanding of carbon Statement, ConocoPhillips recognizes that dioxide (CO2) sequestration, and reducing capture human activity, including the burning of fossil and storage costs through development and fuels, is contributing to increased concentrations of greenhouse gases (GHG) in the atmosphere, Clean Power for the United Kingdom which can lead to adverse changes in global In 2004, ConocoPhillips launched the new climate. While the debate continues over the Immingham power plant adjacent to the extent of human contributions and the timing Humber refinery in North Lincolnshire, England. and magnitude of future impacts, the company is It is the largest fully qualifying cogeneration plant in Europe and makes a significant contri- committed to taking action now to begin bution to meeting the U.K. targets for reduced addressing the issue. CO2 emissions.

Opportunities to reduce carbon dioxide (CO2) also are being This 730-megawatt cogeneration plant supplies investigated in the company’s technology efforts, such as its Implementing the Climate Change Position steam and electricity to the Humber refinery. E-Gas technology. In 2004, ConocoPhillips took several actions Excess steam goes to a neighboring refinery, ConocoPhillips is pleased, that by working toward implementing its climate change position. and excess electricity is fed into the country’s national grid. The plant also can provide heat and together with the agencies, it found solutions The company’s E&P and R&M businesses began power to other emerging industries in the area at that will significantly reduce emissions, while assessing data to develop objectives to reduce competitive prices. enabling the company to continue to provide its GHG emissions. Guidance for integrating climate In addition to providing a clean source of customers with a reliable supply of quality fuels. change considerations into ConocoPhillips’ electricity, environmental benefits of the plant ConocoPhillips places the highest priority on its project planning and approval processes is include use of surplus fuel gas produced by the commitment to operate safely and in an being developed in conjunction with efforts to Humber refinery, which would otherwise have been flared. environmentally responsible manner. integrate sustainable development. The company actively engages in discussions on climate The company entered into negotiations change through memberships in the American voluntarily. The discussions with the EPA and Petroleum Institute (API) and the International the Department of Justice have been ongoing Petroleum Industry Environmental Conservation since 2000. When combined with the earlier Association. In 2004, ConocoPhillips joined the agreement, all ConocoPhillips U.S.-based International Emissions Trading Association. refineries now will be part of a consent decree. Because it was negotiated in good faith, the Developing Business Opportunities settlement was reached without litigation. In 2004, ConocoPhillips created a Global Gas unit within its E&P business to focus the company’s Over the past three years, the United States efforts in the development and management of has reached similar agreements with many lower-carbon natural gas. The company is The Immingham power plant. other refiners. performing internal research and participating

1 Please see http://sd.conocophillips.com/climate_position.asp for the full Climate Change Position Statement. 32 http://sd.conocophillips.com Health, Safety & Environmental Performance

application of new technology. These projects Enhanced Coalbed Methane Consortium. Preparing for Regulation include WESTCARB (the U.S. Department of ConocoPhillips also is a member of CO2Net, the ConocoPhillips’ U.K. and Canadian businesses Energy’s West Coast Regional Sequestration European network of CO2 researchers, developers are actively preparing for GHG regulations in Partnership), the SINTEF Group study of CO2 for and users of CO2 mitigation technology. In addition, those countries, beginning in 2005 and 2008, enhanced oil recovery and disposition in aquifers ConocoPhillips has joined the CO2 Capture Project. respectively. Since the start of 2005, ConocoPhillips in Norway, and the Alberta Research Council’s facilities across Europe have been subject to

Greenhouse Gas (GHG) Metrics*

ConocoPhillips reported total GHG emissions The company’s total 2003 CO2 equivalent GHG Greenhouse gas emissions from the refining sector include carbon dioxide (CO2) emissions from opera- emissions were approximately 53 million tonnes. were approximately 58 percent of total company tions (which includes the emissions associated with Previously reported 2002 GHG emissions have GHG emissions, or 31 million tonnes in 2003. electricity and steam sold by the company), CO2 been restated to approximately 50 million tonnes, Refining GHG emissions normalized per unit of emissions from purchased electricity, CO2 emissions in order to include emissions from purchased throughput are about 33,000 tonnes CO2 equiva- from purchased steam, and methane (CH4) emissions steam and to reflect improvements in data quality lent per million barrels of hydrocarbon refined. from operations in terms of CO2 equivalent. and completeness. In 2003, GHG emissions E&P 2003 GHG emissions, including exploration, increased by about 2.8 million tonnes from the production and gas processing operations, account Greenhouse Gas Emissions restated 2002 estimate due to business growth for about 35 percent of total company emissions. 2003 (2.5 million tonnes) and operating fluctuations Normalized E&P GHG emissions are about 20,000 (0.3 million tonnes). tonnes per million barrels of oil equivalent. 11% CO2 from Operations 3% CH4 as CO2 Equivalent 4% GHG (CO2 Equivalent) CO2 from Purchased Steam GHG (CO2 Equivalent) Geographic Distribution CO2 from Purchased Electricity 2003 82% 2003 E&P and Midstream Carbon dioxide from operations, the major 2002 R&M component of total company GHG emissions, 11% Total North America 06010 20 30 40 50 includes emissions from process operations such as Total Europe Millions of Tonnes 13% exhaust from combustion sources and vented CO2. Total Asia Pacific/Other The scope of CO2 reporting excludes emissions 76% associated with products sold and company- operated transports except for marine vessels. (See page 39 for more information on the company’s GHG emissions calculations GHG (CO2 Equivalent) by Business Sector GHG Tonnes per unit of Production methodology.) Refining operations are energy 2003 intensive and account for the majority of the 2003 company’s direct CO emissions. 7% E&P and Midstream 2 Global Refining 9% 2002 Global Refining Methane emissions are a minor fraction of the total Global E&P 04010 20 30 GHG emissions from operations. These emissions Global Gas Processing Thousands of Tonnes/MMBOE result from vents on tanks, separators or other vessels, 26% Global Other leaks from valves and flanges, or natural gas vented 58% during maintenance or emergency procedures. Methane also is found in exhaust gases as a result of incom- *See page 23 for more information on HSE data assumptions and page 39 for more information on plete fuel combustion. The majority of the company’s emissions calculations. methane emissions are from its E&P operations. http://sd.conocophillips.com 33 Health, Safety & Environmental Performance

the European Union’s emissions trading pro- employees worldwide, 13 ideas or projects gram. The company’s commercial organization were selected in 2003 and 11 in 2004 for is preparing to trade CO2 allowances in order to special recognition. optimize ConocoPhillips’ net emissions position for businesses in Europe. The trading group Evaluation criteria used to judge submissions will focus on minimizing the cost of procuring emphasized the fit of an idea within the any additional allowances required to meet pollution prevention hierarchy of “Reduce, compliance and maximizing the value of any excess allowances. Waste Reduction Efforts in China Applauded In 2003, the company and its partners submitted the gas flare elimination project for The People’s Republic of China’s State Oceanic Administration has the company’s Rang Dong field in Vietnam for recognized ConocoPhillips’ China approval as a Clean Development Mechanism business unit for outstanding (CDM) project under the Kyoto Protocol. The contributions and commitments to China’s environmental protec- project’s GHG accounting methodology became tion efforts. The Administration awarded then the ninth methodology (and the first for the Loss Prevention Vice President Mark Boben industry) approved by the CDM executive board. (pictured above) with the distinguished “Marine Environmental Protection Model The project itself is in the CDM validation/ Company pipelines employ ConocoPhillips Specialty Products drag Award.” The award recognized several firsts reducer technology, resulting in the ability to move more barrels of registration process. A final decision from the for offshore oil operators in China: reinjecting product with less energy. In addition, the drag reducer allows the CDM executive board is expected during 2005. drill cuttings versus disposing overboard, pipelines to be operated at a lower pressure, reducing energy costs. obtaining ISO 14001 certification, and com- mitting to reduce produced water discharges Flaring by lowering the cost of production. As part to 5 percent through reinjection practices for Flaring occurs when produced gas is burned of the API’s Climate Action Challenge, future developments. off as a safety precaution or when there is no ConocoPhillips has committed to improving the infrastructure for capturing, transporting and energy efficiency of its U.S. refining operations beneficially utilizing the gas. Flaring is both an by 10 percent by the year 2012, as measured environmental issue and an economic issue as by the Solomon Energy Efficiency Index. The flared gas is lost product. The company has begun company has begun collecting and validating collecting flaring data and will be refining its company energy use data to include energy systems so that it can report flaring data in metrics in future reports. future reports. Waste Energy Efficiency ConocoPhillips launched a Stamp Out Waste Using energy efficiently is both an environmen- campaign in 2003, which, due to its success, tal benefit through reduced air emissions as was repeated in 2004. Of the nearly 200 well as an economic benefit for the company submissions, from individuals and teams of An employee on the floating production, storage and offloading facility in Bohai Bay, China.

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Reuse/Recycle, Safely Dispose,” with education Recycled materials are residual materials from R&M, primarily due to the large refining sector, as an additional core value. In 2004, additional an industrial or commercial process that are generates about three-fourths of the total emphasis was placed on waste minimization not sold as product or disposed of as waste, company hazardous waste. In R&M, major projects that had been implemented in the but are reused, reclaimed or recovered for shutdowns and periodic maintenance activities workplace. Projects included ways to reduce beneficial use. can result in spikes in total waste generated hazardous waste at refineries, evaluate total from year to year. In E&P, drilling wastes and life cycle costs in materials purchases, achieve Of the total 753,000 tonnes of residual other one-time wastes can cause periodic cleaner power by replacing lead acid batteries materials managed by ConocoPhillips businesses fluctuations in waste quantity. with fly wheels which run on kinetic energy, in 2003, nearly half were recycled or reused, Hazardous Wastes recycle abandoned pipelines, enhance oil about 9 percent were hazardous waste, and the recovery from wastewater, reduce paper usage, balance were non-hazardous waste. 2003 improve spill containment methods, and E&P and Midstream 2002 R&M reduce the tire waste from truck fleets. Operating segments typically generate different 07525 50 hazardous and non-hazardous waste streams. Thousands of Tonnes The Stamp Out Waste program team has made all ideas submitted available to business units Multiple Perspectives Identify Decommissioning Solutions in the North Sea and staffs throughout ConocoPhillips. Stakeholder input has proven valuable as Waste Metrics ConocoPhillips’ North Sea business unit assesses Waste metrics collected and reported include options for the ongoing process of decommissioning oil production equipment in the North Sea. A hazardous waste, non-hazardous waste and cessation plan for 15 platforms, 235 kilometers of recycled residual materials. Hazardous waste infield buried pipelines and an estimated 31,000 includes all waste that is regulated as haz- tonnes of historic drill cuttings was submitted – and approved – by the Norwegian authorities. ardous, toxic, priority, special or any other While some of the equipment will remain in similar term as defined by an appropriate operation for years, the company is planning future regulatory agency or authority. Non-hazardous disposal of infrastructure such as steel jackets and topside structures from the Ekofisk I production waste includes industrial wastes resulting from facility. Scientific research, along with other company operations that are not designated or important factors such as stakeholder consultation, listed as hazardous by a regulatory agency. is part of the decision-making process.

Waste Profile To facilitate dialogue, ConocoPhillips has developed artistic views, illustrations and easily 2003 understandable presentations, along with 48% Decommissioning of the Ekofisk tank and protective wall were newsletters and a Web site. discussed with stakeholders. 9% Recycled According to Arnt-Goeran Hartvig, with the Oslo-based Environmental Foundation cessation project. Bellona found it most interesting Non-Hazardous 43% Bellona, “Since 1999 we have acted as a sparring to be part of the stakeholder dialogue and to Hazardous Waste partner and sounding board on the environmental have been given the opportunity to present our questions and issues connected to the Ekofisk I professional views and suggestions.”

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The quantity of hazardous waste managed by and use water wisely. Oil and gas industry water addressing the need for a corporate strategy on ConocoPhillips’ businesses in 2003 was about issues include: water management, investigating how the company 64,000 tonnes. This was 3,000 tonnes less • Water produced with oil and gas (volumes, can use its technical capabilities for improved than managed in 2002, primarily due to fewer treatment, handling, discharges) water management, seeking opportunities to refinery maintenance activities in 2003. • Fresh water use versus reclaimed or salt support local water resource projects, and water use determining goals for efficient water use. Risk Management & Remediation • Protection of surface water and groundwater ConocoPhillips is remediating or restoring from contamination by spills or leaks Biodiversity and Environmentally more than 4,000 properties with surface or • Facility process water treatment Sensitive Areas subsurface contamination. The company’s • Water use for steam production and cooling Biodiversity is the life support system of responsibility for remediation can arise from the planet, and its loss impacts all people. various situations, including properties currently ConocoPhillips is studying various approaches for All aspects of society, including business, owned by ConocoPhillips, now owned by another managing issues related to water. These include have a responsibility to conserve biodiversity, party but previously owned by ConocoPhillips or one of its predecessor companies, jointly Canada Seeks Water Options owned with one or more third parties, and those currently owned by others where ConocoPhillips ConocoPhillips Canada business unit has drilled a Waterflood has assumed individual or joint responsibility well at the Westerose field in central Alberta to Cross Sectional View determine the viability of using salt water instead for cleanup. of fresh water in waterflood operations, where Production Injection Production water is injected into oil-filled geologic formations Well Well Well Where ConocoPhillips performs remedial to enhance oil production at adjacent wells. activities, it minimizes risk to the health Though not mandatory, companies in the oil and safety of employees and the affected and gas industry have been asked to find ways to communities by employing appropriate tech- preserve Canada’s fresh water supply by reducing Injected or eliminating the amount used in their operations. nologies and operating practices at project Water sites, and being prepared for emergencies. By “This quest for an alternative to fresh water Oil Bank Oil Bank disposing of waste in an environmentally involved people across the organization,” said Neil Spenceley, a former Westerose field engineer who Residual Oil responsible manner, the company minimizes the has since transferred to Alaska. “The jury is still This drawing shows how the waterflood technique can enhance impact of remediation activities. out on whether salt water will be an economical oil production. alternative in every situation, but we are moving in the right direction. Searching for salt water is more Water expensive, and there are greater risks, but it is the The company’s efforts were noticed by Judy Winter, Fresh water is a limited resource that is sustainable, responsible decision.” secretary for the Butte Action Committee for becoming increasingly scarce in many parts of the Environment, a province-wide community The Westerose team also worked with the group that seeks to preserve fresh water for future the world. The United Nations has defined community to find fresh water alternatives, meet- generations. “The people from ConocoPhillips water as one of its highest priorities for action ing and listening to the concerns of residents in worked with the residents rather than against in the next decade. As with any natural resource, the Rimbey District, which covers the Westerose them. They kept the communication channels field. As a result, the company made the commit- open and listened to concerns.” ConocoPhillips has an obligation to conserve ment not to use fresh water for waterflood projects in the Rimbey District.

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protect the biodiversity of eastern Venezuela’s Corporation and Petróleos de Venezuela- Gulf of Paria. In developing pre-production Corporacíon Venezolana del Petróleo (PDVSA- environmental baseline studies, the company CVP) hosted a symposium to share the included the input of representatives from information from environmental and biodiversity Audubon Venezuela, the Smithsonian studies conducted in the Gulf of Paria and the Institution, Fundación la Salle, Conservation Orinoco Delta in eastern Venezuela. The event International, Ecology & Environment, and drew representatives from the Venezuelan Venezuelan academic institutions. scientific community, federal and state governments, the oil industry, nongovernmental ConocoPhillips’ Venezuela business unit works organizations, and the local fishermen and with the United Nations Development Program indigenous communities. and the Venezuelan Ministry of Environment and Natural Resources, participating in a Some of the new discoveries presented global environmental facility program for the included: conservation and sustainable use of the biological • The number of bird species registered in the diversity of the biosphere reserve of the Orinoco Pedernales region has increased approximately Delta. In addition, the company has funded and 40 percent; is participating with Fundación Tierra Viva • 108 plant communities have been defined, and other Venezuelan organizations on the including some new to the delta; and development of illustrations, compact discs • The mangrove thickets can reach a height

The Orinoco Delta in the Gulf of Paria. and tapes to broadcast bilingual (Spanish of 40 meters (131 feet). and Warao – the indigenous language) radio to encourage sustainable use of biological messages about the environment, culture In addition to presenting biodiversity resources, and to promote equitable sharing and health in the Orinoco River Delta. assessments of the area’s aquatic ecosystems, of biodiversity benefits. ConocoPhillips’ HSE the symposium also addressed topics such policy currently guides the company in ConocoPhillips has signed a Memorandum as trawl fishing and the associated issues, protecting the natural environment and of Agreement with Conservation International the socioeconomic realities of the region, biodiversity wherever it operates. to develop a biodiversity action plan. The and the threats and opportunities related to first product of that partnership was the conservation and sustainable utilization of the The company is studying the biodiversity issue development of the bulletin titled “Rapid region’s biodiversity. and plans to develop a strategy for providing Assessment of the Biodiversity and Social a consistent way to protect and conserve Aspects of the Aquatic Ecosystems of the biodiversity. One example of ConocoPhillips’ Orinoco Delta and the Gulf of Paria, Venezuela.” efforts can be found in the partnerships with In 2004, ConocoPhillips and its co-venturers diverse organizations the company is forming to Eni Venezuela, Overseas Private Investment

1 http://www.conocophillipsparia.com http://sd.conocophillips.com 37 Economic Contribution

• Capital expenditures – capital expenditures Contributing to the Global Europe 17.3% Economy and investments totaled $9.5 billion. Asia 20.6% • Expenses: Economic Expenditures Australia .9% – production and operating expenses were South America .5% ConocoPhillips contributes to the global economy North America 60.5% Africa .2% $7.4 billion; in a variety of means, as outlined in the list – selling, general and administrative expenses below of 2004 economic expenditures. These were $2.1 billion; and figures illustrate the company’s economic This graphic reflects ConocoPhillips’ geographical employee – exploration expenses were $703 million. interaction with several of its key stakeholder representation by continent as of Dec. 31, 2004. • Interest expense – interest and debt expense groups – governments, shareholders, employees, was $546 million. service needed for the best cost. The company suppliers, and lenders. procurement comes from vendors around the • Taxes – total taxes charged to income from Global Procurement globe. ConocoPhillips has developed supply continuing operations were $23.7 billion. In choosing its procurement relationships, base diversity initiatives and processes that will • Dividends – cash dividends paid on common ConocoPhillips seeks suppliers that can uphold facilitate the inclusion of locally owned, minority- stock equaled $1.2 billion. its core values and provide the quality and owned and women-owned businesses in its supply base. The execution of ConocoPhillips’ Meeting Demand U.S. supply base diversity plan began in 2004 and includes education and training, outreach, ConocoPhillips’ commercial organization helps tracking and reporting of program results. realize the maximum value for crude oil and natural gas production, while minimizing the cost of crude oil, feedstocks and fuel for the company’s refineries. It efficiently manages disposition of the refined products, natural gas liquids and power produced at company facilities. At times, the commercial organization mitigates the effects of supply disruptions, such as the one that resulted from a labor strike in Venezuela in late 2002 and early 2003.

Each year, commercial moves more than 2.5 billion barrels of crude oil and refined products and 3.5 trillion cubic feet of natural gas. In North America, ConocoPhillips’ natural gas production portfolio and third-party gas marketing business have positioned the company to support Commodity trading floors are located in Houston, Calgary, London future exploration and production projects, such as and Singapore, providing around-the-clock commodity manage- In Vietnam, ConocoPhillips and the Vietnamese government share a arctic gas and liquefied natural gas imports. ment for ConocoPhillips. vision of growth in the Asia Pacific region. One factor contributing to recent success in the country is the Su Tu Den field.

38 http://sd.conocophillips.com Innovation Capital Efficiency Risk Management Margin Improvement Growth Enhancement Total Shareholder Return

Economic Jobs Creation Skills Enhancement Resource Efficiency Local Economic Impacts Product Stewardship Social Investments Life-Cycle Management Products to Services Business Ethics Socio- Eco- Security Economic Efficiency

Sustainability

Social Environmental Socio- Environmental Diversity Clean Air, Water & Human Rights Land Emissions Reductions Community Outreach Zero Waste, Releases & Spills Indigenous Communities Biodiversity Labor Relations Safety & Health Environmental Regulations Global Climate Change Access to Potable Water Crisis Management Environmental Justice We welcome your questions, comments and suggestions. To submit feedback or request copies of this report, contact us at: ConocoPhillips 600 North Dairy Ashford (77079-1175) P.O. Box 2197 Houston, TX 77252-2197 USA

Web site: http://sd.conocophillips.com E-mail: [email protected]

This report was printed with soy-based inks on ConocoPhillips is a member of 10 percent post-consumer the World Business Council for waste recycled paper. Sustainable Development. www.conocophillips.com Appendix

For More Information Company Reports Environmental Data Quality and Assurance http://www.conocophillips.com/about/ Guidelines, calculation tools and training are On the ConocoPhillips Web Site Company+Reports/index.htm provided to ConocoPhillips’ business units for Please visit the company’s Sustainable • Annual Report calculating and reporting environmental incidents, Development Web site, which will be updated • SEC Filings (page down) releases and emissions. The businesses are regularly and will be the primary source for • Fact Book accountable for reported data completeness and information about the company’s sustainable accuracy and for consistency with accepted development activities and performance: reporting practices. A business level data sub- http://sd.conocophillips.com mission, review and approval process is imple- mented to provide accountability for the results Additional areas of the Web site with information and to ensure the best possible data quality. on sustainability-related topics or with information on the company include: The corporate health, safety and environment (HSE) function verifies and validates the reported Sustainable Development data. In addition, an internal review of the 2003 http://sd.conocophillips.com metrics and the data collection process has • Sustainable Development Position Statement Regional Sustainable Development Reports • Climate Change Position Statement been performed by the company’s corporate • Renewable Energy Position Statement Alaska Charter & Sustainable Development Report HSE auditors. http://www.conocophillipsalaska.com/charter/ cpaicharter.pdf Health, Safety and Environment Emissions Calculations Locality Management Strategy for Venezuela http://www.conocophillips.com/hse/index.htm The approaches used by the company’s businesses • HSE Policy http://www.conocophillipsparia.com/files/ english-for-viewing.pdf in reporting emissions data for greenhouse gases and other compounds are based on the Corporate Governance Canadian Business Unit Dialogue on Sustainable following principles: http://www.conocophillips.com/about/ Development • Undertake continuous emission monitoring, Corporate+Governance/index.htm http://www.conocophillips.ca/index.htm • Corporate Covernance Guidelines and with measured exhaust gas flow, compute • Code of Business Ethics & Conduct Policy instantaneous mass emission rate and inte- and Booklet grate over the reporting period. • Undertake periodic monitoring of exhaust gas Community Partnerships flow and composition and estimate mass http://www.conocophillips.com/community/index.htm emission over the reporting period using plant operating records. Other resources • Estimate emissions using a mass balance and http://www.conocophillips.com/newsroom/ process flow knowledge. other_resources/index.htm • Estimate emissions using emission factors • Fact Sheets provided by the manufacturer’s specifications, • Energy Answers local regulatory authority, AP-42, API • Energy Glossary Compendium or other industry standard. http://sd.conocophillips.com 39 Safe Harbor Provisions

Cautionary Statement for the that the statement of expectation or belief • The ability to meet liquidity requirements, Purposes of the “Safe Harbor” will result, or be achieved or accomplished. including the funding of the company’s Taking into account the foregoing, the capital program from operations, is subject Provisions of the Private following are identified as important risk to changes in the commodity prices of Securities Litigation Reform factors that could cause actual results to differ the company’s basic products of oil, natural Act of 1995 materially from those expressed in any forward- gas and natural gas liquids, over which ConocoPhillips is including the following looking statement made by, or on behalf of, ConocoPhillips has no control, and to a lesser cautionary statement to take advantage of the the company: extent the commodity prices for its chemical “safe harbor” provisions of the PRIVATE • Plans to drill wells and develop offshore or and other products; its ability to operate its SECURITIES LITIGATION REFORM ACT OF onshore exploration and production properties refineries and chemical plants consistently; 1995 for any forward-looking statements made are subject to: the company’s ability to obtain and the effect of foreign and domestic by, or on behalf of, the company. The factors agreements from co-venturers or partners, and legislation of federal, state and municipal identified in this cautionary statement are governments; engaging drilling, construction governments that have jurisdiction in important factors (but not necessarily all and other contractors; obtaining economical regard to taxes, the environment and important factors) that could cause actual and timely financing; geological, land, or sea human resources. results to differ materially from those expressed conditions; world prices for oil, natural gas • Estimates of proved reserves, raw natural gas in any forward-looking statement made by, or and natural gas liquids; and foreign and supplies, project cost estimates and planned on behalf of, the company. United States laws, including tax laws. spending for maintenance and environmental • Plans for the construction, modernization remediation were developed by company Where any such forward-looking statement or debottlenecking of domestic and foreign personnel using the latest available includes a statement of the assumptions or refineries and chemical plants, and the information and data, and recognized bases underlying such forward-looking timing of production from such plants are techniques of estimating, including statement, the company cautions that, while subject to, in certain instances, approval from those prescribed by the U.S. Securities it believes such assumptions or bases to be the companies and/or subsidiaries; boards and Exchange Commission, generally reasonable and makes them in good faith, of directors; the issuance by foreign, federal, accepted accounting principles and other assumed facts or bases almost always vary from state, and municipal governments, or agen- applicable requirements. actual results, and the differences between cies thereof, of building, environmental and assumed facts or bases and actual results can other permits; the availability of specialized be material, depending on the circumstances. contractors and work force; worldwide prices Where, in any forward-looking statement, the and demand for the products; availability of company expresses an expectation or belief as raw materials and transportation in the form to future results, such expectation or belief is of pipelines, railcars or trucks; and, in certain expressed in good faith and believed to have a instances, loan or project financing. reasonable basis, but there can be no assurance

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