INTEGRATED REPORT 2020 - ENAP INTEGRATED REPORT 2020 1 This Integrated Report was developed in Empresa Nacional de Petróleo (ENAP) Address: Avenida Apoquindo 2929, Piso 5, accordance with the regulatory framework Unique Tax Number Register: 92.604.000-6 Las Condes, Santiago de Chile. established by the Financial Markets Public company created by Law 9.618 Telephone number: (56-2) 22803000 Commission (CMF) and the standards of enacted 19th June 1950. Postal Code: 7550246 the International Integrated Reporting Website: www.enap.cl Council (IIRC) and the Global Reporting Securities Registry: Nº783 of the Initiative (GRI) in its essential version. The Superintendency of Securities and Insurance information published in this document 4th October 2002. refers to the company’s performance between January 1 and December 31, Course of business: Exploration, production 2020, and has been duly audited and and commercialization of hydrocarbons and verified by Deloitte. their derivatives; production, transport and commercialization of energy and electric power. If you have any doubts or comments about the information contained on this document, please contact: Corporate Affairs and Communications Team Institutional Relations and CommunitiesTeam Avenida Apoquindo 2929, 5th floor, Las Condes, Santiago, Chile Email: [email protected] CONTENIDO pág. pág. Message from the Chairman of the Board 4 Our team 45 Message from the General Manager 5 2020 Main staff figures 46 Our acknowledgement to all employees 7 Human Rights approach on labor practices 47 2020 Materiality 8 Occupational Health and Safety 55 Our company 9 Environmental management 59 Purpose, vision and values 10 Energy efficiency and NCRE transition 60 Regulation 10 Sustainable management of water resources 64 Subsidiaries, associates and lines of business 11 Waste management 66 Local and international operations 13 Biodiversity protection 69 Main national and international partners 13 Memberships and endorsements 14 Community relations and Corporate Management 15 social investment 70 Board of Directors 16 Committee of Heads, 2020 Management Additional information 77 and Special Committees 18 Historical review 78 Board and Senior Managers Remunerations 20 Sustainability policy and stakeholders 79 Transparency, work ethic and compliance 21 ENAP’s 2020 staff data 82 2020 essential facts 85 Our activity 23 GRI table of contents 86 Operational continuity 25 Strategy facing the sanitary and industry’s crisis in 2020 26 Reasoned analysis and Creation of value and financial sustainability 28 consolidated financial statements 94 Risk Management and Incident Prevention 30 Exploration & Production (E&P) 32 Refining & Marketing (R&M) 37 Supply Chain Management 42 Successful Clients Management 44 INTEGRATED REPORT 2020 - ENAP Message from the Chairman of the Board This document addresses ENAP’s over 60 updated and reinforced protocols first integrated report, as an effort to and security controls, which activated systematize the company’s economic, remote work for 30% of the company, social and environmental performance enabled accomodation facilities for during 2020. This was a particularly employees working in the refineries, plants complex year, where the Covid-19 health and maritime terminals, as well as ensuring emergency became the biggest crisis of the preventive fuel supply and signing recent times in our industry. agreements to ensure the gas availability. Nearly 40 % for oil demand was reduced Seeking to reverse ENAP’s financial worldwide, due to the confinement losses projections, the company measures adopted by countries in order to focused its efforts on three main reduce the virus proliferation. This led to an aspects: securing liquidity, reducing oversupply and a sharp drop in the price. In investment and meeting our self- fact, the price of a crude oil barrel dropped imposed US$ 100 million savings target, to levels not seen in at least 20 years, which we surpassed. To make such a and refining came to operate at a zero figure available in a company like this marginal or even negative cost. We were is only possible when we cohesively not unaffected by these figures at ENAP, due to the recorded 35% reduction in fuel work with all our stakeholders. In consumption, between March and April, this regard, I would like to restate my which reached 40% when quarantines acknowledgement to ENAP’s unions and were activated in the Metropolitan Region. each one of the workers who voluntarily Although from August onwards the agreed to reduce their salaries, by scenario improved, it remained below the reviewing and/or waiving their bonuses, 2019 achieved performance. allowances and/or variables. Under these circumstances, a work plan The experiences and lessons we learned was put together based on three priorities: throughout 2020 allow us to proudly state (1) safeguarding our own workers and that an ethical imperative is what drives ENAP contractors’ health and safety, (2) regarding its role in our country. Furthermore, maintaining the country’s necessary fuel it forces us—under these circumstances—to supply, and (3) reducing financial loss as take a critical look at the energy industry by much as possible. These objectives were rethinking its operationalization—through a addressed by the Crisis Committee that much modern, cleaner and resilient industry— was created for this purpose. Among its in order to contribute to the wellbeing of Chile management main milestones there are and each one of its citizens. Fernando Massú Taré 4 INTEGRATED REPORT 2020 - ENAP Message from the General Manager I am writing this letter, with the intention year did not end with any profits, we putting in perspective one of the hardest lost US $ 90 million which seemed really years—if not the hardest—for the energy far from US $500 million that analysts industry and the world order in general. and the market expected for ENAP. The pandemic, caused by the proliferation Fortunately, our performance improved of the Covid-19 virus, altered our lifestyles, during the second semester with US $ 39 and reconfigured citizenship habits million profits that led us to have a more from strong restrictions on mobility optimistic view to face 2021. and consequent contraction of fuel consumption. All this as the result of what we have been doing since 2018, when This scenario created a greater challenge this administration took over the for us, so we defined a management challenge of leading ENAP. We have strategy with three focuses: (1) ensuring made the effort to improve our our workers and contractors health and processes, control our expenses and safety, (2) sustaining the country’s fuel postpone investments that were not requirement (3) minimizing the financial urgent during these years. loss originated from by the pandemic. Fortunately, we were able to fulfill them in I know 2020 was a difficult year for everyone, a proper manner. but we stayed afloat as we temporarily reduced bonuses and agreed allotments in In order to put all this into action the collective agreements with the trade required the simultaneous coordination this exercise that we probably would unions of Magallanes, Aconcagua, Santiago, US$100 million in expenditure main and execution a series of actions that not have perceived if the context were Sipetrol and DAO, and with the professional categories in our annual average. were conditioned by sanitary measures different: I mean the stoppage of the Bío unions of Aconcagua, Bío Bío and the ENAP to prevent the virus spread. Everything Bío Refinery—in moments of greatest Refineries Shift Work Union. This effort was The protection of the fueling supply under a strong sense of uncertainty and contraction in demand—anticipating the a complemented by our executives who strategy was based on the operations and fear of the unknown. In this sense, the maintenance and covering the crude oil resigned to 99% of the variable income. To inventories reinforcement to overcome— adaptability and resilience capacity shown requirements with the available stock. This everyone who saw their income decreased autonomously and without depending on by our staff, along with their commitment meant a significant saving. during this period: thank you very much for third parties—any fuel requirements. This to their contribution to the country’s your loyalty to ENAP and Chile. work was carried out in close coordination stability by guaranteeing fuel supply is Additionally, the contracts subscribed with the Ministry of Energy and the something to be highlighted. with our suppliers seeking to generate As for investment, we generated savings for distribution companies, by reviewing savings were revised, as there was US$ 170 million which were complemented stock levels and promoting distribution This effort was not in vain and had a a reduced performance due to the with an active assets management of efficiency. Regarding the gas availability, direct correlation with our economic established sanitary recommendations. accounts receivable and structuring of we signed an agreement to acquire performance. While the fact is that the Thus, our costs were restrained in about long-term debt. Opportunities arose during 4MMm3 daily from Argentina, regarding 5 INTEGRATED REPORT 2020 - ENAP the gas availability, in case there was a tests in the Magallanes region. Together The work done responded not only I will end this message by inviting you to need to paralyze operations in Magallanes. with this, we reorganized our teams, by to those who are an integral part read our first Integrated Report, a document Fortunately, there was no need to activate setting apart those critical functions of our value chain, but also to our that shows the effort we have made in order this measure. and positions in order to adjust the shift communities, as we helped our to present our most relevant management systems, and daily following-up the people most vulnerable neighbors in a areas in financial, social and environmental Each of the decisions taken to minimize exposed to contagion and enabling major vulnerability condition with matters during 2020, fulfilling the United loss and secure fuel stock were complex.