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Acquiring and Maintaining Social License to Operate During the Lifecycleof Major Oil and Gas Operations

Katherine A. Gilbert, ExxonMobil Production Company; James W. Canning, ExxonMobil Development Company

Copyright 2014, International Petroleum Technology Conference

This paper was prepared for presentation at the International Petroleum Technology Conference held in Kuala Lumpur, Malaysia, 1012 December 2014.

This paper was selected for presentation by an IPTC Programme Committee following review of information contained in an abstract submitted by the author(s).Contents of the paper, as presented, have not been reviewed by the International Petroleum Technology Conference and are subject to correction by the author(s).The material, as presented, does not necessarily reflect any position of the International Petroleum Technology Conference, its officers, or members. Paperspresented at IPTC are subject to publication review by Sponsor Society Committees of IPTC. Electronic reproduction, distribution, or storage of any part of this paperfor commercial purposes without the written consent of the International Petroleum Technology Conference is prohibited. Permission to reproduce in print is restrictedto an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of where and by whom the paperwas presented. Write Librarian, IPTC, P.O. Box 833836, Richardson, TX 75083-3836, U.S.A., fax 1-972-952-9435

IntroductionThis paper addresses some of the key considerations and activities required in order to acquire andmaintain a Social License to Operate (SLO) throughout the full life-cycle of major upstream oil and gasprojects and operations (hereafter referred to as a Project or Operation). Operations in both Papua NewGuinea and Chad, representing different phases of the lifecycle, were examined in order to identify keystrategies and lessons learned.

OverviewThe upstream lifecycle of an oil and gas project typically begins with exploration activities, moves intothe design and construction of facilities and infrastructure following discovery of commercial quantitiesof oil and gas, transitions into production operations and then ends with decommissioning. It is importantto identify and address the socioeconomic aspects and risks associated with each phase of the operationas early as possible and with a long-term, strategic view. Any commitments, expectations and relation-ships established with local stakeholders during one phase can have positive or negative impacts onsuccessive phases of the operation. Since there are often significant changes to the scope of activities thattake place within a given community throughout the life-cycle, it is imperative to identify a strategy thatallows for both the successful acquisition and long-term maintenance of a SLO. Stakeholders and issueswill likely change during the life-cycle, so the SLO Strategy must take that into consideration.

What is a Social License to Operate?There are varying definitions of SLO which are used by different entities depending on the context of thecountry in which they operate. One way to define SLO is the degree to which a company and its activitiesare accepted by the local network of stakeholders, including government, landowners, the local commu-nities and any other people directly affected by an Operation. This unwritten social contract is earned andmaintained through relationships based on honesty, transparency and respect. Ongoing approval bystakeholders is based on the companys on-the-ground performance.

Simply stated, social license to operate is being invited into a country or community to do work, andbeing allowed to stay. To do this successfully, it is important to build strong relationships by establishinglegitimacy, credibility, and trust. Its very important to understand that SLO is built on perceptions, and

not always the facts. Social legitimacy is based on the established norms of the community and requiressatisfying a combination of legal, social and cultural commitments. Depending upon the experience ofsociety with development activities, the process to acquire SLO may be formal or informal, defined ornebulous. Credibility is largely created by consistently providing clear and factual information AND bymeeting all commitments made. Trust comes from shared experiences and takes time and effort to buildand maintain, requiring regular presence, interaction and communication.

Importance of Acquiring and Maintaining Social License to OperateBuilding positive relationships with the local community stakeholders is a key step to acquiring andmaintaining a social license to operate. This is true for operations around the world, whether in developedor developing countries, and regardless of the phase in the oil and gas life-cycle.

A good example to illustrate this during the development stage of the upstream life-cycle is the PapuaNew Guinea (PNG) Liquified Natural Gas (LNG) Project, in which over 95% of the land in the countryis customarily owned and tied to families and clans in a long-standing manner with significant culturalmeaning and no paper records. The Project had to acquire access to this customary land and treat it andthe landowners respectfully, through ongoing relationships. When done in a mutually acceptable manner,the local communities and people have allowed the work of the Project to proceed. Work stoppages canadd millions of dollars to the total cost of the Project, and in many cases, be a direct addition to the Projectschedule.

Maintaining these positive relationships with the local community long term is important to successfulproduction operations as well, particularly when new or unforeseen challenges require changes to thescope of activities of long-term operations. Evidence of this can be seen in the Chad-CameroonDevelopment Project which began production operations in 2003. There are numerous villages andextensive agricultural activities located within the boundaries of the Oil Field Development Area (OFDA)in southern Chad. After the completion of the initial Project construction activities it became apparent thatthe complex geologic environment required a significant expansion of the drilling program in order tofully develop and maintain production levels within the oil field. As a result, acquisition of additional landwithin the OFDA was required to support the drilling of hundreds of additional wells over a 10 year

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period. The successful establishment and maintenance of a SLO with the stakeholders within the OFDAwas critical to the successful acquisition of this additional land and in meeting production objectives.

A social license to operate can be viewed similarly to safety. Like safety, if the aspects of SLO aremanaged properly, oil and gas operations can avoid incidents and save time and money. That meansfocusing on the leading indicators of engaging with the communities to educate them about theoperations and addressing their issues and concerns in a timely manner. This builds the relationship andearns the Operation credibility and trust. Taking a lead from the commonly used concept of the safetypyramid, paying attention to these leading indicators will reduce or eliminate the lagging indicatorsof work delays or stoppages. The diagram below, put together by the PNG LNG Project team and entitledLeading and Lagging Indicators of Work Stoppages, shows the leading and lagging indicators for sociallicense to operate listed inside the pyramid, while the corresponding indicators for safety are listed alongthe right side of the pyramid.

In addition, work stoppages are frequently accompanied by or can lead to safety and security incidentsthat put the Projects workforce in jeopardy of threat or injury. Therefore, avoiding work stoppages isconsidered important to minimizing safety and security risks. The Project does this by using the varioussystems, programs, and processes of social license to operate to provide barriers depicted in the chartbelow entitled Preventing Security Incidents.

In mid-2014, the PNG LNG Project transitioned to active production operations. The strategy andprograms detailed here reflect the activities implemented during the Project phase that resulted in thesuccessful establishment of the SLO and the completion of construction activities and transition toOperations ahead of schedule. The strategy is equally as relevant and important during productionoperations in PNG in order to maintain the SLO for the next 30 years.

There are three planks to the SLO strategy in Papua New Guinea. The first is stakeholder engagement.This entails communicating with all stakeholders about the Project, engaging with them from the very startand then continuous engagement activities that include explanations of the Projects scope, its progress,and how the construction activities may affect communities impacted by the Project. It also meansbuilding relationships with communities and key leaders to gain their support and buy-in of the Projectand its work activities, as well as participating in community development and social programs. And itmeans listening to communities issues and concerns, and being responsive to their grievances.

Papua New Guinea LNG Project Strategy and Programs- Establishing and Maintaining the SLO

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The second plank of the SLO strategy is the companys behaviors, actions, and interactions. As guestsin Papua New Guinea, everyone working on the Project must show respect for the people of PNG, theirenvironment and their cultural norms. The Project must meet its commitments to the people andcommunities. This involves communicating with people about what the Project will do, and thendelivering on commitments made. By doing this, as well as getting involved and being part of thecommunity, the Project builds trust, a key part of any relationship.

The third plank of social license to operate is community investment. As a responsible corporate citizenin Papua New Guinea, the Project aims to contribute to building a more sustainable future for the citizensof PNG by funding programs that teach new skills, build capacity and create opportunities for economicgrowth and independence. These things can help to create a sense of personal and community responsi-bility for the success of individual programs, as well as contribute to the success of the Project as a whole.

These are shown in the diagram below entitled, Key Aspects of PNG Social License to OperateStrategy.

As the Project neared completion, visibility of Project activities within the communities was anticipatedto decrease as pipeline and facility construction came to an end. A key contributor to the SLO Strategyis the ability of a Project or Operation to employ, train and engage the local people in the activities. Asa result, expectations related to the number and types of jobs available to the local community andopportunities for local suppliers must be managed as well. Community programs and investments mustalso be modified to address the needs of community and the Operation long-term.

Activities in PNG have been underway for the last three years in order to facilitate that transition, whichincluded a modification of the SLO Strategy and the associated managing organization. By beginning thetransition planning early, the Operations SLO in PNG should be well-maintained as the Project movesinto the approximate 30 year phase of Production.

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Maintaining the SLO in Chad-CameroonThe Chad-Cameroon Development Project includes oilfields in southern Chad and a 1,070 kilometerpipeline system to transport treated crude oil to a marine terminal on the coast of Cameroon for export.Production Operations commenced in 2003 after 10 years of planning, scientific investigations, engineer-ing and extensive public consultation, and several years of initial construction.

Once the pipeline and infrastructure construction was completed, the focus shifted to productionoperations and the ongoing oilfield development (over 700 production and high pressure water injectionwells in operation in seven oilfields). The operations in southern Chad have benefited significantly froman ongoing SLO strategy focused primarily in the Oil Field Development Area (OFDA). The strategy formaintaining the SLO in Chad has focused on community engagement and relationship building, individualand community land use compensation programs, community investments, a responsive grievancemanagement process, workforce and supplier development, transparency initiatives and positive environ-mental performance.

The Project holds regular public consultations to engage the local stakeholders on these key strategicareas. In 2012, the Project conducted 1072 village level public consultation meetings attended by nearly20,000 people. This has been critical for understanding the current and future needs and concerns of thelocal communities and enables the Project to modify SLO strategies and activities. This was a keycomponent to maintaining the SLO and enabling the successful acquisition of additional land required tosupport the expanded drilling program.

This is also a key component in planning for the future, as one of the key objectives during theproduction phase of the lifecycle is to continue to promote the positive influence of the operations on localcommunities while also working to ensure that the benefits are sustainable long-term by the communitiesand individuals themselves. The SLO Strategy in Chad remains focused on all of the same key areas, butis also now focusing on activities, programs and partnerships that will provide positive, sustainableimpacts within the communities in the OFDA upon the eventual completion of individual and communityland compensation programs.

Since multiple groups within the Project manage or provide resources for the various communityprograms and engage with different stakeholders within the local community, government and Non-Governmental Organizations (NGO), an increased emphasis has been placed on collaboration in planningand execution. This further illustrates one of the key components of maintaining a successful long-termSLO in the production operations phase --- the integration of all relevant functions, including Safety,Security, Health, Environment (SSHE), Public and Government Affairs, Procurement and others, as wellas all levels of management within the organization into the development and execution of the strategy.

Key Messages and Lessons LearnedThere are a number of lessons learned from the experiences in both PNG and Chad:

Acquiring social license to operate is the first step; maintaining social license to operate is along-term process that requires people, systems and processes, programs, and management focus.

Building and maintaining relationships with the communities and stakeholders is critical, and ittakes a lot of people, time and effort.

Showing respect for the local culture and cultural norms is a key part of the relationship with thecommunities and stakeholders.

Effectively communicating with stakeholders is extremely important and must be done regularlyand in a way that is easily understood. To quote an old adage, communicate, communicate,communicate, and then communicate some more.

Listening to the communities issues and grievances, and responding to them in a timely manner,is critical. Even if the answer is no, be responsive and tell them.

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The Project and Company must meet its commitments made to the communities. This involvescommunicating what will be done and then doing it. It is important to develop workforcerelationships, understanding that the workforce is a part of the community in which the companyis operating and that those communities will have a strong influence on these workers.

Social issues are closely linked to environmental, regulatory, safety and security issues. One canlead to the other, so they must be managed consistently and in an integrated manner.

The stakeholders and their issues should be identified very early in the life-cycle, and mitigationmeasures should be developed as part of the SLO Strategy.

Social programs should be implemented with a business focus, with clear objectives and a projectbenefit in mind, and they should be run and managed like a project. Otherwise, these programs aredestined to fail, or not meet the desired objectives.

The SLO Strategy should be developed with the full life-cycle of operations taken into consider-ation. Commitments or expectations set with local stakeholders during exploration or developmentphases of an operation must be sustainable and desirable long-term.

Developing and executing a successful SLO Strategy requires collaboration and commitment of allrelevant functions and levels of management within an organization.

Organizational and resource requirements needed to execute the SLO Strategy should be consid-ered and planned for as early as feasible, particularly during the transition between different phasesin the upstream oil and gas project life-cycle.

Address local problems and issues with local solutions. A SLO is required for operations anywherein the world, but the strategy for developing and maintaining it may be different.

Social programs need to be sustainable and the community needs to agree with and be part of theimplementation of the program on the ground for it to be successful. Community ownership andsweat equity are key ingredients for success.

Maintaining the SLO requires responsiveness and flexibility to adjust to changing stakeholders,issues, or business objectives.

Partnering with NGOs to implement social programs can be effective, but a careful assessment ofthe NGOs capacity and their objectives needs to be done prior to embarking on any projectstogether.

While implementing social programs, it is imperative to remember that the Project or Company isnot the government and therefore cannot do the governments job in terms of solving the countryssocial problems and deficiencies. The Projects social programs should not interfere, but rather becomplementary, to those of the Government.

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Acquiring and Maintaining Social License to Operate During the Lifecycle of Major Oil and Gas Op ...IntroductionOverviewWhat is a Social License to Operate?Importance of Acquiring and Maintaining Social License to OperateMaintaining the SLO in Chad-CameroonKey Messages and Lessons Learned