occidental petroleum 2006 social responsibility
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TRANSCRIPT
Good neighbor.Good business.Social Responsibility Report 2006
Occidental Petroleum Corporation
CONTENTS
Introduction to Worldwide Social Responsibility 1 º Message from the Chairman 2
One Management System 4 º Integrating Social Responsibility and Health, Environment and Safety º HES Principles
Responsible Workplace Practices 6 º Compliance Commitment and Responsible HES Management º A Safe and Healthy Workplace º Environmental Performance º Energy Effi ciency and Climate Change º Compliance º Employment Practices º Developing Expertise in Our International Workforce
Ethical Business Practices 24 º Commitment to Human Rights º Responsibility and Integrity in Conducting Our Business
Good Neighbor Practices 28 º Educational Enrichment º Encouraging Safe and Healthy Communities º Helping People Help Themselves º Stimulating Local Development
Tomorrow 36
Business Overview 37
ON THE COVER: In Arauca, Colombia, school children enthusiastically greet an Oxy representative. Through the A Crecer literacy and adult education program, illiteracy rates have been reduced to near zero.
GLOSSARY
ACC American Chemistry CouncilAPI American Petroleum InstituteBLS U.S. Bureau of Labor StatisticsCHP Combined Heat Power (Cogeneration)EPA U.S. Environmental
Protection AgencyGHG Greenhouse GasHES Health, Environment and Safety IIR Injury and Illness Incidence Rate
(Incidents per 100 worker-years)M ThousandMM Million
NGO Nongovernmental OrganizationOccidental Occidental Petroleum Corporation
(Oxy), together with its affi liates and subsidiaries
OSHA U.S. Occupational Safety and Health Administration
SEC U.S. Securities and Exchange Commission
SR Social ResponsibilityTRI Toxics Release InventoryWHC Wildlife Habitat Council
OxyGOOD NEIGHBOR. GOOD BUSINESS.SOCIAL RESPONSIBILITY REPORT 2006
Occidental Petroleum Corporation (Oxy) is committed to being an outstanding and responsible corporate citizen, as we strive for continual improvement in our worldwide Health, Environment and Safety (HES) systems and Social Responsibility (SR) performance.
WORLDWIDE SOCIAL RESPONSIBILITY
Our responsible workplace practices combined with our good neighbor initiatives motivate our employees, minimize our operating risks, lower our costs and enhance our reputation. These activities directly affect our business success and stockholder value.
Previously, we have reported separately on our annual HES and SR activities. This year, we are combining these two reports into one as part of our process of integrating SR into our comprehensive HES management system. The process will allow us to design, implement and measure SR activities using standards similar to those we have long applied to our HES programs. This integration
ensures that we are both supporting our business goals and making the most effective contributions to the communities where we operate.
Our report profi les many of our activities around the world. These include safeguarding the health of our employees and stakeholders, protecting, preserving and enhancing the environments in which we operate as well as contributing to the enhance-ment of the quality of life in communities near our operations. These profi les provide insight into the people and processes that help make Oxy a good neighbor and a highly successful oil and gas and chemical company.
In our operations In the communities where we work In the environment
United States Colombia Oman
11
Dr. Ray R. IraniChairman, President and Chief Executive Offi cer
Message from the Chairman
Generating profi ts for our stockholders while operating a socially responsible company is challenging, rewarding and absolutely necessary for Oxy’s success.
Fueling human progress and economic growth while focusing on operational integrity requires a solid, well-designed approach to social responsibility. Over the years, we have implemented sound, well thought out social responsibility programs to ensure the safety of our employees, maintain high environmental standards and to support social programs in the communities in which we operate. Social responsibility is not just a fashionable term — it is one of Oxy’s core values. We believe it. We live it.
Our values shape everything we do in business. Our strong performance in 2006 was due in large part to our successful implementation of strategic investments and being a good corporate citizen. Not only is Oxy delivering good returns to our shareholders, we are also one of the safest companies in both the oil and gas and chemicals industries.
Oxy’s continued commitment to safety and social responsibility benefi ts our bottom line by reducing risk, improving employee productivity, reducing operating costs and lost production time, while enhancing our reputation. We are proud to report our progress in this year’s report.
In 2006 we signifi cantly increased our employee human rights training programs worldwide. Oxy formalized our corporatewide human rights program more than three years ago and we will continue expanding our efforts. Insight to our progress appears throughout this report and includes examples of our activities in Chile, Colombia, Libya and Oman.
The graphs, statistics and numbers in this report are one measurement of our social responsibility accomplishments. But, the satisfaction of helping a community take advantage of the opportunities created by natural resource development is measured more by the human factor. Our “Homes for Houston” project illustrates our commitment to being a good neighbor and is one of Oxy’s success stories. This report also provides highlights and insights into our efforts in several additional areas.
22
For example, our coral reef protection study in the Arabian Gulf will help preserve and protect a sensitive ecosystem for future generations. We also implemented an emissions reduction system in our Hugoton gas fi eld operations in Kansas by retrofi tting production wells with electric motors and eliminating the need for gas-fi red engines. Our accomplishments have earned us numerous awards.
We are also highlighting some of our signifi cant community activities, including our participation and support of Best Buddies; an “Opportunities Bank” in Colombia supporting small businesses; the Safe T. Turtle program — a child safety education program in our Permian operations; and a Petroleum Technology Academy near our Elk Hills, California operation.
We remain fully committed to HES and Social Responsibility policies that are responsible, ethical and accountable. We recognize the need to maintain a balance between financial and operational performance. Our responsibility to our stockholders, our communities and the future depends upon our success in building a stable platform for sustainable growth economically, socially and environmentally.
Being a good neighbor is simply good for business.
Ray R. IraniChairman, President and Chief Executive Offi cer
Elk Hills is one of seven Oxy sites certifi ed by the Wildlife Habitat Council.
3
ONE MANAGEMENT SYSTEM
Integrating Social Responsibility and Health, Environment and Safety
Sustainable success demands strong systems and performance. More than 25 years ago, Oxy implemented a comprehensive HES management system, which has helped us achieve continual improvement. We are now extending this rigorous approach to promote improvement in our SR performance, creating a social responsibility standard that defi nes the requirements business units must meet in their stakeholder relations, social risk management activities and quality of social programs.
In 2006, Occidental Oil and Gas Corporation established inter-disciplinary SR teams to assess SR performance and serve as champions of social responsibility by determining areas for improvement and promoting effective action planning.
As a fundamental business element, Oxy’s goal is continued HES system and performance improve-ment. Our corporate HES vision statement and guiding principles give direction to Occidental HES activities.
These principles, as implemented through Oxy’s HES policies and procedures, incorporate the following commitments.
1. Protect the environment and the health and safety of people using design procedures, work practices and employee training.
2. Correct operating conditions that have a signifi cant adverse health, safety or environmental impact.
3. Reduce waste generation and responsibly manage waste disposal.
4. Reduce pollutant releases to the environment.
5. Make effi cient use of nonrenewable natural resources.
6. Use energy effi ciently.
7. Provide information on the safe use and disposal of Occidental’s products.
8. Maintain a dialogue with neighboring communities about HES concerns.
9. Keep Oxy’s Board of Directors informed about HES issues.
10. Report annually on Oxy’s HES performance.
The full text of these principles is included in the Health, Environment and Safety section of our Internet site, www.oxy.com.
HES Principles
Workers at Oxy’s offshore Qatar unit are reminded each day that “Safety Comes First.”
44
Compliance Commitment and Responsible HES Management
Oxy is committed to operating in compliance with all applicable HES laws by employing stringent internal programs that often exceed prevailing legal requirements.
From the Long Beach shoreline, THUMS islands are often mistaken for resorts, when in fact, they are active oil and gas operations. THUMS, Long Beach is one of six Oxy sites certifi ed by the Wildlife Habitat Council.
RESPONSIBLE WORKPLACE PRACTICES
In addition, our businesses endeavor to achieve a worldwide standard of care that provides the same degree of protection to employees, contractors, the public and the environment, wherever we operate in the world. Oxy’s Board of Directors has a compre-hensive view of HES activities and leadership. HES performance is considered in employee annual performance review and compensation.
Oxy diligently works to strengthen existing programs by benchmarking against leading corporations and tracking developing issues and HES management trends. Oxy also actively participates in progressive organizations, such as the Global Environmental Management Initiative, the World Environment Center, ORC Worldwide, the Auditing Roundtable and the Wildlife Habitat Council.
Oxy’s HES quality assurance and quality control (QA/QC) processes measure program effectiveness. Our multifaceted QA/QC process, which ranges from frequent facility-level inspections and audits to comprehensive audit team reviews, verifi es necessary program elements are in effect and that
a process for implementing and monitoring change exists. It assures compliance with applicable legal requirements and company policy and confi rms that management systems and physical controls are maintaining operations in compliance with these requirements. HES professionals and non-HES personnel who are selected for their management potential are staffed on review teams to further their understanding of Oxy’s HES programs and requirements. Resulting action plans are tracked from conception to completion. During 2006, HES audits for 25 operating locations were completed and reviewed by senior management.
Oxy sets high standards of HES performance aimed at ensuring responsible environmental stewardship and sustainable operations. We challenge ourselves to conduct business in a manner that creates value for society — including our employees, neighboring communities, partners, suppliers, host governments and stockholders. We believe Oxy’s exemplary performance provides a competitive advantage in today’s complex global marketplace.
66
Nationwide, less than one-hundredth of one percent of approximately six million work sites have attained OSHA Star status. OxyChem has achieved OSHA Star recognition at 34 facilities with 18 currently operating (16 of the 34 sites have been sold or shut down). Contractors at seven OxyChem sites also have received OSHA Star awards.
An OSHA Star work site (or state equivalent) must have comprehensive and successful safety and health programs that achieve total reportable and lost workday injury rates below private industry’s national average. OSHA criteria for Star status strongly encourages management and employee commitment to meet or exceed all regulatory requirements. Once a facility meets the OSHA Star criteria, it must be recertifi ed every three to fi ve years to retain its OSHA Star status. No Occidental facility has ever lost its OSHA Star designation OxyChem’s strong safety programs contribute to ongoing recognition under the federal govern-ment’s prestigious OSHA Voluntary Protection Program (VPP).
OXYCHEM OSHA STAR SITES (INITIAL APPROVAL YEAR)
Chicago, Illinois (2006)Wichita, Kansas (2005)Cincinnati, Ohio (2000) Mobile, Alabama (1998)OxyChem Headquarters — Dallas, Texas (1998)Muscle Shoals, Alabama (1996)Delaware City, Delaware (1996)Niagara Falls, New York (1996)Taft, Louisiana (1994)Taft On-site Contractor (1998)Dallas, Texas (1993)Convent, Louisiana (1991)Convent On-site Contractor (2000)Ingleside, Texas (1991)
OXYVINYLS, LP
Pedricktown, New Jersey (2004)Deer Park, Texas (two sites: 1997–2001)Deer Park On-site Contractor (two sites in 2003)La Porte, Texas (two sites in 1997)La Porte On-site Contractor (two sites in 2003)Pasadena, Texas (1991)Pasadena On-site Contractor (2003)
OSHA Star
OSHA Star status is the highest recognition for excellence in safety from the U.S. government’s Occupational Safety and Health Administration (OSHA).
OxyChem’s Ingleside, Texas facility has earned the OSHA Star designation since 1991.
7
Safe and Healthy Workplace
1996
0.880.39
1997
0.730.33
1998
0.680.23
1999
0.650.29
2000
0.830.35
2001
0.690.33
2002
0.620.43
2003
0.680.26
2004
0.340.22
2005
0.470.25
2006
0.470.26
IIRLost Time
Occidental Employee Injury and Illness Incidence Rate and Lost Time Case Rate Per 100 Workers
2.08
1996
1.93
1997
2.17
1998
1.10
1999
1.67
2000
1.28
2001
1.15
2002
1.55
2003
1.09
2004
1.18
2005
1.24
2006
Occidental Contractor Injury and Illness Incidence Rate Per 100 Workers
RESPONSIBLE WORKPLACE PRACTICES
Oxy is demonstrably committed to providing a safe and healthy workplace. Rigorous policies at every work site help to protect our employees, contractors and neighboring communities.
CONTINUED SAFETY EXCELLENCE
Oxy has consistently ranked as one of the world’s safest companies with 11 consecutive years of Injury and Illness Incident Rates (IIR — recordable injuries and illnesses per 100 worker-years) of less than one. The most recently published (2005) U.S. Bureau of Labor Statistics (BLS) Industry average is 4.6. In 2006, Oxy’s employee IIR of 0.47 refl ects a 4-percent per year improvement trend over the past 10 years and indicates that injuries to Oxy’s employees occur about one-tenth as often as injuries to the average U.S. worker.
Oxy also is one of the top performers among its industry competitors. The most recent data available from the American Petroleum Institute (API) show that the average IIR for all U.S. exploration and production company employees is 0.55, while the average for American Chemistry Council (ACC) peer companies is 1.27.
The same commitment to safety that has reduced the number of recordable injuries also has led to fewer severe injuries. This is indicated by the Lost Time Case Rate, which represents the total annual number of cases per 100 workers that resulted in an employee being unable to return to work or perform
normal duties the day after an occupational injury or illness. Occidental’s performance, which includes all of its worldwide operations, compares favorably with the 2.4 rate for all U.S. private industry based on the most recent BLS data. Oxy’s employee Lost Time Case Rate has improved about two percent per year over the last 10 years.
Our business segments rely on service contractors for specialized or short-term work. Occidental expects its contractors to share its commitment to workplace safety and reinforces this expectation by including it in its contractual agreements. HES performance is an important factor in the selection of contractors. Oxy monitors the performance of its contractors during the contract period by requiring that the company be notifi ed of all injuries along with plans to prevent recurrence. The data indicate that contractors working full time for Oxy perform far better than those doing similar work for other companies. Oxy’s 2006 consolidated worldwide full-time contractor IIR was 1.24, refl ecting a 4-percent improvement over the past 10 years. Based on 2005 BLS data, Oxy’s contractor results were approximately fi ve times better than the average for the U.S. construction industry.
8
0.20
0.30
0.47
0.70
0.70
Dentists
Stock Brokers
Occidental (year 2006)
Insurance Agents and Brokers
Legal Services
2.00Computer & Electronic Products
2.10Oil & Gas Extraction
2.40Basic Chemicals
2.40Mgmt. of Companies & Enterprises
3.70Paper Mills
4.60All Industries
5.10Coal Mining
6.30Construction
6.30Grocery Stores
7.80Meat Processing
9.60Saw Mills
10.70Steel Foundries
12.90Motor Vehicle Manufacturing
Injury and Illness Incidence Rates for Selected Industries(Source: U.S. Bureau of Labor Statistics – 2005)
Per 100 Workers
Responsible Care at OxyChem
Occidental Chemical Corporation’s (OxyChem) active participation in the ACC’s Responsible Care® initiative is an excellent example of this commitment. The Responsible Care® program requires member companies to conform their practices to a set of industry-wide metrics that often go well beyond government mandates. The Responsible Care® program has not only helped signifi cantly reduce emissions, but also contributed to raising safety performance to a level well above the overall manufacturing sector.
As a testimonial to the sustained excellence of Occidental’s safety and environmental performance, the ACC in 2005 awarded OxyChem the Responsible Care® Leadership Award — one of the industry’s most prestigious awards.
9
Environmental Performance
SUSTAINED ENVIRONMENTAL PROGRESS
Oxy seeks continuous improvement in resource conservation, release reduction, pollution prevention and energy effi ciency.
4.81.4
6.333.1
6.44.9
20.13.3
3.34.1
2000
5.44.5
2001
7.318.0
2002
2003
2004
2005
2006
OilWater
Liquids Unintentionally Discharged Compared to Production Barrels Per Million Barrels of Oil Equivalent
RESPONSIBLE WORKPLACE PRACTICES
Strong HES programs are designed and implemented to meet specifi c business and environmental objectives, and to enable resource allocations to be made in accordance with HES risk management priorities.
For example, OxyVinyls’ Louisville PVC plant was designated an American Chemistry Council’s Energy Effi ciency/Environmental Impact Award site for 2005 for implementing a project that annually conserves 45 million gallons of potable water and reduces sewer discharges by an equal amount. The Louisville facility achieved these results by installing automated equip-ment that replaced city water with recycled water.
Oxy also makes progress in land and habitat conservation. As a member of the Wildlife Habitat Council (WHC), Oxy’s efforts at the 102nd Street Landfi ll in Niagara Falls, New York received certifi ca-tion in 2006 for the implementation of a successful, comprehensive wildlife habitat management program. Since 1988, the nonprofi t, nonlobbying WHC has worked to increase biodiversity, create and protect habitats and expand environmental awareness.
Oxy has six additional sites certifi ed by the WHC. Oxy’s other WHC certifi ed sites are located in Long Beach, California; Montague, Michigan; Copper Basin, Tennessee; Elk Hills, California; Wichita, Kansas; and Geismar, Louisiana. All sites have cooperative efforts involving management, employees, community members, local conserva-tion groups, and local, state or federal agencies.
SPILL PREVENTION
Oxy’s HES program addresses spill prevention in a variety of ways, including investing in technology to detect and prevent pipeline corrosion, making extensive use of secondary containment, operator training programs, auditing and inspection. If an oil spill occurs, liquids typically are quickly recovered and impacted soil is treated by natural bioremedia-tion methods. Generally, the primary contaminant in a produced water release is salt, which is usually addressed by rinsing the soil with fresh water.
Despite increasing oil production by more than 150 percent since 1995, the ratio of oil unintentionally released into the environment versus production is only one-thousandth of one percent. In 2006, less than 30 percent of Oxy’s oil spill incidents involved releases of more than 10 barrels. Excluding three produced water spills, which accounted for more than 75 percent of the total amount of produced water released during the year, worldwide releases averaged less than 25 barrels per incident. Even though these amounts spilled are very low, Oxy strives to achieve a goal of zero spills.
10
10.521.9
1.910.8
2.27.5
1.94.1
2.34.1
1999
2000
1.84.4
2001
2.45.4
2002
2003
2004
2005
Total Releases
8.9 0.7 0.6 0.2 3.3 0.0 0.0 Land0.3 0.2 0.4 0.5 0.7 0.8 1.3 Underground Injection
<0.1 <0.1 <0.1 <0.1 <0.1 <0.1 <0.1 Water1.3
11.24.6
1998
10.00.1
<0.11.0 1.0 1.2 1.2 1.2 1.0 1.1 Air
Transfers
OxyChem Releases and Transfers Millions of Pounds
1998
1999
19251
2000
15553
2001
16155
2002
14251
2003
6248
2004
5551
2005
5443
6645
NonhazardousHazardous
Waste Generation from OxyChem Operations Thousands of Tons (Data Excludes Wastewater)
TRANSFERS AND WASTE REDUCTION
Oxy’s HES Principles and policies require a constant focus on waste reduction and resource conservation. Within Oxy’s wide range of operations, different approaches are used to achieve continuous improve-ment. Pollution prevention and release reduction projects are included in the annual budget process.
Toxics Release Inventory (TRI) data submitted by OxyChem to the U.S. Environmental Protection Agency (EPA) are shown in the table and graph below. For 2005 (the most recent report year), total reportable releases and transfers to off-site facilities for destruction or disposal were 7.8 million pounds. This is approximately 50 percent lower than in 1998. The increase from 2004 was due to the acquisition of additional manufacturing capacity. Total releases are less than 0.2 pound per ton of production capacity, or approximately one-hundredth of one percent. The majority of TRI reportable chemicals were inciner-ated, treated, recycled or burned for energy recovery. The remainder was safely disposed of in permitted deep well injection facilities.
In 2005, OxyChem used the mercury cell chlor-alkali process at two of its U.S. manufacturing locations, one in Delaware City, Delaware, another in Muscle Shoals, Alabama. OxyChem permanently shut down the Delaware City facility in 2005 and in early 2006, announced plans to close its Muscle Shoals, Alabama mercury cell chlor-alkali operation in 2008.
Although its vinyl chloride emissions are well below permitted levels, OxyVinyls, LP voluntarily entered into an enforceable commitment (discussed further on page 18) in 2006 to reduce its combined vinyl chloride emissions by almost 50 percent from four manufacturing facilities. The company will undertake emission reduction projects at a cost of approxi-mately $1.1 million to redesign stripper columns and reactor vessels, and install vacuum systems for railcar unloading.
OxyChem waste generation data include activity related to ongoing production operations at OxyChem plants and its 74-percent owned OxyVinyls, LP chemical plants. In 2005, total waste generation increased due to the addition of manufacturing capacity. Hazardous waste generated in 2005 was equivalent to less than 0.3 percent of the amount of OxyChem production capacity and refl ects a 53-percent decline in waste generation since 1998. OxyChem’s well-established waste minimi-zation program is a structured approach to refi ne and improve manufacturing processes, operating protocols and maintenance procedures. Waste minimization projects entail signifi cant engineering effort, extensive process modifi cations and capital expenditures. In 2005, more than 90 percent of OxyChem’s solid hazardous waste was incinerated, treated, recycled or burned to recover energy. Most of this material was processed at OxyChem’s on-site incineration facilities. The remainder was disposed of off-site at licensed commercial incinerators or landfi lls.
11
“Best in Class”
Storebrand Investments, a Norway-based international investment and insurance fi rm, honored Oxy in February 2007 with its “Best in Class” award in recognition of the company’s industry-leading environ-mental and social performance.
As part of its investment strategy, Storebrand conducts periodic analyses of the environmental and social responsibility performance of companies listed in the Morgan Stanley Capital International World Index. Each company analyzed is benchmarked against others in its industry sector. Companies ranking in the top 30 percent earn Storebrand’s “Best in Class” designation. Oxy was the only U.S. oil company to make the list. The environmental and social responsibility analysis criteria for the oil and gas industry include environmental risk management, human rights, labor rights, governance and labor relations.
Oxy and Dolphin Energy Limited are sponsoring a comprehensive study on the coral reefs offshore between Abu Dhabi and Qatar to gather specifi c data needed for a conservation plan to preserve and protect the coral reef habitats.
PIPELINE MAGAZINE’S “EXCELLENCE IN ENERGY” ENVIRONMENTAL AWARD
Pipeline Magazine awarded Dolphin Energy Limited (24.5 percent owned by Oxy) the 2006 “Excellence in Energy” Environmental Award for its participation in an ongoing coral reef study in the Arabian Gulf between Abu Dhabi and Qatar. The award encom-passes the Middle East energy sector.
The coral reef study is a joint initiative sponsored by Dolphin Energy, the Emirates Wildlife Society, World Wide Fund for Nature, the Environmental Agency — Abu Dhabi and Qatar’s Supreme Council for the Environment and Natural Reserves. The study’s goal is to establish methods of protecting coral reefs in the Arabian Gulf via a thorough evaluation of coral cover, species diversity, degraded reef recovery levels, as well as to confi rm the accuracy of reef mapping. Results revealed that most reefs in the area are in good health and that those that have suffered damage from past temperature fl uctuations can recover provided they are not subjected to further disturbances. Following completion in 2007, the study will be used to prepare a conservation plan to preserve and restore reefs in the Gulf.
12
Near the southern boundary of Oxy’s Colorado acreage, geoscientists Nicki Atkinson and Steve Slauson take a moment to appreciate the natural environment.
Numerous inquiries into this subject by universities, think tanks and independent researchers provide insight into the complexities of the climate system and its drivers, the diffi culty of modeling this system, the challenges involved in predicting future tempera-ture effects and related consequences, and the adaptation and emission mitigation options that may be available.
While Oxy conducts no independent climate change research, we closely monitor the scientifi c and public research to better understand the impact of GHG emissions and how adaptation and emission mitigation options may infl uence or impact our operations. Management, staff and line operations personnel are engaged in developing GHG emission estimates, evaluating the impact of proposed regulations, assessing carbon credit trading markets and voluntary climate change activities, and discussing these topics with stakeholders and the public.
Principal industry trade associations, including the API and the ACC developed voluntary climate change programs consistent with the U.S. Department of Energy’s ‘Climate VISION’ effort in which Oxy participates. Also, the company has responded to inquiries by the Carbon Disclosure Project (www.cdproject.net), a consortium of institutional investors that surveys the world’s largest companies on this topic.
While many climate advocates urge aggressive action to reduce worldwide GHG emissions and some initial steps have been taken, essentially no regulations requiring GHG emissions controls
have been implemented by national governments in the areas where we operate. Recently, some U.S. states have adopted laws establishing GHG emission inventories and eventual reduction goals. Oxy is participating in the development of these laws. When the California Global Warming Solutions Act of 2006 was adopted, Oxy was the fi rst upstream oil and gas producer in California to join the voluntary California Climate Action Registry, committing to tracking and publicly reporting GHG emissions. Oxy is actively preparing emissions estimates and working to obtain third-party expert certifi cation.
Although the impact of climate change on Oxy’s operations is uncertain, new regulatory controls may affect costs, demand and market prices. We believe our business plans are consistent with the goal of mitigating GHG emissions. Furthermore, Oxy is well positioned because of our leadership in carbon dioxide (CO2) injection for enhancing oil recovery. This process is viewed by the Intergovernmental Panel on Climate Change (IPCC) as the way in which wide-spread sequestering of CO2 emissions could occur.
Carbon dioxide is the principle GHG related to Oxy’s activities and is a product of hydrocarbon combus-tion to generate power for our operations. Methane, another GHG, is the main constituent of natural gas that sometimes is fl ared during oil production in operations where no local gas markets or transpor-tation facilities exist. Oxy is pursuing various methods for delivering natural gas — the fossil fuel with the lowest GHG emissions — such as our programs in Oman and the United Arab Emirates. OxyChem also uses natural gas extensively in many of its production activities.
Energy Effi ciency and Climate ChangeRESPONSIBLE WORKPLACE PRACTICES
The Environmental, Health and Safety Committee of the Board, together with Oxy’s management, staff and operations personnel, consider climate change-related issues and seek cost-effective methods for minimizing the greenhouse gas (GHG) emissions from our operations.
14
Oxy estimates GHG emissions for our oil and gas, chemicals and other operations using the Greenhouse Gas Protocol developed by the World Business Council for Sustainable Development and the World Resources Institute, supplemented by more detailed, business-specific protocols prepared by the ACC and the API. We continually refine our GHG estimation methodology. For consolidated reporting purposes, we adjust all compounds to CO2 equivalents.
We estimate that Oxy’s share of GHG Protocol Scope 1 (direct) emissions from facilities operated in 2006 was approximately 10.23 million metric tons of CO2 equivalents. Carbon dioxide is the predominant component, with the remainder being methane. Other GHG emissions: nitrous oxide, hydrofluoro-carbon compounds, perfluorocarbon compounds and sulfur hexafluoride are insignificant. Oxy’s share of Scope 2 (indirect) emissions (those associated with electricity purchased from off-site suppliers) for facilities we operate, totaled 5.99 million metric tons of CO2 equivalents.
The GHG emissions estimates in the graph below are based on Oxy’s share of equity ownership in the facilities we operate (excluding emissions from natural-gas flaring where required by contracts with certain state-owned oil companies). If the basis reflected 100 percent of emissions from facilities Oxy operates instead of equity share, Oxy’s estimate of
Scope 1 plus Scope 2 greenhouse gas emissions would increase by 5.5* million metric tons of CO2 equivalents. GHG Protocol Scope 3 emissions are not estimated because the largest amounts would be related to the ultimate use by others of our crude oil and natural gas products, of which Oxy has no knowledge.
Oxy’s emissions estimates between 2006 and 2005 indicate a 15-percent increase in direct emissions and a 16-percent increase in indirect emissions, reflecting the acquisition of additional oil and gas assets and chemical manufacturing capacity and higher operating rates to satisfy market demands.
Oxy believes that the most effective way to reduce GHG emissions is to become more efficient. Consistent with our business focus on being an efficient, low-cost producer, Oxy has been implementing new maintenance and operating practices, installing more energy-efficient equipment and constructing efficient natural gas and hydrogen-fired cogeneration facilities and investigating methods of capturing and selling natural gas.
Oxy is proud to participate in the EPA’s Natural Gas STAR Program to evaluate, implement and report cost-effective technologies and practices to reduce methane emissions from our oil and gas operations. This innovative program is a voluntary, non-regulatory partnership between the EPA and oil and gas industry, which provides a forum for companies to share
NorthAmerica
5.857.75
SouthAmerica
0.141.55
MiddleEast
0.010.92
IndirectDirect
Occidental Estimated GHG Emissions for 2006 (Equity Share Basis)Million Metric Tons CO2 Equivalents
8.144.75
8.105.00
8.875.18
10.235.99
2003
2004
2005
2006
DirectIndirect
Occidental Estimated GHG Emissions(Equity Share Basis) Million Metric Tons CO2 Equivalents
*Correction of figure published in 2006 printed report. 15
technical knowledge for effi ciently reducing methane emissions, and recognize best practices. As a result of our STAR Program participation, Oxy has implemented a broad spectrum of projects — some traditional and some innovative — which have produced sustainable annual methane reductions estimated to be more than 1.5 billion cubic feet. In 2006, at EPA’s invitation, Oxy joined the new EPA-sponsored Natural Gas STAR International Program, where signifi cant reductions in methane emissions that were achieved in Oxy’s international assets (primarily by capturing gas for sale) are being recognized and best practices shared.
Occidental Oil and Gas’ Worldwide Environmental Manager, Krish Ravishankar, was recognized by EPA as the Natural Gas STAR “Implementation Manager of the Year.” Working to promote best practices in Oxy’s oil and gas operations, he led the effort in 2006, which resulted in EPA’s fi rst international “Methane to Markets” workshop in Colombia.
Oxy evaluates energy effi ciency using an energy intensity index that employs revenue as a normal-izing factor. The index illustrates a 39-percent improvement in energy effi ciency since 1996. OxyChem has decreased its energy use per pound of production by 20 percent since 1995 with
investments in energy conservation and cogenera-tion projects. Oxy’s 2006 oil and gas operations reported a 5-percent energy use reduction on a production-weighted basis even as operations grew.
More than 25 years ago, Oxy began investing in building several highly effi cient cogeneration plants for electrical power and steam to supply Oxy oil and gas and chemicals operations. Cogeneration, or combined heat and power (CHP), signifi cantly increases electrical power generation effi ciency over traditional methods while reducing CO2 by as much as 66 percent. CHP is the simultaneous production of electrical energy and another form of useful thermal energy from the same fuel source. The thermal energy, when converted to steam, can drive turbines to generate more electrical power without additional GHG emissions.
The GHG emission reduction benefi ts from Oxy’s cogeneration facilities are substantial. Using typical assumptions for the national electrical grid average CO2 emission factor, installed capacity of the cogeneration units, steam boiler thermal effi ciencies and steam quality and usage, Oxy’s cogeneration facilities at full utilization are estimated to reduce GHG emissions by more than four million metric tons per year, or 20 percent of what the company’s combined equity share basis Scope 1 and 2 emissions otherwise would be.
1.00
1996
1995
1.28
1997
0.97
1998
0.97
1999
0.92
2000
0.73
2001
0.70
2002
0.90
2003
1.18
2004
0.98
2005
0.82 0.78
2006
Occidental Energy Intensity Factor Base Year 1995 = 1.0
Occidental Oil and Gas’s Worldwide Environmental Manager, Krish Ravishankar, was recognized by EPA as the Natural Gas STAR “Implementation Manager of the Year.”
16
EMISSION REDUCTIONS/INCREASED PRODUCTION
Oxy’s electrifi cation and automation program in the Hugoton gas fi eld in Kansas and Oklahoma is reducing CO2 emissions and is just one example of similar efforts in several Oxy operations. In addition to GHG reductions, the program is expected to reduce time and costs associated with well monitoring and maintenance while increasing fi eld production.
The project involves retrofi tting production wells with electric motors and eliminating the need for gas-fi red engines, thereby reducing emissions. Electric motors can operate intermittently, unlike gas engines that work best when operating on a 24-hour basis. As a result, Oxy has been able to market the gas that otherwise would have been burned in the engines. Pump-off controls have been automated and connected to a computer system so that lease operators can more efficiently monitor production rates and operating conditions, respond to well problems more quickly and, in some cases, anticipate and correct operating anomalies before they occur.
The average production rate from the newly equipped wells has risen by approximately four percent. In addition, the reduction in daily running time has reduced wear and tear on the equipment and is expected to extend the average time between shut downs for maintenance — resulting in lower operating costs and increased production from the fi eld.
Corollary benefi ts have been observed; for example, lease operator driving time has been reduced by extending well-maintenance schedules. This means reduced risk of traffi c accidents and lower vehicle fuel and maintenance costs.
Full electrification and automation of more than 1,000 wells in the Hugoton fi eld is scheduled to be completed during 2007 and will result in estimated annual cost savings of more than $1 million due to reduced maintenance and downtime. At completion of the retrofi t project, we estimate additional annual net reductions of more than 20,000 tons of CO2 emissions and that 365 million cubic feet of methane will fl ow into the sales pipeline annually.
At completion of Hugoton’s retrofi t project, it is estimated that CO2 emissions will be reduced by more than 20,000 tons per year.
17
Compliance
Oxy seeks strict adherence to these requirements, addresses required corrective actions in a timely manner and seeks ways to further strengthen compliance. As a result of this effective HES management system, compliance is high and Oxy receives very few citations, especially considering Oxy’s size and scope.
Citation and penalty data refl ect the level and focus of agency enforcement activity, which varies from year to year with agency priorities. As a result, these data do not necessarily serve as good leading indicators of any company’s HES management systems’ performance. However, enforcement priorities can present additional opportunities to strengthen HES management systems. Oxy strives to capitalize on these opportunities even as the regulatory framework becomes more complex and restrictive.
Citations, which are actions initiated by a govern-mental agency, include notices of violation, warning notices, administrative orders, consent orders/agreements and civil actions or court orders. Often, citations focus on administrative matters. Citations are tracked by Oxy worldwide and may include health, environment, safety, process risk management and transportation activities. In the table below,
citations are summarized according to the applicable environmental media: air, water, land or other. The “other” category includes administrative, product-related and employee safety issues. One trend is apparent — enforcement activity relating to the Title V operating permit program under the U.S. Clean Air Act is increasing.
In 2006, total penalties paid by Oxy were $557,032, a small amount as compared to other large industrial companies. In 2006, the OxyVinyls partnership concluded voluntary discussions with federal, state and local environmental agencies with jurisdiction over four manufacturing facilities, with Oxy agreeing to reduce vinyl chloride emissions and to resolve disputed administrative claims and allegations of environmental violations at those facilities. In addition to emission reduction projects, OxyVinyls paid penalties of $340,000 to resolve the matter. Excluding the OxyVinyls matter, the average penalty amount in 2006 was just over $7,000. Another method for assessing performance trends is the amount of penalties paid by the year in which the notice of the alleged deviation was received, as shown on the graph below (this data excludes commitments by Oxy for Supplemental Environmental Projects).
22 33 39 31 52
1999
2000
45
2001
40
2002
2003
2004
2005
Total
12 7 24 22 32 26 32 Air4 9 7 2 8 13 5 Water3 1 4 2 9 4 — Land3
29
1998
851
15 16 4 5 3 2 364
2006
5428
— Other
Occidental Citations Number of Occurrences
150 149 67
1998
152
1999
314
2000
325
2001
129
2002
180
2003
417
2004
2005
2006
Occidental Penalties Paid* Thousands of Dollars
* Through 2006, reported by year in which notice was received.
RESPONSIBLE WORKPLACE PRACTICES
ENFORCEMENT AND PERFORMANCE
Throughout Oxy’s operations there are hundreds of thousands of HES-related legal and permit requirements.
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ENVIRONMENTAL EXPENDITURES
Oxy’s U.S. business operations are subject to stringent laws and regulations relating to improving or maintaining the quality of the environment. Likewise, international operations subject to environmental protection laws. Environmental expenditures related to current operations are factored into overall business planning. Operating expenses are incurred continu-ously, while capital expenditures relate to longer-lived improvements in currently operating facilities.
Oxy’s 2006 environmental operating expenses and capital expenditures for projects related to environ-mental protection are shown in the table below. Oxy’s commitment to maintaining compliance and improving HES performance means that signifi cant expenditures will continue. Although total costs may vary in any one year, over the long-term, segment operating and capital expenditures for environmental compliance are expected to increase.
ENVIRONMENTAL EXPENDITURES RELATED TO BUSINESS SEGMENTS
In millions 2006 2005 2004
OPERATING EXPENSES Oil and Gas $ 95 $ 65 $ 51Chemical 73 67 59 $168 $132 $110
CAPITAL EXPENDITURES Oil and Gas $55 $43 $44Chemical 25 21 12 $80 $64 $56
REMEDIATION
Laws that require or address environmental remediation may apply retroactively to past waste disposal practices and releases of substances to the environment. In many cases, the laws apply regardless of fault, legality of the original activities or current ownership or control of sites. Oxy and certain of our subsidiaries are currently participating in environmental assessments and cleanups under these laws at federal Superfund sites, comparable state sites and other domestic and foreign remediation sites, including currently owned and previously owned sites. Also, the company and certain of our subsidiaries, have been involved in a number of governmental and private proceedings involving historical practices at various sites including, in some instances, having been named in proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar federal, state and local environmental laws. These environmental proceedings seek funding or
performance of remediation and, in some cases, compensation for alleged property damage, punitive damages and civil penalties. In most of these proceedings, Oxy is one of many companies that have shared in the costs involved. With all such environ-mental proceedings, Oxy accrues reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
To enhance efficiency and effectiveness, Oxy manages its environmental remediation efforts through a wholly owned subsidiary, Glenn Springs Holdings, Inc., which reports its results directly to Oxy’s corporate management. Cash expenditures related to site remediation activities in 2006 were approximately $71 million. The table below presents Oxy’s environmental remediation reserves at year-end 2006, 2005 and 2004 grouped by three categories of environmental remediation sites:
$ amounts in millions 2006 2005 2004
# of Reserve # of Reserve # of Reserve Sites Balance Sites Balance Sites Balance
CERCLA & equivalent sites 105 $226 128 $236 125 $239Active facilities 21 116 18 114 16 75Closed or sold facilities 40 70 39 68 39 61Total 166 $412 185 $418 180 $375
As of December 31, 2006, Occidental or certain of its subsidiaries have been named in 105 CERCLA or state equivalent proceedings, as shown below.
$ amounts in millions #of Reserve Sites Balance
Minimal/No exposure (a) 85 $ 6Reserves between $1–10 MM 14 55Reserves over $10 MM 6 165
Total 105 $226
(a) Includes 32 sites for which Maxus Energy Corporation has retained the liability and indemnifi ed Occidental, 5 sites where Occidental has denied liability without challenge, 15 sites where Occidental’s reserves are less than $50,000 each, and 33 sites where reserves are between $50,000 and $1 million each.
In determining the environmental remediation reserves, Oxy refers to currently available information, including relevant past experience, available technol-ogy, regulations in effect, the timing of remediation and cost-sharing arrangements. For a complete discussion of these factors and other information concerning the environmental remediation reserves, see our 2006 Annual Report on SEC Form 10-K.
19
EMPLOYER OF CHOICE
Oxy strives to be an employer of choice in the oil and gas, and chemical industries.
Employment Practices
During the past three years, the number of Occidental Oil and Gas employees has grown signifi cantly through acquisitions and the staffi ng of new projects. The rapid growth of our workforce has required the enhancement of the traditional key human resource management programs such as Employee Empowerment and Mentoring, Leadership at All Levels and Training.
Through the development of these programs and employee activities identifi ed through the TeamOxy employee association, Oxy was named one of Houston’s Best Places to Work in 2006. The annual Houston Business Journal award is given based on an employee satisfaction survey, with nominated companies required to have a certain percentage of their employees respond to the survey. Employees were asked to identify reasons why they believe they work at one of the best workplaces in Houston. Oxy
is one of the fi rst companies in the oil and gas industry to receive this prestigious award.
To help new employees adapt more quickly to their new jobs and to the company’s culture, we have redesigned our “On
Boarding Program.” This system helps integrate new employees into the organization,
so they can become highly productive and respon-sible members of the workforce in the shortest possible timeframe.
The On Boarding program activities include “New Employee Luncheons” where new employees have the opportunity to meet company leaders and learn more about the business, and technology exchange conferences where they can network with leading technical experts across the company.
Our “Mentoring Program” provides technical mentors to new employees. This program is designed to accelerate the learning and acculturation process among new employees by providing a support system to enhance their potential for success.
New Oxy employees and their mentoring partners work together formally for a year, but many choose to continue their relationship beyond that point. More than 100 employees, at all levels of the company, have attended mentoring training workshops to enhance their mentoring skills.
DEVELOPING LEADERS AT ALL LEVELS
Oxy’s future depends on strong leadership and new employees are not the only ones to receive profes-sional development training. Developing employees as leaders at every level of the organization is a cornerstone of Oxy’s success. Our employees make decisions every day that impact the business, the community and the environment. We want to ensure that they have the skills and resources to make and manage their decisions effectively; therefore a variety of employee development programs are in place to support their effort.
The “Leadership Development Program” (LDP) is focused on developing the current and future generation of senior leaders across the organization. The LDP provides current and future leaders with the tools to implement and drive business strategy and manage challenges. Since 2001, more than 175 participants from every Oxy business unit and operational location around the world have completed the program.
“OxyChem Leadership Essentials” (LE) was created by OxyChem, which recognized the need for continuous development of the organization’s leadership talent. OxyChem is implementing its LE training program by targeting fi rst-line manufacturing supervisors and managers. The LE training comple-ments other programs developed for leaders at all levels and is designed to be delivered internally by OxyChem employees. The modular curriculum develops leaders who are entrusted to execute the organization’s strategies and meet its goals by building and maintaining a high-performing workforce.
RESPONSIBLE WORKPLACE PRACTICES
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TECHNICAL TRAINING
Occidental’s global employee technical training program emphasizes the development and ongoing enhancement of the critical workforce competencies needed to execute our strategic plan. Training takes many forms including formal classroom, distance learning, on-the-job work experience and job rotations.
Oxy is focused on training employees to gain the skills necessary to adjust to the changing demo- graphics of our workforce. In addition, existing training programs, procedures and guidelines are being reviewed and combined with feedback from various technical assessments to identify actions for improving the quality and effectiveness of technician training.
Examples of employee development efforts: º “ Oil and Gas Geoscience Functional Training
Initiative” (FTI) is a focused effort to improve the ability of Oxy geoscientists and engineers to understand and predict reservoir quality. Formal training and associated fi eld trips are offered
worldwide. Most of the courses are designed to encourage a multidisciplinary approach to reservoir description and characterization. More than 370 individuals participated in 2006.
º “ Oil and Gas Engineering Development Program” (EDP) was created in 2006 as a formal engineer-ing development program to address the increasing need for high-quality engineering talent. Increasingly, Oxy is hiring more engineering students from college campuses around the world and EDP, supplemented with a combination of focused formal training and early job rotations, accelerates their ability to rapidly reach core competency. More than 100 engineers are currently enrolled in the program.
º “ OxyChem Technician Training” ensures OxyChem’s superior HES knowledge is transferred to new employees. Oxy trains employees in HES processes and procedures, job fundamentals, and the safe and effective handling of the chemicals used in the business.
At the 2006 Functional Training Initiative Carbonate Reservoir Characterization course, engineers Ravi Sharma and Robert Kramm examine a modern carbonate core from a tidal fl at environment with geoscientists Natalia Aristizabal and Alexandra Webster. Sixty Oxy geoscientists and engineers studied a modern carbonate environment to learn more about facies predictabil-ity, reservoir properties and geologic risk.
Developing Expertise in Our International WorkforceRESPONSIBLE WORKPLACE PRACTICES
As our business has expanded around the world, we have attracted thousands of employees of exceptional talent from numerous countries and cultures, bringing a broad world perspective to the corporate culture. Oxy’s ability to work effectively in highly diverse cultural environments enhances value for Oxy’s partners, employees and stockholders.
Oxy has established comprehensive programs to hire national employees in the different countries where we operate, and train them in all operational and professional disciplines. This program has contributed to our operating effi ciencies, and expanded the overall technical and management expertise of the workforces in emerging countries where we have operations.
In Oxy Oman, we maintain our strong commitment to the “Omanization” program at all levels of our Oman operations — from executive management to entry-level positions. This program is designed to replace foreign expatriates with Omani citizens in all job positions. Aside from the new Mukhaizna operations, Omani employees comprise 90 percent of Oxy’s workforce in Oman. As our operations continue to expand in Oman, so will our efforts to train and recruit local employees.
In Latin America, we continue our long-standing efforts to maintain a predominantly national workforce in each of our operations.
In addition to building the workforces in our inter-national operations through the hiring and training of local employees, Oxy also assigns these employees to responsible positions throughout our worldwide operations as part of our comprehensive career development process.
PROVIDING FAIR COMPENSATION AND BENEFITS
Oxy’s wages, benefi ts and employment terms are designed to attract and retain top-quality talent. Compensation is targeted to be competitive within the respective labor markets and to provide signifi cant opportunity for personal growth based on performance.
A WORKPLACE FREE FROM DISCRIMINATION,
HOSTILITY AND HARASSMENT
Any hostility or harassment of any employee based on age, color, gender, sexual orientation, national origin, religion, or any racial, ethnic or other personal characteristic is a violation of Oxy’s policies. Every Oxy manager is responsible for the communication, implementation and enforcement of this policy at their location and for complying with all applicable anti-discrimination laws and regulations.
PROTECTING EMPLOYEE RIGHTS
Oxy has a long-standing policy of respecting employees’ voluntary freedom of association with respect to causes, organizations or political parties they wish to support or join. Oxy encourages employees to participate in the political process on their own time. Employees have a right to make political contributions in their own name and from their own assets. Employees are not required by the company to make any political contributions.
EQUAL OPPORTUNITY EMPLOYER
We provide equal opportunity to all individuals in every aspect of employment without regard to race, color, religion, ethnicity, gender, national origin, disability, age, sexual orientation or veteran status. This applies
144547
U.S. employeesnon-U.S. employees
Supervisory Positions WorldwideWithin Oxy’s Oil and Gas, and Chemical operations
Out of 691 supervisory positions held in Oxy’s Oil and Gas and Chemical operations worldwide, 547 or about 79 percent of these positions are held by non-US employees.
RESPECTING DIVERSITY
An infl uential factor in Oxy’s success is the broad cultural diversity of its multinational, multiethnic workforce.
22
to all phases of employment, including recruitment, hiring, compensation, promotion, training, work assignments and performance evaluations.
We believe every employee at Occidental is a potential leader, and our recruiting, training and development programs are designed to help realize their full potential. Our vision is that every employee knows that he/she will be constrained only by their ability and desire in contributing fully to their own personal and the company’s success.
WORK/LIFE BALANCE
Oxy recognizes that maintaining a healthy balance between job duties and the responsibilities associ-ated with everyday life is important in order to retain talent and maximize performance. In addition to competitive paid time off and vacation policies, many Oxy sites offer fl exible work schedules, telecommuting and other programs aimed at accommodating the needs of a diverse workforce.
There are times when an employee may struggle with family, emotional or other issues that can affect the employee’s well-being and ability to function effectively at work or in their personal lives.
Acknowledging the impact of these issues, Oxy offers an Employee Assistance Program, which provides free counseling sessions to support employees, dependents and retirees.
OXY WELLNESS PROGRAM
Oxy initiated an expanded health improvement and wellness program in 2006 that is available to all U.S.-based Oxy employees and their spouses. The program takes a preemptive approach to fi nding and addressing health risks to keep participants healthy. Oxy recognizes that health improvement has been shown to provide signifi cant benefi ts, including higher productivity and reduced medical costs, for the company and our employees.
Oxy’s wellness program incorporates online health risk assessments, free health screenings and other elements that provide health risk education and risk reduction assistance. Participants can meet with a health advisor to discuss their individual results and consider ways to improve personal health and wellbeing. More than 4,000 employees and spouses have completed their online health assessments in the months since this program was launched.
To encourage improved health of Oxy employees, one of the innovative programs introduced by OxyWellness is “Walk This Way” where employees log the number of steps they take to win cash prizes.
Oxy Oman’s Sadiq Al-Lawati, Vice President — Health, Environment and Safety, and Najeeb Al Harthy, Vice President for B9 and B27 Operations review geographic data.
Sonya Chavez, THUMS Island White Facilities Operations Supervisor, has more than 25 years of service with THUMS, Long Beach. The fi rst woman to hold a top supervisory position at the site, she is known to her colleagues and management for her focus on safety.
23
Oxy is a signatory of the Voluntary Principles on Security and Human Rights, which guide companies in maintaining the safety and security of operations while ensuring respect for human rights and fundamental freedoms.
Oxy’s corporatewide Human Rights Policy was formalized in 2004 to reinforce our ethical business practices with respect to the promotion of human rights within all areas of our activities and infl uence.
Our policy requires human rights training for all security personnel, managers and new hires. Background checks are conducted for all security personnel, including contracted employees. It also requires impact assessments, consistent with the Voluntary Principles, to be conducted before new work activities begin in any non-U.S. location.
PROMOTING HUMAN RIGHTS AWARENESS
THROUGH TRAINING
Oxy’s Human Rights Policy is based on international standards and supports the universally recognized rights and freedoms set forth in the Universal Declaration of Human Rights, the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work, the Voluntary Principles on Security and Human Rights and the Global Sullivan Principles. More than 2,000 Oxy employees, including nearly all employees from operations in Argentina, Colombia, Libya and Oman have received human rights training. Trainees discuss the policy and important human rights and social responsibility issues. Special attention is given to Oxy’s commitments to stakeholders and ways in which the company develops an understanding of issues of the local culture. The training material used in these electronic courses is customized to adapt to local cultures and translated into local languages. Arabic and Spanish training modules facilitate the learning process for trainees.
Oxy’s training materials include case discussions, examples from extractive industries and illustrations of good practices, and are available to all employees through our internal Human Rights Web Site. Our Human Rights Policy can be viewed at www.oxy.com.
CONDUCTING SOCIAL IMPACT ASSESSMENTS
The Human Rights Policy requires our operations to conduct social impact assessments that include stakeholder analysis, issue identification and consideration of community needs. These social impact assessments include risk evaluations consistent with the terms of the Voluntary Principles.
Commitment to Human Rights
Oxy is committed to conducting its business in a manner that observes the law, respects the cultural values of the communities in which we operate and refl ects a high standard of ethics.
Human rights training sessions such as this one in Chile are conducted by Oxy’s Director of Social Responsibility, Luis Fernando De Angulo. The one-on-one training offers employees the opportunity to discuss human rights and social responsibility issues unique to their communities and reinforce that human rights are core values at Occidental.
ETHICAL BUSINESS PRACTICES
2424
Through risk assessments and training in Oman, employees now are paying close attention to their interaction with local communities and have developed relationships of mutual respect.
Oxy Libya’s Protocol Affairs Manager, Leila Elkial, helps our staff in raising awareness and understanding of culture and history at the beautifully preserved Roman ruins of Sabratha located on the Mediterranean Sea in Libya.
Checks and balances are incorporated into our business practices in an effort to ensure that our operations promote economic development, without jeopardizing human rights. In 2006, assessments were completed in Oman, Libya and Colombia — including the La Cira project in Colombia (see the following page) — and additional assessments were initiated in Argentina and Yemen.
In new projects like Mukhaizna, Oman, acquired by Oxy in late 2005, the social impact assessment is performed concurrent with the environmental impact assessment. This practice informs a comprehensive approach to addressing the relationship of environmental and community issues.
Conducting risk assessments allows us to incorpo-rate stakeholder expectations and the unique characteristics of local institutions and cultures into our project-planning and decision-making processes. For example, we pay close attention to our interac-tion with Bedouin populations in Oman, addressing archaeological heritage in Libya and maximizing opportunities for local labor and skills development in our new projects in the Middle East. Many recent social initiatives have emerged from these assess-ments, such as training programs for neighbor communities in Oman, developing local vendors in La Cira, Colombia and addressing youth unemploy-ment issues in Argentina.
In the future, the implementation of our Human Rights Policy throughout the company will be increasingly integrated with the HES and SR Management System, providing a source of quality assurance for our efforts and making every employee responsible for social responsibility performance.
PROMOTING THE VOLUNTARY PRINCIPLES ON
SECURITY AND HUMAN RIGHTS IN COLOMBIA
Occidental has been actively participating in the initiative led by the Colombian government to promote the Voluntary Principles on Security and Human Rights in the country’s extractive sector.
Oxy is a member of the National Committee on the Voluntary Principles, convened and chaired by the Colombian Vice President. This committee conducts periodic progress reviews with the participation of local representatives of signatory governments and companies, and the Colombian Oil Industry Association (ACP). Oxy’s participation is helping the National Committee achieve its aspiration to make the Voluntary Principles an industry-wide practice and to expand the involvement of reputable nongovernmental organizations (NGOs).
These efforts have had such widespread impact that Colombia is now recognized by many as a showcase in demonstrating progress and commitment to the Voluntary Principles.
25
A CONSTRUCTIVE COLLABORATION WITH INTERNATIONAL ALERT AND FUNDACIÓN IDEAS PARA LA PAZ
Occidental de Colombia recently agreed with ECOPETROL (Colombia’s national oil company) to jointly operate an enhanced oil recovery project at the La Cira oil fi eld in the Middle Magdalena Valley — a region that has been impacted by violence and diminishing economic opportunities for the local population.
Key aspects of the La Cira projects include sharing and exchanging information with neighbors.
Much of the project’s future success depends on proactively addressing security, human rights and social issues.
In 2006, Oxy and ECOPETROL partnered with two nongovernmental organizations to conduct an innovative Social Risk Assessment of the project and the region, to identify issues that needed remediation, to fi nd opportunities that could be developed and to comply with a key requirement of Oxy’s Human Rights Policy requiring such social impact assessments.
International Alert (Alert), a London-based confl ict resolution and peace-building NGO, which has been actively engaged in global multistakeholder initiatives to address development issues, was selected to conduct an independent assessment. Alert used their proprietary tool, Confl ict Sensitive Business Practices (CSPB), which allows companies to apply two-way risk and impact analysis with a specifi c, but not exclusive, focus on issues of security and human rights. Alert, teamed with its local Colombian partner, Fundación Ideas Para la Paz (FIP) — on the pilot application of a human rights and social risk program in La Cira to test the CSBP approach it had developed based on fi eld research and consultation with various stakeholders.
Oxy and ECOPETROL’s staff, from managers to fi eld workers, participated in this collaborative effort through workshops, training, interviews and extensive review of the project documents and socioeconomic information of the region.
After a three-month pilot, a full risk assessment, including field work was conducted, providing valuable analysis and recommendations to address the social, security and economic impacts of the project. FIP and Alert provided guidance in conducting
the fi eld analyses, as well as training for the La Cira project teams. To ensure the independence and autonomy of all parties involved, a formal Memorandum of Understanding was drafted. This Memorandum set forth the specifi c roles of the working relationship between the NGOs and the companies.
The utilization of the CSBP and the coaching from the NGOs provided clear guidance for current and future stakeholder consultation on issues including: identifying specifi c actions for further implementation of the Voluntary Principles in the region; providing valuable feedback on key aspects of the La Cira project, including managing land issues with neighbors; and promoting safe utility use among the local population who had installed unsafe connections to the oil field pipes. The most important long-term effect of the NGO collaboration has been the introduction of risk analysis and stakeholder engagement as a continuous practice.
Commitment to Human RightsETHICAL BUSINESS PRACTICES
26
ETHICAL BUSINESS PRACTICES
The code includes a policy of “zero tolerance” for violations and applies to all employees and businesses of Oxy. In many geographic areas where we do business, the code’s requirements are more stringent than the prevailing legal requirements.
Strong corporate governance policies are funda-mental to good corporate citizenship. Oxy’s Board of Directors and management are committed to accountability and continue to upgrade policies to ensure the company stays at the forefront of good governance.
Our corporate governance practices have been given high ratings by several independent entities. For example, GovernanceMetrics International (GMI), an independent corporate governance and ratings agency, rated Oxy 10 out of a possible 10 in December 2006. Oxy was one of only 38 companies from among 3,800 firms assessed to receive GMI’s highest rating.
Oxy publishes additional information on our policies in the proxy statement and on our web site www.oxy.com.
Responsibility and Integrity in Conducting Our Business
CODE OF CONDUCT
Oxy adheres to a written code of business conduct that fosters a high standard of ethical behavior as part of the foundation for all business management.
Oxy corporate legal assistant, Carre Soppe reviews the company’s Code of Business Conduct brochure. All employees are expected to be familiar with the details of the policy.
Excerpt from Oxy’s Code of Business Conduct
…before taking any action each employee should consider the following questions, and unless the answer to each question is “yes” the action should not be taken:
º Is this action, legal, ethical, and socially responsible?
º Does this action comply with both the spirit and the letter of the Code of Business Conduct?
º Will this action appear appropriate?
º Is it clear that the Company would not be embarrassed or compromised if this action were to become known within the Company or publicly?
27
GOOD NEIGHBOR PRACTICES
Recognizing the untapped human resources in Taft, Oxy was instrumental in founding the Petroleum Technology Academy as an integral part of the Taft High School curriculum in 2001.
The Academy is a unique three-year alternative learning program emphasizing petroleum technology and preparing students for a career in the oil and gas industry. Oxy and other industry affi liates worked with Taft High School in developing a strong academic program accredited by the State of California.
Liliana Torres, one of 40 students in the program’s inaugural class, is now a third-year mechanical engineering student at California State University at Fullerton (CSUF) and President of the Society of Women Engineers at CSUF. Liliana credits her achievements to the support she received from her parents and Oxy, and the education she received in the Academy. “Attending the academy gave me confi dence and an opportunity at a young age to learn valuable skills which opened doors leading me toward a career in petroleum engineering.” Liliana has been an intern at Occidental Elk Hills for the past three years, and hopes to have a career with Oxy when she graduates.
Oxy’s contribution to the Academy includes mentoring, fi eld trips, career and curriculum consulting, leader-ship skills, providing an in-depth understanding of the petroleum industry, and most of all, helping build confi dence and self-esteem.
In addition, with Oxy’s support, the Polk county High School at Copper Basin, Tennessee has established a student exchange program with Taft High School, furthering the scope of knowledge of students from each region. The Independent Petroleum Association of America (IPAA) discovered the Academy’s unique program in 2006. The IPAA visited the Academy and recognized its curriculum integrity, leadership building attributes, student accountability and the collaborative efforts between administration, teaching team, students, parents and the strategic partnerships. The IPAA is planning to initiate a similar program in the Houston Independent School District in 2008.
Educational Enrichment
ELK HILLS, TAFT ACADEMY — OIL RELATED EDUCATION FOR THE NEXT GENERATION OF ENGINEERS, GEOLOGISTS AND IT PROFESSIONALS
The rural town of Taft, California lies 15 miles from Oxy’s giant Elk Hills oil and gas operation and is one of the ‘neighbors’ in Oxy’s Good Neighbor program.
Liliana Torres presents documentation on production trend analysis to Oxy’s Executive Vice President, John Morgan.
As an intern conducting fi eld work at Oxy of Elk Hills, Liliana Torres is a graduate from the Petroleum Technology Academy. Developing a career in petroleum engineering will be a win/win situation for both Liliana and Oxy Elk Hills.
2828
A CRECER — TO GROW OXY COLOMBIA
A Crecer, meaning to grow in Spanish, is a literacy and adult education program being carried out in Arauca, Colombia, where Occidental de Colombia has operations in the Caño Limón oil fi eld.
Jointly sponsored with ECOPETROL (Colombia’s national oil company) and the El Alcaravan Foundation, the program designs and applies learning methodologies that encourage individual, family and community participation in literacy, educational and personal development activities. It offers area residents the opportunity to work with facilitators in weekly gatherings, to attend personal-ized classes, participate in learning games and
recreational activities to gain literacy, and expand education and personal development.
A Crecer, launched in 2003, is working to ensure continuation of the program and planning to add 2,000 participants from the region. In addition, A Crecer is working with Oxy to replicate the program in other areas in Colombia where we have operations.
A Crecer was launched in 2003 and by the end of 2006, 19 area villages in the Caño Limón oil fi eld area participating in the program had illiteracy rates reduced to almost zero.
29
OXY PERMIAN — “SAFE T. TURTLE”
Tragedy strikes most communities at one time or another. It is the character of those in the community that determines how the tragedy is handled.
GOOD NEIGHBOR PRACTICES
Encouraging Safe and Healthy Communities
In 2003, following a West Texas oil fi eld accident that occurred when two local youths breached security, Oxy’s Permian operations recognized the need to educate children about dangers in the oil fi eld. A public service campaign to deal with this issue was created by Oxy in collaboration with the Permian Basin Petroleum Association’s (PBPA) public relations committee. Billboards and advertisements were designed, videos were produced and a mascot was born — Safe T. Turtle. Oxy Permian supports this program on an ongoing basis, serving on the PBPA Public Relations Committee that oversees the program and participating directly in school presentation activities.
Ben Sheppard, PBPA’s Executive Vice President said, “With thousands of oil fi eld facilities and related equipment throughout West Texas, it is imperative that we teach kids not to play on or around that equipment. We also want to show them the many precautions our industry takes to be safe when working in the oil fi eld.”
The most important part of this education program is done in the classroom. Safe T. Turtle appears in his naturally protective safety shell and wears a hard hat and steel-toed boots. He holds a sign displaying his main message, “Play it Safe… Don’t Take Chances!” The children are drawn to him. Safe T. Turtle has visited dozens of schools and has talked with thousands of children in the Permian Basin area about the various hazards they could encounter around oil field operations. Accompanied by an industry safety representative, who discusses safety precautions, Safe T. Turtle also hands out stickers and leaves posters reminding the children that the oil fi eld is not a playground.
“Presenters sometimes wonder if their messages are getting through, but trust me, they are!” said Principal Joy Jones of Crane Elementary School in Crane, Texas. “Two of our staff members who had kids in our school’s presentation said their kids were talking about it at home, quoting messages from the presenter and the video.”
Since the inception of the program, Safe T. Turtle has appeared on numerous billboards throughout West Texas and has been seen and heard in multiple public service announcements on television and radio both in English and Spanish.
Safe T. Turtle appears in his naturally protective safety shell and wears a hard hat and steel- toed boots.
Safe T. Turtle with Texas Governor, Rick Perry, displaying the program’s main message, “Play it Safe… Don’t Take Chances!”
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Launched in 2006, the Oman Safe Driving program fi lm has been shown to all Oman employees who drive company vehicles. The companion brochure distributed to more than 10,000 drivers, has been so successful that other companies have asked permission to reprint the brochure.
OMAN SAFE DRIVING PROGRAM
As part of our contribution to the safety of the communities in which we operate and to address issues of local importance, Oxy is working with the Royal Oman Police, the Ministry of Education and Oman TV to address the growing number of road accidents in the Sultanate of Oman.
Oxy’s fi nancial support helped to fund the printing and distribution of a brochure and production of a powerful fi lm, “Pain and Hope,” which focuses on the experiences of auto accident survivors and family members. The fi lm will be distributed to schools throughout the Sultanate and shown to the general public. The brochure will be distributed to thousands of drivers throughout the Sultanate.
The Oman safe driving program demonstrates Oxy’s longstanding interest in preventing vehicle accidents. Due to the location of Oxy Oman’s operations, all company employees attend a desert driving training program to reinforce the care that must be taken when driving on unpaved roads in remote areas. A journey management system is employed to check-in with drivers at various waypoints. Also, company vehicles are stocked with emergency supplies and equipped with systems to record operating parameters such as speed, braking and engine function that are downloaded and analyzed to reinforce safe driving behavior.
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THE BEST BUDDIES CHALLENGE: 2006
Hurtling down the twisting, turning 100 miles of scenic California coast from Monterey to the Hearst Ranch in San Simeon, more than 500 colorfully clad cyclists rode to benefi t Best Buddies International.
GOOD NEIGHBOR PRACTICES
Helping People Help Themselves
Oxy served as a Golden State sponsor and Host Committee Member for the 2006 Volvo Best Buddies Challenge: Hearst Castle, which raised close to $2.5 million for Best Buddies International, a non-profi t organization dedicated to helping people with intellectual disabilities by providing opportunities for one-to-one friendships and integrated employment.
Founded in 1989 by Anthony Kennedy Shriver, Best Buddies is a vibrant, international organization that has grown from one chapter to more than 1,300 middle school, high school and college campuses across the U.S. and internationally. Best Buddies’ six formal programs — Best Buddies Middle Schools, High Schools, Colleges, Citizens, Jobs and e-Buddies will positively impact more than 300,000 individuals this year.
Oxy’s active investment in the community is not simply providing fi nancial support, it is also about participation, commitment and being a ‘good neighbor.’ TeamOxy, our employee-driven community volunteer program, promotes employee involvement in programs aligned with our strategic business objectives, and refl ects our vision and values. TeamOxy’s participation in the Challenge provided not only sponsorship, but also an employee team of 49 riders who raised $61,000.
TeamOxy cyclists from Long Beach, Los Angeles, Elk Hills and Houston participated as one of the event’s top fundraising teams in this high-energy, family event chaired by California’s First Lady, Maria Shriver. Our community involvement illustrates Oxy’s core values and the benefi cial relationships we are building throughout our sphere of infl uence.
California’s First Lady, Maria Shriver with distinguished Student Leader Katie Meade at the kick off of the Best Buddies Challenge 2006. Katie will be recognized at the 18th Annual Best Buddies Ball with the Spirit of Friendship Award for her dedication to the mission of friendship for people with intellectual disabilities.
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“ It’s Oxy’s focus on being a
socially responsible company
and its employees commitment
to that goal that makes them
a great company.”
— Anthony Kennedy Shriver
Founder Anthony Kennedy Shriver, right, has built Best Buddies into the world’s largest nonprofi t dedicated solely to providing opportunities for one-to-one friendships and integrated employment to people with intellectual disabilities.
Richard Hallock, below, Oxy’s Executive Vice President of Human Resources, was one of the 49 TeamOxy employees to participate in the 2006 Best Buddies Challenge. TeamOxy raised $61,000 for the event.
Oxy Oil and Gas Strategic Staffi ng Lead, Amanda Mackintosh, below far right, is up before dawn to start the challenge.
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OXY COLOMBIA: “OPPORTUNITIES BANK” — BUSINESS COUNSEL AND MICRO LOANS
For Jose Fernelli Aguirre, a 67-year-old owner of a small bicycle manufacturing and sales business in Arauca, Colombia, the Banco de Oportunidades (Opportunities Bank) has been a godsend.
GOOD NEIGHBOR PRACTICES
Stimulating Local Development
Mr. Jose Aguirre, at right, is one of the many small business owners who have received assistance from the “Opportunities Bank” program.
The program, created by Oxy Colombia, through the El Alcaravan Foundation, has provided Mr. Aguirre with business advice and fi nancial assistance that helped him create a successful business.
Mr. Aguirre is just one of many small business owners receiving assistance from the Opportunities Bank program. The initiative grew out of the Arauca Municipal Development Plan, which focused on job creation and preservation in the area.
Oxy and El Alcaravan Foundation have developed and run successful microcredit and small business support programs in rural areas of Colombia. Results have been so positive that the local Municipality of Arauca and other social entities have partnered
with El Alcaravan to move more of these programs forward by committing additional resources to enable more local business people to participate in and benefi t from this program.
To date, the program has helped more than 300 area residents who were interested in starting, building and/or sustaining a business. The Bank of Opportunities program offers personalized business consulting that takes into account individual needs. Its principal focus in the Arauca area is on the sale of meats, produce, clothing and household products.
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HABITAT FOR HUMANITY
“Homes for Houston” project inspires OxyChem volunteers to dedicate a week of their time and labor to a Houston family.
Seventy-fi ve OxyChem volunteers participated in an ambitious eight-day homebuilding spree for the Habitat for Humanity “Homes for Houston” project in partnership with the Vinyl Institute in April and May, 2006. Employees from OxyVinyls’ Houston operations worked as carpenters, roofers, framers, painters and landscapers to make a home a reality for a deserving local family. The project concluded with a ceremonial dedication of the home built by OxyChem employees for local residents Mr. and Mrs. Achour Amari and their three young children, who were delighted to accept the keys of their new home.
“We were so surprised! We are very happy!” exclaimed Achour Amari. “We have little babies and only I work. A mortgage is too tough for us and now I will have a home to raise my children in. We have suffered and now hope is on the way. I thank all of you for what you are doing.”
OxyChem President Chuck Anderson participated, pounding nails alongside other OxyChem employees. Houston’s Habitat project leaders acknowledged his exemplary leadership as the fi rst major company president to be personally involved in an area Habitat project.
Many of the OxyChem volunteers worked in group shifts, working one to four days at a time, lending their expertise at each phase of the construction.
“Often, people feel like they do not have the time for a project of this magnitude,” said Chris Corwin, Oxy Human Resources Manager and the project’s
volunteer coordinator. “Then they get involved, see the house form and realize the signifi cant impact their involvement had in helping a less fortunate family. It is a very rewarding feeling.”
“One of the tenets of Habitat for Humanity is to build homes that are not only affordable, but are high quality and energy effi cient. Vinyl building products help achieve that goal and are part of every Habitat for Humanity home we build,” said Houston Habitat for Humanity President and CEO Laurence J. Payne. The fi nished house featured several vinyl products donated by OxyChem customers, including vinyl siding, windows, doors, fl ooring and PVC pipe. Vinyl products are lighter than wood or metal, they transport easily and are more durable than other traditional building materials.
Later in 2006, building upon the OxyChem experience, other Houston-based Oxy Oil and Gas and Energy Marketing employees assisted the local chapter of Habitat for Humanity with a weekend
“wall build.” The dedicated Oxy team built 18 walls in record time for a house slated to be constructed in mid 2007.
Mr. and Mrs. Achour Amari are the “Homes for Houston” recipients, thanks to Habitat for Humanity and OxyChem volunteers.
OxyChem President Chuck Anderson participated in Habitat for Humanity’s “Homes for Houston” project, pounding nails alongside Human Resources Manager Dave Mayeaux and other OxyChem employees.
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Tomorrow
We believe that responsible health, environment, safety and social responsibility practices, are fundamental requirements of the Oxy family.
Drawing on our past successes and our many lessons learned, our thousands of employees will continue their dedication to upholding the high standards and values Oxy has established. In the four continents and 12 countries where we operate, we pledge to bridge cultural and language differences, and to seek and implement continuous improvement in our HES and SR programs.
While helping to meet the world’s energy needs, Occidental and our employees are committed to being outstanding and responsible corporate citizens. That is our pledge… and our promise.
Oxy’s success working with local communities has helped create a prosperous business model that encourages cultures where we operate to thrive. At left, an Omani fi sherman mends his net near the town of Al Bustan.
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© 2007 Occidental Petroleum Corporation
This report was printed on recycled paper.
OxyGOOD NEIGHBOR. GOOD BUSINESS.SOCIAL RESPONSIBILITY REPORT 2006
Business Overview
Occidental Petroleum Corporation (NYSE: OXY) is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions.
Oxy is the fourth largest U.S. oil and gas company, based on equity market capitalization. Oxy’s wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls.
Occidental is committed to safeguarding the environment, protecting the safety and health of employees and neighboring communities and upholding high standards of social responsibility in all of the company’s worldwide operations.
For additional information on the company’s operational and fi nancial performance, see our 2006 Annual Report on SEC Form 10-K.
CURRENT NEWS AND GENERAL INFORMATION
Information about Occidental and its Social Responsibility and Health, Environment and Safety activities, including news releases, is available at www.oxy.com. Or call 1-888-OXYPETE (1-888-699-7383) toll-free to request an investor package.
FOR MORE INFORMATION
Occidental welcomes your thoughts, questions and suggestions on this report. To send your comments or to request more information or additional copies of this report, please contact Richard S. Kline, Vice President, Communications and Public Affairs at:
Occidental Petroleum Corporation10889 Wilshire BoulevardLos Angeles, California 90024
Occidental, Oxy, OxyChem and OxyVinyls, mentioned in this report, are trademarks or trade names of Occidental Petroleum Corporation, or one of its subsidiaries or equity investees, registered or used in the United States or other countries throughout the world.
Forward Looking Statements: Statements in this report that contain words such as “will,” “expect” or “estimate,” or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: exploration risks, such as drilling of unsuccessful wells; global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. You should not place undue reliance on these forward-looking statements which speak only as of the date of this report. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. U.S. investors are urged to consider carefully the dis-closure in our Form 10-K, available through the sources set forth above.
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