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Abstract ConocoPhillips has partnered with Corporacion Venezolana de Petroleo (CVP), Eni Venezuela B.V and OPIC Karimun Corporation to develop hydrocarbon reserves in the Gulf of Paria West (GOPW), in northeastern Venezuela. First oil is expected in 2006 with an estimated initial production of 55,000 barrels of oil per day. Located at the convergence of the Caribbean Sea and Orinoco River system, the Gulf of Paria (GOP) is a socio-economically complex, ecologically sensitive, and internationally significant region. ConocoPhillips has developed an innovative Locality Management Strategy (LMS) to minimize the risks of development and maximize potential benefits of hydrocarbon development. The LMS integrates environmental, social, and economic programs with input obtained from a continuing dialogue with local, national and international stakeholders. This paper will highlight the benefits of implementing a sustainable development strategy throughout all phases of hydrocarbon development in sensitive environments.

To date the LMS has enabled ConocoPhillips to anticipate project sensitivities and proactively work with stakeholders while also meeting Company business. Partners have been identified to leverage socioeconomic, environmental and operational programs in the region. Since 2000 and in partnership with non-government organizations, more than 6,000 man-hours have been invested in building human capacity in communities closest to the projects. In collaboration with international and national organizations, a local biodiversity conservation plan is being developed, and—through skill development, training and employment opportunities—the company is encouraging the creation of a community organization that will maximize benefits from

certain aspects of operations. Based on continuous stakeholder consultation, the LMS continues to evolve and provide opportunities to leverage project benefits to the local, national and international project stakeholders. Background and Introduction ConocoPhillips has partnered with Corporación Venezolana de Petróleo (CVP), Eni Venezuela B.V. and OPIC Karimun Corporation to develop hydrocarbon resources in the Gulf of Paria West (GOPW), in northeastern Venezuela. Located at the convergence of the Caribbean Sea and the Orinoco River system, the Gulf of Paria is a socioeconomically complex, ecologically sensitive, and internationally significant region. Consequently, ConocoPhillips and its partners decided to implement an innovative and proactive approach to development in the region. This paper summarizes ConocoPhillips’ proposed development in the GOP and the environmental and socioeconomic context in which it is being proposed. Key elements of the LMS and initial perceived benefits/achievements to date are highlighted. Hydrocarbon Developments in the GOP. ConocoPhillips and its investment partners have considerable interests in the GOP Region. In 1998, the Consortium discovered large hydrocarbon (oil and gas) reserves in the Gulf of Paria West (GOPW) Block. Testing and evaluation completed between 1998 and 2002 confirmed that the Corocoro Field includes several oil and gas production zones, and in April 2003 the Venezuelan government officially approved the project. State-owned Corporación Venezolana de Petróleos (CVP)/Petróleos de Venezuela, S.A (PDVSA) has since exercised its right to become an investment partner with a 35 percent participation. ConocoPhillips, with a 32.5 percent investment, remains the project Operator, while Italy’s Eni Venezuela B.V. and Taiwan’s OPIC Karimun Corporation retain 26 percent and 6.5 percent of the project, respectively.

The Corocoro Oil Development Project will be implemented in two phases. Construction of Phase I facilities began in 2003, and this phase will produce an estimated 55,000 barrels per day (BPD). The project facilities will include a wellhead platform and a central production facility (CPF). A 22-kilometer pipeline will carry crude from the production facilities to a 1.3-million barrel, double-hulled,

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Benefits of Locality Management in the Context of Hydrocarbon Development: A Journey Towards Sustainable Development in the Gulf of Paria, Venezuela Fernando D. Rodriguez, SPE/ConocoPhillips Inc., Francis Rivera/ConocoPhillips Venezuela; Agnieszka D. Rawa/Ecology and Environment, Inc.

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floating storage and off-take (FSO) located in deeper waters. Customer tankers will load crude from the FSO.

ConocoPhillips is also planning to conduct additional oil exploration (Phase II Exploration) in the GOP area; evaluate development of gas reserves; and consider other business investments in the GOP Region, such as: ■ Agreements with other operators in the GOP region to use

current or planned infrastructure; ■ Partnerships to develop oil/gas; and ■ Acquisition, development, operation and/or investment in

other adjacent areas. The GOP Region. The GOP is a body of water surrounded by Venezuelan coastline and an area that is both environmentally and socioeconomically sensitive. The region’s key characteristics include a diverse population (including indigenous Warao communities in the southern part of the GOP), low socioeconomic indicators, inadequate infrastructure, high levels of biodiversity and a dependence of the local communities on natural resources for subsistence. The economy of the GOP region is based predominantly on catching and processing fish.

The GOP is surrounded by several protected areas, national parks and forest reserves (Figure 1). Ecologically, it is an area of national and international importance and visibility due to the hundreds of aquatic and terrestrial species found there, including migratory bird species. The GOP has been classified as a priority marine area for conservation due to the large number of marine species that it harbors within its comparatively small area.

Since the 1930s, the GOP has experienced sporadic oil development and production activities. Currently, only Perenco and ConocoPhillips Venezuela are active in the southern part of the GOP region.

Elements of the Locality Management Strategy ConocoPhillips and its partners developed the Locality Management Strategy (LMS) to manage the risks of development while maximizing the benefits of the planned development to the nearby communities. Based in part on dialogues with stakeholders, the LMS is a flexible, sustainable development strategy that puts top priority on “local” focus (for which it gained its name) and seeks to add cohesion and value to the programs that ConocoPhillips and its partners are implementing in the context of hydrocarbon development. ConocoPhillips developed the first version of the LMS in 2000; it has since been updated and improved based on lessons learned from implementation. ConocoPhillips Vision for the GOP. One of the critical elements of the LMS is the vision that stands behind it. ConocoPhillips envisions being a catalyst for positive change in the GOP. The Company intends to work in partnership

with others to integrate environmental realities and socioeconomic concerns of the GOP communities and other national and international stakeholders into project goals. The strategy that ConocoPhillips and its partners are pursuing seeks to integrate best available practices to protect the environment with capacity building to help create healthier, stronger and more prosperous communities. Foundations of the Locality Management Strategy. The LMS is based on ConocoPhillips’ Values and Policies; the Company’s vision for sustainable development in the GOP; its experience operating in sensitive environments worldwide; issues recognized by the industry as relevant to sustainable development; and the results of a continuing process of comprehensive local, national and international stakeholder consultation (Figure 3). Implementation of the LMS is guided by the following principles established by the Company to help achieve sustainable growth in the GOP: 1. Local focus; 2. Commitment of resources; 3. Comprehensive stakeholder consultation and engagement; 4. Maximum local content; 5. Minimum environmental footprint and impact on

biodiversity; 6. Implementation of management systems and codes of

conduct; 7. Emphasis on long-term solutions; 8. Partnerships with NGOs to leverage project benefits; 9. Increased total benefits and improved community health;

and 10. Transparent tracking through performance indicators. Threats and Opportunities Assessment. Another critical element of the LMS is its reliance on the local and region-specific conditions in order to minimize any inherent or perceived risks and leverage benefits to all stakeholders.

ConocoPhillips systematically evaluates the potential risks and possible benefits of developing hydrocarbon resources in the GOP region. Development risks and opportunities are identified by analyzing the environmental and socioeconomic characteristics of the GOP, incorporating the results of local, national, and international stakeholder consultation, and by using several issue identification and decision risk and analysis (DR&A) tools developed by the Company. Risk and opportunities were identified in the following areas: Socioeconomic ■ Divergent or unrealistic stakeholder expectations, ■ Excessive dependence of community on Operator, ■ Technology transfer, ■ Secondary impacts of development, ■ Integrity of Warao culture, ■ Effects on fisheries, ■ Media communication, ■ Revenue management practices, ■ Employment, ■ Institutional changes,

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■ Capacity building, and ■ Leveraging benefits through partnering. Environmental ■ Oil spills, ■ Waste generation, handling and disposal, ■ Effects on biodiversity, ■ Activities of other operators, ■ Natural conditions in the GOP region, ■ Best available technologies and practices, ■ Implementation of project-specific standards ■ Increasing GOP data, and ■ Environmental education. Operational ■ Security, ■ Employee and Contractor conduct, ■ Health, ■ Safety, and ■ Sustainable development implementation.

These risks and opportunities are being addressed through various programs consistent with the established LMS principles.

Commitment to LMS. As shown on Figure 2, the LMS is envisioned, managed and implemented in coordination with ConocoPhillips’ partners. LMS implementation is guided by a Steering Committee composed of upper management representatives of several Corporate departments. In general, LMS implementation is a “line responsibility” integrating all departments that participate in ConocoPhillips operations in the GOP. LMS Review and Improvement Process. As shown on Figure 3, ConocoPhillips continues to learn from its experience operating in the GOP and integrates input obtained from the stakeholder engagement process. The Company regularly reviews the effectiveness of project goals, integrates new information and adjusts social investment plans and environmental programs to balance the diverse expectations and needs of the community with Company operations. The review process is completed during meetings with key members of the LMS Management and Implementation team. During these meetings, programs are evaluated for their consistency with LMS principles and the risks and opportunities that they were designed to address. ConocoPhillips has also developed a self-assessment tool to promote consistent application of LMS principles for current and future GOP operations. This tool will foster accountability, facilitate sharing of information among managers and establish a transparent process of improvement. LMS Implementation to Date Implementation of the LMS to date has been guided by ConocoPhillips and its partners’ investment goals, the risks and opportunities of development, as well as input obtained during the comprehensive project stakeholder consultation and

engagement process. Initial benefits are evidenced by the issues that were proactively identified and resolved collaboratively—thereby avoiding potentially costly project concerns in the future—and the partnerships that have been formed to date. Stakeholder Consultation and Engagement. Several local, regional, and national workshops, meetings and other community outreach programs were completed between 1998 and 2003 to promote dialogue with stakeholders who might be affected by the project. For example, meetings with the following primary stakeholders have been conducted: residents of Pedernales, Capure, Isla Misteriosa, Güiria and Irapa; the Warao community; fishermen associations; labor unions; county, state (Sucre State and Delta Amacuro State) and national governments; the National Indigenous Council (CONIVE); Port of Sucre; Trade Associations and Chambers of Commerce; the Venezuelan Ministry of Environment; and numerous NGOs, including Fundación la Salle, CESAP, Fe y Alegria, Fudena, Provita, SOCSAL, and Tierra Viva.

Through consultation, some of the following concerns or expectations relative ConocoPhillips’ and its partners’ activities in the GOP were identified:

■ The impact of a potential oil spill. Communities, and in

particular fishermen, have asked ConocoPhillips how it will protect their resources in case of emergencies such as oil spill;

■ The potential effect of waste generated by operations. Stakeholders worry that the aquatic environment on which they depend may be affected by the products and wastes that development might bring to the region;

■ Direct benefit from development. ConocoPhillips has been asked whether benefits will be tangible to people living in the GOP;

■ Employment opportunities. Communities wish to know how many jobs will be created and who will be employed by operations;

■ Fishing activities. Fishermen have asked ConocoPhillips for support in strengthening their associations; ensuring the sustainability of their catch and remaining informed of project schedule;

■ Education. Communities have asked for help to improve their schools and the quality of their education;

■ Training. Women and other members of the community have asked for training so that they can also contribute to generating income;

■ Institutional strengthening. Stakeholders have requested ConocoPhillips to assist in the establishment of communication mechanisms between the government and community;

■ Duplication of Efforts. To avoid duplication of efforts, stakeholders have advised us to foster synergy amongst the organizations that ConocoPhillips involves in the GOP;

■ Synergy with other GOP Operators. National stakeholders have also asked us to what degree we will be coordinating with other oil companies in the area;

■ Ensure continuity of programs. Non-government

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organizations as well as national government institutions have requested that ConocoPhillips ensure the continuity of programs that it establishes; and

■ Goods and Services. Potential contractors or industry associations have requested to be informed regarding ConocoPhillips needs and implementation schedule.

On an international level, ConocoPhillips has sought

feedback to fine tune strategies for sustainable development and to provide expert organizations with an opportunity to contribute to programs that address the implementation of best management practices and standards, biodiversity and community development. Stakeholders consulted to date have included the World Bank Group and the International Finance Corporation, The Overseas Private Investment Corporation (OPIC), the United States Export/Import Bank, the Inter-American Foundation (IAF), the World Wildlife Fund, Conservation International, the Smithsonian Institution, The Nature Conservancy, the United Nations Development Program (UNDP), Global Environmental Facility (GEF) and others.

Similarly on an international level, some of the following

concerns and expectations were identified:

■ Oil Spill. International stakeholders expressed a concern over the potential impact of spills due to the storage of oil in a floating storage off-take and the uncertainty relative to best management practices of “customer” tankers that would load from it;

■ Flaring. Stakeholders also inquired about ConocoPhillips plans for associated gas production and noted the potential impact of heat radiation from flaring on migratory birds, mangroves, and aesthetics of the GOP region;

■ Socio-economic sustainability. International stakeholders recommended that ConocoPhillips place significant effort in the Warao communities and the potential for population migration that might result from increase oil activity in the region;

■ Biodiversity. Stakeholders placed learning about and preserving the GOP's biodiversity as a key recommendation. Opportunities for collaboration to assess, monitor and protect biodiversity were numerous among those consulted;

■ Public participation and disclosure. Organizations inquired about ConocoPhillips plans to continue consultation and disclose project information; and

■ Partnerships and Collaborations. Among the international stakeholders consulted to date several opportunities to leverage ConocoPhillips efforts through partnerships on both socioeconomic and environmental (biodiversity) programs have been identified.

Socioeconomic Programs. ConocoPhillips has completed numerous programs as part of its socioeconomic investment plan in the GOP. These programs have focused on local capacity building in collaboration with reputable NGOs, including CESAP – IRFA Fe y Alegria, SOCSAL, Tierra Viva and government organizations such as INCE. ConocoPhillips has invested more than 6,000 hours developing skills in the GOP community since 2000. The Company has emphasized programs aimed at training local fishermen in various skills, including food preservation, and has provided basic bilingual education to the Warao community. By participating in the Delmos Agreement, ConocoPhillips has also aimed to assist in the improvement of overall health indicators in the GOP through increased access to better quality potable water. Environmental Programs. To date, ConocoPhillips’ environmental programs have focused on establishing updated and comprehensive baseline information, including data on marine biodiversity for the project area. These baseline studies are designed to supplement information on the region’s rich, intricately interconnected ecology, water and sediment quality, fisheries, and coastal vegetation. As part of the LMS’s goal to minimize environmental impacts, programs have also included analysis and adoption of project-specific standards; the development of an Oil Spill Contingency and Response Plan; and the incorporation of technologies and policies to reduce impacts (e.g., use of double-hulled FSO, adoption of a “no flare” policy and a “zero pollution” policy with respect to the discharge of drill cuttings and muds). Operational Programs. ConocoPhillips has implemented programs associated with its direct project development activities but that are aimed at the communities in the GOP. To date, these programs have focused on identifying local skills and capabilities in order to assess the potential for using local labor during the project. Training of local workers in the skills they need to assist the Company’s activities, including assisting in emergency response, was also successfully completed. Partnerships and Collaborations. ConocoPhillips has already forged several partnerships to pave the way towards sustainable development goals in the GOP, including: ■ Conservation and Sustainable Use of the Biological

Diversity of the Biosphere Reserves of the Orinoco Delta – Venezuelan Ministry of the Environment and National Resources (MARN) and United Nations Development Program (UNDP), and partially funded by GEF;

■ Delmos Agreement – PDVSA and Perenco; ■ Initial Biodiversity Action Plan – Conservation

International; ■ Bird Baseline Study – Audubon Venezuela and the

Smithsonian Institution; ■ Community Development – Inter-American Foundation;

and ■ Population, Energy and Environmental Program involving

Sub-Andean governments, industry and indigenous group representatives – World Bank.

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LMS Action Plan 2003-2005 As ConocoPhillips proceeds with its plan to develop hydrocarbon resources in the GOP—and begins activities in 2003—the LMS will focus socioeconomic, environmental and operational programs on issues that have been determined to be most critical to achieving sustainable development in the region. As shown on Figure 4, the LMS structure promotes cohesion among all the programs that are completed and planned in the GOP and ensures that these programs will continue to address key risks and opportunities in the region. Stakeholder Engagement and Consultation. ConocoPhillips will continue its dialogue with local, regional and international stakeholders identified to date. The Company will also seek input from additional national and international stakeholders to further address the expectations of a broad range of GOP stakeholders. Socioeconomic Programs. Socioeconomic programs will focus on sustainable growth of local communities and preservation of Warao culture and health. With the help of an NGO, ConocoPhillips will evaluate the possibility of establishing a GOP community foundation that could become a counterpart and a partner in promoting growth. Community programs will seek to build capacity through training, skill development and education—with particular emphasis on supporting sustainable growth of the fishing industry. Intercultural programs will promote an appreciation of Warao traditions, crafts and culture, while health programs will center on improving the quality and distribution of potable water. Environmental Programs. With the help of national and international NGOs and organizations such as Audubon Venezuela, Fundación La Salle, Conservation International and the Smithsonian Institution, ConocoPhillips will complete programs to better understand and preserve marine biodiversity in the GOP. Furthermore, the Company will evaluate the feasibility of establishing a biodiversity and sustainability center that would involve the communities as well as relevant national and international stakeholders—and would help to disseminate to the scientific community the valuable information on biodiversity it has helped to generate. As the Company approaches the date of first oil production, continued emphasis will be placed on environmental protection, development of key performance indicators, accident prevention and avoidance of impacts on the resources of the region. Operational Programs. ConocoPhillips will continue to complete operational programs that are specifically aimed at communities. For example, a more detailed labor assessment and skill inventory among local workers will be completed as the company increases its activities. Training and skill development programs will be completed in order to prepare these workers for employment. Select members of the community will also be trained to aid in the event of an emergency such as an oil spill. Partnerships and Collaborations. ConocoPhillips will maintain the partnerships that it has established to date. To

further leverage its efforts, the organization will also identify new partners on its challenging road toward sustainable development in the GOP. Conclusion The LMS is an innovative approach to hydrocarbon development in sensitive regions. This sustainable development strategy focuses on local risks and opportunities from local, national and international perspectives and integrates socioeconomic and environmental considerations into the life cycle of ConocoPhillips’ and its partners’ activities in the GOP. The LMS will be updated and adjusted to incorporate lessons learned from experience, and input obtained from an ongoing dialogue to be maintained with our stakeholders. Implementation of the LMS will continue to be a team effort that brings new, diverse and innovative strategies to the challenges of achieving a strong socioeconomic and environmental performance in our GOP operations.

To date, the LMS has successfully uncovered actual and perceived project concerns early during the planning phase of GOP activities, thereby addressing risks and leveraging opportunities. As evidence by several successfully completed programs, the LMS has also helped the Company to understand and respond effectively to diverse and evolving expectations of stakeholders. Furthermore, the LMS continues to add cohesion and perspective to the variety of environmental, socioeconomic and operational programs that are being implemented, providing a road map on the journey toward sustainable development in the GOP. Acknowledgements The authors of this paper would like to thank Corporacion Venezolana de Petroleo (CVP), Eni Venezuela B.V and OPIC Karimun Corporation for supporting the innovative application of untested sustainable development strategies in the Gulf of Paria. We also wish to thank the entire ConocoPhillips organization in Venezuela, without whose creativity and dedication this work would not have been possible. We wish to thank the GOP communities for their trust and support of our activities in the Gulf of Paria. Last but not least, we wish to thank those Government Institutions, Non-Government Organizations, and other stakeholders for their continue receptivity, feedback and input. References The Gulf of Paria Locality Management Strategy. A Framework for Addressing the Social, Economic and Environmental Issues of the GOPW Project. Caracas, June 2000. Conoco Venezuela.

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Figure 1 Location of Current ConocoPhillips Activities in the Gulf of Paria

Figure 2 LMS Management and Implementation Team

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Figure 3. Foundations of the LMS

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Figure 4. Past and Future LMS Programs