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1Engen Limited Integrated Annual Report 2014

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Integrated Annual ReportEngen Limited

2014

2 3Engen Limited Integrated Annual Report 2014 Engen Limited Integrated Annual Report 2014

Contents

ABOUT THIS REPORT 4

CHAIRmAn’S REvIEw 5

CEO’S STATEmEnT 7

EnGEn AT A GLAnCE 11Company Ownership 11Our African Presence and Number of Retail Outlets and Terminals 11The Engen Brand 12Our Operational Divisions 14 Refinery 14 Supply, Trading and Optimisation (STO) 14 Engen Sales and Marketing (ESM) 14 International Business Division (IBD) 14Engen Value Chain 16

BUSInESS COnTEXT 18Global Environment 18Sub-Saharan Africa (SSA) Environment 19RSA Environment 19

GOvERnAnCE AnD ETHICS 21Engen’s Approach to Governance 21Engen Limited Board 22Board Committees 22Engen Management Committee 24Compliance 26Health, Safety and Environment Management System (HSE-MS) 27

RISK mAnAGEmEnT 29Our Approach 29Our Risk Governance Framework 29HSEQ Risk Management 29Engen’s Top Risks 30

SUSTAInABILITY In COnTEXT 31The Process to Determine Materiality 32Material Issues 33

FInAnCIAL CAPITAL 36Financial Performance Overview 36Key Financial Indicators 36Capital Investment 36Value added statement 37 Summarised flow of capital between stakeholders (Rm) 38

mAnUFACTURED CAPITAL 41The Refining Process 41Sales and Logistics 42 ESM 42 IBD 43

HUmAn CAPITAL 44Our Total Workforce 44Developing Talent 44Employment Equity 46 Our Employment Equity Performance 48Collective Bargaining 49Organisational Health 49 Occupational Health Programme 49 Employee Wellness Programme 51Safety 52 Behavioural Safety 52 Visible Felt Leadership 53 Capability Development 53 Safety Performance 53

SOCIAL AnD RELATIOnSHIP CAPITAL 54Stakeholder Engagement 54 Engaging our Stakeholders 55Involvement in External Initiatives 56Corporate Social Investment (CSI) 57 Educational Support to External Stakeholders 57 Environment Management Support to External Stakeholders 58 Health and Safety Support to External Stakeholders 58 Engen Employee and Dealer Outreach Initiatives 59 Engen in Sub-Saharan Africa and the Indian Ocean Islands 61

nATURAL CAPITAL 63Environmental Management 63Fresh Water Management 63 Groundwater 65Energy Management 65Climate Change and Greenhouse Gas Emissions 66Atmospheric Emissions 68Waste Management 69Loss of Primary Containment (LOPC) and Spill Management 70

TRAnSFORmATIOn 71Our B-BBEE Performance 71New B-BBEE Codes of Good Practice 73

GRI COnTEnT InDEX 74

InDEPEnDEnT ASSURAnCE REPORT On SELECTEDEnvIROnmEnTAL InFORmATIOn 76


Engen is committed to being the oil company of choice in Sub-Saharan Africa and the Indian Ocean Islands. Engen is driven by this strategic objective and reflecting on our sustainable development performance of 2014, I am pleased to share this journey with you.

Maintaining the position as industry market leader in South Africa, as well as expanding Engen’s presence into Africa and the Indian Ocean Islands, has remained our focus. Operational Excellence and effective HSEQ and Risk Management, along with the continuous efforts to optimise the supply chain, has been critical in ensuring the reality of our vision. Engen remains steadfast in engaging stakeholders and providing customers with high quality products.

However, 2014 proved to be a challenging year amidst a volatile global economic landscape. In this time, five of the countries in which Engen has an affiliate presence experienced economic contraction. With growth in the other 13 countries, it is expected the GDP in Sub-Saharan Africa will continue growing over the next five years. This will however be at a rate below 4%, which is largely due to the subdued global economic landscape.

The CPI index in most of Engen’s affiliate countries decreased in 2014, indicative of the tough market conditions as well as the associated market slowdown. In addition, high pump prices decelerated product demand. Supply constraints, along with the non-compliance of Broad-Based Black Economic Empowerment (B-BBEE) in South Africa were also contributing factors impacting profits.

Refining margins were under pressure but the sharp decline in global crude oil prices had a significant impact on improving these margins towards the tail end of 2014. This was not unique to Engen, affecting refineries across the globe with the entire industry displaying negative growth in the retail gasoline market.

Engen did however have encouraging successes. The Engen Refinery in Durban experienced improved operating performance making 2014 the best year for the plant since 2004. Part of the credit for this outstanding accomplishment must be given to the exceptional execution of the annual Turnaround. Well done to the entire Engen Refinery team for completing and delivering superb results.

With noteworthy capital investments across the supply chain, focus remained on providing the best service and convenience offerings. Engen is proud to have once again been awarded with the Sunday Times Top brands award in the Top Petrol Station category and to have also been named the “Coolest Petroleum Brand” by young South Africans in the Sunday Times Generation Next survey. These prestigious awards reaffirm Engen’s position as the industry market leader in South Africa.

As we strive towards becoming the oil company of choice in Sub-Saharan Africa and the Indian Ocean Islands, we are mindful to continue building and maintaining influential and effective relationships with all stakeholders. In 2014 we developed and adopted a Stakeholder Engagement Policy, which provides guidance on stakeholder engagement at Engen with clear role definition, terminology and scope.

Engen’s commitment to South Africa and the African continent is embodied in our corporate social investment activities, which continued to be focused on the delivery of a nation-building agenda. In the year under review, Engen moved forward with projects focusing on education, environment, and health and safety. These projects were all aligned to the business and our operating environment as well as being in line with national social priorities.

About this report

DATUK wAn ZULKIFLEE wAn ARIFFInCHAIRMAN

Chairman’s Review

This report constitutes another important milestone in our efforts to deliver sustainable value to stakeholders. It builds on our 2012-2013 Integrated Report and begins to include elements of the Global Reporting Initiative (GRI) guidelines for Sustainability Reporting GRI G4. It is also based on the principles and framework as presented in the International Integrated Reporting Framework (December 2013).

The approach taken in preparing this report focusses on the value chain of the business and how the business manages the process of value creation across five of the six sustainability capitals as guided by the <IR> framework. We have also listened to guidance from internal and external stakeholders to make this report a better tool to share our sustainability journey.

The scope of reporting covers our performance in the 18 countries where we have retail presence, and all business concerns where we have operational control (see the map on page 11). We report fully on key sustainability performance indicators regardless of percentage share ownership. In the event that there are material deviations from these reporting parameters, they will be clearly stated in the report.

The focus of this report is our performance for the period starting 01 January 2014 to 31 December 2014. In addition, we have provided relevant historical information and we make references to past events in order to maintain historical context of the key issues discussed.

As part of the wider Petroliam Nasional Berhad (PETRONAS) Group, please consult the PETRONAS Sustainability Report 2014 for additional information and context.

For this report, Ernst & Young provided the financial assurance and KPMG provided the non-financial assurance for selected sustainability information. The latter is indicated by the abbreviation “RA” for reasonably assured next to the figures quoted.

Engen Limited Sustainability ManagerEngen Court, Thibault Square. Cape Town, 8001PO Box 35, Cape Town, 8000

E mail: [email protected]: +27 21 403 5258Fax: +27 21 403 4384Web: www.engenoil.com


CEO’s Statement

DATUK AHmAD nIZAm SALLEH MANAGING DIRECTOR AND CEO

We believe that through our activities, we have made substantial progress in achieving our objectives in order to meet customer needs, thus enabling an increase in our business interests and profit share across Sub Saharan Africa and the Indian Ocean Islands, delivering more value, at lower costs than our competitors.

In closing, I would like to thank our shareholders, PETRONAS and Pembani, for their support and guidance. We serve Engen at their request and therefore hold our fiduciary and statutory obligations in the utmost regard. To my fellow Board members, thank you for your commitment in guiding the organisation through a turbulent global economic period.

Finally, on behalf of the Engen Limited Board, I would like to extend my gratitude to the Engen Management Committee and all Engen employees for their loyalty, commitment and perseverance. They have made Engen’s success possible, and they continue to make GREAT happen.

As we begin to reap the benefits of the significant strategic innovations that were implemented in 2014, I remain optimistic about the future. These investments are certain to deliver impressive results and improved performance, which I look forward to sharing with you soon.

DATUK WAN ZULKIFLEE WAN ARIFFIN

Engen experienced a challenging year in 2014. The turbulent global economic landscape and continued high crude prices put severe pressure on profits.

Consumers also felt the pinch with the continuous fuel price increases throughout the year. This had a negative impact on local sales volumes, with disposable consumer income also being affected by increases in the interest rate in our largest market, South Africa. Consumers only experienced some relief in December 2014 when fuel prices dropped on the back of decreasing crude costs.

We were however able to increase our turnover compared to the previous year despite these challenges. This is because we remained focused on delivering on the strategy, proving our resilience through these tough economic conditions.

Product volumes improved in our markets outside South Africa, with good sales growth in Reunion, Mozambique, Gabon, Zambia and Mauritius. However, overall company expenses increased in the 2014 financial year, which resulted from higher staff costs and higher depreciation due to a capital expansion programme in our International Business Division and to a lesser extent in Engen Sales and Marketing (ESM). This also includes the Refinery depreciation charge on stay-in-business capital.

The Engen Refinery achieved outstanding performance in 2014. A safe, reliable and stable operating plant resulted in the best refinery operating performance of the last 10 years. This is attributed to, amongst others, a successfully executed Turnaround and record mechanical availability. The culture of chronic unease drove excellent results not only in plant operations but also in personnel and process safety, as well as in environmental and regulatory compliance.

The persistent focus delivered the best reliability performance over the last five years with the refinery achieving 98.1% reliability versus a plan of 94.6%. In tandem with this outstanding

performance, Overall Equipment Effectiveness (OEE) reached 97.4%, far surpassing the plan of 90.3%. This is without doubt due to the great effort, collaboration and commitment from the entire Refinery team.

The SAFOR lube refinery was shutdown as planned in mid-2014 which was followed with the crude diet and process operations being optimised for the new fuels-only configuration. The Alkylation unit reliability and utilization also achieved the best performance for more than a decade, with 98.5% and 61.6% respectively. In addition, a successful regeneration of the Reformer catalyst has delivered octane capability not seen in previous recent cycles.

The Refinery’s successful year, illustrates the effect of allocating financial resources for capital expenditure as well as for the intensified training of employees.

In addition, capital expenditure at the Refinery has been invested in environmental improvements, maintenance and reliability, infrastructure, future fuels and other profit generating interventions.

Engen has also made significant capital investments across the value chain. One of these is the recent building and commissioning of the Beira Terminal in Mozambique.

Amidst a continued focus to always deliver the best service to our customers, signature convenience offerings continued to be rolled out across the Engen service station network. Notable achievements include more fast food and restaurant partnerships, franchise bakeries and a coffee offering, alternate payment solutions and a range of other innovations. This includes an innovative partnership with logistics group UTi, which is seeing Engen roll out the first UTi ByBox delivery terminals.


Providing superior service and convenience, coupled with high quality products, is Engen’s priority. As part of our efforts to enhance customer experience and improve service offerings, we have also partnered with Butcher’s Best Biltong Bar. The first Biltong Bar was launched at the Engen Vineyard Convenience Centre in Cape Town, South Africa and plans for further roll-out to other sites in 2015 are currently underway.

Other innovations include solar-equipped retail sites, with the second one being launched at the Engen All Africa Convenience Centre in Alexandra. The installation allows for an impressive average energy yield of up to 170 kWh per day. And while the site generates solar energy, it also has various energy saving installations, including LED lighting. This project is assurance to Engen’s commitment to energy efficiency. As a company, we are also on a journey to strategically reduce transport emissions through replacement of our trucks. In 2014 we purchased six Euro 5 specification product delivery trucks.

The main focus in the Southern African market of South Africa, Lesotho and Swaziland, was the roll-out of service stations including 1-Plus sites, in previously disadvantaged areas. This saw the upgrade and rebranding of five sites in these areas. Engen now boasts a total of 1 057 retail sites in the region. In 2014, we rolled out eight new Corner Bakeries to bring our total to 497. Engen also opened seven new Woolworths Foodstops.

In IBD, Engen continued to drive the growth strategy in the retail network. This has resulted in a significant increase in the number of retail sites in Kenya and Zimbabwe. Overall, IBD now has a total of 447 retail sites. As we cement our presence in Africa, we continue to explore opportunities to expand our markets. In addition to the 18 affiliate operations, Engen started to market and distribute lubricants to a further seven countries while exporting a variety of products to more than 20 other countries across the continent. Engen’s IBD volumes improved with healthy sales growth in five markets.

Constantly looking at ways in which to improve our health, safety, environment and quality (HSEQ) management, Engen made great strides in enhancing practices. Following the implementation of the PETRONAS Mandatory Control Framework (MCF), we have conducted a number of internal audits to improve compliance levels. The MFC is aimed at improving the manner in which we manage our HSEQ systems and forms a high level framework for the management of related risks.

Furthermore, to identify, assess, monitor, report and mitigate against the ever changing business risks associated with value creation processes in a globalised economy, Engen adopted an effective Enterprise Risk Management system in 2014. The goal is to protect and create value through our business activities. Supporting these activities will drive us to objectively manage exposure and risks in all areas of our value chain.

The strategic recruitment of critical positions improved in 2014 when comparatively measured against 2013. Engen continues to believe that continued investment in employee training and competency is critical for the realisation of the Engen vision.

With transformation being high on the agenda for Engen, since 2012 we have improved our B-BBEE status from a Level 4 B-BBEE Contributor to a Level 3 B-BBEE Contributor. Achieved through the deliberate in depth analysis and verification of different elements of the codes, the review of the business strategic objectives, as expressed in the revised Engen strategy, has yielded improvements in our transformation campaign.

It is with deep regret that we report a fatality during the year under review. This was due to a road transfer related incident at our Head Office in Cape Town. We extend our condolences to the family and friends of the deceased. We remain focussed on striving to ensure the safety of all our people. An investigation into the incident has been conducted and corrective action implemented to prevent future recurrence.

I would like to extend a sincere thank you to the Engen Board for their guidance, support and encouragement throughout 2014. I would especially like to thank the members of my management committee and all Engen’s employees for their commitment and hard work during an exciting and challenging year.

As we continue our journey to being the oil company of choice in Sub-Saharan Africa and the Indian Ocean Islands, we remain optimistic about the future. Although the year ahead won’t be easy, I remain confident that Engen will continue to progress in building our business base and profitability. Engen’s key strength remains a proficient, dedicated and passionate workforce, who will propel the company forward towards our goals.

DATUK AHMAD NIZAM SALLEH


2014 Highlights

• Engen Beira Terminal in Mozambique completed to full operational status

• Refinery Turnaround – Successfully completed ahead of schedule with no spills, fires and LTIs

• Refinery Performance – Plant reliability was at 98.1% and Overall Equipment Effectiveness at 97.4%.

• An effective 36% reduction in major LOPC.

• Strategic recruitment of critical positions, improvement of 13% on the 2013 baseline.

Recognition

• Awarded the 2014 Aviation Service Provider of the Year by AFRAA (African Airlines Association).

• Sunday Times Top Brands award in the Top Petrol Station category.

• Engen Petroleum was crowned the “Coolest Petroleum Brand” by South African youth, in the coveted Sunday Times Generation Next survey (8-22 age group).

• Standard Bank People’s Wheels award for South Africa’s Favourite Fuel Brand

• TruckX awards for Best Fuel/ Lubricant Brand and Best Truck Stop.

Sponsorships

In 2014 we launched Engen Cycle in the City events in Pretoria, Durban and Cape Town. This is the first of its kind in the country and it is a blend of short circuit racing, family participation and promotion of road safety.

Engen sponsored Premier Soccer League team, Supersport United, won the Telkom Knockout Cup.

The regional Engen Knockout Challenge under-17 youth football tournament ran from June through to August 2014 in Port Elizabeth, Bloemfontein, Durban, Johannesburg and Cape Town.

Now in its 11th year, it has touched the lives of some 20 000 participants across South Africa and has proved highly successful in helping young soccer hopefuls further their football aspirations. Previous participants who have taken this positive step, include: Thulani Serero, Ronwen Williams and Keegan Dolly to mention a few.

We have also developed the Engen Champ of Champs, which complements the Engen Knockout Challenge. The Champ of Champs see the regional Knockout Challenge Champions from each region join in battle to establish the best of the best and walk away with the coveted title of being crowned the national under-17 Engen Champion of Champions.

Regional Champions who qualified for the 2014 Engen Champ of Champs were:

• PE Sundowns Eastern Cape Champions

• Harmony Academy Free State Champions

• Amazulu FC KwaZulu-Natal Champions

• Bidvest Wits Gauteng Champions

• ASD Cape Town Cape Town Champions

• Supersport United FC The host club of the event and the winner of the 2014 Engen Champ of Champs

Engen at a Glance

Engen is an African company that operates in the Oil and Gas sector. Our focus is in the downstream business of refined petroleum and related products. We do this through our integrated value chain comprising a refinery, a network of storage facilities, distribution facilities, blending facilities and a retail network. All these are supported by marketing and trading expertise. We have operations across 18 countries in Sub Saharan African and the Indian Oceans Islands where we offer product and convenience services to our stakeholders.

Our refinery, located in Durban near the port facilities, has a nameplate capacity of 135 000 barrels of crude per day. Refinery finished products together with imported refined products are sold through our distribution network which includes commercial facilities and 1504 retail outlets of which 1057 are located in South Africa, Lesotho and Swaziland. A further 447 retail sites are in our International Business Division affiliate operations.

Our logistics network is supported by 50 main depot terminals across Sub-Saharan Africa and the Indian Ocean Islands. We also have access to storage infrastructure through collaboration with partners.

Company Ownership

The Malaysian national oil company Petroliam Nasional Berhad (PETRONAS), holds 80% of Engen equity. Pembani Group (Pty) Ltd owns 20% equity.

Our African presence and number of retail outlets and terminals

We operate in 18 countries and distribute lubricants into a further 7 countries. Our range of products includes: fuels, lubricants, solvents, polymers, chemicals and bitumen.

1) BOTSWANA2) BURUNDI 3) DRC 4) GABON 5) GHANA 6) KENYA 7) SOUTH AFRICA, LESOTHO & SWAZILAND 8) MALAWI 9) MAURITIUS 10) MOZAMBIQUE 11) NAMIBIA 12) RÉUNION 13) RWANDA 14) TANZANIA 15) ZAMBIA 16) ZIMBABWE

16

14

15


1-StopThe Engen 1-Stop network specifically meets the needs of the long distance traveller. It includes a Quickshop, public bathrooms, multi-branded fast food takeaways and/or restaurant facilities, play areas for children, tourist information, telephones and diesel trucking facilities.

1-PlusEngen 1-Plus are differentiated service stations in urban areas that have selected convenience partner outlets, including a Quickshop, Corner Bakery, rotisserie chicken or fast food brand, coffee offering, Woolworths or convenience meals, and an ATM.

The Oil CentreThe Oil Centre is an approved distributor of Engen and Mobil branded lubricants, located in metropolitan areas to service small and medium-sized lubricant customers.

FluidlinkFluidlink is a complete lubrication and fuels solution for industrial and mining customers. It is designed to reduce downtime and increase the life of equipment.

1-CardEngen 1-Card is a fleet solution for safe, secure transactions that helps owners control fleet expenses.

Engen IPSInnovative Packaging Solution (IPS) fluid bags are designed to reduce cost-to-serve to customers with intermediate bulk lubricants.

Hydrokin ESFHydrokin ESF is a hydraulic fluid with energy-saving properties.

Oil-on-TapOil-on-Tap is an innovative oil-dispensing unit for small- and medium-sized automotive and engineering companies.

PrimaxEngen Primax Unleaded is the branded petrol that balances performance and fuel economy. It includes a new generation detergent that cleans and improves engines.

Dynamic DieselEngen Dynamic Diesel cleans and restores dirty engines and protects and maintains new engines to increase performance and lifespan.

Laurel Paraffin Engen’s Laurel Paraffin is kerosene used for lighting, cooking and heating.

QuickshopQuickshop is the convenience store located at many Engen service stations, open 24 hours a day, 7 days a week.

TruckStop Engen Truck Stops are service stations spread across South Africa dedicated to the needs of truck drivers and include rest and ablution facilities.

The Engen BrandWe continue strengthening our brand and introducing new value-adding branded products to meet key market demand. Engen has developed strength in our strong leadership and we have developed strong brand leadership and governance at the highest level of the business.


RefineryThe Refinery manufactures a range of products required to meet customer requirements. We have coupled 60 years of refining experience with continual investment in technology to maintain refinery competitiveness and international certification such as ISO 9001 and 14001 certifications. We are currently working towards the implementation of ISO 17025.

Supply, Trading and Optimisation (STO)The key role of the Supply, Trading and Optimisation (STO) Division is to support the growth of ESM and IBD with the supply of optimal petroleum products. In carrying out that role, STO has the responsibility to plan for maximum supply efficiency and coordinate strategies and operations to balance supply and demand for fuel in the system. Trading is the activity undertaken to close the gap between supply and demand in the system and carried out within the context of optimisation.

Engen Sales and Marketing (ESM)The Engen Sales and Marketing (ESM) division is responsible for the promotion, sales and distribution of our products in South Africa, Swaziland and Lesotho. This includes all our service offerings through our convenience retail centres.

ESM also manages the supply of lubricants designed for specific customer needs. This is done in partnership with parent company PETRONAS International Lubricants (PLI) through the trading arm of PLI Africa, which is responsible for all PETRONAS lubricants operations on the African continent and in Australia. Engen operates two lubricants blending facilities, the Engen Lube Oil Blend Plant (LOBP) and the Zenex Blend Plant (ZBP) both located near the port facilities in Durban. There are also four distribution centres that are part of the South African supply system.

International Business Division (IBD)The rest of our operations throughout Sub Saharan Africa and the Indian Ocean Islands are managed by International Business Division (IBD), who provides petroleum products and convenience services to our customers.

Our Operational Divisions

Engen is organised into four operational divisions, namely: The Refinery, Supply Trading and Optimisation (STO), International Business Division (IBD) and Engen Sales and Marketing (ESM).

Supply, Tradingand Optimisation

(STO)Refinery

Crude ProcessingSourcing of Crudeand finished product

All infrastructure in our affiliate operations

(e.g.: storage, retail, bulk transport)

• Storage• Bulk transport• Commercial Fuels• Retail• Chemicals• Lubricant plants & Distribution centres

InternationalBusiness Division

(IBD)

Engen Sales andMarketing (ESM)

• South Africa • Lesotho• Swaziland


Engen Value Chain

Product, tailored product & Convenience services marketed to customers

Storage facilities,rail, pipeline, shipsand road transport

used to take productto customers

Fuels, lubricantsand petrochemical products producedfrom crude at ourDurban refinery

Crude and finished product sourced

Crude and finished product shippedto local storage

Product

Crude Source

Inbound Logistics Processing Outbound Logistics Customer

Shipping Tanker

Import

Sales andmarketing

OutboundLogistic

Processing / refiningSourcing

InboundLogistic

Shipping Tanker

Refinery

Depot Terminal

Depot Terminal

Customer Storage

Industry

Mining

Retail Convenience

Centres

Aviation

Pipeline Transfer

Road Transfer

Rail Transfer

Shipping Transfer

Local Crude Storage


Sub-Saharan Africa (SSA) Environment

In 2014, five countries within which we have affiliate presence experienced economic contraction. The other 13 countries all experienced economic growth with the economy of Reunion expanding by 1.03% compared to 0,19% in 2013.

In 2014, the 10 most traded currencies in the region lost 10% to 14% against the US dollar, with Ghana, South Africa, Botswana and Mauritius currencies incurring the most losses during the second and third quarters. The ZAR weakened against the US dollar in September 2014.

The CPI of most countries in which we have affiliate presence decreased during 2014. This is indicative of the tough market conditions and the associated market slowdown.

The growth rates of petroleum demand and GDP in Sub-Saharan Africa grew by 5.6% and 4.2% respectively throughout the year.

The outbreak of the Ebola virus in the region had a mild negative impact on the business due to travel restrictions and reduced tourism. As a precautionary measure following a risk assessment, travel to our Western African affiliate operations was restricted for four months in 2014.

RSA Environment

South Africa is our largest market in the region based on sales as well as assets. The sharp drop in oil prices is estimated to have provided a saving of about R92.2 billion in a full year. On a GDP of R3.8 Trillion, that’s about 2.5% of GDP (compared to a current account deficit earlier in the year of about 6.5% of GDP annualised). The country’s trade deficit between October and November 2014 narrowed from R21 billion to R5 billion.

Unfortunately, this drop in oil price and resulting improvement in balance of payment in 2014 came too late to have an impact on the GDP as it grew at 1.5%. This is the weakest performance since the 2009 recession.

The country also experienced managed electricity blackouts towards the end of 2014. The GDP growth rates are lower than the 5% (from the National Development Plan), considered to be the growth rate required to make significant impact on reducing unemployment, poverty and gross income inequalities.

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

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source: SARB

Real GDP growth

Business Context

Global Environment

The two themes that characterised 2014’s global economic environment during 2014 was the weak economic recovery and the drop in commodity prices - both iron ore and oil registered historic drops. The latter gained prominence in the last quarter of 2014 as shown in the graph.

According to the International Monatary Fund (IMF), the world economy is delicately balanced. The recovery of the US economy has shown considerable improvement compared to the EU and other developed and emerging economies. Developing nations’ 2014 GDP growth rate showed a sharp decrease to 4.4% with China and India recording 7.4% and 5.8% respectively, significantly lower than expected.

Dec “13 Mar “14 May “14 July “14 Oct ‘14 Dec “1435

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55

65

75

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95

105

115

125

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rices

US$

Gold

Platinum

Copper

Iron Core

Brent Crude


Governance and Ethics

South Africa experienced a modest rise in inflation for 2014 with the inflation rate of 5.3% by December 2014 (5.4% December 2013). However, factors such as rising electricity prices, possible recovery of oil prices, and further weakening of the currency can increase inflation.

The petrol price fell by R1.10 per litre in 2014. Further price drops are expected until the full effect of the oil price drop is reflected in pump prices.

The rand’s volatility remained a concern for investors and it continued to weaken against major currencies during 2014.

Engen’s Approach to Governance

In today’s connected and globalised economy, good financial performance is no longer enough to build stakeholder confidence in the company’s business model and strategy. The manner in which the business manages itself, the structure, the policies and procedures, and the company’s views on critical global issues such as human rights and climate change, all play a role in defining stakeholder perception and the manner in which the business is able to amplify its value creation process through strong relationships.

At Engen, governance starts with the Engen Board of Directors, composed in accordance with the King Code of Good Governance. The Board ensures that the manner in which we conduct our business meets the highest standards applicable to a company such as Engen. Through strict governance principles the board optimises business performance while maintaining compliance with all relevant regulations.

Following the fifth democratic elections on May 7, 2014, the Department of Energy (DoE) named Minister Tina Joemat-Pettersson as the new minister. The key discussions currently taking place between industry and government include the proposed tightening of fuels product specification earmarked for 2017 and the introduction of biofuels into the South African fuel mix.

Overall 2014 global refining margins ended the year on a much improved level compared to 2013 except the USA (especially in the Gulf Coast).

The BoardThe responsibilities of the board are outlined in the Board Charter and they cover all key aspects including the board’s involvement in directing the business strategy that creates value for our shareholders in an ethical and socially responsible manner.

The Board Charter is reviewed and adopted by the board annually. All the board committees operate under board-approved mandates and terms of reference, which are also reviewed annually to keep them aligned with current best practice. In 2013, we adopted a Memorandum of Incorporation which further addresses the responsibilities of the directors.

Composition

Our board members at the end of the financial year comprised;

five non-executive directors

• Datuk Wan Zulkiflee Wan Ariffin (PETRONAS – Executive Vice President Downstream Business) (chair)

• Mr. Amir Hamzah Azizan (VP Downstream Marketing and Group MD/CEO of PETRONAS Lubricants International Sdn. Bhd)

• Mr. Mohd Farid Mohd Adnan (PETRONAS – Vice President Refining and Trading)

• Mr. Joe Makobe (MD of Pembani Group until 1 April 2014)

• Ms. Zellah Fuphe (Non-Executive Director)

three independent non-executive directors

• Mr. David de Beer

• Ms. Dawn Mokhobo

• Ms. Nosipho Molope

three executive directors

• Datuk Nizam Salleh (MD/CEO)

• Mr. Andrew Bryce (Financial Director)

• Mr. Vukile Zondani (Director: Special Projects) Ms Fiona Gumede is the Company Secretary.

Board CommitteesThere are three board committees, namely the Board Audit Risk and Compliance Committee (BARCC), the Remuneration and Nomination Committee and the Social and Ethics Committee.

ZAR to the USD (2014

Benchmarking: Global Cracking margins and RSA national margin

J F M A M J J A S O N D10

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140,0

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USGC based on WTI USGC based on LLS Mediterranean

Average SA National

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Composition

Our board members at year end comprised;

non-executive directors

Independent non-executive directors

Executive directors

Datuk Ahmad Nizam Salleh (Managing Director & CEO)

Mr. Andrew Bryce(Financial Director)

Datuk Wan Zulkiflee Wan Ariffin(PETRONAS – Executive Vice

President Downstream Business) (chair)

Mr. Joe Makobe(MD Pembani Group)

Mr. Amir Hamzah Azizan(VP Downstream Marketing & Group

MD/CEO of Petronas Lubricants International Sdn. Bhd)

Ms. Zellah Fuphe(Non - Executive Director)

Mr. Mohd Farid Mohd Adnan(PETRONAS – Vice President

Refining and Trading)

Mr. David de Beer Ms. Dawn Mokhobo Ms Nosipho Molope

Mr. Vukile Zondani(Director: Special Projects)

Ms. Fiona GumedeCompany Secretary

meetings• Minimum of 4 meetings per year• Additional meetings may be heldKey focus• Assists the board by ensuring that Engen’s directors and executives are remunerated fairly and responsibly and that their remuneration is aligned with shareholders’ interest• Ensures that Engen’s remuneration strategies and policies are designed to attract, motivate and retain quality employees, directors and senior management, committed to achieving the overall goals of the company• Makes recommendations to the board and shareholders for their consideration and final approval regarding remuneration strategy and policy• Benchmarks Engen’s remuneration against competitor companies• Ensures that Engen’s leadership is representative of all race groups and is in accordance with the spirit and targets set out in the Department of Trade and Industry’s (DTI) Codes of Good Practice• Ensures that the appointment of Engen’s directors is transparent and governed by formal procedures set out in the committee’s terms of reference and Board CharterComposition• Majority of members of the committee are independent non-executive directors.• The CEO and General Manager: Human Capital Division are standing invitees to any committee meetings, but have no vote.

Board Audit, Riskand Compliance Committee• Nosipho Molope (Chairperson)• David de Beer• Dawn Mokhobo

Remuneration and nomination Committee• Dawn Mokhobo (Chairperson)• Nosipho Molope• Amir Hamzah Azizan

Social and Ethics Committee• Zellah Fuphe (Chairperson), • David de Beer• Lungile Dumse (GM: HCD)• Shirley Moroka-Mosia (GM: HSEQ)• Tasneem Sulaiman-Bray (GM: Corporate Affairs)

meetings• Minimum of 2 meetings per year• Additional meetings may be heldKey focus• Assists the board with the oversight of social and ethical matters relating to the Engen Group. It performs an oversight and monitoring role in terms of: - Embedding a culture of ethical behaviour in Engen - Activities with regard to any relevant legislation or codes of best practice - Good corporate citizenship - Performance in terms of the environment, health and public safety, including the impact of company’s activities on its products and services Consumer relations• Promotion of equality, prevention of unfair discrimination, reduction of corruption, transformation policies and strategies and social responsibility policies and strategies Composition• The committee is chaired by a non-executive director• The other members of the committee are:- - An independent non-executive director - General Manager HSEQ - General Manager Corporate Affairs - General Manager HCD

meetings• Minimum of 4 meetings per year• Additional meetings may be heldKey focus• Reviews and oversees: - Engen group’s finances - Integrated reporting - System of financial controls - The governance of risk - Compliance with legal and regulatory requirments - Oversees the internl audit function - Oversees the effectiveness of the combined assurance plan and outcomes - Reviews all audit findings (internal and external) Composition• All independent non-executive directors• Standing invitees with no vote:• The CEO - General Manager: Finance - General Manager: Enterprise Risk and Assurance - Senior Manager: Enterprise Risk and Assurance• External auditor, by invitation

Engen Limited Board

Remuneration and nomination Committee Social and Ethics CommitteeBoard Audit Risk and

Compliance Committee (BARCC)


Internal AuditThe internal audit function is a pillar through which the organisation can strengthen governance and make incremental improvements where necessary. The internal audit goes beyond what would typically be covered by the external audit. It includes critical items such as the organisation’s impact on social capital (reputation and brand strength), human capital (organizational culture) and natural capital (environmental impacts and liabilities).

This is done through our enterprise risk and assurance department based on a BARCC approved audit plan. Any critical issues identified through this process can be referred to the BARCC.

Statement of Internal ControlThe audit committee must ensure the integrity of integrated reporting and internal financial controls. The Engen board continually reviews the effectiveness, adequacy and integrity of this control environment.

The internal controls system in place is designed to identify and categorise risk according to its potential impact on our ability to create and maintain value. Integrated into that system is the business response to risk. We have a system that proactively manages and responds to our key risks, insuring business sustainability.

Accordingly, the system can only provide reasonable and not absolute assurance against the occurrence of any material misstatement or loss. It is therefore supplemented by a business continuity system to ensure continued business resilience during times of unavoidable significant events.

Through integration of information technology and modern tools, the organisation is engaged in continuous efforts to improve the control systems.

Engen Management Committee

The management committee comprises of:

• Datuk Ahmad Nizam Salleh – Managing Director & CEO

• Adnan Adams – GM: Corporate Planning

• Andrew Bryce – GM: Financial Services

• Hilmi Daud – GM: Supply, Trading and Optimisation

• Lungile Dumse: GM: Human Capital Division

• Fiona Gumede – GM: Corporate Legal and Company Secretary

• Drikus Kotze – GM: International Business Division

• Joe Mahlo – GM: Engen Sales and Marketing

• Shirley Moroka-Mosia – GM: Health Safety Environment and Quality

• Ivershini Reddy – GM: Enterprise Risk and Assurance

• Tasneem Sulaiman-Bray – GM: Corporate Affairs

• Jehan Zaib – GM: Refinery (From 7 April 2014)

• Vukile Zondani – Director: Special Projects

Outgoing members

• Kamal Bahrin Ahmad – GM: Refinery (until 7 April 2014)

• Dave Wright – Special Advisor to the MD/CEO (until 31 July 2014)

Mr. Drikus KotzeGM: International Business Division

Mr. Joe MahloGM: Engen Sales and Marketing

Datuk Ahmad Nizam Salleh Managing Director & CEO

Mr. Adnan AdamsGM: Corporate Planning

Mr. Kamal Bahrin Ahmad GM: Refinery (until 7 April 2014)

Mr. Andrew BryceGM: Financial Services

Mr. Hilmi DaudGM: Supply, Trade and Optimisation

Mr. Lungile DumseGM: Human Capital Division

Ms. Fiona GumedeGM: Corporate Legal

and Company Secretary

Ms. Shirley Moroka-MosiaGM: Health Safety

Environment and Quality

Ms. Ivershini ReddyGM: Enterprise Risk and Assurance

Ms. Tasneem Sulaiman-BrayGM: Corporate Affairs

Mr. Vukile ZondaniDirector: Special Projects

Mr. Jehan ZaibGM: Refinery (from 8 April 2014)

Mr. Dave WrightSpecial Advisor to the MD/CEO

(until 31st July 2014)


In conducting its business operations, Engen is committed to complying with legal requirements, including all applicable regulatory requirements in the jurisdictions in which it operates.

The Engen Compliance Framework aims to provide and outline our entire regulatory universe, particularly legislation with a material impact on business and operations. For each legislative requirement identified, there is clarification of the implications of non-compliance.

To further enhance and fine tune compliance, the roles played by all internal stakeholders are identified to ensure that responsible parties are appropriately informed and have the ability to take the necessary steps to maintain business compliance with legislation. In the case of new laws and amendments to existing laws, responsible and accountable people are able to take the necessary steps to practically move the business towards compliance within required timeframes.

By adopting and implementing this framework we continue to enhance our tradition of transparency with regard to legal compliance. It will also empower our relevant personnel with the appropriate accountability to ensure compliance with relevant pieces of legislation.

The compliance framework has enhanced our reaction time to intervene where necessary and contributed in raising awareness at divisional level. It achieves this by bringing perspective to legislation that is material to that particular operation and understanding the compliance risk it carries.

Compliance in IBD operations, spread across 15 affiliates with a diverse legislative environment in different languages, constitutes both a challenge and opportunity for Engen. A lot has been done

to ensure compliance with all relevant legislation in each country. We have recently started to conduct a risk-based approach towards compliance. Individual affiliates manage and track all regulations that are relevant to them. In addition, head office tracks and manages regulations that pose a high risk to the business. This dual system of semi-centralised compliance management allows us to ensure compliance with regulatory requirements.

We have continued with Competition Law training for all staff, and additional training as it applies to collaborative industry initiatives (e.g. participation within industry bodies). We conduct proactive Competition Law compliance audits to identify areas where we can strengthen our system.

During the reporting period we completed migrating environmental legislation compliance tracking from a paper-based system to an on-line system. This has enhanced our ability to follow and manage compliance. Continual improvements of this system are in progress on an ongoing basis. We have also been active in increasing internal awareness of environmental legislation and have produced brochures to provide clarity on new legislation and encourage internal discussions to improve compliance. We are also at an advanced stage of phasing out polychlorinated biphenyls from our operations and any areas where they may still be present are managed as per regulatory requirements.

We continue to apply more than 20 Group Environmental Standards in all of our activities and facilities and we are subject to internal audits as well as independent external audit and inspections to confirm compliance and continual improvement.

The Engen Refinery, Durban Terminal, Engen Lubricating Oil Blend Plant (LOBP) and Richards Bay Bunkering Services retained their ISO 14001 environmental management system certification in 2014.

Leadership andCommitment

Policy and StrategicObjectives

Organisation, Responsibilitiesand Documentation

AssuranceManagement Review

Hazards and EffectsManagement Process

MCF Elements

HSEQ-MS Elements

Plans and ProceduresImplementation and

Monitoring

Capability Health

EnvironmentSafety & Transportation

Process, Safety & Asset IntegrityManagement of Change

Safe OperationsContractor HSE Management

Design, Engineering & ConstructionIncident Management

& Emergency Response

The HSE management System and mFC Interface

Compliance

Health, Safety and Environment Management System (HSE-MS)

The HSE-MS consists of eight key elements that require management aspects including competence, assurance, incident and contractor management to be in place. In addition, the HSE Mandatory Control Framework (MCF), based on operational experience in PETRONAS, focusses on the 50 most significant HSE risks for which prevention and mitigation measures are mandatory. The main objective of the framework is to strengthen HSE governance.

In 2012 we started the implementation of the MCF. Progress with the implementation of the requirements was tracked throughout Engen and the reported compliance is subject to internal audits.


Risk Management

Our Approach

Engen has adopted an effective Enterprise Risk Management system to identify, assess, monitor, report on and mitigate against the impacts of the ever changing business risks associated with value creation processes in a globalised economy.

Our goal to protect and create value through our business activities and supporting activities drives us to objectively manage exposure and risks in all areas of the value chain.

To achieve this, we have made all necessary resources available to key people within the business. This includes the development of key systems and processes, the training of key personnel, and company-wide communication to ensure that Enterprise Risk Management is continuously improved and institutionalised across the organisation.

Our Board of Directors oversees the Enterprise Risk Management process at Engen. The Board’s Audit, Risk and Compliance Committee ensures that the Enterprise Risk Management process complies with the relevant standards and industry norms and that it is applied effectively across the business to achieve an acceptable risk profile for the business.

Our Risk Governance Framework

At Engen, the risk profile is a critical tool for business strategy. Through our policy, we establish the organisational risk appetite and tolerance limits. Our risk governance system revolves around the following four governance elements:1) Risk Policy and Strategy2) Risk Organisation and Structure3) Risk Measurement4) Risk Operations and Systems

Our key risks are monitored through a well-established and entrenched risk management system and process. Significant effort has gone into fine-tuning the system to fit our business model and link with other systems of governance. We also manage compliance with the risk reporting requirements and we capture lessons learned from risk experiences and practices as well from the outcomes of assurance activities.

Each of the operational divisions and key support functions has a Risk Management office. The corporate risk department oversees all risk management activities across the business and manages strategic mitigation responses.

HSEQ Risk Management

Engen Petroleum Limited manages all HSEQ risks through proper implementation of HSE MS and MCF. Our risk management systems ensure that all risks to people, the environment, company assets, and company reputation are managed to as low as reasonably practicable (ALARP). Every year Top HSEQ risks are identified based on outcomes of incident investigation trends, all tiers of assurance, near misses, analysis and benchmarking of industry best practises and evolving legislative requirements. The mitigation strategies for these risks are identified and implementation plans developed which eventually inform key focus areas for risk management for the year. These top risks feed into overall Engen top risks as per Enterprise Risk Administration policy.

The risk mitigation together with ongoing implementation of HSE MS and MCF are monitored through different tiers of assurance. At the site level Tier 1 audits are conducted. These focus on specific elements, systems and areas, e.g. permit to work. Engen Petroleum Limited Corporate HSEQ conducts Tier 2 audits in all Engen operating divisions. These audits focus on HSE MS and MCF implementation. PETRONAS conducts Tier 3 risk based audits on Engen. External audits are also conducted on a suppliers and contractor rendering service representing high risk.

Risk Policyand Strategy

RiskOrganisationand Structure

RiskMeasurement

RiskOperations

and Systems

Organisational Structure to Manage,Share Information and Build Capabilities

MeasurementMethodologies and

Techniques

Process Controlsand ReportingMechanisms

Risk Management Frameworkand Guidelines


Engen’s Top Risks

Risk Detail ReferenceRegulatory risk Operating in 18 states across Sub-Saharan Africa and the Indian Ocean Islands

exposes the business to a multitude of evolving regulatory systems.

The financial impact of some of the regulations can be significant and compliance can be a journey taking years of investment.

Page 26

Strategic risk The availability of strategic skills remains a challenge and is exacerbated by increased competition for scarce skills. Attracting and retaining these skills contributes significantly to our ability to achieve our strategic objectives.

We also operate within a wider community whose relationships play a critical role in our success. It is critical to ensure that we derive value and synergy through these relationships.

There have been various incidents of labour unrest, particularly in South Africa. The impact of this on the value chain is significant and in some cases, individual businesses across the value chain have no direct influence on the disputes, but they are still affected by the outcome.

Page 52, 42

Operational risk We operate very complex production facilities with hazardous and flammable substances. Ensuring safe production and delivery of these products to customers is a primary focus.

Producing products on time and according to specification is critical for customer satisfaction.

Page 39

Financial risk Slow economic growth, both globally and regionally, represents a risk to sustained growth for us and for our customers.

Page 42

Environmental risk Annually, we produce and transport billions of litres of product that can have negative impacts if released into the environment in an uncontrolled manner.

Page 61

Sustainability in Context

Our view of sustainable development is informed by the importance of creating and protecting value across five sustainability capitals, namely the Social and Relationship, Human, Manufactured, Natural and Financial. In our effort to provide high quality products and services to our stakeholders, we strive to continually enhance our value creation and address the negative impacts across the five capitals.

Furthermore, our activities are guided by the seven key results areas in line with our parent company PETRONAS’s sustainability framework.

Human capital:Developing and retaining talent. Creating an environment for performance and creativity

Manufactured capital:Managing our assets and all key infrastructure required for our value creation

Natural capital:Protecting the environment. Mitigating against and adapting to effects of climate change

Social capital:Strong relationships and proactive engagement with our stakeholders

Financial capital:Sustainable financial performance through value creation across human, social, natural and manufactured capitals

InboundLogistics

ProcessingRefining

Sales &Marketing

Great peopleand greatleaders

Operational excellence

Protected naturalsystems

Strong stakeholder

relationships

Long term financial

sustainability

value creation across sustainability capitals

Sustainable growth across all capitals Value created throughoutthe organisational value chain

Sustainableoutcomes

OutboundLogistics


The Process to Determine Materiality

In the context of sustainability, an issue is material if it has significant influence on the ability of the business to deliver value. Such issues have a strong influence on business-related decisions taken by the leadership and stakeholders.

In order to identify material issues for the business we initiated an internal review of our stakeholder engagement process in 2013. This review resulted in the development of a process that covers all key stakeholder categories and the stakeholder groups within those categories. Since stakeholder engagement at Engen is decentralised and happening at various levels of the organisation, the focus was on the internal governance structures. These structures shape the organisation’s responsiveness to stakeholder issues.

We have identified senior managers that play a pivotal role in stakeholder (see stakeholder engagement sub-section) relationships across the business. Workshops were organised with these managers to better understand the status of the relationships, the key issues, the future outlook and mechanisms employed to strengthen these relationships. Such relationships include provisions enabling us to get feedback on our activities.

The material issues are then identified and agreed to by the business. These then guide our sustainability focus and inform the nature of the response by the organisation.

Material Issues

Eleven material issues were identified through the stakeholder engagement process. These issues, which are of interest to both stakeholders and the business, inform the focus of our efforts.

In this report we provide information on Engen Limited’s operations, how governance drives sustainability in our organisation and our performance in the five capital areas.

BiodiversityEnsuring projects and

operations do not have significant impact on

the diversity of humans, animals and plants.

natural Resource UseMaking oil and gas products

available at reasonable market prices, promoting efficient use

of energy and water, and supporting the use of

renewable energy.

Climate ChangeLimiting GHG emissions and adapting to climate change

Safety and Environment (HSE)Preventing and eliminating injuries,

health hazards,damage to property

and conserving the environment.Product Stewardship

Ensuring that products conform to quality and HSE standards

and meet the needs of society.

Societal needsSafeguarding human rights within

our sphere of influence, contributing to community needs,

investing in training and education, promoting arts and sports

and conducting our business in a

transparent manner.

Shareholder valueSustaining the company’s

profitability through value creation, efficient

extraction and manufacturing

processes.

SustainabilityFramework

Sustainable financial performance

Financial sustainabilityallows us to grow as business

and it also allows us to contribute to the growth of our

stakeholders - (pg 36)

Good governanceand busines ethics

The creation of a cultureof responsibility,

accountability, integrityand transparency - (pg 21)

Safe and secure work environment

We take seriouslythe protection of our people against hazards associated

with our businessenvironment - (pg 52)

Proactive stakeholder engagement

From “managing” relationships towards creatingsustainable value

through relationships - (pg 54)

Regulatory complianceCompliance with national

regulations provides licence to operate, compliance with out internal requirements allows

us to derive value through our strong relationships with

authorities - (pg 26)

TransformationSupporting the principlesof fair and equitable value creation across the social

spectrum - (pg 71)

Regional business climateTo properly understand

and respond to opportunities and risks posed by the

environment within whichwe operate - (pg 18)

Customer and business partner value proposal

A customer-focussedculture leading to

strong partnerships - (pg 12)

Responsible citizenshipSensitivity to the realities

of our largercommunities - (pg 57, 72)

Protecting the environmentTo ensure that we do not create

stakeholder value atan unacceptable cost to natural

systems that support lifeand livelihoods - (pg 63)

Employee value creationTo create a great place

for great people - (pg 44)


Financial Capital

Key Financial Indicators

2014 20130

500

1000

1500

2000

2500

SustenanceGrowth

495

369

1 815

1 461

(Rm

)

Financial (Rm unless shown) 2014 2013

Extract from Statement of Profit or loss

Turnover 108 249 105 776

Operating (loss)/profit (847) 3 947

(Loss)/profit for the year (960) 2 584

Extract from Statement of Financial Position

Total Assets 33 619 38 320

Equity attributable to equity holders of the parent 16 664 17 124

Sales Volume (in millions of litres) 9 475 9 628

The key indicators of our financial performance were as follows:

Sales volumes were negatively impacted by the increase in fuel prices during 2014 (the average price of petrol increased by 7% compared to 2013). In South Africa, consumer disposable income was also impacted when the South African Reserve Bank increased interest rates by 50 basis points in January 2014 and by another 25 basis points in July. The industry thus showed negative growth in the retail gasoline market of approximately 4.2%. Consumers only experienced some relief in December 2014 when fuel prices dropped by 69cpl on the back of decreasing crude costs.

During 2014, IBD volumes improved with good sales growth experienced in some of our affiliate operations.

Expenses due to higher staff costs and higher depreciation due to the capital expansion programme in some of our markets, as well as Refinery depreciation charge on stay-in-business capital. In addition, there were increased distribution costs, particularly with regards to aviation products distribution in some markets. Expenses were also affected by weakening currencies in a number of affiliates whose local currencies weakened significantly during 2014.

Operating costs in 2014 also included a loss, driven by a release of the foreign currency translation reserve (FCTR) on deregistration of Engen African Holdings (Mauritius) (EAH), a foreign intermediate holding company which was no longer required in the Group structure.

Total assets decreased by 18% from the prior year by the end of 2014. This was driven mainly by a decrease in inventories on the back of a lower Rand crude cost as well as lower inventory holdings at the end of the year.

Capital Investment

Engen continues to roll out signature convenience offerings across our network, including fast food and restaurant partnerships, franchise bakeries, franchise coffee, alternate payment partnerships and a range of other innovations. In parallel, Engen has steadily overhauled the networks it acquired from its competitors in recent years.

We continue to make significant capital investments across our value chain. Capital expenditure at the Refinery has a clear focus on the environment, maintenance and reliability, infrastructure, buildings and equipment, future fuels, and profit generating interventions.

Value added statement

The value added statement measures performance in terms of value added by the Group through collective efforts of management and employees. The statement shows how value added has been distributed to those contributing to its creation.

Financial Performance Overview

The financial performance overview encompasses a comparative year on year analysis of the 2014 reporting period. The refining margin was still negatively affected by the impact of the US and EU sanctions against Iran. However, the drastic global decrease in crude oil prices, especially in the last quarter of 2014, played a significant role in improving the refining margin, not only of Engen but of refineries around the world in general. This had a marked impact in reducing the losses reported in the financial results of the Group for the financial year.

For the Year ended 31 December 2014

31 December 2014 31 December 2013

Rm

Total value created 1 452 6 457

value Distribution

Employees 2 052 1 916

Equity Capital Providers 159 901

Loan Capital Providers 142 163

Government 436 1 132

- Normal Company Tax 436 1 132

CSI 19 25

Retained for future growth (1 356) 1 774

- Depreciation and Amortisation 675 525

- Retained Profit (1 575) 1 194

- Deferred Tax (456) 55

Total value distributed 1 452 6 457

2014 2013

0

500

1000

1500

(1500)

2000

(1000)

2500

(500)

Employees Equity Loan Normal CSI Retained for Capital Providers Capital Providers Company Tax Future Growth


Summarised flow of capital between stakeholders (Rm)

CustomersR108 249

InvestmentR88

RetainedIncomeR1 356

SuppliersR106 885

EmployeesR2 052

EquityProviders

R159

FinanceProviders

R142

CommunitiesR19

Government(Taxation)

R436

Engen


Manufactured Capital

The success of Engen in creating value along its value chain can be, among other things, affected by the availability and condition of manufactured capital, such as buildings, equipment and infrastructure, to support its operations. For Engen the main elements of manufactured capital include inbound shipping vessels, mooring facilities, the Refinery, pipelines, bulk transport vehicles, the road network, rail transport and storage facilities. The degree to which Engen can influence the availability and condition of its manufactured capital depends on the degree of control it can exercise over them.

Engen’s capital expenditure programme is aimed at maintaining or improving the condition of capital equipment or facilities, expanding our infrastructure for further growth and improve HSEQ performance and comply with relevant regulations.

The Refining Process

Engen owns and operates a fully integrated crude oil refinery in Durban, South Africa. The refinery is managed on the basis of operational excellence in health, safety, environmental, quality and reliability dimensions.

The Refinery achieved outstanding performance in 2014. A safe, reliable and stable operation resulted in the best refinery operating performance of the last 10 years. The highlights of the year include the successfully executed turnaround and record mechanical availability. The culture of chronic unease drove excellent results not only in plant operations but also in personnel and process safety, environmental and regulatory compliance. An internally conducted Tier 2 Operations and Asset Management audit further contributed to our success.

Persistent focus throughout the year delivered the best reliability performance over the last five years. The refinery achieved 98.1% reliability versus a plan of 94.6%. In tandem with this outperformance, the actual OEE (Overall Equipment Effectiveness) reached 97.4% far surpassing the plan of 90.3%.

The South African Fuel Oil Refinery (SAFOR), which has been producing lubricating base oils and is jointly owned by Engen, Caltex and Total, was shutdown and the remaining units incorporated into the refinery from August 2014.

Following the shutdown, the crude diet and process operations were optimised for the new fuels-only configuration. In particular, the Alkylation unit reliability and utilization achieved the best performance for more than a decade, 98.5% and 61.6% respectively. In addition, a successful regeneration of the reformer catalyst has delivered octane capability not seen in recent previous cycles.

The 2014 Refinery turnaround was successfully completed ahead of schedule with excellent quality records, with no major injuries, spills, fires or leaks. The planned outage was achieved in spite of the disruptions arising from the metal workers industrial action. A successfully executed turnaround and record mechanical availability positioned the Refinery to benefit from the upswing in the refinery margins in the second half of the year. The successful year at the Refinery illustrates the effect of allocating financial resources for capital expenditure and for intensified training of employees at the Refinery.

Several interventions were initiated to ensure the South African liquid fuels supply chain and neighbouring states had adequate capacity and were able to sustain the growth in demand over the long term. Engen initiated an optimatation programme to enable the required supply chain capacity interventions. Some of the key initiatives as part of this programme included investments in the back of berth piping that enables high speed ship discharge into coastal tankage in the Durban Port area. In addition, Engen has invested in New Multi-Product Pipeline (NMPP) feeder pipelines at Island View to enable connectivity to the NMPP. As the fuels products landscape changes in RSA in-line with global trends, additional supply chains have also been invested in, namely additional tankage, pumps and piping at Engen Refinery and the depot network to cater for the increasing demand for ultra-low sulphur products.

Reliability OEE Mech. Availability

2010 2011 2012 2013 201450%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%


Sales and Logistics

Engen manages and operate 50 depot terminals, 1 504 retail sites, lube oils and chemicals blending facilities and a number of distribution centres and warehouses across the Sub-Saharan Africa and Indian Ocean Islands. We also have access to more distribution infrastructure through partnerships and collaborations.

ESMTo respond to Gauteng and inland customer needs and improve our logistics network, we have upgraded a numbers of inland depot facilities. The upgrade of the Rustenburg depot continued this year, and is planned to be completed at the end of 2016. This project will see two new tanks installed, the installation of a rail siding, expansion of the loading bays and the installation of a new fire-fighting system. During 2014 we started the upgrade of the East London terminal to enhance supply during peak demand. Eventually, the complete upgrade will include office blocks, gantry structure, upgrade of the wharf line and general upgrade of roads and surfaces. To align with environment legislation, Engen initiated a project to install vapour recover units (VRUs) at all required facilities, from manufacturing to depots, specifically, Kroonstad, Klerksdorp, Rustenburg, East London and Witbank. The Durban terminal in Wentworth, as well as the Tara rail loading facility were also included in this scope.

Three new retail sites were built in South Africa to bring the total to 1 057 retail sites for ESM. We rolled out eight new Corner Bakeries to bring our total to 497. In 2014, 17 Corner Bakery conversions took place, one new Fast Food was established and seven upgraded. We also opened seven new Woolworths Foodstops.

Engen continues to be a key player in the petrochemicals business. We continue to focus largely on three areas in this sector:

• The base chemicals which are an output of the refinery

• Polymers and complementary products which we source and distribute

• Construction chemicals which include bitumen

The chemicals business has three blending facilities, the main blending and distribution plant located at Island View in Durban, the Epping plant in Cape Town and the Isando plant in Johannesburg. There is a network of distribution facilities that allows the chemicals business to be involved throughout the value chain of our product.

The lubricants operates two lube blending facilities located near the port of Durban. These are responsible for the blending and distribution of lubricants across South Africa and neighbouring countries. We also have distribution centres in every country where we have affiliate presence. Products are distributed to all distribution centres by rail and sea.

In 2014, we started the expansion of our Lube Oil Blend Plant (LOBP) plastic line in Durban. This expansion is planned to increase our capacity by 500 bottles per minute. Commissioning is expected to take place in 2015.

In partnership with the logistics group UTi, Engen is rolling out the first UTi ByBox delivery terminals. The first site was completed at the Woodlands convenience centre in Woodmead, Johannesburg and further sites will be rolled out in the Sandton area. The system will be used by customers to send parcels, which can be collected at Engen sites. It will also allow delivery of online-purchased items and collection at Engen sites. The system has built-in security measures to safeguard the goods and ensure they are collected by the intended recipient.

As part of our effort to enhance customer experience and improve our service offerings, we have partnered with Butcher’s Best Biltong Bar and launched the first Biltong Bar experience for our customers at the Engen Vineyard Convenience Centre in Newlands. Plans for further roll-out to other sites in 2015 are currently underway.

IBD Operational Retail Sites

no. of Operational Retail Sites (IBD)

Dec 2012 Dec 2013 Dec 2014 notable developments and engagements

Botswana 42 44 46

Burundi 20 21 17 Financial performance 73% above planned. Industry responding to 3 new tax regimes implemented in 2014. Risk of the 1% turnover tax remains high.

DRC 57 63 60 Leveraged our strong relationship with stakeholders to recover key debts as well as compensation for our sites that had to make way for a national highway.

Gabon 22 22 22

Ghana 23 27 25 Engagement in progress with regulatory authorities regarding standards at service stations and margin increases.

Kenya 9 9 14 Good progress in discussion with key industry stakeholders and authorities regarding rollout of the cashless payment system.

Malawi 11 11 11

Mauritius 30 31 32

Mozambique 14 17 16 Completion of the Beira Pipeline Terminal

Namibia 57 57 56 Positive results obtained linked to good stakeholder relationships with key customers

Reunion 33 33 34 Good stakeholder engagement strengthened our relationship with key customers. Recharging stations were implemented in Reunion.

Rwanda 19 19 18

Tanzania 7 5 6

Zambia 35 34 34 Leveraged strong stakeholder engagement to maintain our licence to operate.

Zimbabwe 39 44 56 Successful engagement with regulatory authorities on importation permits for Diesel 50.

Total 421 437 447

IBDOur international business continued to implement the growth strategy in the retail network in selected markets. To enable growth in the other sub-Saharan countries where we operate, Engen has invested in an east coast corridor, by way of a coastal storage facility in Beira, Mozambique, to enable fuel flow to the inland countries.

In addition to this, an extensive investment in the West African coast of Namibia will enable coastal and primary depot facilities; namely Walvis bay increased coastal tankage and Ondangwa primary depot facilites, which includes road and rail facilities.


Human Capital

Human capital forms a critical part of our sustainability roadmap. Our vision in this respect is to develop strong leadership supported by capable teams. Engen recognises the importance of talent management and strong bench strength.

Developing Talent

Through our Operations Academy, we continue to assess employees using the Management Toolkit Platform to determine the core needs of each individual. All employees will be assessed during the next two to three years.

Our Human Capital Division continued to roll-out the Talent Management Programme during 2014 which is aimed at equipping employees for their current positions and preparing them for potential future positions.

Our graduate development programme continues to develop young individuals with exceptional talent supporting students in the fields of accounting, engineering, information technology, human capital development and marketing. During 2014 18 students were part of the programme and three were absorbed in Engen as employees.

In 2014 we launched the Business Administration Learnership programme. The programme was launched in partnership with the Project Management Institute (PMI) and is initially targeting people living with disabilities. This programme focuses on enabling currently unemployed individuals and is rated an NQF level 2. The objective is to take participants to NQF level 4 and use the programme as a talent pool for future Engen recruitment. For 2014 a total of 23 Black females were enrolled.

In 2013 we engaged external auditors to identify improvement opportunities in our capability development data. This has resulted in improved employee training data.

During 2014, 39 employees with disabilities were enrolled in the skills development programs of which 30 were male and 9 female.

Engen had a strong showing at the Standard Bank Rising Star Awards, a business sector specific system that publicly recognizes inspirational and passionate individuals who have a capacity for achievement and success.

Engen finalists in the Energy & Chemicals category were Nobleman Kani, Nthabiseng Mutisya, Lisa Ferraz and Mxolisi Bhebhe (pictured from left to right).

Engen’s Rising Stars

nobleman Kani, Operations Manager – Imtrasel: Engen Petroleum Limited, and Alternate Director – ROSE Foundation, says, “I have been exposed to great challenges and have had the opportunity to work with highly competent leadership and high-performance teams that have helped to take my career development to new highs”.

nthabiseng mutisya, Engen Learning and Development Manager, says, “Over the past 3 years I have experienced both personal and career growth. In addition to being promoted from a consultant role to a management role, I have been given educational study opportunities as well as tools to increase my self-awareness, thus making me a better leader, African and human being”.

Lisa Ferraz, Engen Organisational Development Specialist, says, “From the minute I started at Engen back in 2010, my personal development and career progression have been a priority for the organisation”.

mxolisi Bhebhe, Engen Business Planning and Accounting Manager, says, “The exposure I have been afforded by Engen through my work experience has cemented my ability to participate at senior levels of management in the organisation. Working in a multi-national organisation and with cross-functional teams has broadened my horizons”.

Temporary and contractors Permanent Grand Total

2012 2013 2014 2012 2013 2014 2012 2013 2014

Non SA 25 37 34 623 573 564 648 610 598

SA 475 481 473 2914 2908 2951 3389 3389 3424

Total 500 518 507 3537 3481 3515 4037 3999 4022

Our Total Workforce

Number of students in the graduate development programme

Breakdown of skills development provided in 2014 for South African employees

Total Absorbed

2010/11 2012 2013 20140

2

4

6

8

10

12

14

16

18

20

male Female

Skills development Year A C I W A C I W Total

Total workforce

2014 957 377 370 258 396 210 85 122 2775

2013 917 369 384 339 350 212 86 153 2810

2012 859 299 323 232 281 159 60 108 2351

Employees with disabilities

2014 6 4 7 13 3 3 1 2 39

2013 3 4 8 15 3 3 1 3 40

2012 4 3 5 9 1 4 1 2 29


FN 1,1%

A46%

C 22.1%

W 15.2%

I 15,6%

FN 2,8%

A27%

C 22,9%

W 26,6%

I 20,8%

management Race and Gender representation July 2014 compared to SA EAP***

Permanent employees Race and Gender representation July 2014 compared to SA EAP***

2014 Permanent Employees 2014 management Employees

*Only Applicable in SA**The diversity ratios are calculated using South African employees against the total South African permanent workforce (including foreign nationals). Therefore, the diversity ratios do not add up to 100 %; the difference is the ratio of foreign nationals to total permanent workforce.*** South African Economically Active People

Employment Equity*

Engen’s new 5 year EE plan, developed through a consultative process, was submitted to the Director General of Labour on 14 November 2014. The plan covers the period 1 August 2014 to 31 July 2019. The plan was developed with due consideration of the amendments to the EE Act and Regulations, and the impact of the revised BEE Codes.

Aligned with the Department of Labour’s reporting period, in July 2014 our permanent workforce in South Africa comprised a total of 2922 employees, of which 28.7% were women. There was an increase from 26.1% to 27.7% of South African women managers. Black employee representation within the company increased from 82.4% in to 83.7%.

The following diagrams illustrate Engen Employment Equity Workforce Profile** for all permanent employees compared to South Africa’s Economic Active People.

A C I W FN M F

0%

10%

20%

30%

40%

50%

60%

70%

80%

Engen Management SA EAP

A C I W FN M F

0%

10%

20%

30%

40%

50%

60%

70%

80%

Engen Permanent Employees SA EAP


Collective Bargaining

Wage negotiations are one of the contentious activities Engen has to manage as part of the sustainability roadmap and commitment to create a great place for great people with a great leadership team.

During the 2014 wage negotiations, we signed a two-year wage deal with employees which ensured that there will be no wage negotiations in 2015.

We engage our employees through centralised bargaining in South Africa and Gabon. In Namibia and Tanzania, we have decentralised engagement with employees and their affiliated unions, however, in Tanzania we also communicate with the Employee Association of Tanzania. Zambia is not unionised but we maintain discussions with the Zambian Employees Association. All other affiliates are not unionised and we engage employees internally within Engen.

Within Engen we have three platforms for discussing material employee issues. The Operations Consultative Forum (OCF) focusses on operational issues for our outbound supply chain employees and the Refinery Consultative Forum (RCF) which deals with the refinery employees. Lastly we have the National Consultative Forum (NCF) which discusses issues that affect the whole business.

Organisational Health

Engen’s organisational health service comprises a wide collection of health related activities across the entire organisation, linking with risk management, legal compliance, human resources and industrial relations, hence the use of the term “organisational health”, as opposed to simply “occupational health”.

The key objectives of Engen’s Organisational Health Service are to support the company in:

• Reinforcing Engen’s position as an employer of choice by providing a tangible expression of the company’s care for its employees

• Maximising employee productivity and quality of life through health initiatives aimed at optimising health and wellbeing

• Satisfying its Occupational Health related compliance requirements

Our Health and Wellness programs are arranged into the Occupational Health Programme and the Employee Wellness Programme.

Occupational Health ProgrammeOccupational health hazards in this business are chemicals, noise, fatigue and ergonomics. We manage these risks through our comprehensive industrial hygiene programme. All our facilities have up-to-date health risk assessments (HRAs) in compliance with the South African Occupational Health and Safety Act (OHSA), and related legislation. In other African countries we regularly conduct workplace health risk assessments and exposure surveys which are performed by rigorously selected Approved Inspection Authorities.

Engen’s health-based industrial hygiene programme stands out as an industry leader. It goes beyond legal compliance as it aims to minimise health risks related to workplace exposure. Some of the key innovations include:

• Exposure measurements by Similarly Exposed Groups (SEG’s), enabling improved integration with medical surveillance.

• Application of internationally accepted exposure standards (which are sometimes more rigorous than SA’s statutory standards).

• Application of international best practice statistical techniques to ensure high quality data interpretation.

• Intelligent reporting to optimise outcomes management and integration with medical surveillance.

• Rigorous corrective action management.

Engen’s Workforce Profile as at 31 July 2014, as reported to the Department of Labour

Occupational levelsmale Female Foreign nat

TotalA C I W A C I W M F

Top Management 3 1 0 3 2 1 1 0 3 0 14

Senior Management 16 14 13 24 8 8 4 9 7 0 103

Professionally Qualified Middle Management 172 149 172 182 88 72 33 67 16 4 955

Skilled Technical Junior Management 280 149 127 72 205 133 39 56 2 0 1063

Semi-skilled 505 91 61 21 65 28 7 9 0 0 787

Total Permanent Employees 976 404 373 302 368 242 84 141 28 4 2922

Temporary Employees 35 17 14 16 23 10 4 6 2 0 127

Total 1011 421 387 318 391 252 88 147 30 4 3049

Permanent employees with disabilities 6 5 8 16 1 6 1 3 0 0 46

Engen’s Workforce Profile as at 31 July 2013, as reported to the Department of Labour.

Occupational Levelsmale Female Foreign nat

TotalA C I W A C I W M F

Top Management 2 1 0 3 2 1 1 0 3 0 13

Senior Management 12 13 10 24 6 7 5 6 9 1 93

Professionally Qualified Middle Management 156 141 174 197 75 65 32 70 16 4 930

Skilled Technical Junior Management 272 144 128 76 194 134 42 66 1 2 1059

Semi-skilled 525 106 65 28 65 30 6 11 0 0 836

Total Permanent Employees 967 405 377 328 342 237 86 153 29 7 2931

Temporary Employees 26 17 16 16 18 9 0 9 2 1 114

Total 993 422 393 344 360 246 86 162 31 8 3045

Permanent employees with disabilities 3 5 9 16 1 5 1 3 0 0 43

Our Employment Equity Performance


In addition, our international travellers are exposed to additional geographically-specific risks. During 2014, the ebola virus epidemic in the region drew particular attention, as our International Business Division comprises operations in 15 countries throughout Africa, some of which are near to the countries directly affected by the epidemic. Ebola cases were confirmed in the northern region of the Democratic Republic of Congo (DRC) where we have affiliate operations. Through careful tracking and information surveillance, collaboration with International SOS, issuing travel advisories and restrictions, and implementing controls on our interactions with travellers to and from the affected parts, Engen managed to avoid any significant adverse consequences of the epidemic.

Fitness to perform safety-sensitive work is an area of particular focus. Engen’s mandatory medical testing programme, with its double objective aimed at fitness to work assurance in safety sensitive work, and screening for early signs of occupational disease, continued uneventfully. All Engen employees are offered annual health screening, but not all screening is mandatory. For those who do not perform safety-sensitive work, or who are not exposed to significant occupational health hazards, the screening is aimed at personal health risks, and managed through our Employee Wellness Programme.

For employees who have shifted to the left of the “wellness continuum”, and who now have established chronic disease, the focus is on preventing disease progression through effective control, which is exercised through the chronic Disease Care Plans available through the Engen Medical Benefit Fund.

The outcomes of the personal health risk screening programs, as well as the statistics related to causes of incapacity, disability and premature death, provide useful guidance to the education and awareness drives.

Employee Wellness Programme

Our Employee Wellness Programme consists of the following initiatives:

• Health and Wellness Promotion (information and awareness)

• Annual Health and Wellness Medicals (personal health risk screening)

• Counselling and support services (Employee Assistance Programme/ EAP)

• Nurse Based Primary Health Care Services

• Chronic Disease Risk Management

• Incapacity and Disability Management

Engen’s integrated approach to employee health risk management addresses issues across the wellness continuum, as illustrated below:Employees with Chronic Disease

CVS= Cardio-Vascular SystemIOD= Injury on Duty

Chronic Disease / Complication

Chronic Disease / CVS

Chronic Disease / Diabetes

Chronic Disease / HIV

Substance / Alcohol Abuse

Medical Condition (non Chronic)

Occupational Disease / IOD

Other

5,6%

30,33%

26,29%

6,7%

1,1%

11,12%

1,2%

9,1%

Minimise Impact Minimise Likelihood

Implementation Strategy

Personal Health Risk mx(smoking, BP, BmI, Chol.)

Organisational (Group) RiskmX (incl. Actuarial Impact Analysis)

Absenteeism, Incapacity, Disability mx, Employee Assistance

Programmes, monitoring & Controlof Chronic Diseases

Lifestyle (Education/AwarenessDrives). wellness Committees.

Resiliency & Stress managementFatique management

Health PromotionInterventions

Focus Areas

Screening for RiskFactors

Rehabilitation, Accommodation.

Rx Plan Compliance

Primary PreventionOptimise Health

Secondary PreventionPrevent Progression to Illness

Tertiary PreventionPrevent Progression toIncapacity or Disability

Disease management

Incapacity / Disabilitymanagement

Dea

th B

enefi

tsm

anag

emen

t

wellness management

“wellness Paradigm”“Disease Paradigm”


Key outcomes of the personal health risk screening were:

Profile of Employee Health Risk Factors

This graph compares the prevalence of the main health risk factors in Engen with the South African population, adjusted for the demographics unique to Engen. Note that these are employees found to have risk factors, not necessarily diagnosed with chronic disease. It shows that the Engen employees that where tested were well placed for all the risk factors, except obesity (Body mass Index or BMI). This will be a focus area for Engen’s Wellness Programme for the foreseeable future.

SafetyAt Engen safety is a way of life, it underlies every aspect of our business and is embedded throughout our processes from the operational floor to the boardroom. That is highlighted by the visible felt leadership programme discussed later in this section. We have developed a comprehensive process to ensure safe operations, to learn from any incident that happens in areas where we have operational control and we have comprehensive assurance system to ensure the integrity of safety systems that we have put in place.

We have developed an advanced safety dashboard with indicators that are discussed at the most senior level of the organisation and are linked to performance-based remuneration for senior managers and executives.

We continue the implementation of our behavioural safety programme which was rolled out to employees and management in 2010.

Behavioural SafetyBehavioural safety rolled out in 2010 with all Engen employees and management participating.

As a company, Engen believes incidents are preventable. Engen’s safety focus is about caring and believes we all have the right to go home safely. Addressing at risk behaviour and conducting a safety observation has the power to influence working safely and following procedures. Each employee is given a quota of the number of observations to be conducted for the month. This is captured and analysed on a monthly basis to address any at risk behaviour.Behavioural safety assessments, conducted against the roll-out, identified leadership skills needed to reinforce safety awareness. Conducting a behavioural safety observation and management walkabouts shows our personal commitment to safety with Felt Leadership also known as Visible Felt Leadership.

During 2014 our total recordable rate (TRR) increased from 0.36 to 0.44 and the lost time injuries frequency (LTIF) decreased from 0.18 to 0.12.

It is with sadness that we report a fatality during the year of reporting. This was due to a road transfer related incident at our Head Office in Cape Town. We extend our condolences to the family and friends of the deceased. We remain focussed to striving to ensure safety of our people and we conducted an investigation into the incident and implemented corrective action to prevent future recurrence.

Safety Performance

Smokers Raised BP Raised Gluc. Raised Chol. Raised BMI HIV Pos.

% o

f Sam

ple

0%

10%

20%

30%

40%

50%

60%

22% 23%

10%

39%

14%12%

21%

47%52%

28%

13%16%

Engen SA Benchmark

2010 2011 2012 2013 2014

Lost Time Injury Frequency (LTIF) (per 200 000 man hours) 0.24 0.25 0.24 0.18 0.12

Total Recordable rate (TRR) (per 200 000 man hours) 0.63 0.69 0.34 0.36 0.44

work-related fatalities 1 0 0 1 1

Visible Felt LeadershipLeadership in safety is ‘Felt’ by those employees around us and action focused. It involves building a strong safety culture and engaging in conversations with employees about the hazards and risks of the task. It is easily observable, shows personal commitment, makes a positive impression, involves and affects all employees.

Felt Leadership is a line responsibility where individuals take ownership and is driven by teamwork, and not the exclusive domain of senior management.

As part of Felt Leadership we initiated management walkabouts which is part of senior management performance contracts. During these walkabouts safety behaviour is observed by senior management followed by appraisal of good safety behaviour and correction of unsafe behaviour. A monthly executive summary is provided to management to address at risk behaviour.

Capability DevelopmentThe Taproot Training Methodology was rolled out to staff to assist with Incident Investigation so that incident root causes could be identified and corrective action put into place to prevent recurrence.

The Engen STOP programme encourages all employees to implement immediate intervention to stop unsafe behaviour. STOP Training is on-going and all new employees are being trained, with refresher training being rolled out to staff as well.

Induction training is being completed for all new employees with a high focus on HSEQ.


Social and Relationship Capital

Stakeholder EngagementOur stakeholder engagement continues to make strides since its review in 2013. One of the key outcomes of 2014 was the development and adoption of the Stakeholder Engagement Policy. The policy provides guidance on stakeholder engagement at Engen with clear role definition, terminology and scope.

Furthermore, a Stakeholder Engagement Framework was developed and adopted during the year of reporting. This has been a great guiding document to harmonise all activities surrounding stakeholder engagement and it also links this activity to other key documents within the business, such as the code of business ethics, policies and our value system. It also provides clarity on performance assessments and the development of a Stakeholder Engagement Forum.

One of the key implementations of 2014 is the stakeholder engagement process, which eventually identifies material issues for the business. This process started in 2013 and was carried on in 2014 with the various stakeholder group leaders holding mini-workshops to discuss key issues relating to their specific stakeholder group of focus.

To best manage stakeholders, four high level categories and their respective groups have been identified, as shown in the figure below:

Engaging our Stakeholders

As part of stakeholder engagement, relationship champions from across the business conduct an annual review of key stakeholder issues and the engagement channels that drive the relationship. The outcome of this process is the material issues reported in the sustainability context section, and the engagement channels summarised in the figure below. While the list provided in the figure is not comprehensive, it provides an idea on the scale of the engagement.

The process followed in discussing stakeholder engagement, eventually influencing material issues, involves the identification of relationship champions for each stakeholder group (e.g. suppliers, customers). The champions hold a mini-workshop and review key stakeholder issues and engagement channels. Anticipated focus areas are highlighted for the upcoming engagement period and included in their engagement plans.

The stakeholder engagement plans of all senior managers are included as part of performance contracts across the business and are managed as part of the normal performance management process.

Authorisers• Shareholders• Government• Regulators

Associations• Organised business• Industry bodies• Professional associations

Partners• Employees• Suppliers and service providers• Business partners• Customers

Influencers• Public• Communities• NGOs• Media

StakeholderEngagement

Employees

Customers and Business partners

Shareholders

Suppliers

Government and regulators

Media, public, communities and

NGOs

Employees To create a great place for great people.To build great leadership.To realise our Journey to greatness.

• Organised meetings• Culturesurveys• Organisedevents(roadshows, annual events etc)• Internalmedia• Formalplatformsandforums

To create synergy between our value and that of our partners.To create lasting valuee for our customers nd become the company of choice.

• Conferencesandtradeshows• CustomerServiceCentre• Webinterface

To ensure business alignment between shareholders and the business.To attend to reserved matters.

• Quarterlyreviews• DirectreportingchannelbyCEO• Executivecommitteemeetings

Strong supply chain, security of supply and high quality standards across the supply chain.

• Supplierextranet• Servicelevelagreements• Supplieraudits

To ensure compliance with existing regulations.To participate in the development of new regulations.To participate in socio-economic development activities.

• Engagementisdependenton material issues and strategic level• Engagementthroughmeetings and written submissions• Throughorganisedbusinessand industry associations

Sustainable social licence to operateSynergy through strong relationshipsResponsible citizenship

• Corporatewebsite• Annualreport• 24hcommunityline(Durban)• Representativecommunityforums• CorporateSocialInvestmentand Enterprise Development initiatives

How we engage

How we engage

Stakeholder group

Stakeholder group

why we engage

why we engage


Corporate Social Investment (CSI)

Engen continued with its corporate social investment projects focusing on education, environment as well as health and safety during 2014.

Educational Support to External Stakeholders

Engen maths and Science Schools There are nine Engen Maths and Science Schools (EMSS) in four provinces across South Africa, namely Western Cape (1), Gauteng (1), KwaZulu-Natal (4) and Eastern Cape (3). Approximately 1920 learners were registered for 2014 and were assisted by 42 educators which included the nine Regional Coordinators. It is with pride that we announce that the EMSS matric learners of 2014 achieved a pass rate of 99% (up from 95% in 2013) compared to the national average of 75.8% (the National average in 2013 was 78%). Also 70% of the EMSS matric learners achieved a bachelor’s pass whilst the national average for a bachelor’s pass was 41%.

Artisan Learnership ProgrammeEach year the Refinery seeks young talented individuals to be part our Learnership Programme, specializing in, among others, instrument mechanicians, fitters and electricians training, depending on the needs of the Refinery. The Learnership is in line with the Chemical Industries Education and Training Authorities (CHIETA) standards. Completion of this training leads to National Qualifications Framework (NQF) Level 4 certification.

During this period, Engen has spent about R40 000 per learner for training. Approximately 12 of these learners continued to work at Engen on completion of their learnership.

Computer SchoolThe Engen Community Computer School, based in the area surrounding our Refinery, offers nationally recognised certificates (NQF Level 3) computer courses to community members. The school currently provides computer skills training to approximately 300 students annually.

Involvement in External Initiatives

Engen always welcomes the opportunity to work with government and regulatory authorities to advance sustainable development. We do this through direct participation in government initiatives as well as through the various industry associations.

During the reporting period we were involved in a number of government initiatives around climate change, energy issues, environmental legislation, occupational health legislation, transformation and tax legislation amongst others.

We participate in SAPIA’s Advisory Committee on Climate Change (ACCC), which discusses regulatory and voluntary issues on climate change policy and measures. We also participate in the SAPIA Environment, Health and Safety (HSE) Committee which deals with issues relating to road transport, security, environment and emergency management matters. These engagements provide a platform for Engen and other companies in the sector to collectively engage in regulatory matters with authorities.

Engen continued to be part of a group of companies that voluntarily work together to support the National Business Initiative’s (NBI) objectives of promoting sustainable growth and development in South Africa through partnerships, practical programs and policy engagement. This included participating in NBI forums including

the NBI Energy Efficiency Leadership Network (EELN) which holds meetings on a monthly basis to discuss and share experiences on various energy efficiency initiatives, including liaison with government authorities on energy and climate change policy and processes. Engen is a member of the EELN Advisory Committee.

We hosted a number of the South African National Energy Association (SANEA) forums in Cape Town, which cover a wide range of energy and climate change topics. SANEA offers Engen the opportunity to exchange energy related information between South Africans and between South Africa and players internationally, via the World Energy Council networks. SANEA stimulates original thought and catalyses transformation of the energy sector.

Our interests are further addressed through business associations such as Business Unity South Africa (BUSA) and Chamber of Commerce.

To support the development of relevant industry standards, we participate with the South African Bureau of Standards (SABS) in the working groups and international plenary committee meetings involved in the development and adoption of ISO standards.

The Southern African Institute for Occupational Hygiene (SAIOH) was chaired by Engen in 2014.


Environmental Management Support to External Stakeholders

EduPlantWe are still supporting the EduPlant programme is being run by Food and Trees for Africa (FTFA). The purpose of this programme is to assist schools and community with the establishment and/or improvement of the schools’ food gardening projects. For 2014 Engen made R2.45 million available for this programme.

EduPlant focuses on Permaculture, a system of farming and gardening that combines plants, animals, buildings, water, the local people and landscape in such a way that it produces more energy than it uses by recycling all nutrients and waste. This helps schools to improve food security, nutrition and health as well as generates some much more needed income in some situations.

A total of 250 EduPlant cluster workshops took place between January 2013 and October 2014. This was represented by four clusters in each of the nine provinces (36 clusters in total) with FTFA conducting seven workshops per cluster. Approximately 1605 participants were reached during the workshops and included 637 educators and 487 learners from 482 schools as well as 481 community members.

During 2014 the EduPlant Award Ceremony took place where

60 schools in nine provinces were chosen

as finalists out of the 392 entries received (445 in 2012).

The standard of entries in 2014 was

a vast improvement compared to the

previous intake of applications.

All 60 school finalists won R1 500 cash, EduPlant t-shirts, a large resource pack containing plant material and a wealth of environment education resource materials donated by eight contributors. KwaZulu-Natal schools came first in three of five categories each winning a R15 000 cash prize.

Health and Safety Support to External Stakeholders

Driver wellnessEngen Driver Wellness, a mobile health awareness initiative run by the Corridor Empowerment Project (Coremp), continues to grow its positive impact on the country’s bulk truck operators with increased driver participation in voluntary screenings and improved health scores.

Engen contributed approximately R1.2 million in support of Trucking Wellness in 2014. Trucking wellness is funded and driven by the National Bargaining Council for the Road Freight and Logistics industry. It is a primary healthcare delivery programme dedicated to the wellness of employees in the Road Freight and Logistics Industry. In 2014, 21 Engen sites were part of this programme which commenced in June and concluded in November. A total of 7181 unique screenings were conducted in 2014, compared to 4815 in 2013 which was a 49.1% increase. The total number of individuals screened also increased by 445 (50.9%) since 2013, as did all individual categories of screening. Screenings for cholesterol increased by 186 (43%), glucose by 433 (51%), BMI by 447 (51%), blood pressure by 444 (51%), HIV by 283 (47%), TB by 289 (48%) and sexually transmitted infections by 284 (47%).

Forecourt wellnessThis programme focuses on medical/wellness screening for forecourt attendants at Phambili Roadshows. The programme covers Cape Town, Johannesburg, Tshwane and Durban, Bloemfontein, East London and Port Elizabeth during. A total of 1952 forecourt attendants were screened and the total number of screenings (5 827) included blood pressure, cholesterol, glucose and HIV screenings.

Paraffin SafetyEngen’s `KlevaKidz’ Paraffin Safety Campaign is an awareness campaign that educates rural and township children between the ages of seven and 11 on safe handling and storage of paraffin. This programme visited 99 schools in five provinces during 2014 reaching 30 000 learners. The campaign entails industrial theatre paraffin safety awareness.

Engen Employee and Dealer Outreach Initiatives

In addition to the Engen CSI commitments, Engen employees and dealers have also been involved in community outreach activities. During 2014 employees participated in the Winter Warmer Scarf Knitting Challenge and over 550 scarves were knitted by employees and donated to various charities. Employees in the Eastern Cape participated in Mandela Day activities and donated mattresses and school bags to the Vukuhambe Special School. In the Western Cape Engen donated office furniture to the Community Chest who have distributed the furniture to smaller NGO’s and NPO’s who care for persons with disabilities. Other employee groups donated groceries to a nursery school.

In 2014, 47 employees were supported in their community initiatives through the Employee Community Partnership Programme. Engen continues to support community outreach initiatives through the Dealer Community Participation Programme. A total of 38 dealers participated in this programme.


Engen in Sub-Saharan Africa and the Indian Ocean Islands

Our affiliate operations continued community outreach initiatives in the education, health and welfare arenas.

Engen Tanzania: Towards a healthy communityIt was in the early 1980s that the fight against the acquired human immuno-deficiency syndrome (AIDS) picked up significant momentum. Today, more than 30 years later, the fight continues and much progress has been made. Engen Tanzania partnered with Support for International Change (SIC), a non-governmental organisation, to address some of the vital aspects through which communities are affected by AIDS.

Through this partnership Engen has been able to make a lasting impact to the lives of communities that are affected by HIV/AIDS but are out of reach to many NGOs working to address the problem in the various spheres of life that it affects. This programme has reached close to a 100 rural villages and places particular focus on four key intervention areas in the fight against the pandemic:

• Education: There are still misconceptions about HIV that need to be addressed. Awareness campaigns have increased the level of awareness of many but surveys conducted by SIC showed that there are people who still believe in myths that have been proven wrong a while back. Awareness is a journey and reaching a percentage of the population is not enough to stop the spread of the virus, every single person needs to know the correct facts in order to make the right decision to protect the health and dignity of themselves, their family and friends as well as the health and dignity of those around him.

• Testing: Promoting the idea that knowing your status is the first step towards dealing with the syndrome through the provision of voluntary and confidential testing and counselling. Providing support and care for people who test positive for the HI virus.

• HIV Care and Treatment: Tanzania provides free HIV care at public hospitals. For rural dwellers the trip to a hospital can be a long and challenging experience. SIC provides free mobile clinics for rural residents. In some instances, these clinics are the only option available they can get.

• Community Support: Rural communities have a much stronger social and community bond and this is their strength. SIC engages at community level and develops a virtuous cycle based on credible information through which the community develops its own unique ways to manage their response to HIV/AIDS.

The partnership between SIC and Engen dates back to 2009 when Engen provided fuel.

“Engen began partnering with SIC to provide the precious fuel that allows us to reach our target communities. With our hard working staff and heavy field schedule, currently Engen sponsors between 1800-2000 litres of fuel each month, worth approximately $2500 USD. For SIC, a small but highly recognizable organisation operating on a limited budget, this donation is invaluable and equates to nearly 10% of our overall budget each year”

This partnership, to date, has resulted in:

• Over 135,000 free, confidential HIV tests and counselling services• Initiation and support for 17 mobile care and treatment centres providing monthly care and medication to over 1500 people• 9 of these mobile care and treatment centres being established as permanent HIV clinics in the government health system• Awareness campaigns led by over 1400 Tanzanian and international volunteers• Provision of over 550,000 HIV prevention education interventions

GhanaOperation Smile: Engen Ghana provided fuel support for the operation.

Made a donation to the Otumfuo Education Fund. An education fund to assist bright pupils who don’t have the means to further their education.

TanzaniaSupport for International Change (SIC): Donation of fuel to the NGO based in rural Arusha. The objective of SIC is to train leaders in global health and development in order to limit the impact of HIV and AIDS in underserved communities.

Indian Ocean IslandsLink to Life: Counselling for cancer patients from vulnerable groups.

Provision of massage therapy to cancer patients.

Provision of temporary accom-modation for Link to Life offices, centre and library.

ZimbabweEngen Bubi retail site: Support for the local soccer club through supply of sportswear.

BotswanaLink to Life: Counselling for cancer patients from vulnerable groups.


Our approach to managing our natural capital is based on international best practice, legal compliance and maintaining our environmental and social licence to operate in all the countries we operate in. This is one of the focus areas in our dedication to sustainability and forms part of the strategic pillars in our revised strategy. We are committed to reduce the negative environmental impacts of operations and to strengthen our positive environmental impacts.

Our environmental team is responsible for ensuring that Engen policies and procedures are aligned with all legal and regulatory requirements. The team is also responsible for the implementation and auditing of environmental policies, standards and procedures in our operations. We proactively work with governments, other industry role players and civil society on issues relating to natural capital.

We frequently review our environmental risks and opportunities and ensure that management plans are in place for all of our significant environmental risks. As part of continuous improvement, we measure and monitor our water consumption, energy consumption and fugitive emissions and use the information to make better management decisions. As eco-efficiency is part of our sustainability strategy, we strive to produce more useful goods by using fewer resources, producing less waste and reducing our carbon footprint.

Some of the data reported in this section only covers our operations in South Africa, Swaziland and Lesotho.

Environmental Management

Managing our environmental aspects includes understanding and complying to relevant legislation, internal standards and relevant international best practice. The regulatory framework relating to air quality, water and waste management is evolving and elevates the importance of environmental compliance and good practice. Continuous monitoring of the changes in environmental legislation enables us to align our activities with legal requirements.

The PETRONAS Mandatory Control Framework (MCF)contains six elements which focus on environmentalmanagement. As part of our consistent approach to minimisingthe impacts of our activities we base our environ-mental management approach on these elements:

• Air emission management

• Environmentally hazardous substances

• Environmental impact assessment

• Hazardous waste management

• Soil and groundwater management

• Wastewater management

The Engen Refinery, Durban Terminal, Engen Lubricating Oil Blend Plant (LOBP) and Richards Bay Bunkering Services continued to meet the ISO 14001 environmental management system requirements.

We actively manage the following key environmental issues:

• Water

• Energy

• Climate change

• Atmospheric emissions

• Hazardous and non-hazardous waste

• Loss of Primary Containment (LOPC) incidents (including spills of product)

Fresh Water ManagementResponsible water management is critical in most countries where we operate and has become a business imperative. Business growth is becoming intrinsically linked to water security, making water use efficiency a variable for business sustainability in water stressed Sub-Saharan Africa.

Recognising this, we applied a methodology developed by PETRONAS to calculate water availability for our South African operations.

We applied the OECD water stress threshold of 1700 kL per person per year to identify areas under increasing water stress. According to this method, all our facilities in South Africa operate in areas with severe water scarcity. Using another approach, which bases water stress on the ratio between renewable water supply and water demand in a watershed, 11 of the 13 water management areas in which we operate can be classified as under severe water scarcity.

In our value chain, the refining process accounts for the majority of our water requirements. The water withdrawal of two adjacent facilities, the Island View facilities and the Durban Terminal, are included in the Refinery water withdrawal total.

Natural Capital

RA = 2014 data Reasonably assured by KPMG

Water withdrawal (kL)

x 10

0 00

0

2010 2011 2012 2013 201426

29,1

30,3

33,6

34,9

3332,7

30,3RA

31,3RA

33,934,4

27

28

29

30

31

32

33

34

35

36 Refinery Engen Total


Total water withdrawal has decreased over the past three years. This has been due to a reduction in throughput as well as water efficiency initiatives implemented. Improvements in systems efficiency and reliability, as well as better water management, resulted in the refinery almost doubling cooling water cycles. This resulted in approximately 110 ML of water savings per year.

The refinery also achieved an increase on the average cycles of water use from 6 to more than 10, resulting in water saving of approximately 40ML per year. This was achieved by relaxing operating specification in line with international standards. Apart from contributing to resource efficiency, these initiatives resulted in financial savings in excess of R2.3 million per year for our refining process.

For Engen Sales and Marketing, data improvements in the verification of and discovery of incorrect bills brought about improvements in water data accuracy and addressed minor overestimation of water consumption. This, together with optimisation of water use during equipment and surface washing, resulted in our reported water use decreasing by almost 9 ML in 2014.

Further water use overestimation was addressed through improved boundary setting for our IBD affiliates.

The Lubricants division reduced water withdrawal significantly in 2013 by decreasing the number of wet fire-fighting exercises. In 2014 water use further decreased due to a decrease in throughput.

Our focus in the near future will be further water data quality improvement, and at all divisions and sites we plan to have more defined roles and responsibilities, and the development of further water conservation plans. The refinery has a budgeted 3-year plan to further reduce freshwater withdrawal.

GroundwaterThe remediation strategy has been designed to remediate contaminated soil and groundwater, and manage contaminated sites to a standard that allows industrial and domestic use and addresses environmental protection of the soil and groundwater. This strategy is being undertaken in liaison with the relevant authorities from different countries.

With this strategy, Engen conducts site-based desktop risk based assessment to determine the status of the site in terms of contamination. These Phase I (non-intrusive) environmental site assessments are conducted to identify contaminants of concern, potential or actual sources of historical or ongoing contamination, and potentially responsible parties. Then Phase II and III (intrusive) environmental site assessments are conducted to characterize site conditions and define presence, level, and extent of contamination as well as where contamination is present, in choosing appropriate remediation methodologies and compilation of remediation action plans.

These initiatives support remediation methodologies ranging from active engineered systems to natural attenuation to address the contaminated sites.

Energy Consumption

To keep the conversation going on this topic, Engen conduct ECoPs (Environmental Committee of Professionals) meetings. These meetings consist of environmental professionals within the business and they take place quarterly to discuss developments in environmental legislation and strategies to better protect natural resources.

Energy Management

Energy management at Engen is a facet of climate change and resource efficiency management as part of the Engen Sustainability Framework.

We continue to be an active participant in the voluntary Energy Efficiency Leadership Network (EELN), which builds on a pledge made by organised business to the South African Minister of Energy in 2012. The pledge entails that industry would mainstream energy management in decision-making and operations. One highlight of 2014 was Engen’s signing of the National Business Initiative (NBI) agreement to be part of the Private Sector Energy Efficiency (PSEE) programme. The agreement calls for energy efficiency baseline studies to be done by PSEE at the NBI member companies with the view to implement the Energy Management System (ISO 50001) in the member companies. Engen has become a participant in this programme which is co-funded by the NBI and with the blessing of the Engen Energy Management Committee (EMAC). The baseline studies will cover office buildings, depots and terminals, the refinery, other operations and fleet management.

Year 2014 saw further progress in our South African retail outlet energy efficiency programme that involves replacement of conventional lighting fixtures with energy efficient ones, mostly the LED-type. During the year the energy saving through lighting alternatives was 73%, with an energy cost saving of more than R 26m. The associated indirect carbon saving was 1 822 tons of CO2e.

As a way forward, Engen has specified energy efficient lighting as a standard for all new sites and outlet upgrades. Our dealers can purchase and install these specified lighting fixtures and receive a 15% rebate on the cost and installation of the luminaires.

At IBD, the Reunion Firefly initiative installed charging stations at their retail outlets for electric vehicles (EV). Engen has also completed the first prototype Photo Voltaic installation at one of our retail sites in SA, the All Africa Convenience Centre in Alexandra, Gauteng. The PV panels on the site can produce up to 170kWh during the day which is more than enough for the retail outlet requirement. Daily output measurements are made to inform decisions regarding the expansion of this initiative.

2010 2011 2012 2013 20140

2

4

6

8

10

12

14

16

x 1

000

000

GJ

Refinery SAFOR ESm

Lubes Buildings Engen Total


Total Direct GHG Emissions

Engen Total Scope 2 Emissions

The amount of GHG emissions at Engen each year is closely associated with the throughput at the refinery that year and our data reflects this. Although the refinery is our biggest GHG emission source, they use fuel gas as the major energy source which is comparatively cleaner than fuel oil, which was used until 2002.

2014 saw progress with the implementation of the Engen Climate Change Framework, adopted in 2009 to minimise the carbon footprint of our activities outside the Refinery. This includes the Fleet replacement programme. In the year under review we acquired an additional six Euro 5-standard bulk road tanker trucks with on-board technology to reduce GHG emissions. We now have a total of 17 such tankers meeting European specifications. Further efforts will include implementing measures to reduce our consumption of fuel and electricity, reviewing our policies on air travel for business, and further encouraging behaviour changes and efficiencies amongst our staff.

In office buildings, measures to reduce paper use and the energy consumption of printers, have had good results since 2013. Staff have to use access cards to authorize printing, resulting in a significant reduction in the amount of wasteful printing and uncollected printed material. Based on an internal survey conducted before and after the monitoring of individuals’ printing, the savings per annum, for a sample of 20 staff members, has been as follows:

• Paper saved (size A4) - 74 kg (30 reams of paper)

• Energy saved - 3 kWh

• GHG emissions reduced from electricity use - 3kg CO2e

• Water saved during electricity production - 4.2 litres

• Coal saved during electricity production - 1.59 kg

• Emissions reduced during paper production - 112 kg CO2e

Climate Change and Greenhouse Gas Emissions

Engen considers potential climate change impacts such as flooding, insufficient water supply for operations, severe storms, increased vulnerability to diseases and interruption of the supply chain as real risks to our business. Engen is aware that weather-related incidents can lead to significant loss of company assets and revenue, as well as loss of reputation.

In 2014 climate change continued to command a high level of attention in South Africa and at Engen. New mandatory requirements, as Government response measures to climate change, were proposed. These included the declaration of greenhouse gases (GHG) as a priority air pollutant, carbon budgets and national desired emission reduction objectives. This compelled us to review our approach to the management of climate change and energy.

Another response by the authorities is the proposed carbon tax, which will impose a cost on the use of fossil fuel - particularly at the refinery - as well as a potential for increased electricity tariffs. Engen actively participates in the industry’s dialogue with government concerning these issues.

We continue to quantify our carbon footprint using internationally accepted guidelines and principles to allow for reporting data that is complete, accurate, consistent, comparable and transparent. Our direct (Scope 1) and indirect (Scope 2) GHG emissions are provided in the figure below. The total direct emissions include those from refining operations, base oil and lubricant blending plants, company vehicles and the road tanker fleet. Engen does not currently estimate and account for Scope 3 GHG emissions: all indirect emissions (not included in scope 2) that occur in the value chain.



2010 2011 2012 2013 20140

0,005

0,01

0,015

0,020

0,025

0,020

0,016 0,0186

0,0185 0,019

Refinery Emission Intensity

2010 2011 2012 2013 2014

2010 2011 2012 2013 2014

0

0

1.00

0.5

2.00

1.0

3.00

1.5

4.00

2.0

5.00

2.5

6.00

3.0

7.00

3.5

8.00

9.00

10.006.59RA

2.69RA

6.78

2.29

5.59

2.21

8.33

2.86

7.57

2.82

Engen’s Scope 1 GHG Emissions (105 CO2e)

Tonn

es C

O 2e x

105

tCO 2e

/ BBL

Tonn

es C

O 2e x

105



Atmospheric Emissions

To remain true to our objective of not only managing our emissions, but also providing transparent and accurate reporting to our stakeholders, we embarked on a journey to improve our management of key emissions indicators. To do this, we subjected our 2013 performance for the emission indicators in the table to an internal review by KPMG to examine our systems and identify areas of improvement. The internal review outcomes helped us to strengthen the system enough to request KPMG to conduct an external independent assurance for the same indicators in 2014. The assurance resulted in a 13.7% improvement of the NOx data quality for 2014. All our emissions remain below the active South African emission limits.

At Engen there has always been a strong focus on managing atmospheric emissions, which are associated with the refining process. There has been a lot of effort towards maintaining these emissions within regulatory limits. The Minimum Emission Standards for listed activities in terms of NEM:AQA were promulgated late in 2013, not allowing adequate time for major plant modifications to be done before the March 2015 due date. Whilst the Refinery meets most of the existing plant standards as well as some of the new ones, it has requested a postponement for certain compliance timeframes of the MES from the Department of Environment Affairs as described in the table below. This postponement request was accompanied by a full impact assessment and public participation process.

Waste Management

We aim to actively manage the amount of waste we produce by recycling whenever possible. We dispose responsibly of the waste we generate and minimise the amount of waste we send to the landfill. Although the amount of Refinery waste recycled during 2014 was less than the 2013 total, we are continuing with the waste recycling programme at the Refinery. The high level of waste generated prior to 2014 was due to clean-up related to legacy incidents which were approaching completion in 2014.

*Restated after internal audit

Atmospheric emissions (tonnes) 2012 2013 2014Refinery SO2 2667 2480 2240RA

Refinery NOx - - 1044RA

Refinery filterable Particulate Matter 241 251 217RA

Section 21 Category Description Postponement Request

Sub- Category 2.2 Catalytic Cracking Unit

Compliance to Particulate Matter limit from the FCCU for existing plant

Postponement for compliance with the MES for Particulate Matter for existing plant requested with a limit of 140mg/m3 until 31 March 2019

Subcategory 2.4: Storage and Handling of Petroleum Products

Installation of Vapour Recovery Unit at gasoline rail loading facility

Postponement of the compliance with the MES for existing plant until 31 March 2016

Subcategory 2.4: Storage and Handling of Petroleum Products

Installation of Internal Floating Roof for two storage tanks

Postponement of the compliance with the MES for existing plant until 31 March 2016

Refinery Air emissions

Refinery waste management (tonnes) 2011 2012 2013 2014

Hazardous waste Generated 10 386 14 256 20 349 9 462

Recycled 6 871 10 737 10 242* 3 766

Disposed 3 515 3 519 10 107 5 696

Non-hazardous Disposed 1 343 2 734 10 221 1 778

Total disposed to landfill 4 857 6 252 20 328 7 474


Transformation

Loss of Primary Containment (LOPC) and Spill Management

LOPC refers to an unplanned or uncontrolled release of any material from its engineering containment. If the material released is contained within a designated secondary containment receptacle or bunded area, it remains an LOPC, but is not referred to as a spill. A portion of LOPC that escapes the secondary containment is also logged as a spill. Our LOPC classification takes into account the flashpoint of the liquid as per API Standard 754.

Loss of Primary Containment (LOPC) incidents, which include potential spills to the environment, represent a potential for soil and groundwater contamination. To minimise its occurrence and impact, the LOPC reduction programme was launched in 2012. This programme has reduced the number of major LOPC from 20 in 2011 to seven in 2014. The increase in volume to 257 cubic meters was

due to a single pipeline incident accounting for 91% of the major LOPC volume for the year. We were fortunate that the product was contained in the secondary containment. We are tightening our systems to guard against these infrequent but high impact events that result in large volumes escaping containment. This programme is now being expanded to cover retail site deliveries as well.

In 2014 Engen started a Spill Response Strategy to identify and pre-approve spill response companies that would respond to spill incidents in Engen’s footprint in South Africa. A yearly performance review, undertaken by Engen, will ensure that the service providers continue to meet the competences required to clean up spillages. The aim of the strategy is to have a service provider in each region to enable prompt response during spillages. This will enhance our efforts to reduce the impact of environmental spillages which, despite an increase in the volume of Major Spils, have decreased from 105 in 2013 to 17 cubic meters in 2014.

Engen’s transformation agenda is influenced by business, ethical and legislative imperatives. We are also keenly aware that this is a journey that will require time and patience. Our Black Economic Empowerment Policy states that “We will promote and develop an enabling environment in which Engen will deliver on its transformation strategy”. This policy extends to Engen’s employees, dealers, suppliers, business partners and the wider community. In South Africa, our transformation programme is also governed by the Broad-Based Black Economic Empowerment (B-BBEE) Act (Act 53 of 2003) and other relevant legislation, as well as the Liquid Fuels Charter and the Mining Charter.

We would like our employees to see value proposition in our fair and equitable employment policies.

Since transformation objectives have been incorporated in the Engen Balanced Scorecard, they have been expressed and cascaded down and throughout the business, which leads to more effective planning and execution of each B-BBEE element by the organisation.

Our B-BBEE Performance

Since 2012, Engen has improved its B-BBEE Level status from a Level 4 B-BBEE contributor to a Level 3 B-BBEE contibutor, achieving a score of 81.50% from 73.24%. This has been achieved by our deliberate in-depth analysis and verification of different elements of the codes. The review of the business strategic objectives, as expressed in the revised Engen strategy, has yielded improvements for our transformation journey especially in areas like Ownership and Enterprise Development.

In order to take a more long-term view, our performance regarding the B-BBEE scorecard is discussed over the period 2012-2014.

Engen’s improved score on the Ownership element is derived out of Pembani and the application of the exclusion principle as per the verification manual (recalculation in 2014). Our score for Management Control is steadily increasing.

The employment of people from designated groups in junior and senior management has continued to show improvements, while we continue to face challenges with regards to the representation of people with disabilities. A disability awareness campaign, together with the commitment of employing people with disabilities by the different divisions, shows the business is serious about diversity of its workforce. Divisions, together with the Employment Equity Committee, are paying special attention to this area in order to boost our performance.

The Skills Development score has increased steadily over the past two years. An area of improvement is skills development expenditure on people with disabilities, which achieved the least points within the Skills Development element. This is consistent with the challenge identified under the employment equity element when it comes to the employment of people with disabilities and the training opportunities thereof. Improvements in the recording of skills development spend that is within divisional control has seen Engen being able to recognise more training spend that was not included in the previous reporting period.

Our Preferential Procurement score has seen a drop since 2012. Procurement from suppliers that are Black owned, especially small and micro enterprises as per the codes, have been a challenge for Engen. Steps have been put in place to increase procurement from Black-owned and Black-woman owned suppliers with the view to ensuring that Engen complies. The integration of the use of information systems, and providing supportive guidance by procurement on suitable Black and Black-woman owned suppliers is starting to bear results for the preferential procurement element, as seen in the increased score for 2014.

The programme focus has included leadership and awareness, analysis of incidents, behavioural changes, and improvement in maintenance. Initiated at the depots and terminals, it was also rolled out to service stations across Engen and includes mandatory monitoring plans for sites where there have been spills.

In April a Heavy Furnace Oil (HFO) spill occurred in the Port of Richards Bay. This resulted in the material coming into contact with the bay, impacting the surrounding area including the mangroves in the Port. Response teams from specialist oil spill response organisations were activated and the incident was quickly brought under control, minimising any further impacts to the environment. Continual monitoring of the impacted area, including the mangroves, over the past year has shown that environmental impact was significantly limited as a result of the quick response. Monitoring will continue into 2015 when a final assessment of the environment will be done.

number and volume of LOPC and Spills

+ = Restated to include an incident in which the volume was under investigation

* Major LOPC definition applies as per the API Standard 754. For flammable liquids major LOPC threshold is 7 barrels or 1120 litres.For combustible liquids major LOPC threshold is 14 barrels or 2240 litres.

2012 2013 2014

Number of Major LOPC* 20 11 7

Volume Major LOPC (kL) 124 157+ 257

Number of Major Spills (> 7bbl) 6 5 4

Volume of Major Spills (kL) 58 105 17

* Arrows compare 2014 to 2012 performance

Elements weighting 2012 2013 2014 Indicator*

Ownership 20 10.33 12.97 15.54

Management Control 10 9.37 9.12 9.53

Employment Equity 15 12.08 10.94 11.32

Skills Development 15 8.25 8.68 9.68

Preferential Procurement 20 18.03 14.8 15.43

Enterprise Development 15 10.18 14.53 15

Socio-economic Development 5 5 5 5

Total 100 73.24 76.04 81.50

B-BBEE Level 4 3 3


It is worth noting that some Black-owned and Black-woman owned entities that were brought into the supply chain as part of Engen’s transformation are amongst the top 5 vendors for crude and refined products.

For the first time, Engen scored full points in the Enterprise Development element. A number of successful enterprise development initiatives have been maintained and, where necessary, enhanced to ensure that there is value both to Engen and the recipients.

Key initiatives include:

• EngenIncubator

Based in the Raizcorp Business Incubator in Durban are 39 small businesses that are undergoing intensive business support under the guidance of Raizcorp. In 2014, a review of the incubator programme was done to ensure that companies that are in the programme can become suppliers to the Refinery. This review means that at least 80% of recipients should have the technical ability to undertake contracts.

• IntegratedEnergyCentre–Bushbuckridge

Work is on-going in the building of the Engen Integrated Energy Centre (IEC), which is a One-Stop energy shop owned and operated by the Bushbuckridge community in Mpumalanga. Not only is this programme aimed at creating a viable enterprise development model for rural areas, it also plays a critical role in addressing social challenges facing the rural poor.

Over the past few years, Engen has consistently achieved a full score for Socio-Economic Development.

• EngenPitchandPolish

This successful programme continues to unearth talented young entrepreneurs and 2014 was no exception. Below is the table of the top 4 businesses that made it to the finals from different provinces.

notable programs include:

• KlevaKidzprogrammeonparaffinsafety (discussed in more detail in the section on CSI)

• EngenMathsandScienceSchoolsprogramme (discussed in more detail in the section on CSI)

• WildlandsGreen-preneursprogramme

This programme centers around teaching school children environmental awareness and poverty alleviation through food gardens. The programme has been extended to the communities of Bushbuckridge where Engen is establishing an Integrated Energy Centre. This is to ensure that there is alignment with other Engen initiatives that are community orientated.

New B-BBEE Codesof Good Practice

The amendments to the B-BBEE Codes of Good Practice as published in the Government Gazette on 11 October 2013 have raised the bar when it comes to implementing B-BBEE in line with government’s National Development Plan priorities. While these codes come into effect in 2015, we continue preparing the business for their implementation and where necessary, steps are being put in place to align policies and procedures with the spirits of the codes. To this effect, a project was launched to improve monitoring and reporting systems in line with the new codes. The increased emphasis on preferential procurement and enterprise and supplier development is being considered in the review of our procurement processes.

Efforts to transform the demographic composition of retail site ownership continued and eleven more BEE-owned sites were added. Approximately 45% of our retail sites are owned or managed by previously disadvantaged individuals.

In addition to the DRC, Gabon, Burundi, Botswana and Zimbabwe which have indigenized shareholding requirements, there was an increased focus on regulating transformation in Ghana and Namibia. Various models and options are being explored to unlock indigenized shareholding and continue to improve the diversity of the business. We have also embarked on a Strategic Sourcing project to empower local suppliers as part of our construction project in all our affiliates. These will include the development of retail and commercial sites where local suppliers are given preference over foreign contractors.

Recycling depot in Cato Manor boosts BEE, local development

The launch of a new recycling facility in the Cato Manor area on 22 August 2014 was attended by Barbara Thompson, Deputy Minister of Environmental Affairs, Dr Andrew Venter (CEO of Wildlands), Mntu Nduvane (Stakeholder Engagement Manager for Corporate Affairs at Engen), Councillor Lindiwe Ntaka Mhlongo (representing the Mayor’s Office) and local community members.

This recycling depot has been built and equipped under a multi-million-rand enterprise development partnership between Engen Petroleum and Wildlands Green-preneurs (Pty) Ltd. Tasneem Sulaiman-Bray, GM: Corporate Affairs at Engen, says the facility is the latest initiative to come out of the company’s R4.5 million investment deal with Wildlands Green-preneurs, which was announced in October 2013.

“Engen’s investment will significantly boost recycling efforts while promoting black empowerment and local enterprises,” says Sulaiman-Bray. “In return, we will receive carbon credits, supporting our sustainability and planet change agenda. The partnership aims to benefit multiple initiatives serving a variety of key causes, namely black economic empowerment (BEE), local enterprise development (ED) and green issues,” she says.

Urvashi Haridass (Project Manager for Recycling at Wildlands) says the funds from Engen went towards a range of infrastructural interventions at the Cato Manor site. “We built two sheds, one of 10 by 12 metres and another of 12 by 12 metres. In addition, we concreted the full yard, refurbished our containers, three in total, and installed a water line and ablution facility.” Electricity has been installed which will allow the facility to commission additional machinery to enhance efficiencies.

From July 2013 to June 2014, 290 Waste-preneurs in Cato Manor have traded 951 000kg’s of recyclable waste, and have been rewarded with R144 764 worth of livelihood support items.

“Engen’s investment, together with the investment of the Green Fund, will greatly benefit this cause as it allows us to equip plants with infrastructure that will increase our output, thus boosting recycling in the region, benefiting more Waste-preneurs and ultimately allowing us to employ more people,” said Venter. “We are very excited about our partnership with Engen and Green Fund. Thanks to these key partners Wildlands is better equipped to do what it does best – green the economy.”

# name Business Concept

1 Lebo Selloane (Welkom)

A mobile x-ray service targeted at mine workers in the Welkom area and surrounding communities.

2 Asa Mazomba (Port Elizabeth)

An online procurement platform for the construction industry named Tender Point.

3 Themba Sehawu (Nelspruit)

Fruit picking device, an innovative technology to improve speed, safety, and efficiencies on fruit collection by the farm workers.

4 Ayanda Ntsho(Soweto)

An organic and environmentally friendly black peat alternative for growing mushroom farmers. RSA currently imports black peat from the Netherlands.


GRI CONTENT INDEX

This report has been compiled guided by the Global Reporting Initiative (GRI) Guidelines for Sustainability Reporting G4. This index guides the reader to the page(s) where information relating to GRI parameters and performance indicators can be found.

Parameter or performance indicator Page number(s)

No Brief description

GENERAL STANDARD DISCLOSURES

Strategy and analysis

G4-1 CEO and Chairman statement 5-7

Organisational profile

G4-3 Name of the organisation 1

G4-4 Primary brands, products, and/or services 12-13

G4-5 Location of organisation’s headquarters 4

G4-6 Countries where the organisation operates 11

G4-7 Nature of ownership and legal form 11

G4-8 Markets served 11

G4-9 Scale of the reporting organisation 16

G4-10 Employee numbers 44

G4-11 Employees covered by bargaining agreements 49

G4-13 Significant changes regarding the organisation during the reporting period 4

G4-15 External initiatives 56

G4-16 Membership of associations 56

Identified Material Aspects and Boundaries

G4-17 Entities included in organisation’s financial statements 36

G4-18 Process of defining aspect boundaries and defining the content 32

G4-19 List of material aspects 33

G4-20 Boundary for each aspect within the organisation 4

G4-22 Explanation of the effect of any re-statements of information 4

G4-23 Significant changes from previous reporting period regarding the report 4

Stakeholder Engagement

G4-24 List of stakeholder groups engaged 54

G4-25 Basis for identification of stakeholders 54

G4-26 Approaches to stakeholder engagement 55

G4-27 Key topics raised by stakeholders and organisation’s response 55

Report Profile

G4-28 Reporting period 4

G4-29 Date of most recent previous report 4

G4-30 Reporting cycle 4

G4-31 Contact point for questions 4

G4-32 G4 in accordance option 4

G4-33 Policy about external assurance 4

Governance

G4-34 Governance structure of the organisation 21

G4-36 Board procedures for overseeing the organisation’s management of eco-nomic, social and environmental performance

21

G4-39 Status of CEO vs. chair 21

SPECIFIC STANDARD DISCLOSURES

Economic

DMA

G4-EC2 Financial implications, risks and opportunities due to climate change 66

G4-EC7 Development and impact of infrastructure investments and services primarily for public benefit

57, 71

Environment

DMA Energy 65

G4-EN3 Energy consumption within the organisation 65

G4-EN6 Initiatives for energy-efficient or renewable energy-based products 66

DMA Water 63

G4-EN8 Total water withdrawal 63

G4-EN10 Percentage and volume of water recycled and reused 64

DMA Emissions 68

G4-EN15 Direct GHG emissions (Scope 1) 67

G4-EN16 Indirect GHG emissions (Scope 2) 66

G4-EN18 GHG Emissions intensity 67

G4-EN19 Initiatives to reduce greenhouse gas emissions 66

G4-EN21 NOx, SOx, and other significant air emissions 68

DMA Waste 69

G4-EN23 Total weight of waste 69

G4-EN24 Total number and volume of significant spills 70

Social: Labour Practices and Decent Work

G4-LA6 Rates of injury, occupational diseases and fatalities 53

G4-LA7 Workers with high risk of occupational diseases 52

G4-LA9 Employee training 44

G4-LA10 Programs for skills management and lifelong learning 44

G4-LA12 Composition of governance bodies and employees according to diversity indicators

46


Independent Assurance Report on Selected Environmental Information

To the Directors of Engen Petroleum Limited

We have undertaken a reasonable assurance engagement on selected environmental information as described below and presented in the Engen Limited Integrated Annual Report 2014 (the Report) of Engen Petroleum Limited (Engen) for the year ended 31 December 2014. This engagement was conducted by a multidisciplinary team including environmental and assurance specialists with extensive experience in environmental reporting. We were engaged to provide reasonable assurance on selected key performance indicators for the year ended 31 December 2014 only.

Subject matter

We are required to provide reasonable assurance on the following key performance indicators prepared in accordance with the Global Reporting Initiative (GRI) G4 Guidelines, marked with a RA, and presented on page 7 of the Report.

Indicator Engen Operations Unit of measure

1.1 Engen Scope 1 Direct GHG Emissions Excluding IBD coun-tries* 105 tons CO2 equivalent

1.2 Engen Scope 2 Indirect GHG Emissions Excluding IBD coun-tries* 105 tons CO2 equivalent

1.3 Energy usage Excluding IBD coun-tries* GJ

1.4 Refinery energy usage Engen Refinery GJ

1.5 Refinery Scope 1 Direct GHG Emissions Engen Refinery 105 tons CO2 equivalent

1.6 Water withdrawn Excluding IBD coun-tries* m3

1.7 Refinery water withdrawn Engen Refinery m3

1.8 Refinery SOx emissions Engen Refinery Tons

1.9 Refinery Total filterable Particulates Engen Refinery Tons

* IBD countries refers to Engen’s downstream marketing operations in Africa other than South Africa, Lesotho and Swaziland.

Directors Responsibilities

The Directors are responsible for the selection, preparation and presentation of the environmental information in accordance with the GRI G3.1 Guidelines. This responsibility includes the identification of stakeholders and stakeholder requirements and material issues, for commitments with respect to environmental performance, and for the design, implementation and maintenance of internal control relevant to the preparation of the Report that is free from material misstatement, whether due to fraud or error.

Our Independence and Quality Control

We have complied with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which includes independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

In accordance with International Standard on Quality Control 1, KPMG Services Proprietary Limited maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Our Responsibility

Our responsibility is to express an opinion on the selected environmental information based on the evidence we have obtained. We have conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE 3000), Assurance Engagements Other than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board. That Standard requires that we plan and perform our engagement to obtain reasonable assurance about whether the selected environmental information is free from material misstatement.

A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain evidence about the quantification of the selected environmental information and related disclosures. The nature, timing and extent of procedures selected depend on the practitioner’s judgement, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments we considered internal control relevant to Engen’s preparation of the selected environmental information. A reasonable assurance engagement also includes:

• Assessing the suitability in the circumstances of Engen’s use of the criteria, as the basis for preparing the selected environmental information;

• Evaluating the appropriateness of quantification methods and reporting policies and internal guidelines used, and the reasonableness of estimates made by Engen; and

• Evaluating the overall presentation of the selected environmental information and whether the information presented in the Report is consistent with our findings, overall knowledge and experience of environmental management and performance at Engen.

Our work included the following evidence-gathering procedures:

• Interviewing management to evaluate the application of the GRI G4 Guidelines and to obtain an understanding of the control environment relative to the reported environmental information;

• Inspecting documentation to corroborate the statements of management and senior executives in our interviews and discussions;

• Testing the processes and systems to generate, collate, aggregate, monitor and report the selected environmental information;

• Inspecting supporting documentation and performing analytical procedures; and

• Performing site work at Engen Refinery (Durban).

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the selected environmental information for the year ended 31 December 2014 is prepared, in all material respects, in accordance with the GRI G4 Guidelines.

Other Matters

Our report does not extend to any disclosures or assertions relating to future performance plans and/or strategies disclosed in the Report.

The maintenance and integrity of Engen’s Website is the responsibility of Engen’s management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the Report or our independent assurance report that may have occurred since the initial date of presentation on the Engen Website.

Restriction of Liability

Our work has been undertaken to enable us to express an opinion on the selected environmental information to the Directors of Engen in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than Engen, for our work, for this report, or for the opinion we have reached.

KPMG Services Proprietary Limited

Per PD Naidoo Director Johannesburg Date

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