occidental petroleum corporation occidental petroleum’s worldwide standard of care...

Occidental Petroleum Corporation

Occidental Petroleum’s Worldwide Standard of Care---------------------------------------

Presented by Richard A. SwanVice President -

Health, Environment and Safety

November 4, 2003


Oxy Business Segments

• Occidental Oil and Gas Corporation– Worldwide Oil and Gas Exploration and

Production Activities– 2002 Sales - $4.6 billion

• Occidental Chemical Corporation– U. S. Chemical Manufacturing Activities – 2002 Sales - $2.7 billion

• Glenn Springs Holdings, Inc.– Centralized Site Remediation


2002 Daily Production


United States

Elk HillsElk Hills37 Million BOE37 Million BOE

2002 Production

THUMSTHUMS9 Million Barrels9 Million Barrels

HugotonHugoton13 Million BOE13 Million BOE

OXY PermianOXY Permian60 Million BOE60 Million BOE

Horn MountainHorn MountainDecember December

StartupStartup


Corporate Governance• Key governance items at Occidental– Annual election of Board of Directors– 10 of 12 Board members are independent outsiders– Lead outside Director– Confidential voting by shareholders– No poison pill– Formal “code of business conduct”– Stock ownership guidelines for officers– Performance-based incentives for senior executives

• Occidental’s governance highly rated– Rated 10.0 by GovernanceMetrics International


ENVIRONMENTAL, HEALTH AND SAFETY COMMITTEE (ECOB)

BOARD OF DIRECTORS

DIRECTOR,ENVIRONMENTAL

AFFAIRSCarl Wirdak

CORP. MGR., HESCOMPLIANCE ASSURANCE

Coni Manders

MANAGER,SAFETY AND PROCESS RISK

Harold Schambach

PRESIDENT AND SENIOR OPERATING OFFICER

VICE PRESIDENT,HEALTH, ENVIRONMENT AND

SAFETYRick Swan

HES STEERING TEAMDIRECTOR, HES - REGULATORY

AFFAIRS (OCCIDENTAL INT’L)Al Collins

GLENN SPRINGS HOLDINGS, INC.(SITE REMEDIATION)

VP - HEALTH, ENVIRONMENT & SAFETY OCCIDENTAL PETROLEUM (Swan)

DIRECTOR, HES and SECURITYOCCIDENTAL OIL & GAS (Scott)

VP - HEALTH, ENVIRONMENT & SAFETY OCCIDENTAL CHEMICAL (Kemp)

DIRECTOR - HES REGULATORY AFFAIRSOCCIDENTAL INTERNATIONAL (Collins)

DIRECTOR – HEALTH, ENVIRONMENT & SAFETYGLENN SPRINGS HOLDINGS (Terwilliger)

MANAGER – SAFETY & SECURITY SERVICESCORPORATE HQS AND SERVICES (Hallen)

CORPORATE DIRECTOR,SAFETY AND PROCESS

RISKGeorge Buxton

CHAIRMAN ANDCHIEF EXECUTIVE OFFICER

EVP, GENERAL COUNSELAND SECRETARY

CHIEF FINANCIAL OFFICER &EXEC.V.P.-CORP.DEVELOPMENT

HES COUNSEL

HES Functional Organization


EHS Committee (ECOB)

• Established in 1981

• Four “independent” Board members

• Meets 5 – 6 times annually with OPC HES staff, OPC President (senior operating officer), and General Counsel (Chief Compliance Officer)


EHS Committee

• Reviews status of HES issues, company compliance, remediation projects and significant incidents

• Provides written reports to full Board• Reviews all facility HES audit and

assessment reports


OPC HES PolicyRoles and Responsibilities

OIL & GAS OXYCHEM

OPC

OPC ROLE•Strategy•Policy•Oversight•Consultation•Coordination

Industry Segments•Implement industry specific HES programs that achieve a consistent worldwide standard of care•Plan, measure and report performance•Assess and improve HES management system

GSHI


To protect people and the environment, while creating stockholder value through

efficient Health, Environment and Safety (HES) management.

HES Strategic Objective


• To have effective and efficient HES management systems in place in all business segments

• That enable the company to achieve continual improvement in HES performance, and thereby

• Be recognized as a company committed to responsible HES management

HES Strategic Goals


• Oxy’s first approach – Meet the intent of U. S. laws• U. S. laws may be to prescriptive for

foreign locals• U. S. laws may require excess paperwork• U. S. laws may require technology or

management practices unavailable in foreign locals

• Foreign requirements may exceed U. S.

Problem: Establishing Worldwide Standards


Worldwide Standard of Care

Definition: “The set of HES performance expectations and goals established by an Industry Segment that provide people and the environment a consistent level of protection from HES risks inherent in the various similar business activities of the Industry Segment, wherever located.”


Worldwide Standard of Care“Beyond Compliance”

• Compliance with all applicable HES laws and regulations is a minimum

• Correct or stop any activities with an unacceptable risk to people’s health and safety or the environment

• Set worldwide business segment HES performance objectives

• A risk evaluation and mitigation program that achieves consistent results worldwide


HES Management System

Program Review assesses how well each Segment is managing the above programs (Policy 89:10:00)

Inherent Risks (arising from chemicals, process technology, siting, etc.)

Residual Risks (remaining after appropriate HES programs are in place)

Operations Risks

(arising from operating practices, maintenance practices, HES programs, etc.)

Legal Risks (arising from need to comply with laws, etc.)

QA/QC ProgramHES

Risk Mgmt.

Incident Investigation (management system performance feedback)


HES QA/QC Program

• 50+ major facility locations worldwide • Risk-based audit frequency (2 - 3 yrs.)• Reports include:

– Assessment of status of facility’s HES compliance and programs

– Specific audit findings– Impact of findings on facility’s risk level– Corrective action plans

• Each full audit report provided to ECOB


HES Risk Management• Structured process for assessing HES

risks and mitigation opportunities• Provides information for risk mitigation

decisions and resource allocation• Establishes a system of authorities for

risk acceptance • Facility can not accept risks above a

certain level without annual review by senior Segment management

• Annual risk status review verifies that a consistent SOC is being achieved


Process for Evaluating Risks

Methodology consists of:– Identifying potential failure scenarios– Determining the potential consequences– Determining the likelihood that each

consequence will occur– Using a consequence-probability matrix to

determine the response level– Determining appropriate risk response


Identify Scenarios• Typical scenarios:

– Failure of piping or process vessels

– Loss of utilities (electricity, water, air, etc.)

– Failure of control systems

• Hypothetical scenario:

– A natural gas pipe breaks causing an explosion/fire in a facility

– Natural gas is clean (no Hydrogen Sulfide)

– No neighbors within a mile radius

– Facility is occupied part-time by two employees


Define Consequences

POTENTIAL CONSEQUENCE TABLE

Potential Consequence Type* Level 3 Level 4 Level 5Onsite PermanentIncapacitating Injury

1 2 or 3 >3

Environmental impairmenta) Cleanup/remediationb) Food chain/terrestrial

life/aquatic life impacts

Adversea) < 1 yearb) Minor

Seriousa) >1 yearb) Moderate

Extensivea) Not possibleb) Extensive

Offsite property damage Minor Moderate ExtensiveOffsite human impact Minor Moderate Permanent

Incapacitating Injuryor significant health

impactOnsite property damage or lossof production revenue

$10MM to $25MM $25MM to $100 MM >$100MM

Public reaction Adverse Serious Threatens continuedFacility operation

*Criteria for Potential Consequence Levels 1 and 2 are to be defined by IS.


Probabilities

• Stated as a frequency based on the number of years between events (1 in X years)

• General categories are:– >1/100 years (>1 x 10-2)– 1/1,000 years to 1/100 years– 1/10,000 years to 1/1,000 years– 1/1,000,000 years to 1/10,000 years– < 1/1,000,000 years (<1 x 10-6)


• Probability of pipe breaking (past experience, age, maintenance & inspection program, etc.)

• Probability of the gas being ignited (typical wind speed and direction, ignition sources, etc.)

• Probability of two people being within the radius of an explosion or fire (percent of time during a year that two or more people are in the area)

• Example: Use 1/5000 years as our probability

Determine Probabilities


Identify Response Category

>10-2 D E E

10-3 to 10-2 D(C**) D E

10-4 to 10-3 * D D

PR

OB

AB

ILIT

Y (

1X)

10-6 to 10-4 * * D

3 4 5

POTENTIAL CONSEQUENCE

LEVEL * Risk Response Category defined by IS.

** If no Permanent Incapacitating Injury.


Determine Response

CATEGORY RESPONSE

A - C Responses to HES Risks below Level D should be defined by the IS HES RiskManagement program and addressed as continuous improvement opportunities.

D Perform appropriate qualitative or quantitative risk analysis to verify risk level anddocument risk studies, potential hazards and relevant risk reducing measures.Facility management shall implement appropriate measures to achieve the ISWorldwide Standard of Care and inform senior IS management if risk can not bereduced to a lower category in a timely manner.

E Utilize opportunities identified in risk analysis to implement mitigation measures toachieve the IS Worldwide Standard of Care. If the risk can not be reduced to alower category in a timely manner, perform quantitative risk analysis to verify risklevel and assess mitigation opportunities. If a lower risk level is not achieved,concurrence of IS executive management is required. Opportunities to reduce riskshould be reviewed annually.


Interface with QA/QC Program

• Risk levels are used to set audit and assessment frequencies

• Risk inventories and profiles are the basis for the risk discussion in the executive summaries of audit/assessment reports


HES Program Review

• Corporate review of Segment HES programs and management systems

• Six to nine month process of interviews and site visits

• Assesses whether consistent worldwide standard of care is being achieved

• Report prepared for Segment CEO, OPC management and ECOB

• Segment CEO presents findings and response plans to ECOB


Health & Safety Performance

4.04.0

5.75.7

8.18.1

7.97.9

3.33.3

0.620.62

Occidental’s 2002 Injury & Illness RatesIndustry Comparisons*

* U.S. Bureau of Labor Statistics


Comparative Total Returns3 Years (1/1/00 - 12/31/02)*

(Percent)

* Data Source: Bloomberg


Market Indexes

12/31/01 12/31/02

Comparative Stock PerformanceComparative Stock Performance

Index: Dec. 31, 2001 = 100


Summary

• Occidental’s HES program has contributed to continuous improvement in HES and financial performance.

• Success attributable to a strong HES governance program, coupled with “beyond compliance” objectives.


Questions?

occidental petroleum corporation occidental petroleum’s worldwide standard of care...

Documents

opc hes staff

gas corporation worldwide

facility hes audit

startup slide

daily production slide

industry specific hes

hes management system

swan vice president