BP’s BTC Pipeline a Role-Model

BP’s BTC Pipeline a Role-Model

100.jpgThe FINANCIAL interviewed Matthew Taylor, the Manager of Communications and External Affairs at BP, regarding the company’s global and regional commitment to CSR and the risk-management policy run by Business.


The FINANCIAL -- BP, the multinational oil company, known for its utmost contribution to CSR, is the implementer of a number of social projects in Georgia. Those involved in the project want the BTC Pipeline to be a role-model for future oil and gas mega-projects.


Q. BP has been operating in Georgia since 1996. The company is the lead investor and operator in the three major oil and gas projects: Baku-Tbilisi-Ceyhan (BTC) Pipeline, South Caucasus Gas Pipeline, and Western Route Export Pipeline. What’s been your mainstream vision of CSR while implementing the projects?


A. Our former CEO once told a journalist in London that “We don’t do CSR”. He was referring to the phrase (CSR) that has grown in popularity but is often a confusing one to understand. We have a business and that includes many stakeholders: employees, customers and communities for example. Different businesses have different impacts on society and will manage that impact in different ways.


The oil industry is a very high impact industry, particularly here in Georgia whereas in the offshore side of the business we obviously have a limited community impact. It really depends on where you go within BP, you’ll find small community programs and larger ones, depending on what the business requires.


CSR for BP starts with our employees and the creation of jobs. I think this should be regarded a key contribution of business, especially where unemployment is high. BP currently has 600 employees in Georgia and numerous contractors. One of the key aspects for us is to be a responsible company employing people under the right conditions. That’s one angle of CSR, lots of our programs are driven by the desire to do the right thing.


The oil industry is much focused on risk management and much of the logic behind the community investment projects and the regional projects is to try to reduce risk.


Q. Does BP policy differ in the regions in terms of CSR?


A. There are some slight differences. The key factor in all countries is to work out what the communities need and then decide what you can offer.


We’re certainly not a charity organization or a donor body, but BP’s invested 10s of millions of dollars in the area of community and social projects in Georgia. In terms of overall foreign investment statistics it is more than  USD 1 billion. In the future we’ll be investing around USD 5-6 million per annum. BP’s done a lot in Georgia and we’ll continue that commitment. Just by running a successful business here we create benefits for Georgia.


We’re good partners for the governments in Georgia, Azerbaijan and Turkey. It’s important that they feel we’re doing something constructive beyond our core oil and gas business.


Q. Construction of the new pipelines has had an economic and social impact on communities near to the pipeline routes. What’s the risk management policy carried out by BP in Georgia?

A. We’ve faced particular risks while dealing with BTC and South Caucasus pipelines. The risks included: stoppages, which is very costly if you have a huge workforce and vehicles ready to build the pipeline and are suddenly asked to stop the works for some period, it really costs a lot of money.


During the constructions there were some community protests in different parts of the country. If you’ve got something to offer that community whether it’s fare compensation or additional community projects, the community gets more willing to accept the business. That’s a form of risk management for BP, as it’s more effective for us to invest in community programs and not to stop construction. 


Q. As for the Regional Development Initiative (RDI), it was announced by BP that the energy sector is going to be the company’s focus. What’s been your motivation for choosing that direction?


A. BTC Pipeline is a model for oil and gas focused projects development. It included doing something to contribute to the economy in each country, beyond employing people. The thinking was that the oil industry has certain characteristics, particularly in Baku where lots of money is generated in a very short amount of time.


So one of the areas RDI looks at is effective governance. BP is extremely realistic about what influence we have and it’s a government’s job to manage oil revenues. We have the experience from Trinidad, U.K, North Sea, where oil was discovered and developed several decades ago and the governments have learned how to handle those revenue inflows.


The other areas RDI focuses at are: job creation that we call enterprise development initiative, and energy. In Georgia it’s the energy situation we’ve been trying to contribute to for a number of years, particularly in the winter period. We’ve been involved in winter heating programs in the past and refurbishments of storage facilities by means of helping with the refurbishments of the gas pipeline that comes out from Russia to Armenia, called the North-South gas pipe line.


As for the enterprise development initiative, the aim of the project is to create a better business environment by reducing regulatory burden on SME. In the frame of the project we’ve supported the expansion of the ProCredit bank in partnership with the EBRD, provided technical assistance and on-lending capital to the non-bank MFI Constanta.


We continue to be involved in helping GOGC manage the grants they’re receiving from the U.S government to repair the pipeline. We’ve learned a lot about pipelines, we know a lot about pipelines and it’s the area we’ve got something to offer in.


Q. Corporate transparency is an essential part of CSR, how open is BP to the public?

A. Effective governance also includes the aspects of how we govern our business in terms of transparency. We publish lot of information about BP’s operations. We produce a sustainability report annually. In the future we’ll continue issuing data on our performance and put it on our website so that people can get it and question us. Lots of companies don’t ‘air their dirty washing in public’.


I think part of CSR is about making people look into your business and giving them the facts, the information, so that they can hold you to account. It’s very difficult when there’s no information and it’s then when one assumes you’re hiding something. 


Q. You’re involved in the upcoming CSR forum in Georgia. What’s been your motivation to get engaged in that forum?

A. Really to share information with other companies who we may learn from or have something to offer to. For us CSR is not about giving cheques out for good causes as there are lots of good causes in Georgia that we could spend lots of time, effort, and resources on in contributing small amounts to thousands of different projects. BP is in Georgia to do business and we’d rather contribute to several areas and do it on a large scale. We do a few things well and that’s the philosophy.


I think CSR is doing good business and it’s not just some discipline to be taught. There’s no price for being a social responsible company if you go bust. This is not some weird new science from Europe, it’s about thinking ahead. That’s one of the main messages I’ll be delivering.


Q. Tourism development, which has become a key priority for the country, appears to be an aspect of interest for BP. What’s your commitment in terms of the Borjomi-Bakuriani project, being the 8th and the latest one in the frame of RDI initiative?


A. Our major contribution in Bakuriani is cleaning the place up. We’re helping to clean the place up with our partners like GTZ, the German development agency. We want Bakuriani as a region to develop; it’s an important region for BP.

We’ve invested much in waste management projects that enabled Borjomi to acquire new vehicles, new waste-bins. The latest project is a contribution to waste-water, the sewage project in Bakuriani which will start shortly.


Managing the waste that BP produces has been very difficult for us, especially in Georgia because we find that under the standards that we’re working to we have to dispose of waste in an EU compliant way and there are no alternate facilities in Georgia. That’s the reason why we have to store the waste and export some of it to facilities in Europe. We’d much rather dispose of it locally in Georgia rather than putting it on a boat. It’s very frustrating sometimes to see some of the beautiful countryside in Georgia being spoiled by waste. However I don’t actually blame people for doing this as they don’t have any other choice.


Q. Which other regions does BP program focus cover?

A. RDI has no real geographic boundaries. We could also invest in programs on the coast or in Eastern Georgia.


RDI covers three countries: Georgia, Azerbaijan and Turkey and isn’t limited only to Georgian regions. I think we have a bias to these regions through which our pipeline passes. BP supports the preservation of Georgia’s biodiversity through various programs of USD 3 million value.

We’re also active in cultural heritage activities. While building pipelines in Georgia or Turkey or Azerbaijan we also come across very interesting ancient artefacts. Our partnership with the Georgian National museum is an attempt to communicate with the public. 


Q. Which project could you single out as one you’re personally most proud of?


A. That’s a tough question. I think something BP’s pleased with, as it is linked with our core business is the ongoing repairs to the North-South Gas Pipeline. Georgia’s still reliant on different sources in terms of gas. When you are a big energy company operating in a country that suffers from energy insecurity, it’s important to try and contribute where you can. So, we’ve made a few investments and we’re motivated to continuing with this.


Q. BP’s involved in the corporate governance project together with IFC. What’re the responsibilities you as an oil company are charged with in this respect?


A. The corporate governance project together with IFC is open to any business. In our case, given our business in Georgia, CSR is really about government and community relations rather than consumers.


Lots of CSR projects are undertaken to attract consumers and new customers whether it’s a bank or a healthcare company. For us, and it’s an over-used phrase, it’s a license to operate. We’re given that license by the community, by governments, regional authorities and we have to respect them.

CSR- it’s a difficult phrase and it means different things to different people. It’s become very commonly used in Western Europe and the U.S. Though it’s not a phrase we use in BP, we’re just doing the right things and it’s beyond building pipelines.


Q. What’s BP focus on education funding in Georgia?


A. BP keeps on being oriented at the spheres of: education, enterprise development, energy access and environment and culture.


In terms of education we’ve contributed USD 2 million from the BP pledge programme (BP Pledge), to the International School of Economics in Tbilisi, that was created to promote excellence in postgraduate economic study and research across the region


In Dear Leap- the school computerization program, our investments reached USD 2.8 million which led to the provision of over 3 000 computers to approximately 400 schools in Georgia.

BP also supports a Master level scholarship programme in partnership with the British Council to allow gifted Georgian students to study in the U.K over three years with USD 1.5 million of BP’s contribution.


We were also engaged in creating the Public Learning Facility in the Georgian National Museum with a USD 0.5 million initiative.


BP’s been taking care of improving the schools in the towns along the BTC/SCP pipeline route. The USD 2.5 million contribution allowed improvement of school infrastructure and teacher/parent trainings.


As for the focus on cultural heritage, development of the Dmanisi archaeological site, restoration of Tadzrisi Monastery, renovation of Borjomi Park, - are the key projects being implemented.

Q. 2006 was a year of important transition, marking the beginning of full operations on the Baku-Tbilisi-Ceyhan, (BTC) and South Caucasus Pipelines (SCP) following the successful completion of construction. What are the top success stories about 2007?


A. Efficiency in the Georgia section of the BTC section has been very good and throughput has averaged around 6-700,000 barrels per day. In 2007 we’re selling gas to Turkey, also supplying Georgia with up to a million cubic metres a day, in line with our contract. We are continuing to work on repairs of the Western Route pipeline and hope to complete the Georgia section repairs shortly; repair work is also required in Azerbaijan that will take several more months. We are pleased with how the restoration of the pipeline trench has progressed.


By the end of 2008 we’ll have BTC running 1 million barrels of oil per day to Ceyhan. 16 oil companies are engaged in the BTC pipeline and they all contribute their portion to the project.

The safety record also continues to be solid. We’ve made lots of effort particularly in driving issues in order to avoid accidents.


We operate in a business where risk management is very important. The risks are probably greater in Baku where we’re working Offshore with big terminals.


Detailed description of the projects approved and being implemented so far under the Regional Development Initiative:

Engineering Design of Water and Wastewater Systems in Borjomi and Bakuriani
The project envisages financing the design work for the Borjomi-Bakuriani Water and Wastewater Rehabilitation Project. The activities include preparation of detailed engineering design, environmental review for rehabilitation of Borjomi and Bakuriani water supply and wastewater systems to ensure a reliable, affordable and sustainable water supply service, and improve the sewerage network and provide acceptable wastewater treatment and disposal facilities. We have contributed USD 245,000 with further capital investments provided by EBRD, MCC/MCG, State Budget and other sources to the amount of approximately USD 25 million.

Support to ProCredit Bank’s Expansion in Georgia
In partnership with the EBRD, BTC and SCP partners have provided USD 750,000 to support the establishment and renovation of three branches of the ProCredit Bank of Georgia - in Telavi, Khashuri and Rustavi. All three branches are now fully operational following official opening ceremonies conducted in May 2006. The new branches provide access to banking and borrowing services in those areas that previously had limited access to finances.

Georgia Business Enabling Environment Project 

The project was formally launched in March 2006, seeking to improve the business enabling environment by reducing administrative barriers to running and operating small businesses and by streamlining regulation. The project is working closely with the Georgian Government to improve two regulatory issues in particular: inspections and permits/licences. Together with our partners, we have contributed USD 750,000. Funding has also been provided by the IFC (USD 500,000), which also implements the project, and the Canadian International Development Agency (CIDA) (USD 250,000). A baseline survey was conducted in 2004, and approximately 1 000 SMEs participated in it. The survey focused on identifying the barriers to business development. A subsequent survey of about 2 000 SMEs was conducted in 2006, which measured the progress achieved in the last two years. 

Support to Georgian Oil and Gas Corporation

Under an agreement signed with the Georgian Oil and Gas Corporation (GOGC), BP and its co-venturers have provided technical advice in support of a major rehabilitation of the North-South Main Gas Pipeline. Our contribution of USD 1.1 million was set in the context of a USD 40 million rehabilitation project funded by the US Government’s Millennium Challenge Corporation (MCC). The BP team provided training to GOGC staff in project management, covering topics such as scheduling and reporting, cost control, contractor management, safety and environmental management, and the use of GIS systems. 

Technical Assistance and On-lending Capital for Micro Finance Institution “Constanta Foundation”

The project provides technical assistance to Constanta, as well as on-lending capital for its microfinance activities. The technical assistance component includes provision of support to strengthen Constanta’s internal control, training of local staff, covering legal fees incurred with regards to loan documentation, etc. while on-lending capital will be used by Constanta to increase its lending capacity. Our funding for the project is USD 600,000 with a further USD 3.5 million concessional credit line provided by EBRD, which implements the project.

Georgia Corporate Governance Project
The goal of the project is to improve the corporate governance practices of Georgian companies, thereby helping them to operate more effectively and allowing them easier access to capital. The main objectives of this project are to increase knowledge among Georgian companies and banks about corporate governance and help them implement the best international practices; to work closely with the government to improve the legislative framework regulating corporate governance in Georgia; and to increase public awareness of corporate governance issues. We have provided USD 400,000 supplemented by a further USD 550,000 from IFC and USD 828,000 from the Canadian International Development Agency. 

Private Sector Business Development in Greater Borjomi Region
In the Borjomi region, private sector business development is being supported through the provision of USD 3.15 million from BTC partners. This project is also being implemented by GTZ - International Services. The project is currently concentrating on developing two sectors - beekeeping and milk processing. Comprehensive works are underway to assist both sectors in raising productivity and improving the quality of the produced goods.

Solid Waste Management Project in Borjomi and Bakuriani
A project to improve waste management infrastructure in the Borjomi and Bakuriani towns was launched in 2004. A range of equipment, including waste containers, bins and vehicles has been provided to both municipalities. Public awareness campaigns were also conducted. The project will be complete upon the construction of an all-weather access road to the Bakuriani landfill. Project funds of approximately USD 580,000 have been provided by BTC partners. The initiative is being implemented by GTZ - International Services.