Shutterstock.com Attaining ‘Privilege to operate’ in the Arctic; Understanding the environmental, social and political risks in a rapidly evolving system – the Greenland example “Insert” then choose “Picture” – select your picture. Right click your picture and “Send to back”. Jon Perry Partner, ERM UK The world’s leading sustainability consultancy The world’s leading sustainability consultancy
Contents Part 1 ■ Greenland 101 ■ Exploration in Greenland ■ It’s not all about the permitting ■ Q&A Part 2 ■ What is Privilege to Operate ? ■ Why is all this important? ■ What are the lessons? ■ Q&A Shutterstock.com The world’s leading sustainability consultancy
Shutterstock.com Part 1 – context ■ Greenland 101 ■ Exploration in Greenland ■ It’s not all about the permitting The world’s leading sustainability consultancy
Greenland 101 – The basics (this is important later on) ■ 2,166,086 km² Europe is 4.7 (about the same size as Algeria, slightly more than times as big as three times the size of Texas) Greenland, with over 12,000 times as many people ■ Population 57,000 (about the same as Kettering) ■ 85% is covered by icecap with only 15% along the coast inhabitable ■ There are no roads between the towns on the coast ■ Greenlanders are an indigenous Inuit people, which make up 85% of the population ■ Kalaallisut, a traditional Inuit dialect, is the country’s official language, although Danish is also heavily used. Language Source: www.MapFight.com and translation is an important issue. 4 The world’s leading sustainability consultancy
Greenland 101 – Greenland Economy ■ 85% of exports are from fish and shellfish ■ As well as fishing, around 10 % of the workforce is directly or indirectly involved in the hunting industry ■ Greenland receives an annual block grant of around € 470 M from the Danish State ■ Identifying alternative sources of income and foreign investment is considered vital for the economy ■ Social problems include high levels of unemployment and lack of suitable skills within the workforce Source: J Perry 5 The world’s leading sustainability consultancy
Greenland 101 - Political Framework ■ Greenland was a colony of Denmark until 1953, when it became a constituency in the Danish Kingdom alongside the Faroe Islands ■ On May 1st, 1979, Greenland Home Rule was established. ■ In November 2008 Greenland voted that Self Rule should be introduced and this was accepted by the Danish parliament. ■ On the National day, June 21st 2009, the Greenland Self-Government replaced the Home Rule Government (now just “the Greenland Government”) ■ Greater jurisdiction including natural resources (but not the whole offshore area) – still a tricky balance 6 The world’s leading sustainability consultancy
Greenland Exploration History (in pictures) 1970s 1980s 1990s 2000s 2010s 7 The world’s leading sustainability consultancy
Greenland Exploration –Permitting backdrop ■ Frontier area, highly challenging ■ Emerging legislative regime ■ Lack of local resources (eg Govt) ■ Single authority (BMP), with broad powers ■ Considerable stakeholder scrutiny ■ Setting a high bar for the oil and gas industry, without constraining growth or discouraging E&P activity Which means… ■ Frequent amendments to the legislation and guidance ■ Vociferous and often conflicting stakeholder views; Source: www.bmp.gl ■ Cherry-picking of standards to quickly build up a suitable legislative framework 8 The world’s leading sustainability consultancy
Shutterstock.com Questions The world’s leading sustainability consultancy
Greenland E&S Permitting –A moving target 2009 (Jun) Guidelines for preparing an EIA Report for Activities Related to Exploration, 2009 Development, Production and Transport of Hydrocarbons Offshore Greenland 2009 (Nov) Guidelines for Social Impact Assessments for mining projects in Greenland (BMP) 2010 (Jun) Guidelines to Environmental Impact Assessment of Seismic Activities in Greenland Waters (NERI / BMP) 2011 (Jan) BMP Guidelines – for preparing an EIA report for activities related to hydrocarbon exploration and exploitation off shore Greenland 2011 (Apr) Guidelines for preparing an EIA report related to stratigraphic drilling offshore Greenland (BMP) 2011 (Apr) Guidelines for application, execution and reporting of offshore hydrocarbon exploration activities (excluding drilling) in Greenland (BMP) 2011 (May) Greenland Bureau of Minerals and Petroleum Exploration Drilling Guidelines 2011 (Dec) Supplementary guidelines for EIAs concerning seismic surveys in Greenland 2012 (DCE) Present 2011 (December) BMP Guidelines for application, execution and reporting of offshore hydrocarbon exploration activities (excluding drilling) in Greenland (BMP) 2011 (Dec) Guidelines to environmental mitigation assessment of seismic activities in Greenland waters (DCE) 2013 onwards ‐ ? 10 The world’s leading sustainability consultancy
Greenland – It’s not all about the permitting Project description - then: • Strategic Environmental Licence • Environmental Mitigation Assessment (NERI/DCE) Assessment OR • Environmental Impact Permitting Assessment Plus • Consider Cumulative Seismic Project description - then: • Environmental Mitigation Assessment OR Permitting • Environmental Impact Assessment Plus • Consider Cumulative Site/Env Survey • Environmental Impact Assessment -Discharge modelling -Oil Spill Contingency Plan Permitting • Social Impact Assessment • Impact Benefit Agreement Spud well 11 The world’s leading sustainability consultancy
Greenland – It’s not all about the permitting Given the unique environment and regulatory structure, it can be difficult enough fulfilling E&S permitting requirements in Greenland; however focussing only on an approvals based approach is likely to generate significant project risks – both immediate and longer term. Identifying and addressing the Non-Technical Risks is an essential part of attaining Privilege to Operate 12 The world’s leading sustainability consultancy
Greenland – Stakeholder Regime Despite its low population, there are numerous stakeholder groups within Greenland that need to be considered… Greenlandt oday.com As well as the people themselves… And a broad range of external stakeholders… 13 The world’s leading sustainability consultancy
Shutterstock.com Questions The world’s leading sustainability consultancy
Shutterstock.com Part 2 - Meaning ■ What is Privilege to Operate ? ■ Why is all this important? ■ What are the lessons The world’s leading sustainability consultancy
What is Privilege to Operate? ■ a term that reflects going beyond simply acquiring regulatory approval by taking full account of the views and concerns of stakeholders; ■ it is about involving people, but it also involves minimising major project risks due to delays, protests, legal disputes and media action; ■ the benefits of privilege to operate , as well as the potential risks of ignoring it, are increasing reflected in oil company rhetoric; “ Being a safe, compliant and reliable operator is our highest priority at BP, and we understand that the privilege to operate depends on our ability to operate responsibly.” (bp.com) and not just from the supermajors; “Salyan oil & gas Limited (Azerbaijan), as a responsible corporate citizen, seeks opportunities to strengthen the communities and countries in which it has the privilege to operate , through sustainable practices and initiatives” (www.salyanoilgas.com) 16 The world’s leading sustainability consultancy
What is Privilege to Operate? ■ For all the reasons given previously, Shutterstock.com the Arctic, and in particular Greenland, is an area where industry needs to focus on more than just approvals ■ The unique social, political and environmental factors in this area combine to focus stakeholder attention and put pressure on all participants: Industry, Government, communities and NGOs ■ The technical, logistical and scheduling challenges in this area leave little room for manoeuvre ■ The permitting framework is complex, it is also evolving and the bar keeps getting moved – generally upwards 17 The world’s leading sustainability consultancy
Why is all this important? Headlines 18 The world’s leading sustainability consultancy
Why is all this important? ■ Long project delays are attributed to sustainability issues (e.g. stakeholder, Shell boss defends community, environment) far more than to Alaska project as ice either Commercial (eg cost or contract) or halts drilling Technical issues Goldman Sachs study ■ Non-technical risks have the potential to hold Shell has spent more than $4.5bn over four years up a project for years, unlike many technical preparing for work in the problems Chukchi and Beaufort ■ Once it becomes a public issue, the required seas, off the state's west solution may be completely disproportionate and north coasts, but has faced legal action, post- to the actual harm to health, safety and the Deepwater Horizon drilling environment – it becomes an issue of bans and a very short perception more than of science summer weather window. ■ Failure to attain privilege to operate also shapes future legislation and the expectations of regulators 19 The world’s leading sustainability consultancy
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