“Health, safety and environmental considerations must underpin everything we do”

“My principal responsibility as chief executive is to develop a strong, competitive and efficient group,” he tells me. “To succeed in that endeavour, health, safety and environmental considerations must underpin everything we do. We thereby make our group more robust, reliable and competitive. It is also important to remain an attractive place to work, which offers our employees good development opportunities.”

StatoilHydro wrote industrial history in Norway during 2007, implementing the merger between Statoil and Hydro’s oil and gas business in less than a year. Throughout the merger period, the company also devoted full attention to safe and good operations and maintained positive results. This was down to a serious commitment being made by the whole organisation, as well as good and close collaboration with union officials.

The group is the result of the biggest-ever merger in the Nordic region. As operator for a total production exceeding three million barrels per day, StatoilHydo is the world’s largest operator in deep water. The merger was driven primarily by the need to strengthen our international competitiveness. At the same time, the company is realising major benefits and gains on the Norwegian Continental shelf, which will benefit its owners, its partners and society as a whole.

In parallel with the integration process, StatoilHydo established new platforms for long-term international growth over the past year. “We have further strengthened our position in North America through a major acquisition in Canadian oil sands and by acquiring exploration licences in the Gulf of Mexico and off Alaska,” says Lund of the company’s expansion. “In addition, we secured a position with Russia’s Shtokman field. These will be important areas for us in the years to come.”

Environmental concerns
As an industry, oil and gas lives on top of the global stress zone where the need for secure and adequate energy supplies rubs up against the climate challenge. The climate issue represents both a challenge and an opportunity for everyone involved in this sector; something that Lund appreciates and understands. “The challenge is to reduce greenhouse gas emissions. Its opportunity is the commercialisation of more environment-friendly solutions and products. We are constantly challenged over the footprint we leave as an energy company. In coming years, our competitiveness will be influenced by our industrial response to the climate challenge,” he says.

“Our response involves both making our core business cleaner and more energy efficient, and strengthening our involvement with new energy. This is why we are committed to enhancing energy efficiency and develop environmental technology. This is why we are developing new technology for carbon capture and storage at Mongstad. And this is why we are stepping up our involvement in renewable energy, with the focus on wind power and biofuels.”

StatoilHydro’s move last year into Canadian oil sands was first and foremost about realising major resources that can help to meet the world’s growing energy demand. At the same time, the company is working on technology and industrial measures which address the associated environmental and climate challenges.

Technological development is at an early stage in this area, which is why the company has established a new technology centre for heavy oil in Calgary. “Our starting point is solid experience from areas such as managing carbon emissions, enhancing energy efficiency and improving oil recovery. No easy fixes are available, but I am convinced that we have a lot to contribute.” StatoilHydro’s ambition is also to develop more efficient and environment-friendly solutions for heavy oil.

Opportunity cost
Opportunities in the oil and gas industry are defined more by geology than by geography. The world’s oil and gas resources are often found in areas that pose major development challenges; poverty, corruption and human rights violations all present demanding conditions.

For all companies operating in areas like the Middle East, this calls for extra vigilance to ensure that business is conducted with a high degree of openness and within an uncompromising performance framework defined by values, HSE principles and an ethical platform. Lund says that StatoilHydro’s best contribution to social development is to conduct an efficient and profitable business within this framework. The company also works systematically on measures to operationalise its corporate social responsibility.

StatoilHydro’s work on sustainability is about continuous improvement. Last year showed the group it needed to improve in a several areas, as it was involved in three fatal accidents during 2007; tragic incidents that caused irreplaceable loss for the bereaved. “The oil spill from the Statfjord A platform in the North Sea was unacceptable,” says Lund. “The investigation exposed weaknesses and deficiencies which we cannot accept, given our high ambitions in the environmental area. We have initiated a number of improvement measures to ensure that such events are not repeated.

“An oil and gas company which aims to compete successfully over tomorrow’s resources must take sustainability seriously. Our ambition is to be part of the solution to important sustainability challenges. We then need an active and open dialogue with the society around us. Our interaction with owners, government authorities and civil society will help to make us even better. Only in that way can we strengthen and renew our contribution to meeting future challenges and expectations.”

This sentiment is echoed by Børge Brende, newly-appointed managing director of the World Economic Forum (WEF). The strict environmental standards set on the Norwegian Continental shelf will give the group a major advantage in extending our international commitment.

“When the authorities in various corners of the world come to award licences to oil and gas companies, StatoilHydro’s list of achievements related to sustainability will be given increased weight,” he says.

Brende’s new base is at the head office of the non-profit WEF in Geneva. A former Conservative member of the Storting, he was a high-profile minister of the environment and then of trade and industry between 2001 to 2005. He now plays a central role when the WEF brings together heads of government, industry leaders and key academics at its annual conference in Davos to seek solutions for the world’s really major challenges.

“Climate change, corruption, poverty, human rights violations, lack of education and clean water are individually such big and complex issues that they mean more than simply an unworthy life for those who suffer under them,” Brende states.

“My job is to highlight that such challenges also have a direct effect on company bottom lines because they destabilise the basis for future economic growth and progress. That in turn weakens both the ability and desire to invest by the whole private sector.

“In other words, hindering dramatic climate change and conflicts rooted in excessive social differentials is in the business community’s own interest. Although its primary responsibility is to be commercial, the authorities alone cannot make the world more sustainable. After all, the private sector represents by far the largest slice of the global economy.”

To help solve the complex problems facing the world, the WEF must go right to the top – where the power lies. Its list of members is long and heavyweight, and includes top executives from the 1000 largest companies in the world – including StatoilHydro – and representatives from smaller companies which nevertheless play a key role in their region or segment.

Brende is convinced that the world can only be shifted in a more sustainable direction if people get better at persuading governments, industry, research bodies and civil society to pull together and reach agreement on a number of key global rules of the game.

“We must be more intelligent at using the best aspects of the market economy, and that’s what the business community is best at,” he tells me. “That must be combined with experience from public administration and with the thoroughness and methodology of the academic community to ensure that as many considerations as possible are taken into account.

“However, the sustainability discipline still contains too much of a planned economy mindset, and that in itself isn’t sustainable because it means that some parties don’t feel a proprietary attitude towards it.”

Overcoming adversity
He admits that it will not be easy to overcome both poverty and climate problems simultaneously as long as economic growth means increased use of fossil fuels.

“But we must collectively identify solutions which can uncouple growth in energy consumption from rising emissions. Much low-hanging fruit can be plucked in a transitional phase before the world is able to make greater use of renewable energy sources. Combating deforestation will be a very useful contribution at relatively low cost. We can also improve energy efficiency at both industry and end-user levels through relatively minor measures. In addition comes carbon capture and storage, where StatoilHydro is a world leader.”

Operations on the Norwegian Continental shelf have yielded a number of positive developments, as Brende states. That applies perhaps particularly to legislation on produced water from offshore oil production as well as the carbon tax adopted in 1991. “A direct result of the latter levy, after all, was that StatoilHydro began to capture carbon dioxide from the Sleipner West wellstream in the North Sea and store it in the Utsira formation,” he says. “This engineering achievement was a direct consequence of tougher demands from the government, demands to which the industry responded very positively.

“Last year’s climate White Paper calculated how much carbon dioxide would have been emitted on the NCS if this tax hadn’t been introduced. It found that this would have totalled 10 million tonnes annually, or 20 percent more than Norway’s current emissions.”

Brende emphasises that the legislation has been very successful because it has helped to turn the NCS into a laboratory for environmental technology. “StatoilHydro has subsequently developed Ormen Lange and Snøhvit, of course,” he observes. “These two projects are right at the limits of the humanly possible with today’s technology. That takes the world forward. When StatoilHydro is now becoming involved with the more polluting Albertan oil sands in Canada, the group needs to watch its step and avoid damaging the good reputation it has built up. Refusing to compromise on the high standards set in Norway will then be important. That might otherwise involve serious reputational problems for the group, which could make it less attractive as an operator elsewhere in the world.”

Asked how StatoilHydro can use its experience from Norway to grow internationally, Brende notes that licence awards are more politicised in other parts of the world at times and that the fight over energy resources is getting tougher. “Being associated with taking sustainability seriously will confer a major competitive edge in the future. That applies not only to the environment, but just as much also to human rights, integrity, working conditions, ethics and safety – the whole HSE umbrella,” he says.

“Actions like the Extractive Industries Transparency Initiative and the WEF’s own Partnering Against Corruption Initiative represent very important measures. They will help to lift many countries out of a swamp of corruption, which in itself blocks necessary sustainability measures. It’s important here that the business community launches its own initiatives with organisations like the WEF.

Risk management of health and the working environment
Controlling and managing risk is the basis for all HSE work. StatoilHydro’s results reflect the way the group has worked systematically over many years to improve the working environment.

In-house requirements, national and international standards and the regulatory authorities make specific demands for the physical working environment and control of risk.

An important management principle is that risk must be assessed and reduced as far as practicable, even though relevant technical standards for such aspects as noise levels and pollution of the working atmosphere may have been met.

This means that StatoilHydro carries out evaluations together with users when planning workplaces and plants, and performs studies or analyses to check whether burdens or exposure can be reduced. That also applies in relation to traditional and established solutions.

StatoilHydro’s goals for health and the working environment are:

• to achieve security, workplace health promotion, trust, collaboration and improvements

• to avoid undesirable loads, injuries, and occupational illnesses and fatalities

• to have clear targets and requirements to achieve these goals.

During the operations phase, the group carries out studies of the working environment and work processes to assess whether risk can be reduced by making changes to technology, organising the work differently, providing worker training or improving protection.

Clear priorities are set for risk reduction when a hazard has been identified:

• removing the hazard through design or technology changes, or by converting to less hazardous chemicals

• controlling the hazard through technological solutions, such as a closed system

• controlling the hazard through organisational measures or changing work processes

• controlling the hazard through protective measures or equipment - this represents the final option or is used as a last barrier.

Evaluations and analyses based on Norway's Norsok standards are carried out in the design phase, with working environment surveys and StatoilHydro’s own tools deployed during operation to assess chemicals, noise, ergonomics and psychosocial conditions.

The group performs evaluations and measurements to assess whether its risk-reduction measures are effective, and also follow up in such a way that possible residual risk is controlled.