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2012 Sustainability Report
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Oando Sustainability Report

Jan 31, 2017

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  • 2012SustainabilityReport

  • Vision:To be the premiercompany driven byexcellence

    Mission:To be the leadingintegrated energysolutions provider

  • At Oando, we are mindful of the impact ofour activities on all our stakeholders as wellas on the environment. Sustainability is at theheart of all we do and is integrated into thecore of our business practices; fromconceptualization and delivery of value-adding products and services, to thedevelopment of our local communitiesthrough sustainable social investment.Oando is committed to high standards ofcorporate governance, ethics and goodwill.

    Oando PLCSustainability Report 2012

    03

    Whats Inside

    04 Oando PLCs Core Values

    05 Scope and Reporting Framework

    06 Chairmans Report

    09 Group Chief Executive's Statement

    10 Oando PLC at a Glance

    16 What sustainability means to us

    17 Awards & Recognitions

    18 Risk Assessment and Materiality

    20 Sustainability & Corporate Governance at Oando

    26 Stakeholder Engagement

    36 Our Environment

    48 Occupational Health & Safety

    56 Human Rights

    58 Our Employees

    64 Investing in our Communities

    66 Oando Foundation

    70 Economic Performance

    72 GRI Content Index

    Introduction

  • Oando PLCSustainability Report 2012

    04

    Oando PLCsCore Values

    T

    R

    I

    P

    P

    rofessionalism

    l Working together towardsthe fulfillment of acommon vision

    l Building communitiesthrough collaboration

    l Commitment to a sharedwin

    l Showing consideration toall Stakeholders

    l Protecting the Environment l Health and Safety for alll Encouraging diversityl Zero tolerance to all forms

    of human rights abuses

    l Honesty in all businessdealings

    l Reliability &Trustworthiness

    l Protecting Shareholdervalue

    l Developing and promotinglocal skills and expertise

    l Acting in accordance withreason, justice, law andmorality

    l The zeal to meet thehighest standards ofservice and productivity

    l Creating the energy toInspire

    eamwork

    espect

    ntegrity

    assion

    Oandos corporate culture is hinged on thevalues of Teamwork, Respect, Integrity, Passionand Professionalism (TRIPP), which embody theOando Way:

  • Scope andReportingFramework

    This Sustainability Report covers the periodbetween 1st January 2012 and 31st December2012. Its scope spans across the businessactivities of the Companys six divisions:Exploration and Production, Energy Services,Gas and Power, Marketing, Supply and Trading,and Terminals and Logistics.

    This Report focuses only on operations within Nigeria and whereOando maintains significant control or influence. As this is ourfirst Sustainability Report, there are no restatements ofinformation to be provided in respect of earlier reports.

    The Report focuses on material activities, developments andconcerns of the Company within the ambit of the most applicableindicators. We have adopted the view that an issue is materialwhen it impedes our ability to remain commercially viable andsocially relevant to the communities in which we operate. In particular, material issues are those that have a strong bearingon our stakeholders assessments and decisions about Oandoslong-term sustainability and its commitments to their needs. Ourstrength in managing these material issues affects our ability toachieve our strategic objectives.

    We shall continually refine and improve our content selectionprocess for reporting, and take into account the diversity in ourportfolio of operations.

    In compiling this Report, Oando has adopted the GlobalReporting Initiative Sustainability Reporting guidelines GRI G3.1(see www.globalreporting.org). In addition, our Report fallsunder the GRI application level C, which requires the OandoGroup to self-declare on at least 10 GRI indicators across itseconomic, social and environmental performance indicators. The indicators chosen for the purpose of this Report reflects theextent to which we have met the GRI reporting requirements. Our intention is to continue to improve on our sustainabilityperformance over time such that we would be in a position toreport on all criteria relevant to the operation of our business.

    A GRI context index and summary table matching details of our performance in line with the GRI indicators are provided on Page 72.

    Best value is achieved reading this Report in conjunction with thesupplementary data in our 2012 Annual Report which can befound on the company's website at www.oandoplc.com.

    Oando PLCSustainability Report 2012

    05

    An issue is materialwhen it impedes ourability to remaincommercially viable andsocially relevant to thecommunities in whichwe operate.

    sustainability...

  • ChairmansReport

    Sustainability encompasses practically every aspectof how we conduct our business, influencing ourstandards of ethics and compliance, our efforts todrive a sustainable supply chain and our emphasison maintaining a comprehensive yet diverse culturewhere all our employees can pursue meaningfulwork and rewarding careers.

    Dear Stakeholders,

    We are pleased to share with you our maiden SustainabilityReport. At Oando, we believe sustainability is a journey thatrequires a long view and a broad stakeholder perspective, as well as collaboration and perseverance.

    Our aspirations as an indigenous oil and gas company in Sub-Saharan Africa are tightly interwoven with our sustainabilitypriorities. We are committed to helping our stakeholders thrive by creating sustainable environmental, social and economicvalue in how we do business at Oando.

    We strive to operate responsibly and effectively whilst creatingoptimum value for all our stakeholders as we advance in ourquest to expand our operations globally.

    Sustainability encompasses practically every aspect of how weconduct our business, influencing our standards of ethics andcompliance, our efforts to drive a sustainable supply chain andour emphasis on maintaining a comprehensive yet diverseculture where all our employees can pursue meaningful work and rewarding careers.

    In 2012, the Company achieved significant milestones as you willobserve through the course of the Report. We intend to improveon these achievements annually in ways that will elevate theCompany to the next level and set us further on the path of beinga leader in the provision of safer, reliable, economic and greenerservices and solutions.

    At Oando, we are focused on those who have a major stake inour performance today and in the future Our investors,employees, customers, communities, business partners, theNigerian government and our various regulators, etc. Thesestakeholders often have competing priorities; however, we aim forthe right long-term balance that strengthens trust and confidencein the Company and helps us be a truly sustainable organization.

    Oando PLCSustainability Report 2012

    06

    increased trust...

    HRM Oba Michael A. Gbadebo, CFR - Chairman

  • We take our corporate integrity and reputation very seriously and as such, we are committed to ensuring the Companymaintains the highest international standards of corporategovernance as we understand the impact that this has in buildingtrust with all our stakeholders. Increased trust translates tosustainable value to the Company, helping us secure local andforeign investment capital, develop a throughput of talentedemployees, retain and win new customers, and provide areservoir of bankable goodwill to draw from in uncertain times.

    I want to thank all our stakeholders whose belief and continuedcommitment have contributed to our achievements. We remaindedicated to the core principles of corporate sustainability inpursuit of our goal of creating new business opportunities that will bring sustainable development and increasing investmentinto Africa.

    HRM Oba Michael A. Gbadebo, CFRChairman

    Oando PLCSustainability Report 2012

    07

    In 2012, the Companyachieved significantmilestones as you willobserve through thecourse of the Report.

  • Oando PLCSustainability Report 2012

    08

    future generationsin mind...

  • Oando PLCSustainability Report 2012

    09

    Group ChiefExecutive'sStatement

    We will continue to operate with the higheststandards of safety, environmental performance,ethics, economic stewardship and communityengagement in every aspect of our business.

    Our sustainability reporting aims to demonstrate how as abusiness all our actions are done with future generations in mindand our ultimate goal is to create an environment that enables abetter standard of living than what we currently enjoy. Theseactions illustrate our commitment to carrying out our business inaccordance with the pillars of sustainability. In conjunction withour core values (T.R.I.P.P), sustainability has been at the center ofour business throughout our journey from a petroleum marketingcompany to a fully integrated energy company.

    Oando remains committed to the principles and implementationof good governance as exhibited in our corporate governancepolicy. We are dedicated to the protection and promotion of allstakeholders interest and recognize the invaluable contributionsthat best practice principles of sustainability and corporategovernance add to increasing shareholder value.

    Annual sustainability reporting is a winning approach in both theshort and long term, and we are certain that it will represent a realcontribution to the success of our company and to thesatisfaction of the interests of our stakeholders.

    In conclusion, the sustainability of our business is based on ourability to apply consistent processes and systems in carrying outour daily operations and ensure that every risk, no matter howsmall, is identified, planned for, and successfully managed. Wewill continue to operate with the highest standards of safety,environmental performance, ethics, economic stewardship andcommunity engagement in every aspect of our business.

    We are pleased to share our 2012 Sustainability Report with youand commit to continuous improvements in every aspect of ouroperations in ensuring that the realization of the better tomorrowbecomes a reality.

    In the spirit of being environmentally friendly and to conserveresources, we shall be producing limited printed versions of thereport, making it freely available for download through ourcorporate website and the Global Reporting Initiative database.

    Mr. J.A TinubuGroup Chief Executive

    Annual sustainabilityreporting is a winningapproach in both the shortand long term, and we arecertain that it will representa real contribution to thesuccess of our companyand to the satisfaction ofthe interests of ourstakeholders.

    Mr. J.A Tinubu, Group Chief Executive

  • Oando PLC ata Glance

    Our vision is to be a premier company driven by excellence andwe are on a mission to be the leading integrated global energysolutions provider.

    Our operations are currently focused on Sub-Saharan Africa andinclude upstream, midstream and downstream activities fromexploration and production through gas and power distribution tomarketing and supply of gas, crude and petroleum products.

    Oando PLCSustainability Report 2012

    10

    Oando Plc is a leading integrated energy solutionsprovider in sub-Saharan Africa with a primarylisting on the Nigerian Stock Exchange, asecondary listing on the JSE Limited, South Africaand a subsidiary listing of its exploration andproduction business on the Toronto StockExchange.

  • Oando PLCSustainability Report 2012

    11

    Exploration & ProductionOandos exploration andproduction division has a portfolioof assets at different stages ofexploration, development andproduction.

    Energy ServicesOando provides oilfield anddrilling rig services to majorupstream companies operating inNigeria through its subsidiary,Oando Energy Services Limitedand operates the largest swamprig fleet in the Niger Delta.

    MarketingOando Marketing PLC is Nigeriasleading retailer of petroleumproducts and has a vast distributionnetwork with over 546 retail servicestations.

    Supply & TradingOando Supply and Trading Limitedis Africas largest independent andprivately owned oil trading companyinvolved in the large scale exportand import of petroleum productsand crude oil throughout Africa,Europe, Asia and the Americas.

    Terminals & Logistics LimitedOando Terminals & LogisticsLimited is a subsidiary of the Oando Group that manages thedevelopment of petroleum productsand reception terminals.

    Gas & PowerOando Gas & Power Division is adeveloper of Nigerias natural gasdistribution network and captivepower solutions. We pioneered theconstruction of a private sectorpipeline network facilitating thedistribution of natural gas toindustrial and commercialconsumers.

    The development of our gasdistribution network has positivelyimpacted on industrial activity inthe south east and south west ofNigeria.

    Marketing Division

    Supply & Trading Division

    Terminals & Logistics Division

    Gas & Power Division

    Exploration & ProductionDivision

    Energy ServicesDivision

    DownstreamOperations

    MidstreamOperations

    UpstreamOperations

    Oando Group

    Group Structure: Oandosbusiness is organized into sixdivisions. These divisions bysectors are:

  • Oando PLC ata Glance

    Oando PLCSustainability Report 2012

    12

    n 4.5 kboed daily production.

    Key Assetsn Producing Assets: Abo Field (OML

    125) & Ebendo Field (OML 56).n Near-Term Assets: Akepo Field

    (OML 90), Qua Iboe (OML 13),Bilabri Field (OML 122) and OML 134.

    n Exploration Assets: OPLs 321 & 323, EEZ Blocks 5 and 12.

    n OPLs 282, 236 & 278.

    Oando EnergyResources Inc. (OER)

    A leading E&P company with a portfolio consisting of oil and gasassets situated in the Gulf of Guinea.

    The Company is listed on the Toronto Stock Exchange in Canadaand has local operating capacity partnerships with both indigenousand international oil companies.

    OERs mission is to deliver sustainable value to stakeholders bycontinually growing reserves through development of its existingportfolio and acquisition of new assets.

    Key FactsEntity

    ExPLORATION & PRODUCTION

    Profile

    Key Assets:n Swamp Drilling Rigs Teamwork,

    Passion, Integrity and Respect

    Oando EnergyServices (OES)

    A leading provider of energy services to E&P companies in Nigeria. OES is the largest swamp drilling rig fleet operator in Nigeria and isfocused on providing high-quality energy services and operationssupport including innovative technology, world-class safetypractices and personnel competence.

    With 3 years of successful drilling operations in swamps under itsbelt, OES places emphasis on strict adherence to EHSSQ policiesand improved service delivery as a platform to deliver value tostakeholders.

    OES is poised to expand its range of services to meet the needs ofits clients with the introduction of new service lines.

  • Oando PLCSustainability Report 2012

    13

    GAS & POWERKey Assets:n 100km gas distribution pipeline in

    Lagosn 128km gas pipeline in Eastern

    Nigerian Akute captive power plantn Central Horizon Gas Company,

    Compressed Natural Gas Facility,Alausa IPP

    Operating Entities:n Gaslink Nigeria Limitedn Akute Power n East Horizon Company Limitedn Central Horizon Gas Company

    Limited

    Oando Gas & Power (OGP)

    The largest private sector gas distributor and developer of captivepower solutions in Nigeria. The division pioneered gas distributionin the Greater Lagos area, before expanding into Eastern Nigeria,and is now well positioned to benefit from its mover advantage andincrease its customer footprint in the near future.

    OGP has made significant investments in the development ofNigerias gas and power infrastructure with a 233km gas pipelinegrid already completed with plans in place to expand the grid to600km in a few years.

    OGP aspires to provide industrial and commercial users withaccess to efficient, clean and cheaper fuel and its aim is toreplicate the success of its Lagos gas distribution network in otherparts of the country.

    OGP has leveraged on the capability of its gas grid to build anindependent power generation plant in Lagos. It is in the finalstages of constructing a Compressed Natural Gas (CNG) facility inLagos.

    The Akute Power Plant was commissioned to generate constantelectricity to the Lagos Water Corporation, thus increasing thesupply of water to millions of residents in Lagos State.

    Consequently, the Company was given the mandate to build anatural gas central processing facility in Rivers State which willsupport and enhance its current operations.

    Key FactsEntity Profile

  • Oando PLC ata Glance

    Oando PLCSustainability Report 2012

    14

    Key Strengths:n Access to 160 million litres of

    physical storage in major markets.n Strong management team with

    over 40 years combined tradingexperience.

    n Knowledge of local and regionalmarket dynamics

    n Access to trading lines in excessof US$1bn

    n 100% track record of delivery on allsupply contracts

    Oando Supply andTrading (OST)

    OST procures and trades a broad range of refined petroleumproducts including Jet A1, Gasoline, Dual Purpose Kerosene(DPK), Automotive Gas Oil (AGO), Low/high Pour Fuel Oil, Base Oiland Bitumen.

    OST has a 15% market share of Premium Motor Spirit (PMS)importation into Nigeria

    Key FactsEntity

    SUPPLy & TRADING

    Profile

    Key Strengths:n 1 in every 5 litres of petroleum

    products sold or distributed is byOMP

    Key Assetsn Over 500 retail outlets in Nigeria,

    Ghana, and Togon 15% market share in private

    Premium Motor Spirit (PMS)importation into Nigeria

    n 8 Terminals with combinedcapacity of over 160 million litres

    n 2 lube blending plants withcombined capacity of 100 millionlitres/annum

    n 7 LPG filing plants with combinedcapacity of 945 metric tons

    n 3 aviation depots with combinedcapacity of 3.4 million litres

    n Over 160 million litres of physicalstorage in major markets

    n Over 1,980 trucks throughpartnership

    n Over 500 industrial customersn 13 lubes warehousesn 15 in-station filing plants (Pay-As-

    U-Gas)n 13 Vendor Managed Inventory

    (VMI) locations

    Oando MarketingPLC (OMP)

    OMP is a fully owned subsidiary of Oando PLC and West Africasleading oil retailer. With a vast distribution network, OMP hassuccessfully established an unparalleled resource footprint acrossNigeria. It currently has two operational subsidiaries with over 500retail outlets in Nigeria, Ghana, Togo and the Republic of Benin.OMP is Nigerias leading retailer of refined petroleum products.

    MARKETING

  • Oando PLCSustainability Report 2012

    15

    TERMINALINGn Commenced the construction of

    the pioneering Apapa SubmarinePipeline (ASP) project deliveringalmost 3 million tonnes a year.

    n Berthing capacity for largervessels of up to 45,000 tonnecargoes currently restricted byshallow draft at other nearproximity port facilities.

    Oando Terminals andLogistics (OTL)

    OTLs entry into the terminals sector completes Oandos presencein all segments of the energy value chain with a 210,000 metrictonnes (MT) capacity product reception terminal and assetdevelopment projects such as Liquified Petroleum Gas (LPG)Storage.

    Key FactsEntity Profile

  • WhatSustainabilitymeans to us

    We commenced our efforts of building a sustainable company asfar back as 1991 when 60% of the Company was sold to theNigerian public. The eventual goal is to be the foremostindigenous Oil and Gas Company of choice for our businesspartners, employees, local and international shareholders,customers, suppliers and the general public. We aim to build astrong and sustainable brand that will grow incrementally overseveral generations.

    All of the above cannot be attained without fully incorporatingsustainable development goals into our business and deliveringon our commitments with respect to the management of thetriple-bottom line the organizations economic, social andenvironmental risks, obligations and opportunities.

    Sustainable development for Oando is the integration ofeconomic, environmental and social considerations into the coreof our decision-making, business policies and processes and ourentire operations with the mindset that we are building a lastingand growing legacy for generations to come. In the quest tobecome Africas premier integrated energy solutions providerand the global brand of choice throughout the entire energyvalue chain, we are constantly seeking ways to improve ourofferings. A key tool in measuring our Companys performancehas been the process of benchmarking our performance againstthat of successful peers within the industry. We are neversatisfied with the status quo but aim to achieve our goals byconstantly reengineering and improving on processes andsystems in place.

    The 2012 Sustainability report is the first to be produced byOando and it provides a balanced and true representation ofOandos performance in respect of corporate governance andsustainability issues for the period.

    Oando PLCSustainability Report 2012

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    Economic

    Social

    Environmental

    Oando

    The Triple-Bottom Line

  • Oando PLCSustainability Report 2012

    17

    Awards &Recognitions

    Oando Plc through its selection process, hasdeveloped a team who have strived hard toensure that we not only live up to stakeholder'sexpectations but that we excel in respect of ourenvironmental, social and economic impacts.To this end, the efforts of our magnificent teamwere recognised by a number of awards andachievements in 2012, notably:

    Oando PlcNigerias Best Company of the Year Award NNPC at the Nigerian Oil & Gas Conference

    Recipient EntityAward Award Body

    Manufacturers Association of Nigeria Oando Gas & Power LtdManufacturers Association Award

    Appreciation Award Oando Gas & Power LtdTertiary Education Trust Fund

    International Trade Fair, Port Harcourt Oando Marketing PlcBest Product Award

    Ministry of Environmental Protection Authority Oando Marketing PlcBest Environmentally Friendly Industry

    Lagos State Ministry of Education Oando FoundationCorporate Social Responsibility

    Oando PLCs superiorperformance and outstandingleadership continue to attract localand international recognition,supporting our efforts to becomeAfricas leading integrated energysolutions provider.

    Milestonesn In the year under review, the gas & power division,

    OGP maintained its Quality Management SystemCertification and compliance with the ISO9001:2008 Standard and achieved a zero QualitySystem non-conformity.

    n Our energy services division, OES, maintainedzero Lost Time Injury (LTI) for all 3 Rigs in the NigerDelta.

    living up tostakeholdersexpectations...

  • RiskAssessmentand Materiality

    During the year, the Board approved an Enterprise RiskManagement (ERM) framework which sets out a top-levelframework for the consistent management of risk in Oando Plcand its subsidiary companies. The framework seeks to buildstakeholder confidence in our business with respect to bothbusiness strategy and our ability to deliver acceptable andsustainable operating results.

    We are executing this framework by establishing communicationwith stakeholders on emerging risk events. We are currentlydeveloping internal and external flexibility so that we canrespond effectively to opportunities created by the occurrence of an unexpected event. Our approach focuses on current andemerging key business risks that could prevent us fromachieving our objectives and sustaining our business in alldomains (Financial results, market position, compliance withlegislation) in the short, medium and long term.

    To this end, we have developed customized risk definitions tocreate a common language for understanding and discussingrisk within the Group.

    The level of current or emerging risk is determined by the impactand likelihood of the risk. The risk impact ranges frominsignificant to catastrophic whilst the likelihood ranges from rareto near certainty. A financial indicator is also attached to eachrisk. We monitor the risk by establishing Key Risk Indicatorsthresholds. Risk reducing measures must be implemented toreduce the risk to a residual risk.Management operates andmonitors the system of controls through procedures and policiesestablished to guide business activities. The Group regularlyreviews its policies, procedures and risk management systemsto confirm their suitability to current business objectives,compliance with regulations and protectiveness of shareholdervalue.

    As part of our project management process, a detailed riskassessment is performed to assess the impact of our activitieson the environment, society, health of our stakeholders, humanrights, and the overall reputation of the Company. Impactreducing controls are thereafter implemented to reduce anyadverse impact to acceptable levels.

    Oando PLCSustainability Report 2012

    18

    We have developed customized riskdefinitions to create a commonlanguage for understanding anddiscussing risk within the Group.

    The Board and management of Oando Plc(Oando Group or the Group) are committedto establishing and sustaining leading practicesin all its business processes and it aims to dothis in a holistic manner.

    Growth

    Risk Management

    Return on Capital

    Innovation and New Products

    Compositionof Business

    Portfolio

    GreenSales andMarketing

    RegulatoryManagement

    ReputationManagement SustainableValue Chains

    Reaching NewCustomers and

    Markets

    Operational-riskManagement

    SustainableOperations (eg, reducingemissions, energy,waste, water)

  • We monitor a number of economic, socio-political risk indicatorsthat could affect our business sustainability if not checked. TheNiger Delta unrest and the terrorist insurgencies in the northernpart of the country, are fundamental socio-political risk whichcould lead to damage to our assets and threats to life. To mitigatethis risk, we engage our host communities and providesustainable support through the efforts of our Oando Foundation,who is engaged in projects that help to stimulate the localeconomy and provide assistance in areas where governmentefforts in education are not adequate. Through its Adopt-A-School campaign, host community agreements are in placewhich ensures that the communities derive economic value fromour presence. We engage local staff from the host communitiesfor appropriate services that we require for our operations as partof our effort to positively impact the local community and supportthe governments commitment to Local Content. We haveredeployed staff from the troubled areas in the North to otherparts of the country in order to eliminate the threat to life andlimb.

    Oando is registered in multiple jurisdictions. This increases theburden of compliance with the laws and regulations in all thejurisdictions where we operate, resulting in regulations andregulatory risk. Non-compliance could in effect, put our licence tooperate at risk. To address this risk, we engage country matterexperts, combined with our in-house Group Governance team,who monitor changes in legislation and its effect on ourbusinesses.

    Our people represent our most important asset without which wecannot achieve any of our objectives. We have a highly-skilledHuman Resources unit who provide strategic support to ouremployees and implement talent management initiatives. We aimto align our employment requirements with our business modeland strategy. Our goal is to attract the best in class, and rewardthem appropriately. As performance is a key part of our HRstrategy, we have put in place a robust performancemanagement tool to appraise staff performance and we continueto benchmark our standards against globally acceptablestandards. This helps in mitigating the risk of losing requisite skill,knowledge and experience to our competitors and ensures thatwe achieve our business objectives.

    Managing our financial risk is a core part of our risk managementstrategy. We closely monitor oil prices, exchange rate andinterest rate volatility, as these are major drivers of value acrossthe value chain in our business. We take out hedging instrumentsand enter into forward contracts as appropriate; in order toprotect our projected profit margins and targets and sustain ourbusiness model. Fluctuating foreign exchange rates could have asignificant impact on our earnings since some of our revenue isdenominated in US Dollar and our operational expenses aredenominated in Naira, the local currency. We manage thismismatch by entering into financial derivatives and forwardcontracts as appropriate.

    Liquidity and credit risk are fundamental financial risks that theCompany focuses on to ensure that we meet our financialobligations at all times. The Group has a balance of short,medium and long-term facilities with a number of financialinstitutions which gives us the ability to create financial flexibility.

    In order to build a sustainable and world class company, in 2010we embarked on International Organization for Standardization(ISO) certification in all our subsidiaries, as part of this exercise;we updated our procedures and policies to global standard. Wehave however identified that non-conformity to the laid downpolicies and procedures is another risk faced by the Company.We mitigate this risk using regular checks for compliance andefficiency from our internal auditors and annual StandardOrganization of Nigeria (SON) audits. We aim to ensure that ourlaid down processes and policies speak to our business strategy.

    In conclusion, as part of our risk management strategy we haveidentified risk categories that could affect the short to long-termexistence of our business and have put in place measures thatwill either reduce, eliminate, transfer or manage those risks.

    We shall continue to review these measures as we review ourbusiness strategy and ensure that they speak to the riskindicators that may point to crystallization of identified risks.

    Oando PLCSustainability Report 2012

    19

    consistentmanagement of risk...

  • Sustainabilityand CorporateGovernance atOando PLC

    At Oando, we believe that strong corporategovernance is essential for the achievement ofsustainable value for all our stakeholders.Consequently, Oando is committed to exhibitingthe highest levels of corporate governance andcontinues to make significant progress inimplementing structures, policies andprocedures aimed at strengthening governancewithin the Group.

    Governance StructureOur governance structures reflect the importance we attach tothe fact that our business cannot separate environmental andsocial matters from traditional economic indices. Oandosgovernance structures ensure that there is consolidation andstrong correlation between sustainability and our financialsuccess as we continue to evolve.

    Our policies and commitments are adhered to at all levels withinthe Group with a clear leadership direction and tone from the top.This requires a clear structure for delegation of authority, clarityover roles, objectives and responsibilities evidenced byincreased accountability and commitment to results.

    Oando PLCSustainability Report 2012

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    Our policies andcommitments areadhered to at all levelswithin the Group witha clear leadershipdirection and tonefrom the top.

    strong corporategovernance...

  • We recognize the chain of authority that starts with our owners -our shareholders, through the Board of Directors, who promoteand represent their collective interests, to the Group ChiefExecutive (GCE) and his Group Leadership Council (GLC), towhom authority for the executive management of the Company isdelegated. The goal established by the Board of Directors putsthe interests of all our owners at the heart of all we do. Thecollective goal is the maximization of long-term shareholder valuethrough sustainable operations.

    This goal drives our need to operate in a sustainable manner.The Board is accountable to our shareholders for the optimumperformance of the Group, and as such, its members arebeholden to act in good faith, with due care and in the bestinterests of the Group and all its stakeholders. The Board is alsoresponsible for setting the strategic direction for the Group andoverseeing its business affairs whilst managing risks. In addition,the Board develops and implements sustainable policies whichreflect the Companys responsibility to all its stakeholders.

    The Board is made up of a group of individuals from diverseacademic and professional backgrounds. The size of the Boardis in line with the prescriptions of Article 78 of Oando PLCsArticles of Association which stipulates that the number ofdirectors shall not be less than 10 or more than 15.

    The position of the Chairman and Chief Executive Officer arevested in different individuals in line with governance bestpractice.

    The Board adopts the following best practice principles in thedischarge of its duties:n The Company believes that the Chairman of the Board should

    be a Non- Executive Director.n To maintain an appropriate balance of interest and ensure

    transparency and impartiality, a number of the Directors areindependent. The independent Directors are those who haveno material relationship with the Company beyond theirDirectorship.

    n Directors abstain from actions that may lead to conflict ofinterest situations; and comply fully with the Companys Policyon Related Party Transactions.

    Oando PLCSustainability Report 2012

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  • Board of Directors

    Audit Committee

    Strategic Planning& Finance Committee

    Governance and Nominations Committee

    Risk, Environmental Health, Safety, Security andQuality Committee

    Sustainabilityand CorporateGovernance atOando PLC

    Oando PLCSustainability Report 2012

    22

    The Companys Board Committee structure

    we operate to thehighest standards oftransparency...

  • Governance EthosThe Oando Group is fully committed to effective corporategovernance and the need to observe the highest levels ofintegrity in the conduct of its business. As such, each thedirectors, management and employees are all committed toensuring that they operate to the highest standards oftransparency, accountability and good corporate governance bycomplying with the requirements of Nigerian and internationalcorporate governance regulations, particularly:n the Securities and Exchange Commission (SEC) Code of

    Corporate Governance for public companies in Nigerian the King III Reportn the Organization for Economic Development (OECD)

    Principles of Corporate Governancen the UK Bribery Actn the Foreign Corrupt Practices Act (FCPA) and n the Toronto Stock Exchange Corporate Governance Policy.

    The Governance Office is charged with the responsibility ofdeveloping and monitoring the implementation of corporategovernance policies and procedures by the Group and itssubsidiaries. This unit also appraises the Groups level ofcompliance and periodically reviews these policies to ensurethey continually align with best practice.

    Oando PLCs Internal Policies and ProcessesGoverning Ethics & ComplianceIn order to provide guidance on corporate governance issues,the Company has implemented the following internal policies andpractices which are reviewed periodically to ensure continuedrelevance and adherence to global best practices:n Code of Business Conduct and Ethicsn Gift and Benefits Policy n Insider Trading Policyn Dividend Policyn Related Party Transaction Policiesn Whistle Blowing policyn Board Appointment Processn Know-Your-Customer Policyn Remuneration Policyn Anti-Corruption Policyn Blacklisting Policyn Records Management Policyn Information Disclosure Policyn Environmental, Health, Safety & Security Policy

    Oando PLCSustainability Report 2012

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    The names of Directors who held office during the reportingperiod are as follows:

    Non -Executive Directors1. HRM Michael Adedotun Gbadebo, CFR (The Alake of Egbaland) 2. Mr. Ogogho Akpata 3. Ms. Nana Appiah-Korang4. Chief Sena Anthony 5. Ammuna Lawan Ali, CFR 6. Engr. Yusuf K.J N'jie

    Independent

    Executive Directors7. Mr. Jubril Adewale Tinubu8. Mr. Omamofe Boyo9. Mr. Mobolaji Osunsanya10. Mr. Olufemi Adeyemo

    For details regarding the Board and its Committees, please referto pages 59 60 of our 2012 Annual Report.

    The Oando Group isfully committed toeffective corporategovernance and theneed to observe thehighest levels ofintegrity in the conductof its business.

  • Sustainabilityand CorporateGovernance atOando PLC

    Anti-Corruption, Bribery and FraudLike other international oil and gas companies, we face thechallenge of working in territories where the perceived or actualrisk of corruption and bribery is high. We have a policy of zerotolerance to corruption. However, managing the risk is imperativeas new regulations and legislation (such as the UK Bribery Act2010, which came into force in July 2011 and the FCPA) areintroduced in environments where prosecuting authorities areincreasingly unsympathetic; cooperating across jurisdictions andlevying record-breaking fines.

    In 2012, we continued to build on and strengthen our proceduresfor managing ethical conduct and bribery and corruption risk. Weare fully committed to the global fight against corruption and weactively participate in this fight through our membership of thefollowing local and international organizations:

    1. Partnering Against Corruption Initiative (PACI) of theWorld Economic Forum:The Company joined PACI in 2008, an initiative of the WorldEconomic Forum, which is a global, multi-industry, multi-stakeholder anti-corruption initiative set up to raise businessstandards and to contribute to a competitive, transparent,accountable and ethical business society. The PACI initiativerequests companies to commit to a set of anti-bribery andcorruption Principles useful in strengthening their internalanti-corruption programme and in assisting with the designand implementation of effective policies and systems toprevent, detect and address corruption issues.

    2. United Nations Global Compact (UNGC):The UN Global Compact is a strategic policy initiative forbusinesses committed to aligning their operations andstrategies with ten universally accepted principles coveringthe areas of human rights, labour, environment and anti-corruption (amongst others) and reporting publicly onprogress made in implementing these principles within theirbusiness operations.

    Oando became a signatory to the UNGC in July 2009 andhas been an active participant in the Local Network of theGlobal Compact in Nigeria. In 2010, the Company deployeda member of its staff to the UNGC office in New York to assistwith strengthening the local networks globally. Oando PLC isalso a pioneer member of the Global Compact LEADplatform.

    3. Convention on Business Integrity (CBi):Oando became the 21st member to sign up to the CBi onNovember 16, 2009. CBi is a declaration for the maintenanceof ethical conduct, competence, transparency andaccountability by private sector operators. It was establishedto empower business transactions within Nigeria againstcorruption and corrupt practices. Oando is a member of thecore group of signatories to the Convention.

    4. Fraud Awareness Working Group (FAWG)Oando is a member of the FAWG, a forum aimed at unitingcorporate organizations operating in Africa in the fightagainst corruption and fraud in their environment.

    Oando PLCSustainability Report 2012

    24

    we have a policy ofzero tolerance tocorruption...

  • Training on Anti-Corruption InitiativesFor the purposes of instilling an ethical culture in the Company,new members of staff are trained on the Companys policies andpractices through a compliance on-boarding process.

    A re-certification exercise is also conducted via an online testannually for all employees and directors in the Group and itsentities. This exercise entails refresher courses on the OandoCode of Business Conduct & Ethics and anti-corruption policiesand principles. Those who pass the test are awarded aCertificate of Compliance. 639 employees (and Directors)participated in the recertification exercise over the reportingperiod.

    Employees in business units who handle sensitive informationsuch as Legal, Finance, Procurement, Marketing and HumanResources are specifically trained on ways of dealing with thedifferent ethical dilemmas that may arise in the execution of theirduties.Every month, the Governance Office publishes the Ethics Watchbulletin, which is circulated amongst all employees and businesspartners for the purposes of educating and keeping them up-to-date on different ethical and compliance issues.

    Managing the risk of corruption through the supplychainAt Oando, we are committed to doing business with onlyreputable, honest and qualified business partners and vendors.The Company, through its employees, exercises due care andtakes reasonable safeguards geared towards evaluating potentialbusiness partners in making selections regarding whom totransact business with as their integrity could have a huge impacton our Companys reputation.

    We carry out corruption risk assessments of territories/countriesthat we are considering for new operations as well as duediligence into the ethical track-record of potential businesspartners and providers of materials and services.

    In the reporting period, we revised our Ethical Conduct DueDiligence Standard to bring greater alignment with the newContracts and Procurement Standard which was also issuedduring the period under review and essentially lays downprocedures on how to source for contracts and manage it post-award. The Ethical Conduct Due Diligence Standard was alsorevised to bring greater clarity and direction over the duediligence required when considering potential social investmentpartners and technology partners.

    Whistle Blowing HotlineThis Hotline was set up as an avenue for the Groupsstakeholders and all members of staff to confidentially reportunlawful and/or unethical practices involving the Company,members of staff, Directors and any other key stakeholder.

    The Group engaged the services of an independent consultant,KPMG Professional Services to manage the Hotline and ensurethat all reports are kept confidential and directed to theappropriate authorities for investigation and resolution.Employees are also encouraged to report grievances throughany of the following mediums:n Visits, calls or emails to the Governance Office;n The Compliance Helpdesk; or n Escalation of issues through appointed Torch Bearers

    (employees who volunteer to assist the Governance Office inentrenching Oandos core values in the entities and businessunits to which they belong).

    ZERO Tolerance to CorruptionIn cases of fraud or corruption, we at Oando adopt human rightsbest practice, bearing in mind the rule of law which requires thatboth sides of a matter are heard, and that the matter is fully andfairly investigated. Representations are made to a disciplinarycommittee made up of persons who are neutral and understandthe tenets of equity and fairness.

    During the reporting period, no cases of fraud or corruption werereported. However in the previous year, we had three cases offraud reported in our marketing division (OMP). In all reportedcases, a disciplinary committee was duly constituted and uponinvestigation, a case of fraud was established in one of the casesinvestigated; following which the employment contract of theerring staff was terminated.

    Over the reporting period, there were no legal actions regardingcorruption, anti-competitive behaviour and violations of anti-trustmonopoly legislation in which Oando was identified as aparticipant.

    Governance Office Initiatives n Recertification exercises, n Training for business partners on the Code of Business

    Conduct and Ethics, n Web-based compliance itinerary video trainings,n New Directors induction programme and Directors training,n Service Stations and facilities spot checks (Adopt-a-station), n Compliance Week, n World Anti-Corruption Day and n Ethics Watch bulletins.

    All these are aimed at protecting the reputation of the Group andpreserving the Oando brand, a vital asset and contributor to thebottom-line and avoiding penalties which erode shareholdervalue and can potentially cripple the growth and survival of theCompany.

    Oando PLCSustainability Report 2012

    25

    Oando became asignatory to the UNGCin July 2009 and hasbeen an activeparticipant in the LocalNetwork of the GlobalCompact in Nigeria.

  • StakeholderEngagement

    We understand that communication that is balancedand accurate generates trust; hence, we aim todevelop an approach to stakeholder engagementwhich supports our sustainability aspirations. Inlight of this, we are committed to measuring,auditing and publicly reporting our stakeholderengagement activities and performance.

    Oando PLCSustainability Report 2012

    26

    By virtue of the nature ofour operations, we build andmaintain strategic, ongoingrelationships with ourstakeholders.

    Our key stakeholders

    Employees Communities Government &Regulators

    Business Partners / Vendors Customers Investors

    The key stakeholders we have identified are those who areimpacted by the business of the Company or who have animpact on us.

    By virtue of the nature of our operations, we build and maintainstrategic, ongoing relationships with our stakeholders, to enableproactive engagement, preserve mutually beneficial relations,manage social expectations, minimize reputational risk andpositively influence the business environment.

    We employ a range of channels and mechanisms in order to getstakeholder feedback. The frequency of engagement variesaccording to the stakeholder group and the particular issueconcerned. We use a decentralized stakeholder engagementmodel, in which the relevant unit/entity undertakes stakeholderengagement activities appropriate to their particular areas.

  • Engagement with EmployeesOur Goal: To create a motivated workforce throughpersonal growth, security and learning. Ensuring everyemployee reaps the rewards of his/her vital role in theCompany and understand that they are the coresuccess drivers essential to the fulfillment of ourbusiness strategy.

    Engagement Initiatives:n Employee Surveys & Questionnairesn Town Hall Meetingsn Newslettersn Companys intranet & websiten On-boarding & Inductionn Whistle-blowers Hotlinen Employee Volunteer Programme (EVP) n Ethics Watch

    Oando PLCSustainability Report 2012

    27

    we understand thatcommunication that isbalanced and accurategenerates trust...

    We employ a range of channels and mechanisms in order to getstakeholder feedback. The frequency of engagement variesaccording to the stakeholder group and the particular issueconcerned.

  • StakeholderEngagement

    Oando PLCSustainability Report 2012

    28

    Engagement with InvestorsOur Goal: Providing timely, accurate and transparentinformation to enable shareholders make informeddecisions about the Company and their investments andobtain feedback on the Companys performance.

    Engagement Initiatives:n Annual General Meeting (AGM)n Investor Road Showsn NSE / JSE Announcementsn Investor Callsn Conferences / One-on-One Meetingsn Conferences / One-on-One Meetingsn Median Shareholders Associations

    The Company values the importance and role that all ourdifferent investors groups have played in the Companysprogress and as such, makes a conscious effort to keepthem updated on the Companys activities and obtainconstructive feedback.

    Our investors as at 31st December 2012

    n Retail Investors (43%)

    n Pension Fund Administration (PFAs) & Local institutions (20%)

    n International Institutions (15%)

    n Strategic Investors (11%)

    n Others (Brokers, staff, etc.) (11%)

    43%

    20%

    15%

    11%11%

  • Oando PLCSustainability Report 2012

    29

    By virtue of the nature of our operations, we buildand maintain strategic, ongoing relationships withour stakeholders, to enable proactive engagement,preserve mutually beneficial relations, managesocial expectations, minimize reputational risk andpositively influence the business environment.

    Engagement with CommunitiesOur Goal: Sensitively engaging and giving back to thecommunities through social and environmentalinitiatives.

    Engagement Initiatives:n Memorandum of Understanding (MoU)n Sustainable Community Development Projectsn Town Hall/Peoples Parliament meetings n Dispute Resolutionn School Based Management Committee (SBMC)

    Community Relations Strategy

    Why POWERS?To eliminate:n the general distrust amongst members of the

    community of oil and gas companies as a result ofunfulfilled promises;

    n the pollution of rivers and streams in thecommunities we were to traverse;

    n the destruction of aquatic animals;

    Ultimately, the objective of the POWERS strategy is togive back to the communities through economicempowerment and capacity building.

    POWERS

    SustainableDevelopment

    Partnership

    Ownership

    Win-win

    Empowerment

    Respect

  • StakeholderEngagement

    Oando PLCSustainability Report 2012

    30

    The Companys community relations strategy, POWERS(Partnership, Ownership, Win-Win, Empowerment, Respect& Sustainable Development) was initiated and adopted asthe internal guide for managing community relatedengagements on all Company projects.

    This strategy was developed in 2012, during theconstruction phase of 124km East Horizon gas pipelineproject as there was a general feeling of deprivation,marginalization, and exploitation in the oil-producingcommunities we were operating in.

    Engagement Processn Identification of the area of operation.n Conducting of a fact-finding recognizance field trip

    (RECCE mission).n Introducing the Company to Stakeholders, i.e. the Local

    Government Authority, Community Leaders, etc.n Convening a stakeholders consultation meeting.n Negotiation and execution of a Memorandum of

    Understanding (MoU).n Implementation of the MoU and execution of a

    Community Development Project (CDP).n Ensuring there is continuous engagement with the

    community throughout the course of the project.

    The Companys community relations strategy,POWERS (Partnership, Ownership, Win-Win,Empowerment, Respect & SustainableDevelopment) was initiated and adopted as theinternal guide for managing community relatedengagements on all Company projects.

    CASESTUDy - ENGAGEMENT WITHCOMMUNITIES

    Ownership Make our stakeholders see themselves as partof the owners of our project. This way they willcherish and protect the facilities within theirlocality.

    Win - win Proactive in use dialogue to handle and resolveconcerns and disagreement with ourstakeholders.Empowerment Provide our stakeholders with variousempowerment programs which will go a longway to building trust and mitigating the

    prevailing restiveness and unemployment.

    Respect Respect of the culture of host communities andintegrate it with the companys core values.Sustainable Development Collaborate with our stakeholders to initiate andimplement Sustainable CommunityDevelopment (SCD) programs/projects.

    Partnership Have strategic partnership relationship with ourstakeholders to build a long lasting mutualrelationship.

  • Oando PLCSustainability Report 2012

    31

    OGULAGHA KINGDOM IN OML 90

    PROCESS SIGNIFICANCEReconnaissance visit To identify communities, understand the people, their culture, land and water

    accesses, security situation, infrastructural gap, youth organizations, presence of other operators, etc.

    Sending introductory letters to To intimate the relevant government functionaries, community leaders, and other the government and other stakeholders of the presence of the Company and plans to work in the area.strategic stakeholders

    Courtesy Visits/Paying homage To express respect to the appropriate public authorities and community leaders before organizing an open stakeholders meeting and execution of any field activities.

    Sending out the notice of open To provide an open forum for all stakeholders to hear about the Company directlystakeholders meeting from the Relationship Officers, air their concerns and expectations and rub

    minds on matters of mutual benefit such as work programs, incentives to early completion, job opportunities, etc.

    Conducting a Joint Need To collaborate with the local community to identify infrastructural gaps and the Assessment (JNA) critical common needs of the community stakeholders. Projects are selected and

    recommended to the Company by the community for execution from the JNA exercise.

    Requesting the local This allows the local stakeholders take ownership of the process of selecting theircommunity to elect their representatives. This body once elected by the community and communicated tocommon representatives to the Company through an official letter is recognized and inaugurated. For interface with Relationship example, in the Akepo operation the interface body is called the Ogulagha Officers Kingdom Development Committee (OKDC).

    Executing an MoU An MoU is signed with the community. The MoU incorporates all agreements andobligations reached between the Company and the community.

    Request for community reps to Based on the MoU and agreed project selection and execution plan, a local nominate community contractor is nominated by the community for the execution of a specific contractors for the execution of Sustainable Community Development Project. This in addition creates economicSustainable Community empowerment for the locals.Development Project.

    Putting in place a structured While operation is going on, there are structured engagement meetings that arestakeholders engagement held to proactively review the expectations of the community and also monitorpost-MoU. the implementation of the MoU. This continues throughout the life of the project.

    CASESTUDy - COMMUNITy RELATIONS ENGAGEMENT PROCESS

  • StakeholderEngagement

    Oando PLCSustainability Report 2012

    32

    Engagement with Governmentand Regulatory AuthoritiesOur Goal: Performing our obligations as goodcorporate citizens. Helping to construct the regulatorylandscape within which businesses can thrive.

    The Engineering & Technology Organization (ETO) unitof the Company is charged with the responsibility ofthe realization from inception to completion of all majorengineering projects undertaken by the Company. Toexecute these projects, we require the collaborationand approval of various governmental bodies. Theapprovals sought depend on which government orregulatory body has jurisdiction over the geographicallocation of the project and the type of project.

    Regulatory agencies engaged with:n Nigerian Content Development & Monitoring Board

    (NCDMB)n National Assembly (NASS)n Nigerian National Petroleum Corporation (NNPC)n Department of Petroleum Resources (DPR)n Government sponsored eventsn State Universal Basic Education Board (SUBEB)

    In addition, Oando Energy Resources (OER) has aGovernment Relations Department (GRD) whichfunctions as the official liaison between OER and thegovernment. In the other entities of the Group, thisfunction is primarily undertaken by their respectiveBusiness Development units.

    The GRD interfaces with appropriate arms ofgovernment regulating the petroleum industry with theintent of promoting OERs operational and corporatebusiness objectives.

    In 2012 the engagements with regulatory agenciestook the form of meetings, stakeholders forums,conferences, reports, presentations and summons.However, the GRD usually operates using a monthlyrolling plan of engagements.

  • Oando PLCSustainability Report 2012

    33

    Engagement with BusinessPartners & VendorsOur Goal: To build capacity among vendors andbusiness partners in such a way that our sharedobjectives yield maximum results, strengthening smalland medium-sized enterprises (SMEs) in our supplychain and using our development initiatives to helpSMEs build a track record which would then enablethem attract more patronage.

    Engagement Initiatives:n Contract meetingsn Vendor forumsn Vendor audits / Capability evaluationn Service Quality Reviewsn Tendersn Lunch and Learn sessionsn Training sessions by the Governance Officen Non-Governmental Organizations (NGOs)

    Statement of business relationshipby Oilserv Limited

    We are proud to be associatedwith Oando Gas and Power forthe opportunities granted toOilserv Limited to demonstrate itscapability in project deliverythrough projects involving theconstruction of gas distributionnetworks and the construction of

    a power plant. This relationship has equallyenhanced our resource base through equipmentacquisition and capacity building of its personnel.We have also leveraged on these projects toempower other indigenous companies in the oiland gas sector through our subcontracting policy.

    GROUP MD / CEO - EMEKA OKWUOSA

    Statement of businessrelationship by Well WorldwideEnergy Logistics Ltd

    Well-Worldwide has maintained abusiness relationship with OandoPlcs energy services division,OES since 2009. Since then, Wellhas been rendering logisticssupport services to OES ranging

    from freight, customs brokerage and haulage tomanagement services.

    Our relationship with Oando has contributed tothe growth and development of Well-Worldwide,especially in terms of professionalism andexpertise.

  • StakeholderEngagement

    Oando PLCSustainability Report 2012

    34

    Engagement with our CustomersOur Goal: Building brand recognition, responsiveness tocustomer needs, providing our customers with value-added products and services and responding to feedbackfor continual improvement.

    Oando Marketing Plcs (OMP) customer care unit engageswith our customers in the downstream division.

    Engagement Initiatives:n Customer feedback analysisn Customer satisfaction surveys n Customer meetings n Walk-in: These are office visitations whereby customers

    can come into Oando in person to make theircomplaints/enquiries. Our walk-in centers are located atOando Terminal 1, Apapa and the Port HarcourtTerminal.

    COMMERCIAL CUSTOMERSCustomers who purchase products and services for commercial use, such as aviation, construction, industrial and manufacturing companies.

    END USERSThese are final consumers who purchase Oando Marketings product for their use.

    RETAIL CUSTOMERSThese are service stations nationwide who service end-users. The following sub-categories fall under the retail stations:

    COSS - Company Owned Service Stations, LDE - Loan Delivery Equipments and Gallonage.

    INFLUENCER CUSTOMERSThese are regulatory agents who have stake in the operations of the business such as, Petroleum Tanker Drivers Association (PTD),

    Petroleum Product Pricing Regulatory Agency (PPPRA) etc.

    VMI - VENDOR MANAGED INVENTORyThese are commercial companies who enlist Oando Marketing PLC to manage the storage facilities and fuel dumps,

    and supplying all their fuel needs.

    VAP / eVAPValue Added Peddling: Companies with multiple operational sites across the country who require diesel (AGO) and lubricants e.g. banks, eateries etc. eVAP: Electronic Value Added peddling: These are mostly home owners who purchase product for

    home use securely online.

    TRANSPORTERThese are customers who manage Oando Marketings fleet for delivery of products.

    Our Customers

  • Oando PLCSustainability Report 2012

    35

    n The 23% increase in service logs for 2012 is attributable tomore customers becoming aware of the OMP Customer CareUnit.

    n The increase in product supply logs was due to the fuelsubsidy removal which had an impact on product availability.

    n The increment in maintenance and repairs log was due tounavailability of spare parts (e.g. pumps, generators) toreplace faulty ones.

    n Of the 4638 issues opened for 2012, only 6 of these areawaiting resolution at the date of this publication as the issuesinvolve substantial repairs

    Gas Connect is the official monthly newsletter circulated to all customers as a medium for disseminating currentissues and getting feedback on the natural gas industryand other important topics.

    CASESTUDy - GAS CONNECT

    5000

    4500

    4000

    3500

    3000

    2500

    2000

    1500

    1000

    500

    0

    2011 2012 Issue Count

    3566

    4638

    Customer Reported Issues 200018001600140012001000

    800600400200

    0

    20122011

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  • OurEnvironment

    We are committed to achieving and demonstrating soundenvironmental performance by controlling the impacts of ouractivities, products and services on the environment, consistentwith our environmental policy and objectives. We do this in thecontext of increasingly stringent legislation, the development ofeconomic policies and other measures that foster environmentalprotection, and increased concern expressed by interested thirdparties about environmental matters and sustainabledevelopment.

    We place a high premium on the environment in which weoperate; which is why we are constantly working on preservingand conducting our operations in such a way that reduces anynegative environmental impact to the barest minimum andimprove the way we use our resources in a more sustainablemanner.

    We operate competitively, however, as a responsible corporateorganization; we adopt the principles of sustainabledevelopment, that is, development that is based onenvironmental protection, mutual respect and responsibilitytowards future generations.

    Oando has continued to demonstrate improvement in itscapacity to carry out all its operations without adverselyimpacting the health and safety of our stakeholders, and withminimal impact to the environment.

    The focal commitment of the Group to the minimization of theenvironmental impact resulting from its operations is expressedthrough our Environmental Health and Safety (EHS) Policy.In implementing our EHS Policy at all levels of our business; weensure that we put in place the following:n A functional Waste Management Plan (WMP);n Environmental Management Improvement Plan (EMIP);n Training of our staff on basic and vital EHS topical issues; andn Ensuring our operations are conducted in a manner that

    guarantees efficient energy utilization and resourcemanagement.

    Oando PLCSustainability Report 2012

    36

    NON-HAZARDOUS WASTE HAZARDOUS WASTE

    GLASSES PAPER/ OTHER METALS/ OILy MEDICAL/FOOD CERAMICS PLASTICS PACKAGING DOMESTICS WOODS WASTE SLUDGE OTHER TOTAL

    January 1871 51 711.5 624 1030.5 192 144 0 29.2 4653.2February 1280.5 29.5 243 185.5 257 96 150 2300 42 4583.5March 1692 78 650 597 636.5 121.5 148 0 31 3954April 1891 39.5 657 627 697.5 113 99 0 46.7 4170.7May 1393 46.5 152.50 78.5 123 127 86 0 31.3 2033.8June 1440.5 82 131 87.5 139 126.5 124 0 46.4 2177.4July 1484 44 143 115.5 108 113.5 10100 10000 27.7 22148.7August 1592.5 62 170 116.5 186 176.5 10087 10000 49.5 22377September 1961 57 359.5 248.5 305 158 30074 30000 42 63223.5october 1827 75 189.5 127.5 187.5 183 2207 6000 71.5 10843November 1528.5 45 151.5 133.5 149.5 126.5 1762 0 48.8 4001.8December 1532.5 53.5 131.5 101 182.5 000 1719 540 35 4421.5

    19493.5 663 3690 3042 4002 1656.5 56700 58840 501.1 148588.1

    2012 Waste Streams for Oando Plc.

  • Oando has continued to demonstrate improvementin its capacity to carry out all its operations withoutadversely impacting the health and safety of ourstakeholders, and with minimal impact to theenvironment.

    Oando PLCSustainability Report 2012

    37

    n The noticeable increment in the volume of oily wasteand sludge generated between July Septemberwas as a result of planned periodic tank cleaning atsome of our terminals. This involves the cleaning outof sump at the bottom of the tanks. The sumpcontains sludge and other oily constituents thathave accumulated at the bottom of the tank overtime.

    n In addition, the onset of the rainy season causes awash-off of deposited oil, impacted soil and productfrom drainages and catchment areas into theseparator pits from where these deposits areseparated and later evacuated as oily waste.

    n The increment in food waste occurred primarily fromour drilling rigs. The rise in the volume of wastegenerated was as a result of increased activity ofthe contractors on board. During rig move, there areusually less operational activities and thus, lessgeneration of food waste.

    n Paper and packaging waste are largely from ourKaduna Lube Plant where our products andadditives are packaged. A spike in the volume ofpaper waste occurs when there is an increase inproduction.

    After proper inventory, segregation and quantification into thedifferent streams, all waste is properly stored and evacuated ormanaged by an approved waste management vendor. WasteConsignment Notes (WCN) are written documentation whichdefine our waste management process from cradle to graveusing government approved waste management facilities.

    Medical waste is incinerated and the residue managed bygovernment-approved vendors whilst contaminated soil ismanaged via the use of Thermal Desorption Unit and is trackedusing Waste Consignment Notes.

    More than half of the food waste is generated by our threefunctional swamp rigs: OES Integrity, OES Teamwork and OESPassion due to the residential nature of their jobs.

    Our Kaduna Lube Blending Plant which is responsible for themanufacture of our Oleum range of lubricants accounts for thebulk of the packaging waste plastic cans/bottles and theircovers and cartons.

    In the period under review, the Company had noadministrative/judicial sanctions levied against it for failure tocomply with environmental laws and regulations. Nor were thereany significant fines, non-monetary sanctions or cases broughtthrough dispute resolution mechanisms.

    Waste ManagementBy the nature of our activities, the Company generates minimal toconsiderable amounts of waste in its vast operations across thecountry. These range from domestic waste such as garden,plastic and food remnants in canteens/kitchenettes within thelocations of operation to industrial waste such as, effluents andgaseous emissions, contaminated soil from spill sites andtanks/vessel cleaning, oily rags, batteries, glass-fluorescenttubes and fused bulbs, medical waste (expired drugs, soileddressing cotton, used needles, syringes), scrap metals, officewaste such as papers, packaging materials, etc. at theTerminals/plants/depots/Head Office and construction sites.Some of these waste materials have potential negative impact onthe environment. We are conscious of the amount of waste thatour operations generate and are constantly thinking of new andinnovative ways to reduce and recycle such waste.For the purpose of this Report, waste has been classified broadlyas hazardous and non-hazardous.

  • The waste generated from drilling cuttings and drilling muds byOER are 540 MT and 3,361 MT respectively. The services of ahazardous waste management company was employed todispose and treat the waste generated.

    Oil SpillsOne of the most crucial problems facing the oil and gas industrythe world over is how to prevent oil spillages and in the event thatthey do occur, how to minimize their impact on the environment.At Oando, we hold ourselves to the highest safety standards, andthis applies not just to the welfare of our employees, but to theenvironment and host communities where we operate.

    A system of tiered preparedness and response gives astructured approach to the process of adjudging oil spillpreparedness and responsiveness to incidents in the course ofour operations. It allows potential oil spill incidents to becategorized in terms of their potential severity and ensure that wehave in place the capabilities to respond timeously.

    The Department of Petroleum Resources (DPR) classifies oilspills according to their severity. Oando also classifies spillsaccording to their levels of severity for notification and reportingpurposes, with three tiers typically defined in our Oil ContingencyResponse Plan.

    For Tier 1 spills, the facility manager/host company has the soleresponsibility of controlling the spill. For tier 2 and tier 3 spills, theEmergency Response Team has the responsibility of controllingoil/chemical spill.

    The Company maintained its level of excellence during the yearwith regards to spills. During the reporting period, 40,000 liters ofbase oil was spilled at a third-party customers facility in Ilorin,Kwara State. Compared to the spillage in 2011 of 68,441 liters,the spillage in 2012, totalling 44,186 liters (40, 000 liters (major)and 4,186 liters cumulative from all plants, terminals and depots)had relatively insignificant impact on the environment as theproduct was adequately contained with the facilitys bund walland recovered immediately.

    The National Oil Spill Detection and Response Agency(NOSDRA) was established by the Federal Government ofNigeria by Act 15 of 2006 as a response to the persistentenvironmental degradation and devastation of the ecosystemespecially in the oil-producing areas of the Niger-Delta region. A draft bill amending the NOSDRA Act is currently beingconsidered by the National Assembly with the significantinclusion of the Polluter Pays Principle". Basically, once this law is enacted, this principle would place legal responsibility and accountability on Oando in the event of any spill, land

    contamination or air pollution. This also implies that Oando Plcwould bear liability regardless of whether it was caused by theCompany or its assigned contractor(s).

    Our ultimate goal is to have no operational spills. To this end, wecontinue to focus our efforts on environmental safety andresponsiveness to actual spillage occurrences.

    Emission to Air and Discharge into Water The emission of substances that destroy the ozone layer andother regulated pollutants from our Company processes andoperations are negligible as evident in our periodic air qualitymonitoring. In addition to in-house monitoring carried out by ourspecialists, air emission and effluent monitoring audits are carriedout periodically by independent consultants at our variouslocations to ensure compliance with regulations and also to getan independent opinion.

    Effluentsn 656,000 liters of salvaged products from the draining of tank

    effluents at Apapa.n 4000 liters from tank effluents at Onne.

    All our key assets have effluent treatment mechanismsadequately maintained for effective operation. Since 2009,qualitative and quantitative information on effluent disposal inOando have been stored on our OER-EHS database.

    Oando has a standardized procedure for air quality anddischargeto-water monitoring. We conduct regular bi-weeklyand monthly air quality and effluent monitoring for all key assets.Reports of last years monitoring exercise reflect the Companysconscious effort to further reduce our emissions and discharge-to-water. In 2011, over 97% of all the parameters monitored werewithin the Department of Petroleum Resources (DPR) specifiedlimit, whilst in the period under review, over 99% of all parametersmonitored were within DPRs stipulated limit. Where theparameters exceed recommended limits, measures are put inplace to comply with the specifications immediately or tointroduce changes to operations.

    OurEnvironment

    Oando PLCSustainability Report 2012

    38

    Our ultimate goal is to have no operational spills.We continue to focus our efforts on environmentalsafety and responsiveness to actual spillageoccurrences.

  • Oando PLCSustainability Report 2012

    39

    compliance withregulations...

    Average Air Quality Monitoring DataPARAMETERS Methods DPR Limit Average pH APHA 4500H+ 7.0-8.5 7.44

    Temperature, OC Thermometer 25 22.40

    TDS, mg/l APHA 2540-C N/A 463

    Salinity, mg/l APHA 4500-B 600 95.72

    Oil & Grease, mg/l ASTM D 3926 10 1.65

    Turbidity, NTU APHA 2130-B 25 16.8

    TSS, mg/l APHA -209D 30 29.0

    Odour N/A N/A Objectionable

    BOD, mg/l APHA 5120B 10 4.20

    COD, mg/l APHA 5220B 10 6.87

    HEAVy METALSIron, mg/l APHA 3111 B 1.0 0.7

    Chromium, mg/l APHA 3111 B 0.03

  • Water ManagementWater management is an important global issue. Water is criticalto the sustainability of our business, which is why we recognizethe need to manage freshwater usage responsibly, withconsideration for communities, consumers and the environment.Despite its global importance, the impacts of freshwater supplyand water quality can be very local in nature. In light of this,building local awareness, skills and sustainable practices withlocal authorities and communities is crucial to our commitment tosuccessful water management.

    Our sources of water are:n Boreholesn Water from the Lagos State Water Corporation

    Energy ConsumptionAt Oando, we do our best to manage energy consumptiondespite the erratic electricity supply we have had to contend withfor decades in Nigeria.

    Our primary source of electricity is the Power Holding Companyof Nigeria (PHCN) and we make use of generators powered byautomotive gas oil (diesel) and premium motor spirit (PMS) in theevent of power outage.

    Diesel 479,629 liters Electricity 1,552,492 Kwh (5588.9712 GJ)PMS 39,385 liters

    OurEnvironment

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    building localawareness, skills andsustainable practices...

    WATER PRODUCED:5147.9m/year

    WATER RECyCLED:0.000432m/year

    At Oando, we do our best to manage energyconsumption despite the erratic electricitysupply we have had to contend with fordecades in Nigeria.

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    BiodiversityBiodiversity entails protecting plant and animal species and ecosystems. This is an essential component of our health, safety andenvironmental commitments. We address biodiversity conservation during the planning and development of major projects byconducting environmental impact assessments, collecting key environmental data and implementing mitigation and monitoringprograms to reduce impacts.

    Significant impacts on biodiversity associated with our activities:Impact MitigationIncrease in noise levels ranging 1.Risk assessment/noise mapping.from 66.0 dB (A) in office areas 2.Additional wall erected to dampen the noise level between the office and the control roomand 89.3 dB at the exterior such 3.Reduced access and exposure time to noisy areasas the generator house. 4.Regular preventive maintenance

    5.Use of ear muffs/ear plugs6.Medical surveillance

    Impact MitigationIncrease in local ambient 1.Risk assessment.temperature as well as 2.Increasing the height of exhaust pipes above the buildingconcentration of air pollutants 3.Provision of ventilation and air conditionersfrom gas engines at our Akute 4.Rotation of Tasks and personnelPower Plant. 5.Air emission monitoring

    6.Use of scrubbers

    Impact MitigationSoil exposed to direct sunlight 1.Backfilling, with topsoil and subsoil.for a long period of time due to 2. Adequate cleaning up and site restorationexcavation activities at our Ekot 3.Allowing for natural attenuationEkpo, Aka Ibonda and Mfamosing sites, thus leading to excessive removal of moisture from the soil which in turn could have affected organisms dwelling in the soil.

    Impact MitigationInadequate measures to contain 1.Routine maintenance of machinery to prevent spillthe spill of oil from machinery, 2. Mopping up spills with absorbent materialsrun-off or drainage water 3.Training and refresher courses for Operators and Technicianscontainment at our Ekot Ekpo site. These occurrences could have led to vegetation intake of contaminated water through contaminated ground water. Also, the ground water will finally contaminate streams and rivers when it flows into them.

    Impact MitigationPossible displacement of illegal 1.Redesign of pipeline route to reduce impact on the socio economic wellbeing of the local occupants along asset footprint community

    Impact MitigationDegradation of sites and nearby 1.Complete site restoration through backfilling, vegetation, planting of treesareas due to land acquisition, 2.Reduction of land take sizemovement of equipment and personnel.

    Impact MitigationLoss of arable land biodiversity 1.Reduction of noise leveldue to movement of man, 2.Reduction of land takemachines and road construction 3.Making use of common roads as opposed to creating new accessduring construction. 4.Backfilling, vegetation and natural attenuation

  • Pipeline construction andBiodiversity In one of our pipeline projects, we had a pipelinethat traversed a palm plantation in Abak LocalGovernment Area (LGA) in Akwa Ibom state and arubber plantation in Odukpani LGA in Cross Riverstate.

    The Project Management team in this case, consultedwith the management of both plantations and jointlyagreed a route that had the least impact. Theconstruction led to the felling of approximately 450 agedpalms at Abak and 850 rubber trees at Odukpani.

    If this approach had not been adopted, there wouldhave been a significant impact on ecosystemdevastation and vegetation loss, which in turn wouldhave had an adverse impact on both the bioticcomponents (i.e. individuals, community or severalcommunities, plants, animals and other livingorganisms) and abiotic components (i.e. all non-livingforces in the habitat which affect organism), biodiversityand specie loss.

    Adequate compensation was given to plantation ownersin Abak LGA and Odulpani LGA where the pipelinetraversed the plantations to assist them to plant moretrees than were felled.

    The project as part of its community developmentprogram plans to adopt 13 schools in the 13government areas that the pipeline traversed.

    In addition, during the construction phase of the project,over 500 indigenes were engaged to participate insome element of works (welders mate, fitter mate,riggers, surveillance etc). Locals who possessed somespecial skills (welders and qualified nurses) were alsogiven first right of refusal. The indigenes were alsoadequately compensated for land taken.

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    Akute Power PlantThe Akute Power Plant is a 12.15MW IPPincorporating 4 x 3 MW gas-fuelled engines and theconstruction of a 13km natural gas pipeline. ThePlant was commissioned in February 2010 andcommenced full operation in 2011.

    At the Akute Power plant, the significant impact of ouractivities on biodiversity has been the increase in noiselevels within the facility with noise levels reaching 66.0dB(A) in office areas. This has now been reduced to53.9 dB. We are committed to reducing the noiselevels further.

    There has also been an increase in local ambienttemperature as well as in the concentration of airpollutants from gas engines. However, the Companyembarked on mitigating activities such as thereinstatement of a 13km Right of Way (ROW). Thecompletion of a noise mitigation project directed atreducing the noise levels within the office spaces toacceptable levels and the engagement of local laboursources for the reinstatement of gas supply pipelineROWs.

    CASESTUDy CASESTUDy

  • Sustainability Considerations in MarineEnvironmentsIn order to preserve marine flora and fauna as well as ensureno disruption to inland waterway access, our gas & powerdivision insists on Horizontal Directional Drilling Technology(HDDT) for all pipeline river crossings, as illustrated below.

    We are well aware of the impact of our operations onbiodiversity and our moral obligation to preserve the resourcesat our disposal. In light of this, we are in the process ofdeveloping and implementing a viable biodiversity policy thatwill ensure the responsible stewardship of environmentalresources. As a Corporate member of Nigerian ConservationFoundation (NCF), with registration certificate No 0000101, weintend to increase our engagement with the NCF by focusingon how to preserve the full range of Nigerias biodiversity andpromote sustainable use of natural resources for the benefit ofpresent and future generations.

    In the preceding year, we embarked upon a tree plantingactivity called Plant-A-Tree at the ground-breaking ceremony ofour new Oando Marketing Head Office in Apapa, Lagos, Over20 trees were planted. We also contributed to the greening ofTerminal 1 access road and walkway with several species ofgrasses, shrubs, flowers and lemongrass.

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    Illustration of Horizontal Directional Drilling.

  • OurEnvironment

    Environmental Risks and Impact Assessment At Oando, prior to the commencement of construction works forany project, an Environmental Impact Assessment (EIA) isrequired by regulation to be carried out and necessary approvalsgranted. Thereafter, impact mitigation and monitoring would becarried out by the regulators to ensure that the EnvironmentalManagement Plan (EMP) submitted alongside the EIA Report isbeing adhered to. Once the adherence is confirmed, a finalapproval is given and an Environmental Impact Statement isissued, stating that no negative impact to the environmentoccurred or will occur in the future.

    The process leading to the issuance of the Environmental ImpactStatement (EIS), as practiced in Oando, is described below:n An Application is made to the Federal Ministry of Environment

    (FME) stating the Terms of Reference (TOR). The TOR willcontain the project description and processes to be carriedout to obtain the EIA report. This includes number of seasonsamplings to be taken, procedures to analyse the samples,study methodology and study area for the socio-economicaspect of the report.

    n A site verification exercise is done by the FME so as todetermine how to categorise the project.

    n A response is obtained from the FME granting approval for theEIA to be carried out and stating the category to which theProject belongs. The category of the project will determinewhether technical reviews will be performed with delegatesfrom FME only or will be inclusive of stakeholders to beimpacted by the project, i.e. members of the community.

    n On approval of the TOR, the EIA exercise is carried out, usingcompetent consultants and scientists and copies of the draftreport submitted to Federal Ministry of Environment.

    n The submitted reports are publicly displayed at each of theLocal Government Areas potentially impacted by the projectfor twenty one (21) days for review. All comments areforwarded to the regulators for collation and for further review.

    n Subsequently, a technical panel review meeting is scheduled,which may include stakeholders within the project area.

    n After the technical review, the FME grants a provisionalapproval for the construction works to commence whilstdetailing changes/clarifications to be made to the submitteddraft report. Also the letter granting approval will prescribe theapplicable regulatory fees to be paid.

    n The requested changes are made to the EIA report and thefinal report is submitted with payment advice for theprescribed fees.

    n Afterwards, the FME will conduct Impact Monitoring &Mitigation (IMM) exercises to ensure the EnvironmentalManagement Plan submitted is being adhered to.

    n Once satisfied with the above, the final EIA approval is givenand an EIS issued.

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    In the year 2012, the Company carried out Environmental Impact Assessments (EIA) and Impact Mitigation & Monitoring (IMM)exercises on the projects below:

    S/ No Entity Project

    1 Oando Gas & Power Alausa Integrated Power Plant (IPP) EIA / IMM

    2 Oando Gas & Power Compressed Natural Gas (CNG) Plant EIA/IMM

    3 Oando Gas & Power Greater Lagos IV Pipeline System EIA

    An Environmental Impact Assessment (EIA) isconducted before we commence constructionworks for any project.

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    Our Environmental Initiatives Managing our carbon footprintn Providing free bus services to transport employees from

    different regions to the Companys sites, thus reducing thedaily use of personal cars by staff.

    n As a company with international footprint, we intend to fullyimplement video conferencing facilities at all our corporateoffices globally to cut down on travel costs and reduce ourcarbon footprint.

    n Maintaining targets such as zero spills, zero gas leaks, zerofire incidents, etc. as emphasized in our commitment towardsattaining the ISO 14001:2004 Environmental ManagementCertification (EMS).

    n Training staff on the use of the Paperless Portal, our web-based collaboration tool which allows information sharing anddocument collaboration, thus increasing productivity, reducingpaper usage and wastage. All working documents andarchives are stored on Share point, our enterprise systemsportal, which reduces the need for printing and ultimatelycontributing to the global initiative on the preservation of trees.

    n The introduction of Smart Print to further control printing byreducing printing to the bare minimum and minimizing ourspending on printing consumables. In 2012, this initiativesaved the Group 59.08% in printing costs. Before thecommencement of Smart Print, the cost to the Company ofprinting consumables was N69,549,366,13. Costs ofconsumables are now down by approximately 60% toN28,461,510.

    n Reducing our diesel consumption by enforcing the 10 p.m.generator shutdown policy from Monday to Friday and 5 p.m.shutdown over the weekend by investing in solar-poweredUPS; thus, minimizing our CO2 emissions and carbonfootprints as much as possible within our operatingenvironments.

    n Extensive campaign of O-Gas by our Marketing Company forthe switch from the use of firewood and kerosene to LiquefiedPetroleum Gas (LPG) in households across the nation, as acleaner source of energy.

    n The piping of natural gas to our Lagos terminal (energyquadrant), so that it runs on natural renewable energy asopposed to diesel, thus resulting in savings of over N100mper year.

    n Reduction in carbon emissions generated from operationswhich can in turn be used as carbon credits such as thecompressed natural gas CNG concept and LPGs campaign.

    In 2012, our marketing company embarked on anextensive media campaign with its O-Gas productaimed at reducing the carbon footprint of manyNigerian households by encouraging the switchfrom the use of firewood and kerosene to LPG as acleaner source of energy.

  • Oando Marketing Plc (OMP) developed a solution that aims to provide low-income householdswith affordable and accessible cleaner cooking fuels through low weight 3kg Liquefied PetroleumGas (LPG) cylinders with an integrated cooking ring. LPG is often considered the short-termsolution to deliver modern energy on a global scale for cooking applicat