T h e w orld of LUKOIL’s intern ation al upstream projec ts

OIL JOURNAL

REGIONAL HSE outlook for oil and gas

Regulations in Middle East oil and gas are getting more stringent as the sector plays an important role 6

June 2014

Thi

nkst

ock

COMMUNITY relations in Ghana

Deal will see cooperation on exploration, production and transport of hydrocarbons 2

GAZPROM oil and gas partnership venture agreed

LUKOIL is striving to ensure Ghanian villages are not adversely affected by operations in their local area 3 LU

KO

IL A

rchi

ves

Cor

bis

LUKOIL projects in Iraq not affected by violence

LUKOIL Overseas President Andrey Kuzyaev said that recent violence in Iraq wouldn’t affect the company’s operations there: “Of course we are worried, but we hope the project won’t suffer. There are no additional risks.” The West Qurna-2 field is located in the south, away from events of recent weeks. In other news, LUKOIL President Vagit Alekperov signed an addendum to the West Qurna-2 contract with representatives of Iraq’s North and South oil companies for a faster return on investments and construction of the Tuba-Fao pipeline from the field to the country’s main export hub in Basra.

Editor-in-Chief: Artem ZagorodnovEmail: oiljournal@lukoil-overseas.comAddress: LUKOIL Overseas Service BV, Dubai Properties Group Building, TECOM, DubaiWebsite: lukoil-overseas.com (digital version)Publishing Director: James HewesEditor: Anshuman JoshiDeputy Editor: Eduan R. MaggoPages Editor: Priya MathewSubeditor: Riaz NaqviDesign Editor: Biplob RoyDeputy Design Editor: Nicholas D’SouzaDesigner: Pranith Ratheesan

Published and printed by Al Nisr Publishing LLC. Private circulation only

Oil Journal is LUKOIL Overseas’ official English-language monthly newsletter.

Questions? Comments? Let us hear your voice!oiljournal@lukoil-overseas.com

Cor

bis

Cor

bis

2BusinessInsight

“ W e meet today in a dif-ficult environment: the Hotel Ukraina,” were the sardonic

words Russian Prime Minister Dmitry Medvedev chose to kick off the 14th Inter-national Energy Forum (IEF) at Moscow’s Royal Radisson last month. The venue brought together the energy heads of over 50 countries, the UN, EU, APEC, OPEC, the IEA, International Gas Union and leading global businesses, as well as LUKOIL Presi-dent Vagit Alekperov.

Kandeh Yumkella, Chairman of UN-En-ergy and former Director-General of the UN Industrial Development Organisation, offered a most impassioned speech on the subject of energy poverty.

He lamented that 1.5 billion people worldwide still lack access to electricity, while three billion experience fuel deficits.

Participants hailed the recently unveiled

Joint Organisations Data Initiative — Oil & Gas Transparency (JODI) in a common declaration. Building on a similar initiative for oil that dates to the late 1990s, leading energy ministers and global organisations, such as the UN and OPEC, launched a beta version of JODI-Gas last year, which sought to mitigate volatility in global energy mar-kets by creating a common database of transparent and reliable data. By 2014, 77

countries representing 90 per cent of the world’s natural gas supply and demand had joined JODI-Gas, and in May the JODIGas World Database was opened to the public.

Alekperov met with the energy min-isters of Algeria, Iran, Kazakhstan, Saudi Arabia and the UAE. He was accompanied by LUKOIL Overseas President Andrei Kuzyaev. The next IEA meeting will be held in Algeria in 2016.

Agreement outlines ten-year plan for exploration, production and transportation in various Russian regionsF ollowing last month’s

tragedy off the Ghana coast, an unprecedent-ed search and rescue

operation with LUKOIL’s in-volvement did not go unnoticed by local authorities. The incident also brought LUKOIL’s safety ef-forts to the forefront of discus-sion. Rose Maltby of LUKOIL Overseas’ Houston office reports from the coastal town of Axim, where she engaged local fisher-men and tribal leaders to find out how exploration is affecting their livelihoods and environ-ment (Pg.3).

This month, Oil Journal returns to Iraq to spend a day with Anar Hasanov, Health, Safety & Envi-ronment Manager at West Qur-na-2. He’s the man responsible for the wellbeing of everyone on the ground. And how does our company’s reputation compare to other global energy compa-nies? We asked Sergei Shuklin, Division Head, HSE (Pgs. 4-5).

Geologist Natalya Belyaeva explains how she made an amendment to Charles Darwin’s theory on reefs (Pg. 7), while translator Sergei Bogatyrev shares his experiences working in Saudi Arabia on Pg. 8, where LUKOIL Overseas is looking to launch tight gas production next year.

— Artem Zagorodnov

Editor’s note

Safer measures

L UKOIL President Vagit Alekperov and Alexei Miller, Chairman of Gazprom, the world’s largest natu-ral gas producer, signed a strategic

partnership agreement for the next ten years at last month’s St. Petersburg International Economic Forum. The document foresees the two giants jointly implementing oil and gas projects in Northern Russia’s Nenets and Yamalo-Nenets autonomous okrugs (regions), the Caspian Sea, Eastern Siberia and other areas. Cooperation in everything from exploration, production, preparation and transportation to processing is covered by the agreement, as well as exploration and production of hydrocarbons overseas.

“The real outcomes of the long-standing cooperation between LUKOIL and Gazprom demonstrate its mutually beneficial effect on the businesses of our companies. The 2014-2024 Strategic Partnership Agreement of-fers new opportunities to both LUKOIL and Gazprom,” Alekperov said at the forum.

“We intend to promote mutually benefi-cial strategic cooperation with LUKOIL. Im-plementation of the current and future pro-jects will strengthen the economic potential of our companies,” Miller commented.

Shared historyGazprom and LUKOIL will coordinate

geological exploration, exchange data and utilise each other’s transportation systems. LUKOIL will use Gazprom’s transportation system for its gas and Gazprom will gain ac-cess to LUKOIL’s shipment and loading fa-cilities for its oil. The two companies will continue their existing partnership in raw hydrocarbon supplies and the manufacture of petroleum and gas-chemical products. The new deal also foresees joint research and development in power engineering and developing environmental infrastructure.

LUKOIL and Gazprom already operate a number of joint projects, including supplying gas from the former’s fields in the Bolshek-hetskaya Depression in Northern Russia and in the Caspian Sea, where they are conduct-ing geological exploration and development of the Tsentralnoye field.

Chris Weafer, Senior Partner at Macro-Advisory, says, “Sharing expertise and in-frastructure will allow for greater efficiency and faster development while also keeping costs down for both companies.”

B Y A R T E M Z A G O R O D N O V

B Y G R I G O R Y V O L C H E K

LUKOIL, Gazprom strike new oil and gas deal

The International Energy Forum is held every two years at a different location

No more volatility: JODI-Gas pushes transparency

Pic

ture

s: R

ose

Mal

tby

LUKOIL praised for African Gala Night in MoscowLUKOIL Overseas’ Moscow office received a letter of thanks from the Union of African Diplomats in Russia for its sponsorship of the African Gala Night on June 7 at Moscow’s Renaissance Monarch Hotel. “It served as a good platform for the direct exchange of culture between Russians and the African community in Moscow. We look forward to future opportunities to strengthen collaboration with your company.”

F or travellers accustomed to sprawling, chilly airports and miles of smooth pavement, the journey to Axim, Ghana is an un-

usual one. After an international flight to the lush, green West African coast, travel-lers fly with a small regional air carrier for a 20-minute jaunt from Accra to Takoradi — renowned in Ghana as the Oil City — home to LUKOIL Overseas’ Ghanaian op-erations base.

Community relationsLUKOIL joined the project for explora-

tion and appraisal of hydrocarbons on the

Cape Three Points Deep Water (CTPDW) bloc offshore Ghana in July 2009. While the company has drilled several wells in the block and declared a discovery at the Dzata 1X well, the search for a commercial discov-ery continues.

LUKOIL began its CTPDW exploration drive in May with the Lynx 1X well, utilis-ing a fifth-generation drill ship. Since the Jubilee discovery, drilling has increased dramatically, resulting in many offshore rigs entering Ghanaian waters in territories overlapping the country’s traditional fish-ing industry.

With a marine coastline of 550 km, fishing is critical to Ghana. Nearly 10 per cent of the country’s population works in the fish-ing industry.

Interactions between the exploration and fishing industries have not always been positive. Fishermen can be injured if they are too close to a rig’s flare boom, which is a structure that permits the safe burning of excess natural gas. Cast nets can get caught in the thrusters of the dynamic positioning systems that keep the massive rigs stable against ocean waves. This can result in the release of drilling fluids and well byprod-ucts into the ocean, endangering crews and causing millions of dollars in delays, as well as equipment and environmental damage.

The Petroleum Commission Ghana re-quires operators to conduct community drilling sensitisation campaigns in coastal villages before drilling operations to inform fishermen of the duration and location of drilling campaigns, as well as the manda-tory 500-metre radius safety clearance zone around the rig to ensure the safety of the fishermen and rig crews.

In general, the fishing community under-stands the need for the clearance zone and

3BusinessInsight

Go local and get vocal

Community relations The LOOP delegation sought to dispel misconceptions about the impact of exploration on fishing

At LUKOIL’s recent drilling sensitisation campaign in Axim, Ghana, local fishermen and tribal leaders shared concerns about the exploration’s impact

the long-term economic benefit of growth in Ghana’s oil and gas industry. However, they also contend with illegal offshore trawling, which depletes fish stocks faster than they can replenish. They believe that the light of the drilling rig draws fish into the zone and reduces their catch.

Matching expectationsTo conduct the drilling sensitisation cam-

paign, LUKOIL Overseas Offshore Projects (LOOP) personnel Bruce Falkenstein, Man-ager — License Management, Compliance and Joint Operations; Rose Maltby, Manager — Public Relations, and Rose Afriyie, Com-munity Liaison Officer, travelled to more than a dozen fishing communities with members of Ghana National Petroleum Corporation (GNPC, a 15 per cent partner in the CTPDW bloc) and Petroleum Com-mission Ghana, the regulatory body for the country’s upstream petroleum activities.

One of the new sensitisation campaign initiatives was involvement of not just the leadership of fishing communities, but also the dual authority structures of elected gov-ernment representatives and the traditional tribal authorities.

In Axim and more than a dozen other fishing villages over a four-day period, the LOOP delegation respected the Ghanaian tradition of appearing before paramount chiefs and district chiefs to request permis-sion to engage their communities in the sensitisation campaign.

After permission was granted by local chiefs, the LOOP delegation met with fish-ermen from the local and surrounding vil-lages to advise them of the 60-day drilling campaign and the critical need to stay out of the safety zone during this short time pe-riod. Pictures of the rig and support vessels were distributed.

Nearly every community expressed their frustration at the unexplained drop in over-all fish quantities and their belief that it is related to the oil industry. The LOOP del-egation used the opportunity to help dispel some misconceptions about how we find oil beneath the seabed.

The discussions yielded several interest-ing points, including Bruce Falkenstein’s clarification that “Norway’s seafood indus-try is second only to its oil industry — Eu-rope’s largest oil producer, and the world’s third-largest natural gas exporter. Both of these industries are thriving. It is possible to co-exist peacefully and profitably.”

B Y R O S E M A LT B YLU

KO

IL A

rchi

ves

T hirty-nine of LUKOIL’s prospective managers descended on Houston this month for their second seminar in the world’s oil capital as part of

Skolkovo Business School’s LEADER pro-gramme. Being in relative proximity to the Southern Gulf of Mexico, which is opening up to private companies for the first time in over 70 years, the event was aptly titled Managing Innovation. The students, broken up into six groups, honed the projects they will present in the fall with the help of world-renowned specialists in the oil and gas sector.

Baljit Dhami, Total VP in America, said maintaining a creative working environ-ment is key to fostering innovation even in dire financial straits. He identified good forecasting skills; dedication; an ability to overcome hardship; a focus on results; and personal strength as key characteristics of a successful global upstream manager. The company put these traits to the test at its Willcox holding in the Gulf of Mexico, where it drilled six dry wells at a cost of nearly $200 million each. When Skolkovo

Innovation and diligence key to managementB Y P AV E L B O G O M O L O V Ilya Kadlubinsky

Head of Analytical Accounting Office in MoscowI’ve had a need for such an out-of-classroom ex-perience for awhile. I’ve spent years analysing in-formation coming in from

regions where the company operates, and have always been asking: would it possible to see international upstream investments managed not in fragments, but focused on the entire body of modern realities? With this seminar, I finally see a wide overview of things. The Skolkovo diplomas we get in autumn will not just be a formality — they’ll provide a real impulse to our careers.

Alexandra Toksubaeva

Acting Head of Planning and Monitoring Office for the Northern group of LUKOIL Engineering fields in PechorNIPIneft

In Houston I liked the way “innovation” was interpreted. It turns out it consists of three key elements: easier, better and cheaper. The Skolkovo programme helps, first and foremost, to realise one’s full potential. You can see people gain a broad view of indus-try-wide problems and their potential solu-tions. You not only become a more qualified expert, but develop your personality as well.

Pavel Delia

Chief Geologist, LUKOIL Overseas Cote d’Ivoire (Abidjan)Total and HESS’s presen-tations about managing innovation will help us im-prove the quality of geo-logical research in West Af-

rica. In the long term, each participant will be reviewed in terms of creative contributions to the program, and the top 20 will be pre-sented to management. This review will help form development programmes as part of the company’s long-term personnel policies.

participant Alexandra Toksubaeva inquired as to how the company’s management react-ed to the result, Dhami bluntly replied: “They put up with it. If you’re attached to an idea, you can’t stop. The seventh well brought us great success, as did the following one.”

However Professor Jack Christiansen, Di-rector of the Petroleum Technology Initia-tive in the University of Houston’s College of Technology, emphasised that innovation shouldn’t be an end in itself. “Innovation needs to create value,” he explained, adding that most companies would benefit from reviewing how they conduct meetings and brainstorming sessions. Most companies could benefit from simplifying contact be-tween personnel, he added.

David Randolph of HESS, a company that has managed to quadruple the value of its remaining projects over the last five years after shedding several unprofitable ones, was asked his formula for maintain-ing profitability in difficult circumstances. “We have a thorough screening process for all projects from the very beginning which takes into account the results of neighbor-ing blocks, such as Jubilee and TEN in Gha-na,” he explained.

How to pre-empt a disasterOil Journal steps into the shoes of the man responsible for protecting everyone’s lives at West Qurna-2 in Iraq

4SpecialReport

Ghana office commended for rescue effortGhana’s Civil Aviation Authority has sent a letter of gratitude to LUKOIL Overseas for the company’s role in search, rescue and recovery operations following the May 8 helicopter crash of one of its contractors. The letter praised the extensive knowledge shared by LUKOIL as an example to the industry. Four of eight people aboard died in the crash.

Pic

ture

s: L

UK

OIL

Arc

hive

s &

Cor

bis

W hen 41-year-old Anar Has-anov joined LUKOIL Over-seas as HSE Manager at West Qurna-2 in 2012, he brought

with him a wealth of experience from around the globe — but not the kind most of us have had. In 2008, he was responsi-ble for safely evacuating 211 people from an offshore oil rig during a toxic gas leak in his native Azerbaijan. Two years later, he was working in a support team as a BP crisis manager during the Deepwater Ho-rizon spill in the Gulf of Mexico — one of the worst environment disasters to date.

“The oil and gas industry is one of the most hazardous businesses in the world,” Hasanov contends. “But the demand for our product is one of the world’s highest. Without us, nearly every other industry would stop — that’s why we do it. It makes me proud to help protect people and the environ-ment in this situation.”

B Y E K AT E R I N A S I L I N A A N D A R T E M Z A G A R O D N O V HIS STORY

Anar Hasanov graduated from Baku State University with a mas-

ter’s degree in Oriental Studies in his native Azerbaijan in 1994. This was around the time International Oil Companies (IOCs) first began form-ing consortiums in the region, and Hasanov took advantage of the HSE training they offered to employees. He obtained the British Safety Coun-cil’s International Diploma in Safety Management and the NEBOSH In-ternational Diploma in Occupational Safety & Health and has not looked back since. “We had a lot of room for improvement in HSE among compa-nies originating in the former USSR, and I realised it was my calling,” he says. Hasanov worked as BP’s Deputy H&S Manager at Sangachal Oil & Gas plant and as Director for Crisis Man-agement in Turkey, Georgia and Azer-baijan before becoming Crisis Man-agement Lead at QatarGas and joining LUKOIL in December 2012.

No typical dayHasanov spends most of his four-

week shift in an office at the West Qurna-2 pilot camp making sure similar accidents don’t occur at LU-KOIL. “We’ve had no major incidents during my time at LUKOIL, and I in-tend to keep it that way,” he affirms while solemnly running his eyes over reports from the previous week at his desk. Paper, maps and charts describ-ing technical details of nearly every piece of equipment in operation at West Qurna-2 dominate an otherwise spartan office.

The first meeting with all depart-ment heads at West Qurna-2 — eve-ryone from infrastructure to produc-tion — begins at 7am in the Conference Room in Pilot Camp. “The key is to ensure everyone knows what every-one else is doing,” he whispers while taking notes with a pen. Hasanov is referring to the so-called SIMOPS (si-multaneous operations), which are a critical part of HSE at any major pro-ject. “There’s not really a typical day in this line of work,” he explains.

After returning to his desk to plan the week’s work, he heads back to the open space office for a word with his team. “I assign one person to each of the teams working at West Qurna-2,” he says in a hurried pace. “This is the focal point of contact for that group. They relay HSE issues to this person, and they pass some to me.”

Nothing out of the ordinary is re-ported, and Hasanov is soon putting on his bulletproof vest as an armoured

SUV convoy waits to take him to the Central Processing Facility (CPF), a 15 minute drive across 45-degrees of desert heat. “You have to keep in mind this is an international team and people come with varying cultures of workplace safe-ty,” he says. “Our mission is to get them all up to a single set of standards. I don’t believe in policing — that’s a part of HSE work, but it’s inefficient. You have to ex-plain to people why it makes sense for them to behave in a certain way — no policing is required.”

Details about CPF “We had issues with what’s called

Personnel on Board, or POB,” explains Hasanov. “This procedure requires each facility to keep an accurate log of every single person’s whereabouts during the shift. At a potentially dangerous produc-tion site, this information is absolutely critical in case of an emergency. Our rescue team needs to know if everyone is safe and the whereabouts of any injured personnel. Otherwise they may risk their lives for no reason.”

After passing through another security gate, he arrives at the CPF complex, the heart of the 340-square-kilometre con-tract territory. All oil produced from the dozens of wells dotting the area passes through the CPF before being sent off via the export pipeline corridor. Currently, this is over 200,000 barrels a day.

Culture of SafetyHasanov’s day ends back in his office

and often goes late into the night. “The key is to analyse risk and prevent acci-dents before they happen,” he says while going over more paperwork. In a few days his shift ends and he will fly back to his family in Baku. “The most rewarding part is seeing people change their behaviour and attitude toward safety and apply those new habits in their personal lives among their families and friends,” he continues.

“LUKOIL Overseas is a young company among the likes of Shell and Exxon Mo-bile,” he adds. “We’re putting in the foun-dation, the structure of the HSE culture that’s developing here. It’s great.”

HSThe Health & Safety division is re-

sponsible for protecting employees in the field, providing them with comfort-

able and safe working conditions. The newest safety technologies and gear on the market are used to that end. At West Qurna-2, the HS team purchased beige working robes instead of LUKOIL’s tra-ditional red ones to minimise fatigue and overheating, and equipped each employ-ee with protective equipment including personal gas detectors. The team offers on-site training.

ENVLUKOIL Overseas was one of the first

companies in the Mesopotamian marsh region to conduct an environmental baseline study, completed in 2010. Since 2011, the company has been monitoring changes to the environment with a mobile laboratory, while encouraging local con-tractors to abide by set rules. Elsewhere in the world, the team develops strategies for dealing with oil spills and conduct-ed trainings using the best international practices. It also implements green stand-ards for utilising emissions at production sites. LUKOIL Overseas was the first oil company to receive a positive evaluation of its environmental impact assessment from Iraq’s Ecology Ministry.

SIMOPSAmid the rigorous schedule of the West

Qurna-2 project, it became clear LUKOIL Overseas would have several complex pro-cesses (e.g. drilling and construction) oc-curring simultaneously at the same place. That’s why the SIMOPS manager was introduced. They are responsible for en-

Please describe LUKOIL Overseas’ ex-perience implementing best practices in HSE

Changing the mentality of people used to working under different rules is a long-term process. That’s why HSE specialists conduct conduct no fewer than four safety drills a month and relay feedback to per-sonnel at each of our production sites. At the Kumkol oilfield in Kazakhstan, for ex-ample, we conducted a drill involving the Ministry of Emergency Situations, fire bri-gades and medical personnel.

We’ve had challenges working with SI-MOPS (simultaneous operations) where we have several types of activities — drill-ing and construction, for example — going on at the same time. While there are dif-ferent brigades working on these tasks, in the case of, say, a gas leak, everyone must evacuate the area without exception. The Yamama reservoir at West Qurna-2 is rich in hydro sulphuric H2S gas and a failure to evacuate could lead to heavy casualties. Even a small concentration can cause in-stant death.

Another problem involved construction work going on in the vicinity of the well pads. One small spark from a welder can theoretically set off a massive explosion. We would find cranes operating above workers — this creates additional risks for accidents. Our job was to identify and mini-mise all of these risks.

There was a lack of coordination, and that’s why we introduced SIMOPS manag-ers. They are responsible for implementing HSE across all groups and contractors in a single area such as a well pad.

I’m happy to report that by the end of last year we made significant progress dealing with this problem. We held drills here in the Dubai office when the Moscow employ-ees were relocated. Fortunately, everyone evacuated as they were supposed to.

The alarm was so loud that we didn’t re-ally have a choice

(Laughs) Yes, the signal essentially pushes you out of the building. We are perfecting the process of gathering every-one in a safe location and facilitating easy access to the building for rescue services. In addition to identifying risks, we have to develop action plans of what to do in case an incident occurs and how to prevent it from ever taking place.

We’ve also created safety alerts, which are distributed among staff. These feature information about acci-dents that occurred, with visuals, and explain how to prevent them in future. We are passing out plastic cards with key emergency numbers that person-nel can keep in their wallets.

How does this experience com-pare with other energy giants?

We all face the same problems in HSE. Companies with a more devel-oped HSE culture experience fewer accidents. It’s a culture where each employee analyses the risks before undertaking any action so that he can come home alive and well to his loved ones. He studies it not just from his own perspective. The worker will be able to point out safety violations to colleagues and correct their actions before they lead to accidents.

How are you developing the corporate culture at LUKOIL Overseas?

Our main goal is to improve HSE culture at LUKOIL. One way we do this at West Qurna-2 is by rewarding teams for accident-free work and disciplining team leaders who did not foresee hazards in the workplace. We have competitions for the safest work and ecological environment. We hold semi-nars on basic HSE principles and proper cal-culation and prevention of risks.

Have you faced challenges overcoming an old mentality toward safety within the company?

Russian legislation tends to be based on experience — measures developed to pre-vent accidents that already occurred from repeating — while international legislation is founded on risk analysis of what dangers employees themselves identify and a pre-vention of such incidents occuring. This is what we’re trying to implement at LUKOIL.

What have been the most signifi-cant safety incidents in recent years? One case involved an employee falling down a shaft because he hadn’t checked his footing, while another involved somebody tripping and falling down a staircase. It’s impossible to completely eliminate human

error, we examine dynamics across years and aim to minimise it.

How does LUKOIL Over-seas’ safety record look like? Are we providing a safe working environment for employees?

We have a methodology for analysing our success

at providing a safe environ-ment and we publish quarterly

reports. Management sets targets for a Total Recordable Incidents Rate

based on figures across global energy companies.

This is a measure of recordable work-place injuries (deaths, non-fatal occupa-tional illness and injuries) normalised per one million working hours a year. Our data using this methodology is in line with leading oil and gas companies [see chart].

— Sergei Shuklin graduated with an En-gineering degree from Kirov Polytechnical Institute in 1981 before completing two years’ military service in Russia’s Far East. He has worked at LUKOIL since 1995, when he began as an HSE specialist in his native Kirov. In 2002, he joined LUKOIL Overseas as a Senior HSE Specialist. Shuklin has worked as HSE Division Head since 2011.

How to pre-empt Sergei Shuklin, Division Head, HSE, on keeping workers safe

In safer hands

Protective policies HSE is a key element

of West Qurna-2’s daily operations

LUKOIL Overseas HSE (as of 9.6.14)

4,170days without a workplace emergency

220 days without accidents leading to lost work time

$14.92 million — total amount spent on HSE in 2013

4 safety drills held monthly at each production site

150 HSE employees at West Qurna-2 *26 of them are responsible only for capital construction operations

main project subdivisions: Health and Safety (HS), Environmental protection

(ENV), SIMOPS (Simultaneous Operations) and Emergency Rescue Services (ERS)

4

It’s a culture where each employee analyses the risks before undertaking any action so that he can come home alive and well to his loved ones.”

‘‘

suring a coordinated safety strategy and minimising risks that occur between dif-ferent divisions working at one place.

ERSThis team is the first to respond to any

emergency. Members have vast experi-ence working under extreme conditions in places like Iraq and Afghanistan. The company recently added six new rescue vehicles to its fleet at West Qurna-2.

Total Recordable Incidence Rate

LUKOIL Overseas

Shell

Conaco

Total

Hess

Statoil

0.7

1.3

0 0.5

1 1.5 2 2.5

3 3.5

4 4.5

5

0.32

2.2

0.8

4.2

0.4

1.4

0.38

1.8

0.7

4.4

0.6

1.8

0.29

1.6

0.6

4.1

2010 2011 2012

TRIR is a measure of recordable workplace injuries (occupational death, non-fatal occupational illness and non-fatal injuries that involve one or more of the following: loss of consciousness, restriction of work or motion, transfer to another job or medical treatment other than first aid) normalised per one million working hours a year.

6IndustryVoices

H ealth, safety and environment (HSE) management has become a core issue for the global oil and gas industry as environmental

disasters and their heavy publicity have in-creased regulatory scrutiny.

Companies are stepping up their efforts to make oil exploration and exploitation safer and environmentally sustainable — overall spending on the sector is forecast to surge 60 per cent to $56 billion by 2030 from $35 billion in 2011, according to US-based consultancy Lux Research. It adds that the result should be a continued reduc-tion in the rate of incidents, which has al-ready been halved over the last decade.

Due to their complex nature, oil and gas operations always involve a certain risk level that is higher than in other industries, and sometimes isolated incidents or mis-takes can have great impact or even lead to disaster. Following the Deepwater Horizon catastrophe in 2010, governments have set clearer directives on how to manage risk levels and how to integrate this risk man-agement into the design and operation of any oil and gas facility. “With producers shifting to extract resources from increas-ingly harsh environments, new technolo-gies and drastic innovation are required to improve HSE practices and make the production and transportation of hydrocar-bons safer,” says Rick Nariani, an analyst at Lux Research.

The price of safetyCurrently, most of the spending for HSE

goes into upstream operations at $0.70 per barrel of oil equivalent (BOE) — compared to midstream operators that spend less than $0.01 per BOE. More than 39 per cent of all HSE expenditure happens in the US, where spilling a single barrel of oil currently costs producers $8,000 in penalties, making the US the biggest market for HSE in the oil and gas industry. But the issue is being tak-en more and more seriously in the Middle East, where a great share of the world’s oil and gas is produced.

“It is the job of an HSE manager to im-plement health, safety and environmental issues in the selected solutions in order to obtain a risk level that is acceptable and as low as reasonably practicable, or ALARP,” says Jesper Thomsen, Director of Ramboll Oil & Gas in Abu Dhabi.

Managing HSE risks can be complex, as it is about risks to people, the environment,

As Health, Safety and Environment (HSE) regulations in the oil and gas industry in the Middle East become more stringent, the sector plays an increasingly important role in the management of hydrocarbon operations

B Y A R N O M A I E R B R U G G E R S P E C I A L T O O I L J O U R N A L

May 22, 2014Russian oil giant looks east

Andrei Kuzyaev: The Middle East is a key region for our growth. We have our West

Qurna-2 project located in Iraq. We have a large exploration project in Saudi Arabia and we’re going to have more projects in the Middle East. So Dubai just became a new center point for our corporate service centre.

John Defterios: People see all the lack of security, 3,000 killings in 2014. Does it affect business at all where you operate?

AK: Security is a priority aspect for us. Up to date we’ve had zero cases of kidnapping and zero terrorist attacks in our contract area. We know it’s a hard time in Iraq for the Iraqi peo-ple. We think that now stability in the country is better.

JD: You talk about new projects in the Middle East. Beyond Iraq, Saudi Arabia, Egypt, what are you looking at today?

AK: After we started production at the West Qurna-2 field in Iraq, we’re going to enter new exploration projects in Iraq. We’re also considering several projects in Iraq with discovered fields. One of them is Nassiriya and some oth-ers. In Saudi Arabia, we’re considering a tight gas project. In Egypt, we’re not looking for expansion.

Press highlights

Aired on Marketplace Middle East

June 6, 2014

LUKOIL: new contract helps Iraq, investors

LUKOIL have announced chang-es to their contract to work on West Qurna-2, following talks

with the Iraqi Minister of Oil Abdul Kareem Luaibi.

The new alteration expands the scope of the work to include the Tuba-Fao pipeline, as well as speed-ing up the process of cost recovery for investors.

Of the expanded scope of the work on the infrastructure of the giant West Qurna-2 field, LUKOIL presi-dent Vagit Alekperov was upbeat:

“The Iraqi export system requires upgrading to accommodate growing production due to a number of li-censing rounds conducted in recent years. The construction of the Tuba-Fao pipeline will provide for a direct connection between the West Qur-na-2 field and the country’s largest export terminal, creating opportuni-ties for further production growth from the field”.

production and reputation at the same time, and reducing these risks is key to ef-ficient and sustainable production.

“HSE management is not an added layer of procedures; it is a way to organ-ise the elements for ensuring continuous improvement of the health, safety and environmental performance in an organi-sation,” adds Johannes Petersen, Project Manager for Health and Safety Manage-ment at Ramboll.

Regional rulesThe UAE state-owned oil company AD-

NOC acts as the de-facto regulator of HSE matters in the Abu Dhabi oil and gas sec-tor, which is by far the largest in the coun-try. ADNOC has set up codes of practice as standards by which the group manages HSE. They refer to UAE laws and regula-tions and standards used by the interna-tional oil and gas industry. This applies to all subsidiaries of the group, and the implementation of such management sys-tems is expected from all contractors.

“We are equally committed to the pre-vention of pollution, protection of the environment, conservation of the natu-ral resources and to sustainable devel-opment,” explains Abdul Munim Saif Al Kindy, Chief Executive Officer of ADCO, responsible for ADNOC’s onshore oil op-erations, adding that this includes “hold-ing all levels of management, supervision and employees functionally accountable for HSE performance”.

Oil and gas searching for improved HSE

Thi

nkst

ock

Questions? Comments? Let us hear your voice! Write to oiljournal@lukoil-overseas.com

HSE management is not an added layer of procedures; it is a way to organise the elements for continuous improvement of the health, safety and environmental performance in an organisation.”

‘‘

7

N atalya Belyaeva became enthralled with reefs during a student trip to Russia’s southern coast with her husband. Living in a tent by the

Azov Sea, she studied underwater bioherm’s limestone at Kazantip in the Crimea Penin-sula. Belyaeva remembers a particularly calm night. The couple sat in complete silence, wary of disturbing the harmony of their sur-roundings, until they heard a splashing noise coming from the water. It was a baby dolphin. Belyaeva got up and gently eased down the slope into the water. The dolphin, rather than being afraid, swam circles around her, illu-minated by fluorescent plankton on the sur-face of the water. “I’ve seen this phenomenon many times since then with my daughters, but that first time it was mystical,” she says.

She would go on to work as a Professor in Syktyvkar and Ukhta in northern Russia and earn a PhD at Moscow State University on sedimentology in 2000. By the time she joined LUKOIL in 2004, she was raising two daugh-ters and two godchildren as a single mother. Her distinguished career in exploring oil and gas deposits spans 37 years, taking her f r o m Indonesia to Saudi Arabia.

Belyaeva witnessed the ef-fects of some of the bloodi-est conflicts in the Middle East in the latter half of the 20th century first-hand. “From a modern perspec-tive, it’s completely unfair to compare countries, even neighbouring ones, which have been through war with those that haven’t.”

B e l y a e v a ’ s proudest profes-sional accom-plishment is her contribution to the theory of how coral reefs evolve, first hy-pothesised by Charles Darwin.

After spending around 12 days observing coral reefs and atolls on the Cocos Islands, Darwin developed a theory on their formation which he published after his voyage on the HMS Bea-gle from 1831-36.

Professor G. Wilson likened reefs, which have existed since the Cambrian period over 500 million years ago, to a Shakespearean play in which a changing series acts out a timeless plot. Some reefs die, others are born, but the laws of formation remain unchanged. Darwin’s theory explains the genesis of all reefs, cate-gorising them by type. He believed they form during a period of slow subsidence on the sea bottom, when gradual deepening is compen-sated by the formation of corals.

This was proven in 1967, when a special com-mittee began studying the effects of nuclear

testing near Bikini Atoll in the Pacific. “My amendment to the theory was that reefs form when the sea bottom is experiencing very fast subsidence (over a hundred me-tres in a million years), so the reefs are formed very quickly,” explains Belyaeva. “I would never have achieved success without my teachers and by standing on the shoulders of giants such as Charles Darwin. He considered the theory on reef formation as one of his greatest ac-complishments. Any geologist who has worked with reefs will confirm this.”

Natalya Belyaeva, who is celebrating ten years at LUKOIL, talks about her career and how she improved one of Charles Darwin’s theories

L UKOIL’s racing team took second and third place in the first two rounds of this year’s Dubai Kart-drome Endurance Championship,

which took place in February and May, re-spectively. The event is one of the Middle East’s largest karting championships, attract-ing teams from dozens of countries. Each round features a different task for the teams to complete: 12 hours of non-stop driving, 600 laps covering 700 kilometres, and the biggest challenge of all — the 24-hour race.

“We have a motto,” says Rasul Akhmet-shin, Team Captain and Senior Of-ficer at the company’s Contract & Procurement Department. He has enjoyed karting as a hobby for the last eight years. “‘What Rus-sian doesn’t like to drive fast?’, asked

19th century classical writer Nikolai Gogol. Karting is the first step to big motor sports, the world of love for speed and fair play,” ex-plains Akhmetshin.

All five of LUKOIL’s team members —Akhmetshin, Oleg Varnin, Alexei Dubrov, Konstantin Ilin and Yaroslav Kaydin — share the task of driving the company’s car throughout the gruelling event. A driver

can’t spend more than 90 minutes at the wheel without taking a 40 minute break. “The top spots were all tak-

en by professional drivers, while we’re just doing this for fun,” adds Akhmetshin.

“The biggest challenges are the weather — it can get

pretty hot, and we conduct the races in all kinds of cli-mactic conditions

— and working together as a team,” he says.Following the results of the first two

rounds, LUKOIL’s team took third place among all corporate participants. “I would like to thank LUKOIL Overseas’ man-agement for supporting the team,” adds Akhmetshin. The third (700 kilometre) and fourth (24-hour) rounds will take place in October and November, respectively, and will also feature Akhmetshin and his team.

LUKOIL takes top spots at Dubai Kartdrome Endurance Championship

LUKOIL conducts Baltic Sea environment trainingLUKOIL conducted tactical training exercises for localising and liquidating the effects of an oil spill on its Arcticheskoye platform off the coast of Russia’s Kaliningrad region. Arcticheskoye is preparing to drill several wells in the area by June 2015. The exercise simulated collecting spilled oil from the sea and transporting it with tankers for onshore refinement.

Cor

bis

US drill rigs up to 1,866

The US drilling rig count edged up another nine units to hit 1,866 by the end of May, Baker Hughes reported. All nine were land-based rigs (totaling 1,792), while the remaining 74 in operation are either inland water or offshore rigs. The vast majority are horizontal (1,251) vs directional and oil (1,539) vs gas rigs. Canada jumped 44 units by the end of May, bringing its total to 98. The biggest growth in demand was in Oklahoma, Texas, California, Wyoming and Alaska.

Europe in power crisis

Europe is facing a major structural crisis in power reliability, according to a recent report by the International Centre for Natural Gas Information. Unlike in the US, the price of coal in Europe is about a third of natural gas. Gas demand for power has plummeted by one-third from its 2010 peak, with coal-fired capacity under pressure and electricity from renewable energy not rising at the same pace. The report calls for a CO2 price high enough to encourage the transition to gas.

Cor

bis

Cor

bis

Pic

ture

s: L

UK

OIL

Arc

hive

s

CorporateResponsibility

The scientist

Natalya Belyaeva (pictured above with colleagues at the South Oil

Company’s soil sample depository in Iraq) graduated in Fossil Fuel Geology and Geochemistry in 1977 from Mos-cow State University and obtained a PhD in sedimentology in 2000. She is a world-renowned scientist, author of over a hundred scientific works, and is credited with discovering the first endoskeleton of the extinct Arthro-dira fish, and for her amendment to Charles Darwin’s theory on reef for-mation. The Radiolaria Beliaevorum (an ancient single-celled organism) is named after her. Belyaeva joined LUKOIL Overseas since 2004.

Pic

ture

s: L

UK

OIL

Arc

hive

s

BY OLGA SHKABARDNYA

Team LUKOIL Rasul Akhmetshin, Konstantin Ilin, Oleg Varnin, Yaroslav Kaydin and Alexei Dubrov

Standingon ShouldersDarwin’s

The Way It Was

Halycon days

Belyaeva with peers in

a student dormitory, 1976

For obvious reasons, it is better to avoid visiting Saudi Arabia during the summer months. As with everywhere else in the Middle East, the autumn and spring months are the best time for a trip. However, due to its proximity to the sea, the weather in the Eastern province is generally very pleasant even in the summer.

A desert quarterOne of the most beautiful places to visit

in Saudi Arabia is the famous Rub al Khali, or Empty Quarter, which is the largest sand desert in the world. It has a special place in the heart of every Arab as it is here that the Bedouin culture was born. In terms of area, this desert is larger than France and occupies not only Saudi Arabia but also parts of Yem-en, Oman, and the UAE. One of the greatest books about the desert and the lives of the Bedouin was written by British explorer Wil-fred Thesiger, titled Arabian Sands (1959). I would also recommend that you take a look at the stunning images of the desert snapped by George Steinmetz, a regular contributor to National Geographic. You will discover that the Empty Quarter is not empty at all.

— The writer, a translator at LUKOIL Over-seas’ Dubai office, worked as an interpreter for an engineering construction company in Saudi Arabia during 2009-10.

Photo of the Month

8 LUKOIL and partners mark a decade of KarachaganakOn June 9, Karachaganak Partners (ENI, BG, Chevron, LUKOIL Overseas and KazMunaiGaz) passed the remarkable one-decade milestone. On June 9 2004, the first vessel with Karachaganak crude oil was loaded at CPC Marine Terminal in the Black Sea. Since then, 850 vessels have been loaded by Karachaganak — a total of 75 million tonnes of crude oil. Export of crude oil via CPC will be increased after the completion of the CPC expansion project.

GlobalPerspective

This photo of a typical desert sun-set, so familiar to the hundreds of LUKOIL Overseas employees sta-

tioned through Iraq, Saudi Arabia, Egypt and Dubai, was taken by Vadim Ilin out-side the West Qurna-2 construction site earlier this year. He says this scene is encapsulated in his mind as a momento of his long experience working in the Middle East. Ilin is currently a drilling manager at the recently launched West Qurna-2 field in Basra, Iraq.

LUKOIL employees who are handy with a camera are welcome to send any photos snapped in any of the countries we oper-ate in to oiljournal@lukoil-overseas.com.

In FocusWhere to eat

■ Saudi cuisine is based on tradi-tional Middle East staples such as mutton, poultry, lamb, fish, eggs, milk, rice, vegetables and spices. You will also find plenty of Indian, Pakistani, Filipino and Thai restau-rants, along with local and interna-tional food chains. For fans of Thai cuisine, I recommend Thai House in Al-Khobar for a good Tom Yum. You should know, however, that restau-rants often have two sections: a family room and a room reserved for single men. Alcohol is forbidden in the Kingdom, but there are vari-ous non-alcoholic brands available.Coffee lovers should try ‘kahwa‘ a traditional Saudi Arabian brew, which is made from unroasted green beans and cardamom. Where to stay

■ Sofitel is based near the popular Corniche area. Mövenpick Hotel offers views of the Gulf shore. Le Méridien in the centre of Al-Khobar offers good fitness facilities and an outdoor swimming pool.

LUKOIL Saudi Arabia

The Saudi office is based in the APICORP building on Coastal road in Al-Khobar. It is manned by a team of 29.

Phone: +966 3 859 7507

Any trip to Saudi Arabia would be incomplete without a visit to the eastern part of the country. Along with many other superlatives, the

Eastern province is the largest of the King-dom. Consisting of three major cities: Dammam, Dhahran and Al-Khobar, which are also known as the triplet cities. Origi-nally sleepy little villages dependent on fishing and pearl diving for survival, they were transformed into commercial and in-dustrial centres, virtually merging into one another and forming a huge agglomeration with Dammam as capital.

Sands of goldThe oil industry

in Saudi Arabia began in the East, which to

The oil-rich country provides tourists with a plethora of spectacular natural attractions

Saudi Arabia

Each month, Oil Journal will publish a travel piece from a country where LUKOIL Overseas operates. For feedback or contributions, write to oiljournal@lukoil-overseas.com

Cor

bis

Pic

ture

s: C

orbi

s &

Thi

nkst

ock

Vad

im Il

in

B Y S E R G E Y B O G AT Y R E V date remains the most oil-rich region in the world. No wonder why Saudi Aramco, the national petroleum and natural gas company, has its headquarters in Dhahran.

My discovery of the Kingdom of Saudi Arabia began in the autumn of 2009 when I came to Al-Khobar from Bahrain via the

King Fahd causeway, which is the coun-try’s bridge to Bahrain. The distance from Manama to Al-Khobar is around 50km,

but if you travel during day-time, it may take you from

one-to-four hours to get to Saudi Arabia, de-

pending on traffic. The bridge itself is 25km long and the border between

the two coun-tries lies on a small island in its middle.

The golden sands Hit the road The King Fahd causeway

links Al-Khobar in the Kingdom of Saudi Arabia to Bahrain