Manuel Ortiz Monasterio
Director
ERM
Alberto Sambartolome
Alberto Sambartolome
Partner
ERM
/
View from the Top

Getting Social and Environmental Performance Right

Wed, 01/21/2015 - 14:52

Q: What are the social and environmental risk factors when working in Mexico’s onshore fields?

MO: One of the main social risks companies will face is their own newcomer status. We are talking about mature fields, where the neighboring communities are accustomed to the way PEMEX has worked for decades. However, companies that will soon enter the country will have to develop their own social approach, conduct their own studies, identify the needs of the communities, and build rapport with community leaders. Of course, PEMEX has not always shown the best social practices, so new companies will face further distrust because of this.

Q: How valuable can the participation of the federal, state, and local government be in social matters, and do you believe that SENER should take this responsibility?

AS: The new legal environment is so new that nobody is entirely sure on how it will work. Companies will still have to carry out environmental and social impact assessments, but the current scenario is different enough to bring new challenges to the operating companies. We are still unclear about SENER and ASEA’s level of participation in this matter, as it is unknown to what extent SENER will support private companies with regards to their social approach. However, based on our experience and our customers’ comments, I can say that the best path is to work side-by-side with the government. This is better because communities tend to have complaints about previous situations that companies should not deal with by themselves, since they were not involved. The government should be present at all times to help companies understand the challenges associated with investing in Mexico and how to overcome them. If the government supports companies with the social aspects, they can combine expertise and knowledge. Companies can bring their international experience and the authorities can provide their understanding of the Mexican people.

Q: What do you think the communities will value among the things that oil companies can provide?

MO: There are both positive and negative impacts related to oil and gas operations. If a company needs to use plenty of water, it may need to invest in building infrastructure to cover that necessity. This will have an impact on flora and fauna, so having plans to relocate or investing in a form of compensation to offset the impact can be highly appreciated. Furthermore, companies may want to hire locally so that part of the economic benefits go to the local communities. To do so, companies need people with better skills, so they might want to invest in local schools and training centers. Every project has particularities, so there is not a single formula. Each project has to assess its impact on the community it is working in and, based on that, come up with an investment plan.

AS: Communities will value companies that truly engage with them and seek mutual benefits. Many communities may not know exactly what they need to cover their needs and to be sustainable. This gives companies the possibility to engage with the communities and help them determine what might be best for them. In this way, communities can truly become part of the projects.

Q: Are oil companies sufficiently aware of non-technical risks before participating in bidding rounds?

MO: Large companies, which have the most advanced sustainability practices, are assessing non-technical risks before bidding in the rounds. Such companies see community relations as an investment because they have faced difficulties in other places. Not considering this properly has resulted in conflicts and problems, leading to the costly shutting down of activities.

Q: Is there a correlation between a company’s size and its approach to environmental and social responsibility?

AS: The size of a company does not matter as there are different ways to manage and to evaluate these risks. Some companies see reputation-related risks as one of the greatest concerns while others prioritize economic risks.

MO: In most cases, large companies will have more advanced policies and processes since they have faced bigger issues. However, smaller companies see what happens to larger players in the media, so they learn the needed lessons to avoid finding themselves in a situation they cannot handle.

Q: How can ERM help clients throughout the whole life cycle of their projects?

MO: ERM sees impact assessments as an iterative process, making it better to carry them out during the initial phases of a project. These assessments should influence the design of a project. I have seen companies turning away from their original path and building longer pipelines to avoid specific social or cultural heritage issues. This means that projects might drastically change but will be ultimately completed, as opposed to not happening at all. ERM has a group within the company that follows the whole lifecycle of a project, from the design stage up to abandonment. After all, the dismantling of an operation has other social and environmental impacts. What happens to 15,000 workers when a project ends? We help clients understand this sort of impact and guide them on the relevant mitigation methods. At this stage, we are also evaluating social and environmental impacts, but there are a lot of other risks that will come up as time passes. For example, HR and safety processes will be imperative for avoiding accidents in new operations. To cover this area, we just acquired a boutique company from Norway that specializes in safety. In addition, we have a solid team that is specialized in general safety for the oil and gas industry. We are looking forward to seeing how the industry will evolve and how ERM can support its clients.