…the year in reviewInternational Association of Oil & Gas Producers

For more than 30 years, OGP has served the industry that finds and produces the oil & gas on which the world relies. In addition to representing upstream interests before

global and regional bodies such as the United Nations and the European Union, we identify and widely disseminate best practices in safety, the environment and other aspects of upstream operations. OGP was particularly active in 2005 – and for good reason. It was a year when serious questions were raised about the viability of future supplies of oil & gas. Ironically, 2005 also saw significant efforts to limit the industry’s access to many of the areas where we are most likely to find and produce the reserves needed to meet long-term global demand.As ever, OGP helped the industry to respond to these challenges. As part of this, in 2005 we continued to inform decision-makers on the true impact of our operations. In addition, we increased our efforts to help drive improvements in upstream operations around the world through the spread of new technology and innovation. The results: greater safety and less environmental impact – both of which should lead to improved public perceptions of our industry. We also enhanced efficiencies by continuing OGP’s tireless promotion of global standards for a global industry.In these few pages we can only provide a glimpse of the range of OGP’s activities and accomplishments in 2005. For a more comprehensive view, and to learn about the issues that OGP is currently tackling, I suggest a visit to the Association’s website: www.ogp.org.uk.Whatever OGP accomplishes, it is through the combined efforts of our member compa-nies and organisations and OGP’s dedicated secretariat in London and Brussels. For my own part, and on behalf of OGP’s Management Committee, I would like to thank them.

Stig Bergseth, April 2006

Highlights of 2005

Security of supply: a fundamental issue

The year 2005 saw high crude oil prices and temporary shortage of product

supply. This was due to a combination of factors: growing market demands from developing economies such as India and China, political instability in major produc-ing areas and a series of severe storms that shut in Gulf of Mexico production for weeks at a time. At least one of these factors was short term. Political instability could remain a fact of life. And though growth in energy demand from emerging economies is likely to continue; it will probably not be at the same dramatic rate seen in 2005. Nevertheless, worries about the long-term viability of oil & gas became a concern, particularly in Europe.

Chairman’s introduction

Therefore, OGP began an information campaign on security of oil & gas supplies. It was directed at European decision-makers and included a meeting between OGP Chairman Stig Bergseth and EU Energy Commissioner Andris Piebalgs. Throughout, the message focused on the long-term viability of oil & gas (accounting for as much as 60% of the energy mix even a quarter-century ahead); the level of investment required to build the enabling framework; the importance of free and open markets in oil & gas and the benefits of diverse sources of supply. According to research commissioned by OGP at the end of 2005, this campaign succeeded in raising awareness among Brussels decision makers. Some 80% of

those polled believed that oil & gas would be viable fuels for decades to come.

OGP EU Affairs Manager Norbert Liermann and Nina Commeau-Yannoussis from the EU Commission visit the Burgan field in Kuwait

Five new members in 2005

The bigger OGP is, the better the Association can represent the upstream

industry it serves. In 2005, five new companies joined OGP. They were TNK-BP, MI-SWACO, Perenco, Oil Search Limited and Hellenic. By the end of the year, OGP has a total of 60 members. Collectively, they produce more than half of the world’s oil and over a third of its gas through operations in some 80 countries.

Soundings on marine life impact

Just when regulatory agencies in Australia, Brazil, Canada, the UK and

the USA were starting to re-evaluate and update their rules on seismic exploration, OGP embarked on a two-phase joint industry project (JIP) to improve knowledge

concerning the sound generated during upstream operations

and its potential effects on marine

life.

Phase 1 was a scoping study, meant to identify the gaps in existing knowledge. The results were the subject of a workshop organised by OGP in Halifax, Nova Scotia in September. The meeting attracted lead-ing figures from national regulatory agen-cies, academic and research institutions, maritime industries and non-governmental organisations as well as members of the upstream industry. The knowledge gaps identified during Phase 1 were reviewed and discussed. Output from the workshop helped to refocus the JIP’s future activities.At the end of 2005, OGP proposed the launch of the second phase of the JIP. Participating oil & gas companies, trade associations, service companies and other relevant organisations will provide the funding, expected to be around $20 million over three years.

Upstream safety: long-term improvements & new priorities

In a study based on the biggest database in the history of upstream safety report-

ing, the annual OGP Safety performance indicators report found the continuation of an improvement trend. Based on an analysis of almost 2.3 billion work hours of data worldwide from 37 companies operating in 78 countries, there was a 6% improvement in lost time injuries recorded in 2004. Moreover, the injuries in 2004 were slightly less severe than in the previous year.The figures for fatalities were less encour-aging. There were 120 company and contractor deaths reported in 2004; nine more than in 2003. And over half of these fatalities were transport-related.That is why, as part of the industry-wide effort to reduce upstream deaths and injuries in 2005, OGP focused on transport safety. This led to publication of a new set of safety recommended practices aimed at eliminating serous road traffic incidents and fatalities. It is applicable to all land transport activities in the upstream industry, including all company and contractor vehicles and drivers operating on company roads and premises as well as on public roads. It also covers other transport activi-ties including moving personnel and freight and mobile plant activities.In November OGP held a two-day Transporting People & Equipment Safely conference in Cairo to determine the best ways to improve safety performance. The meeting attracted more than 230 line man-agers and safety experts from 29 countries across six continents. The event also included participation from transportation services providers, regulators, equipment manufacturers and consultants.Having focused global attention on the issue of transport safety, in 2005 the Safety Committee met to determine a new theme for the subsequent year. Building on the results of a workshop held in 2004, they announced that their 2006 priority would be on managing major incident risks.

New committee established: Surveying & Positioning

Early in 2005, OGP’s Management Com-mittee approved the establishment of

the Surveying & Positioning Committee. It was formed from a previously independent body, the European Petroleum Surveyors Group, composed of specialist surveyors, geodesists and cartographers from oil companies operating within Europe. It was regarded as the leading authority on geographic surveying and positioning within the international oil & gas industry.As an OGP standing committee, Surveying & Positioning now has a wider geographic remit than in its previous, purely European, existence. It gives OGP unrivalled technical

leadership in the field of surveying and positioning and promotes wider adoption of best practices in these areas. Moreover, the Surveying & Positioning Commit-tee is better placed to support oil & gas producers, influence decisions by governments and regulators and create closer links with standards organisations.

The environment: a new process, a new subcommittee & a new report

Early in the year, OGP went public with a new Environmental, Social and Health

Risk Impact Management Process – more popularly known as E-SHRIMP. This flexible industry approach simplifies the essential task of assessing and managing every aspect of an oil & gas project throughout its development cycle.In order to provide specific focus on marine protected areas and species – which have a bearing on security of supply – the Envi-

ronmental Quality Committee established a dedicated sub-committee. This new group, which first met in the second half of 2005, will develop a long-term strategy on the is-sue, while simultaneously monitoring – and influencing whenever possible – regulatory developments.Year-end saw the publication of the latest report on environmental performance in the upstream industry. The report (which looks at gaseous emissions, aqueous discharges, non-aqueous drilling fluids on cuttings, spills and energy consumption) was based on information submitted by 28 member companies working in 56 countries in 2004.

Working with an enlarged European Union

In 2005 the European Union expanded its membership from 15 to 25 countries,

including a number that had formerly been in the Soviet Bloc. With this expansion came significant changes to the European institutions including the Commission, the Parliament and the Council. To help ensure that the relevant decision makers in the new European government were aware of the role of the upstream industry, OGP embarked on a communications pro-gramme highlighting the contributions that our members make to Europe in general.Throughout 2005, OGP stressed the benefits of upstream activities to Europe in position papers, reports, presentations and face-to-face meetings. These pointed out that the industry:

Provides 40% of the EU’s generated electricityIs responsible directly and indirectly for more than 1 million jobs (in the previous EU of 15 nations alone)Contributes revenues of up to €15 billion a yearAnnually invests more than €25 billion to Europe’s direct benefitFurther stimulates the European economy through partnerships with other industries and funding of research programmes through university support

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On the implementation of Europe’s internal gas market, OGP maintained strong involvement in the Madrid Forum of regulators and at the European Association for the Streamlining of Energy Exchange (EASEE-gas), which develops common business practices. In 2005 there were agreements to remove obstacles to interoperability. This is key to an open and well-functioning gas market in Europe.

Endorsement for global collaboration on regulations

In an address to the International Regulators’ Offshore Safety Forum (IRF),

the chairman of OGP’s Safety Committee called for the group to work with industry to develop a better understanding of risk profiles and how they are best addressed. Speaking before an audience of leading figures from government and industry drawn from over 20 countries, Volkert Zijlker called on IRF to join with OGP and other industry associations to test how existing protocols could be enhanced and made more complete. OGP’s view was that this would be preferable to IRF proposals for separate protocols in different countries or regions.OGP also took the opportunity to chal-lenge the industry’s regulators to become more involved in the identification, develop-ment and implementation of standards within their regions.IRF, in turn, challenged OGP to develop effective ways to deal with the implications of aging production facilities.

Raising standards globally

As usual, OGP’s Standards Committee was one of the Association’s most

active. In addition to the usual range of workshops and bulletins, there was the launch of the third phase of a joint industry project on technical editing.Moreover, at the World Petroleum Congress in Johannesburg, OGP chaired

a roundtable on the global impact of upstream standards. Participants included regulators, representatives of multi-national and national E&P companies, contractors and the International Organization for Standardization.Discussions underscored the industry’s genuine commitment to worldwide stand-ards, highlighted the potential financial gains associated with applying them and shed light on some of the difficulties encountered in achieving global objectives.The roundtable also raised the issue of medical standards, including standards of fitness for work in the upstream industry.

Reserves reporting considered

An OGP workshop held in Rome examined one of the most controversial

issues of recent years: reserves reporting. Featuring experts, government and the investment community as well as the upstream industry, the workshop helped to identify principal stakeholders and also considered what role – if any – OGP should play in determining an industry position on reserves reporting.Though it was agreed that OGP itself should not propose specific changes to existing reserves reporting rules, despite the artificialities associated with them, the workshop did conclude that OGP should concentrate on playing an enabling role.

This could involve getting alignment from the industry on a number of issues, including ways to strengthen industry communications on the topic. The workshop also noted that OGP could add credibility to any industry proposals by facilitating participation from the account-ing/auditing fraternity.Without OGP involvement, there could be a danger that the current reporting regime, based on the largely out-moded requirements of the US Security Exchange Commission, would either prevail or be replaced by something even less relevant to upstream operations.

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SPE HSE Conference; Kuala Lumpur, MalaysiaJack-up Drilling Workshop; SingaporeTransporting People & Equipment Safely Workshop; Cairo, EgyptIMCA Annual Seminar: Expanding Marine Contractors; Abu Dhabi, UAEManaging Upstream HSE Issues: Global Solutions with a Regional Focus; Shenzhen, China

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World Bank turns to OGP on flaring

The World Bank’s Global Gas Flaring Reduction (GGFR) initiative has looked

to OGP as a potential partner to assist with monitoring, data collection and identifying and disseminating best practice.

Launched at the World Summit on Sustainable Develop-ment in Johan-nesburg in 2002,

the GGFR has since worked with national

governments, development agencies and the industry in

reducing the environmentally dam-aging – and wasteful – flaring and venting of gas associated with crude oil extraction. For example, according to GGFR figures, the amount of gas lost through a single year’s flaring is the equivalent of 30% of the EU’s gas consumption in 2004.At a meeting in London OGP agreed to co-host a best practices workshop on gas flaring in late 2006.

Brian Raggett, who had served as OGP’s first European Affairs Director, retired halfway through the year. He was succeeded by Beate Raabe, who had been an

OGP European Affairs Manager. New to the Brussels team in 2005 was Diederik Peereboom, who joined OGP from the office of a Dutch Member of the European Parliament. He succeeded Beate Raabe on her promotion.

EventsIn 2005, OGP staged or actively participated in 14 events related to the environment, health, safety, operations and corporate social responsibility.

Offshore Mediterranean Conference; Ravenna, ItalyHuman Factors & Regional HSE Workshops; Cumana, VenezuelaSPE E&P Conference; Galveston, TexasBiodiversity and the Oil & Gas Industry – Central & West Africa; Luanda, AngolaWildlife Conservation Society & IADC Workshop on Environmental Impacts; New York, USASustainability Reporting Workshop; Paris, FranceWorld Petroleum Congress; Johannes-burg, South AfricaInternational Standards Workshop: Focusing on Africa; Johannesburg, South AfricaMarine Sound Workshop; Halifax, Canada

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New faces; new roles

OGP’s members elected a new Management Committee in 2005.

In a ballot that closed on 11 March, they chose as their leaders for a two year term: BP, Chevron, ConocoPhillips, ExxonMobil, Qatar Petroleum, Shell, Statoil and Total. Stig Bergseth of Statoil was again voted in as chairman.Earlier in the year Charles Bowen became OGP’s new Executive Director, succeeding Alan Grant. Charles Bowen joined OGP

following a 30-year international career with Total that took him to the Middle East and the North Sea as well as corporate head-quarters in Paris.

Beate Raabe

Diederik PeereboomCharles Bowen

Publications

OGP produced a total of 10 reports in 2005. Most of these reports, as

well as many of the 360 others published since 1974, are available from the publications section of www.ogp.org.uk

Health & safety incident reporting users’ guide – 2004 dataCatalogue of international standards used in the petroleum and natural gas industriesPreventing the next major incident Fate and effects of naturally occurring substances in produced water on the marine environmentSafety performance of helicopter operations in the oil & gas industryStandards bulletin 6Land transportation safety recom-mended practiceOGP safety performance indicators 2004Aviation weather guidelinesEnvironmental performance in the E&P industry – 2004 data

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Marine Sound workshop; Halifax, Canada