bp in georgia · in georgia marked another important step for us and our partners by paving the way...

BP in GeorgiaSustainability Report 2006

The BP group

BP provides energy from oil and gas and from other low carbon sources fortransportation, heat and light, and retail brands and products used in everyday life. Weoperate globally, with business activities and customers in around 100 countries andmore than 97,000 employees. We have exploration and production interests in 26countries. Just under 40% of our fixed assets are located in the US and around 25% inthe UK and the rest of Europe.

In 2006, the BP group produced the equivalent of almost 4 million barrels of oil and gasper day for customers across the world. This included the start of oil production fromthe East and West Azeri platforms in Azerbaijan, delivered to markets through thenewly completed BTC pipeline which runs through Georgia. The group’s capitalspending totalled $17.2 billion in 2006. On the US Securities and Exchange Commission(SEC) basis of reserves reporting, our reserve replacements ratio was 113% in 2006.a

This report: its scope and process

In BP, we define ‘sustainability’ as the capacity to endure as a group, by renewingassets; creating and delivering better products and services that meet the evolvingneeds of society; attracting successive generations of employees; contributing to asustainable environment; and retaining the trust and support of our customers,shareholders and the communities in which we operate.

This is the third account of our sustainability performance in Georgia, building on theGeorgia Sustainability Review in 2004 and the full sustainability report we published in2005. Our activities in 2006 began to shift from a focus on projects to ongoingoperations, a transition which marks the expansion of our role here as an operator of oiland gas assets, which we will be for many years to come. While the nature of ouroperations is changing, our commitment to transparency remains the same. Our futuresustainability reporting will continue to reflect the priorities of the business whileresponding to the concerns of our readers.

Data is presented for country operations as a whole, unless where indicated forspecific projects and operations. The report has been prepared by our business inGeorgia, based in Tbilisi, and describes our activities across the country. These are setin the regional context where appropriate. As previously, we have used a formalprocess to determine which issues are of most significance to internal and externalparties to ensure that the report presents a balanced and reasonable view of ourperformance.

a On a combined basis of subsidiaries and equity-accounted entities, excluding acquisitions and disposals.

A glossary of terms used in this report is provided on page 42.

1 A message from our country manager

2 What responsibility means for BP

3 Highlights in 2006

4 Responsible operations

5 How we work7 Our business activities10 Financial and economic performance 11 Dialogue and engagement16 Health and safety19 Environmentally sound operations23 Protecting cultural heritage24 Security and human rights26 Our people

28 Our role in society

29 The social and environmental context 30 Climate change 31 Promoting good governance32 Enterprise development 33 Education35 Access to energy36 Our programmes

40 Performance data

41 Assurance statement

42 Glossary of terms

43 Further information

A message from our group auditor, Ernst & Young

We have reviewed the BP in Georgia Sustainability Report 2006 in order toprovide assurance to BP management that the data, statements and assertionsmade regarding the sustainability performance of BP in Georgia are supported byevidence or explanation. Our scope of work and conclusions can be found onpage 41.

In this report, references to ‘BP’ and the ‘BPgroup’ shall mean BP p.l.c., its subsidiariesand affiliates and, unless otherwise stated,the text does not distinguish between theoperations and activities of BP p.l.c. and thoseof its subsidiaries and affiliates. Unlessspecified otherwise, references in this reportto ‘us’, ‘we’, and ‘our’ shall refer to companiesin the BP group operating in Georgia.

Work in progress at Area 80 in Akhaltsikhe,near the Turkish border.

A message from our country manager

2006 was a year of important transition, marking the beginningof full operations on the Baku-Tbilisi-Ceyhan, (BTC) and SouthCaucasus pipelines (SCP) following the successful completion of construction. The full commissioning of BTC which wascelebrated at an inauguration event in Ceyhan, Turkey in July,marked the culmination of a remarkable feat of engineering andmanagement involving thousands of people in Azerbaijan,Georgia and Turkey over more than a decade.

The completion of SCP and the construction of the off-takepipeline which links SCP to the national gas distribution systemin Georgia marked another important step for us and ourpartners by paving the way for the delivery of first gas intoGeorgia, achieved in January 2007. This was also an importantmilestone for the government and people of this country.

The end of construction and the beginning of operations isnot, of course, as clear-cut or as simple as this perspectivesuggests. Making the transition safely and efficiently hasinvolved hundreds of people working together to ensure aneffective handover. The scope of this challenge has beenimmense – demobilizing people and equipment, appointing newcontractors, introducing the systems and procedures necessaryto manage change, merging and creating new teams andorganizational structures – all of this while ensuring that businesscould proceed as usual. The smoothness of the transition to datehas been remarkable.

This focused effort has not prevented us from taking newstrides forward. We have continued to build local capacity, notjust through engineering and construction activities, but alsothrough broader measures. The Regional Development Initiativelaunched with our partners has progressed in building regionalcapacity, through projects supporting business and infrastructure

development. Social investment initiatives, funded directlythrough BP or via grant programmes agreed with thegovernment, have continued to support community infrastructureprojects, capacity building, education and economicdevelopment.

This combination of achievements and actions provides theinsight to an important message: BP, as an operator in Georgia,will be here for a long time. The oil and gas fields in the Caspianare among the most productive and sizeable anywhere in theworld. BP has already made a major investment in the regionand in Georgia. We will continue to play our part here, in amanner which is safe, responsible and dedicated to the mutualadvantage of BP, our partners and the people of Georgia.

Hugh G McDowell

BP Georgia Country ManagerJune 2007

Sustainability Report 2006 1

2 BP in Georgia

What responsibility means for BP

This report is structured according to the framework we use in BP to

describe the different aspects of corporate responsibility. According to

this framework, our activities fall into two categories: those in which we

have control and those where we have an influence. Our ‘sphere of

control’ covers our operations, while our ‘sphere of influence’ extends

beyond our operations to many aspects of society and the environment.

Progressive

operator

BP and climate change

Legal

compliance

BP and development

Chapter 1: Responsible operations

Sphere of control

Operating responsibly has two levels. At its core itrequires compliance with laws and regulations. At asecond, higher level, we seek to act as a ‘progressiveoperator’ by setting our own standards that go furtherthan the law requires. We believe that a company with aspirations to succeed in the long term musthave universal standards of individual and collectivebehaviour that are applied in every activity, everywherearound the world. In a large, diverse organization suchas BP, this continues to be our primary challenge.Chapter 1 reports on our performance in this sphereduring 2006.

Chapter 2: Our role in society

Sphere of influence

In this sphere, we seek to take a lead in significantareas, such as climate change and development, whereour experience, assets and capabilities enable us toseek to be a positive influence. Our role in addressingclimate change goes well beyond minimizing our ownemissions to include contributing to the policy debate,supporting research and developing new, cleanertechnologies in power and transport. Through our BPAlternative Energy business, we are investing in powergenerated from renewable and alternative sources and,in 2006, we set up a business to explore, develop andmarket new generations of biofuels. In terms of socialand economic development, our main contribution is typically in the form of government revenues, jobs,skills and products. We also have a wider role to playin promoting sound governance and contributing to the progress of our host communities. Chapter 2 coversour progress in these areas during 2006.


Highlights in 2006

Commissioning of the BTC pipeline

The Baku-Tbilisi-Ceyhan (BTC) pipelinedelivered its first oil in June 2006. This isthe largest new non-OPEC source of oilsupply to be brought on stream in 15years (pages 7-8). This project has alsodelivered social and economic benefitsfor communities along the pipelinecorridor (pages 37-38).

Completing SCP and constructing the off-

take gas pipeline We completed theconstruction of SCP and an off-takepipeline which connects it to the nationalgas distribution system of Georgia. Thisproject has enabled the delivery of firstgas into Georgia in January 2007, animportant step for the government andpeople of Georgia (pages 9, 35).

Completing land reinstatement

Engineering and restoration work on land surrounding the BTC and SCPpipeline right of way was completed in2006. External auditors and reviewershave commented favourably on the veryhigh quality of this reinstatement work(pages 19-20).

Managing the transition from projects to

operations We successfully tackled awide range of organizational, technical,and commercial challenges to ensure asmooth and safe handover from projectsto the phase of continuing operations.While some transitional challengesremain, we believe our organization is well-equipped to embark on the newand long-term phase of operations inGeorgia (details are available throughoutChapter 1).

Contributing to social development

Our social investment projects havecontinued to bring improvements to thecommunities along the pipeline route. The Improved Schools Programme, forexample, was considered by externalevaluation to be one of the mostsuccessful components of communityinvestment made by BTC. More broadly,further progress has been made inimplementing our Regional DevelopmentInitiative (pages 33-34, 37-39).

Achievements

Challenges

Working to improve local institutional

capacity We continue to face a numberof challenges relating to theimplementation of legal andadministrative matters which createdelays and add complexity to theoperating environment. We will continueto work hard to resolve these issues withthe government (page12).

Safeguarding performance on the western

route Following successful maintenancework on the pipeline in 2006, we decidedto carry out further work to review the risksassociated with landslide in some areas ofthe pipeline route. To preserve safe

operations, the Western Route ExportPipeline (WREP) pipeline has ceasedoperation while these assessments arebeing carried out (pages 8-9).

Building local leadership capability Wehave taken further steps to increase thesize and capability of our Georgian staff.However, there is a continuing challengeto place sufficient local staff inleadership positions across the business (pages 26-27).

Tackling waste management While weface a variety of day-to-day challenges in protecting the natural environment,

resolving the issue of waste managementhas proved an intractable problem giventhe lack of EU compliant disposal facilitiesin Georgia. This will be a focus of our effortsas we move into operations (page 20).

Delivering the Kodiana projects As part of our commitment to the Georgiangovernment, we have undertaken tocomplete a number of additionalconstruction projects that introducefurther environmental protection into theKodiana sections of the BTC pipeline.Continued excellence in projectmanagement will be required to deliverthese commitments as desired (page 8).

Responsible operations1.1 How we work

1.2 Our business activities

1.3 Financial and economic performance

1.4 Dialogue and engagement

1.5 Health and safety

1.6 Environmentally sound operations

1.7 Protecting cultural heritage

1.8 Security and human rights

1.9 Our people

Shah-Deniz gas is delivered to Georgia through 30-inch off-take pipeline.


Responsible operations

1.1 How we workOperating responsibly lies at the heart of our framework for corporate

responsibility. Responsibility demands that we maintain high and

consistent standards every day and wherever we work – including

safety, integrity, environmental stewardship and people management.

This section outlines our approach and how the activities of BP Georgia

fit within the group framework.

Our business in Georgia is an integral partof BP’s activities in the Africa, MiddleEast and Caspian region and is a part ofone of the group’s long-term operatingcentres. Our activities form part of theexploration and production ‘segment’ ofthe business, one of three operatingsegments across the group as a whole(the other two being Refining andMarketing, and Gas, Power andRenewables).

We work closely with our colleagues inAzerbaijan and Turkey, and form part of theAzerbaijan strategic performance unit. Thisreflects our geographical proximity butmore importantly the linkage between thepipeline assets and facilities in Georgiaand the oil and gas production, storage

and distribution assets in and around theCaspian and Mediterranean seas.

Our operations in country aresupported by a range of group functionswhich aim to achieve coherence acrossthe group, manage risk effectively andachieve economies of scale. Technologicalsupport is provided by the group’sresearch and engineering activities.Technology helps the group access theenergy resources we need to providefuture security of energy supply andsupports the group in its goal ofminimizing the environmental impact ofits energy production and consumption.

BP also works with a number of non-BP companies and other entities in joint ventures (JVs). From a group

perspective, many of these JVs are largeand significant businesses in their ownright, established as separate companieswith their own boards and governanceprocesses, in which BP is a shareholder.In all cases, BP implements its ownstandards and policies in those JVs itoperates and where the joint ventureagreement permits. Where BP is not theoperator or where BP is the shareholderin a JV, BP encourages adoption of orworks towards standards and policiescomparable with BP’s own. In Georgia,our aviation supply business is deliveredthrough one such joint venture, betweenAir BP and Aviafuel Service.

Vision and strategy The BP group strategyis captured within five-year and annualplans. The strategy seeks to achieve theprincipal goal set by the board – namelymaximizing shareholder value on a long-term basis. Segments and business units,including BP Georgia, develop their ownstrategies in line with the group strategy.

Governance and risk management Ourcorporate governance and managementsystems provide a framework fordetermining what we are trying to deliverand how we go about that delivery. Thesystems are designed to enable the

Our operations in country aresupported by a range ofgroup functions which aim toachieve coherence acrossthe group, manage riskeffectively, and achieveeconomies of scale.

business to achieve its commercial goals– through strategy, planning andexecution – while operating safely,ethically and responsibly by applyingvalues, standards and controls.

In terms of how we deliver, our action isshaped by: • Executive limitations: These define the

boundaries between the board and the

group chief executive (GCE) and thoseactivities and conditions the boardconsiders unacceptable. The boarddelegates authority to the GCE forperformance within these limitations.

• Brand attributes: Our brand attributesare to be ‘performance-driven’,‘progressive’, ‘innovative’, and ‘green’.

• Group values: Group values arestatements that lay out courses of

action and goals, often aspirational,against which we can test ourperformance and shape the reputationof the group. They include aspirationsto have no accidents, conductenvironmentally sound operations,treat employees fairly, have aninclusive and meritocratic organization, pursue mutuallyadvantageous relationships andpromote respect for human rights.

• The BP code of conduct: The code of conduct translates certain groupvalues into specific mandatoryprinciples and expectations for all employees within BP.

• Group standards: These set out clearexpectations, processes and principlesto be followed worldwide. The code ofconduct and standards for drivingsafety, credit, business continuityplanning, and the group investmentassessment and approval proceduresare fully operational. Four others havebeen approved and are now beingexecuted: control of work, integritymanagement, digital security andsecurity; and three are currently beingdefined: marine operations; people;and management information.

• Control processes: These consist ofpractical frameworks which enableimplementation of the system ofinternal control.

• Individual performance objectives: This defines an individual’s expectedcontribution to deliver the annual plan.It lays down the individual’s targets,objectives, resources, activities and limitations. This report provides insight into the

operation of these values, standards andcontrols in the context of our activities in Georgia.

WHAT we deliver

HOWwe deliver

Board goals

Group strategy

Group five-year plan

Group annual plan

Segment,function and regional plans

Executive limitations

Translating the goals into activities and executive limitations into individual limitations

Board governance policies

BP management framework

Brand attributesand group values

Code of conduct

Groupstandards

Control processes

Performance management

Individual performance objectives

Board goals to individual performance objectives

6 BP in Georgia


Our business activities in Georgia havefocused on three major oil and gaspipelines, in which we are the leadinvestor and operator. Our partners andtheir shareholdings are shown below.

With the completion of the BTC andSCP projects we are in a transitionalphase as we begin long-term routineoperations. This transition has alreadyinvolved changeover of staff, thedemobilization of manpower andequipment, new organizationalstructures, new commercialarrangements, and a new set oftechnical challenges. Managing thischange safely and efficiently has been,

and remains, a significant challenge.Considerable management effort hasbeen dedicated to this in the course of 2006, working through structuredmanagement of change processes to ensure a smooth handover.

In addition to this, we are undertakingmajor maintenance work on the westernroute pipeline. We are also engaged inthe construction of a number of facilitiesalongside the BTC/SCP pipeline route toprovide additional physical and technicalsecurity for the pipelines. These facilities,described below, were requested by theGeorgian government or required as acondition of accepting the oil spill

emergency response plan agreed in2005. In 2006, we also began upgradingand constructing roads to providereliable access to valve stations alongthe pipeline.

The Baku-Tbilisi-Ceyhan pipeline (BTC)

The pipeline, which is 1,768km in lengthin total, is capable of transporting over amillion barrels of oil per day from theSangachal terminal in Azerbaijan to themarine oil terminal in Ceyhan on theTurkish Mediterranean coast. It is one of the longest pipelines in the world.Construction of the BTC pipeline inGeorgia was completed in 2005.

1.2 Our business activitiesOur major activities in Georgia are changing from investment in projects

to long-term operations.This reflects the successful completion of our

new pipeline projects in the region, which have been among BP’s most

significant and high-profile investments in the past decade. We are now

embarking on a new, long-term phase of managing operations.

6.8

8.6

BP

TPAO AzBTC Devon Itochu Amerada Hess Total NICO

Statoil Chevron Inpex ExxonMobil Eni ConocoPhilips LUKoil

10

108

2.7

34.1

WREP

3.95.6

10.3

8.9

6.533.4

2.362.5

2.5

30.1

BTC

55

8.71

25

9

10

1025.5

25.5

SCP

10

10

The pipeline shareholders (%)

SOCAR


8 BP in Georgia

BTC became fully operational in 2006.Oil flow rates through the pipeline havesteadily increased, and the pipeline nowbrings around 600,000 barrels of oil perday to the world market. Reinstatementand landscaping work on the right ofway was completed along the pipelineroute to a very high standard (describedin more detail in section 1.6).

Construction of additional facilitiesproviding environmental and technicalsecurity in the alpine Kodiana section of the pipeline also began in 2006.Construction of a security baseprogressed until freezing winter

conditions necessitated suspension andwill resume as soon as weather permits.A security base, currently underconstruction, will provide a permanentfacility with living quarters, offices,maintenance facilities, power generation,sewage treatment and potable watersystems. It will be handed over to the Georgian government Strategic Pipelines Protection Department (SPPD)for their use.

Initial work was also carried out on theconstruction of the emergency drain downfacility (EDDF). The facility will include an8,500m3 steel tank constructed within a

secondary underground concrete tankfor the draining and storage of oil fromany Kodiana section of the BTC pipelinein certain emergency situations. Onreceiving the required permits from thegovernment of Georgia in October, thetank site was cleared and prepared forpile installation, beginning in 2007.

Design work was carried out in 2006on a system of secondary containmentsites to contain oil safely in the unlikelyevent of a pipeline rupture. Eachsecondary containment site consists of asettlement basin constructed around anexisting stream bed with a dam and

BTC Commissioning

The official inauguration of the full BTC pipeline export system took place in July 2006 at theCeyhan terminal on the Mediterranean coast of Turkey. The event, hosted by the Turkishgovernment, was attended by their Excellencies Ahmet Nejdet Sezer, President of Turkey; theTurkish Prime Minister, Recep Tayyip Erdogan; President Ilham Aliyev of the Republic of Azerbaijan;and the President of Georgia, Mikheil Saakashvili; together with visiting senior government andstate officials, senior executives of BTC owner companies and business representatives.

Addressing the inauguration ceremony at Ceyhan, Lord Browne thanked all those involved:“The commissioning of the Baku-Tbilisi-Ceyhan pipeline is a significant step in the long history

of the oil industry. It reintegrates significant oil supplies from the Caspian into the global market for the first time in a century.On behalf of BP, I would like to express our thanks to all those who made it possible to get to this point.

I’d like to thank the thousands of extraordinary people from the three countries directly involved – Azerbaijan, Georgia andTurkey – and the people from many others beyond, whose support and involvement was indispensable – the members of theworkforce, the inhabitants of local communities, the companies, governments, international institutions, our partners and, ofcourse, our own staff. BTC is the first great engineering project of the 21st century.”

Western route refurbishment

In January 2006 – during a severe Georgian winter – a project team of 20, including engineers andoperations experts, was set up to begin a maintenance programme to confirm the location of anomaliesin the pipeline which had been identified during pipeline smart pigging investigations.

The 2006 maintenance work, undertaken in two phases over the course of the year, is ongoing; itinvolved an average crew size of approximately 95 people for phase 1 and 81 for phase 2, workingcontinuously in shifts at the worksite. During 2006, it took some 450,000 man-hours. Their work wascarried out without shutting the pipeline down. This was made possible by co-ordinated logistical operationsand project management, guiding appropriate risk assessments and engineering solutions. The work

involved digging up the pipeline where analysis had required inspection and performing visual and ultrasonic testing examinationof the anomalies to determine what action, if any, was needed. This involved either removing surface discontinuities, welding full-encirclement sleeving (an innovative technique in which the new sleeving in effect becomes the new pipe) or directly replacingdefective pipe through cut-outs.

To date, the work has been undertaken without a single recordable health, safety or environmental incident.



sluice gates. The sluice gates can beclosed in an emergency to retain any oiluntil it can be safely removed by the oilspill response team. Construction willcommence on the secondarycontainment sites in 2007.

The Western Route Export Pipeline (WREP)

This 830km pipeline transports oil fromthe Chirag field in the Caspian Sea viathe Sangachal terminal in Azerbaijan tothe Supsa terminal in western Georgia,with just under half the pipeline locatedin Georgia. WREP, which became fullyoperational in 1999, is capable oftransporting up to 155,000 barrels of oil per day.

Scheduled maintenance work late in2005, involving the use of smart pigging(pipeline inspection using equipment toprovide data about the condition of thepipeline) identified anomalies in thepipeline, which upon evaluation neededrepair. The maintenance repairprogramme set priorities for carrying outwork to address the anomalies. Thismaintenance repair programme isongoing. Late in 2006, further work wascarried out to review the risks associated

with landslide in some areas of thepipeline route. In order to preserve safe operations, the WREP pipeline has ceased operation while theseassessments are being carried out. Tomitigate the potential risk of line failure,the assessments are being evaluated ona section of the pipeline passing throughthe Zestaponi region. This section isscheduled to be rerouted around thelandslide areas in the near future.

The South Caucasus Gas Pipeline (SCP)

Construction of this pipeline, built in the same corridor of land as the BTCpipeline through its passage in Georgia,was completed in 2006. Like the BTCpipeline, it is buried underground. SCPcarries natural gas from the Shah Denizfield in the Caspian Sea to customers inAzerbaijan, Georgia and Turkey.

Gas entered the Georgian section of the pipeline in September 2006 as part of the pipeline testing andcommissioning process. A new 12kmpipeline, connecting the SCP to theGeorgian gas distribution system nearGardabani, was also completed in 2006.Following commissioning, first

commercial gas was delivered into theGeorgian market in January 2007.

The introduction of gas into theGeorgian section of the SCP pipeline has enabled the commissioning andoperation of the gas fuel system to theBTC main crude oil line (MOL) pumps.This work, which began in December2006, is scheduled for completion in2007. The intention is for all MOL pumps to be operating on gas in 2007.We believe that operating the pumps on gas will bring improved reliability to the BTC system and result in loweroverall air emissions and more efficient production.

Air BP Our aviation fuelling business hasbeen active in Georgia since 1998. At Tbilisiairport, Air BP provides jet fuel to nationaland international airline customers.Together with our joint venture partner,Aviafuel Service, we distribute lubricantproducts including BP and Castrol brands.

2006 marked another successful yearfor Air BP, gaining new customers suchas Air Baltic and BA Cargo and having norecordable HSSE incidents in the courseof the year.

SupsaSupsa

TbilisiTbilisi

TsalkaTsalka

BakurianiBakurianiBorjomiBorjomi

TadzrisiTadzrisi

KutaisiKutaisi

PS11PS11

PSG1PSG1

PSG2PSG2

Air BPAir BP

PS13PS13

PS15PS15

PRS1PRS1

PRS2PRS2

Supsa TerminalSupsa Terminal

Area 80

km 250

Turkey

Azerbaijan

Georgia

Armenia

Iran

IraqSyria

Russia

Black

SeaCaspian

Sea

SCP

WREP

Ceyhan

Sangachalterminal

ACG

ShahDenizBTC

WREP - oil (Western Route Export Pipeline)

SCP - gas (South Caucasus Pipeline)

Pump station

Pump station Georgia

PSPS

PSGPSG

Pressure reduction stationPRSPRS

kmkm 100100

BTC - oil (Baku - Tbilisi - Ceyhan)

5050

Area 72

Georgia

BP projects in Georgia

10 BP in Georgia

WREP tariff is paid to the nationalgovernment. The table below shows feepayments arising from WREP from 2000-2006. The slight decline in 2006 is due tothe reduction in throughput caused byprudent pipeline maintenance andrefurbishment.

Initial profit tax payments, linked tothe throughput on the BTC pipeline,were made in 2006. These amounted to$7.8 million from all the BTC partners.We estimate that the profits taxpayments will be around $25 million in 2007 as throughput increases.

It has been estimated thatapproximately 27% of foreigninvestment in Georgia came from BPand its partners in 2006. Our capitalinvestment on construction in Georgiasince project inception has been $906 million on BTC and $585 million onSCP. Details of our capital and operatingexpenditure from 2004-2006 are shownin the table below. The informationshows that the balance of expenditure is beginning to shift from capital tooperating expenditure as the nature ofour operations changes from projects tocontinuous operations.

1.3 Financial and economic performance Our financial and economic impact in Georgia is significant. We are

a major foreign investor and an important contributor to national

government revenues through the payment of taxes and transit fees.

We are a significant contractor of local companies. Our spending is

designed to enhance communities’ environmental and social projects in

the short term, and also to promote long-term economic and social self-

sufficiency. In all these ways, we make an important contribution to

Georgia’s economic and social development.

20006.59

20018.08

20028.71

20038.74

20049.3

200510.44

20069.80

WREP tariff payments 2000-2006 ($ million)

Capital and operating expenditure in Georgia ($000)

Capital Operating2004 2005 2006 2004a 2005 2006

WREP 2,342 4,752 0 20,581 23,711 41,443BTC 262,936 225,812 130,932 0 0 29.474SCP 160,861 205,736 137,893 0 0 1,187Total 426,139 436,300 268,825 20,581 23,711 72,104

a Includes Georgian Pipeline Company office and administrative costs not included in the 2004 BP Georgia Sustainability Review.

Notes:Payments are made to GOGC (the Georgia Oil and GasCorporation) following its establishment in 2006. Prior tothis, payments were made to GIOC (the GeorgianInternational Oil Corporation). The figures quoted in the 2004 BP Georgia SustainabilityReview were drawn, as indicated, from an IMF paper.

Our capital investment onconstruction in Georgiasince project inception hasbeen $906 million on BTCand $585 million on SCP.


1.4 Dialogue and engagementOur employees and contractors in Georgia interact on a regular basis

with a wide range of groups – including government, communities,

opinion leaders, NGOs, lenders, suppliers, and business partners. Our

aim is to ensure that dialogue and engagement with these groups

builds relationships which create mutual advantage – that is, benefits

for those with whom we do business as well as for ourselves.

Layers of Monitoring and Assurance

Comprehensive monitoring has been afeature of the BTC and SCP projectssince their inception. Monitoring is carriedout by those in the project teams,involving auditing of projects, day-to-dayoperations in the field and contractorperformance. It is also provided byexternal bodies at arms-length from theprojects with a formal role in monitoring.These include: • The Caspian Development Advisory

Panel (CDAP): the panel, which hasnow completed its work, met formallyat least twice a year, and paid anannual visit to the region. CDAPreported direct to the BP group chief executive.

• NGOs: monitoring is provided throughthe ‘Pipeline Monitoring and DialogueInitiative’. The programme’s activities in 2006 are described in more detail below.

• The Social Resettlement Action Planpanel (SRAP): SRAP reviewed theproject for the seventh time inSeptember 2006.

• Host government monitoring: thistypically covers issues of regulatorycompliance, supplemented by broaderdiscussions with government agencies.

• The lender group’s Independent

Environment Consultant (IEC): theIEC’s audit reports are issued quarterlyand track compliance with ourenvironmental and social action plans.

• Formal grievance mechanisms, such asthose provided by the European Bankfor Reconstruction and Development(EBRD) and the International FinanceCorporation (IFC): these give individualsan additional avenue for raisingcomplaints about the impact of theprojects, outside the mechanisms wehave established ourselves.In addition to this, a range of topic-

specific monitoring has been conducted,such as human rights monitoring providedby independent international legal experts.Growing interest in revenue transparencyin Georgia has also led to a review in 2006 by the Georgian Young LawyersAssociation of BTC grant spending. Ouractivities are also subject to national andinternational media coverage.

We believe this multi-layered monitoring provides a level of oversightunprecedented for an extractive industriesproject – a view supported by CDAP.

The Caspian Development Advisory Panel

(CDAP) CDAP’s final public report on the BTC projects marked a significantmilestone in the project’s development.

The completion of CDAP’s work, whichwas set up four years ago to provideindependent advice on the projects,provided an opportunity to review BTC’sachievements to date and to outline thechallenges ahead.

Among the achievements listed byCDAP were that the pipelines had raisedthe standard for environmentally-sensitiveinfrastructure development in the region,had generally met an array of exactingenvironmental and social standards, hadundertaken a vast programme of landacquisition expeditiously but fairly, hadsecured commitments for the protection


12 BP in Georgia

of human rights, and had taken steps tobuild local capacity among NGOs and insocial and environmental projects thatpromote longer-term sustainabledevelopment.

However, the panel noted areas where work will be needed in future. The transition to operations, for example,creates new challenges for ensuringsafety and the operational integrity of the facilities. Continuing vigilance will be required to safeguard human rightsand revenue transparency. CDAPrecommended additional funding insupport of the Regional DevelopmentInitiative, continued support for NGOcapacity building and further management attention to tackle thechallenge of waste management.

We will consider CDAP’srecommendations carefully and will factorthem into the evolution of our long-termstrategy in Georgia and the region.

Government relations We continue tointeract with Georgian governmentauthorities at many levels on a range ofissues. Over the course of the year, wehave worked with the government todeliver long-term strategic objectives suchas the delivery of first gas into Georgia.As can happen with initial productionfrom new wells, start-up of gas deliverywas not as predictable or consistent asdesired, which had a knock-on effect on

our ability to deliver gas to Georgia as anticipated. Despite these initialproblems, delivery of gas was achieved in January 2007.

Doing business in an environment in which the government’s legal andadministrative capacity is developingbrings challenges. On some issues,notably the treatment of land, disputeshave arisen over the legitimacy of landownership. The absence of ConstructionRights Agreements with the state hasresulted in the inability to register ourrights, leaving this land subject topossible privatization. Similarly, althoughthe state has formally agreed ‘pipelinesafety zones’ the necessary legislativechanges have not yet been made which

will make these designations formal. Wehave also faced delays in licensing andpermitting due to organizational changesin regulatory structures although this hasnot prevented us from obtaining all thenecessary approvals from government formajor operations.

Despite these challenges, there havebeen numerous examples of how aconstructive working relationship canprovide mutual benefit. We havecontinued to provide training forgovernment security staff and havecompleted the provision of non-lethalsecurity equipment in accordance with anagreement made with the government in2004. Both of these steps will enhancegovernment capacity and boost pipeline

We have continued toprovide training forgovernment securitystaff and have completedthe provision of non-lethal security equipmentin accordance with anagreement made withthe government in 2004.

The Caspian Development Advisory Panel

‘In this, our final public report, we assess how well BP and BTC are doingin turning their vision into reality. We find that the companies have madean impressive start. The Caspian projects can already boast a long list ofaccomplishments, many of which break new ground for investments byextractive industries in developing and transition countries....

As we commend these important achievements, we also note that thelargely construction-oriented activity that we have observed during thefour years of our mandate represents only a small fraction of theapproximately 40-year operating life of BTC and its associated projects.Thus, while the companies have laid the foundation for the new model atwhich they aim, we also conclude that an equally significant, if not greater,

challenge lies ahead. Meeting this challenge will require sustained senior management attention and a continued – indeed, insome respects, enhanced – commitment of human and other resources.’CDAP Final Report and Conclusions (January 2007).

security. The BP pledge and BTC grantprogrammes have supported governmentobjectives in a number of policy areasincluding education and cultural heritagedevelopment while helping us to buildrelationships with local communities.

Engagement with communities Werecognize that construction of the newpipelines has had an economic andsocial impact on communities near tothe pipeline routes. We have worked tominimize negative impacts and bringpositive benefit through investment insocial and environmental projects. Ourcommunity liaison officers (CLOs) haveworked closely with communityrepresentatives, listening to theirconcerns and seeking to resolve fairlyany problems that arise.

In the course of 2005 on the BTC/SCPpipeline corridor, we received complaintsabout damage to structures allegedlycaused by heavy traffic or pipeline-related blasting. BP engagedindependent engineers to review the vibration assessments done byconstruction contractors. Their reportconcluded that construction traffic wasunlikely to be the primary cause ofcracking in structures. Further studieswere carried out this year to assesswhether blasting vibrations associatedwith pipeline construction were the

cause of structural cracking. Theseinvestigations concluded that no housescould have suffered structural damage.While it was unlikely, however, thereport concludes that it could not beruled out that houses may have sufferedcosmetic cracking to plaster if they werewithin 188 metres of the blastinglocations. On the basis of this report, BPelected to offer payments to the 16houses that are within 188 metres of theblasting locations. These complaints areapproaching closure by the InternationalFinance Corporation’s (IFC) ComplianceAdviser/Ombudsman (CAO) and BTC.

Given the completion of pipelineconstruction and reinstatement work,we recognize the need to revise anddevelop our approach to communityrelationship building. While we willmaintain our relationships with thepipeline affected communities we havedealt with in the past, we will be

considering further the wider needs ofcommunities across the country. To helpprogress our thinking, we commissionedan independent study in 2006 intodeveloping a long-tem communityrelationship strategy for Georgia.

Land acquisition and compensation

BTC/SCP pipeline construction andreinstatement of the construction corridorwas completed during 2006.

The core activity throughout 2006 has been the programme of land usehand back. The return of land for use byprevious landowners (which is providedfree of charge but subject to certainrestrictions and rights of access) is a project commitment, which wassubstantially completed in the districts of Tetritskaro, Tsalka and Borjomi during2006. The programme will continue andshould be fully completed by the end of2007. However, in some areas additional


The Social Resettlement Action Plan Panel (SRAP)

The SRAP expert panel, in undertaking their seventh review of work on theGeorgia section of BTC and SCP in 2006, focused on consultation with peopleaffected by the projects. They found some issues where additional action isneeded. For example, they suggested that further attention to detail was requiredto ensure that communities fully and consistently understood elements of theland use hand back process. But the panel also formed the following conclusion:

‘A key development in Georgia is the relationship between the community andthe Project. People seem to be genuinely appreciative of the work carried out byBTC Co. and there is greater level of trust and feeling that the Project will ‘do theright thing’. Almost all the communities consulted expressed positive views aboutBTC Co. A large part of this can be attributed to the tremendous effort anddedication of the social and land team staff and they are to be congratulated onthis outcome.’ Extract from the conclusions to SRAP’s expert panel review (September 2006).


BTC/SCP Land and Crop Payments in Georgia ($)

Land Crops Total

2003 6,691,490 4,933,688 11,625,1782004 2,325,732 4,865,665 7,191,3972005 484,572 1,090,274 1,574,8462006 607,127 1,504,568a 2,111,695Totals 10,108,921 12,394,195 22,503,116

a Crop payments in 2006 include some amounts that were paid as joint compensation for land and crops.

14 BP in Georgia

land acquisition has been necessary. Forexample, land has been required for theconstruction of additional facilities in theBorjomi district.

During the formal land use hand backprocess BTC Co. also obtained additionalrights over strips of land lying outside andadjacent to the construction corridor.These additional rights of restriction arenecessary to ensure the safety andintegrity of the pipelines. All affectedlandowners receive a payment for thearea intersected, which is based upon thefull land value as used by the project forland acquisition.

We described in our 2005 report thegrievance processes that exist to enablecomplaints to be dealt with throughindependent channels managed by the IFC and its Compliance AdviserOmbudsman (CAO). In 2006, the numberof complaints received through the formalgrievance process declined substantially,with the result that 99% of all complaintsreceived were resolved prior to closingthe project phase grievance log andopening an operations phase log. The fewproject phase complaints that had notbeen resolved were carried forward tothe operations phase grievance log forresolution. The EBRD also received a

single complaint in 2006 which remainsto be resolved.

Also, during 2006, preparations weremade to deal with complaints or issuesarising after landowners re-occupy theconstruction corridor, with the emphasisbeing on safe working, in compliancewith the required restrictions.

The SRAP auditors visit to the projectin September 2006 confirmed thatlandowners and users understood therestrictions. SRAP were generallysatisfied with the land use hand backprocedure and were pleased with the level of payments made for additional restrictions outside theconstruction corridor.

As the project enters the long-termoperations phase the emphasis is onmaintaining contact with affectedlandowners and users, not only tosatisfy the lenders’ requirements, butalso to ensure that the pipelines areoperated in an efficient and safemanner. We recognize, as CDAP havepointed out, that continuing effort willbe required over the operational life ofthe pipelines to ensure land userestrictions are adhered to andmechanisms are put in place formanaging potential disputes.

NGO capacity building:The ‘Pipeline

Monitoring and Dialogue Initiative’ We arealso taking steps to build the capacity ofcivil society institutions so that dialogueand constructive engagement can beenhanced. A central part of this is workwe have done with non-governmentalorganizations and the media.

We continued the ‘Pipeline Monitoringand Dialogue Initiative’ (PMDI),completing a second cycle of activity. This built on and expanded the first cycleof work undertaken in 2005. PMDI,implemented with the collaboration of the Eurasia Foundation (EF), seeks topromote international standards ofmonitoring and audit, provideopportunities for team-based auditactivity, and build the capacity andprofessionalism of national NGOs inGeorgia. The programme has beensupported by the United NationsDevelopment Programme (UNDP) and the International Finance Corporation (IFC).

Four NGO working groups audited BP’sperformance in the following areas in2006: waste management, oil spillpreparedness, cultural heritageprotection, and reinstatement andbiodiversity. The type of work undertaken

Community liaison

‘During BTC pipeline construction our work was hectic, requiringquick decisions and actions to address community concerns andgrievances, both verbal and written. The pipeline constructioninevitably has an impact on communities and, as a result, we had tovisit almost every village in our working area to deal with the issuesneeding attention.

On occasion, resolving problems required intense negotiation withlocal authorities, municipality members, municipal heads, and otherinfluential individuals. In addition, we had to take whatever actionswere appropriate in response to requests from locals. Our goal wasto solve their problems and minimize work stoppages, which couldhave a negative impact on the project schedule. Doing all this wasoften a challenge from dawn to dusk, seven days a week!

Now, with the pipelines in operation, we have more opportunity to plan our day-to-day activities. But we still visit communities,meet people, and try to resolve concerns. We have more time to work on our strategy and to deliver projects that will bringfurther benefit for communities. Implementing the small grants to schools programme, for example, is already bringing us intoclose contact with schools along the western route. Our timetable may be a little calmer, but the challenge goes on.’Lika Kvitsinashvili and Zura Mgvdliashvili, BP community liaison officers.

by the working groups is summarized inthe case study. The NGOs receivedsupport from BP in setting up site visits,providing documentation, and respondingto queries and requests. They were alsosupported by expert training provided byEF’s international adviser.

The working group reports werepublished in October 2006. Each reportcontained detailed findings andrecommendations and BP’s response tothem. They also included observations on whether or not non-compliancesidentified during the first cycle werecorrected and recommendations taken on board. The full reports are available at www.bp.com/caspian.

In total, 36 civil sector representativesparticipated in the two cycles of theprogramme through the working groups.Organizations that expressed interest butwere not selected for participation in aworking group were invited to form awider interest group which metperiodically to monitor developments.

An independent satisfaction survey ofthe NGO participants carried out at theend of the programme found that it hadoffered a unique opportunity for thoseinvolved to deepen their knowledge ofauditing to international styles andstandards. The survey found the

programme had had a positive impact on capacity building within the NGOorganizations involved. It also found that the independent expert trainingprovided through the programme wasvaluable in helping participants plan their work process and conduct otheraudit activities.

Engaging our people A number ofmechanisms are used to communicateand engage with our employees. ThePeople Assurance Survey, a group-wideassessment of opinion carried out everytwo years, was undertaken in 2006.Information on its findings is presented in section 1.9.

We inform our employees about thecompany’s internal as well as externalnews through newsflashes and internalnewsletters. We engage our employeesthrough ‘town halls’, team meetings,events, and visits to Georgia by seniormanagement from other parts of thecompany. In the course of this year, we focused on improving our internalcommunication to ensure employees arebetter informed, involved and engaged. A strategic internal communication planhas been developed which seeks to usecommunication effectively in support oflong-term business objectives.



Building local NGO capacity

The pipeline monitoring and dialogue initiative (PMDI) has sought todevelop national NGO capacity in Georgia. Working groups set upunder PMDI consisted of five individuals with relevant backgrounds,drawn from separate Georgian NGOs. Following preparatory work todefine goals, information requirements, timescales, and audit tools,the groups typically carried out a programme of document review,interviews, and site visits. Draft reports were shared with thecompany allowing for comment and discussion. Once commentshad been considered, final reports were published.

‘Compliance audit in the oil industry is a complex and technicallychallenging endeavour. The PMDI programme provided both aunique window on technical issues surrounding the BTC project, and a constructive framework for enhanced dialogue among energy

sector experts and civil sector experts. I am pleased that the initiative’s primary goals – building capacity and professionalexposure for civil sector audit teams – have been successfully achieved.’ Andrea Harris, Eurasia Foundation’s Regional Vice President for the South Caucasus.

In the course of thisyear, we focused onimproving our internalcommunication toensure employeesare better informed,involved andengaged.

16 BP in Georgia

Health Our BTC/SCP project team havecarried out work to identify and tackle arange of personal health risks. Some ofthese arise from the nature of projectwork, which is typically physicallydemanding and often carried out inchallenging environments. Maintainingfood and water safety, for example, is asignificant risk when working in remotelocations. We have therefore carried outfood safety training, food hygiene audits,

and water assurance testing. To address other personal health risks,

we have taken initiatives includingestablishing a health clinic in Bakurianiavailable for company and contractoremployees, and running campaigns on health issues such as influenza,substance abuse and smoking. We have provided first-aid training foremployees and contractors and havecarried out epidemiological monitoring

along the BTC/SCP right of way. At sites, we have provided courses on

resuscitation and on how to respond tolife-threatening emergencies. Medicalfacilities at pump stations 1 and 2, and inArea 80 of SCP have been equipped tointernational standards and are able toprovide treatment for any injured personon site. At the Supsa terminal, a newambulance has been purchased for usein medical evacuations.

1.5 Health and safetyEnsuring the health and safety of all those involved in or affected by

our activities requires a constant focus on personal and process safety.

As we move from projects to operations, we are working to build on

the safety culture we have established.This requires managing the

risks associated with change, as well as the different health and

safety concerns which arise from continuous operations.

Developing a pandemic response plan

In response to international concerns about the possible spread ofinfluenza, we have developed, in accordance with BP group policy, a pandemic response plan for Georgia.

The plan is based on the fact that people are always our firstpriority. In addition, we recognize the significant reliance thatgovernments, customers and communities place on BP and thereforeon the need for us to have robust systems of business continuity.

The plan provides guidance on the organization and actions neededto address issues which might affect our people, facilities, systems,and supply chain. It outlines the steps that need to be taken inpreparation for a pandemic and the actions to be taken in response tothe different phases of a pandemic as defined by the World Health

Organization (WHO). The plan identifies categories of roles – such as those which are ‘business critical’ – and definesindividuals’ responsibilities in the event of the need to take action.



Safety The nature of the safety issueswe face is changing as we move to theoperations phase. The focus is shiftingfrom the risks associated with pipelineconstruction (such as heavy lifting,welding and excavations) to the need toensure process safety, ensuring the safemanagement of hydrocarbons and thelong-term physical integrity of thepipelines and other assets. As part ofthis, we took action to implement thegroup ‘six point plan’ which targets keypriorities for investment and action. InGeorgia, for example, our work on WREPpipeline maintenance (see section 1.2)has focused on seeking to ensure thecontinued integrity of the pipeline. We have also continued to build thecompetence of our teams throughtraining and development.

In making the transition to operations,we have, in common with the rest of the BP group, focused on the threedimensions of safety – personal safety,process safety, and protection of theenvironment. We recognize that the veryexistence of change can create safetyrisks, as project demobilization takesplace, simultaneous operations areconducted, and new contractors areappointed. It is essential to maintain thestrong safety culture which has beenbuilt up over the course of construction.To help manage the transition processsafely, safe systems of work trainingcourses were conducted for companyand contractor personnel, such as areaauthority and performing authoritytraining sessions.

A variety of training programmes hasbeen undertaken. These help to support

existing competencies and develop newskills. Ninety-three percent of staff in our2006 people assurance survey statedthat their safety competencies and skillswere adequate to do their job. Thisshows the good position we havereached as well as the margin forimprovement.

Induction training, which raisesgeneral safety awareness andfamiliarizes employees and contractorswith health, safety, security andenvironmental issues, is routinely carriedout. Training on BP’s ‘Golden Rules ofSafety’ has been provided. The goldenrules cover high risk areas of activitysuch as lifting, working in confinedspaces, or working at height. Safetyimmersion programmes, which involve a concentrated focus on particularactivities or tasks (such as lifting, driving,or energy isolation) were rolled out to BPand contractor employees.

Toolbox talks on site are regularlycarried out prior to starting work activity.Task risk assessment has also beenconducted. Training has also been givenon incident investigation, designed toidentify the root causes of incidents toprevent them happening again in future.

Contractor safety We have alsocontinued to work hard in pursuit ofgood safety performance from ourcontractors. Safety Leadership Teammeetings have been held every secondweekend, involving companymanagement and contractors. Theseprovide an opportunity to focus on therisks that arise in relation to futurescheduled work, such as scaffolding

activity. Incidents are also reviewed andexperience shared. We also convened asafety leadership workshop for all maincontractors which sought to improvesafety performance by encouragingworking together, acting consistently,sharing learning and implementing best practice.

On site, we have implementedincentive programmes designed to drivegood safety behaviour. The ‘Five Starprogramme’ provides a financial rewardfor consistently good personal safetybehaviour. Rewards are also provided forthe completion of safety trainingobservations and advanced safetyauditing cards, taking account of boththeir quantity and quality.

A contractor auditing and assuranceprogramme covering operations hasbeen developed for 2007.

Driving safety Improving driving and roadsafety has long been a focus area for thecompany, as road traffic accidents havebeen the largest single cause ofworkforce fatalities (30%). In Georgia,driving has always been a major risk on account of the importance oftransportation and logistics in ouractivities.

The risks we face arise from amultiplicity of vehicle-based activities,involving both light and heavy vehicles.Preventive actions have includedproviding fatigue management trainingfor drivers and carrying out regularvehicle checks. All heavy vehicles (suchas cranes or piling rigs) that enter a BPsite are inspected. We have also ensuredwe are properly equipped with vehicles

We have taken initiatives includingestablishing a health clinic inBakuriani available for company andcontractor employees, and runningcampaigns on health issues such asinfluenza, substance abuse andsmoking. We have provided first-aidtraining for employees andcontractors and have carried outepidemiological monitoring along theBTC/SCP right of way.

93%of staff in our 2006 peopleassurance survey stated thattheir safety competenciesand skills were adequate todo their job.

18 BP in Georgia

designed for winter conditions, such asthe use of specialist snow accessvehicles.

Drivers are given assessments whenthey start and regular re-assessments,and take defensive and off-road training.Training on winter driving techniques isundertaken. We introduced drug andalcohol checks as part of our drivermonitoring programme, and usetelematic recording systems to monitordriving behaviour (see the case study).The implementation of the driving safetystandard, which sets out requirementsfor BP employees driving or travelling in motor vehicles on BP business, hasalso progressed.

We believe that the combination ofthese actions has contributed to asignificant improvement in driving safetyperformance in Georgia from 2004-2005(measured by TVAR – the total vehicleaccident rate), but that the increase inTVAR in 2006 highlights the need for continued efforts.

Safety performance The safetyprogrammes implemented within BPGeorgia and among our contractors havehelped us achieve a good safety recordin 2006. We are pleased to report thatthere were no fatalities in our activitiesin 2006 and WREP and Supsa have nowgone eight years without a Day AwayFrom Work Case (DAFWC).

Improving driver safety

We have installed a telematic driving systemon every vehicle in the BP fleet – numberingover 230.

The recorders provide monitoring ofseveral aspects of driver behaviour. Forexample, we can obtain real-time or periodicinformation on vehicle speed and the use ofdriver and passenger seat belts. Thetechnology allows us to record speed limitsand speed travelled on different types ofroad throughout the country. This gives usthe possibility to analyse drivers, vehicles,and locations in order to learn lessons toimprove safety performance.

Safety performance in Georgia

Performance dataa 2004b 2005 2006Projects

Workforce fatalities 1 1 0Day Away From Work Case frequencyc 0.13 0.06 0.06Recordable Injury Frequencyd 1.16 0.43 0.13Total Vehicle Accident Ratee 4.52 1.42 2.65Man hours worked 18,119,886 13,167,493 6,342,139Kilometres driven 15,257,792 22,427,584 9,818,909

Operations

Workforce fatalities 0 0 0Day Away From Work Case frequency 0 0 0.11Recordable Injury Frequency 0 0.3 0.11Total Vehicle Accident Rate 0 1.15 1.14Man hours worked 1,623,625 1,326,005 1,783,500Kilometres driven 2,990,173 4,356,418 6,119,306

Air BP

Fatalities 0 0 0Day Away From Work Case frequency 0 0 0Recordable Injury Frequency 0 0 0Total Vehicle Accident Rate 0 0 0Man hours worked 33,033 34,342 33,100Kilometres driven 87,806 60,880 61,500

a Health and safety performance data has been collected differently in 2006 due to the commissioning of BTC and SCP and thedemobilization of the major contractor, SPJV. Data shown for ‘operations’ therefore includes information from BTC/SCP, WREP andthe Supsa terminal. In the 2005 Sustainability report, information from these assets was shown separately. It has therefore beensubject to minor restatement to enable more consistent comparison with 2006. Data for ‘projects’ includes all projects in Georgia.Information from the Air BP joint venture continues to be shown separately.

b Information in the 2004 BP Georgia Sustainability Review did not include SCP.c DAFWC: An injury or illness is classified as a Day Away From Work Case (DAFWC) if as a consequence of it the member of the

BP workforce could not have worked on any day after the injury or illness, irrespective of whether there was scheduled work, orwhen a physician or other licensed health care professional recommends that the member of the BP workforce stay at home butthe individual comes to work anyway. The Day Away From Work Case frequency (DAFWCf) is the number of injury DAFWCs to theBP workforce for every 200,000 hours worked in the same period.

d RIF: The total number of Recordable Injuries to the BP workforce for every 200,000 hours worked in the same period. A recordable injury is an injury and illness incident that results in a fatality, a day away from work case, restricted work or job transfer, or medical treatment beyond first aid.

e TVAR: Total Vehicle Accident Rate: the sum of all light vehicle and all mobile plant accidents per one million kilometres driven.


2006 has been a year in which we have carried out significant internalreorganisation. A management of changeprocess for the environment departmentwas undertaken which defined risks,activities, roles and responsibilities in the transition from project to operations.We have also integrated the BTC, SCPand WREP teams to align people and processes.

While making the changes necessaryto create an appropriate organizational

structure for the future, we have ofcourse had to respond to a variety ofongoing operational challenges. Theseinclude reinstatement, progressingtowards meeting the oil spill responseplan conditions, confirming ourcompliance with various requirements in Environmental and Social ImpactAssessments (ESIAs), and continuing totackle the issue of waste management.One of the biggest challenges has beenmanaging the change from a main

international project contractor to anumber of smaller, often local andregional contractors. This has involveddeveloping new working relationships andproviding training and assistance to seekto ensure that all work is done to projectand BP standards.

Reinstatement A major focus of effort in2006 has been work on reinstating theright of way. This has required heavyengineering work and bio-restoration

1.6 Environmentally sound operationsOne of BP’s group values is to seek to minimize the environmental impact

of its operations.We aim to do this across the life cycle of our activities. In

Georgia, our focus has been on minimizing the impact of our construction

projects. Actions taken in pursuit of this include environmental and social

impact assessments, pipeline rerouting, reinstatement, and incorporating

high technical standards in asset design and construction. As we move into

the next phase of the project life cycle, the challenge will shift towards

minimizing impacts from routine operations.

BTC and SCP – Reinstating the Right of Way (RoW)

’Viewed as a whole, we find the quality of reinstatement along the pipeline route to be world-class. BTC and the contractors working under its supervision have donean outstanding job of refinishing the RoW to fit the contours of the surroundinglandscape. Although it will take time, especially in freshly reinstated high altitudeareas, for plant cover to re-establish itself fully, BTC’s careful topsoil managementpractices are already being rewarded with the reappearance of native pioneerplants. In lower lying areas where reinstatement took place relatively early, the RoW marker posts are frequently the only visible evidence of the pipelines’presence. BTC’s restoration work is to also be commended for its attention tobiodiversity in environmentally sensitive areas along the pipeline route, through theplanting of native saplings and a comprehensive monitoring programme to verifythat local species re-establish themselves in appropriate numbers on the RoW.’CDAP Final Report and Conclusions (January 2007).


20 BP in Georgia

involving the reinstatement of topsoil andvegetation. Independent observers havecommented on the excellent quality ofthis work, including SRAP, theindependent environmental consultant,and CDAP. Much of the RoW now shows good regrowth and the pipelinecorridor in many sections is virtuallyindistinguishable from natural ground.Marker posts are often the only visibleevidence of the pipeline’s presence.

Reinstatement has also involved work‘off the right of way’, which covers areassuch as camps, pipe yards, access roads,borrow pits and rock disposal sites.

Waste management BP has committed toEU standards of waste management forthe BTC pipeline and associated facilities.This is a challenge as the wastemanagement infrastructure in Georgiadoes not currently meet EU standards.

For non-hazardous waste, our objectivehas been to build an EU compliant facilityat a BP operated site east of Tbilisi for thedisposal of BP generated non-hazardouswaste. The facility is to be constructed inan area which can be expanded for alarger municipal site, and which could bepartly funded by BP and other potentialpartners.

In 2006, we identified what we believeto be a suitable site and began definingland ownership and allocation needs.Preliminary designs are being developed.This process has involved regulardiscussions with the Tbilisi municipality,the Ministry of the Environment, GIOCand other partners. Upon obtaining a sitewith the help of the government, our aimis to complete the design, and theenvironmental and social impactassessments, and gain the permits andconstruction approvals required.

We continue to store hazardous andnon-hazardous waste that cannot belocally recycled or placed in the non-hazardous landfill at a controlled centralwaste accumulation area and areproceeding with plans to export this toEU compliant facilities outside Georgia.Any such transboundary wastemovement requires authorization underthe Basel Convention, registeringappropriate and agreed transport anddisposal options between the

participants. We are defining these routesnow and have begun the administrativeand permitting processes necessary,using experienced contractors in thewaste field.

Our effort to manage waste safely andto high standards has been carefullyscrutinized by external organizations andhas resulted in a number of criticisms andrecommendations. CDAP, for example,noted the difficulties we had encounteredin meeting the standards we had set forourselves and recommended a review of

lessons learned and a more consolidatedfocus on waste management issues atexecutive level. The NGO working groupwhich carried out a detailed audit ofwaste management on BTC and SCP made a series of specificrecommendations for action. The report of the lender-appointed independentenvironmental consultant noted thecontinuance of challenges in this area.

We will take steps to tackle this issuein a way which meets the short-termrequirements, while continuing to pursuethe goal of establishing better long-termfacilities.

Biodiversity and conservation The fifthannual biodiversity competition was heldin Georgia in 2006. The aim of thecompetition is to make a real, measurableand positive impact on biodiversity byfinding the best ideas for raisingawareness of the importance of thepreservation of the world’s biodiversity.The competition is sponsored by BP andits partners.

As previously, project submissionswere made in two categories: bestbiodiversity project and best biodiversitymedia materials. A total of 57 proposalswere received, the highest number todate. Twenty-nine of these werebiodiversity project submissions; 28 in the media category.

The range of submissions wasimpressive. This was reflected in theawards made. In the highly commendedcategory, separate awards were made forprojects concerned with eco-tourism,beetle preservation, and education. Thefirst prize, receiving an award of $14,700was given to support the development ofa ‘red list’ species database. A secondprize award of $8,530 was made for work on the conservation of wild plants.Three further participants were highlycommended and received $2,000 eachfor capacity building purposes.

In the media category, two awardswere given, a third prize of $300 and a second prize of $500. The technicalpanel decided that there would not be a first prize award this year but welcomed the higher level of interest and increasing sophistication of thesubmissions made.

The fifth annualbiodiversitycompetition was heldin Georgia in 2006. Theaim of the competitionis to make a real,measurable andpositive impact onbiodiversity by findingthe best ideas forraising awareness ofthe importance of thepreservation of the world’s biodiversity.


The Environmental Investment Programme

(EIP) The Environmental InvestmentProgramme, a $9.3 million three-countryinitiative funded through the BTC andSCP projects, has supported initiativesfocused on the promotion andconservation of biodiversity. Georgiareceived $3 million of the programme’sallocated funds. The programme, whichbegan in September 2003, is divided into themes identified during the ESIAprocess and through consultation withnational and international stakeholders.The five projects financed were: • Caucasian Black Grouse Research,

Monitoring and ConservationManagement project, implemented by the Georgian Centre for theConservation of Wildlife. The goal ofthe project was to provide a scientificbasis for the conservationmanagement of this endemic, rare andglobally threatened species. The projectended in 2005, with the developmentand government acceptance of thespecies management plan. In 2006, aproject to put the action plan in placewas initiated.

• Ecosystems and Species Conservationin Georgia: the Brown Bear project,implemented by NACRES – Noah’s ArkCentre for Recovery of EndangeredSpecies. The project aimed to estimate

the bear population, appraise threats,describe the reasons for habitat loss,establish a bear conservation actionplan, and promote communityinvolvement in conservation activities.The project was completed in 2006and we are considering financing asecond phase implementing elementsof the bear conservation action plan.

• Management of the Small GrantsProgramme for NGO Capacity Buildingalong the SCP and BTC Pipeline routes.This was implemented by Save theChildren in partnership with NACRES.The project sought to develop NGOcapacity to engage citizens inenvironmental awareness andeducation. An independent evaluationcompleted at the end of 2006 foundthat the project had achieved most ofits major environmental and socialobjectives, and yielded satisfactoryenvironmental and social benefits, withonly minor shortcomings. We areworking with Save the Children todevelop a second phase of theprogramme to continue to the end of 2008.

• Enhancement of EnvironmentalEducation, conducted by the NGOCARE, in conjunction with the CIP-Improved Schools Project. The goal of the project was to deliver extra-

curricular training to adolescents onenvironmental issues and conservationapproaches, to promote active learningmethodologies in teaching, and toupgrade teaching materials. ‘Eco-clubs’,were created in schools to undertakeenvironmental projects. This initiativewas completed in April 2006.

• Environmentally Sound LivestockFarming Project, also carried out byCARE. The project sought to promoteenvironmentally sustainable livestockmanagement practices in the 24villages surrounding the Borjomi-Kharagauli National Park. The projectwas substantially complete in 2006,with only minor activities remaining in 2007. In addition to the activities summarized

above, a feasibility study for a major newproject to develop a management plan fora Ktsia-Tabatskuri Managed Reserve wascarried out. This project, which is beingcarried out by the World ConservationUnion (IUCN), will continue until 2008.

Emergency response Emergencyresponse capability is required for a range of incidents, whether they arerelated to health, safety, security or theenvironment. Our approach to response isguided by the group’s crisis managementframework. Having the capability to


22 BP in Georgia

Responding to the Abastumani Fire

In August, a serious forest fire occurred in the Adigeni districtnear Abastumani, about 15 kilometres from the BTC/SCPright of way. In response to a request from the government,BP provided bulldozers, food and water as well as helicoptersupport to help identify the hot spots in the fire.

The Ministry of Foreign Affairs in its official briefingthanked Turkey, Ukraine and BP for the support they hadprovided in tackling the blaze. The Georgian Minister ofEnvironment later presented a letter of recognition to theBP fire fighting team. The team subsequently received a BPAzerbaijan SPU President’s safety award for their efforts.

respond to emergencies is a key part ofrisk management.

In moving from project to operations,we have created an integrated IncidentManagement Team (IMT), covering all BPoperated Georgia assets and projects andproviding support to site response teamsin emergency situations. The IMT linkswith company management, governmentagencies, media and the public, as andwhen required.

To minimize the risk of anenvironmental incident, we have adoptedinternational technical standards andselected pipeline routes which minimizeas far as reasonably practical the risk ofoil spills or gas leaks. Pipeline design,materials and construction have beenimplemented to high internationalstandards.

In 2006 we had 11 incidents onGeorgia Operations where IMT supportand mobilization were required. Many of

these incidents were precautionary. Allresponse was supported and co-ordinatedfrom the Tbilisi incident managementcentre. After each IMT mobilization adebriefing was held and a formal reportwith improvement actions issued.

Site emergency drills were conductedon a regular basis at our sites inGeorgia, covering a range of scenarios.The aim is to ensure effective responsein the event of a real emergency. Amajor emergency response exercisewas carried out on SCP in June 2006 to test whether command and controlsystems were in place beforeintroducing gas into the pipeline.Georgia state authorities and externalobservers attended the exercise andparticipated in a final debriefing session.A successful cross-border oil spillresponse exercise was also conductedto test the mobilization of manpowerand equipment across the border from

Georgia to Azerbaijan in case ofemergency.

We have had to respond to three oilspill incidents in 2006. The first occurred inJanuary when a lubricant leak of 1,000litres occurred at pump station 1. All of thespill was contained and drained to theclosed drain system. The second occurredon the western route in April where afarmer accidentally damaged a hoseillegally attached to the WREP pipeline.The volume of oil released was 9,221litres, all of which was recovered. Thethird, at block valve station GB09 on theBTC pipeline in May, resulted in therelease of 195 litres of oil, all of which wasrecovered. In each case, incident responseteams were dispatched to the scene tosupervise the clean-up operation. BP alsoresponded to an incident at the Batumi oilterminal at the request of oil terminalmanagement. Our team provided supportto the oil spill responders.

To minimize the risk of an environmental incident, we haveadopted international technical standards and selectedpipeline routes which minimize as far as reasonablypractical the risk of oil spills or gas leaks. Pipeline design,materials and construction have been implemented to highinternational standards.


Support for the Georgian National Museum (GNM)

BP in Georgia has embarked upon a partnership programme with the country’s leadingcultural institution, the Georgian National Museum.

In an agreement with Georgia State Museum Development Association made inJanuary 2006, we agreed to provide a grant of $500,000 towards establishing a learningfacility at the GNM in Tbilisi. This will include an auditorium and a learning centre. Thesewill provide a world-class facility for a broad range of educational activities.

A separate grant made under the partnership programme is supporting the development of a tourist facility in Dmanisi, amedieval village near Tbilisi where archaeological digs have discovered fossils of early humans. The grant, worth $400,000, willpromote Dmanisi as a cultural and educational site, attracting visitors to the area and generating economic benefits for the region.

1.7 Protecting cultural heritage The BTC project right of way passes through 250 kilometres of land

that has been visited, lived upon, and shaped by people for some

1.75 million years – the country of Georgia. Georgia is home to the

oldest known out-of-Africa homo erectus remains, the rich burial tombs

of Bronze Age kings, Promethean legend and the Golden Fleece, and

some of the world’s oldest and most beautiful ecclesiastical architecture.

The BTC company made an earlycommitment to the protection ofarchaeological sites and monumentsduring pipeline construction andoperation. In collaboration with the Centrefor Archaeological Studies (CAS) and theCultural Heritage Protection Department,the BTC project heritage protectionprogramme was formalized.

Spending on this programme has beenapproximately $2.5 million. Our activitieshave been audited by IEC and one of thePMDI NGO working groups.

Programme elements include carefulrouting to avoid known sites and study ofkey sites prior to construction. During

construction a team of professionalsmonitored activities to look for evidenceof new sites and make sure known siteswere protected. When activities likestripping and trenching led to theidentification of new sites, consultationswere undertaken with CAS to decideupon proper treatment. In some casessites were protected through pipelinereroutes. In others, archaeologicalexcavations and studies protected sites.

The BTC monitoring programme hasled to the identification and study of manysignificant heritage sites. Sites andobjects found range from the paleolithicto the late medieval period and include

stone tools tracing the movement of early humans from Africa to Europe and vestiges of 18th-century Turkishexpansion in the form of an aqueduct andnatural mineral baths. Excavations are notthe final step of the progamme; they arefollowed up by analyses and reporting.

Archaeological and architectural studiescompleted as a result of the BTC pipelineproject help to better illuminate Georgia’srich history. Our aim is to continue tocontribute to this understanding. Toprotect cultural heritage sites duringoperations, we have developed amanagement plan providing guidance on cultural heritage site protection.

24 BP in Georgia

During 2006, the pipeline continued tobe protected by government forces: theStrategic Pipeline Protection Department(SPPD) protects BTC/SCP and SupsaTerminal and the Special Task ForcePolice protects WREP. In addition, weengage a private security provider toprotect our permanent facilities. Alongthe length of the pipeline, Field SecurityOfficers (FSOs) are used.

Our overriding approach is tostrengthen pipeline security by

developing strong relationships with thecommunities in which we operate and toundertake activities that are mutuallybeneficial. We seek to achieve this byemploying security staff from localcommunities through our privatesecurity provider. Our CommunityLiaison Officers and FSOs also play acritical role in engaging our communities.

The framework for providing securityis set out in a bilateral protocol weentered into with the Georgian

government in 2004. This protocoldefines the government’s responsibilityin providing security, the procedures foruse of force, recruitment and training ofpersonnel, and on communication andconsultation between the two parties. Italso sets out how the parties will adhereto international human rights standardsincluding the Voluntary Principles onSecurity and Human Rights, in theprovision of security. BP is one of thefounding members of the Voluntary

1.8 Security and human rightsWe have established a clear framework for the provision of security

and protecting human rights. We have also developed a good working

relationship with the Georgian government’s security forces, who play

an important role in providing a secure and safe environment for our

people and assets. In 2006, we continued to strengthen our capacity to

provide effective security.

Security training

Bowman Risk Management (BRM), a UK-based security training and consulting company,has continued to work with the Georgian Strategic Pipelines Protection Department (SPPD)and provided planning and training support for the organization during 2006. The planning hasconcentrated on the development of detailed standard operational procedures (SOPs) andincident management procedures for the SPPD, while the training programme has beendevoted to developing the operational skills that the SPPD require to protect the pipelines.The training has therefore included practical topics such as command and control, tacticalsurveillance and search operations, winter operations, remote area survival and rescuetraining, emergency vehicle extraction courses, medical training, and driver training.

Particular emphasis has been given to international law, human rights, and conflict resolution. Modules have included theUN Declaration of Human Rights, the UN code of conduct for law enforcement officials, the Voluntary Principles on Securityand Human Rights, conflict prevention and management techniques, the use of force and the establishment and application of national rules of engagement. This training is delivered in the classroom, where the theories and principles are covered indetail and then followed by a practical lessons and exercises.

Principles on Security and HumanRights, designed to help companies inthe extractive industries maintain thesafety and security of their operationswithin a framework that upholds respectfor human rights.

Since signing this protocol, we have taken steps to work with thegovernment and fulfil our obligations,through activities such as training,consultation, information exchange andcompliance monitoring. For example, we continued to provide training to theSPPD. Courses included human rightstraining, first aid and winter survival. Itwas encouraging to note the observationof the SRAP expert panel, following theirconsultation with villages in September2006, that ‘almost all villagers said thatthey did not find the security personnel a problem and some even said that itmade them feel more secure’.

The protocol recognizes the need forclose communication and informationexchange between BP and governmentsecurity forces. In 2006, we worked withspecial departments within the policeforce who carried out investigativeactivities leading to the arrest of thoseinvolved in illegal oil tapping of WREP.Our security staff carried out permanentmonitoring and helicopter surveillance

over areas of concern with the SpecialTask Police. As a result, losses fromWREP (which has been a problem forsome time) were significantly reduced.Notwithstanding these efforts, werecognise the need to remain vigilant. An illegal tap on WREP, for example,resulted in an oil spill in April and ourincident response team was mobilizedquickly, minimizing the spill’s impact.

In 2006, our performance againstsecurity and human rights commitmentswas assessed by independent experts,US law firm Foley Hoag LLP. Their reportwill be published in 2007.

In 2004, a separate agreement wasalso reached with the Georgiangovernment on the provision of securityequipment, facilities and operationsfunding. In accordance with thisagreement the delivery of all securityequipment was completed and thesecond payment of $1 millionoperations funding was made to thegovernment in 2006. Construction of theKodiana security facility also began in2006. When complete this facility, whichwill be primarily staffed by localpersonnel, will provide a permanentbase with accommodation, offices, and training areas for governmentsecurity personnel.


We have taken steps to work with thegovernment and fulfil ourobligations, throughactivities such as training,consultation, informationexchange and compliancemonitoring. For example,we continued to providetraining to the StrategicPipeline ProtectionDepartment (SPPD).


26 BP in Georgia

To succeed in becoming a local company,we need to attract and recruit Georgiannationals, develop their skills, give themopportunity, and perpetuate a workingculture which treats people fairly, withrespect and on merit.

As we move into long-term operations,we are seeking to promote moreGeorgian nationals to leadershippositions. In support of this, the GeorgiaLeadership Development Programme(GLDP) continued in 2006, usingworkshops, exercises, and team-buildingto help emerging leaders develop. Wehave appointed more Georgians toleadership positions within the businessand are working on an organizationalcapacity development plan which willaddress succession planning and trainingneeds, implementation of which willbegin in 2007.

Our headcount numbers show that thetotal size of our workforce has increasedyear on year since 2004. This has includedan increase in Georgian nationals andexpatriates. Among the Georgiannationals, we are engaging more peopleas BP employees and also more ascontractors. The expatriates areexperienced staff with relevant priorexperience, working in short and somelong-term roles.

2006 People Assurance Survey Wecompleted the People Assurance Survey(PAS) in 2006, a BP-wide employeeopinion survey conducted every twoyears. The questionnaire examines variousaspects of employees working lives andprovides valuable data for leadershipteams. Responses are confidential andremain anonymous, and are sent directly

to an independent third-party researchfirm. The participation rate in 2006 forGeorgia was 63%.

The PAS provides a wealth ofinformation about employee attitudes toseveral ‘dimensions’ of their working life.A composite ‘Employee SatisfactionIndex’ (ESI) is calculated based onanswers to 10 of the survey questions.

The ESI score for Georgia, expressedas a percentage, showed animprovement on 2004, rising from 61%to 68%. This compared to the BP groupscore of 66%. Employees had particularlyfavourable views of issues such as theextent to which job expectations wereclear, the degree to which individualobjectives linked to business goals, andthe organization’s strong environmentalperformance. Less favourable responseswere registered for reward, benefits andrecognition and on opportunities fordevelopment.

In addition to communicating the PASresults widely across the business, focusgroup sessions were held to discuss theresults in detail. Discussions have fed into the development of an internalcommunications plan which identifiesactivities that will facilitate closeremployee engagement with the businessand its objectives.

1.9 Our peopleThe change in the nature of our activities in Georgia in 2006 has had

major implications for our people. Staff transfers, internal and external

recruitment, and changes to roles and responsibilities were just some

of the effects. While any period of change can be unsettling, the

transition to operations has also brought opportunities for BP Georgia

staff. Building and developing our local capacity remains a key priority

as we move into the operations phase.

BP Georgia workforce headcount2004 2005 2006

Number of Georgian nationals 389 398 492Number of whom are BP employees 228 271 274Number of whom are contractors 161 127 218

Number of expatriate nationals 142 138 162Number of whom are BP employees 37 38 26Number of whom are contractors 105 100 136

Total workforce number 531 536 654

Compliance and ethics A number ofmechanisms exist for employees andcontractors to raise ethical concerns. Theframework for our values and standardsof behaviour is the BP code of conduct.

The code represents BP’s commitmentto integrity, defining what is expected ofevery BP employee in five areas: health,safety, security and the environment;employees; business partners;governments and communities; andcompany assets and financial integrity. Itis a company-wide framework that setsout how we should behave when facedwith choices about our behaviour at work,ranging from basic rules on safety todetailed expectations regardingcompetition and anti-trust issues. It wasdeveloped in line with international bestpractice and shows employees where tofind more detailed standards on specificissues. It was launched across thecompany in 2005.

We reinforced elements of the codethis year by including reference to it in our worker rights training.

The PAS results showed confidenceamong our employees that BP givespriority to group values and the code ofconduct in pursuit of its business andcommercial goals, and that the code isenforced when breaches occur.

Human and labour rights In 2005 anindependent assessment was conductedby Foley Hoag to monitor compliancewith our commitment to respect the

fundamental human rights and labourrights of workers and members of localcommunities affected by our activities. Intheir assessment published in February2006, Foley Hoag found that we were in‘substantial compliance’ with our humanrights commitments and that efforts hadbeen made to follow best practices. Theassessment concluded that in someareas new standards had been set.Nevertheless, areas were identified forimprovement and we have taken action in2006 to address those recommendations.

One of the actions has been to raiseemployee and contractor awareness offundamental worker rights. Trainingaddressed International LabourOrganisation (ILO) conventions – such as freedom of association, freedom ofmovement, and non-discrimination. It included guidance on the stepsemployees and contractors could take if acomplaint or concern was raised, focusingon the importance of non-retaliation withinthe workforce. Over 720 staff andmanagers received this training in 2006.

Ethics certification As in previous years,we completed the ethics certificationprocess in 2006. Every year, eachbusiness or functional team is asked toproduce a certificate indicating the extentto which it has complied with laws,regulations and the code of conduct.Under this process, line managers certifythe behaviour of teams under theirdirection following a team discussion.

The certificates include details of anybreaches of compliance and reportprogress on any issues raised theprevious year. This process continues tothe group chief executive, who signs acertificate for the whole group andreports to the board’s safety, ethics andenvironment assurance committee.

OpenTalk Employees or contractors withan enquiry or concern about compliance,ethics or the code of conduct may contactour independent confidential helpline,OpenTalk. Individuals can contactOpenTalk using a multilingual phone lineor via fax, e-mail or letter, 24 hours a day,seven days a week. All reports arehandled by an independent organizationbefore being forwarded to BP. Concernsare passed to a regional ombudsperson, a senior BP manager, who will arrange aresponse, possibly including aninvestigation. BP will not tolerateretaliation against anyone who raises anOpenTalk case or is named in one. Anyallegation of retaliation is investigated and,if substantiated, disciplinary action will betaken against those responsible.

In 2006, we raised awareness ofOpenTalk by including reference to it inour worker rights training and distributingposters. We were pleased to see fromthe PAS results that nearly 90% of ouremployees were aware of the OpenTalkhelpline and that the percentage ofpeople prepared to use OpenTalk hadincreased significantly from 2004.


Fostering improved HR management with contractors

In November, the BP social team led the annual audit of the BTC Employment and TrainingManagement Plan which lists commitments in relation to recruitment, employment conditionsand training. Management and employee interviews were held with 10 contractororganizations, and documents were reviewed. BP’s own HR department and agency staff werealso included.

The audit found areas where HR functions were carried out well but that potential existedfor building greater understanding of human resources management.

From the audit, we will seek to raise contractor awareness of human resourcesmanagement and outline the sorts of best practice policies that BP expects. This will includeinformation on: the new Georgian labour code, disciplinary procedures, employee grievancemechanisms, policies that cover fundamental worker rights, open and transparent recruitmentprocesses, and appropriate documentation.


Our role in society2.1 The social and environmental context

2.2 Climate change

2.3 Promoting good governance

2.4 Enterprise development

2.5 Education

2.6 Access to energy

2.7 Our programmes

Children enjoying attractions in Borjomi park, renovated with BP’s support.


Our role in society

Georgia’s rate of economic growthaccelerated from 2004-2006. World Bankand Georgian government projectionsforecast continuing average GDP growthof 5-7% in the 2006-2008 period. A number of reforms have contributed to this improved performance includingstrengthening state institutions, improvinggovernance and anti-corruption, investingin infrastructure and improving theregulatory environment.

Despite this, many fundamentalchallenges remain. Several of these aresocial in nature, characterized by the needto protect the vulnerable and to develophuman resources. The government hascommitted to meeting the UN MillenniumDevelopment goals by 2015 and hasdeveloped an Economic Developmentand Poverty Reduction Programme with the support of the internationalcommunity and extensive civil societyparticipation. The commitments made willrequire sustained investment in basicpublic services such as health, education,and social protection.

Business contributes to developmentthrough its support for social projectswhich have clear and focused objectives.At group level, we focus our contributionson support of revenue transparencyinitiatives, and direct most of our

community investment to projects thatsupport enterprise development, educationand improving access to energy. Thesebroad themes have widespread relevanceacross many parts of the world in whichwe operate, but we take account ofspecific local needs in the projects wesupport. In Georgia, these group prioritiesand themes are implemented through a number of national and regionalprogrammes, described in the sectionswhich follow.

Business has a role to play incontributing to poverty reduction throughits delivery of essential products andservices – such as energy – whichstimulate economic developmentdirectly. However, there is a perceivedtrade-off between providing access to

energy and the protection andimprovement of the natural environment.Our group values include the aspirationto overcome this trade-off.

In our operations in Georgia and aroundthe world, we deal with this in partthrough measures to ensure ouroperations are carried out in anenvironmentally sound manner –described in section 1.6 of this report.

There is, however, anotherenvironmental issue which represents asignificant challenge for societies in everycountry of the world: climate change. For this reason, we begin this section by setting out the group’s thinking onclimate change and provide an overviewof its global marketing of low-carbonpower and transport.

2.1 The social and environmental contextPositive steps have been taken in recent years in Georgia to promote

economic growth and improve social conditions. GDP growth has been

strong, and efforts have been made to implement poverty reduction

programmes. International organizations, such as the UN, the World

Bank, the IMF, and the EBRD are supporting these initiatives. For our part

and on behalf of our partners, we are committed to promoting economic

and social development in Georgia through our investment in operations

and the social and community projects which accompany them.

At group level, we focus ourcontributions on support of revenuetransparency initiatives, and directmost of our community investmentto projects that support enterprisedevelopment, education andimproving access to energy.

30 BP in Georgia

Our track record for action on climatechange stretches back to 1997 and weare widely known as the first oilcompany to publicly acknowledge theissue. Today we take precautionaryaction to limit GHG emissions and workto combat climate change. We first setvoluntary targets to reduce emissionsfrom our operations in 1998 andachieved these original goals ahead ofschedule. We continue to take action toreduce these emissions.

In response to increasing demand forenergy with a lower-carbon footprint, we have made a major commitment todevelop low-carbon sources of energy. In2005, we launched BP AlternativeEnergy, a profitable business thatprovides low-carbon power generationsolutions based on solar, wind, hydrogenpower and gas power.

We continue to market a range ofcleaner fuels and lubricants around the world. In 2006, we introduced BPUltimate fuels to South Africa andRussia at significant levels and rolled outour Ultra Low Sulphur Diesel in the US.We are working with several partners to develop lubricants that supportimprovements in engine constructionand emissions systems that are

intended to improve fuel efficiency andreduce pollution.

We fund a significant amount ofresearch on ways of providing low-carbonenergy and have made carbon a themeof our corporate advertising in severalcountries throughout 2006.

Climate change remains high on theglobal policy agenda and we are activelyinvolved in the debate. We support theview that, in order to reduce the risks ofthe worst impacts of climate change, theCO2 equivalent of GHG concentration inthe atmosphere should be limited withinthe range 450-550 parts per million (ppm).We also argue in favour of mandatoryemission caps and policies that set aprice for carbon in a way that can changebehaviour and encourage innovation.

1997

BP publicly acknowledges, at Stanford, the need

for precautionary action to cut GHG emissions

after exiting the Global Climate Coalition.

Climate change – our journey

February 2006

BP announces hydrogen power plant with

carbon capture in California.

1998

BP sets target to cut GHG emissions from our

operations to 10% below 1990 levels by 2010.

BP achieves this target nine years early, in

2001, by introducing energy efficiency projects

and cutting flaring of unwanted gas.

June 2006

BP pledges $500 million to establish Energy

Biosciences Institute research programme.

December 2006

BP is involved in wind power projects in the

US, that have a potential generating capacity

of 15,000MW.

2015

BP goal to have invested $8 billion in BP

Alternative Energy business and to have

delivered GHG reductions of 24 Mte a year.

November 2006

BP Solar doubles manufacturing capacity

worldwide from 100MW to 200MW compared

with 2004.

2012

BP goal to have improved energy efficiency by

10-15% versus 2001 baseline.

2.2 BP and climate changeAs a global energy company we have a responsibility to play a part

in addressing the threat of climate change. In 2006, we launched a

biofuels business that will provide low-carbon solutions for transport.

We also announced plans to invest $500 million over 10 years to create

an Energy Biosciences Institute, which will explore the application of

bioscience and the production of new and cleaner energy.


Our role in society

2.3 Promoting good governance Our investment in Georgia is long-term. We have a clear interest in

Georgia’s long term economic progress.Transparency and good

governance are important aspects of sound economic management.

We therefore try to use our influence to ensure that the wealth created

through the development of natural resources is used productively.

Securing transparency about the use ofgovernment revenues derived from naturalresources is becoming an increasinglyhigh-profile issue in Georgia. It is beingsupported by NGOs and campaigninggroups such as the Open Society GeorgiaFoundation, and the Coalition for theTransparency of Public Finance.

Reforms made by the Georgiangovernment have brought improvementsto levels of transparency and in tacklingcorruption. Transparency International’s2006 Corruption Perception Index, foundthat business people and country analystsperceived that corruption in Georgia haddeclined over the period 2004-2006. But,

Georgia’s score on the index and itsplacement in terms of internationalcomparisons indicate that furtherprogress needs to be made.

In our activities in Georgia, we havesought to be open and transparent. Thelayers of monitoring we describe insection 1.4 are a reflection of thatcommitment.

There are many aspects to promotingtransparency, including publicizingagreements with government on non-financial matters such as human rights. Inrelation to revenues, we have tried toapply the same spirit of transparency inour dealings with government. We have

established an open process forpublishing financial information about theBTC grant programme, and created anaudit process for these funds within thegrant agreement.

The application of these provisions inthe BTC grant programme was examinedin a review led by the Georgian YoungLawyers Association (GYLA), concluded in 2006. Their report reiterated theimportance of transparency in ensuringthe effectiveness of the grantprogramme. GYLA called for clearerexpression of the goals of the grantagreement to ensure that grant moniesare properly used.

Building in transparency and audit

Our grant agreement with the government of Georgia, available to the public on the internet(www.bp.com/caspian), contains specific provisions on transparency and audit.

These state the commitment of the parties to the principles of transparency and accountability.BTC Co. is required to report publicly the amount and timing of each grant payment. The

government is obliged to report on its funding for each project in the areas permissible under the agreement – namelyeducational, healthcare, social welfare business development, and job creation programmes. Detailed and verifiable records ofexpenditure must be kept. A process is set out for the transmission of funds between the parties. Reputable independentauditors must be appointed to review each request for funds and verify that the grants have been used in accordance with theagreement. An executive summary of the auditor’s report must be made available in Georgian and English in a timely manner.

32 BP in Georgia

2.4 Enterprise developmentWe can make an important contribution to the development of local

enterprise. By using local suppliers, we can create jobs, develop lasting

skills and contribute to economic wealth and stability.The skills gained

by local companies can help them succeed in the long term, beyond the

energy sector. For us, local enterprise development can shorten and

stabilize our supply chain and in some cases reduce costs. A local

supplier base also helps us to develop constructive relationships with

the local community.

Business development in the Borjomi region

The objective of one of our Regional Development Initiative projects is to help small-scaleentrepreneurs and agro-businesses in the Borjomi region improve their product lines,competitiveness and organizations.

During a project inception phase, studies were made of economic activities in Borjomi,Akhaltsikhe, Adigeni, Aspindza and Khashuri counties. Key stages in the economicprocesses were analysed, from primary to final production in the markets of urban areas.Other processes in agriculture and other manufacturing sectors were identified.

It was decided the project should focus on livestock development and milk processing, and beekeeping. The livestockdevelopment project is seeking to tackle problems of poor nutrition and weaknesses in fodder production, trade and marketing,and problems associated with veterinary services and artificial insemination. The beekeeping project will support theimprovement of honey quality, the creation of a brand name and access to markets. Both will have capacity building elements.

The project involves engaging with individuals, as well as establishing organizational structures, such as farmers’associations or unions, which will help improve the agricultural sector of the Borjomi region as a whole.

BP Georgia and our partners makesignificant payments to local, Georgian-owned businesses. The table showstotal annual payments to Georgiancompanies from 2000-2006. The steadyincrease in local spending is in part areflection of our move towardsoperations, where a skilled local supply chain is needed. Our principalcontractors also use local sub-contractors where possible.

As part of our community investment

Payments to local companies ($million)

2000200120022003200420052006

10 13.9 15.9 20.3 26.1 53.7

86.8

programme, we have contributed toinitiatives supporting enterprisedevelopment. In particular, we haveprovided support for entrepreneurs andsmall businesses by providing micro-credit, delivered to customers throughour implementing partners in thecommunity investment programme, suchas the Constanta Foundation. Enterprisedevelopment is one of the three corethemes within our Regional DevelopmentInitiative (see section 2.7).

Year 2000: Georgian Pipeline Company (GPC) payments.Year 2001: GPC and BP payments.Years 2002 and 2003: GPC, BP and BTC payments.Years 2004-2006: GPC, BP, BTC and SCP payments.


Our role in society

2.5 EducationSupporting education is a key activity within the group corporate

responsibility framework because it focuses on issues that affect our

future: energy and the environment, basic education, and education

for business. Helping education is also, of course, a key aspect of

sustainability – enabling skill and knowledge transfer from one

generation to the next. Within Georgia, we support primary and

secondary schools, as well as postgraduate research and study.

Support for schools The CIP-ImprovedSchools Project (CIP-ISP) which began inthe summer of 2004, seeks to provideopportunity for adolescents to participatemore effectively in Georgia’s future socialand economic growth. The project hassupported school rehabilitation, teachertraining, awareness raising campaigns oneducational reform and the organizationof summer camps.

Building on our valuable experience inschools projects along the BTC/SCPpipelines from the first phase of CIP-ISP,we completed the planning in 2006 for an initiative to provide small grants toschools along the western route. This willbe extended to all districts along theWREP over the next 3-4 years. Theprogramme will be managed by ourcommunity liaison officers.

Deer Leap

The Deer Leap project in Georgia seeks to increasecomputerization in the country’s schools. The project actson a strategic priority identified in the national EconomicDevelopment and Poverty Reduction Programme (the‘EDRP’) to introduce information and communicationtechnologies in education. Deer Leap is a four-yearprogramme running from 2005-2008, designed by theMinistry of Education and Science. It was introduced bypresidential decree.

Deer Leap is based on a successful example of nationalschool computerization in Estonia. The programme there –called ‘Tiger Leap’ – ran from 1997-2000 and madesignificant progress in providing internet connections toschools, training teachers in basic computer skills, andpurchasing educational software packages.

34 BP in Georgia

Studying in the UK: theexperience of a Georgianscholarship student

‘Spending a year working and studying inthe UK was a great opportunity. I studiedat Royal Holloway, part of the University ofLondon. Living and working in the UK gaveme a great insight into the British way oflife. Professionally, the experience gave megreater independence, enabling me toestablish useful contacts which will help me in my future work. My finalassignment – a short documentary – wasscreened at various international filmfestivals including Rotterdam, Trieste, Tbilisiand Paris. I am extremely grateful to BPand the British Council for the support theyhave provided.’ Salome Jashi, Georgian scholarship student.

We have also initiated a programme ofinvestment in schools around the Supsaterminal (known as ‘ISAST’). ISAST is oneof the elements of our social investmentprogramme along the western route. Itbuilds on the most successful elementsof CIP-ISP.

In April 2006, we signed an agreementwith the Ministry of Education on co-financing a school computerizationprogramme. The initiative, called ‘DeerLeap’ led to the provision of over 3,000computers to approximately 400 schools

in Georgia. We provided $2.8 million fromthe BP pledge programme.

We have also provided financialsupport for the establishment of theInternational School of Economics inTbilisi. It is being created to promoteexcellence in postgraduate economicstudy and research across the region. Our support has helped progress plansfor the school’s opening. A first group of57 students has been admitted, from 167applications, and includes Georgian, Azeriand Armenian nationals. Faculty members

have been appointed and administrativepositions are being filled. It is anticipatedthat the school will move into its ownrefurbished building in 2007.

We also support a Masters levelprogramme to allow gifted Georgianscholars to study in the UK over threeacademic years (see section 2.7). Thesecond group of eight scholars wasselected in 2006 and departed for UKuniversities in September. The selectionprocess for the third round of scholarswas also begun.

We have also providedfinancial support for theestablishment of theInternational School ofEconomics in Tbilisi. It isbeing created to promoteexcellence in postgraduateeconomic study andresearch across the region.


The need to address problems of energysupply and security is a responsibility ofthe Georgian government, in co-operationwith its regional partners.

We recognize the role we can play inhelping establish energy security byproviding technical support and advicewhere necessary and by operating thenew pipeline facilities in Georgia safelyand efficiently. When necessary, wehave also provided relief through the

provision of emergency fuel supply (seethe case study).

In 2006, we completed the coreconstruction of the 30-inch gas off-takepipeline to enable the delivery of gas toGeorgia from the Shah-Deniz gas field inAzerbaijan. The pipeline, which is 12,205metres long, commences at the outletof the SCP pipeline (at pump station 1,near Gardabani) and terminates at theinterconnecting facility to the 36-inch

Georgian gas transmission systemmanaged by GTC.

The main construction of the pipelinewas completed in 2006 and hydrotesting – filling a new pipeline with water andapplying a pressure greater than standardoperating procedures in order to prove thepipeline’s integrity – was conducted beforehanding over operation of the pipeline tothe Georgian government. Some fencingand restoration is being completed now.

2.6 Access to energyGeorgia faces a number of challenges in securing and providing energy.

This was made clear in 2006 when gas and electricity shortages

occurred in January, following explosions which cut the supply from

Russia. Securing adequate supply and improving the country’s energy

infrastructure are important strategic requirements which will enhance

Georgia’s energy security.

Kerosene donation helpsalleviate energy crisis

In response to the energy shortagesexperienced in January 2006, BP Georgiadonated 200 tonnes of kerosene to thegovernment of Georgia to provide help inalleviating the consequences of the energy crisis.

The kerosene, for use in domestic heating,was released from Air BP stocks anddistributed by the government through theexisting fuel distribution network. Weunderstand from government that this donationwas helpful in responding to a difficult period.

Our role in society

36 BP in Georgia

2.7 Our programmesOver and above investing in the economy, BP and our partners have

committed to social investment programmes across Georgia.The

initiatives put the themes of our social investment approach into action.

They include the ‘BP pledge’, the BTC/SCP Community Investment

programme, the Improved Schools Project, a BTC grant programme for

Georgia, and a Regional Development Initiative. In 2006, we developed our

investment programme for WREP, reflecting our aim to take an integrated

approach to managing social investment for all three pipelines.

Supporting the Georgian wine industry

A number of events have been organised by the EUGBC to support the growth ofthe Georgian wine industry, an important economic sector with the potential toincrease its exports and the need to diversify its export markets.

A reception was held in June to mark the launch of exploratory negotiations on a bilateral agreement on wines and spirits between Georgia and the EU, in theframework of the EU-Georgia Partnership and Co-operation Agreement. InNovember, the EUGBC organized a visit by representatives of Georgian wineproducers to Oslo. During this visit, Georgian producers met representatives of theNorwegian State monopoly VINMONOPOLET, as well as Norwegian importers ofwines and spirits. At the meetings, the characteristics of the Norwegian wine andspirits market were discussed as well as possibilities for exporting Georgian wineto Norway. It is hoped that this will lead to the successful export of Georgian winein the near future.

‘The BP Pledge’ In October 2004, BPmade a commitment to Georgia bypledging $14.5 million of extra social andeconomic investment funds. The pledgemoney has all been allocated and issupporting projects on education, healthcare, trade and business development,and cultural heritage. • In the field of education, progress

was made with the creation of theInternational School of Economics inTbilisi. Support was also provided for a

national project to promotecomputerization in schools.Developments on these initiatives aredescribed in more detail in section 2.5.

• In the area of healthcare, BPcontributed $3 million in 2005 torenovate and equip a regional healthcare facility in Kutaisi, westernGeorgia.

• On trade and business development,the EU-Georgia Business Council(EUGBC) was established in January

2006 with $0.3 million of financialsupport from BP. The role of theEUGBC, which is based in Brussels, isto promote trade and investment tiesbetween Georgia and the EuropeanUnion. A number of events were heldin 2006, including a seminar on EU-Georgian trade issues, and events tosupport the promotion and export ofGeorgian wine. The EUGBC worksclosely with business councils basedin Georgia including the Georgian


Our role in society

Empowering local communities

‘Pipeline communities in Georgia face many social and economicchallenges, arising from the stark transition from a centrallyplanned and managed society to one dominated by the rules ofthe free market with an implicit requirement that communitymembers become innovative and competitive – somethingcompletely new.

CARE’s vision is to help people live in a society characterizedby tolerance and social justice, where poverty is eliminated andpeople live in security. To move towards this, we have worked tohelp communities confront the social challenges and barriers theyface. CIP, for example, gave opportunity for Kvemo Kharabavillage in Tsalka to repair their school. They took this opportunitywith both hands, repaired the school, secured additional fundsfrom local government to build three more classrooms, and wenton to install a community drinking water system where none hadexisted before. Local roads were repaired, and a sports hall built.

The empowerment of communities comes from the empowerment of people. CARE and its implementing partners,through BP support, has been able to provide chances for pipeline communities to gain such empowerment. The problemsthat beset isolated Georgian villages are huge, but by demonstrating that community action can make a difference, the beliefsof individuals about their future can change, which is the foundation of much of our work.’Jonathan Puddifoot, Georgia Country Director, CARE International.

Chamber of Commerce and Industry,the American Chamber of Commerce,and the Federation of GeorgianBusinessmen and the Association ofGeorgian Exporters. All of theseorganizations are members of theEUGBC.

• To help preserve cultural heritage, wesigned an agreement in 2006 with theGeorgian National Museum to provideBP financial support for thepreservation and development of theDmanisi archaeological site (see the

case study in section 1.7). We providedfunding of $400,000 for this purpose.

The BTC/SCP Community Investment

Programme (CIP) and CIP-2 The BTC/SCPfunded Community InvestmentProgramme started in March 2003. Itwas developed through a process ofconsultation with communities, donors,NGOs and government and aimed topromote sustainable social andeconomic development in thecommunities along the pipeline route.

The total CIP budget for Georgiaduring the construction phase of theBTC and SCP projects was $8 million. Ofthis, $5.5 million was dedicated to CIPover a three-year period. $2.5 millionwas dedicated to the CIP-ImprovedSchools Project. Spending supportedprojects which renewed ruralinfrastructure, such as medical oreducational facilities, or water supplysystems. Micro-loans were provided tostimulate small business growth. Trainingsessions supported farmers and

BP made a commitment to Georgia by pledging

$14.5millionof extra social and economicinvestment funds.

To help preserve cultural heritage,we signed an agreement in 2006with the Georgian NationalMuseum to provide BP financialsupport for the preservation anddevelopment of the Dmanisiarchaeological site. We provided$400,000 of funding for thispurpose.

38 BP in Georgia

demonstration farms were created.Social services networks for elderly andvulnerable people were supported.Capacity building through the creation ofcommunity-based organizations, waspromoted.

In the light of the positive impact ofthe CIP programme, we decided in 2006to continue with a second phase. CAREInternational in the Caucasus (one of theoriginal implementing partners) wasawarded a grant from BP and itspartners to continue the initiative for athree-year period and to support theprocess of community development in77 rural communities along the BTC andSCP pipelines.

The goal of CIP-2 is to enhancerelations between BP and pipelinecommunities through improved livelihoodsecurity and employment, andstrengthened civil society. The overallprogamme budget is $5 million over

three years. This will be dedicated toprojects in the fields of economicdevelopment, infrastructure rehabilitation,youth and education development andcivil society capacity building.

CIP-2 will be implemented with fiveorganizations: Constanta Foundation,Georgian Organization of ScoutMovement, the Association of BusinessConsulting Organizations (ABCO), theCentre for Training and Consultancy(CTC), and Partners Georgia.

The BTC grant programme for Georgia InOctober 2004, BTC and the governmentof Georgia signed an agreement toestablish a grant programme forGeorgia. Under the agreement, BTCundertook to provide a series of grantsto fund social and economic projectsbeneficial to the citizens of Georgiaduring a critical period before pipelinerevenues reach their maximum. The

commitment was for funding of $40 million to 2010, with a further $1 million per year for the remaining life of the pipeline.

In 2004 the first grant payment of $9 million was disbursed by thegovernment to support povertyallowances ($5.5 million), regionalpensions ($2.6 million) and a studentvoucher scheme ($0.9 million). In 2005,no disbursement was made but in 2006a payment of $15 million was madewhich was dedicated to education.

The Regional Development Initiative

In 2005, working with our oil and gaspartners, we decided to establish aRegional Development Initiative (RDI)designed to bring sustainable socio-economic benefits to people in Georgia,Azerbaijan, and Turkey.

In 2006, progress was made on eachof the five projects currently under way:

Technical support for pipeline rehabilitation

BP, as the operator of BTC and SCP, already playsan important role in providing energy security.

Under the RDI framework a multi-disciplinedBP team worked with the Georgian Oil and GasCorporation (GOGC) to help prepare for therefurbishment of the North-South Main Gaspipeline, an important but ageing part of thenational gas distribution system. Our contributionwas set in the context of a $40 millionrehabilitation project funded by the USgovernment’s Millennium Challenge Corporation(MCC). The BP team have provided training to

GOGC staff in project management, covering topics such as scheduling and reporting, cost control, contractormanagement, safety and environmental management, and the use of GIS systems.

In addition to providing technical input, we and our partners made a funding contribution of $750,000. This wassupplemented by a further $400,000 from RDI in early 2006.

The skills gained by GOGC will assist them in using the MCC funds for refurbishment of the pipeline. The ultimate goalof the project is to ensure that GOGC personnel become sufficiently well trained to manage a refurbishment project of thisscale in future on their own.


Our role in society

• A project to improve solid wastemanagement infrastructure in theBorjomi and Bakuriani region waslaunched in 2004. A range ofequipment including waste containers,bins and vehicles has been provided.Public awareness campaigns havealso been run. The project will becomplete upon the construction of an all-weather access road to theBakuriani landfill. Project funds ofapproximately $580,000 have beenprovided by BTC partners. Theinitiative is being implemented byGTZ-IS.

• In the Borjomi region, private sectorbusiness development is beingsupported through the provision of$3.15 million from the BTC partners.This project is also beingimplemented by GTZ. The project isconcentrating on two sectors –livestock development and milk

processing, and beekeeping. Staffhave been hired and project inceptionactivities are under way. Moreinformation on this project is providedin the case study on page 32.

• Georgia SME Policy Project: Thisproject, formally launched in March2006, seeks to improve the businessenabling environment by reducingadministrative barriers to running andoperating small businesses and bystreamlining regulation. The project isworking closely with the Georgiangovernment to improve two regulatoryissues in particular: inspections andpermits/licences. Together with ourpartners, we have contributed$750,000. Funding has also beenprovided by the IFC ($500,000) and the Canadian InternationalDevelopment Agency ($250,000). Asurvey of approximately 1,000 SMEswas completed, building on an initial

survey carried out in 2004. Its focuswas on identifying the barriers tobusiness development. The survey willbe published in 2007.

• In partnership with the EBRD, the BTC and SCP partners haveprovided $750,000 to support theestablishment and renovation of threebranches of the ProCredit Bank ofGeorgia – in Telavi, Khashuri andRustavi. All three branches are nowfully operational following officialopening ceremonies conducted inMay 2006. The new branches provideaccess to banking and borrowingservices which have previously beenlimited in these regions.

• Under an agreement signed with theGeorgian Oil and Gas Corporation(GOGC), BP and its partners haveprovided technical advice in support ofa major rehabilitation of the North-South Main Gas Pipeline.

In partnership with theEBRD, the BTC and SCPpartners have provided$750,000 to support theestablishment andrenovation of three branchesof the ProCredit Bank ofGeorgia – in Telavi, Khashuriand Rustavi. All threebranches are now fullyoperational following officialopening ceremoniesconducted in May 2006.

40 BP in Georgia

Performance Data

2004 2005 2006

Safetya

BP employee fatalities 0 0 0BP Contractor fatalities 1 1 0Days away from work cases (DAFWC)b – workforcec 12 4 3Days away from work cases frequency

(DAFWCF)d – workforce 0.12 0.06 0.07Recordable injuriese – workforce 105 30 5Recordable injury frequency (RIF)f – workforce 1.06 0.41 0.12Total vehicle accidents 69 35 33Total vehicle accident rateg 3.76 1.30 2.06Hours worked – workforce 19,776,554 14,527,840 8,158,739Kilometres driven 18,335,771 28,844,882 15,999,715

Environmenth

Direct carbon dioxide (CO2) (tonnes) 32,029 35,421 146,084Indirect carbon dioxide (CO2) (tonnes) N/A N/A N/ADirect methane (CH4) (tonnes) 202 220 396Equity share direct greenhouse gas

(GHG) (tonnes CO2 equivalent) 12,362 13,687 47,675Flaring (exploration and production) (tonnes) N/A N/A N/ASulphur dioxide (SOx) (tonnes) 39 44 197Nitrogen oxides (NOx) (tonnes) 589 651 1,751Non-methane hydrocarbons (NMHC) (tonnes) 1,834 1,990 1,823Number of spills (loss of primary containment) 1 1 3Volume of product spilled (litres) 15 70,914 10,416Volume of product unrecovered (litres) 10 0 0Total hydrocarbon discharges to water (tonnes) 0.015 0 0Hazardous waste treated (tonnes) 1,307 513 0

Employees

Total BP Georgia staff 531 536 654

a Safety data shows performance for Georgia as a whole, encompassing our in-country activities described in this report (WREP,Supsa, BTC, SCP and Air BP).

b DAFWC: An injury or illness is classified as a Day Away from Work Case (DAFWC) if as a consequence of it the member of theBP workforce could not have worked on any day after the injury or illness, irrespective of whether there was scheduled work, orwhen a physician or other licensed health care professional recommends that the member of the BP workforce stay at home butthe individual comes to work anyway.

c The BP workforce comprises all BP employees, all BP contractors and all BP Directors. d DAFWCf workforce: The number of injury DAFWCs to the BP workforce for every 200,000 hours worked in the same period. e A recordable injury is an injury and illness incident that results in a fatality, a day away from work case, restricted work or job

transfer, or medical treatment beyond first aid. f RIF: The total number of Recordable Injuries to the BP workforce for every 200,000 hours worked in the same period. g TVAR: Total Vehicle Accident Rate: the sum of all light vehicle and all mobile plant accidents per one million kilometres driven.h Environment data for the years 2004 and 2005 covers WREP and the Supsa terminal. Data for 2006 covers all three pipelines

(BTC, SCP and WREP) and associated facilities in Georgia.


Independent assurance statement to BP

management The BP in GeorgiaSustainability Report 2006 (the Report)has been prepared by the managementof BP Georgia, who are responsible forthe collection and presentation ofinformation within it. Our responsibility, in accordance with BP management’sinstructions, is to carry out a limitedassurance engagement on the Report as outlined below, in order to provideconclusions on the claims, data andcoverage of issues within it.

Our responsibility in performing our assurance activities is to themanagement of BP p.l.c. only and inaccordance with the terms of referenceagreed with them. We do not thereforeaccept or assume any responsibility forany other purpose or to any other personor organization. Any reliance any suchthird party may place on the Report isentirely at its own risk.

What we did to form our conclusions Ourassurance engagement has been plannedand performed in accordance with theInternational Federation of Accountants’International Standard for AssuranceEngagements Other Than Audits orReviews of Historical FinancialInformation (ISAE3000). Our scope ofwork is to carry out a limited assuranceengagement on the claims and datacontained within the Report.

The Report has been evaluated againstthe following criteria: • Whether the Report covers the key

sustainability issues relevant to BP inGeorgia in 2006 which were raised inthe media, BP Georgia’s own review ofmaterial sustainability issues, andselected internal documentation.

• Whether sustainability claims made inthe Report are consistent with theexplanation and evidence provided byrelevant BP managers.

• Whether the sustainability datapresented in the Report are consistentwith the relevant business unit leveldata records. In order to form our conclusions we

undertook the steps outlined below.1. Reviewed a selection of external

media reports and internal documentsrelating to the sustainabilityperformance of BP in Georgia in 2006 as a check on the scope andappropriateness of statements madein the Report.

2. Reviewed BP Georgia’s process fordetermining the key issues to beincluded in the Report.

3. Reviewed information or explanationabout the Report’s sustainabilityperformance data and statements.Whilst we reviewed documentation to support the sustainability datacontained within the Report, we didnot test the data processes forgathering, collating and reporting dataat country or site level.

Level of assurance Our evidencegathering procedures have been designedto obtain a limited level of assurance onwhich to base our conclusions. The extentof evidence gathering proceduresperformed is less than that of areasonable assurance engagement (suchas a financial audit) and therefore a lowerlevel of assurance is provided.

Our conclusions On the basis of ourreview and in accordance with the termsof reference for our work we provide thefollowing conclusions on the Report. Ourconclusions should be read in conjunctionwith the above section on ‘What we didto form our conclusions’. 1. Does the Report cover the key issues?

Based on our review of media,selected internal documents, and BPGeorgia’s process for determining key

issues, we are not aware of any keysustainability issues that have beenexcluded from the Report.

2. Are the data and statements regarding

BP Georgia’s sustainability performance

contained within the Report supported

by evidence or explanation?

We are not aware of anymisstatements in the assertions anddata presented by BP managementwithin the Report regarding BPGeorgia’s sustainability performance.

Our independence Our assurance teamhas been drawn from our globalenvironment and sustainability network,which undertakes similar engagements tothis with a number of significant UK andinternational businesses. As auditors toBP p.l.c., Ernst & Young are required tocomply with the independencerequirements set out in the Institute ofChartered Accountants in England &Wales (ICAEW) Guide to ProfessionalEthics. Ernst & Young’s independencepolicies, which address and in certainplaces exceed the requirements of theICAEW, apply to the firm, partners andprofessional staff. These policies prohibitany financial interests in our clients thatwould or might be seen to impairindependence. Each year, partners andstaff are required to confirm theircompliance with the firm’s policies.

We confirm annually to BP whetherthere have been any events including theprovision of prohibited services that couldimpair our independence or objectivity.There were no such events or services in 2006.

Assurance statementThis report has been substantiated by Ernst & Young, the BP group auditors.

The primary purpose of the report substantiation process is to test that the

assertions, claims and data set out in the text regarding BP’s sustainability

performance can be supported by evidence.This process is intended to give

assurance about the report contents from an independent third party. Ernst

& Young’s scope of work and their conclusions are provided below.

Ernst & Young LLP

London, June 2007

42 BP in Georgia

ACG Azeri-Chirag-Guneshli fieldBTC Baku-Tbilisi-Ceyhan pipelineCAO Compliance Adviser/OmbudsmanCAS Centre for Archaeological StudiesCDAP Caspian Development Advisory PanelCLO Community liaison officer CO2 Carbon dioxideDAFWC (F) Day away from work case (frequency)EBRD European Bank for Reconstruction and DevelopmentEDDF Emergency drain down facility EF Eurasia FoundationEIP Environmental investment programmeESI Employee satisfaction indexESIA Environmental and social impact assessmentEU European UnionEUGBC European Union Georgia Business CouncilFSO Field service officerGGIC Georgian Gas International CorporationGIOC Georgian International Oil CorporationGHG Greenhouse gasGOGC Georgian Oil and Gas Corporation GPC Georgian Pipeline CompanyGTC Gas Transportation Company HSSE Health, safety, security and the environmentICOMOS International Council on Monuments and SitesIEC Independent environmental consultantIFC International Finance CorporationIMT Incident management teamISP Improved schools projectJV Joint ventureMCC Millennium Challenge CorporationNGO Non-governmental organizationPAS People assurance surveyPMDI Pipeline monitoring and dialogue initiativeRDI Regional development initiativeRoW Right of waySCP South Caucasus PipelineSEC Securities and Exchange CommissionSME Small and medium-sized enterpriseSPPD Strategic Pipelines Protection DepartmentSPU Strategic performance unitSRAP Social resettlement action planUNDP United Nations Development ProgrammeWREP Western Route Export Pipeline

Glossary of terms


Your feedback is important to us. You canwrite to us at the address below, markedfor the attention of the Communicationsand External Affairs team, or send an e-mail to us at [email protected]

BP Georgia, 38 Saburtalo Street, 0177,Tbilisi, Georgia

Design and productionDesign and Typesetting: Steed Design, 44 Dawlish Drive, Leigh-on-Sea, Essex SS9 1QX, United KingdomPrinting: CPD, 17 Brook Road, Rayleigh,Essex SS6 7UT, United KingdomPhotography: Simon Kreitem

Contact details and acknowledgements

In 2006, we have continued to embedour three levels of sustainabilityreporting: the BP group sustainabilityreport, selected country reports andselected local site reports.

Group reporting Our group websiteprovides a full information resource forpeople interested in finding out moreabout BP’s approach to sustainability andresponsibility. The site includes detailedinformation and data about the group’ssustainability performance, including theBP Sustainability Report 2006(www.bp.com/sustainability andwww.bp.com).

A range of case studies is availableonline. These provide specific examplesof how we put our commitments intopractice around the world. They covertopics including health, safety andsecurity, employees, diversity andinclusion, education, conservation, BPand development, responsible operations,enterprise development, revenuemanagement, and business ethics. They have been substantiated by Ernst & Young (www.bp.com/casestudies).

The website also includes detailedcharting tools that allow you to view BP’sperformance data on issues such as

health, safety and the environmentthrough an intuitive and easy to usecharting function with an accessibleformatting option. Charts can be createdas images and raw data downloaded(www.bp.com/hsechartingtool).

Our environmental mapping tool aimsto provide greater transparency on theissues we face at local level by allowingaccess to environmental managementinformation about individual BP sites.This shows where all major BP operatedfacilities with ISO certification are locatedand identifies which issues are significantfor management at each site. The toolenables the user to review details of how BP sites are addressing fourenvironmental aspects – air emissions(non-greenhouse gas), freshwater use,wastewater and waste – as well aswhether or not they border or lie withinan IUCN category I-VI protected area.Plotting these sites on background mapsthat illustrate regional environmentalconditions helps to put site informationinto local context, especially in relation to environmentally sensitive areas.(www.bp.com/hsemappingtool).

Country sustainability reports In 2006, we produced four country sustainability

reports: Azerbaijan, Georgia, Germanyand Trinidad and Tobago. As with thisreport, their aim is to provide a detailedinsight into our operations in the contextof a particular region or market. They havebeen produced to a consistent templatein terms of structure, content and designand have adopted standardized processesfor content development and externalverification.(www.bp.com/countrysustainabilityreportsand www.bp.com/worldwide).

Verified site reports Our website alsocontains more than 60 verified sitereports, providing detailed accounts ofhealth, safety, environmental, and socialperformance around the world. Webelieve independently verified site reportsprovide local transparency on ourprogress towards our stated aspirations(www.bp.com/sitereports).

Speeches on corporate responsibility Wepublish a range of speeches on our groupwebsite. In 2006, these included subjectssuch as technology and innovation,energy security, business and poverty,alternative energy, climate change andlow carbon power.(www.bp.com/speeches).

Further information

Production notesPaperThis sustainability report is printed onRevive Enhanced paper from the RobertHorne group, which is produced using100% de-inked post-consumer wasterecycled fibre at a mill that has beenawarded the ISO 14001 certificate forenvironmental management. The post-consumer reclaimed material is certifiedin accordance with the rules of theForest Stewardship Council. The pulp isbleached using an elemental chlorine-free (ECF) process.

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