BP in Georgia · for providing transparency in relation to the group’s operations in Georgia....

BP in GeorgiaSustainability Report 2005

The BP group

BP p.l.c. is the parent company of the BP group, one of the largest groups of oil andgas companies in the world, serving around 13 million customers a day in more than100 countries. The BP group provides fuel from oil and gas and from other low carbonsources for transportation, energy, heat and light, and retail brands and products usedin everyday life.

In 2005, the group produced the equivalent of more than four million barrels of oil andgas a day for customers across the world. The group’s capital spending totalled $13.9billion in 2005, investment that will help to provide sustainable supplies of oil and gasfor decades to come. The group replaced more than 100% of its existing production forthe 13th year running (for subsidiaries and equity-accounted entities) on a UK SORPbasisa. In 2005, BP took an important step by announcing the launch of BP AlternativeEnergy – a business that is aimed at offering its customers new choices of low carbonenergy, such as solar power, wind, combined cycle gas turbines, and the newtechnology of sequestration.

This report: its scope and process

Sustainability for BP means the capacity to endure as a group, by renewing assets,creating and delivering better products and services that meet the evolving needs ofsociety, delivering return to our shareholders, attracting successive generations ofemployees, contributing to a flourishing environment and retaining the trust andsupport of our customers and the communities in which the group operates.

This account of our sustainability performance in Georgia builds on ‘BP In Georgia:Sustainability Review 2004’ which was published for the first time in 2005. This year,the report gives a more detailed account of our economic, environmental and socialperformance, covering our activities in 2005. Data is shown for country operations as awhole, or where indicated for specific projects and operations. The report has beenprepared by our business in Georgia, based in Tbilisi, and describes our activities acrossthe country, set in the regional context where appropriate. In preparing the report, wehave used in-depth analysis and a formal process to determine which issues are ofmost significance to internal and external parties. We have done so to ensure that thereport presents a balanced and reasonable view of our performance.

The report, which has been independently verified, forms one of several mechanismsfor providing transparency in relation to the group’s operations in Georgia. Many layersof monitoring are integrated into those operations. Scrutiny of our progress and of thechallenges we face is carried out by independent external agencies and auditors. Ourlenders and partners require regular accounts of progress. National and internationalnon-governmental organizations (NGOs) provide further scrutiny. Local communitieshold us accountable for operating safely and responsibly. As well as describing ourperformance, we hope that this report will contribute to constructive dialogue with allthose who take an interest in our activities in the country.

aStatement of recommended practice.

A glossary of terms used in this report is provided on page 38.

1 A message from our country manager

2 What responsibility means to us:

the corporate responsibility framework

3 Highlights in 2005

4 Responsible operations

5 BP at-a-glance7 Our business activities9 Our financial and economic

performance 10 Dialogue and engagement14 Environmentally sound operations18 Protecting cultural heritage19 Health and safety22 Security and human rights24 Our people

26 Our role in society

27 The social context 28 Climate change 29 Promoting good governance30 Enterprise development 31 Education32 Access to energy33 Our programmes

36 Performance data

37 Assurance statement

38 Glossary of terms

A message from our group auditor, Ernst & Young

We have reviewed the Georgia 2005 Sustainability Report in order to provideassurance to BP management that the data, statements and assertions maderegarding the sustainability performance of BP in Georgia are supported byevidence or explanation. Our scope of work and conclusions can be found onpage 37.

In this report, references to ‘BP’ and the‘BP Group’ shall mean BP p.l.c., itssubsidiaries and affiliates and, unlessotherwise stated, the text does notdistinguish between the operations andactivities on BP p.l.c. and those of itssubsidiaries and affiliates. Unless specifiedotherwise, references in this report to ‘us’,‘we’, and ‘our’ shall refer to companies inthe BP Group operating in Georgia.

Cover: vegetation regrowth and cattle grazingover the BTC pipeline in Georgia.

A message from our country manager

2006 marks the tenth anniversary of BP in Georgia. We are nowon the threshold of completing the major phase of our oil andgas field developments in the region and commissioning theBaku-Tbilisi-Ceyhan (BTC) oil export pipeline and the SouthCaucasus gas pipeline (SCP) which cross Georgia.

With a total construction cost approaching $4 billion, the BTCpipeline is the first direct oil transportation link between theCaspian and Mediterranean seas. It offers a commercially viableand inherently safer means of transporting oil over largedistances than existing infrastructure and facilities, as well asproviding a means of relieving the growth of oil transportationthrough the Bosphorus straits.

SCP, which is planned to export gas from the Shah Denizfield to markets in Azerbaijan, Georgia and Turkey, runs parallelto the BTC pipeline through Georgia. The gas supplied throughSCP represents a source of future energy security and supplydiversity for Georgia.

The Western Route Export Pipeline (WREP), also known as theBaku-Supsa pipeline, which was our first investment in Georgia,has operated successfully and safely since 1999. It has broughtvaluable transit fee revenues to the government of Georgia.

These developments demonstrate that a major new energycorridor has been created in the south Caucasus which isexpected to make a significant contribution to local and globalenergy security in the future. This is an achievement of whichwe and our partners can be proud.

In reaching this position, we have faced an array of challenges.They have included intense media and public scrutiny, politicaluncertainty, severe weather and difficult terrain, and a range oflogistical problems. We recognize that managing such a diverserange of challenges is a fundamental part of what it means to bea responsible business. Dealing with them successfully has beenan integral part of making the projects viable.

But one overriding challenge we have faced, and continue toface, is operating in a manner which is truly sustainable. As wedefine and illustrate in this report, sustainability is a complexand long-term challenge involving the renewal of assets, thedelivery of products and services that meet society’s needs,and attracting successive generations of employees. It is aboutcontributing to a sustainable natural environment, and retainingthe trust and support of customers, shareholders and thecommunities in which we operate.

This report is one demonstration of our commitment tosustainability. It shows how we have performed in the course of2005 and describes the variety of programmes we have put inplace to help us ensure we operate responsibly and to mutualadvantage in the years to come. We are proud of theachievements outlined above. They demonstrate that strategicinfrastructure projects can be successfully delivered in Georgia,and that Georgia’s transport, labour and service infrastructurecan support projects of a global scale. We have invested heavilyin the country as well as in our relationships with communities,local non-governmental organisations, and government. Theseinvestments and delivering mutual benefit have been the keysto our success and will continue to be so in the future. We arecommitted to continuing to work in a manner in whichresponsibility is an integral part of the activities we pursue.

We welcome your feedback on the performance and planswhich are outlined in this report.

Hugh G McDowell

BP Georgia Country ManagerAugust 2006

Sustainability Report 2005 1

Progressive operator

BP and climate change

Legal

compliance

BP and development

2 BP in Georgia

What responsibility means to us: the corporate responsibility framework

This report reflects the framework we use to describe our view of what

responsibility means for BP and why it matters for the long-term

sustainability of our business. At the core of this framework are all of the

activities that we control. We are accountable for these operations and we

must run them responsibly. Only by operating responsibly can we also

legitimately gain recognition for the social benefits we generate through

the supply of products and services, tax revenues, jobs and shareholder

wealth. We also have a wider role to play in activities we can influence

but do not control, because responsibility is shared with others.

Sphere of control: responsible operations

Operating responsibly has two levels. At its core it is about compliance with the law. This can be difficult enough, especially injurisdictions where laws either do not exist, are evolving or are inconsistently applied. At a second, higher level, a company withaspirations to succeed in the long term must have universal standards of individual and collective behavior that are applied in everyactivity, everywhere around the world. In a large, diverse organization such as BP, this continues to be our primary challenge. Chapter1 reports on our performance in respect of responsible operations during 2005.

Sphere of influence: our role in society

Beyond our operations we seek to have a positive influence over issues that affect our business and where we have the capacity tomake a contribution. Primary among these are the challenges of climate change and social and economic development. Our role inaddressing climate change goes well beyond minimizing our own emissions. It involves contributing to the policy debate, supportingresearch and developing new, cleaner technologies in power and transport. In 2005, we achieved a milestone when we launched amajor business, BP Alternative Energy, dedicated to generating and marketing low-carbon power. In terms of social and economicdevelopment, although our main contribution to developing countries is typically in the form of government revenues, jobs, skills andproducts, we also have a wider role to play in promoting sound governance and contributing to the progress of our hostcommunities. Chapter 2 describes our progress in these areas in 2005.

Chapter 1

BP: responsible operations

Chapter 2

BP: our role in society


Highlights in 2005

Bringing ‘first oil’ to Georgia The entireBTC pipeline was in the ground inGeorgia by the end of the second quarterof 2005 and Azerbaijani oil from the Azeri-Chirag-Guneshli (ACG) field developmentstarted flowing into the Georgian sectionof the pipeline in the summer. Thetransition from project to operationsphase has been successfully completedfor BTC, with linefill operations concludedand pipeline facilities commissioned inGeorgia (page 8).

Operating the Western Route Export Pipeline

(WREP) with outstanding performance

WREP, which transports oil from theCaspian to the Supsa port on theGeorgian Black Sea, achieved maximumthroughput capacity of 155 thousandbarrels of oil a day. The pipelineoperations recorded outstandingoperating efficiency of 99%. This wasachieved without a ‘day away from workcase’ for the seventh successive year,encompassing more than 4 million manhours safely worked (pages 20-21).

Protecting and restoring the environment

New developments occurred in 2005which will provide further safeguards forthe natural environment. The Georgian OilSpill Response Plan for BTC wasapproved, with conditions, by thegovernment of Georgia in May 2005,building on over two years of work withthe government and its advisors (page 15).We also made significant progress in landreinstatement after pipeline construction,involving complex engineering work andnatural reinstatement (pages 14-15).

Supporting social investment Variousprojects in the fields of education,health care and energy were supportedfrom BP’s social and economic pledgeto Georgia made in 2004, providing$14.5 million in support. We also beganpreparations for the second phase ofthe BTC/SCP community investmentprogramme, with a budget of $5 millionover the next three years (pages 33-34).

Initiating the Pipeline Monitoring and

Dialogue Initiative The first cycle of theNGO monitoring programme, designedto build NGO capacity as well aspromote transparency and dialoguebetween industry and civil society, wassuccessfully completed in 2005. Many ofthe recommendations made in the NGOreports were accepted and will beimplemented (page 13).

Implementing the Regional

Development Initiative Substantial efforthas been given to putting into action thethemes of the Regional DevelopmentInitiative, a mechanism for contributingto social and economic development at anational level in Georgia, Azerbaijan, andTurkey. Projects have been launched tosupport mostly private sector businessdevelopment. We have provided supportfor the rehabilitation of the north-southmain gas pipeline (page 35).

Achievements

Challenges

Managing the transition from projects

to operations safely and efficiently Thecompletion of BTC and SCP pipelineconstruction in Georgia will createchallenges arising from the start up ofnew facilities, the changeover of staff,new collaborations, and thedemobilisation of project personnel.Although our safety performance hasbeen superior to pipeline projectaverages, our priority is to ensure wemanage this transition safely andefficiently (details are available throughoutthe report).

Managing expectations and

promoting transparency We recognize thepositive contribution we can make tosocio-economic development in Georgia,such as by helping to secure access to

energy. But, we are also clear about thelimits to what we can achieve. We mustmanage community expectations bybeing clear about where government hasprimary responsibility and by promotingtransparency in the management ofproject-related revenues (page 29).

Capacity building We understand thatwe can make a useful contribution tocreating a vibrant and transparent civilsociety in Georgia by helping to buildNGO and media capabilities. We will alsocontinue to build the competencies andexperience of Georgian national staffthrough active pursuit of our ‘localization’agenda, and will continue to use localcontractors and suppliers whereverpossible to build local economic capacity(pages 24-25).

Safeguarding security We must continueto collaborate with national and localauthorities to protect the security of ourpeople and assets, and to protect thehuman rights of all who work on thepipelines (pages 22-23).

Protecting the natural environment Inaddition to having a framework ofmanagement systems we have investedin technical safeguards designed toensure that any risk to the naturalenvironment from the pipelines isminimised and that our waste andimpacts are correctly managed. Ourongoing operations must continue to bemanaged in an environmentally soundmanner (pages 14-17).

4 BP in Georgia

Responsible operations1.1 BP at-a-glance

1.2 Our business activities

1.3 Our financial and economic performance

1.4 Dialogue and engagement

1.5 Environmentally sound operations

1.6 Protecting cultural heritage

1.7 Health and safety

1.8 Security and human rights

1.9 Our people

1

The reinstatement process involves usingrock that was removed from the right of way

during construction in Georgia.


Responsible operations

1.1 BP at-a-glanceOperating 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.

BP operates globally. The group hasbusiness activities and customers inmore than 100 countries and explorationand production interests in 26 countries.Just under 40% of our fixed assets arelocated in the US and around 25% inthe UK and the rest of Europe. BPmakes five year and annual plans toexecute its strategy.

BP is organized in three business‘segments’: Exploration and Production,Refining and Marketing and Gas, Powerand Renewables. The three operatingsegments are served by a range of groupfunctions which aim to achieve coherenceacross the group, manage risk effectively,and achieve economies of scale.Technological support for the entirebusiness 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.

The group is also organized into four‘regions’ to ensure consistency acrossthe segments and functions and torepresent BP to external parties. Ourbusiness in Georgia is an integral part ofBP’s activities in the Africa, Middle East

and Caspian region and is a part of one ofthe group’s long-term profit centres.

BP also works with a number of non-BP companies and other entities in jointventures (JVs). From a group perspective,many of these JVs are large andsignificant businesses in their own right,established as separate companies with

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 or

External relationships

– Mutual advantage– Social impact– Human rights– Transparency– Government relations

and influence

Performance

– Compliance with law and ethics

– Continuous improvement

– Internal targets– Risk

Health, safety and

environment

– Health and safety– Environmentally sound

operations– Transcending the

environmentaltrade-off

People and capability

– Human capability and technology

– Employee treatment – Employee expectations– Inclusion– Merit and diversity– Remuneration

BP

BP group values

6 BP in Georgia

works towards standards and policiescomparable with BP’s own.

BP’s vision and strategy The BP groupstrategy is captured within five year andannual plans. It seeks to achieve threetargets. These are:• to underpin growth by a focus on

performance, particularly on returns,investing at a rate appropriate for long-term growth;

• to increase dividend per share in thelight of BP group policy; and

• to return to shareholders all free cash

flows in excess of investment anddividend needs. BP’s direction is also set by its group

values. These express aspirations, such asfor ethical behaviour, fair treatment ofemployees, or environmentalresponsibility. At the core of BP is anunshakeable commitment to integrity,honest dealing, treating everyone withrespect and dignity, striving for mutualadvantage and contributing to humanprogress by producing energy in waysthat respect both human rights and thenatural environment.

Governance and risk management

Acting consistently in accordance withthese group values requiresidentification, analysis andmanagement of the risks we face as abusiness and as individuals on a day today basis. The group’s corporategovernance framework helps tomanage risk by defining roles andresponsibilities for the board, thegroup chief executive and non-executive directors. Within thisframework, the board, which itself isaccountable to shareholders, delegatesall executive management authority tothe group chief executive. In turn, thegroup chief executive delegatesauthority to senior management andonwards to the front line. This systemof ‘internal control’ is captured in whatis known as the ‘BP ManagementFramework’. It sets out the roles andrelationships of the different parts ofthe business and provides theframework for the complete set ofmanagement systems, organizationalstructures, processes, standards andbehaviours that are employed toconduct our business and to deliverreturn for shareholders. This reportprovides information on many of thosesystems, structures, processes andbehaviours in the specific context ofour activities in Georgia.

Enterprise control in BP

BP’s governance and management processes range from board-level governance policies and the BP management framework to our group standards and code of conduct, through to frontline operating standards and control processes. All these processes support our strategy to deliver long-term shareholder value.

Delivery of shareholder returns

Operating standards

Control processes

Administrative instructions

Board governance

policies

Governance processes

Executive limitations

Board permanent commitees

Board/executive linkage

Board goals

BP management

framework

Delegation

Values, code and standards

Principles of management framework

Stategy, plans and performance

Organization

Status, enforcement and amendments

Group standards

and code of conduct

Focus areas:

Safety

Operations

Security

People

Financial controls

Legal

Conduct


Our activities in Georgia feature three major oil and gas projects, inwhich we are the lead investor andoperator. Our partners and theirshareholdings are shown below. Thethree projects are:• The Western Route Export Pipeline

(known as ‘WREP’). This 830kmpipeline transports oil from the Chiragfield in the Caspian Sea via theSangachal terminal in Azerbaijan tothe Supsa terminal in westernGeorgia. Just under half of thepipeline is in Georgia. Refurbishedand renewed from an existing Sovietpipeline in the late 1990s, oil started

to flow through WREP fromSangachal in December 1998 andreached Georgia in the first week ofJanuary 1999. Since the start ofWREP and terminal operationsthrough to the end of 2005, 317tankers (64 in 2005) have transportedmore than 295 million barrels of oil(more than 52 million barrels in 2005)to world markets from the Supsaterminal. The passage of oil throughWREP has brought substantial transitfee revenues to the government ofGeorgia.

• The Baku-Tbilisi-Ceyhan pipeline(known as ‘BTC’). The BTC

pipeline in Georgia wassuccessfully completed in 2005,an extraordinary achievement ofmore than a decade of co-operation between the hostgovernments, investors andprivate companies. The pipeline iscapable of transporting up to amillion barrels of oil a day from theSangachal terminal in Azerbaijan toa newly constructed marine oilterminal in Ceyhan on the TurkishMediterranean coast. It is one ofthe longest pipelines in the worldand is our highest profile strategicinvestment in the region.

1.2 Our business activitiesBP’s activities in the Caspian region are among the most strategically

important across the whole of the group.The region is host to some of

our most significant and high-profile investments.Within this context,

Georgia plays an important role given its position as a strategic crossroads

for hydrocarbon transit. As we move from investment in projects to long-

term operations in Georgia, we are committed to contributing to Georgia’s

growing economic and social stability in the years ahead.

6.8

8.6

BP

TPAO SOCAR Devon Itochu Amerada Hess Total NICO

Statoil Chevron Inpex ExxonMobil Eni ConocoPhilips LukAgip

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

Partners in the pipelines (% shareholding)


8 BP in Georgia

• The South Caucasus Gas Pipeline(known as ‘SCP’). This pipeline,constructed in the same corridor as theBTC pipeline through its passage inGeorgia, will carry natural gas from theShah Deniz field in the Caspian Sea tocustomers in Georgia, Turkey andAzerbaijan. By the end of 2005, theSCP pipeline was approximately 85%complete. It is planned to beoperational in 2006 in line with gassales commitments to the threecountries. It will provide a reliable and

relatively low-cost source of gas supplyfor Georgia. In undertaking projects of this

magnitude, we have inevitably faced awide range of challenges, many of whichhave created pressure on projecttimescales. Many of the challenges aredescribed in this report, along with ourresponses to them.

In addition to these three majorprojects, our aviation trading businesshas been active in Georgia since 1998.At Tbilisi airport, Air BP provides jet fuel

to national and international airlinecustomers. Together with our jointventure partner, Aviafuel Service, wedistribute lubricant products including BPand Castrol brands.

In Georgia, BP also holds aparticipating interest in Black Seaexploration deepwater blocks IIA, IIB,and III. Anadarko is the operator (48.0%)with BP (28.5%), Turkey PetroleumOverseas Company (13.5%) andChevron (Unocal – 10%). Interpretationof seismic data continues.

First oil celebrations in GeorgiaIn the summer of 2005, Azerbaijani oil from the Azeri-Chirag-Guneshli (ACG) field development startedflowing into the Georgian section of the BTC pipeline.

Official celebrations were held on 12 October 2005, at the first BTC pumping station near Gardabani.Georgia’s President Mikheil Saakashvili highlighted the political and economic importance of the BTCpipeline. Azerbaijani President Ilham Aliyev praised the positive socio-economic developments inGeorgia. President Ahmet Necdet Sezer of Turkey drew attention to progress in regional energydevelopments with the east-west energy corridor envisaged in the 1990s becoming a reality.

After the official ceremony at the pumping station, celebrations continued at the Georgian National Museum in Tbilisi with theopening of the BTC cultural heritage protection exhibition. Guests from around the world had the opportunity to see artifactsfrom BTC excavations and other sites revealing facts about thousands of years of cultural heritage and human life in the region.

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

North-South MainGas pipeline

Ceyhan

Sangachalterminal

ACGBlack Sea

exploration

ShahDenizBTC

North-South main gas pipelineWREP - 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

We are already an important contributor tonational government revenues through thepayment of WREP tariff and in futurepayments made to government linked tothe volumes of oil and gas which passthrough Georgian territory. We are a majoremployer of local companies and Georgiancitizens. We have also made substantialinvestments in environmental and socialprojects, designed to tackle immediateconcerns and to generate longer-termeconomic and social self-sufficiency. Thisinvestment is important to the governmentand people of Georgia and thus werecognize that our engagement here bringserious responsibility as well asopportunity.

The WREP tariff paid to the nationalgovernment is the most direct of ourfinancial and economic impacts at present.The table below shows fee paymentsarising from WREP from 2000-2005.Payments to the government will increasesignificantly when the BTC and SCPpipeline projects become fully operational.We currently estimate that the profits taxpayments from BTC will be around $25million in 2007, and could rise toapproximately $50 million a year in future,which will be in addition to continuingWREP payments. In addition to gas salesin Georgia, SCP brings benefits of gas ‘in

kind’ in lieu of tariff which can beconverted to a financial figure by assuminga gas value. We estimate that this willequate to approximately $17 million peryear under peak phase 1 throughput.

We are the largest single foreigninvestor in the country and as such make asignificant contribution to nationaleconomic well-being. It has beenestimated that about 60% of foreigninvestment in Georgia came from BP and

its partners in 2005. Our capital andoperating expenditure from projectinception to 2005 in Georgia on BTC is$775 million and $447 million on SCP.Details of expenditure for 2004 and 2005are shown in the table below. As thenature of our operations changes frominvestment in projects to continuingoperations, the balance of expenditure willshift from capital to operating expenditurein the years ahead.


1.3 Our financial and economic performance Against a backdrop of social and economic challenges typical of a

country in transition, our financial and economic impact in Georgia

is significant.


Capital and operating expenditure in Georgia ($)

Capital 2004 Capital 2005 Operating 2004a Operating2005

WREP 2,342,000 4,752,000 20,581,000 23,711,000BTC 262,936,000 225,812,000 0 0SCP 160,861,000 205,736,000 0 0Total 426,139,000 436,300,000 20,581,000 23,711,000

2001200220032004

The WREP tariff payments to GIOC 2000-2005 ($ million)

2005

2000

6 7 8 9 10 11

8.088.718.74

9.310.44

6.59

Notes: GIOC is the Georgian International Oil Corporation, the legal entity representing the Georgian government.The figures quoted in the 2004 BP Georgia Sustainability Review were drawn, as indicated, from an IMF paper.

a

a

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

10 BP in Georgia

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.

Understandably, our involvement in themajor projects in the Caspian hasattracted considerable attention, much ofit critical. Our approach has been to beopen and consultative, building in a rangeof mechanisms for internal and externalscrutiny. Across the projects, we haveidentified fifteen separate layers ofmonitoring and assurance. Internalmonitoring is carried out by the projectteams themselves as well as projectcontractors and consultants. Additionalscrutiny is provided by bodies external toBP, such as government or lender-appointed auditors.

This comprehensive externalmonitoring, which has been a feature ofthe projects since their inception,continued in 2005. The CaspianDevelopment Advisory Panel (CDAP)Special Advisor on Environmental andSocial issues visited in July prior to a visitby the full panel in October. A programmeof NGO monitoring, called the ‘PipelineMonitoring and Dialogue Initiative’continued. Its activities are described inmore detail below. The SocialResettlement Action Plan experts panel(‘SRAP’) also reviewed the project inSeptember. Host government monitoringcontinued and included discussions withthe Georgian Ministry of Environment on

Exte

rnal

Operation phase

Inte

rnal

Layer 6

Layer 5

Layer 4

Layer 3

Layer 15

Layer 14

Layer 13

Layer 12

Layer 11

Layer 10

Layer 7

Layer 9

Layer 8

Layer 1

Layer 2

IRM

Caspian Development Advisory Panel

Assurance statement: Ernst & Young

Lenders group environment and social monitoring

SRAP expert panel monitoring

Security monitoring and implementation

Human rights monitoring

BTC shareholder assurance

BP corporation / BU assurance

BTC Co. project assurance Operations management

Azerbaijani regulatorymonitoring

NGO monitoring & capacity

building (AZ)

NGO monitoring & capacity

building (Geo)

NGO stakeholderengagement

(Tur)

Long term stakeholder

dialogue (Az, Geo, Tur)

Georgianregulatorymonitoring

Turkishregulatorymonitoring

Regulatorymonitoring

(Az, Geo, Tur)

BTC assurance team (Az)

Construction contractors (Az)

Construction contractors (Geo)

Construction contractors (Tur)

BTC assurance team (Geo)

Botas assurance team (Tur)

BTC assurance team (Tur)

CLEE APLR RUDF

CAO

Construction phase

Layers of monitoring and assurance

Notes:APLR – Association for Protection of Landowners Rights. CAO – Compliance Adviser Ombudsman.CLEE – Centre for Legal and Economic Enterprise.

IRM – Independent Resource Mechanism.RUDF – Rural and Urban Development Foundation.SRAP – Social and Resettlement Action Plan.

such topics as special containmentmeasures in the Kodiana section of theBTC pipeline, the Georgian BiodiversityMonitoring Programme, rare floralspecies, and waste management.

The Lender group’s IndependentEnvironmental Consultant (IEC)conducted quarterly audits of BTCconstruction through 2005. In Georgia,one ‘class 3’ non-compliance was raisedin 2005, requiring review by the lenders.This concerned the need to movetowards EU compliant wastemanagement facilities (discussed insection 1.5 of this report). Overall, thenumber of non-compliances raised in theIEC audits has fallen steadily since thestart of BTC construction.

The Caspian Development Advisory Panel

CDAP, established to provide independentadvice and counsel to the BP group chiefexecutive on the projects in the region,submitted its year-end report inDecember 2005. The panel found muchthat was positive about the projects andmade recommendations for improvementdesigned to ensure that pipelineconstruction was completed inaccordance with the high environmentaland social standards set for the project.Observations and recommendationscovered issues such as reinstatement andrestoration of the right of way, landacquisition and compensation, and wastemanagement.

Government relations CDAP’sobservations included noting theconsolidation and advancement ofrelations between BP and the Georgianauthorities. The panel noted the variousactions which had been taken to addressthe concerns of the government. Theseincluded steps to inspire greaterconfidence in the safety of the pipeline byintroducing additional engineeringsafeguards, beginning preparation of theoil spill relief tank in the Borjomi regionrequested by the Georgian authorities,and providing support for the constructionand equipping of the security base tohouse government staff responsible forpipeline security. In addition, the firstdisbursements were made under theBTC grant programme agreed in 2004, as

well as preliminary funding from the ‘BPpledge’ grant programme supportingprojects on education, health care,cultural heritage and energy.

Engagement with communities A keyconstituency is the local communitiesaffected by pipeline construction. Ourengagement with communities involvesregular dialogue, including that carriedout by our team of community liaisonofficers with project-affectedcommunities. It also includes formalnegotiations, such as those required forland purchase or the recent programmeof handing land back to its original usersafter pipeline work is complete (knownas ‘land use handback’).

Building and maintaining a positiverelationship with the communities directlyaffected by pipeline construction can bedifficult, given the influence of the pipelinework on local villages and towns and theunfamiliarity of many of thesecommunities with an undertaking of thisscale. As is inevitable for a project of this

size and complexity, communitygrievances, such as those surroundingland purchase or compensation payments,have been raised. The majority of thesegrievances have now been successfullyresolved. In the case of Dgvari village,where the issue of landslides affecting thevillage was raised, we supportedindependent study of the hazards andrisks. This concluded that futureconstruction and operational activitiesassociated with the BTC/SCP pipelinewould have no impact on the village. As ahumanitarian gesture, we providedfinancial support to the government insupport of its plan to relocate the villagegiven the serious nature of landslideproblems. In the course of 2005, we wereinformed by the government that none ofthe funds BP had offered for this purposewould be required but that they would beallocated to fund other initiativesconsistent with the themes of BP-fundedsocial investment projects.

Through our regular contact withcommunities, we are aware of their


‘On the whole, the panel is very favourably impressed with the efforts of BP andBTC’s leadership and on-the-ground team to set and meet high standards for theproject. At the same time, and in the context of the significant accomplishmentsthat the project has already achieved, we offer in this report a number ofobservations and recommendations for ways in which the project’s impact couldbe further enhanced.’

CDAP Report on 2005 Activities: 28 December 2005 (available at http://www.caspsea.com)

Our engagement withcommunities involvesregular dialogue, such asthat carried out by ourteam of communityliaison officers withproject-affectedcommunities.


12 BP in Georgia

Land acquisition and compensationLand acquisition and compensation issues have been a prominentconcern amongst many individuals and communities along the BTCand SCP pipeline routes and also amongst NGOs and developmentagencies. The issues involved are complex, requiring clarity onsubjects such as land registration and ownership, crop inventories,and the return of land once construction has been completed.

In the absence of reliable information about land ownership, or aclear land market with established prices for land plots, the processof land acquisition and return has been necessarily complex. Toensure the process is transparent, land acquisition procedures havebeen described in publicly available documents – a General Guide to

Land Acquisition and Compensation for both BTC and SCP, and a Resettlement Action Plan. An information booklet describingthe land use handback programme and associated restrictions was produced and distributed to communities in 2005.

As far as possible, the projects have purchased the minimum land required for construction purposes. We have consistentlyadhered to the original policy and rates for payment set out in the Resettlement Action Plan.

The process of land acquisition necessary to carry out the work is substantially complete. In some areas, additional landparcels are being purchased where the BTC and SCP pipelines have had to be redesigned, due to local topological conditions.

Overall, since 2003, more than $20 million has been paid in land acquisition and crop loss payments in Georgia. Over 3,400parcels of land that were privately owned or affected by the construction corridor were purchased, along with over 200 parcelsof land in high mountain villages and over 200 leased parcels of land.

As construction of all the pipelines nears completion, the process of returning the use of land to individuals andcommunities has begun. Land (except land occupied by permanent above-ground facilities) is returned to the previous privatelandowners for use free of charge but subject to certain restrictions, such as those relating to future building or tree planting.These restrictions are necessary for the safe operation and maintenance of the pipelines. They have been accepted by theGeorgian government and are in compliance with international codes and standards. They are unlikely to have any practicalimpact on the ability to farm the affected land.

The projects have established formal mechanisms for individuals or communities to raise grievances if they feel they havebeen unfairly treated during the land acquisition or compensation process. This includes the possibility of grievances beingraised with the IFC Compliance Advisor/Ombudsman, providing an independent mechanism for airing and resolvinggrievances. In the course of 2005, significant progress was made on resolving a backlog of claims relating to land acquisitionand crop compensation, and construction related complaints. A small number of outstanding claims remain, which we areworking to resolve as quickly as possible.

concerns about pipeline safety. We haveaddressed this issue in communitymeetings, such as those which havetaken place with village and districtcommunity representatives along thewestern route pipeline.

In the course of the year on theBTC/SCP pipeline corridor, we receivednew complaints about damage tostructures allegedly caused by heavytraffic or pipeline-related blasting. BP

engaged independent engineers toreview the assessments done byconstruction contractors. Their reportconcluded that construction traffic wasunlikely to be the primary cause ofcracking in structures. Further studieshave been recommended to assesswhether blasting vibrations associatedwith pipeline construction were thecause of cracking. This work will takeplace in 2006.

In some cases complainants haveelected to pursue their complaintsthrough other channels, including thecourts or the International FinanceCorporation’s (IFC) ComplianceAdvisor/Ombudsman (CAO). We continueto assess each case on its merits.

On some occasions, communities haveblocked access to the pipeline. Thereasons for these blockages have beenvaried. For example, some have related to

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 1,574,846Totals 9,501,794 10,889,627 20,391,421


requests for compensation for land andothers to employment issues due to staffdemobilisation. We have worked to tacklegrievances and have sought thecooperation of local and nationalauthorities as appropriate to assist inresolving any protracted blockages.

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 in 2005 with non-governmental organizations and themedia. NGO capacity building along thepipeline route is one of the themescovered in the Environmental InvestmentProgramme (EIP). The EIP Small Grantsprogramme aims to build NGO capacityto engage citizens in environmentalawareness and education programmes.

In 2004, we launched a new initiative tofacilitate NGO audits of the BTC and SCPpipeline projects. The ‘Pipeline Monitoringand Dialogue Initiative’ (PMDI) wasestablished with the collaboration ofEurasia Foundation (EF), a privatelymanaged grant making and operatingorganization dedicated to supportingprogrammes targeted at building civilsociety and private enterprise in thecountries of the former Soviet Union. Theinitiative implemented by EF seeks topromote international standards ofmonitoring and audit, provideopportunities for team-based audit activity,and build the capacity and professionalismof national NGOs in Georgia. Theprogramme has been supported by theUnited Nations Development Programme(UNDP) and the IFC.

The first cycle of the programme wascompleted in 2005. NGO participantsreceived training and mentoring from anindependent consultant and EF as well astechnical assistance from BTC to supporttheir work. Based on field visits,interviews with BTC and constructioncontractor staff, and studies of relevantdocumentation, the working groupsproduced audit reports, published in 2005.

The working group reports, whichcovered waste management, thereinstatement process, the protection of

social and human rights along the pipeline(including land issues) involvedrepresentatives from 16 local NGOs. Manyof the recommendations have beenaccepted and part of the second cycle ofthe programme will be follow-up audit toensure that the required actions have beentaken. In addition to providing effectivescrutiny of BP and partner activities, a‘lessons learned’ workshop was held atthe end of the first cycle of activity to helpthe NGOs identify the internal strengthsand weaknesses of their efforts, in orderto determine how they could becomemore effective in future.

The second cycle of PMDI will becarried out in 2006 with national NGOsparticipating, providing further opportunityto monitor and audit BP activities alongthe BTC and SCP pipelines.

We have also launched projects tohelp develop the capacity of the localmedia. Building on work carried out in2003 and 2004 which focused on thedelivery of knowledge and training inbusiness and economics journalism, wehave in 2005 launched English languagetraining in collaboration with the BritishCouncil. We have also held roundtableswith representatives of the Georgianmedia as well as with national andinternational NGOs.

Engaging our people A number ofmechanisms are used to communicatewith our employees. One of these is thePeople Assurance Survey, a group-widesurvey of opinion undertaken every twoyears and which will be undertaken againin 2006. In the course of 2005, we havealso carried out a review of employeecommunications and begun a series ofinternal ‘townhall’ meetings on a quarterlybasis. We have also launched anemployee engagement programme toencourage staff involvement in charitablework. A quarterly programme of externalevents for employees was also initiated in2005 – the first such being held at theGeorgian National Museum, anorganization BP has partnered throughsponsorship.

Research into perceptions of BP in Georgia

We also conducted independent researchto learn more about our corporate

reputation in the country, canvassing theopinions of external parties interested inor directly affected by our activities inGeorgia. We undertook market researchin 2005, appointing a Georgian marketresearch company to examineperceptions of BP.

We were pleased to note therecognition by many of those canvassedin our market research of the positiveimpacts which our presence has broughtto local communities through theprovision of jobs and social andenvironmental investment. Thisperception was supported by responsesfrom our research into BP’s corporatereputation which found that respondentswere positive in their evaluation of theBTC project’s impact on the country. Welearned that we could do more toincrease awareness of our socialinvestment efforts and perceptions of ourenvironmental impact, which we are nowtackling through profile-raising initiativessuch as advertising and sponsorship.

We have also launched anemployee engagementprogramme to encourage staffinvolvement in charitable work. Aquarterly programme of externalevents for employees was alsoinitiated in 2005 – the first suchbeing held at the GeorgianNational Museum, an organizationBP has partnered throughsponsorship.


14 BP in Georgia

Any projects of the scale being carriedout in Georgia would be impossible toimplement without creating somenegative impacts. Our constructionactivities and other operations inGeorgia inevitably have environmentaleffects, such as habitat disturbance orthe need to dispose of waste. Weassess and manage those impacts on acontinuous basis and take appropriateaction designed to address problemsand challenges.

The BTC route passes through anumber of environmentally sensitiveareas, particularly in the Tsalka, Tabatskuri

and Borjomi sections. NGOs haveexpressed concerns about the need toprotect the environment in these regions.In these areas additional pipelineprotection measures have beenimplemented to enhance pipelineintegrity and reduce the risk of accidentaldamage or deliberate third partyinterference that could result in an oilspill. In areas deemed most sensitive,several pipeline protection measures havebeen implemented to detect and locateexcavation in the vicinity of the pipeline.The trench design includes physical andelectronic barriers to prevent excavation

down to the pipe. This combination ofearly detection, location and theincreased time to excavate the pipeallows pipeline patrols sufficient time toreach the area following receipt andacknowledgment of an alarm.

Concerns were raised in 2003-2004about ‘field joint coating’ and welddefects on the BTC pipeline. The pipelineis protected from corrosion by a highintegrity three layer factory appliedpolyethylene coating system used (whichacts as a barrier against corrosion). Thishas been subject to rigorous testing inprevious pipeline use and prior to use on

1.5 Environmentally sound operationsWe seek to operate responsibly across any project’s total lifespan, from

when we first investigate a location until decommissioning and

remediation. In developing our activities, we are keenly aware of the

importance of protecting, and where possible, improving the state of the

natural environment.We aim not only to comply with legal requirements

but to drive down the environmental and health impact of our operations

by reducing waste and emissions and using natural resources responsibly.

Georgia’s natural environment

Georgia possesses a landscape of outstanding natural beauty, unusually variedfor its size and with a rich biodiversity. With 50% of its landmass mountainousand at more than 1,500 metres above sea level, the country ranges fromfertile valleys to semi-arid desert and subtropical coast.

Georgia is also a country which has suffered serious environmentaldegradation resulting from years of industrial neglect where little regard waspaid to issues of land and water contamination. In the past, the environmentsuffered as a result of central planning. Following independence there was along period of stagnation. Today the landscape requires responsible handling topreserve and restore its quality.


BTC. The field welds are protected fromcorrosion by a urethane modified epoxyproduct that has been subject also to arigorous testing programme. During fieldapplication some defects were observedduring quality control inspections. Thesewere due to application of the productbelow the recommended minimumambient temperature. Addressing theissue involved a simple remedy ofapplying heat to the coating andreapplying the product to the joints towhich it was applied below minimumtemperature. BTC is now entirely satisfiedthat this issue has been resolved and nofurther recurrence of these defects havebeen observed since then.

Weld defects – very small transversecracks – were identified in a small numberof manually welded joints in Georgia.Routine inspection identified the issue andthen an enhanced inspection schemeidentified the 193 joints that presentedthese transverse cracks. All of these weldswere removed from the pipeline and re-welded. Additional testing under laboratoryconditions was performed to ensure therewas no impact to the integrity of thepipeline. These defects were limited onlyto manual welds which are less than 22%of the total number of welds within thepipeline. We are confident that theconstruction techniques and testingregimes ensure that the BTC and SCPpipelines are laid correctly and are safe.

Environmental management Each of theprojects has its own environmental (andsocial) management system, coveringthe key environmental aspects. These

include issues such as wastemanagement, pollution prevention,biodiversity protection, landscape, landcontamination and land reinstatement.Management systems provide aframework for planning, doing, checkingand acting in a cycle of continuousimprovement related to thecommitments made in environmentaland social impact assessments.

Environmental and social impact

assessments An important part of ourframework for establishing responsibleoperations has been the conduct ofenvironmental and social impactassessments – or ESIAs.

The BTC and SCP ESIAs arecomprehensive assessments of theenvironmental and social impacts of thepipeline projects. They set out the baselineconditions prior to any disturbance by theprojects and recommend mitigationmeasures that seek to minimize impactsduring construction.

An important feature of the processhas been the identification of the needs,concerns and aspirations of communitiesaffected by the pipelines. The ESIAs haveincorporated a vast amount of study andconsultation – including extensiveinteraction with the communities alongthe pipeline route.

The ESIAs are also the cornerstone ofa process of continuing dialogue. Theyhave been made available to the public inGeorgian, Azeri, Russian and Turkish innon-technical form and have beenpublished on the internet(www.bp.com/caspian).

Greenhouse gas emissions (GHG)

Managing our own operational GHGemissions has always been a componentof our efforts to tackle climate change andto operate as efficiently as possible.Across the BP group, our operationalGHG emissions in 2005 totalled 78.0million tonnes (Mte) of CO2 equivalent ona direct equity basis. In Georgia, GHGemissions from current operations aregenerated primarily through constructionand related activities such as transportand loading. The main contractor on theprojects seeks to minimize emissions asfar as practical through programmes ofmonitoring and maintenance.

Oil spill and gas leak response measures

Taking steps to prevent oil spills and gasleaks is an important part of operationalintegrity. Mitigation measures aboveindustry standards have beenimplemented during the development ofthe pipelines and in the selection ofpipeline routes to minimise as far asreasonably practical the risk of oil spills orgas leaks. Pipeline design, materials andconstruction have been implemented tohigh international standards. Quantifiedrisk assessment and research have beencompleted to assess the performance ofthe pipelines against safety criteria used inEurope. Oil spill response preparedness,in the unlikely case of a leak, ismaintained through having a dedicatedcontractor with responsibility for regularemergency response exercise and aneffective emergency responsemanagement system. Four emergencyresponse exercises have been held

BTC and SCP – reinstating the right of wayThe BTC pipeline has provided an early use of the reinstatement requirementsof the new principles on environmentally sound operations developed at BPgroup level. The principles, which have been developed in the course of 2005,adopt a lifecycle approach. They include inter-related processes andrequirements such as ensuring that globally applicable environmentalperformance requirements are applied. These cover aspects such as minimizingthe footprint of our operations and land reinstatement (pictured left). In relationto the pipelines, the BTC oil pipeline is now in the ground and final constructionof the South Caucasus gas pipeline (SCP) is taking place using the samecorridor as the oil pipeline in Georgia and Azerbaijan. Engineering reinstatementand bio-restoration are being carried out along the pipeline route.


across the three countries crossed bythe BTC pipeline. The Georgian exercisein 2005 was observed by Georgiangovernment representatives and anindependent advisor to the projectlenders. The advisor’s report confirmedthat the response teams were ready torespond to incidents, prior to theintroduction of hydrocarbon transitthrough the country.

A major step forward was taken inMay 2005 with the approval bygovernment of the Georgian Oil SpillResponse Plan (OSRP). The plan wasapproved with conditions intended toprovide additional environmentalsafeguards, such as the construction ofa drain down reservoir in theTskhratskaro-Kodiana section of thepipeline and of secondary containmentfacilities in riverbeds. Approval of theplan marked the culmination of overtwo years of work with the Georgiangovernment and its advisors.Workshops and technical meetingsinvolved the scientific community,lenders, the Ministry of theEnvironment, GIOC, BTC, and specialistconsultants and advisors. Anemergency response plan for SCP iscurrently going through a similarapproval process.

Topics addressed in the OSRPworkshops and technical meetingsincluded contaminated land clean-up, in-situ burning, wildlife response andenvironmental sensitivity assessment. Toaddress this last topic a technicalworking group was established tointegrate the findings of theenvironmental sensitivity report.

The aim of the group was to establish amethodology and identify priorities in oilspill response. Work has resulted inupdating information on environmentalsensitivities downstream of the pipelineand in providing a “rating” of the relativesensitivity of each receptor to an oil spill.This information will provide the incidentteam with valuable information to assist inprioritizing response activities to minimizeany potential environmental damage.

Waste management Waste managementis one of the most sensitive challengeswe face in ensuring we operateresponsibly across Georgia because ofthe absence of domestic wastemanagement facilities that meetEuropean Union standards.

For non-hazardous waste, we havesought to apply EU standards. In thecourse of 2005, we developed a wastemanagement strategy in consultationwith local authorities. We plan to buildan EU compliant facility for non-hazardous waste that will be used byboth the project and municipalities.Until this facility is constructed, ourobjective continues to be to minimisewaste volumes generated at source asfar as possible and to re-use (sludge,wood) and recycle (paper, plastic,metal, glass) waste whenever feasible.In 2005, 72.6% of all waste generatedduring the construction works wasrecycled in local companies. Hazardouswaste, which includes material such asused oil, contaminated soil, and oilcontaminated water, is securely storeduntil it can be treated at an EUcompliant disposal facility.

Biodiversity and conservation Operatingresponsibly also requires protection ofbiodiversity. In relation to WREP, plantconservation and restoration projects,floral monitoring surveys, compensationplanting and landscaping projects havebeen undertaken. Seasonal bird countsand bird migration monitoring have alsobeen carried out.

As part of our approach to protectingbiodiversity we have, together with ourpartners, established an annualbiodiversity competition in Georgia. The2005 competition, which was the fourthone run, was based on the success of thefirst three competitions and had the sameobjective: to make a real, measurable andpositive impact on biodiversity. It aimed tofind the best ideas for raising awarenessof the importance of the preservation ofthe world’s biodiversity, ideas which canbe implemented in a practical way bothtoday and in future.

In the ‘Best Biodiversity Project’category, 12 projects were received andevaluated by the Scientific AdvisoryPanel (for technical evaluation) and thenby the Awards committee (for ensuringthe project met BP’s standards andpolicies). First prize was awarded to theNGO ‘NACRES’ for its project on the‘Study and conservation of the Eurasianotter in Georgia’. The value of the awardwas $15,000. Two second prizes and athird prize were also awarded under this category.

In the ‘Best Biodiversity Article andVideo Material’ category, four entrieswere received. All four were newspaperarticles. The judges concluded that noneof the submissions fully met all the

16 BP in Georgia

Emergency response spill exercise, Georgia

‘The exercise was a definite success. In particular, it is evident that the BTC spillmanagement team has the personnel and the ability to organize and implement anappropriate and effective oil spill response. Lessons were learned during this exercise,which is one reason why they are an important element of a continuously developingand improving oil spill response capability. Notwithstanding these lessons, BTCdemonstrated that they have the management and equipment in place to dealcompetently with an oil spill in Georgia’.

From the report by Polaris Applied Sciences Inc., independent oil spill consultants and advisors to the Lender group (7 June 2005).


requirements of the competition this year,and that there would not be a first prizeaward. A second prize award of $500 andtwo third prize awards were made.

Biodiversity in action: the Environmental

Investment Programme (EIP) TheEnvironmental Investment Programme, a$9.3 million initiative funded through theBTC and SCP projects, supports initiativesfocused on the promotion andconservation of biodiversity. Georgiareceives $3 million of the programme’sallocated funds. The programme, whichbegan in September 2003, is divided intothemes identified during the ESIAprocess and through consultation withnational and international stakeholders.The five projects financed are: • Caucasian Black Grouse Research,

Monitoring and ConservationManagement project. The leadimplementing organization has beenthe Georgian Centre for theConservation of Wildlife. The goal ofthe project was to provide a scientificbasis for the effective conservationmanagement of this endemic, rare andglobally threatened species. Theproject ended at the end of 2005, withthe development and governmentacceptance of the speciesmanagement plan.

• Ecosystems and Species Conservationin Georgia: the Brown Bear project,being implemented by NACRES –Noah’s Ark Centre for Recovery ofEndangered Species. The project aimsto estimate the bear population,appraise threats, describe the reasonsfor habitat loss, establish a bearconservation action plan, and promotecommunity involvement inconservation activities. Activities in2005 included habitat mapping usingGIS data developed by the project,field work to explore bear movements,and awareness-raising activities withthe public.

• Management of the Small GrantsProgramme for NGO Capacity Buildingalong the SCP and BTC Pipelineroutes. This is being implemented bySave the Children. The goal is todevelop NGOs’ capacities to engagecitizens in environmental awarenessand education. Twenty six local NGOsare being supported across all sevendistricts crossed by the BTC/SCPpipelines. In 2005 training and supportwas provided to local NGOs to helpthem develop proposals forEnvironmental activity grants.

• Enhancement of EnvironmentalEducation, being conducted by theNGO CARE, in conjunction with the

CIP-Improved Schools Project (seemore information below). The goal ofthe project is to deliver extra-curriculartraining to adolescents onenvironmental issues and environmentconservation approaches, to promoteactive learning methodologies inteaching, and to upgrade teachingmaterials. In the course of 2005, over170 teachers from participatingschools received training, and thecreation of Nature Clubs wassupported. Project proposalssubsequently submitted by NatureClubs were also supported.

• Environmentally Sound LivestockFarming Project, also being carried outby CARE. The project aims to promoteenvironmentally sustainable livestockmanagement practices in the 24villages surrounding the Borjomi-Kharagauli National Park. The targetgroup is approximately 2,580 livestockfarmers representing approximately40% of all farming households in thetarget villages. In 2005, trainingmaterials have been distributed andupdated and training courses provided. 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.

Waste management in Georgia

In seeking to adhere to EU standards for the disposal of waste, the project invested inan incinerator which would meet the required standards. From its arrival in 2003, theincinerator unit failed to meet the required performance standards. Despite significantinvestment in 2004, the unit’s deficiencies could not be resolved in a feasible and timelymanner and it was shut down in January 2005.

Following discussions with the Ministry of the Environment, the existing Iaglujamunicipal waste disposal facility site, near the city of Rustavi, has been used for thedisposal of non-hazardous non-recyclable/re-usable project waste such as food-

contaminated waste. This was the closest approved municipal site to the source of waste and with the safest road access.Although the site is one of the most widely used waste disposal facilities in Tbilisi and adjacent districts, it does not (nor does anyother waste disposal site in Georgia) possess the infrastructure or operating standards needed to comply with EU standards.

Faced with this challenge, the BTC/SCP project partners have offered to contribute to managing and funding theimplementation of specific works to improve the conditions and management of the site. Training for site staff has also beenoffered. These offers have been made even though the project has generated less than 1% of the total waste disposed at Iagluja.

In addition, BP and its partners have offered to help fund, design and construct a new EU-compliant landfill facility for thedisposal of non-hazardous waste – both generated by the project and for other municipal waste currently going to Iagluja. Theconstruction of the new landfill will greatly benefit the citizens of Georgia.


18 BP in Georgia

With our partners we have so far spentover $2 million on programmes for thispurpose along the BTC and SCPpipeline routes.

We have developed a cultural heritageprotection programme to avoid or minimizeproject impacts to archaeological sites andhistoric monuments as a result of pipelineconstruction and operation. Programmeplanning started during the ESIA processand is aimed at ensuring compliance withapplicable Georgian law, internationalstandards and treaties, and the

environmental requirements of the lendingagencies. The programme was developedin conjunction with the Ministry of Cultureand the Academy of Sciences, keyagencies tasked with heritage oversight inGeorgia. Research teams consist ofinternational and Georgian archaeologists,monument specialists, and culturalresource management specialists. BP hasemployed a project heritage specialist tomanage implementation of the plan.

The plan sets out a number of phasedtasks that reflect the progress of pipeline

construction and the gradual accumulationof knowledge about the archaeologicalresources in the pipeline corridor. Thephases progress from identifyingresources, evaluating their significance,mitigating any impacts associated withconstruction, monitoring activity andmanaging any ‘late finds’ (also known aschance discoveries). A ‘Project Late Finds’protocol sets out the procedures to followto protect and record any heritageresources encountered during pipelineconstruction.

1.6 Protecting cultural heritageThe archaeological heritage of Georgia (in common with that of

Azerbaijan and Turkey) is outstanding in terms of its physical and

historical characteristics.The Georgian government, the general public,

we and our partners therefore place a very high value on protecting and

preserving these heritage resources.

Conservation and restoration of St George’s Church, Tadzrisi

St George’s Church, located off the BTC right of way, is one element of a nationally significant culturalheritage site called Tadzrisi Monastery. The monastery was originally constructed between 830 and thelate 900s but later abandoned and fell into disrepair. Between May and November 2005, the churchwas carefully cleaned, stabilised and reconstructed by the Georgian chapter of ICOMOS (InternationalCouncil on Monuments and Sites) funded through a BTC grant. This involved removing vegetation andover 500 years of overburden and sediment. Archaeological investigations were also conducted. Allstones and features were carefully mapped upon exposure and where possible the original stoneswere used to reconstruct the walls of the church. A variety of highly skilled and predominantly Georgianmasons, engineers, stonecutters, archaeologists, and architects were involved throughout the process.

A side benefit of this project has been the improvement in relations with local village residents culminating in a letter ofgratitude from the community in the autumn of 2005. Visitors to the site have already included government officials,representatives of specialist international organizations such as UNESCO, local residents, and tourists. The site, if properlymanaged and promoted, could be an integral part of Georgia’s economic growth strategies, including heritage tourism.


1.7 Health and safety Our philosophy as a company is that no job is too important not to be

carried out safely. One of our primary responsibilities as an employer of

large numbers of staff and contractors working in challenging

environments is to protect personal health. All of our projects and

operating assets function within a safety management system.

Health We carried out a range of actionsto secure personal well-being such aspre-employment medical screening, foodhygiene audits at catering facilities,water quality assurance inspections incamps, and inspecting health carefacilities along the right of way. Our aimis to protect the well-being of ourworkforce by identifying specific healthrisks and developing programmes andguidelines to protect them from theirimpact. Our effort to address the risks ofavian flu, in alignment with adjacentcountries, is an example.

Safety Our safety managements systemprovides a framework of policies,procedures, practices and tools which aredesigned to ensure safe operations. Inaddition, a wide range of safety initiativeshave been implemented in the course ofthe year. Safety leadership training wasrolled out for management personnel. Asafety training programme, coveringtopics such as Behaviour SafetyObservation Training, Behaviour SafetyAuditing, the company’s ‘Golden Rules ofSafety’, and Energy Isolation wassuccessfully completed.

Our operations have also involvedworking with a large number of staff wehave had to train. Many of these are localstaff with little or no previous insight intothe safety culture required of a project ofthis type, or are contractor personnel withdifferent approaches to safetymanagement. The multiple languages ofthe workforce and the transient nature ofmuch of the working population make thecreation of a safety culture more of achallenge than it is in many workingenvironments. Nevertheless, we seek toensure that our approach is communicated

We estimate that by theend of 2005, we and ourcontractors had completedhealth and safetyinductions for over

12,000people in Georgia.


20 BP in Georgia

effectively, understood, and upheld in alloperations. We estimate that by the end of2005, we and our contractors hadcompleted health and safety inductions forover 12,000 people in Georgia.

Training initiatives were needed toreinforce the safety requirements forworking near overhead power cables.Operators were given reinforcement onthe safe operation of their specializedequipment, such as sidebooms, cranes,and forklifts. Training and other measureswere taken to focus on the special hazardassociated with working on the manysteep slopes in Georgia.

Training was provided to local medicalpersonnel on advanced life support withemphasis on road traffic accidents.Further training was provided coveringhypothermia and other risks related tocold weather, food safety, water quality,camp hygiene, and guidance on thesubstance abuse policy.

Contractor safety Pipeline constructioninvolves recognizing and addressing avariety of health and safety challenges.Heavy lifting, welding and excavations areroutine activities that require wellexecuted safety practices. As is typical ofa major infrastructure project, theextensive use of heavy equipment isnecessary and work is often undertakenin difficult terrain, in sections of Georgiaat high altitude and adjacent to bodies ofwater. Working in difficult weatherconditions was a significant challenge in2005. The projects need to ensure thatsafety and healthy living conditions andadequate medical facilities and personnelare provided for large numbers of people,often accommodated in remote areas.

In addressing these challenges,ensuring that our contractors work safelyis an important priority. We have carriedout a number of safety initiatives in 2005

with our main pipeline contractor (theSpie Petrofac joint venture). Theseincluded safety leadership training, safedriving practices, the inspection of lightand heavy vehicles at facilities, medicalscreening, and health and safetyinspections of the catering facilities. Weare supporting our contractors by workingjointly with their leaders to improve theirsafety programmes.

‘Toolbox talks’ and risk assessmentsare regular features of our safetyactivities. Due to the logistical challengeof gathering workforce personnel, thetoolbox talk is a preferred means ofinformation and training delivery on apipeline project. These are task-specificon-the-job training carried out on site.They are regularly carried out both atpermanent facilities and along thepipeline route. These have covered arange of safety and environmental topicsin 2005 such as lessons learned fromincidents, safety precautions to beimplemented for the current task, wastesegregation, preventing the use ofunauthorized access roads, refueling, oilspill response, and the management oftopsoil and subsoil segregation.

Driving safety The BP group has focusedin 2005 on improving driver and roadsafety through the implementation of thedriving safety standard. The standardspecifies requirements for BP employeesdriving or travelling in motor vehicles onBP business. On the Georgian part of theBTC/SCP project, we have estimated thatthe total kilometers driven to date equateto driving more than 1000 times aroundthe world. The demanding drivingconditions and extensive drivingexposure required rigorous means tomeet the standard.

Special measures have been taken,therefore, to improve driving practices.

Light and heavy vehicles were monitoredand assessed to check their mechanicalcondition and safety equipmentavailability. Drivers were re-assessed toensure the validity of their BP drivingpermits. Guidance and safety measureswere introduced to ensure safer drivingduring winter when the additional hazardsof snow, ice and cold are added to thechallenges.

We began an initiative to equip projectvehicles with telematic driving recorders,which enable more detailed monitoring ofdriver behaviours. The unit provides thedriver real time feedback related to issuesof speed, breaking, seatbelt use andseveral other parameters. The installationof these recorders on the BTC/SCPvehicles was submitted to the ‘Innovation’category of the regional BP ‘Helios’awards competition, an internalprogramme which promotes and rewardscreative ideas for putting our brand valuesinto practice. Guidance and safetymeasures were introduced to ensuresafer driving during winter.

We believe that the steps we aretaking to improve driving safety areworking. On the Georgian part of theBTC/SCP projects, the ‘total vehicleaccident rate’ has declined by almost90% since 2003. In 2005, the Georgiadriving team of direct hires and contractdrivers safely completed over 5.2 millionkilometers driven with no days away fromwork cases and no injuries to any of theirpassengers. It has been estimated thatthe use of seatbelts and rolloverprotection has saved lives in 90 of thevehicle rollovers in the life of the projectin the three countries.

Safety performance The safetyprogrammes we have implementedwithin BP Georgia and among ourcontractors have helped us achieve a


good safety record, with significantfurther improvements in performance in2005. While we are pleased with ourrecord of continuous improvement, ourgoal of zero accidents was notachieved. We deeply regret that wesuffered one fatality in our Georgianoperations in 2005. As with all fatalities,the incident was investigated toestablish the root causes, so thatlessons could be learned anddisseminated. Actions were takenwhich seek to eliminate a repeat of thisor similar accidents.

Our goal in implementing our safetyprogramme is to ensure our activities areconducted as safely as possible. We aimto make safety a key concern foreveryone, in and out of the workenvironment. By the start of 2006,operations on WREP had gone sevenyears without a ‘day away from workcase’ (DAFWC). According to ourassessment, DAFWC frequencyperformance on the BTC/SCP pipelineproject has been over five and a half timesbetter than the industry average for similarprojects. We have carried out more than2.6 million hours of safety training on theBTC project to date, equivalent to 96hours of training for every person who hasworked on the project.

Improving road safety in winter

Road traffic accidents remain one of our highest risks, here in Georgia andacross the BP group. The group-wide driving safety standard is a responseto this – seeking to improve driving behavior to lead to safer drivingeverywhere we operate.

In Georgia, winter road hazards such as ‘black ice’ and extreme weatherconditions are a particular hazard, especially in some of the difficult andremote areas where we work. These conditions oblige each driver engagedin our activities to adapt their driving. Reducing our road traffic accident rateis one of our main safety goals for 2006. Achieving this during the winterseason is a major challenge.

A number of actions were taken to increase driving safety in the winter period:• All project vehicles have been provided with snow chains.• Our contractor has mobilized two 4x4 trucks equipped with salt and sand mix and spreader tail gate to maintain road

conditions and reduce the risk of skidding in snow and icy conditions. • Guidance was issued to project staff, encouraging them to keep speeds as low as necessary, negotiate curves at slow and

steady speeds, and to minimize sudden acceleration and deceleration.• Winter and off-road driver training has been provided, with a qualified instructor providing coaching.


2004 2005

BTC /SCPa

Workforce fatalities 1 1Day Away from Work Case Frequency 0.13 0.06Recordable Injury and Illness Frequency 1.16 0.43Total Vehicle Accident Rate 4.52 1.42Man hours worked 18,119,886 13,468,525Km driven 15,257,792 23,204,992

WREP

Workforce fatalities 0 0Day Away from Work Case Frequency 0 0Recordable Injury Frequency 0 0Total Vehicle Accident Rate 0 0.3Man hours worked 1,230,337 675,621Km driven 2,770,776 3,377,535

Supsa terminal

Fatalities 0 0Day Away from Work Case Frequency 0 0Recordable Injury Frequency 0 0.57Total Vehicle Accident Rate 0 4.96Man hours worked 393,288 349,352Km driven 219,397 201,475

Air BP

Fatalities 0 0Day Away from Work Case Frequency 0 0Recordable Injury Frequency 0 0Total Vehicle Accident Rate 0 0Man hours worked 33,033 34,342Km driven 87,806 60,880

Safety performance in Georgia

aInformation in the 2004 BP Georgia Sustainability Review did not include SCP.

22 BP in Georgia

Providing effective security along allpipeline routes requires a cooperativeapproach involving a number of agencies.Securing pipelines is the responsibility ofthe Georgian government – as it is for anystrategic asset inside the country’sborders. Throughout 2005, the StateSpecial Protection Service (SSPS) wastasked with security responsibility forBTC/SCP and for WREP. As a result of a2005 government policy change, securityfor BTC/SCP and the Supsa terminal nowresides with the Strategic PipelineProtection Department or SPPD (formerlySSPS) while security for the WREP(excluding the Supsa terminal) has beenhanded to the Special Task Police of theMinistry of Internal Affairs.

Working in partnership with localauthorities is also required. In addition toproviding security management and staffat our permanent facilities, we providefield security officers up and down thepipelines. They carry out liaison withcommunities and local police, and providetraining to contracted security personnelposted at pipeline facilities.

Illegal tapping of the WREP remains aproblem. While the pipeline has beenoperating safely since 1999, transportingover 239 million barrels of oil to globalmarkets, there have been instances of

illegal theft, including 17 interventionattempts in 2005, of which 10 weresuccessful. Such incidents pose safetyand environmental risks, including oilspills. The failure of an illegal tapconnection to the WREP in October2005 resulted in an oil spill of 446barrels. The oil spill and pipeline repairpersonnel at the site were able tocontain the spill, and commence therepair and clean-up operation.

A range of practical measures is nowin place which aims to ensure that assetand personal security is maintained. Ourprojects and major assets each havesecurity plans and advisors. MobileSPPD and Special Task Police patrolsensure that security is maintained along the length of the pipelines. Our overriding approach is to try tostrengthen pipeline security bydeveloping strong relationships with thecommunities in which we operate andto undertake activities that are mutuallybeneficial. For example, security guardsposted at valves along the pipelines arerecruited by the service provider fromlocal communities. Another example ofcommunity recruitment is the use ofhorse patrolmen, used to verify theoperational condition of the pipelineright of way.

1.8 Security and human rightsMaintaining the security of our people and assets in Georgia is a key

factor in operating responsibly. It can present significant challenges.These

arise in part from operating in an environment in which there has been

significant political change, and where a degree of regional instability

exists.There is also a need to strengthen systems of law enforcement.

Yet they also arise from simpler and more commonplace events such as

theft. Illegal tapping of oil pipelines, for example, is a recognized

problem in Georgia and an issue we take seriously.

Mobile patrols ensure that securityis maintained along the length ofthe pipelines. Our overridingapproach is to try to strengthenpipeline security by developingstrong relationships with thecommunities in which we operateand to undertake activities that aremutually beneficial.


Putting this approach into practice, ourpipeline surveillance programme for WREPincludes a public consultation element inwhich meetings are held with the localadministration, police, landowners, landusers, managers of local enterprises, localservice organisations, and schools. Weemploy, wherever possible, local people toprovide patrols to ensure the operationalintegrity of our assets and to maintain alink to local communities.

Human rights International oilcompanies have faced criticism fromhuman rights organizations for failing totake sufficient action to prevent humanrights abuses in areas where hostauthorities take responsibility forsecurity. BP supports and uses theVoluntary Principles on Security andHuman Rights designed to safeguardhuman rights by ensuring that police,security forces and private guardsassigned to protect energy sites orpipelines are properly trained andclosely monitored. In this region, wehave taken a number of steps to protecthuman rights. We see our support forhuman rights at project level as part of abroader picture in which civil society andlong term regional stability aresupported through promoting respectfor human rights and the rule of law.

In 2003, a joint protocol was signed,with our support, by each of the threepipeline countries. It includedcommitments to observe the highesthuman rights standards when providingpipeline security. The ‘Joint PipelineSecurity Commission’, establishedunder the protocol, met in the course of2005, bringing security officials fromthe three countries together to workand share experience.

BP established an agreement in 2003with Equity International (EI), a Geneva-based not-for-profit organisation thatpromotes respect for human rights in lawenforcement. Under this agreement, EIprovided practical training courses in

Georgia to SPPD trainees. The goal is toensure that the rule of law is followedand the voluntary principles on humanrights are observed.

In October 2004, BP also agreed abilateral Protocol on Security with theGeorgian Government. The agreementdefined standards and procedures on theuse of force and firearms, on monitoringand reporting, recruitment and training ofsecurity staff, and on communication andconsultation between these two parties.

In a separate agreement on the samedate, we agreed to the loan or transfer ofequipment and facilities to thegovernment for use solely on providingBTC pipeline security. The vast majorityof this equipment – covering a widerange of non-lethal items such asprotective clothing, tents, tools, andvehicles – was delivered in 2005. Afurther part of the agreement providesfor the construction of a base forgovernment security personnelresponsible for patrolling and protectingthe pipeline in the Kodiana section.Preliminary design of the security basewas completed in 2005, and following atender process, a contract forconstruction was awarded. Planning forthe base included the preparation of anEnvironmental and Social ImpactAssessment.

A significant feature of our efforts in2005 with SPPD related to pipelinesecurity training. The training wasprovided in two four week cycles. A totalof 360 individuals received basic trainingon topics including patrolling, weapons,ethical law enforcement, and concepts ofinternational law. The Voluntary Principleson Human Rights were introduced at thistime to new recruits.

Agreements and protocols provide thenecessary framework, but we remainvigilant on the ground in ensuring thathuman rights are properly protected. In2005, we commissioned and published ahuman rights monitoring assessment tomonitor compliance with the BTC and

SCP project commitments to respect thefundamental human and labour rights ofworkers and members of localcommunities affected by the project’sactivities. The assessment was carriedout by specialists from the corporatesocial responsibility practice of the USlaw firm of Foley Hoag LLP.

Foley Hoag concluded in theirassessment that overall the project is in‘substantial compliance with its humanrights commitments’ and that ‘in generalBTC Co. and SCP Co. efforts to addresshuman-rights related issues follow thebest practices for the industry, and insome instances, set new standards’.However, as with projects of thismagnitude there is always room forimprovement and Foley Hoag made anumber of recommendations, especiallywith respect to improvements incompliance in areas such as non-discrimination, working conditions,remuneration and labour grievanceprocedures. The project has prepared aresponse to each recommendation, and is implementing an action plan totackle them.

A copy of the assessment’s executivesummary is available in Georgian and acomplete English copy is available on theproject’s website (www.bp.com/caspian).

We see our support forhuman rights at projectlevel as part of a broaderpicture in which civilsociety and long termregional stability aresupported throughpromoting respect forhuman rights and therule of law.


24 BP in Georgia

An important aspect of our people agendais the need to attract people who shareour ambition to be competitive, successfuland a force for human progress. Aparticular focus is attracting such people inthe group’s new profit centres andemerging markets. In Georgia, we arestriving to be the employer of choice tolocal nationals and to develop theircapabilities as employees. We provide arange of opportunities to enhance thecapabilities of our people including trainingcourses, international assignments,mentoring, team development days,workshops, seminars, and on-line learning.

People Assurance Survey We engage withour employees in a number of ways,through group meetings, events,internal newsletters, and opinionsurveys for example. The 2004 PeopleAssurance Survey in Georgiahighlighted areas where we needed totake action to address employeeconcerns. Two important areas wherewe responded in 2005 were in thedevelopment of a leadershipdevelopment programme and reviewingand improving our contractualarrangements with contract and agencystaff. We also acted on the findings of areview of salaries.

Localisation In our offices in Tbilisi and theregions, we have progressively employedmore people since 2001. This has includedan increase in both the number ofGeorgian nationals and expatriates. Theexpatriates are experienced staff withrelevant prior experience, working in shortand some long-term roles. As the projectshave neared completion we have neededexperienced staff of this kind with relevantprior experience, for commissioning andinitial operations.

The agreements that set out theframework of requirements for ouroperations on the projects, includepreference on the use of local labour in theconstruction and operating phases. Wehave exceeded these requirements. Weestimate that over 4,800 Georgians willhave worked on the BTC pipeline during itsconstruction phase. This will create alegacy of skilled workers for futureinfrastructure projects in the country.

BP Georgia is committed to developingall our staff. As our activities in Georgiamove from projects to long-termoperations, we are seeking to promotemore Georgian nationals to assumeleadership positions. In the course of2005, we implemented a programme toensure all long-term employees hadappropriate development opportunitiesand launched a Georgia LeadershipDevelopment Programme (GLDP),providing briefings, training, careerplanning and succession planning. Wealso identified the roles currently filled byexpatriates, and began succession anddevelopment planning to help ensure thatthe long-term BP Georgia positions areultimately filled by Georgian nationals.

Compliance and ethics 2005 saw thelaunch of the BP Code of Conduct acrossthe company. The code enshrines BP’scommitment to integrity and defines what

1.9 Our peopleBP seeks to offer rewarding careers, exciting challenges, equality of

opportunity and flexible working practices. One of our core values is to

engage the creative talents of our employees. We aim to nurture the

capabilities and skills of our people, treat them and reward them fairly,

make clear the expectations the group has of each employee, and

promote inclusion within a meritocratic organisation of people from

diverse backgrounds.

BP Georgia headcount

Number of Georgian employees in our offices Number of expatriate employees in our offices

2004 Total

2005

389

398

142

138

531

536

is expected of BP employees in a singleuniversal framework. It sets out how BPpeople should behave when faced withchoices about their behaviour at work. Itplaces responsibility on each member ofstaff to report instances of any breaches orpotential breaches of BP’s compliance andethics commitments of which theybecome aware, such as unsafe acts, fraud,or harassment. Our employees eachreceived a copy in the Georgian languageand briefings were provided to BP staffand contractors on its provisions.

Certification We carried out the annualcertification process in 2005, providing akey indicator of legal, regulatory and BPethical compliance within the region. Inthis process, team discussions are heldindicating the extent to which individualsand teams have complied with laws,regulations, and BP’s ethical standards.Certification involves both individuals andline managers, who certify the behaviour

of teams under their direction. Certificatesare submitted upwards through thecountry manager, who in turn signs acertificate submitted on behalf of the staffof BP Georgia.

Open Talk ‘Open Talk’ is BP’s globalindependent employee concernsprogramme, which allows the opportunityfor anyone at BP to raise concerns orenquiries about compliance or ethics, in aconfidential manner. Individuals cancontact Open Talk using a multilingual

phone line or via fax, e-mail or letter, atany time, and callers can choose toremain anonymous. Concerns raised areforwarded to the appropriate regionalombudsman in BP, who will arrange aresponse including any appropriateinvestigation. If allegations aresubstantiated, action is taken. Alongsidethe launch of the code of conduct in2005, we extended the scope of theOpen Talk programme to provide advicefor people on the code, in addition toraising concerns.


The Georgia Leadership Development Programme (GLDP)

To support the BP Georgia localisation agenda, we launched a Georgia Leadership DevelopmentProgramme in 2005. The main purpose of the programme is to develop Georgian nationals so thatthey can assume senior leadership positions in the medium and long term. The programmeprovides a platform for high potential staff to discuss and leverage the benefits of existing BPGroup development programmes and more specifically how they can be applied within BPGeorgia. It provides a forum for sharing best practice and for developing leadership skills toincrease personal impact and effectiveness and thus create the leaders of the future.

Sixteen Georgian employees were selected to be part of the programme. It is our plan to recruitnew participants to the programme on a regular basis. There are currently five female employees inthe programme. As it progresses we will be aiming to include more female employees.

While this initiative focuses on the particular challenge of developing future leaders, it is important to highlight thatdevelopment opportunities are open to all employees.

The views and aspirations of some of the GLDP participants ‘The programme is an opportunity for me to accelerate mydevelopment and deepen my knowledge of my strengths and weaknesses. My hope is that it will offer exposure outside myfunctional area, to bigger challenges, and increase my involvement in future strategic decisions within the company. Thesupport of line managers and mentors is crucial in making this happen.’ Zurab Topuridze, environmental team leader

‘The GLDP is a good opportunity for national staff members to raise their awareness of BP’s development process andidentify areas where they need to develop their skills.’ Paata Jincharadze, senior security advisor

‘The programme is a concentrated way of using the opportunities for development that BP offers.’ Irine Samadashvili, ESIA

co-ordinator

‘Localisation is on the agenda. This is a very important message that the leadership programme delivers; important to me as to aGeorgian. It gives us the opportunity to demonstrate that we will be able to contribute to the future “Georgianization” of thecompany.’ David Magradze, government affairs advisor (pictured above).


BP workforce in Georgia

2004 2005

BP employees (Georgian nationals) 228 271Contractors (Georgian nationals) 161 127

Sub total 389 398

BP expatriates 37 38Contractor (expatriate) 105 100

Sub total 142 138

Total BP Georgia workforce 531 536

26 BP in Georgia

Our role in society2.1 The social 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

2

BP celebrates 10 years in Georgia with apicnic for employees and their families.


Our role in society

Georgia’s rate of economic growth ranks it100th out of the 177 countries listed in theUNDP Human Development Report 2005– well below the rankings of most of othertransitional countries. The UNDP hascommented that poverty is the mainconcern of the majority of Georgia’scitizens, with all its implications for socialand economic growth.

BP and organisations including UNDPand the MCC, are working to reduce theincidence of poverty, support democraticgovernance, and stimulate economicgrowth across Georgia. The Georgiangovernment has committed to meetingthe UN Millennium Development Goals,and has developed, with UNDP assistance,an Economic Development and PovertyReduction Programme. It has also agreeda Millennium Challenge Compact with theMCC. The UNDP and the MCC recognizethat business has a part to play in long-term poverty alleviation. The UNDP’sIntegrated Employment Generation andSME development programme seeks toimprove entrepreneurial skills within smalland medium sized enterprises. TheMillennium Challenge Account programmeobjectives include developing regionalenterprises by funding investment andtechnical assistance and rehabilitating keyregional infrastructure.

Through our activities in Georgia, BP iscommitted to working to promoteeconomic and social development, and toimproving the welfare of the Georgianpeople. This is delivered through theeconomic and financial contribution wemake to the Georgian economy, throughtariff payments to government and via ouruse of local companies and staff. It is alsoprovided through our specific communityand social investment initiatives.

Conducting our business relationshipson the basis of mutual advantage is oneof our core values. We seek to ensurethat our relationships create benefits thatare shared between those with whomwe do business as well as for ourselves.

At the group level, BP recognizes theneed to make a focused and inclusivecontribution to social and economicdevelopment. The group thereforeprioritizes the support of revenuetransparency initiatives, and directs mostof our community investment toprogrammes and projects that supportenterprise development, education andimproving access to energy. The sectionswhich follow describe these.

In Georgia, these group priorities andthemes are implemented through anumber of national and regionalprogrammes, more details of which are

given in section 2.7. It should be noted thatBP also encourages large capital projectsin developing countries, such as BTC/SCP,to invest in additional ‘communitydevelopment’ categories, such as health.

This section of the report describes howwe have been contributing to meeting thesocial and economic challenges faced byGeorgia. We begin by setting out thegroup’s thinking on climate change, giventhat economic growth, social progress,and human well-being are all dependenton access to energy. Providing access toenergy is one of the principal themes of the group’s social investmentprogrammes. These initiatives, in which weuse our investment and influence to makespecific contributions in support of socio-economic development in Georgia, arealso described here.

2.1 The social contextDespite strong GDP growth in recent years, some 52% of the

Georgian population lives below the national poverty line, according

to the World Bank. Key organizations with a role in supporting

development, such as the UN, the World Bank, and the Millennium

Challenge Corporation (MCC) have remarked upon the positive steps

that have been taken in recent years in Georgia to promote stability

and private enterprise development.

28 BP in Georgia

The launch of BP Alternative Energy in2005 followed nearly a decade of actionby BP to address climate change. In 1997,BP was widely acknowledged for publiclyadvocating precautionary action overclimate change, setting voluntary targetsin 1998 to reduce its own emissions. By2001, our GHG emissions were 10%below 1990 levels. We continue toimprove our GHG emissions performancethrough energy efficiency projects and wesupport research into technologicalsolutions to curb emissions.

BP has been developing products thathelp customers reduce their emissions.BP has increased its production anddistribution of natural gas, which producesabout half the CO2 emissions of

conventional coal technology when usedto generate power. BP has developed amajor solar business, built its first windfarm and pioneered technologies forcapturing and geologically storing CO2. Intransportation, BP has also developedadvanced fuels and lubricants that provideemissions reductions.

BP supports precautionary action tolimit GHG emissions, even thoughaspects of the science are still thesubject of expert debate. BP believes thegoal must be to stabilize GHG levelsthrough sustainable long-term emissionsreductions. BP supports the emergingconsensus that it would be prudent tolimit the increase in the word’stemperature to about 2°C above pre-

industrial temperatures. One way toachieve this would be to ensure thatglobal emissions in 2050 are no higherthan today’s – around 25 billion tonnes ofCO2 a year. BP believes that this can beachieved using a mixture of technologies,including innovation to cut CO2 emissionsfrom fossil fuels, significantly increasingthe fuel economy of motor vehicles,increasing the energy efficiency ofbuildings and radically increasing windand solar capacity. BP sees our role aspursuing efficiency in our own operations,creating cleaner products and contributingto an informed debate. For example, BPhas advocated the use of marketmechanisms to enable economies toadjust to a carbon-constrained world.

1997

BP publicly acknowledges the

need for precautionary action to

cut GHG emissions after exiting

the Global Climate Coalition.

Climate change – our journey

1999

BP initiates the CO2 capture

project with other companies

and governments, studying

methods of capturing and

storing CO2 at power plants.

1998

BP sets target to cut emissions

from operation to 10% below

1990 levels by 2010.

2000

BP begins funding the Carbon

Mitigation Initiative at Princeton

University, exploring solutions to

climate change.

2002

BP announces plans to build wind

farm at Nerefco, The Netherlands.

2004

BP’s solar business moves into profit and

announces plans to double production.

BP launches CO2 capture and storage

project at the In Salah gas field in Algeria.

2001

BP achieves its 2010 target nine years

early, having reduced GHG emissions

by energy efficiency projects and

cutting flaring of unwanted gas.

2003

Based on work at Princeton, BP

sets out a range of technology

options to stabilize GHG emissions

over 50 years, including increases

in solar, wind, gas-fired power and

carbon capture and storage.

2005

BP announces plans for

the world’s first industrial

scale commercial hydrogen

power plant. BP launches

BP Alternative Energy.

2.2 Climate changeAs a global energy group, BP has a responsibility to play a part in

addressing the threat of climate change. 2005 marked a milestone

with the launch of BP Alternative Energy, a business that plans to

invest $8 billion over 10 years to lead the market in low-carbon

power generated from the sun, wind, natural gas and hydrogen, as

well as the wholesale marketing of cleaner electricity.


Our role in society

2.3 Promoting good governance We recognize the importance of encouraging the Georgian government

to be transparent in its management of resource-related revenues.

Experience in other parts of the world has shown the potential risks of

corruption and economic difficulty that can arise from the mis-use of

oil-related wealth in developing countries.

Securing revenue transparency is animportant issue in the region, and is beingsupported by a number of NGOs.Azerbaijan is engaged as a pilot participantin the Extractive Industries TransparencyInitiative (EITI), a programme that seeks toincrease the transparency of payments byoil, gas and mining companies togovernments and of the revenuesreceived by those governments. Thegovernment of Georgia, in submissions tothe IMF, has stated its commitment to jointhe EITI even though EITI is not designedfor a transit country environment.

Within Georgia, CDAP havecommented favourably in 2005 on BTC’srelationship with the Georgiangovernment, taking note of thetransparent process that has beenestablished for publishing informationabout the BTC grant programme, and forcreating an audit process for these funds.

The government of Georgia, in submissions tothe IMF, has stated its commitment to join theEITI even though EITI is not designed for atransit country environment.

30 BP in Georgia

2.4 Enterprise developmentWe recognize the role we can play in promoting the development of

local enterprise through engaging local companies in support of our

projects. Doing so creates jobs, increases skills, and injects money

directly into the local economy. We also benefit because we reduce

costs by sourcing supplies locally and by developing mutually

advantageous relationships in the community.

BP Georgia makes significant paymentsto local, Georgian-owned businesses.The table below shows the total annualpayments made to Georgian companiesfrom 2000-2005, with the total figureincreasing consistently year on year. Inaddition to this, our principal contractorsuse local sub-contractors wherepossible and practicable.

Beyond our routine operations, and aspart of our community investmentprogramme, we have contributed toother initiatives supporting enterprisedevelopment. In particular, we haveprovided support for entrepreneurs andsmall businesses through the provisionof micro credit. Enterprise development

is also one of the three core themeswithin our Regional DevelopmentInitiative (described in section 2.7).

2001200220032004

Payments to local companies ($ million)

Notes:Year 2000: Georgian Pipeline Company (GPC) payments.Year 2001: GPC and BP payments.Years 2002 and 2003: GPC, BP and BTC payments.Years 2004 and 2005: GPC, BP, BTC and SCP payments.

2005

2000

5 10 15 20 25 30 35 40 45 50 55

13.915.9

20.326.1

53.7

10


Our role in society

2.5 EducationSupporting education is an important area where we have the capacity

to contribute to development. It 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

enterprise development.

The CIP-Improved Schools Project (CIP-ISP) which began in the summer of 2004,seeks to provide opportunity foradolescents to participate moreeffectively in Georgia’s future social andeconomic growth.

CIP-ISP has supported a range ofprojects in 2005 such as school

rehabilitation, teacher training, awarenessraising campaigns on educational reform(in line with new national models), andthe organization of summer camps. Theexperience gained by communities ininitial projects has led to greaterindependence in planning and preparingsecond phase initiatives.

We also support tertiary education. Ourpledges of $2 million towards theestablishment of the new InternationalSchool of Economics in Tbilisi and of $1.5million to support a Masters levelprogramme over three academic years toallow gifted Georgian scholars to study inthe UK are examples of this support.

Improved Schools Project summer camps in Bakuriani and Tsalka

In July 2005, two computer summer camps were arranged for studentsfrom Tsalka and Bakuriani schools that had been rehabilitated under theprogramme. A solar powered computer lab had been developed in eachof these schools under the framework of the improved schools initiative.

The purpose of the three week summer camps was to:• reinforce and supplement the computer training given to the students

during the school year• provide basic English language training with an emphasis on

computer language, and • provide training in leadership.

In total, 100 students were selected by their teachers to participate. The camps were supported by a group of volunteerteam leaders, computer trainers, and English language teachers. Parents were also invited to help out and participate.

In the morning students were split into learning groups and formal instruction was given daily. The students were allowed atotal of two hours at the computer laboratory per day. The computer laboratory was also open during free time to givestudents the opportunity to practice what they had learned. In the afternoon the groups joined together for discussions groupsand to enjoy outdoor activities such as hiking and playing ball games.

The development of Caspian oilreserves and the completion of the SCPpipeline are important strategicdevelopments which will enhanceGeorgia’s energy security.Accompanying measures, such as therenovation of the country’s gasdistribution infrastructure will also assistin improving the reliability of energysupply to Georgia’s population.

The need to address problems ofenergy supply and security is aresponsibility of the Georgiangovernment, in cooperation with itsregional partners. However, we recognizethe role we can play in helping establishenergy security by providing technicalsupport and advice where necessary andby operating the new pipeline facilities inGeorgia safely and efficiently.

32 BP in Georgia

2.6 Access to energyDespite being a region with substantial reserves of energy which will

help to meet growing demand in the long term, Georgia faces a number

of current energy challenges. Security of supply, for example, is a serious

economic and political issue in Georgia, which depends heavily on

Russia to supply its natural gas needs.

Improving the reliability and capacity of pipeline gas delivery in Georgia

In addition to our investment in SCP, which will bring a newsource of natural gas from the Shah Deniz field in Azerbaijan toGeorgia and Turkey, BP is playing a part in upgrading the existinggas pipeline network in Georgia. According to the Georgian GasInternational Corporation’s (GGIC) estimates, Georgia’s gassystem leaks around 5% of total throughput. BP provided$750,000 to fund an initial survey of the pipeline and to trainGGIC staff as they prepare to carry out restoration work on amajor Soviet-era pipeline, the north-south main pipeline, whichruns south from the Russian border across Georgia to the bordersof Azerbaijan and Armenia. The $40 million rehabilitation is to befunded from the Millennium Challenge Corporation. BP’scontribution is part of the multi-country socio-economicinvestment programme, the Regional Development Initiative.

We recognize the role we can playin helping establish energy securityby providing technical support andadvice where necessary and byoperating the new pipeline facilitiesin Georgia safely and efficiently.


Our role in society

2.7 Our programmesOver and above our direct business investment into the Georgian

economy, BP and our partners have committed to social investment

programmes across Georgia.The programmes and initiatives we have

launched put the key themes of our social investment approach into

action.The programmes include the ‘BP pledge’, the BTC/SCP

Community Investment programme, a BTC grant programme for

Georgia, and a Regional Development Initiative.

Supporting healthcareIn November 2005, the Centre for Interventional Medicine of Western Georgia, in Kutaisiwas officially opened by President Mikheil Saakashvili. It had been renovated with BPsupport under its pledge agreement with the government of Georgia. A total of $3 millionwas allocated to the Kutaisi hospital development, covering mostly diagnostic equipment.

Support for the hospital, a part of BP’s social investment programme, is an illustration ofthe socio-economic benefits that can be realised not just by those communities along thepipeline route but also beyond in wider Georgia.

‘The BP Pledge’ In October 2004 BP madea commitment to Georgia by pledging$14.5 million of extra social and economicinvestment funds. This is known as ‘the BPpledge’. Money is being spent on numberof projects in the field of education, healthcare, and energy. In 2005:• BP pledged $2 million to support a

new International School of Economicsin Tbilisi. The school will promoteexcellence in postgraduate economicstudy and research across the region.The institution is being supported bythe governments of Georgia,Azerbaijan and Armenia, the WorldBank, Tbilisi State University and localand international donors.

• Selection for the first round of a UKscholarship programme for Georgianpostgraduates was completed

successfully. The programme isimplemented jointly with the BritishCouncil. The first group of 10 studentsdeparted for the UK in September2005 to take up Masters-level studiesin UK universities. The fields coveredby the scholarships are banking(including insurance), business studies,management, human rights, law,media, social and political studies, builtenvironment, and internationalrelations and diplomatic studies.Selection for the second round of thescholarship program was initiated atthe end of 2005, to identify 8 finalistswho will take up their studies at UKuniversities in September 2006.

• In 2005 BP contributed $3 million torenovate and equip a regional healthcare facility in Kutaisi, western Georgia.

• Work was carried out to prepare for thecreation of the EU-Georgia BusinessCouncil (EUGBC) established with $0.3million of financial support from BP. Therole of the EUGBC is to promoteGeorgia as a destination for EUinvestment, assist EU businesses innavigating local regulations andidentifying local partners, and to assistGeorgian business in finding markets inthe EU and in achieving EU standards.

The BTC/SCP Community Investment

Programme (CIP) The BTC/SCPCommunity Investment Programmestarted in March 2003. It has beendeveloped through a process ofconsultation with communities, donors,NGOs and government. Its goal is topromote sustainable social and economic

34 BP in Georgia

development in the communities alongthe pipeline route. The total CIP budgetfor Georgia during the construction phaseof the BTC and SCP projects is $8 million.

Georgia’s CIP has two principal sets ofactivities: ‘CIP’ which is aimed at villagesalong the pipeline route, and ‘CIP-ImprovedSchools Project’ (CIP-ISP) which is focusedon schools in towns along the pipelineroute. The programme has brought manytangible benefits to project-affectedcommunities, but has also brought lesstangible but important outcomes such ascommunity empowerment, awareness-raising, and capacity building.

Delivery of CIP and CIP-ISP is led bytwo international NGOs, Mercy Corps andCARE. They work with the assistance offive national NGO partners – ConstantaFoundation (micro-credit), TechnicalAssistance Georgia (infrastructurerehabilitation), Elkana (agriculture andagro-business), Curatio InternationalFoundation (health and social services),and the International Centre for Conflictsand Negotiations (capacity building forconflict resolution).

CIP’s main components are: • Renewal of rural infrastructure:

communities have identified needs,developed workplans, and drawn upbudgets and schedules to undertakeinfrastructure rehabilitation projects.Over 112 projects have beencompleted, on facilities such asmedical and educational facilities, andwater supply systems. Over 96% ofprojects have a community investmentcontribution of over 25%, theminimum requirement for CIP support.This engenders greater communityownership of the project andencourages the community toundertake long-term maintenance.

• Agricultural support: initiatives supporteconomic development by transferringagricultural technologies through on-farm demonstrations and trainingsessions. In 2005, activities includedthe establishment of new farmerassociations to create economies ofscale. Over 800 farmers have benefitedfrom training sessions on subjects suchas seed sorting, preventive measuresagainst seed invasive diseases, theproper use of chemicals and cattlefodder preparation.

• Providing support for incomegeneration through micro-credit: theaim is to stimulate business andemployment by providing at least14,000 micro loans. By the end of2005, over 11,000 loans have beenprovided with an average value ofapproximately $450. To date, the totalloan value is over $4 million.

• Energy efficiency: activities haveincluded the winterisation of buildingsand the installation of fuel efficientstoves. Bio-gas digesters have beenconstructed and installed.

• Social services: the objective has beento establish social services networks forelderly and vulnerable people, to traindoctors and nurses, and provide basicfirst aid training. Following a needsassessment, social service networkshave been established. Within these,youth volunteers have provided supportto elderly village residents. Medicaltreatment has also been provided bydoctors and nurses in visits to villages.Training sessions on HIV, drug andalcohol abuse, and chronic diseaseprevention have been provided.

• Capacity building: initiatives have beenundertaken to improve the capacity ofrural communities to analyse problems,

mobilise resources and implementdevelopment initiatives. A feature ofactivity has been the creation of‘community based organizations’(CBOs). These bring villagerepresentatives together with localgovernment officials. Workshops havebeen provided to the CBOs onleadership, team building, organizationaldevelopment and management.

The BTC Grant Programme for Georgia InOctober 2004, two agreements weresigned with the government of Georgiawhich built on earlier commitments. Asecurity protocol (discussed in section1.8), formalised obligations concerningthe provision of pipeline security in amanner consistent with internationalsecurity and human rights undertakings.Under this framework we have providedfinancial support and programmemanagement for construction of theKodiana security base, for the purchaseof security equipment, and to coverSPPD operating expenses.

The second agreement concerned theestablishment of a grant programme forGeorgia. Under this agreement, a seriesof mutually agreed grants will be providedby BTC to the Georgian government to beused for social and economic projects.Total funding for the programme amountsto $40 million through to 2010, with afurther $1 million per year for theremaining life of the pipeline. In 2004 thefirst grant payment of $9 million wasdisbursed by the government to supportpoverty allowances ($5.5 million),regional pensions ($2.6 million) and astudent voucher scheme ($0.9 million). In2005 no disbursement was made but in2006 a payment of $15 million isscheduled. Thereafter until 2010, $4million per year will be disbursed. Theagreement contains provisions for thegovernment’s management of all grantfunds to be audited.

The intent of the grants is to supportthe government’s ongoing socio-economicdevelopment plans during a critical periodbefore the pipeline revenues reach theirmaximum level. The grants are in additionto any existing social and communityinvestment projects being carried outunder BTC funding.

BP Pledge Status: disbursement phasing ($million gross)

Total 2004 2005 2006 2007

Borjomi Historical Park 4.5 0.6 3.9Kutaisi hospital 3.0 3.0UK scholarships 1.5 0.5 0.5 0.5International School of Economics, Tbilisi 2.0 1.0 1.0Schools computerization 2.8 2.8Georgian National Museum Partnership 0.4 0.4EU-Georgia Business Council 0.3 0.2 0.1Total 14.5 0.6 7.4 4.9 1.6


Our role in society

The Regional Development Initiative

Taking account of the views of variousstakeholders, BP and its partners haveestablished the Regional DevelopmentInitiative (RDI). This is an innovativemechanism that aims to provide a long-term contribution to sustainable socio-economic development acrossAzerbaijan, Georgia and Turkey.

In order to fulfil its purpose, RDI’sstrategy is to:• be regional in focus;• maximise its development impact by

working on a ten-year horizon inclearly defined thematic areas;

• work in partnership with developmentagencies, and in close co-ordinationwith governments, civil society andother interested parties;

• be more than a source of funds, bydrawing on BP and partnercompetencies and working practices;and

• ensure that societies at large acrossthe three countries benefit from theinitiative.A number of important agreements

were signed and financial commitmentsmade in 2004 which developed RDI. Wehave committed $12 million inconnection with the first phase of theprogramme ($6 million with EBRD and$6 million with IFC) and are working withthe IFC and EBRD to secure additionalcommitments from potential partners toraise respectively $25 million with each.

After consultation throughout theregion with various stakeholdersincluding governments, NGOs, IFIs

(International Financial Institutions) anddonor organizations, three themes forRDI have emerged. These are:• Enterprise development – generating

employment, improving the economicperformance of individualentrepreneurs, and contributing to thediversification of the economy.

• Effective governance – supportingpolicy initiatives on transparency;revenue management and the rule of law.

• Access to energy – supportinginitiatives that increase access tosecure sources of energy.In the course of 2005, substantial

effort has been made to identify andimplement a range of projects thatembody these themes. They include:• A pilot project, aiming to improve

solid waste managementinfrastructure in the Borjomi andBakuriani region, was launched in2004 and progressed in 2005. It isbeing implemented by the GermanTechnical Cooperation Agency (GTZ).The waste collection system inBorjomi was modified to improve theefficiency of waste collection and newequipment was purchased to assist inthe upgrade of waste services.

• 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. Its goal is toimprove the product lines,competitiveness and organization of

small-scale entrepreneurs and agro-businesses. It will be implementedthrough the following fields ofintervention: vocational training; SMEimprovement in agriculture, agro-processing, manufacturing andservices; business developmentservices and the creation of a smallbusinesses association; andnetworking and collaboration.

• In partnership with the EBRD, theBTC and SCP partners are providing$750,000 to support the constructionand renovation of three branches ofthe ProCredit Bank of Georgia – inTelavi, Khashuri and Rustavi – whereaccess to banking services andborrowing opportunities has beenlimited. The ProCredit Bank willprovide financing to micro and smallenterprises as well as agriculturalbusinesses.

• Preparation for a major rehabilitationof the north-south ‘Magistral’ gaspipeline has been supported (also seethe case study in section 2.6). Underan agreement signed in 2005 with theGeorgian Gas InternationalCorporation (GGIC), BP committed toprovide project management adviceand technical support, building thecapacity of project managementsystems ahead of receiving the grantfrom the Millennium ChallengeCorporation. BP’s initial fundingcommitment of $750,000 wassupplemented by a further $400,000from the BTC, SCP and ACG partnersin early 2006.

Business finance provision in GeorgiaAs part of the Regional Development Initiative in Azerbaijan, Georgia, and Turkey, we arelooking towards more substantial credit systems and are currently working with a range ofinternational finance institutions and other multilateral development agencies. In Georgia, inpartnership with the EBRD, we have been supporting the ProCredit Bank in the renovation,equipping and staffing of three new bank branches in towns along the pipeline route withlimited access to finances. It is anticipated that the new branches will provide increasedfinancing opportunities to local micro and small enterprises, as well as agricultural businesses.

Country Interest rate (%) Repayment rate Repeat clients (%) Woman clients (%)

Georgia 1.5-3.0 a month 99 80 70Azerbaijan 2.5-3.5 a month 98.87 70 49

36 BP in Georgia

Performance Data

2004 2005

Safetya

BP employee fatalities 0 0BP Contractor fatalities 1 1Days away from work cases (DAFWC)b – workforcec 12 4Days away from work cases frequency (DAFWCF)d – workforce 0.12 0.06Recordable injuriese – workforce 105 30Recordable injury frequency (RIF)f – workforce 1.06 0.41Total vehicle accidents 69 35Total vehicle accident rateg 3.76 1.30Hours worked – workforce 19,776,554 14,527,840Kilometres driven 18,335,771 28,844,882

Environmenth

Direct carbon dioxide (CO2) (tonnes) 32,029 35,421Indirect carbon dioxide (CO2) (tonnes) N/A N/ADirect methane (CH4) (tonnes) 202 220Equity share direct greenhouse gas (GHG) (tonnes CO2 equivalent) 12,362 13,687Flaring (exploration and production) (tonnes) N/A N/ASulphur dioxide (SOx) (tonnes) 39 44Nitrogen oxides (NOx) (tonnes) 589 651Non-methane hydrocarbons (NMHC) (tonnes) 1,834 1,990Number of spills (loss of primary containment) 1 1Volume of product spilled (litres) 15 70,914Volume of product unrecovered (litres) 10 0Total hydrocarbon discharges to water (tonnes) 0.015 0Hazardous waste disposed (tonnes) 1,307 513

Employees

Total BP Georgia staff 531 536

Notes: 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 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.

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 in this table covers WREP and the Supsa terminal in Georgia.


Independent assurance statement

to BP management The BP GeorgiaSustainability Report 2005 (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 asoutlined below, in order to provideconclusions on the claims, data andcoverage of issues within it.

Our responsibility in performing ourassurance 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 beenplanned and performed in accordancewith the International Federation ofAccountants’ International Standard forAssurance Engagements Other ThanAudits or Reviews 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 evaluatedagainst the following criteria: • Whether the Report covers the key

sustainability issues relevant to BP inGeorgia in 2005 which were raised inthe media, BP Georgia’s own reviewof material 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 areconsistent with the relevant businessunit level data 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 2005as 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 tosupport 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 beendesigned to obtain a limited level ofassurance on which to base ourconclusions. The extent of evidencegathering procedures performed is lessthan that of a reasonable assuranceengagement (such as a financial audit)and therefore a lower level of assuranceis 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 inconjunction with the above section on‘What we did to form our conclusions’. 1. Does the Report cover the key issues?

Based on our review of media,selected internal documents, and BP

Georgia’s process for determining keyissues, 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 engagementsto this with a number of significant UKand international businesses. As auditorsto BP p.l.c., Ernst & Young are requiredto comply 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 thatcould impair our independence orobjectivity. There were no such events orservices in 2005.

Ernst & Young LLP

London, August 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.

38 BP in Georgia

ACG Azeri-Chirag-Guneshli fieldAPLR Association for Protection of Landowners RightsArea 72 Gas filtering and metering, gas conditioning (heating), flow control, gas offtake

to Georgian transmission system, fuel gas offtake to BTC (turbines)Area 80 Gas filtering and metering, gas conditioning (heating), flow control, delivery of

gas to Turkish transmission system BTC Baku-Tbilisi-Ceyhan pipelineCAO Compliance Advisor OmbudsmanCBO Community based organizationCDAP Caspian Development Advisory PanelCLEE Centre for Legal and Economic EntrepriseCIP Community Investment ProgrammeCO2 Carbon dioxideDAFWC (F) Day away from work case (frequency)EBRD European Bank for Reconstruction and DevelopmentEF Eurasia FoundationEI Equity InternationalEIP Environmental Investment ProgrammeESIA Environmental and social impact assessmentEU European UnionEUGBC European Union Georgia Business CouncilGGIC Georgian Gas International CorporationGIOC Georgian International Oil CorporationGHG Greenhouse gasGPC Georgian Pipeline CompanyHSSE Health, safety, security and environmentICOMOS International Council on Monuments and SitesIFC International Finance CorporationIFIs International Financial InstitutionsIRM Independent Resource MechanismISP Improved schools projectJV Joint ventureMCC Millennium Challenge CorporationNGO Non-governmental organizationOSHA Occupational Safety and Health Administration OSRP Oil spill response planPMDI Pipeline monitoring and dialogue initiativePRS Pressure Reduction StationPS Pump StationPSG Pump Station GeorgiaRDI Regional development initiativeRoW Right of wayRUDF Rural and Urban Development FoundationSCP South Caucasus PipelineSIP Social Investment ProgrammeSME Small and medium-sized enterpriseSPPD Strategic Pipeline Protection DepartmentSRAP Social and Resettlement Action PlanSSPS Special State Protection ServiceUK United KingdomUNDP United Nations Development ProgrammeWREP Western Route Export Pipeline – also known as the Baku-Supsa pipeline

Glossary of terms


Your feedback is important to us. You can write to us at the address below, marked forthe attention of the Communications and External Affairs team, or send an e-mail to usat [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, David Shepherd, Barry Halton, Ben Gibson, Bryan Cascio

Production NotesPaperThis Sustainability Report is printed on Revive Uncoated from the Robert Horne Group,which is produced using 100% de-inked post-consumer waste recycled fibre at a millthat has been awarded the ISO 14001 certificate for environmental management. Thepulp is bleached using an elemental chlorine free (ECF) process.

Contact details and acknowledgements

This document forms part of BP’sreporting on non-financial performance.Over the past year, BP has establishedthree levels of sustainability reporting:our group report, selected countrysustainability reports (such as this) and aselection of 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 2005(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. Theyhave been substantiated by Ernst &Young (www.bp.com/casestudies).

The website also includes detailed

charting tools that allow you to view BP’sperformance data on issues such ashealth, 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 allowingyou to access environmentalmanagement information about individualBP sites. This shows where all major BPoperated facilities with ISO certificationare located and identifies which issuesare significant for management of eachsite. Using the tool, you can reviewdetails for biodiversity, air quality (non-greenhouse gas), fresh water use, waterquality and waste by region. Plottingthese sites on background maps thatillustrate regional environmentalconditions helps to put site informationinto local context, especially in relation toenvironmentally sensitive areas(www.bp.com/hsemappingtool).

Country sustainabilty reports We publisha number of country sustainabilityreports. As with this report, their aim is to

provide a detailed view of our operationsand an insight into the diversity of ouractivities. They enable you to review ourenvironmental and social performance inthe context of a particular region ormarket. A country sustainability report forAzerbaijan is amongst those provided (for2003, 2004, and 2005)(www.bp.com/countrysustainabilityreports andwww.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. Many of these cover issues ofsustainability and responsibility. In 2005,these included subjects such as energysecurity, energy development, climatechange, technological excellence, andbusiness and the environment(www.bp.com/speeches).

Further information

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