MEARL OIL COMPANY : ENVIRONMENTAL IMPACT TARGETS (A)

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Mearl Plant • In Indonesia, many industrial facilities in the area

were discharging wastewater into open ditches, which could present a serious environmental and health hazard

• Many Australian industrial plants had been accused of moving to Indonesia in order to take advantage of the lower environmental standards

• To ensure that its plans located in Indonesia weren’t accused of this, Mearl Oil Company issued a Water Effluent Management memo

• Mearl established a new policy in May 2003, called Mearl Environmental Impact Targets (EITs)

The Oil and Gas Industry• The oil and gas industry was the largest in the

world, valued between US$ 2 triilion and US$ 5 trillion.

• The United Nations’ Environment Programme’s Intergovernmental Panel on Climate Change reported in 2001 that during the 20th century, the global average surface temperature increased by 0,6oC and the global average sea level rose between 0.1 and 0.2 meters.

• The substantial scientific evidence for global warming had oil and gas companies exploring new means to create green energy while carefully managing public opinion around their current fossil fuel operations.

• Oil and gas companies were increasingly cognizant of the need for a public license to operate and carefully managed their reputation to preserve an enhance this social license.

Environmental Impacts of the Oil and Gas Industry

• The environmental impacts on the air of the oil and gas industry split into two types :

⁻ Risk of explosions and fires

⁻ Emissions

Emissions had a much greater impact and had been the focus of public and political attention such as through the Kyoto Protocol.

• Air Emissions included : ‐ Sulfur Dioxide (SO2)‐ Nitrous Oxides (NOx)‐ Hydrogen Sulphide ‐ Hydrocarbons (HCs)‐ Benzene ‐ Carbon Monoxide (CO)‐ Carbon Dioxide (CO2)‐ Mercaptans‐ Toxic organic

compounds‐ Odors

• Emissions could have damaging effects on the environment, through acid rain and global warming.

• The oil and gas industry also affected water quality through the use of cooling and emissions.

• Water emissions included hydrocarbons, mercaptans, caustics, oil,phenols, chromium and efflusnt from gas scrubbers.

Reducing Impacts

• Two motivations for firms to reduce environmental impacts :⁻ Managing risk⁻ Creating opportunity through innovation

• Risk management included complying with current regulations and foreseeing legislative changes.

• Risk management motivated most companies to reduce impacts, many firm had gained a competitive advantage by finding innovative ways to reduce their environmental footprint.

Reducing Impacts (cont)

• The most common way of achieving this was through reduced resource consumption and thus lower costs.

• A challenge for multinationals was that different juridictions measured discharges in different ways, which caused difficulties conforming to a baseline global environmental performance standard.

MEARL OIL COMPANY CORPORATE PROFILE

• Founded in 1947 • 2003 revenue of $210 billion• Had more than 200 major subsidiaries, joint

ventures, and affiliates • Employed more than 250.000• Partnered with over 8.000 supplier companies• Operations in 30 countries

Renewable Energy Division• Created in 1994

• Explore the company’s various option for hedging against the end of the fossil fuel era

• Started with a modest budget of $100 million

• In 2003, the division budget was $1.4 billion

• 2002 ROACE proves that all Mearl team members are pushing together into a greener, more profitable future

MEARL’S ENVIRONMENTAL POLICY

• Environmental values were first developed in the late 1970s and were refined in Mearl’s Environmental Policy in 1993

• Ore tightly defined standards needed to be imposed on Mearl operations worldwide

ENVIRONMENTAL IMPACT TARGETS

• The Mearl Support System, Environmental, was formed in 1995

• Built to provide direction, guidance, service and support to Mearl operations through implementation of the Mearl Environmental Policy

• The Mearl EITs were established in 2003 to supplement legal requirements, and any other local or regional Mearl environmental requirements.

ENVIRONMENTAL IMPACT TARGETS

• Mearl had an environmental management system in place and was moving its facilities to the ISO 14001 standard.

• In May 2003, the EITs were finalized and communicated throughout Mearl

INTERNATIONAL ENVIRONMENT GROUP

• Mearl International Environment Group (IEG) was established in January 2004

• The objective: – To address common facility

environmental issues that affect Mearl operations worldwide

– Develop common global strategies and recommendations consistent with Mearl’s Environmental Policy

– The IEG consisted of representatives of Mearl operations from around the globe

MEARL CANADA LIMITED

• Canada’s largest producer of crude oil and natural gas

• Had 27 extracting facilities, as well as five refineries and many marketing offices

• Mearlcan employed approximately 15.000 people

• Had the capacity to extract

60 million barrels of oil per year, which 75% was shipped to the United States

The Path Forward• Mearlcan specific concern was

associated with one of its manufacturing operations that did not conform to the effluent requirements in the Water Effluent Management

• The effluent quality of the process wastewater met all sewer use by law limits

• The plant have to install its own biological treatment plant for sanitary waste

The Path Forward• Capital and operating costs

associated with the biological sanitary treatment plant would make it difficult fot the plant to reach its business goals

• Milne strongly supported the performance requirements in the water effluent management EIT and believed its applicability should include Mearlcan operations

• Milne have to prepare the application of the uniform, global environmental impact targets in next meeting

Main Problem• The Mearl Oil Company central had given its

Mearl EITs for Water Effluent Management to Mearl’s global operations. . MearlCan said that EITs for Water Effluent Managment was only make sense to the operations in developing countries.

• MearlCan had met the high environmental standard in Canada. So EITs would affect in increasing the capital cost or administrative burden on its operation. It would only cause competitive disadvantage to MearlCan if the EITs was going to be an obligatory to global Mearl operations .

Main Problem• The central Mearl Oil Company wanted

to standardize the environmental policy for global operation of Mearl company, that was EITs, but MearlCan said that it was only make sense for Mearl operations in developing countries not in countries with extensive regulatory and legislative control for environmental standard

• The difference of point of view from the central Mearl company and MearlCan in executing the Mearl EIT for Water Effluent Management

• Companies should be proactive on processing their waste to avoid the negative impact for the environment

• Standard must be made for each companies, and the standard must meet the national’s standard

• Companies must consider their environment cost as their main cost to avoid the inability to pay for waste processing cost

LESSON LEARNED