Key principles of sustainable supply chain

There are three key principles at the heart of the sustainable supply chain for Tullow. The first one is protecting the environment. In exploring for oil and developing new oil countries we are in most instances working in environmentally sensitive areas. We have a duty to protect the environment as much as possible and grow long-term environmental value for the benefit of future generations. We have to look at the environment not just in terms of the impact of our drilling or production operations but also when we build major project supply chains.

Secondly, a sustainable supply chain also has a role to play in creating real, long-term social benefits. This means building an oil industry in-country that local nationals can be a part of. A new industry provides great opportunities for individuals and business to grow and develop in support of the industry and the wider economy it will create.

As a business Tullow has a diverse and growing group of stakeholders who often have unique and competing needs. To balance and meet those needs appropriately we must be a successful profitable business. As such the third principle of a sustainable supply chain is getting the economic balance right.

Protecting the environment

Lake Albert in Uganda, for example, is an area of outstanding natural beauty. It contains more vertebrate species than any other region on mainland Africa. It is an endemic bird area and is home to a variety of ecosystems. Development of an oil and gas industry there presents ecological challenges in terms of land use, noise and light. We need to keep waste levels as low as possible and be thoughtful about how we manage, control and remove it. Furthermore there will potentially be community and cultural disturbance. We have to carefully consider who our suppliers are, what we require of those businesses and how supply chain affects the community. It is equally important that our suppliers understand their potential impacts and the challenges associated with managing those impacts.

Another environmental issue is the flow of materials by sea, air and road into the region. In the next five years we expect to utilise more than one million tonnes of freight for field development, representing 50,000 journeys and approximately 120 million km. There will also be thousands of personnel movements by road and air in to and out of the area.

Our environmental challenge in this context is to build an effective logistics system and to understand what we can do to improve how that system operates. In 2011, we are addressing this in a number of ways including hosting a logistics supplier open day in Uganda as part of an education and engagement process. We have also commissioned a study into the use of hybrid aircraft in East Africa. Potentially this mode of transport could deliver five times the amount of cargo with one tenth of the environmental footprint.

Creating long-term social benefits

The development of an oil and gas industry creates an opportunity to achieve positive social change. Investment in education and training provides local employment and career opportunities in a new sector of the economy. New industries, technologies, services and skills develop to support economic growth and expansion. Investment in infrastructure and employment attracts new people into the region, expanding local communities. This creates opportunities for local enterprise development to serve the needs of a growing population.

Our role is to work with local businesses to help them achieve the required EHS standards and other pre-qualification criteria so that they can become suppliers to our industry. We are committed to increasing local content wherever possible and give priority to goods and services from local suppliers. All tenders are evaluated for local content and we are re-designing our contracts in 2011 to ensure our international suppliers take the same responsibility for developing local content within their supply chains in-country as we do. This year we will audit and report local content KPIs for all suppliers. We will be investing in local content through our strategic social enterprise programme which is being rolled out in 2012. This will focus on projects that build capacity for our industry through enterprise development and education.