Doing well on megaprojects by doing good

Posted on 17 October 2013

Mega projects that ignore social and environmental impacts almost always end up costing more than those that pay attention to the needs of local communities, the World Energy Congress was told on 17 October.

“70 to 75% of delays on major projects are caused by social and environmental issues, not because of technical failures,” said Keryn James, CEO of Asia Pacific, ERM, an consulting firm that advises corporations on how to minimize the impact of industrial projects on communities and ecosystems.

Experts on how to deal with local communities affected by large energy projects agreed that investing in practices that address social and environmental aspects of a project can be expected to have a positive impact on the bottom line. “Most companies on the Dow Jones sustainability index outperform their competitors,” said Pierce Riemer, Director General of the World Petroleum Council (WPC).

Attention needs to be paid to local communities from the very beginning of a project. “The secret of success is early engagement,” said Enrique Velasquez, Vice President in charge of exploration at Ecopetrol, the Colombian oil company.

Calgary-based energy company Nexen was singled out as a star performer in engaging local communities. “When they went to Yemen they produced for local people four barrels of water for every barrel of oil they took out,” said Riemer. “They bought locally, hired locally and educated local young people, sending them to Canada for training. They have had 15 years of trouble-free operations.” Riemer cited a Latin American petroleum firm that departed from past practice of cutting roads through the jungle when laying a pipeline. “Such roads make it possible for illegal loggers to come in and denude the forest.”

James lamented that companies that will think nothing of spending millions on seismic studies will balk at spending a fraction of such amounts on investing in social and environmental impact work. “Companies need to build a ‘bank of trust’ with local people because invariably there will be disagreements and tensions in any project so if a foreign company is trusted such problems can be solved more easily,” James said. When things go bad, it is usually because companies are unfamiliar with how to do things right. “They either lacked the staff or else ‘there was no time,’” said James. Riemer stated that companies should be willing to “walk away” from a project if it does not meet their standards.

 

This news story is based on the What Does It Take? Session, “Mega projects: Socio-environmental license to operate”, at the 2013 World Energy Congress.