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Occidental Petroleum’s Worldwide Standard of Care --------------------------------------Presented by Richard A. Swan Vice President Health, Environment and Safety November 4, 2003 Occidental Petroleum Corporation Oxy Business Segments • Occidental Oil and Gas Corporation – Worldwide Oil and Gas Exploration and Production Activities – 2002 Sales - $4.6 billion • Occidental Chemical Corporation – U. S. Chemical Manufacturing Activities – 2002 Sales - $2.7 billion • Glenn Springs Holdings, Inc. – Centralized Site Remediation Occidental Petroleum Corporation 2002 Daily Production Occidental Petroleum Corporation United States 2002 Production Elk Hills 37 Million BOE Hugoton 13 Million BOE OXY Permian 60 Million BOE THUMS 9 Million Barrels Occidental Petroleum Corporation Horn Mountain December Startup Corporate Governance • Key governance items at Occidental – Annual election of Board of Directors – 10 of 12 Board members are independent outsiders – Lead outside Director – Confidential voting by shareholders – No poison pill – Formal “code of business conduct” – Stock ownership guidelines for officers – Performance-based incentives for senior executives • Occidental’s governance highly rated – Rated 10.0 by GovernanceMetrics International Occidental Petroleum Corporation HES Functional Organization BOARD OF DIRECTORS ENVIRONMENTAL, HEALTH AND SAFETY COMMITTEE (ECOB) CHAIRMAN AND CHIEF EXECUTIVE OFFICER EVP, GENERAL COUNSEL AND SECRETARY PRESIDENT AND SENIOR OPERATING OFFICER HES COUNSEL CHIEF FINANCIAL OFFICER & EXEC.V.P.-CORP.DEVELOPMENT GLENN SPRINGS HOLDINGS, INC. (SITE REMEDIATION) VICE PRESIDENT, HEALTH, ENVIRONMENT AND SAFETY Rick Swan DIRECTOR, ENVIRONMENTAL AFFAIRS Carl Wirdak CORPORATE DIRECTOR, SAFETY AND PROCESS RISK George Buxton DIRECTOR, HES - REGULATORY AFFAIRS (OCCIDENTAL INT’L) Al Collins HES STEERING TEAM VP - HEALTH, ENVIRONMENT & SAFETY OCCIDENTAL PETROLEUM (Swan) CORP. MGR., HES COMPLIANCE ASSURANCE Coni Manders MANAGER, SAFETY AND PROCESS RISK Harold Schambach DIRECTOR, HES and SECURITY OCCIDENTAL OIL & GAS (Scott) VP - HEALTH, ENVIRONMENT & SAFETY OCCIDENTAL CHEMICAL (Kemp) DIRECTOR - HES REGULATORY AFFAIRS OCCIDENTAL INTERNATIONAL (Collins) DIRECTOR – HEALTH, ENVIRONMENT & SAFETY GLENN SPRINGS HOLDINGS (Terwilliger) MANAGER – SAFETY & SECURITY SERVICES CORPORATE HQS AND SERVICES (Hallen) Occidental Petroleum Corporation EHS Committee (ECOB) • Established in 1981 • Four “independent” Board members • Meets 5 – 6 times annually with OPC HES staff, OPC President (senior operating officer), and General Counsel (Chief Compliance Officer) Occidental Petroleum Corporation EHS Committee • Reviews status of HES issues, company compliance, remediation projects and significant incidents • Provides written reports to full Board • Reviews all facility HES audit and assessment reports Occidental Petroleum Corporation OPC HES Policy Roles and Responsibilities OPC OIL & GAS OXYCHEM OPC ROLE •Strategy •Policy •Oversight •Consultation •Coordination GSHI Industry Segments •Implement industry specific HES programs that achieve a consistent worldwide standard of care •Plan, measure and report performance •Assess and improve HES management system Occidental Petroleum Corporation HES Strategic Objective To protect people and the environment, while creating stockholder value through efficient Health, Environment and Safety (HES) management. Occidental Petroleum Corporation HES Strategic Goals • To have effective and efficient HES management systems in place in all business segments • That enable the company to achieve continual improvement in HES performance, and thereby • Be recognized as a company committed to responsible HES management Occidental Petroleum Corporation Problem: Establishing Worldwide Standards • Oxy’s first approach – Meet the intent of U. S. laws • U. S. laws may be to prescriptive for foreign locals • U. S. laws may require excess paperwork • U. S. laws may require technology or management practices unavailable in foreign locals • Foreign requirements may exceed U. S. Occidental Petroleum Corporation Worldwide Standard of Care Definition: “The set of HES performance expectations and goals established by an Industry Segment that provide people and the environment a consistent level of protection from HES risks inherent in the various similar business activities of the Industry Segment, wherever located.” Occidental Petroleum Corporation Worldwide Standard of Care “Beyond Compliance” • Compliance with all applicable HES laws and regulations is a minimum • Correct or stop any activities with an unacceptable risk to people’s health and safety or the environment • Set worldwide business segment HES performance objectives • A risk evaluation and mitigation program that achieves consistent results worldwide Occidental Petroleum Corporation HES Management System Inherent Risks HES Risk Mgmt. (arising from chemicals, process technology, siting, etc.) Residual Risks (remaining after appropriate HES programs are in place) Legal Risks (arising from need to comply with laws, etc.) Program Review Operations Risks (arising from operating practices, maintenance practices, HES programs, etc.) QA/QC Program Incident Investigation (management system performance feedback) assesses how well each Segment is managing the above programs (Policy 89:10:00) Occidental Petroleum Corporation HES QA/QC Program • 50+ major facility locations worldwide • Risk-based audit frequency (2 - 3 yrs.) • Reports include: – Assessment of status of facility’s HES compliance and programs – Specific audit findings – Impact of findings on facility’s risk level – Corrective action plans • Each full audit report provided to ECOB Occidental Petroleum Corporation HES Risk Management • Structured process for assessing HES risks and mitigation opportunities • Provides information for risk mitigation decisions and resource allocation • Establishes a system of authorities for risk acceptance • Facility can not accept risks above a certain level without annual review by senior Segment management • Annual risk status review verifies that a consistent SOC is being achieved Occidental Petroleum Corporation Process for Evaluating Risks Methodology consists of: – Identifying potential failure scenarios – Determining the potential consequences – Determining the likelihood that each consequence will occur – Using a consequence-probability matrix to determine the response level – Determining appropriate risk response Occidental Petroleum Corporation Identify Scenarios • Typical scenarios: – Failure of piping or process vessels – Loss of utilities (electricity, water, air, etc.) – Failure of control systems • Hypothetical scenario: – A natural gas pipe breaks causing an explosion/fire in a facility – Natural gas is clean (no Hydrogen Sulfide) – No neighbors within a mile radius – Facility is occupied part-time by two employees Occidental Petroleum Corporation Define Consequences POTENTIAL CONSEQUENCE TABLE Potential Consequence Type* Onsite Permanent Incapacitating Injury Environmental impairment a) Cleanup/remediation b) Food chain/terrestrial life/aquatic life impacts Offsite property damage Offsite human impact Onsite property damage or loss of production revenue Public reaction Level 3 1 Adverse a) < 1 year b) Minor Level 4 2 or 3 Serious a) >1 year b) Moderate Minor Minor Moderate Moderate $10MM to $25MM $25MM to $100 MM Adverse Serious *Criteria for Potential Consequence Levels 1 and 2 are to be defined by IS. Occidental Petroleum Corporation Level 5 >3 Extensive a) Not possible b) Extensive Extensive Permanent Incapacitating Injury or significant health impact >$100MM Threatens continued Facility operation Probabilities • Stated as a frequency based on the number of years between events (1 in X years) • General categories are: – >1/100 years (>1 x 10-2) – 1/1,000 years to 1/100 years – 1/10,000 years to 1/1,000 years – 1/1,000,000 years to 1/10,000 years – < 1/1,000,000 years (<1 x 10-6) Occidental Petroleum Corporation Determine Probabilities • Probability of pipe breaking (past experience, age, maintenance & inspection program, etc.) • Probability of the gas being ignited (typical wind speed and direction, ignition sources, etc.) • Probability of two people being within the radius of an explosion or fire (percent of time during a year that two or more people are in the area) • Example: Use 1/5000 years as our probability Occidental Petroleum Corporation PROBABILITY (1X) Identify Response Category -2 >10 D E E D(C**) D E -3 -2 -4 -3 * D D -6 -4 * * D 3 4 5 10 to 10 10 to 10 10 to 10 POTENTIAL CONSEQUENCE LEVEL * Risk Response Category defined by IS. ** If no Permanent Incapacitating Injury. Occidental Petroleum Corporation Determine Response CATEGORY RESPONSE A-C Responses to HES Risks below Level D should be defined by the IS HES Risk Management program and addressed as continuous improvement opportunities. D Perform appropriate qualitative or quantitative risk analysis to verify risk level and document risk studies, potential hazards and relevant risk reducing measures. Facility management shall implement appropriate measures to achieve the IS Worldwide Standard of Care and inform senior IS management if risk can not be reduced to a lower category in a timely manner. E Utilize opportunities identified in risk analysis to implement mitigation measures to achieve the IS Worldwide Standard of Care. If the risk can not be reduced to a lower category in a timely manner, perform quantitative risk analysis to verify risk level and assess mitigation opportunities. If a lower risk level is not achieved, concurrence of IS executive management is required. Opportunities to reduce risk should be reviewed annually. Occidental Petroleum Corporation Interface with QA/QC Program • Risk levels are used to set audit and assessment frequencies • Risk inventories and profiles are the basis for the risk discussion in the executive summaries of audit/assessment reports Occidental Petroleum Corporation HES Program Review • Corporate review of Segment HES programs and management systems • Six to nine month process of interviews and site visits • Assesses whether consistent worldwide standard of care is being achieved • Report prepared for Segment CEO, OPC management and ECOB • Segment CEO presents findings and response plans to ECOB Occidental Petroleum Corporation Health & Safety Performance Occidental’s 2002 Injury & Illness Rates Industry Comparisons* 0.62 3.3 4.0 5.7 7.9 8.1 Occidental Petroleum Corporation * U.S. Bureau of Labor Statistics Comparative Total Returns 3 Years (1/1/00 - 12/31/02)* (Percent) Occidental Petroleum Corporation * Data Source: Bloomberg Market Indexes Comparative Stock Performance 12/31/01 Index: Dec. 31, 2001 = 100 Occidental Petroleum Corporation 12/31/02 Summary • Occidental’s HES program has contributed to continuous improvement in HES and financial performance. • Success attributable to a strong HES governance program, coupled with “beyond compliance” objectives. 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