Environmental, social compliance key to success in Southeast Asia

As in much of the world, governments in Southeast Asia want hydrocarbon development, but want it done in a way that protects their environment, economy, and social structure. In offshore work, this can mean impacts on:

• Environmental issues, such as marine mammals, that may be affected by noise from activities like pile driving
• Social issues, including the effect that a shore base may have on life in nearby villages
• Economic issues, such as the effect of a project on subsistence fishing by local people.

Companies that fail to heed regulations and expectations may find their projects delayed, costs increased, and future projects in jeopardy. This means that being able to meet Environmental, Health, and Safety (EHS) regulations – with the social implications of projects becoming more important – is as much a success factor as good seismic interpretation and reservoir production strategy.

While many of the largest global companies are already well resourced in EHS compliance, we find the greatest need for improvement in the mid-sized companies from outside the region.

Experience shows that, as with oil and gas exploration and production, two of the most critical elements of success in EHS compliance are management of timelines and obtaining the right skills. This is true everywhere, but the complex and fluid nature of the regulatory environment in Southeast Asia makes this even more critical.

Factoring in compliance

Trying to rush a seismic or exploratory drilling program can have severe consequences in mistakes and higher costs. It is the same with EHS compliance. Companies need to build their understanding of their legal obligations, such as having the necessary EHS permits. If they do not comply, regulators may respond with questions and challenges that take time to answer – perhaps the baseline data is insufficient, or impacts of the project on shipping traffic have not been adequately addressed. As a result, the approval may take longer than if sufficient time had been budgeted.

One of the challenges of working in Southeast Asia is that, particularly in some countries such as Vietnam, regulations are always evolving and are further defined by circulars and decrees. Finding out the applicable regulations may add to the timeline.

While many international oil and gas companies say – and believe – that they have allowed enough time for EHS regulatory compliance, many of the regulatory problems are because companies do not understand the local requirements and do not allow enough time.

The right skills

Having provided consultation to resource companies and professional services firms, it seems that members of the resource sector need the best of both worlds – knowledge of the local situation backed by best practices globally. This is best found in the large, international firms that are able to provide skilled professionals with local expertise. Regulators take comfort in the business processes and procedures adhered to by these larger firms, and this can mean a faster, smoother approvals process.

In any business center in Southeast Asia, there are local firms with significant local expertise and the ability to get results. It may be best for resource companies to access their skills indirectly, through the international firms with which they partner.

As in many business situations, the question is whether to develop the necessary capabilities internally, or develop them outside. Resource companies of all sizes should develop enough understanding of the process to understand when it is being done well, but midsize and smaller companies in particular are better off developing a relationship with a credible external resource when it comes to EHS compliance.

Local knowledge is particularly important in Southeast Asia. For example, a state oil company may have its own reasons for pressing a resource company to use a particular seaport as its main access to the country, while a qualified professional advisory firm may from its experience know that its infrastructure is not adequate, and that the company should insist on using a different port.

Other considerations

In Southeast Asia, most oil and gas endeavors involve a joint venture that involves a state oil company. Sometimes these state companies have ideas on the priority to be placed on environmental health and safety that are different from the international norm followed by Western-based resource companies. While dependent on the goodwill of the state-owned company, the Western companies may need to put a good deal of effort into helping their partner company meet the Western company’s internal requirements, as well as those of shareholders, non-governmental organizations, and their own financial backers.

Rob Kirk
Golder Associates, Singapore

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