2. Oxy
GOOD NEIGHBOR. GOOD BUSINESS.
SOCIAL RESPONSIBILITY REPORT 2006
CONTENTS
Introduction to Worldwide Social Responsibility 1
º Message from the Chairman 2
One Management System 4
º Integrating Social Responsibility and Health, Environment and Safety
º HES Principles
Responsible Workplace Practices 6
º Compliance Commitment and Responsible HES Management
º A Safe and Healthy Workplace
º Environmental Performance
º Energy Efficiency and Climate Change
º Compliance
º Employment Practices
º Developing Expertise in Our International Workforce
Ethical Business Practices 24
º Commitment to Human Rights
º Responsibility and Integrity in Conducting Our Business
Good Neighbor Practices 28
º Educational Enrichment
º Encouraging Safe and Healthy Communities
º Helping People Help Themselves
º Stimulating Local Development
Tomorrow 36
Business Overview 37
GLOSSARY
ACC American Chemistry Council NGO Nongovernmental Organization
API American Petroleum Institute Occidental Occidental Petroleum Corporation
BLS U.S. Bureau of Labor Statistics (Oxy), together with its affiliates and
CHP Combined Heat Power (Cogeneration) subsidiaries
EPA U.S. Environmental OSHA U.S. Occupational Safety and
Protection Agency Health Administration
GHG Greenhouse Gas SEC U.S. Securities and Exchange
HES Health, Environment and Safety Commission
IIR Injury and Illness Incidence Rate SR Social Responsibility
(Incidents per 100 worker-years) TRI Toxics Release Inventory
M Thousand WHC Wildlife Habitat Council
MM Million
ON THE COVER: In Arauca, Colombia, school children enthusiastically greet an Oxy representative. Through the A Crecer literacy and
adult education program, illiteracy rates have been reduced to near zero.
3. WORLDWIDE SOCIAL RESPONSIBILITY
Occidental Petroleum Corporation (Oxy) is committed to being
an outstanding and responsible corporate citizen, as we strive for
continual improvement in our worldwide Health, Environment and
Safety (HES) systems and Social Responsibility (SR) performance.
Our responsible workplace practices combined with ensures that we are both supporting our business
our good neighbor initiatives motivate our employees, goals and making the most effective contributions to
minimize our operating risks, lower our costs and the communities where we operate.
enhance our reputation. These activities directly
Our report profiles many of our activities around
affect our business success and stockholder value.
the world. These include safeguarding the health
Previously, we have reported separately on our of our employees and stakeholders, protecting,
annual HES and SR activities. This year, we are preserving and enhancing the environments in which
combining these two reports into one as part of our we operate as well as contributing to the enhance-
process of integrating SR into our comprehensive ment of the quality of life in communities near our
HES management system. The process will allow operations. These profiles provide insight into the
us to design, implement and measure SR activities people and processes that help make Oxy a good
using standards similar to those we have long neighbor and a highly successful oil and gas and
applied to our HES programs. This integration chemical company.
In our operations In the communities where we work In the environment
United States Colombia Oman
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4. Message from the Chairman
Generating profits for our stockholders
while operating a socially responsible
company is challenging, rewarding and
absolutely necessary for Oxy’s success.
Fueling human progress and economic growth while focusing on
operational integrity requires a solid, well-designed approach to
social responsibility. Over the years, we have implemented sound,
well thought out social responsibility programs to ensure the
safety of our employees, maintain high environmental standards
and to support social programs in the communities in which we
operate. Social responsibility is not just a fashionable term — it is
one of Oxy’s core values. We believe it. We live it.
Our values shape everything we do in business. Our strong
performance in 2006 was due in large part to our successful
Dr. Ray R. Irani
implementation of strategic investments and being a good
Chairman, President and Chief Executive Officer
corporate citizen. Not only is Oxy delivering good returns to
our shareholders, we are also one of the safest companies
in both the oil and gas and chemicals industries.
Oxy’s continued commitment to safety and social responsibility
benefits our bottom line by reducing risk, improving employee
productivity, reducing operating costs and lost production time,
while enhancing our reputation. We are proud to report our
progress in this year’s report.
In 2006 we significantly increased our employee human rights
training programs worldwide. Oxy formalized our corporatewide
human rights program more than three years ago and we will
continue expanding our efforts. Insight to our progress appears
throughout this report and includes examples of our activities
in Chile, Colombia, Libya and Oman.
The graphs, statistics and numbers in this report are one measurement
of our social responsibility accomplishments. But, the satisfaction
of helping a community take advantage of the opportunities created
by natural resource development is measured more by the human
factor. Our “Homes for Houston” project illustrates our commitment
to being a good neighbor and is one of Oxy’s success stories.
This report also provides highlights and insights into our efforts in
several additional areas.
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5. For example, our coral reef protection study in We remain fully committed to HES and Social
the Arabian Gulf will help preserve and protect a Responsibility policies that are responsible, ethical
sensitive ecosystem for future generations. We and accountable. We recognize the need to maintain
also implemented an emissions reduction system a balance between financial and operational
in our Hugoton gas field operations in Kansas performance. Our responsibility to our stockholders,
by retrofitting production wells with electric our communities and the future depends upon our
motors and eliminating the need for gas-fired success in building a stable platform for sustainable
engines. Our accomplishments have earned growth economically, socially and environmentally.
us numerous awards.
Being a good neighbor is simply good for business.
We are also highlighting some of our significant
community activities, including our participation
and support of Best Buddies; an “Opportunities Ray R. Irani
Bank” in Colombia supporting small businesses; Chairman, President and
the Safe T. Turtle program — a child safety Chief Executive Officer
education program in our Permian operations;
and a Petroleum Technology Academy near our
Elk Hills, California operation.
Elk Hills is one of seven Oxy sites certified by the Wildlife Habitat Council.
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6. ONE MANAGEMENT SYSTEM
Integrating Social Responsibility and
Health, Environment and Safety
Sustainable success demands strong systems and performance.
More than 25 years ago, Oxy implemented a comprehensive
HES management system, which has helped us achieve continual
improvement. We are now extending this rigorous approach to
promote improvement in our SR performance, creating a social
responsibility standard that defines the requirements business units
must meet in their stakeholder relations, social risk management
activities and quality of social programs.
In 2006, Occidental Oil and Gas Corporation established inter-
disciplinary SR teams to assess SR performance and serve
as champions of social responsibility by determining areas for
improvement and promoting effective action planning.
HES Principles
As a fundamental business element, Oxy’s goal is 4. Reduce pollutant releases to the environment.
continued HES system and performance improve-
5. Make efficient use of nonrenewable natural
ment. Our corporate HES vision statement and
resources.
guiding principles give direction to Occidental
HES activities. 6. Use energy efficiently.
These principles, as implemented through Oxy’s 7. Provide information on the safe use and
HES policies and procedures, incorporate disposal of Occidental’s products.
the following commitments.
8. Maintain a dialogue with neighboring
1. Protect the environment and the health and communities about HES concerns.
safety of people using design procedures,
9. Keep Oxy’s Board of Directors informed
work practices and employee training.
about HES issues.
2. Correct operating conditions that have
10. Report annually on Oxy’s HES performance.
a significant adverse health, safety or
environmental impact. The full text of these principles is included in the
Health, Environment and Safety section of our
3. Reduce waste generation and responsibly
Internet site, www.oxy.com.
manage waste disposal.
Workers at Oxy’s offshore Qatar unit are reminded each day
that “Safety Comes First.”
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7.
8. RESPONSIBLE WORKPLACE PRACTICES
Compliance Commitment and Responsible HES Management
Oxy is committed to operating in compliance with all applicable
HES laws by employing stringent internal programs that often
exceed prevailing legal requirements.
In addition, our businesses endeavor to achieve a a process for implementing and monitoring change
worldwide standard of care that provides the same exists. It assures compliance with applicable legal
degree of protection to employees, contractors, the requirements and company policy and confirms that
public and the environment, wherever we operate management systems and physical controls are
in the world. Oxy’s Board of Directors has a compre- maintaining operations in compliance with these
hensive view of HES activities and leadership. HES requirements. HES professionals and non-HES
performance is considered in employee annual personnel who are selected for their management
performance review and compensation. potential are staffed on review teams to further
their understanding of Oxy’s HES programs and
Oxy diligently works to strengthen existing programs
requirements. Resulting action plans are tracked
by benchmarking against leading corporations and
from conception to completion. During 2006, HES
tracking developing issues and HES management
audits for 25 operating locations were completed
trends. Oxy also actively participates in progressive
and reviewed by senior management.
organizations, such as the Global Environmental
Management Initiative, the World Environment Center, Oxy sets high standards of HES performance aimed
ORC Worldwide, the Auditing Roundtable and the at ensuring responsible environmental stewardship
Wildlife Habitat Council. and sustainable operations. We challenge ourselves
to conduct business in a manner that creates value
Oxy’s HES quality assurance and quality control
for society — including our employees, neighboring
(QA/QC) processes measure program effectiveness.
communities, partners, suppliers, host governments
Our multifaceted QA/QC process, which ranges
and stockholders. We believe Oxy’s exemplary
from frequent facility-level inspections and audits
performance provides a competitive advantage
to comprehensive audit team reviews, verifies
in today’s complex global marketplace.
necessary program elements are in effect and that
From the Long Beach shoreline, THUMS islands are often mistaken for resorts, when in fact, they are active oil and gas operations.
THUMS, Long Beach is one of six Oxy sites certified by the Wildlife Habitat Council.
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9. OSHA Star
OSHA Star status is the highest recognition for excellence
in safety from the U.S. government’s Occupational Safety
and Health Administration (OSHA).
OXYCHEM OSHA STAR SITES
Nationwide, less than one-hundredth of one percent
(INITIAL APPROVAL YEAR)
of approximately six million work sites have attained
Chicago, Illinois (2006)
OSHA Star status. OxyChem has achieved OSHA
Wichita, Kansas (2005)
Star recognition at 34 facilities with 18 currently
Cincinnati, Ohio (2000)
operating (16 of the 34 sites have been sold or shut
Mobile, Alabama (1998)
down). Contractors at seven OxyChem sites also
OxyChem Headquarters — Dallas, Texas (1998)
have received OSHA Star awards.
Muscle Shoals, Alabama (1996)
An OSHA Star work site (or state equivalent) must Delaware City, Delaware (1996)
have comprehensive and successful safety and Niagara Falls, New York (1996)
health programs that achieve total reportable and Taft, Louisiana (1994)
lost workday injury rates below private industry’s Taft On-site Contractor (1998)
national average. OSHA criteria for Star status Dallas, Texas (1993)
strongly encourages management and employee Convent, Louisiana (1991)
commitment to meet or exceed all regulatory Convent On-site Contractor (2000)
requirements. Once a facility meets the OSHA Star Ingleside, Texas (1991)
criteria, it must be recertified every three to five
OXYVINYLS, LP
years to retain its OSHA Star status. No Occidental
Pedricktown, New Jersey (2004)
facility has ever lost its OSHA Star designation
Deer Park, Texas (two sites: 1997–2001)
OxyChem’s strong safety programs contribute
Deer Park On-site Contractor (two sites in 2003)
to ongoing recognition under the federal govern-
La Porte, Texas (two sites in 1997)
ment’s prestigious OSHA Voluntary Protection
La Porte On-site Contractor (two sites in 2003)
Program (VPP).
Pasadena, Texas (1991)
Pasadena On-site Contractor (2003)
OxyChem’s Ingleside, Texas
facility has earned the OSHA Star
designation since 1991.
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10. RESPONSIBLE WORKPLACE PRACTICES
Safe and Healthy Workplace
Oxy is demonstrably committed to providing a safe and healthy
workplace. Rigorous policies at every work site help to protect
our employees, contractors and neighboring communities.
normal duties the day after an occupational injury or
CONTINUED SAFETY EXCELLENCE
Oxy has consistently ranked as one of the world’s illness. Occidental’s performance, which includes all
safest companies with 11 consecutive years of Injury of its worldwide operations, compares favorably with
and Illness Incident Rates (IIR — recordable injuries the 2.4 rate for all U.S. private industry based on the
and illnesses per 100 worker-years) of less than one. most recent BLS data. Oxy’s employee Lost Time
The most recently published (2005) U.S. Bureau of Case Rate has improved about two percent per year
Labor Statistics (BLS) Industry average is 4.6. In over the last 10 years.
2006, Oxy’s employee IIR of 0.47 reflects a 4-percent
Our business segments rely on service contractors
per year improvement trend over the past 10 years
for specialized or short-term work. Occidental
and indicates that injuries to Oxy’s employees occur
expects its contractors to share its commitment
about one-tenth as often as injuries to the average
to workplace safety and reinforces this expectation
U.S. worker.
by including it in its contractual agreements. HES
Oxy also is one of the top performers among its performance is an important factor in the selection
industry competitors. The most recent data available of contractors. Oxy monitors the performance of its
from the American Petroleum Institute (API) show contractors during the contract period by requiring
that the average IIR for all U.S. exploration and that the company be notified of all injuries along with
production company employees is 0.55, while plans to prevent recurrence. The data indicate that
the average for American Chemistry Council (ACC) contractors working full time for Oxy perform far
peer companies is 1.27. better than those doing similar work for other
companies. Oxy’s 2006 consolidated worldwide
The same commitment to safety that has reduced
full-time contractor IIR was 1.24, reflecting a 4-percent
the number of recordable injuries also has led to
improvement over the past 10 years. Based on
fewer severe injuries. This is indicated by the Lost
2005 BLS data, Oxy’s contractor results were
Time Case Rate, which represents the total annual
approximately five times better than the average
number of cases per 100 workers that resulted in an
for the U.S. construction industry.
employee being unable to return to work or perform
Occidental Employee Injury and Illness Occidental Contractor Injury
Incidence Rate and Lost Time Case Rate and Illness Incidence Rate
Per 100 Workers Per 100 Workers
0.88 0.73 0.68 0.65 0.83 0.69 0.62 0.68 0.34 0.47 0.47 IIR 2.08 1.93 2.17 1.10 1.67 1.28 1.15 1.55 1.09 1.18 1.24
0.39 0.33 0.23 0.29 0.35 0.33 0.43 0.26 0.22 0.25 0.26 Lost Time
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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11. Responsible Care at OxyChem
Occidental Chemical Corporation’s (OxyChem) active participation in the ACC’s Responsible Care®
initiative is an excellent example of this commitment. The Responsible Care® program requires member
companies to conform their practices to a set of industry-wide metrics that often go well beyond
government mandates. The Responsible Care® program has not only helped significantly reduce
emissions, but also contributed to raising safety performance to a level well above the overall
manufacturing sector.
As a testimonial to the sustained excellence of Occidental’s safety and
environmental performance, the ACC in 2005 awarded OxyChem
the Responsible Care® Leadership Award — one of the industry’s most
prestigious awards.
Injury and Illness Incidence Rates
for Selected Industries
(Source: U.S. Bureau of Labor Statistics – 2005)
Per 100 Workers
Dentists 0.20
Stock Brokers 0.30
Occidental (year 2006) 0.47
Insurance Agents and Brokers 0.70
Legal Services 0.70
Computer & Electronic Products 2.00
Oil & Gas Extraction 2.10
Basic Chemicals 2.40
Mgmt. of Companies & Enterprises 2.40
Paper Mills 3.70
All Industries 4.60
Coal Mining 5.10
Construction 6.30
Grocery Stores 6.30
Meat Processing 7.80
Saw Mills 9.60
Steel Foundries 10.70
Motor Vehicle Manufacturing 12.90
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12. RESPONSIBLE WORKPLACE PRACTICES
Environmental Performance
SUSTAINED ENVIRONMENTAL PROGRESS
Oxy seeks continuous improvement in resource conservation,
release reduction, pollution prevention and energy efficiency.
SPILL PREVENTION
Strong HES programs are designed and
Oxy’s HES program addresses spill prevention in
implemented to meet specific business and
a variety of ways, including investing in technology
environmental objectives, and to enable resource
to detect and prevent pipeline corrosion, making
allocations to be made in accordance with HES
extensive use of secondary containment, operator
risk management priorities.
training programs, auditing and inspection. If an oil
For example, OxyVinyls’ Louisville PVC plant was
spill occurs, liquids typically are quickly recovered
designated an American Chemistry Council’s Energy
and impacted soil is treated by natural bioremedia-
Efficiency/Environmental Impact Award site for 2005
tion methods. Generally, the primary contaminant in
for implementing a project that annually conserves
a produced water release is salt, which is usually
45 million gallons of potable water and reduces sewer
addressed by rinsing the soil with fresh water.
discharges by an equal amount. The Louisville facility
Despite increasing oil production by more than 150
achieved these results by installing automated equip-
percent since 1995, the ratio of oil unintentionally
ment that replaced city water with recycled water.
released into the environment versus production is
Oxy also makes progress in land and habitat
only one-thousandth of one percent. In 2006, less
conservation. As a member of the Wildlife Habitat
than 30 percent of Oxy’s oil spill incidents involved
Council (WHC), Oxy’s efforts at the 102nd Street
releases of more than 10 barrels. Excluding three
Landfill in Niagara Falls, New York received certifica-
produced water spills, which accounted for more
tion in 2006 for the implementation of a successful,
than 75 percent of the total amount of produced
comprehensive wildlife habitat management program.
water released during the year, worldwide releases
Since 1988, the nonprofit, nonlobbying WHC has
averaged less than 25 barrels per incident. Even
worked to increase biodiversity, create and protect
though these amounts spilled are very low, Oxy
habitats and expand environmental awareness.
strives to achieve a goal of zero spills.
Oxy has six additional sites certified by the WHC.
Oxy’s other WHC certified sites are located in Long
Beach, California; Montague, Michigan; Copper
Basin, Tennessee; Elk Hills, California; Wichita,
Kansas; and Geismar, Louisiana. All sites have
cooperative efforts involving management,
Liquids Unintentionally
employees, community members, local conserva-
Discharged Compared
tion groups, and local, state or federal agencies.
to Production
Barrels Per Million Barrels of Oil Equivalent
Oil
4.8 6.3 6.4 20.1 3.3 5.4 7.3
Water
1.4 33.1 4.9 3.3 4.1 4.5 18.0
2000
2001
2002
2003
2004
2005
2006
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13. TRANSFERS AND WASTE REDUCTION Although its vinyl chloride emissions are well below
Oxy’s HES Principles and policies require a constant permitted levels, OxyVinyls, LP voluntarily entered
focus on waste reduction and resource conservation. into an enforceable commitment (discussed further
Within Oxy’s wide range of operations, different on page 18) in 2006 to reduce its combined vinyl
approaches are used to achieve continuous improve- chloride emissions by almost 50 percent from four
ment. Pollution prevention and release reduction manufacturing facilities. The company will undertake
projects are included in the annual budget process. emission reduction projects at a cost of approxi-
mately $1.1 million to redesign stripper columns and
Toxics Release Inventory (TRI) data submitted by
reactor vessels, and install vacuum systems for
OxyChem to the U.S. Environmental Protection
railcar unloading.
Agency (EPA) are shown in the table and graph
below. For 2005 (the most recent report year), total OxyChem waste generation data include activity
reportable releases and transfers to off-site facilities related to ongoing production operations at OxyChem
for destruction or disposal were 7.8 million pounds. plants and its 74-percent owned OxyVinyls, LP
This is approximately 50 percent lower than in 1998. chemical plants. In 2005, total waste generation
The increase from 2004 was due to the acquisition increased due to the addition of manufacturing
of additional manufacturing capacity. Total releases are capacity. Hazardous waste generated in 2005 was
less than 0.2 pound per ton of production capacity, or equivalent to less than 0.3 percent of the amount
approximately one-hundredth of one percent. The of OxyChem production capacity and reflects a
majority of TRI reportable chemicals were inciner- 53-percent decline in waste generation since
ated, treated, recycled or burned for energy 1998. OxyChem’s well-established waste minimi-
recovery. The remainder was safely disposed of in zation program is a structured approach to refine
permitted deep well injection facilities. and improve manufacturing processes, operating
protocols and maintenance procedures. Waste
In 2005, OxyChem used the mercury cell chlor-alkali
minimization projects entail significant engineering
process at two of its U.S. manufacturing locations,
effort, extensive process modifications and capital
one in Delaware City, Delaware, another in Muscle
expenditures. In 2005, more than 90 percent of
Shoals, Alabama. OxyChem permanently shut down
OxyChem’s solid hazardous waste was incinerated,
the Delaware City facility in 2005 and in early 2006,
treated, recycled or burned to recover energy. Most of
announced plans to close its Muscle Shoals, Alabama
this material was processed at OxyChem’s on-site
mercury cell chlor-alkali operation in 2008.
incineration facilities. The remainder was disposed of
off-site at licensed commercial incinerators or landfills.
OxyChem Releases Waste Generation from
and Transfers OxyChem Operations
Millions of Pounds Thousands of Tons (Data Excludes Wastewater)
10.0 8.9 0.7 Land
0.6 0.2 3.3 0.0 0.0
0.1 0.3 0.2 Underground Injection
0.4 0.5 0.7 0.8 1.3
<0.1 <0.1 <0.1 Water
<0.1 <0.1 <0.1 <0.1 <0.1
1.0 1.3 1.0 Air
1.2 1.2 1.2 1.0 1.1
Total Releases Nonhazardous
11.2 10.5 1.9 192 155 161 142 62 55 54 66
2.2 1.9 2.3 1.8 2.4
Transfers Hazardous
4.6 21.9 10.8 51 53 55 51 48 51 43 45
7.5 4.1 4.1 4.4 5.4
1998
1999
2000
1998
1999
2000
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
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14. PIPELINE MAGAZINE’S “EXCELLENCE IN ENERGY”
ENVIRONMENTAL AWARD
Pipeline Magazine awarded Dolphin Energy Limited
(24.5 percent owned by Oxy) the 2006 “Excellence
in Energy” Environmental Award for its participation
in an ongoing coral reef study in the Arabian Gulf
between Abu Dhabi and Qatar. The award encom-
passes the Middle East energy sector.
The coral reef study is a joint initiative sponsored by
Dolphin Energy, the Emirates Wildlife Society, World
Wide Fund for Nature, the Environmental Agency —
Abu Dhabi and Qatar’s Supreme Council for the
Environment and Natural Reserves. The study’s goal
is to establish methods of protecting coral reefs in
the Arabian Gulf via a thorough evaluation of coral
cover, species diversity, degraded reef recovery
levels, as well as to confirm the accuracy of reef
mapping. Results revealed that most reefs in the
area are in good health and that those that have
suffered damage from past temperature fluctuations
can recover provided they are not subjected to further
disturbances. Following completion in 2007, the
study will be used to prepare a conservation plan to
preserve and restore reefs in the Gulf.
Oxy and Dolphin Energy Limited are sponsoring a comprehensive
study on the coral reefs offshore between Abu Dhabi and
Qatar to gather specific data needed for a conservation plan
to preserve and protect the coral reef habitats.
“Best in Class”
Storebrand Investments, a Norway-based international investment and insurance firm, honored Oxy in
February 2007 with its “Best in Class” award in recognition of the company’s industry-leading environ-
mental and social performance.
As part of its investment strategy, Storebrand conducts periodic analyses of the environmental and social
responsibility performance of companies listed in the Morgan Stanley Capital International World Index.
Each company analyzed is benchmarked against others in its industry sector. Companies ranking in the
top 30 percent earn Storebrand’s “Best in Class” designation. Oxy was the only U.S. oil company to make
the list. The environmental and social responsibility analysis criteria for the oil and gas industry include
environmental risk management, human rights, labor rights, governance and labor relations.
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15. Near the southern boundary of Oxy’s Colorado
acreage, geoscientists Nicki Atkinson and
Steve Slauson take a moment to appreciate
the natural environment.
16. RESPONSIBLE WORKPLACE PRACTICES
Energy Efficiency and Climate Change
The Environmental, Health and Safety Committee of the Board,
together with Oxy’s management, staff and operations personnel,
consider climate change-related issues and seek cost-effective
methods for minimizing the greenhouse gas (GHG) emissions from
our operations.
Numerous inquiries into this subject by universities, have been implemented by national governments
think tanks and independent researchers provide in the areas where we operate. Recently, some
insight into the complexities of the climate system U.S. states have adopted laws establishing GHG
and its drivers, the difficulty of modeling this system, emission inventories and eventual reduction goals.
the challenges involved in predicting future tempera- Oxy is participating in the development of these laws.
ture effects and related consequences, and the When the California Global Warming Solutions Act
adaptation and emission mitigation options that of 2006 was adopted, Oxy was the first upstream oil
may be available. and gas producer in California to join the voluntary
California Climate Action Registry, committing to
While Oxy conducts no independent climate
tracking and publicly reporting GHG emissions. Oxy
change research, we closely monitor the scientific
is actively preparing emissions estimates and
and public research to better understand the
working to obtain third-party expert certification.
impact of GHG emissions and how adaptation
and emission mitigation options may influence or Although the impact of climate change on Oxy’s
impact our operations. Management, staff and line operations is uncertain, new regulatory controls may
operations personnel are engaged in developing affect costs, demand and market prices. We believe
GHG emission estimates, evaluating the impact our business plans are consistent with the goal of
of proposed regulations, assessing carbon credit mitigating GHG emissions. Furthermore, Oxy is well
trading markets and voluntary climate change positioned because of our leadership in carbon
activities, and discussing these topics with dioxide (CO2) injection for enhancing oil recovery.
stakeholders and the public. This process is viewed by the Intergovernmental
Panel on Climate Change (IPCC) as the way in
Principal industry trade associations, including
which wide-spread sequestering of CO2 emissions
the API and the ACC developed voluntary climate
could occur.
change programs consistent with the U.S.
Department of Energy’s ‘Climate VISION’ effort in Carbon dioxide is the principle GHG related to Oxy’s
which Oxy participates. Also, the company has activities and is a product of hydrocarbon combus-
responded to inquiries by the Carbon Disclosure tion to generate power for our operations. Methane,
Project (www.cdproject.net), a consortium of another GHG, is the main constituent of natural gas
institutional investors that surveys the world’s that sometimes is flared during oil production in
largest companies on this topic. operations where no local gas markets or transpor-
tation facilities exist. Oxy is pursuing various methods
While many climate advocates urge aggressive
for delivering natural gas — the fossil fuel with the
action to reduce worldwide GHG emissions and
lowest GHG emissions — such as our programs in
some initial steps have been taken, essentially
Oman and the United Arab Emirates. OxyChem
no regulations requiring GHG emissions controls
also uses natural gas extensively in many of its
production activities.
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17. Oxy estimates GHG emissions for our oil and Scope 1 plus Scope 2 greenhouse gas emissions
gas, chemicals and other operations using the would increase by 5.5* million metric tons of CO2
Greenhouse Gas Protocol developed by the World equivalents. GHG Protocol Scope 3 emissions are
Business Council for Sustainable Development and not estimated because the largest amounts would
the World Resources Institute, supplemented by be related to the ultimate use by others of our
more detailed, business-specific protocols prepared crude oil and natural gas products, of which Oxy
by the ACC and the API. We continually refine has no knowledge.
our GHG estimation methodology. For consolidated
Oxy’s emissions estimates between 2006 and 2005
reporting purposes, we adjust all compounds
indicate a 15-percent increase in direct emissions
to CO2 equivalents.
and a 16-percent increase in indirect emissions,
We estimate that Oxy’s share of GHG Protocol reflecting the acquisition of additional oil and gas
Scope 1 (direct) emissions from facilities operated in assets and chemical manufacturing capacity and
2006 was approximately 10.23 million metric tons of higher operating rates to satisfy market demands.
CO2 equivalents. Carbon dioxide is the predominant
Oxy believes that the most effective way to reduce
component, with the remainder being methane.
GHG emissions is to become more efficient. Consistent
Other GHG emissions: nitrous oxide, hydrofluoro-
with our business focus on being an efficient, low-
carbon compounds, perfluorocarbon compounds
cost producer, Oxy has been implementing new
and sulfur hexafluoride are insignificant. Oxy’s share
maintenance and operating practices, installing
of Scope 2 (indirect) emissions (those associated
more energy-efficient equipment and constructing
with electricity purchased from off-site suppliers)
efficient natural gas and hydrogen-fired cogeneration
for facilities we operate, totaled 5.99 million metric
facilities and investigating methods of capturing and
tons of CO2 equivalents.
selling natural gas.
The GHG emissions estimates in the graph below
Oxy is proud to participate in the EPA’s Natural Gas
are based on Oxy’s share of equity ownership in the
STAR Program to evaluate, implement and report
facilities we operate (excluding emissions from
cost-effective technologies and practices to reduce
natural-gas flaring where required by contracts with
methane emissions from our oil and gas operations.
certain state-owned oil companies). If the basis
This innovative program is a voluntary, non-regulatory
reflected 100 percent of emissions from facilities Oxy
partnership between the EPA and oil and gas industry,
operates instead of equity share, Oxy’s estimate of
which provides a forum for companies to share
Occidental Estimated GHG Emissions Occidental Estimated GHG Emissions
for 2006 (Equity Share Basis) (Equity Share Basis)
Million Metric Tons CO2 Equivalents Million Metric Tons CO2 Equivalents
10.23 Direct
8.14 8.10 8.87
Direct
7.75 0.92
1.55
Indirect 5.99 Indirect
5.85 0.01 4.75 5.00 5.18
0.14
North South Middle
2003
2004
2005
2006
America America East
15
*Correction of figure published in 2006 printed report.
18. technical knowledge for efficiently reducing methane investments in energy conservation and cogenera-
emissions, and recognize best practices. As a tion projects. Oxy’s 2006 oil and gas operations
result of our STAR Program participation, Oxy has reported a 5-percent energy use reduction on a
implemented a broad spectrum of projects — some production-weighted basis even as operations grew.
traditional and some innovative — which have
More than 25 years ago, Oxy began investing in
produced sustainable annual methane reductions
building several highly efficient cogeneration plants for
estimated to be more than 1.5 billion cubic feet.
electrical power and steam to supply Oxy oil and gas
In 2006, at EPA’s invitation, Oxy joined the new
and chemicals operations. Cogeneration, or combined
EPA-sponsored Natural Gas STAR International
heat and power (CHP), significantly increases electrical
Program, where significant reductions in methane
power generation efficiency over traditional methods
emissions that were achieved in Oxy’s international
while reducing CO2 by as much as 66 percent. CHP is
assets (primarily by capturing gas for sale) are being
the simultaneous production of electrical energy and
recognized and best practices shared.
another form of useful thermal energy from the same
Occidental Oil and Gas’ Worldwide Environmental fuel source. The thermal energy, when converted to
Manager, Krish Ravishankar, was recognized by EPA steam, can drive turbines to generate more electrical
as the Natural Gas STAR “Implementation Manager power without additional GHG emissions.
of the Year.” Working to promote best practices in
The GHG emission reduction benefits from Oxy’s
Oxy’s oil and gas operations, he led the effort in
cogeneration facilities are substantial. Using typical
2006, which resulted in EPA’s first international
assumptions for the national electrical grid average
“Methane to Markets” workshop in Colombia.
CO2 emission factor, installed capacity of the
Oxy evaluates energy efficiency using an energy cogeneration units, steam boiler thermal efficiencies
intensity index that employs revenue as a normal- and steam quality and usage, Oxy’s cogeneration
izing factor. The index illustrates a 39-percent facilities at full utilization are estimated to reduce
improvement in energy efficiency since 1996. GHG emissions by more than four million metric
OxyChem has decreased its energy use per pound tons per year, or 20 percent of what the company’s
of production by 20 percent since 1995 with combined equity share basis Scope 1 and 2
emissions otherwise would be.
Occidental Oil and
Gas’s Worldwide
Environmental Manager,
Occidental Energy Intensity Factor
Krish Ravishankar, was
Base Year 1995 = 1.0
recognized by EPA
as the Natural Gas
STAR “Implementation
Manager of the Year.”
1.00 1.28 0.97 0.97 0.92 0.73 0.70 0.90 1.18 0.98 0.82 0.78
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
16
19. EMISSION REDUCTIONS/INCREASED PRODUCTION The average production rate from the newly equipped
Oxy’s electrification and automation program in wells has risen by approximately four percent. In
the Hugoton gas field in Kansas and Oklahoma is addition, the reduction in daily running time has
reducing CO2 emissions and is just one example reduced wear and tear on the equipment and is
of similar efforts in several Oxy operations. In addition expected to extend the average time between shut
to GHG reductions, the program is expected to reduce downs for maintenance — resulting in lower operating
time and costs associated with well monitoring and costs and increased production from the field.
maintenance while increasing field production.
Corollary benefits have been observed; for example,
The project involves retrofitting production wells with lease operator driving time has been reduced by
electric motors and eliminating the need for gas-fired extending well-maintenance schedules. This means
engines, thereby reducing emissions. Electric motors reduced risk of traffic accidents and lower vehicle
can operate intermittently, unlike gas engines that fuel and maintenance costs.
work best when operating on a 24-hour basis. As
Full electrification and automation of more than
a result, Oxy has been able to market the gas that
1,000 wells in the Hugoton field is scheduled to be
otherwise would have been burned in the engines.
completed during 2007 and will result in estimated
Pump-off controls have been automated and
annual cost savings of more than $1 million due to
At completion of
connected to a computer system so that lease
Hugoton’s retrofit reduced maintenance and downtime. At completion
operators can more efficiently monitor production
project, it is estimated
of the retrofit project, we estimate additional annual
rates and operating conditions, respond to well
that CO2 emissions
net reductions of more than 20,000 tons of CO2
will be reduced by problems more quickly and, in some cases, anticipate
emissions and that 365 million cubic feet of methane
more than 20,000 and correct operating anomalies before they occur.
will flow into the sales pipeline annually.
tons per year.
17
20. RESPONSIBLE WORKPLACE PRACTICES
Compliance
ENFORCEMENT AND PERFORMANCE
Throughout Oxy’s operations there are hundreds of thousands of
HES-related legal and permit requirements.
Oxy seeks strict adherence to these requirements, citations are summarized according to the applicable
addresses required corrective actions in a timely environmental media: air, water, land or other. The
manner and seeks ways to further strengthen “other” category includes administrative, product-
compliance. As a result of this effective HES related and employee safety issues. One trend
management system, compliance is high and Oxy is apparent — enforcement activity relating to the
receives very few citations, especially considering Title V operating permit program under the U.S.
Oxy’s size and scope. Clean Air Act is increasing.
Citation and penalty data reflect the level and focus In 2006, total penalties paid by Oxy were $557,032,
of agency enforcement activity, which varies from a small amount as compared to other large industrial
year to year with agency priorities. As a result, these companies. In 2006, the OxyVinyls partnership
data do not necessarily serve as good leading concluded voluntary discussions with federal, state
indicators of any company’s HES management and local environmental agencies with jurisdiction
systems’ performance. However, enforcement over four manufacturing facilities, with Oxy agreeing
priorities can present additional opportunities to to reduce vinyl chloride emissions and to resolve
strengthen HES management systems. Oxy strives disputed administrative claims and allegations of
to capitalize on these opportunities even as the environmental violations at those facilities. In addition
regulatory framework becomes more complex to emission reduction projects, OxyVinyls paid
and restrictive. penalties of $340,000 to resolve the matter. Excluding
the OxyVinyls matter, the average penalty amount in
Citations, which are actions initiated by a govern-
2006 was just over $7,000. Another method for
mental agency, include notices of violation, warning
assessing performance trends is the amount of
notices, administrative orders, consent orders/
penalties paid by the year in which the notice of
agreements and civil actions or court orders. Often,
the alleged deviation was received, as shown on
citations focus on administrative matters. Citations
the graph below (this data excludes commitments
are tracked by Oxy worldwide and may include
by Oxy for Supplemental Environmental Projects).
health, environment, safety, process risk management
and transportation activities. In the table below,
Occidental Citations Occidental Penalties Paid*
Number of Occurrences Thousands of Dollars
8 12 7 24 22 32 26 32 54 Air
5 4 9 7 2 8 13 5 2 Water
1 3 1 4 2 9 4 — 8 Land
150 149 67 152 314 325 129 180 417
15 3 16 4 5 3 2 3 — Other
Total
29 22 33 39 31 52 45 40 64
1998
1999
2000
2001
2002
2003
2004
2005
2006
1998
1999
2000
2001
2002
2003
2004
2005
2006
* Through 2006, reported by year in which notice was received.
18
21. ENVIRONMENTAL EXPENDITURES performance of remediation and, in some cases,
Oxy’s U.S. business operations are subject to compensation for alleged property damage, punitive
stringent laws and regulations relating to improving or damages and civil penalties. In most of these
maintaining the quality of the environment. Likewise, proceedings, Oxy is one of many companies that have
international operations subject to environmental shared in the costs involved. With all such environ-
protection laws. Environmental expenditures related mental proceedings, Oxy accrues reserves when it
to current operations are factored into overall business is probable that a liability has been incurred and the
planning. Operating expenses are incurred continu- amount of loss can be reasonably estimated.
ously, while capital expenditures relate to longer-lived
To enhance efficiency and effectiveness, Oxy
improvements in currently operating facilities.
manages its environmental remediation efforts
Oxy’s 2006 environmental operating expenses and through a wholly owned subsidiary, Glenn Springs
capital expenditures for projects related to environ- Holdings, Inc., which reports its results directly to
mental protection are shown in the table below. Oxy’s corporate management. Cash expenditures
Oxy’s commitment to maintaining compliance and related to site remediation activities in 2006 were
improving HES performance means that significant approximately $71 million. The table below presents
expenditures will continue. Although total costs may Oxy’s environmental remediation reserves at year-
vary in any one year, over the long-term, segment end 2006, 2005 and 2004 grouped by three
operating and capital expenditures for environmental categories of environmental remediation sites:
compliance are expected to increase.
$ amounts in millions 2006 2005 2004
# of Reserve # of Reserve # of Reserve
ENVIRONMENTAL EXPENDITURES RELATED TO BUSINESS SEGMENTS
Sites Balance Sites Balance Sites Balance
In millions 2006 2005 2004
CERCLA &
OPERATING EXPENSES
equivalent sites 105 $226 128 $236 125 $239
Oil and Gas $ 95 $ 65 $ 51
Active facilities 21 116 18 114 16 75
Chemical 73 67 59
Closed or sold
$168 $132 $110
facilities 40 70 39 68 39 61
CAPITAL EXPENDITURES
Total 166 $412 185 $418 180 $375
Oil and Gas $55 $43 $44
Chemical 25 21 12
$80 $64 $56 As of December 31, 2006, Occidental or certain of
its subsidiaries have been named in 105 CERCLA or
REMEDIATION
state equivalent proceedings, as shown below.
Laws that require or address environmental remediation
$ amounts in millions #of Reserve
may apply retroactively to past waste disposal practices Sites Balance
and releases of substances to the environment. In Minimal/No exposure (a) 85 $ 6
many cases, the laws apply regardless of fault, legality Reserves between $1–10 MM 14 55
Reserves over $10 MM 6 165
of the original activities or current ownership or control
of sites. Oxy and certain of our subsidiaries are Total 105 $226
currently participating in environmental assessments (a) Includes 32 sites for which Maxus Energy Corporation has retained the
and cleanups under these laws at federal Superfund liability and indemnified Occidental, 5 sites where Occidental has denied
liability without challenge, 15 sites where Occidental’s reserves are less
sites, comparable state sites and other domestic and than $50,000 each, and 33 sites where reserves are between $50,000
foreign remediation sites, including currently owned and $1 million each.
and previously owned sites. Also, the company and
In determining the environmental remediation
certain of our subsidiaries, have been involved in a
reserves, Oxy refers to currently available information,
number of governmental and private proceedings
including relevant past experience, available technol-
involving historical practices at various sites including,
ogy, regulations in effect, the timing of remediation
in some instances, having been named in proceedings
and cost-sharing arrangements. For a complete
under the Comprehensive Environmental Response,
discussion of these factors and other information
Compensation, and Liability Act (CERCLA) and similar
concerning the environmental remediation reserves,
federal, state and local environmental laws. These
see our 2006 Annual Report on SEC Form 10-K.
environmental proceedings seek funding or
19
22. RESPONSIBLE WORKPLACE PRACTICES
Employment Practices
EMPLOYER OF CHOICE
Oxy strives to be an employer of choice in the oil and gas,
and chemical industries.
During the past three years, the number of New Oxy employees and their mentoring partners
Occidental Oil and Gas employees has grown work together formally for a year, but many choose
significantly through acquisitions and the staffing of to continue their relationship beyond that point.
new projects. The rapid growth of our workforce has More than 100 employees, at all levels of the
required the enhancement of the traditional key company, have attended mentoring training
human resource management programs such workshops to enhance their mentoring skills.
as Employee Empowerment and Mentoring,
DEVELOPING LEADERS AT ALL LEVELS
Leadership at All Levels and Training.
Oxy’s future depends on strong leadership and new
Through the development of these programs and employees are not the only ones to receive profes-
employee activities identified through the TeamOxy sional development training. Developing employees
employee association, Oxy was named one of as leaders at every level of the organization is a
Houston’s Best Places to Work in 2006. The annual cornerstone of Oxy’s success. Our employees make
Houston Business Journal award is given based on decisions every day that impact the business, the
an employee satisfaction survey, with nominated community and the environment. We want to ensure
companies required to have a certain percentage of that they have the skills and resources to make and
their employees respond to the survey. Employees manage their decisions effectively; therefore a variety
were asked to identify reasons why they believe they of employee development programs are in place to
work at one of the best workplaces in Houston. Oxy support their effort.
is one of the first companies in the oil and gas
The “Leadership Development Program” (LDP)
industry to receive this prestigious award.
is focused on developing the current and future
To help new employees adapt more quickly to generation of senior leaders across the organization.
their new jobs and to the company’s The LDP provides current and future leaders with
culture, we have redesigned our “On the tools to implement and drive business strategy
Boarding Program.” This system helps and manage challenges. Since 2001, more than
integrate new employees into the organization, 175 participants from every Oxy business unit
so they can become highly productive and respon- and operational location around the world have
sible members of the workforce in the shortest completed the program.
possible timeframe.
“OxyChem Leadership Essentials” (LE) was created
The On Boarding program activities include “New by OxyChem, which recognized the need for
Employee Luncheons” where new employees have continuous development of the organization’s
the opportunity to meet company leaders and learn leadership talent. OxyChem is implementing its LE
more about the business, and technology exchange training program by targeting first-line manufacturing
conferences where they can network with leading supervisors and managers. The LE training comple-
technical experts across the company. ments other programs developed for leaders at
all levels and is designed to be delivered internally
Our “Mentoring Program” provides technical mentors
by OxyChem employees. The modular curriculum
to new employees. This program is designed to
develops leaders who are entrusted to execute
accelerate the learning and acculturation process
the organization’s strategies and meet its goals by
among new employees by providing a support
building and maintaining a high-performing workforce.
system to enhance their potential for success.
20
23. TECHNICAL TRAINING worldwide. Most of the courses are designed
Occidental’s global employee technical training to encourage a multidisciplinary approach to
program emphasizes the development and ongoing reservoir description and characterization. More
enhancement of the critical workforce competencies than 370 individuals participated in 2006.
needed to execute our strategic plan. Training takes
“Oil and Gas Engineering Development Program”
º
many forms including formal classroom, distance
(EDP) was created in 2006 as a formal engineer-
learning, on-the-job work experience and job rotations.
ing development program to address the
Oxy is focused on training employees to gain the increasing need for high-quality engineering talent.
skills necessary to adjust to the changing demo- Increasingly, Oxy is hiring more engineering
graphics of our workforce. In addition, existing students from college campuses around the world
training programs, procedures and guidelines are and EDP, supplemented with a combination of
being reviewed and combined with feedback focused formal training and early job rotations,
from various technical assessments to identify accelerates their ability to rapidly reach core
actions for improving the quality and effectiveness competency. More than 100 engineers are
of technician training. currently enrolled in the program.
Examples of employee development efforts: “OxyChem Technician Training” ensures OxyChem’s
º
º “Oil and Gas Geoscience Functional Training superior HES knowledge is transferred to new
Initiative” (FTI) is a focused effort to improve employees. Oxy trains employees in HES processes
the ability of Oxy geoscientists and engineers to and procedures, job fundamentals, and the safe
understand and predict reservoir quality. Formal and effective handling of the chemicals used in
training and associated field trips are offered the business.
At the 2006 Functional
Training Initiative
Carbonate Reservoir
Characterization course,
engineers Ravi Sharma
and Robert Kramm
examine a modern
carbonate core from a
tidal flat environment
with geoscientists
Natalia Aristizabal and
Alexandra Webster.
Sixty Oxy geoscientists
and engineers studied
a modern carbonate
environment to learn more
about facies predictabil-
ity, reservoir properties
and geologic risk.
24. RESPONSIBLE WORKPLACE PRACTICES
Developing Expertise in Our International Workforce
RESPECTING DIVERSITY
An influential factor in Oxy’s success is the broad cultural diversity
of its multinational, multiethnic workforce.
A WORKPLACE FREE FROM DISCRIMINATION,
As our business has expanded around the world,
HOSTILITY AND HARASSMENT
we have attracted thousands of employees of
exceptional talent from numerous countries and
Any hostility or harassment of any employee based
cultures, bringing a broad world perspective to the
on age, color, gender, sexual orientation, national
corporate culture. Oxy’s ability to work effectively in
origin, religion, or any racial, ethnic or other personal
highly diverse cultural environments enhances value
characteristic is a violation of Oxy’s policies. Every
for Oxy’s partners, employees and stockholders.
Oxy manager is responsible for the communication,
implementation and enforcement of this policy at
Oxy has established comprehensive programs to
their location and for complying with all applicable
hire national employees in the different countries
anti-discrimination laws and regulations.
where we operate, and train them in all operational
and professional disciplines. This program has
PROTECTING EMPLOYEE RIGHTS
contributed to our operating efficiencies, and
Oxy has a long-standing policy of respecting
expanded the overall technical and management
employees’ voluntary freedom of association with
expertise of the workforces in emerging countries
respect to causes, organizations or political parties
where we have operations.
they wish to support or join. Oxy encourages
employees to participate in the political process on
In Oxy Oman, we maintain our strong commitment
their own time. Employees have a right to make
to the “Omanization” program at all levels of our
political contributions in their own name and from
Oman operations — from executive management to
their own assets. Employees are not required by the
entry-level positions. This program is designed to
company to make any political contributions.
replace foreign expatriates with Omani citizens in
all job positions. Aside from the new Mukhaizna
EQUAL OPPORTUNITY EMPLOYER
operations, Omani employees comprise 90 percent
We provide equal opportunity to all individuals in every
of Oxy’s workforce in Oman. As our operations
aspect of employment without regard to race, color,
continue to expand in Oman, so will our efforts to
religion, ethnicity, gender, national origin, disability,
train and recruit local employees.
age, sexual orientation or veteran status. This applies
In Latin America, we continue our long-standing
efforts to maintain a predominantly national
workforce in each of our operations.
In addition to building the workforces in our inter-
Supervisory Positions Worldwide
national operations through the hiring and training
Within Oxy’s Oil and Gas, and Chemical operations
of local employees, Oxy also assigns these
Out of 691 supervisory
employees to responsible positions throughout our
positions held in Oxy’s Oil
worldwide operations as part of our comprehensive and Gas and Chemical
career development process. operations worldwide, 547
or about 79 percent of
these positions are held
PROVIDING FAIR COMPENSATION AND BENEFITS
by non-US employees.
Oxy’s wages, benefits and employment terms are
designed to attract and retain top-quality talent.
Compensation is targeted to be competitive within
the respective labor markets and to provide 144 U.S. employees
547 non-U.S. employees
significant opportunity for personal growth based
on performance.
22
