‘We Can Be a Force for Positive Change’
A conversation with Mark Little, Suncor’s senior vice president, International and Offshore
As a result of the 2009 merger with Petro-Canada, Suncor has a significantly expanded international presence, including operations in Libya and Syria. In Libya, Suncor is now in the second full year of a five-year exploration program and continues to be a partner in a joint venture operating company called Harouge, which operates production facilities. In Syria, Suncor recently completed construction and commissioning of the Ebla gas plant that is already producing natural gas at its rated capacity of 80 million cubic feet per day of natural gas. However, operating in these countries has raised questions and concerns among some of our stakeholders. They want to know what Suncor is doing to ensure human rights and ethical business practices are upheld at all times. Suncor’s Mark Little provides some answers.
Why should a responsible energy developer like Suncor be involved at all in countries like Libya or Syria?
LITTLE: In any business venture, companies must weigh the potential economic opportunity versus the potential risks. Petro-Canada certainly did so before entering into operations in those two countries through its acquisition of Veba Oil & Gas earlier this decade. Before deciding to retain these particular international assets, Suncor’s leadership team also did so again. In fact, CEO Rick George visited both Libya and Syria in the fall of 2009, to tour our operations and meet with principal industry and government officials. Rick made it clear at the outset that he appreciated the economic value of these assets and related opportunities. All the same, he had two critical questions. First, could we continue to operate safely and effectively in these two countries? Second, can we continue to do so in a responsible and principled manner, while mitigating the potential risks associated with these countries?
So what are the answers to those two questions?
LITTLE: On the first question, I think we’ve demonstrated that, despite the infrastructure and human resource challenges we sometimes face, the answer is a definite yes. For example, we recently completed construction of the Ebla gas plant in Syria four months ahead of the contracted delivery date, and with an impressive safety record.
On the second question, the general answer: it isn’t always easy, but it’s possible. Through these operations we have learned that, by upholding a consistent set of principles for responsible investment and operations, and by supporting the protection of human rights within a company’s sphere of influence, it is possible to be a responsible and ethical energy developer.
I think it’s important for us to understand that we are not starting from scratch. In Libya and Syria, most of our people on the ground have been there for a long time and are operating under our established principles, policies and procedures. All of the good work Petro-Canada did in building up an ethically based and transparent business model in these countries endures.
I’d also make one other point: by performing responsibly in countries like Libya and Syria, foreign corporations can be a force for positive change. By engaging in a respectful and thoughtful manner, you stand to have some positive influence, although it’s not without its risks or challenges.
What are the major risks and challenges—and how do you mitigate them?
LITTLE: Two of them are workplace safety and the environment. Safety and environmental standards are less mature than in North America or Europe. All the same, we strive to achieve the same standards wherever we operate. In the workplace, part of our risk management is to provide the appropriate supervision and training and bring in the necessary equipment to ensure acceptable safety standards are maintained—and to make sure our contractors understand what we expect in this regard.
It’s the same with the environment. In Syria, we’ve established our own standards for handling hazardous waste and worked with contractors to give them the ability to meet those standards. Similarly, in Libya, we’ve made sure any wastewater or sewage from our exploration operations is properly contained and treated.
There are other examples where we’ve gone above and beyond what’s required of us.
The environmental impact assessment that was done prior to our gas project in Syria identified the presence of a critically endangered bird species called the Northern Bald Ibis that had a seasonal feeding ground in part of our exploration area. So we re-designed our seismic survey and adjusted the timing of our operations to avoid impacting the birds.
As part of that same seismic activity in Syria, we adopted a mapping technique to ensure any archeological sites we came across were documented and that information passed on to Syrian authorities. We also adapted our work practices to make sure these sites weren’t damaged. The Syrian authorities weren’t aware of a number of these sites, including some ancient caves. These practices are now being adopted by other operators in the country.
What about basic security—how do you ensure your employees are safe and healthy?
LITTLE: That’s a major priority. Our housing and transportation arrangements for our staff take account of potential risks. In Libya, for example, we typically house our personnel on managed compounds. This ensures our people are living in mutual support, which also help to minimize the need for transportation—driving represents significant risk in Libya. In Syria, the bigger concern is regional security issues due to potential conflict along that country’s borders. The external situation is monitored and we liaise with our local embassies to ensure our employees are kept informed and don’t inadvertently travel into conflict zones.
The health care systems in Libya and Syria are not as developed as those in North America. Before our employees and contractors assume a foreign posting, they undergo a thorough medical to make sure they are fit to work in that kind of environment. They are also given cultural briefings to better understand local customs and simple precautions they can take to protect their own safety and health.
What about the issue of foreign corruption?
LITTLE: When Petro-Canada entered the international sphere, its risk assessment process flagged the concern about corrupt business practices as a high priority. Our position on bribery and corruption remains clear. No employee, agent or contractor of ours must ever offer or accept a bribe or a kickback. We’ve put training programs in place so all our managers and employees understand what the boundaries for ethical behaviour are and the need to flag for evaluation anything that looks like a grey area.
You talked earlier about corporate investment internationally helping to drive positive change. Are there any concrete examples of that in Libya and Syria?
LITTLE: Yes. In Libya, $100 million of our $1 billion signature bonus goes to a sustainable development fund that is spent on social development projects that we mutually agree on with the Libyan authorities. One of the first key areas we looked at was training. In addition to taking Libyan graduates and enrolling them in masters programs overseas, we are working to help improve some of the country’s own technical schools. We are also using the sustainability fund to help Libyans develop better national plans for emergency response.
In Syria, we don’t have a similar sustainability fund, but we developed an extensive training program to select and train Syrians to operate and take leadership positions in our gas plant. We brought a number of Syrians to Canada to undertake training at the Southern Alberta Institute of Technology (SAIT) as a part of their technical development. This has been very successful and we have received very positive feedback from the Syrian government.
Despite these kinds of initiatives, some in the investment community wonder why a company like Suncor, whose primary focus is on developing Canada’s oil sands, would want or need to get involved in potentially higher risk foreign operations. Can you explain?
LITTLE: When we merged with Petro-Canada, Rick George said Suncor would be assessing its assets and future growth projects on three criteria—the strongest near-term cash flow potential, the highest anticipated return on capital, and the lowest risk. The fact is that, on a per-barrel basis, it’s much more expensive to produce a barrel of oil synthetic crude oil from oil sands than to produce a barrel of conventional oil or gas in either Syria or Libya. In Syria, now that we are producing natural gas, the operation will generate positive cash flow for the company. In Libya we have significantly reduced the funding that the country requires, and as we learn more about specific opportunities, we have realized that they come in relatively small investments with strong returns. So these foreign operations can help provide the near-term cash flow and return on capital needed to invest in long-term growth in the oil sands.
That leaves the question of risk. There’s no doubt there is more inherent risk in some areas when operating in Libya or Syria than, say, in Canada or the United States. Yet are those risks manageable? For the time being, we believe they are. As I’ve tried to describe, we are working hard to also do some good along the way for our host nations.
All the same, it’s a balancing act—and one that must be constantly reviewed to make sure the risks do not outweigh the benefits. Quite correctly, our investors—and all our stakeholders—expect us to do just that.