Going further. Doing more. LIVING OUR VALUES Corporate Sustainability Report

Transcription

1 Going further. Doing more. LIVING OUR VALUES 2015 Corporate Sustainability Report

2 DEMONSTRATING ACCOUNTABILITY FOR OUR NONFINANCIAL PERFORMANCE Marathon Oil s 2015 Living Our Values Corporate Sustainability Report describes the Company s headway in addressing critical risks in our operations, the communities where we work and our industry. Our goal is to be recognized as a premier independent exploration and production (E&P) company, which requires Marathon Oil to be a sustainable investment, employer, business partner and corporate citizen. Our strategy is to be the lowest-cost, highest-margin North American focused independent E&P company. While the low commodity price environment in 2015 prompted Marathon Oil to make difficult but necessary decisions, we remained committed to Living Our Values to be healthy and safe, environmental stewards, open and honest, community partners and results focused. Our clear emphasis is on creating a business that is sustainable for the benefit of our key stakeholders. Guided by our values, Marathon Oil took action in 2015 to manage through a challenging period, and we are now laying the groundwork to accelerate production when the price of oil rebounds. We remain committed to operating safely and cost effectively, complying with regulations, protecting the environment, investing in our employees, creating value for shareholders and positively impacting our communities. Thank you for taking the time to learn about our approach to managing risk, addressing stakeholder concerns and overcoming challenges as we build our business for the long term. Sincerely, WE BELIEVE OUR COMMITMENT TO SUSTAINABILITY WILL BENEFIT FELLOW WORKERS, INDUSTRY AND OUR COMMUNITIES Amid energy industry pressures, Marathon Oil s board and management have not been distracted from the Company s longstanding central tenet, Living Our Values. These principles are not merely an advocacy platform for Marathon Oil s license to operate. The objectives, standards of accountability and concrete actions embody the manner in which our people around the world undertake their daily responsibilities. Every Marathon Oil employee continues to seek not only improved financial and nonfinancial performance and to control risks, but also to demonstrate their fundamental commitment to sustainability. In addition to improving processes to enhance sustainability, management while preparing for the return to higher activity levels is taking the current opportunity to strengthen compliance, workforce training and risk management. This report summarizes Marathon Oil s record and progress on these matters. We invite your review of how Marathon Oil s board and management, in the interests of sustainability as well as financial results, are dealing with the environmental, social, political and workplace issues of our business, both recurring and new. We acknowledge that our shareholders properly focus on how the Company is optimizing our economic value. Marathon Oil s board shares this objective. But we trust there is common understanding of how stewardship, citizenship and sustainability are intertwined with our financial performance. Please hold us accountable to those ends. Sincerely, Lee M. Tillman President and Chief Executive Officer Philip Lader Chairman, HES&CR Committee

3 MARATHON OIL S THREE-YEAR PERFORMANCE DATA This table contains data relevant to Marathon Oil s governance, society, environmental, safety and workplace performance. We understand that the accuracy of the data is inherently constrained by differing reporting rules, definitions, estimating methods and other factors. Marathon Oil endeavors to strengthen global data reporting systems and methodologies, but recognizes as accuracy is improved, corrections will be needed periodically. In this table, some totals may not equal the sum of their components and separate calculations of other data may be affected due to independent rounding. The metrics below are for operations under direct Marathon Oil management and operational control. Greenhouse gas (GHG) emissions are estimated using industry guidelines (API s Compendium of Greenhouse Gas Emissions Methodologies for the Oil and Gas Industry and the IPIECA/API/IOGP Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions). Except as noted, metrics in this table represent global performance. PERFORMANCE AREA GOVERNANCE Independent Board Members percent Political Contributions thousand dollars a SOCIETY Social Investments million dollars ENVIRONMENT b GHG Emissions (Global) c,d Direct Emissions million tonnes CO 2 e Indirect Emissions million tonnes CO 2 e Total GHG Emissions million tonnes CO 2 e e Total Methane Emissions million tonnes CO 2 e GHG Intensity tonnes CO 2 e on a weighted basis/production (MBOE) Total Methane Intensity tonnes CO 2 e on a weighted basis/production (MBOE) Methane Emissions as a percent of natural gas produced N/A Energy Use trillion BTU Other Operational Air Emissions (Global) d Sulfur Dioxide (SO x ) tons Nitrogen Oxides (NO x ) tons 23,295 19,195 16,557 Volatile Organic Compounds (VOCs) tons 11,127 7,964 6,169 U.S. Onshore Water Usage million barrels used N/A Spill Events to the Environment > 1 bbl number f Spill Volumes to the Environment > 1 bbl - volume f 3,605 1,151 4,033 SAFETY AND WORKPLACE Safety Global (combined employee and contractor) g Fatalities number Total Recordable Incident Rate (TRIR) incidents/200,000 work hours Process Safety Management Tier 1 Process Safety Events number Tier 2 Process Safety Events number Tier 3 Process Safety Events number h Employees (Global) number g 2,610 3,330 3,359 Turnover percent g,i Minority Employees (U.S.) percent g,j,k Minority Professionals (U.S.) percent g,j,k Minority Supervisors/Managers (U.S.) percent g,j,k Female Employees (Global) percent g,k Female Professionals (Global) percent g,k Female Supervisors/Managers (Global) percent g,k (a) Includes political action committee and corporate contributions. (b) Excludes East Texas/North Louisiana (discontinued assets). (c) Greenhouse Gas (GHG) carbon dioxide equivalent (CO 2 e) emissions are based on carbon dioxide, methane and nitrous oxide from Marathon Oil-operated facilities only. (d) Discontinued assets (Norway, and Green River and Powder River Basins in Wyoming) were removed from previous years data for comparing year-on-year performance. (e) Gross production of all hydrocarbons increased by 5 percent in (f) Data includes spills outside of secondary containment greater than or equal to 1 barrel. (g) Workforce statistics reflect year-end data. (h) Increase in 2014 consistent with Company s continued focus on reporting of near miss events. (i) Turnover rate methodology has been revised to align with Success Factors standards. Data does not include total retirement rates of 11.2 percent and 4.9 percent for 2015 and 2014, respectively. Non-U.S. rate includes employees from our Norwegian asset that was sold in (j) As defined by U.S. Equal Employment Opportunity Commission. (k) 2013 restated to reflect Success Factors methodology. N/A Not Available

4 ALBA COMPRESSION PROJECT A MODEL OF SUSTAINABILITY The Alba field development is vital to Marathon Oil and to the economic and social progress of our host country of Equatorial Guinea and its citizens. We extract condensate and natural gas from the offshore Alba field to supply three Marathon Oil-operated plants on Bioko Island that process these resources to produce methanol, liquefied natural gas (LNG) and other products. Alba is the sole source of cooking gas for Bioko Island s 350,000 residents, as well as of gas for the island s only power station. To sustain the benefits of our integrated gas business interests in Equatorial Guinea, Marathon Oil invested in the major Alba B3 compression project to boost production. Alba B3 involved building a new offshore compression platform (greenfield component) that is a bridge connected to our existing Alba offshore production facilities. This required modifications (brownfield components) to existing facilities to tie-in the new platform s utilities, process control and safety systems with the existing facilities. The project involved the work of employees, a primary contractor and subcontractors on multiple continents, speaking different languages and from different cultures. Contractor relationships for the project allowed us to develop local content and national capacity, including hiring a regional company to complete engineering work in Equatorial Guinea for the first time and contracting one of the largest projects ever executed by an Equatoguinean firm. The project contributed to Marathon Oil spending an average of approximately $86 million per year in Equatorial Guinea since Managing Potential Impacts To manage the project s potential impacts, we stringently enforced World Bank and World Health Organization (WHO) guidelines for health, environmental and safety (HES) protection throughout the project. These and other HES efforts resulted in a TRIR of 0.0 in 2015 and zero environmental incidents during installation. The Alba B3 jacket and topsides were installed on schedule in January 2016, keeping the project on target for start-up in mid Our actions to manage this project reflect our commitment to develop the human resources of Equatorial Guinea as well as the oil and gas resources. The project extends Alba field life beyond 2030, the field production plateau by approximately two years and field economic life by approximately eight years. This allows Marathon Oil to continue generating cash for our business, revenues for Equatorial Guinea and jobs for Equatoguineans. With the resulting stable production and cash flow, Marathon Oil can continue contributing to sustainable social programs that build national capacity and improve wellbeing in Equatorial Guinea. These include the life-saving Bioko Island Malaria Control Project as well as numerous educational, health and community assistance programs. We consider the Alba B3 project to be a model of sustainability for Marathon Oil going forward.

5 SOCIETY: EDUCATION BUILDING THE FUTURE WORKFORCE Marathon Oil invests in education from kindergarten through college to strengthen the communities where we operate and build the future workforce. We support science, technology, engineering and math (STEM) curriculum enhancements, literacy, teacher training and development, programs aimed at meeting community social needs that impact educational outcomes, and college scholarships. Advancing STEM Education We want to stimulate interest in STEM fields and increase the number of students who finish high school and continue their education at a two- or four-year college. To target students near our Eagle Ford operations, the Company has made significant investments in STEM education in several South Texas counties. We piloted the Reasoning Mind Program for math education in one elementary school in the Karnes County Independent School District (KCISD) in By the school year, approximately 420 children in grades 2-5 participated in the program. Based on significantly improved algebra readiness assessment scores and teacher satisfaction with the program, Marathon Oil is expanding Reasoning Mind to approximately 480 pupils at the same schools during the academic year. Early Childhood Education To address kindergarten readiness issues, in 2015 Marathon Oil supported education programs in Houston to help children from lower-income families achieve social, emotional, physical and cognitive milestones and enter school ready to succeed. We also donated one book for every child at Browning Elementary School to address a startling statistic that only one book is available for every 300 children in low-income area homes. INTEGRATED EDUCATION FUNDING MODEL Marathon Oil s Integrated Education Funding Model ensures our investments drive meaningful change in academic performance, graduation rates and interest in STEM fields. The model helps us identify promising programs, measure effectiveness and guide stakeholder engagement to address other factors that can impact academic outcomes. College Scholarship Program To develop a future workforce for the oil and gas industry, in 2015 we provided approximately 170 college scholarships for students from the U.S., Equatorial Guinea and Kurdistan Region of Iraq to study core disciplines such as geosciences, engineering and supply chain. Marathon Oil also funded scholarships to targeted four-year colleges and technical and vocational training. Guided by our Integrated Education Funding Model, Marathon Oil continues to seek effective programs to educate children, support teachers and help communities where we live and work.

6 ENVIRONMENT: AIR EMISSIONS MANAGEMENT REDUCING GREENHOUSE GASES IN OUR OPERATIONS To produce energy responsibly, Marathon Oil has a long-standing commitment to environmental stewardship and continuous improvement. We recognize that climate change, global greenhouse gas (GHG) emissions and local air emissions are key stakeholder concerns, and in 2015 we continued our programs to lower methane intensity as a means of reducing GHGs in our operations. In our continuing efforts to be transparent and responsive to our stakeholders, enhanced emissions management disclosures, including climate change risks, are included in our 2015 Living Our Values Corporate Sustainability Report available online at www. marathonoil.com/lov2015. Our corporate commitment is to reduce releases to the air. To achieve this, we comply with regulations and laws, identify and prioritize significant sources of air emissions, and implement potential solutions to reduce air emissions. We also track and report environmental performance data and management practices to internal and external stakeholders Air Emissions Performance Marathon Oil evaluates our performance using GHG and methane emissions intensity, expressed as carbon dioxide equivalent (CO 2 e) emissions per all hydrocarbon production, because our business is focused on producing hydrocarbon liquids. In 2015, our gross production of hydrocarbons increased by 3 percent compared to However, our global GHG emissions intensity increased 5 percent due to lower activity and production in many assets as a result of reduced capital spending. Global CO 2 emissions increased by 8 percent and methane emissions increased by 11 percent. We also evaluate our performance as a measure of total methane emissions as a percentage of total hydrocarbon produced and total methane emissions as a percentage of natural gas produced. Total methane emissions as a percentage of natural gas produce remained flat compared to Mitigation Strategies The Company uses a variety of strategies to mitigate air emissions from fuel combustion and venting during the drilling and production lifecycle. For example, fuel combustion in engines and other portable equipment generates most of the emissions associated with drilling a well. To minimize these emissions, Marathon Oil strives to drill wells faster, use fewer rigs and use less fuel per well drilled. Other strategies to mitigate emissions in 2015 included: Proactively using infrared cameras to identify emissions sources, resulting in replacing highbleed pneumatic devices to reduce methane emissions and updating or replacing thief hatches to reduce venting. Using vapor recovery units (VRUs), flares and combustion control devices to reduce emissions from storage tanks. Building pipelines to transport oil and produced water to reduce emissions and traffic from truck transportation. For example, in Eagle Ford the average daily volume of crude oil transported by truck dropped approximately 70 percent during the year and 36 percent of produced water was transported via pipeline by year-end Eagle Ford s long-term goal is to transport 70 percent of produced water using pipelines. Marathon Oil remains committed to finding and developing oil and natural gas in a safe and responsible manner, which includes efforts to reduce GHG and other air emissions from our operations in accordance with our standards, policies and applicable regulations.

7 SAFETY: CONTRACTOR MANAGEMENT CONTINUOUSLY IMPROVING PERFORMANCE Contractors, who made up approximately 73 percent of our field workforce in 2015, are crucial to the safety, efficiency and reliability of Marathon Oil operations. We seek contractors who share our commitment to keep people, the environment and communities safe. Contractor management is covered by the Third Party Services element of our Responsible Operations Management System and the Marathon Oil Contractor Management Standard, which drives consistency and clear expectations throughout our operations. The Company has a formal methodology to evaluate HES performance of safety-sensitive contractors. In recent years, we have steadily strengthened our programs to improve contractor safety, starting with verifying their health, environment, safety and security (HES&S) performance during the qualification process. To work with Marathon Oil, contractors must disclose their written safety programs, injury and illness records, and performance history. Contractors who supply personnel for safety-sensitive work in North America are required to register with the ISNetworld global resource and meet our threshold score. We also take steps to ensure they meet their contractual obligations and comply with Marathon Oil s HES&S standards, Code of Business Conduct and other programs. These include formal orientation for new field-based contractors and additional instruction for contractors who issue safe work permits. To manage potential safety risks, contractors must have satisfactory ISNetworld scores at a minimum and superior HES performance. When the only available contractor does not meet our standards, we implement risk management plans and meet regularly with the contractor to ensure they are addressing gaps effectively. In 2015, Marathon Oil maintained our commitment to promote safety leadership with employees and contractors. In addition to implementing corporate programs such as hand safety, our assets engaged with contractor leaders, field supervisors and field personnel. For example: Eagle Ford held approximately 100 face-toface meetings to determine if contractors were cutting back on training or safety programs. Bakken held daily tailgate safety talks, as well as quarterly meetings with leaders from different supplier categories, such as haulers and electrical contractors, to discuss common issues. Oklahoma completed 65 vendor business reviews and implemented an improved Contractor Management Plan. Marathon Oil continued the Contractor Field Verification Audit program we initiated in 2013, performing 75 audits in Continuously promoting a positive safety culture and emphasizing that our workforce must take personal responsibility for safety, avoid shortcuts and use their Stop Work Authority are essential to achieving an accident- and injury-free workplace.

8 CORPORATE COMMITMENTS Corporate-level commitments covering governance, society, the environment, safety and our workforce guide our sustainability activities. Marathon Oil s operations are responsible for working with key stakeholders to identify and implement programs to fulfill these commitments at the local level and to drive continuous improvement. Highlights of our 2015 commitments are summarized below. * For a full listing of our 2015 progress and 2016 focus areas go to our website at: GOVERNANCE Commitment Participate in the public policy process and maintain employee awareness on issues relevant to our company and industry Progress Promoted responsible, state-based regulation of operational and environmental issues that enable cost-effective energy development. SOCIETY Commitment Work with stakeholders to understand how our operations impact local communities. Partner with community organizations to develop and support projects that address existing social issues related to education, health and the environment Progress Developed Corporate Sustainability Guidelines and a stakeholder engagement kit to enhance asset-level sustainability efforts. Implemented Bioko Island Malaria Control Project (BIMCP) interventions, supported teacher training for university-level English as a Second Language courses and sponsored health improvement programs in Equatorial Guinea. ENVIRONMENT Commitment Reduce spills and releases, minimize wastes, and promote water management, conservation and biodiversity Progress Increased emissions management disclosures to include climate change information in continuing efforts to be responsive to stakeholders. Proactively used infrared cameras to identify solutions to reduce air emissions. SAFETY AND WORKFORCE Commitment Strive for an accident- and injury-free workplace, with safe and healthy work practices and conditions throughout our operations. Maintain an inclusive work environment where we attract, develop and retain employees who actively contribute to growing our business Progress Reduced Company s Total Recordable Incident Rate (TRIR) by 48 percent and set new safety performance record with a TRIR of 0.39 for employees and contractors combined. Improved training, competency development and workforce management programs to ensure employees are properly trained and located to operate safely in a variety of economic conditions. Going further. Doing more. Marathon Oil Corporation Corporate Headquarters 5555 San Felipe Street Houston, TX Cover photo: Marathon Oil s Alba B3 compression project offshore Equatorial Guinea is a model of sustainability. View the full report at: