Premier Oil publicly makes the case for constructive engagement in Burma in its social performance report
Financial Times; May 16, 2001
By DAVID BUCHAN
Last year, theForeign Office took the unusual step of publicly asking a British company to abandon one of its largest investments abroad. The company was Premier Oil and the country was Burma. The UK government argued that so oppressive was the local military dictatorship that no foreign investment that might prop it up should be allowed.
Premier took the equally unusual step of ignoring its government's advice - and today goes part of the way towards explaining why.
Its "social performance report", to be presented at the company's annual general meeting today, is hardly a resounding rebuff to the Foreign Office. It does not directly answer the UK government's point that Premier's presence in Burma gives the regime a badge of respectability and economic assistance through tax revenue. But it helps the case for constructive engagement in Burma, at least for the communities surrounding Premier's 70km pipeline, which transports the gas from the Andaman Sea into neighbouring Thailand.
"It's not our company's role to question the money going to the government or what use it makes of it but rather to understand what our local impact is and to ensure it is as beneficial as possible," says Richard Jones, Premier's corporate responsibility manager. "This social performance report just measures social performance but it is our way of showing we are socially responsible."
However, Mr Jones still believes the report to be a landmark. "No other extractive sector company of our size has undertaken such a thorough investigation of its status in relation to corporate social responsibility," he claims. Relative to other oil groups, Premier is tiny: 750 employees worldwide and a turnover last year of Pounds 115m. So far it is mainly high-profile oil companies such as Shell and BP that have felt impelled to produce corporate social responsibility reports, audited by their regular financial auditors, to account for their activities in tricky places such as Nigeria and Colombia.
The only close parallel to Premier's dilemma in Burma is that of Canada's Talisman Energy in Sudan. Talisman has just produced a corporate social responsibility report to justify its involvement, along with Chinese and Malaysian oil companies, in an oil pro-ject at the centre of Sudan's long-running civil war and to ward off allegations of complicity in abuses by security forces and in displacing local people.PwC, auditor of the Talisman report, has been criticised by human rights groups for its limited verification of Talisman's claims, with auditors sticking to the oil concession areas and failing to take in the views of displaced refugees in southern Sudan. The issue has acquired particular sensitivity in the US. Some congressmen are demanding that the Securities and Exchange Commission suspend trading in Talisman shares. The SEC has not gone that far but is planning to demand additional disclosure from foreign companies listed in the US but doing business in countries, such as Sudan, embargoed by the US.
Premier, by contrast, started to act earlier and a bit differently. It began preparing its social performance audit in late 1999, several months before the Foreign Office made its demarche. And because of its limited resources it got EQ Management, a social responsibility consultancy with former Body Shop executives among its founders, and Alyson Warhurst, professor of strategy and international development at Warwick University, to frame the scope of the report; Compass Research, an Australian-owned market research agency in Burma, to ask the questions; and Warwick University's corporate citizenship unit to do the auditing.
Contracting out the study has the virtue of making it look more independent. "In the audit of Shell's report on Nigeria, KPMG goes out to verify the data given to them. We, on the other hand, have got outsiders to gather as well as verify the data," says Mr Jones.
The data in this first Premier report, which covers only the views of employees, local communities and shareholders, contain little that is startling. Some of the people who live in the area surrounding the Premier pipeline, but are not employed by the company, complain about a rise in local prices, which they cannot afford. That is a common feature of oil money flowing into undeveloped areas. Some Burmese, evidently worried about the gas pipe exploding even though it is buried, also say they would like more technical information from Premier. Evidently this is the sort of information their military rulers would not give them.
Premier's future social audits may be more controversial, because the company says it will cover not only business partners and sub-contractors but also aid agencies and "displaced communities" in Burma. The latter two groups may have views more along the lines of Her Majesty's government.
For the moment, however, there is almost an agreement to disagree between Premier and the Foreign Office. British diplomats stressed last week that it is not Premier's business practices in Burma that are suspect but the fact that it is there at all. Yet the company's presence has been useful to the UK government for the release of James Mawdesley, a human rights activist, from his Burmese jail cell last year. "We were uniquely positioned as a passer of messages (between London and Rangoon)," says Mr Jones.
For its part, the Foreign Office now seems disposed to let Premier subscribe to a code of security principles that the UK and US governments drew last year for oil and mining companies to follow in unstable countries. Last December, Premier was excluded from joining BP, Shell and others as initial signatories because of its presence in Burma. This could change when the code is reviewed later this year.
Certainly Premier is keen to join. It may also be able to pass on to others what it has learnt. Petronas, the Malaysian state oil company, has been sounding out Premier on the issue of social responsibility. This is scarcely surprising. Petronas owns 25 per cent of Premier and is the company's partner in Burma. But Petronas also happens to be Talisman's partner in Sudan.