DEDICATED TO MAKING A DIFFERENCE

World Business Council forSustainable Development

2003Case study

BP Trinidad and TobagoSustainable upstream developmentOne enduring characteristic of the oil industry has been change. As a worldwide energy company with 115,000 employees and with a long history in oil and natural gas, petrochemicals and more recently in renewable energy technologies, BP has learned to be responsive to change and indeed to be at the forefront of the change process. At the same time, BP believes that the company should be a force for good in the world. This means contributing to the growth and development of the communities in the more than 100 countries in which it operates through social investment programs which complement and support its business presence. BP provides products that improve their quality of life – fuel for transport, energy for heat and light, and petrochemicals for use in everyday items such as textiles, packaging and health products.

More than merely making an impact at the community level, BP seeks to leverage the pace and scale of growth in its gas business nationally. This it does by enabling capability development among the local supplier community in a way that enhances their ability to support its growth agenda and enlisting the support of other operators, suppliers, state agencies, financial and learning institutions to create maximum socio-economic impact. Specifically, the objectives here are to deepen the extent of backward linkages derived from the upstream services sector through increased use of local inputs, components and intermediate products; expand the extent of forward linkages via primary markets for local services and products; and expand skills development, training and research capabilities at local institutions of tertiary education

BP plans to do more for the communities in which it is active by focusing its efforts on sustainable jobs and wealth creation. As one of the largest and most important companies in Trinidad and Tobago, BP Trinidad and Tobago’s (bpTT’s) goal is to make a lasting contribution to a dynamic and sustainable economy.

The rationale for changeNatural resources themselves do not bring sustainable wealth and growth to a country. Resource-rich developing countries have performed markedly worse in terms of GDP per capita growth than resource-poor countries. Countries unable to reduce natural resource dependency and diversify have a lower standard of living.

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bpTT reviewed its role in the development of Trinidad and Tobago approximately three years ago and recognized that it would be clearly better for both the company and the country if there were a better alignment of economic and social objectives.

The company determined at that point that if it did not take steps immediately to reduce the country’s relative reliance on its natural energy resources, the implications for the future would be grossly negative when these resources run out.

Fortunately for the company, its sustainable development thrust is in complete harmony with a declared program by the government of Trinidad and Tobago for the transformation of the country from “developing” to “developed nation” status by 2020. The government’s goal is to achieve a dynamic and sustainable economy through economic and human development. The country’s upstream services sector, in which BP Trinidad and Tobago is a key player, is uniquely positioned to play a pivotal role in achieving government goals, given its importance in the economy and its technological and innovative characteristics.

BP’s business caseTrinidad and Tobago is expected to double its share of the global energy business from three per cent (3%) currently, to about six per cent (6%) by 2010. bpTT, which currently accounts for over 60% of the country’s gas production, is fast approaching a 500-mboed (thousand barrels of oil equivalent per day) business.

bpTT’s objective is to leverage the unique opportunity presented by the scale and pace of growth of its gas business to enable development of a world-class upstream services sector. In so doing, the company believes that it will maximize the socio-economic impact of its activities.

To facilitate the development of a world-class upstream services sector with maximum socio-economic impact, the company has developed and is implementing a strategy for building capability in three areas: human skills development, business enterprise development and the growth of the local capital market.

The company has already started to build capability in its own national employee base and in the sector generally. The process involves deepening the national skills base beyond industry specific operational skills to include commercial, business development, managerial and leadership skills.

The initiative for developing business enterprise locally is being implemented primarily through the company’s “supply chain management” strategy. For example, the company would give preference to contractors and suppliers who share its aspiration and its vision and who demonstrate a like commitment. The company’s contracting strategies are designed to increase local capability development and thereby enable maximum value-added in the local energy service sector. Local value-added is important because it is the single metric which measures the direct contribution of a business to national GDP.

It is perceived by the company that the country would ultimately benefit by improving its global competitiveness and acquire sufficient capacity to export high-value, knowledge-

“Sustainable development is about human progress. It requires that we grow and improve the company together with the social and physical environment in which it operates. The sustainable development of a company like bpTT therefore can only be aligned with that of the community, indeed the country, in which it operates.”

-- Robert Riley, BP’s Chief Executive Officer

Riley also related this philosophy to his company’s aspiration which sees the company as “a pioneer within the global group, with a distinctive Trinidad and Tobago identity; delivering extraordinary business performance; participating in the development of the country, positively impacting the lives of all work for the company, every citizen of Trinidad and Tobago, and the global environment.”

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intensive skills and services instead of the traditional commodity products only. The initiative for developing local capacity in the country extends even to the company’s programmes for social investment and corporate social responsibility generally.

The objective ultimately is to build human, enterprise and capital market capability in areas that meet the company’s current business needs, while enabling the community to meet its future needs. As locally owned businesses thrive, their requirements for start-up, growth and development financing are expected to grow. This is expected to deepen the mix of financing options available in the local capital market beyond traditional bank financing. Ultimately it is hoped that the critical mass and diversity of financing needs will lead to various forms of equity and quasi-equity offerings in support of local business development.

bpTT is also pursuing its “sustainable development” objectives through collaboration with other stakeholders. The company took a lead in the formation of an alliance set up between business, professional and educational institutions in the oil & gas sector, which focuses on improving local participation in the sector. This alliance has been able to pull together support from a much wider base than bpTT alone could.

In summary, from a socio-economic perspective, a successful end-state might involve some, or all of the following outcomes:

In addition to its contribution to royalties, taxes and specialized employment generation, the upstream oil and gas industry would realize its potential for creating significant linkages with supply firms in other industrial sectors. These linkages would contribute to the diversification of the local economy.

A highly skilled and educated local workforce capable of operating, managing and leading globally competitive upstream service companies based in Trinidad and Tobago.

A culture of entrepreneurship, which continuously fuels the conceptualization, start-up, growth and development of globally competitive local businesses.

An efficient and competitive local capital market.

BPhttp://www.bp.com/

BP Trinidad and Tobagohttp://www.bptt.com/

Government of the Republic of Trinidad and Tobagohttp://www.gov.tt/

About the WBCSDThe World Business Council for Sustainable Development (WBCSD) is a coalition of 165 international companies united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance and social progress. Our members are drawn from more than 35 countries and 20 major industrial sectors. We also benefit from a Global Network of 40 national and regional business councils and partner organizations involving more than 1,000 business leaders globally.

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