Sakhalin Energy Investment Company Ltd. Sustainable … · 2018. 5. 23. · Sustainable Development...

www.sakhalinenergy.com

Sustainable Development Report

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Sakhalin Energy Investment Company Ltd.

Head Office: 35 Dzerzhinskogo St., Yuzhno-Sakhalinsk, 693020, RussiaTel.: +7 4242 66 2000; Fax: +7 4242 66 2801Moscow Office: 31 Novinskiy Blvd, Moscow, 123242, RussiaTel.: +7 495 956 1750; Fax: +7 495 956 1760

TO BE THE PREMIER ENERGY SOURCE

FOR ASIA-PACIFIC

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1. Message from the Chief Executive Officer . . . . . . . . . . . . 52. About the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.1. General 92.2. PrinciplesoftheReportContent

andQualityDefinition 102.3. DefiningMaterialandPriorityTopics

toBeIncludedintheReport 112.4. DefinitionoftheReportScope 142.5. PublicEndorsementoftheReport 143. Corporate Social Responsibility

and Sustainable Development . . . . . . . . . . . . . . . . . . . . . 153.1. Introduction 173.2. SakhalinEnergyCSRSystem 173.3. PerformanceStandards 193.4. SustainableDevelopmentPolicy 203.5. HSEandSocialPerformanceManagement 21

3.5.1. HSEandSocialPerformance ManagementSystem 213.5.2. ImpactAssessment 233.5.3. ChecksandAudit 24

4. About the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254.1. SakhalinEnergy 274.2. MainProductionResultsin2015 27

4.2.1. Assets 274.2.2. DevelopmentProjects 314.2.3. HydrocarbonProductionandExport 324.2.4. SanitaryProtectionandSafetyZones 34

4.3. OperationalExcellenceProgramme 365. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . 375.1. CompanyMission,Vision,Values,andPrinciples 395.2. CorporateGovernanceSystemandStructure 395.3. CorporateGovernanceModel 41

Content5.4. CorporateCulture 445.5. CodeofConduct 455.6. RiskManagement 465.7. Anti-BriberyandCorruption 506. Economic Impact Management . . . . . . . . . . . . . . . . . . . . 516.1. ImportanceoftheSakhalin-2Projectforthe

RussianFederationandtheSakhalinOblast 536.2. FinancialBenefitstotheRussianFederation

andtheSakhalinOblast 536.3. RussianContent 556.4. SupplyChainManagement 566.5. VendorDevelopmentProgramme 587. Stakeholder Engagement Management . . . . . . . . . . . . . 597.1. EngagementStrategy,Principles,

Mechanisms,andTools 617.2. StakeholderEngagementPerformancein2015 627.3. EngagementwithPersonnel 637.4. LocalCommunitiesEngagementthrough

theCompanyInformationCentres 647.5. EngagementwiththeSakhalin

IndigenousMinorities(SIM) 657.6. EngagementwithNon-Governmental

andNon-ProfitOrganisations 687.7. EngagementwithJapaneseStakeholders 687.8. EngagementwithCustomers 697.9. EngagementwithStateandLocal

GovernmentAuthorities 707.10. InternationalandRegionalCooperation 718. Environmental Impact Management . . . . . . . . . . . . . . . . 738.1. IndustrialEnvironmentalControl 75

8.1.1. ImpacttotheAtmosphericAir 758.1.2. ImpactonWaterBodies 76

8.1.3. WasteManagement 778.1.4. Energy 798.1.5. GreenhouseGasandOzone-Depleting SubstanceEmissions 808.1.6. UtilisationofAssociatedGasinProduction 808.1.7. EnvironmentalProtectionCosts andPaymentsfortheNegativeImpact 81

8.2. EnvironmentalMonitoringandPreservingBiodiversity 828.2.1. SoilMonitoring 838.2.2. RiverEcosystemsMonitoring 848.2.3. FloraandVegetationMonitoring 868.2.4. WetlandsRecoveryMonitoring 878.2.5. ProtectedBirdSpeciesMonitoring 888.2.6. Steller’sSeaEagleMonitoring 898.2.7. OffshoreEnvironmentandBiotaMonitoring 908.2.8. BallastWaterControl 918.2.9. GrayWhalesMonitoring 92

8.3. PipelineRight-of-WayMaintenance 948.4. OilSpillPreventionandResponsePreparedness 95

8.4.1. GeneralInformation 958.4.2. OiledWildlifeRehabilitation 96

9. Social Impact Management . . . . . . . . . . . . . . . . . . . . . . . 979.1. Personnel:ManagementandDevelopment 99

9.1.1. ApproachestoHRManagement andHRPolicy 999.1.2. GeneralInformation 1009.1.3. RecruitingPersonnelandOnboarding NewEmployees 1029.1.4. RemunerationandBonusSystem 1039.1.5. SocialGuarantees,Benefits andCompensations 104

9.1.6. IndividualPerformanceReview oftheEmployees 1079.1.7. StaffLearningandDevelopment 108

9.2. LabourSafetyandProtection 1179.2.1. GeneralInformation 1179.2.2. IndustrialSafety 1199.2.3. SafetyCulture 1209.2.4. RoadSafety 123

9.3. OccupationalHealth 1259.4. HumanRights 127

9.4.1. HumanRights:Principles andManagementSystem 1279.4.2. GrievanceMechanisms 1289.4.3. GrievanceHandlingin2015 1299.4.4. HumanRightsTraining 1309.4.5. MonitoringHumanRights 130

9.5. SocialInvestmentsandContributionstoSustainableDevelopmentoftheHostRegion 1319.5.1. SocialInvestmentsandSustainable Development:SakhalinEnergy’s PrinciplesandApproaches 1319.5.2. Children’sSafety(WhattoDoinEmergency SituationsProgramme) 1339.5.3. SakhalinRoadSafetyCouncil 1359.5.4. EnergySocialInitiativesFund 1369.5.5. HurryUpforGoodDeeds 1379.5.6. KorsakovSustainableDevelopment PartnershipCouncil 1389.5.7. VictoryDayProject 1389.5.8. SakhalinIndigenousMinorities DevelopmentPlan 139

10. 2016 Plans and Development Strategy up to 2020 . . . . 143

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MessagefromtheChiefExecutiveOfficer

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147Appendix1. GRIGuidelinesComplianceTable(Rev.4.0.) 148Appendix2. CommentsandSuggestionsofStakeholders

onIndividualAspects,Indicatorsand/orProgrammes,andCompany’sResponseandCommitments 157

Appendix3. TheListofParticipantsofDialogueswithStakeholdersforPreparationofthe2015SustainableDevelopmentReport 165

Appendix4. UsefulLinks 167Appendix5. CompanyInformationCentresList 169Appendix6. FeedbackForm 170Appendix7. CertificateofPublicEndorsement 171Appendix8. ConclusionontheReviewofSakhalin

Energy’s2015SustainableDevelopmentReportbytheRUIECouncilforNon-FinancialReportingforthePurposeofPublicEndorsement 172

Appendix9. Abbreviations 176

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AbouttheReport

Dearcolleagues,

IamhappytopresenttheSakhalinEnergy2015SustainableDevelopmentReport.

Aswithpreviousreports,thisdocumentwaspreparedincompliancewiththeGlobalReportingInitiative(GRI)inter-nationalstandards.WhilecreatingtheReport,wetriedtotakeintoaccount,tothefullestextent,theopinionsofallourstakeholders.

DespitetheeconomicsituationinRussiaandintheworld,itwasanotheryearofsuccessforSakhalinEnergy.

Safetyremainsatoppriorityforthecompany—technological,economic,oradministrativedecisionismadeonthebasisofathoroughassessmentofallsafetyaspects.

Wepayutmostattentiontothereliabilityandintegrityofourassets.ThepreventionofincidentsisthemaintaskthatSakhalinEnergysetsintheareaofsafety.Inthisregard,successispossibleprimarilyon

theconditionthateachemployeehasaresponsibleattitudetosafety,activelyparticipatesintheEffectiveObservationandInterventionProgramme,andcompany’sleadershipunconditionalcommitmenttosafety.

In2015,thecompanyexceededitsproductiontargetsandshipped57cargoesofoiland166cargoesofLNG(whilethetargetfigureswere51and162cargoes,respectively).

Thankstoincreasingreliability,thecompanyreducedunplannedproductionlossesfourfoldincomparisonwiththepreviousyearandthreefoldascomparedwiththeaverageindicatorfortheperiodfromthebeginningofitsoperations.In2015,duringthefirstmajorturnaroundcampaignattrain1oftheLNGplantwecompletedthemodificationsoftheequipmentwhichresultedina1to2%furtheroutputincreaseattrain1.Robustat$40corporateprogrammehelpedthecompanytooptimisethecoststotherequiredlevelwithoutaffectingsafetyandproduction.

SakhalinEnergywasabletoachievethissuccessthankstoitspersonnel.Thecompanycreatesanenvironmentforprofessionalgrowthanddevelopmentofitsemployeesandiscommittedtoprovidinganattractingandcompetitiveemployeevaluepropositionpackage.

Anintegralpartofourworkisengagementwithstakeholders:shareholders,customers,contractors,representativesofgovernmentauthorities,andcommunities.

SakhalinEnergyeffectivelycooperateswiththeSakhalinOblastGovernment,success-fullysolvingcomplexproblemsthatrequirecoordinationamongthevariousparties.

Sincewewereabletooptimiseworkinallareas,thefinancialperformanceofthecompanyremainedatahighlevelin2015,

1.MessagefromtheChiefExecutiveOfficer

whiletheproportionoftheSakhalinOblastbudgetrevenuescomingfromSakhalinEnergywereover60%.

Inspiteofthechallengingeconomicsituation,thecompanydoesnotreduceitsexpendituresonsocialprogrammesbutcontinuestomeetallitscommitments.

Weachievedalotin2015andcontinuemovingforward.Iamconfidentthatthelong-termgrowthofthecompany,and,aboveall,theimplementationoftheLNGTrain3project,willstrengthenRussia’spositionasaleadingenergysupplier,bringeconomicbenefitstotheRussianFederationandtheSakhalinOblast,andcontributetofurtherstrengtheningofenergysecurityintheAsia-Pacificregion.

Regards,

RomanDashkov

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SakhalinEnergytreatssustainabledevelopmentreportingasacorporategovernancetoolthatsystematisesitsnon-financialefforts(environmental,socialandotherprogrammesandinitiatives)andimprovesthequalityofcorporategovernance,whichincreasestheoverallsustainabilityofthecompany.AnopenreportingculturedemonstratesthecompanycommitmenttoCSRandSDprinciplesandconceptsandprovidespubliclymeaningfulinformationabouttheeconomic,environmental,socialandethicalaspectsofthecompanyactivitiesandperformance.

CSRandSDreportingbenefitsthecompanyinanumberofways,includingopportunitiesto:

• identifythestakeholders`opinionsandexpectationsofthecompanyactivitiesandclarifythecompanyCSRandSDstrategy;

•demonstratethatthecompanyisawareofandtakesintoaccountthestakeholders’opinions,creatinglong-termtrustaswellastransparentandconstructivecooperation;

• serveasaneffectivetoolforidentifying,preventing,andmitigatingnon-financialrisks,creatingasustainablereputation(asaresponsibleemployer,partner,etc.);

•createnewopportunitiesandareasofinvolvementforthecompanyinproduction,environmental,andsocialspheres;

• identifyCSRandSDperformanceindicators,evaluateandapplythemtoenhancethequalityofmanagerialdecisionsatalllevels;

•helptocomplywiththeprincipleofcontinuousimprovementandstimu-latethesubsequentimprovementof

internalandexternalprocessesinthecompany;

• increasethecompanycompetitiveness.

TheReportdescribesthecompanySDperformancein2015andpresentsmate-rialtopics,issues,andindicatorsofthecompanyeconomic,environmental,andsocialperformance,includingexecutives’appraisalsofthecompanyperformanceintheperiodunderreviewaswellasthestakeholders’areasofattention.

ThetargetaudienceoftheReportisbothinternalandexternalstakeholderslistedinSection7.2StakeholderEngagementPerformancein2015.

TheReportispreparedinaccordancewiththeproceduresandscheduleapprovedbytheCommitteeofExecutiveDirectors.AdedicatedworkinggroupisestablishedtopreparetheReport.Thisgroupincludesmanagersandspecialistsfromamajorityofthecompanydivisionsresponsibleforparticularaspectsofcorporategovernanceandproductionaswellasforeconomic,social,andenvironmentalimpacts.TheReportisapprovedbytheCommitteeofExecutiveDirectors.

ThisReporthasbeenpreparedinac-cordancewiththeGRIG4SustainabilityReportingGuidelines(Core).

TheReportispostedonthecompanywebsiteanddistributedinSakhalincommunities(throughthecompanyinformationcentresanddistrictlibraries),andamongkeystakeholders.

Thecompanyvaluesopinions,suggestionsandcommentsfromallstakeholdersonthisReport.Toshareyouropinion,youmay:

• fillouttheFeedbackFormattachedtotheReportandsentittothespecifiedaddress;

2.1.General

2.AbouttheReport

• usetheFeedbackFormonthecompanywebsite(www.sakhalinenergy.com);

• fillouttheFeedbackFormatoneofthecompanyinformationcentres(seeAppendix5CompanyInformationCen-tresList).

Material topics and aspects, whicharereflectedintheReport,andtheirprioritywereidentifiedinclosecooperationwiththecompanystakeholders.

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2.2.PrinciplesoftheReportContentandQualityDefinition

2.3.DefiningMaterialandPriorityTopicstoBeIncludedintheReport

ThecompanyacknowledgesandusesthefollowingSDreportingprinciplespresentedonthePrinciplesofReportContentandQualityDefinitionchart.

Materialtopicsofthecompanyactivities,whicharereflectedinthe2015Report,andtheirprioritywereidentifiedincloseco-operationwithallkeystakeholdersofthecompany,including:

• shareholders;• lenders;• governmentauthorities;• customers;• personnel;• contractors;• community;• Japanesestakeholders;• internationalorganisations;• NGOsandothernon-profitorganisa-

tions;• massmedia;• otherstakeholders.

TheReportpaysparticularattentiontosafetyasakeypriorityofthecompanyproduction,economic,environmentalactivities,andsocialperformance.

Thecompanyusedthemostpreferredengagementmechanismsandinforma-tionexchangechannelsforinteractingwitheachgroupofstakeholders,takingintoaccountthepracticeofrelationships(seeSection7StakeholderEngagementManagement).Representativesofstake-holderswereinvolvedindefiningtheRe-portcontentbymeansof:

•electronicsurveysandsurveysatvari-ousevents;

•personalinterviews;

•dialoguemeetingswithexternalstake-holders;

•discussionswiththecompanyperson-nel.

Two rounds of dialogue meetings were traditionally held while preparing the Report, in correspondence with the АА1000SES international standard. The stakeholder representatives were able to ask questions about the company activities, receive answers and express their opinions on the materiality of any aspect of Sakhalin Energy’s activities in real time (see Appendix 2 Comments and Suggestions of Stakeholders on Individual Aspects, Indicators and/or Programmes, and Company’s Response and Commitments).

Inaddition,indefiningtheReportcontent,thecompanytookintoaccountthefollowing:

• systematicmediaanalyses;

• annualpublicopinionsurveysandanalysisofthesubjectsoftheinquiriessubmittedtothecompany(seeSection7StakeholderEngagementManagement);

• recommendationsandcommentsregardingthe2014Sustainable

DevelopmentReportandrecommen-dationsoftheRUIENon-FinancialReportingCouncilthatconductedthepublicendorsementofthe2014Report.

Thecompanyhasalsoanalysedthematerialityofthetopicspresentedinthenon-financialreportspreparedbyRussianandforeigncompaniesinaccordancewithbestinternationalpractices.DetailedinformationontheresultsofengagingstakeholderswhilepreparingtheReport,includingmeetingsandconsultations,surveys,etc.,ispresentedintheMaterialTopicstoBeIncludedinthe2015ReportBasedonStakeholders’OpinionsandMostPriorityTopicstoBeIncludedinthe2015ReportBasedonStakeholders’Opinionstables.

Stakeholder Engagement

Sustainable Development Context

Balanced Approach Compatibility

Completeness Accuracy

Materiality Timeliness

Clarity Reliability

Report content and quality definition

2.AbouttheReport

Principles of Report Content and Quality Definition

Commentsandsuggestionsofthestakeholdersconcerningspecificaspects,indicators,and/orprogrammesofthecompanytobeincludedinthe2015Report

aswellascorrespondingresponseandcommitmentsofSakhalinEnergyarelistedinAppendix2CommentsandSuggestionsofStakeholdersonIndividualAspects,

Indicatorsand/orProgrammes,andCompany’sResponseandCommitments.

Subjects/Aspects Number of answers

Included in the Report (section of the Report)

Mainproductionresultsanddevelopmentprojects 113 4.2

Environmental,health,andsocialimpactassessmentoftheSakhalin-2project 106 3.5.2

Stakeholderengagementperformancein2015 96 7.2—7.10

ImportanceoftheSakhalin-2projectfortheRussianFederationandtheSakhalinOblast 95 6.1

FinancialbenefitstotheRussianFederationandtheSakhalinOblast 94 6.2

GeneralinformationaboutSakhalinEnergyandtheSakhalin-2project 90 4.1

Oilspillpreventionandresponsepreparedness 89 8.4

Mission,vision,values,andprinciplesofthecompany 88 5.1

Industrialenvironmentalcontrol 84 8.1

EngagementoftheRussianparty,contractingandprocurementmanagement,vendordevelopmentprogramme 84 6.3—6.5

Health,safety,environmental,andsocialperformancemanagementsystem 82 3.5.1

Personneldevelopmentandtraining 81 9.1

Hydrocarbonproductionandexport 80 4.2.3

Laboursafetyandprotection 73 9.2

Most Priority Topics to Be Included in the 2015 Report Based on Stakeholders’ Opinions

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Material Topics to Be Included in the 2015 Report Based on Stakeholders’ Opinions

Topics Substantiation

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Mainproductionresultsanddevelopmentprojects

SakhalinEnergyaimstobetheprimerenergysourceandconductsitsbusinessonthebasisofefficient,reliable,andsafeproduction,aswellasaresponsibleattitudetowardsocialandenvironmentalissues.

4.2

Oilspillpreventionandresponsepreparedness

Preventionofoilspillsandconstantpreparednessforoilspillresponse(OSR)aretheabsolutepriorityforSakhalinEnergy.Thecompanyusesthecomprehensiveapproachtohandlethisimportanttask.

8.4

Corporategovernance Corporategovernanceistheprocessofensuringtheproperorganisation,managementandcontrolatSakhalinEnergy.GovernanceiscarriedoutthroughcooperationbetweenSakhalinEnergyseniormanagement,shareholders,andtheRussianparty.Theydefinetheareasofactivity,establishresponsibilities,andevaluatetheresultsachieved. 5

Riskmanagement SakhalinEnergyconsidersthateffectiveriskmanagementisofgreatimportanceforachievingcompanygoals.Theriskmanagementsystemofthecompanyisaimedatmaximisingopportunitiesorminimisingnegativeeffectsofidentifiedrisks,includingrisksoffailuretoreachthegoals,risksoflosses,andnegativefactorsaffectingsuchareasasoperationalexcel-lence,respectforhumanrights,labourrelations,health,safetyandenvironment,anti-briberyandanti-corruption,andothers.

5.6

Impactassessmentofthecompanyactivities

Thecompanyiscommittedtomakinganimpactassessmentpriortoanynewactivitiesorsignificantchangesinexistingprojects.Thisisthebasisoftheduediligenceapproachandallriskmanagementprocesses.SakhalinEnergyseekstoavoidorreducetheimpacttothelowestpossiblelevelortocompensateforitbytakingappropriatemeasures. 3.5.2

HSEandsocialperformancemanagementsystem

ThecompanyusesasystemicapproachtohandleHSEandsocialperformanceissues,whichenablescontinuousimprove-mentinthisarea.ThecomprehensiveHSEandSPmanagementsystemdefinesthecontrolsusedbySakhalinEnergytohandlehazardoussituationsandrisks. 3.5.1

Contractingandprocurementmanagement

TheSakhalin-2projectisoneofthemostcomplexprojectsundertakeninrecentdecadesbytheglobaloilandgasindustry.Effectivemanagementofcontractingandprocurementiskeyfortheprojecttobesuccessful.

6.4

Stakeholderengagement

Thecompanyconsidersregularandmeaningfulengagementwithstakeholderstobeanimportantcomponentofitssuccess-fulbusinessoperations.

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Economicimpactmanagement

TheRussianFederationandtheSakhalinOblastreceivenumerousbenefitsfromtheSakhalin-2project,includingfinancialandtaxrevenuestothebudgetsoftheRussianFederationandtheSakhalinOblast,newopportunitiesfordevelopingnewtechnologies,experienceinmanagingcomplexhigh-techprojects,contractswithRussiancompanies,promotionofemploy-mentandhumanresourcesdevelopment,etc.

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Environmentalimpactmanagement

Duetoitsscopeandcomplexity,theprojectcanpotentiallycauseenvironmentalimpacts,andSakhalinEnergyiscommittedtodealingsystematicallywiththeseimpactssoastomitigaterisksandpreventnegativeconsequences.Arrangingandimplementingindustrialenvironmentalcontrolandmonitoring,aswellasconservingbiodiversity,areessentialcomponentsoftheenvironmentalimpactmanagementsystem.

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Socialimpactmanagement

Thecompanyanditsstakeholdersattachspecialimportancetosocialimpactmanagement,suchasHRmanagementanddevelopment,respectforandpromotionofhumanrights,occupationalsafetyandhealth,socialinvestments,andcontributiontothesustainabledevelopmentofthehostregion. 9

2.AbouttheReport

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TheRUIENon-FinancialReportingCoun-cilwasengagedtoprovideexternalpub-licendorsementofSakhalinEnergynon-financialreport.ThisCouncilissuesindependentexpertevaluationsatthehighestprofessionallevelintheRussianFederation;(seeAppendices7CertificateofPublicEndorsement,and8ConclusionontheReviewofSakhalinEnergy2015

TheReportcontainsinformationontheactivitiesofallstructuralunitsandas-setsofthecompanyinallareasrelatedtosustainabledevelopment,includingeconomic,environmental,andsocialimpactsthatoccurbothwithin(inter-

2.4.DefinitionoftheReportScope

2.5.PublicEndorsementoftheReportSustainableDevelopmentReportbytheRUIECouncilforNon-FinancialReport-ingforthePurposeofPublicEndorse-ment).

Theprimaryfocusofpublicendorsementisthematerialityandcompletenessoftheinformationonthecompanyperfor-mancedisclosedinthenon-financial

reportaccordingtothebestpracticesofconductingbusiness.

nalboundaries)andoutside(externalboundaries)thecompany.SeeMaterialTopicstoBeIncludedinthe2015ReportBasedonStakeholders’Opinionstableabove.

CorporateSocialResponsibilityandSustainableDevelopment

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In 2015 Sakhalin Energy won thenationalcontestoftheRussianUnionofIndustrialistsandEntrepreneurs(RUIE)—LeadersofRussianBusiness:DynamicsandResponsibility–2014—inthemainnominationBusinesswithOutstandingSocialResponsibility.

3.1.Introduction

3.2.SakhalinEnergyCSRSystem

SinceSakhalinEnergywasfounded,corporatesocialresponsibility(CSR)hasbeenamechanismforimplementingcorporatestrategytoimprovethecom-panyroleinsocietyanditsimageandguidethecompanybusinessactivitiesincompliancewiththestandardsofsus-tainabledevelopmentandgoodbusinessethics.ItisanintegralpartoftheSakhalinEnergyproductionandbusinessactivitiesandstrategicdevelopmentplan.Duetohightransparencyandactivestakeholderengagement,corporategovernanceatSakhalinEnergyhasgraduallyprogressedtomanagingthecompanyasanopensystemcontinuouslyexposedtoimpactsfromtheoutsidebusinessenvironment.

CorporatesocialresponsibilityappliestoallactivitiesofSakhalinEnergy.Thisapproachissupportedbyitsmission,vision,andvalues.Practicalaspectsarereflectedandapprovedinanumberofcorporatedocuments(seeSection5CorporateGovernance),including:

• StatementofGeneralBusinessPrinci-ples;

• CodeofConduct;

• SustainableDevelopmentPolicy;

• HumanRightsPolicy;

• Health,Safety,Environment,andSocialPerformancePolicyandCommitment.

Thecompanyappliesaconsiderablepartoftherequirementsandprinciplesdefinedinthesedocumentstoitssuppliersandcon-tractors,inaccordancewiththerequire-mentsofthenewG4GRIGuidelines.Inadditiontospecialcontractualprovisionsandspecificrequirements,thecompany

Thecompanyhasdevelopedasystemtoaccountforandcontrolexternalproduc-tion,financial,technological,social,andenvironmentalimpacts,whichallowsthecompanytomitigatealltypesofrisksandenhanceitsoverallsustainability(seeSection5.6RiskManagement).

arrangestrainingsessionsandworkshopstoensuretheseprinciplesareeffectivelyintegratedintotheworkofitscontractorsandtooverseetheircompliance(seeSec-tion6.4SupplyChainManagement).

AtSakhalinEnergy,CSRtrendsandindicatorsareregularlyevaluatedbyauthorisedpersonnelandseniormanagementwithinthecompanysystemofinternaloversightandaudit,aswellasbylenders,theiradvisers,andindependentthird-partyauditors.Assessmentsarealsodonethroughstakeholderengagements:

• publicconsultations;

• workshopsandtopicaldiscussions;

• opinionsurveys;

• consultationsatinformationcentressetupbythecompanyallovertheSakhalinIsland;

• grievanceaddressinginaccordancewiththeestablishedsystem,etc.

Fordetails,seeSection7StakeholderEngagementManagement.

Thecompanyregularlyprovidesthegeneralpublicwithreportsonsustainabledevelopmentandfulfilmentofcommit-ments.TodefinetheReportcontentandmaterialtopics,consultationswithallstakeholdersareconducted.In2015,thestakeholderengagementprocessfordefiningmaterialtopicsoftheReportwasconsiderablyextendedaspartofthefinaltransitiontotheG4versionoftheGRIGuidelines(seeSection2AbouttheReport).

3.CorporateSocialResponsibilityandSustainableDevelopment

Sakhalin Energy won the national contest of the Russian Union of Industrialists and Entrepreneurs (RUIE) — Leaders of Russian Business: Dynamics and Responsibility – 2014 — in the main nomination Business with Outstanding Social Responsibility.

The awards ceremony took place in Moscow on 19 March 2015 during the plenary session of the RUIE Congress held as part of the 8th Annual Week of Russian Business.

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3.3.PerformanceStandardsRussiancompaniesrefertoCSRbusiness,social,andenvironmentalactivitiesdefinedbylegislation,aswellasarangeofadditionalprogrammesandresponsibilitieswithregardtoemployeesandsociety.Theresultsarereflectedinvariousnon-financialreportsonpracticalactivities.Anumberofcompaniestakeonadditionalrespon-sibilitiesbeyondtheminimumsetbylegislationbasedontheirstrategicandregionalprioritiesandtheirlevelofcorporateculture.SakhalinEnergyisnoexception.ItoperatesinaccordancewiththebestinternationalstandardsestablishedwithregardtoCSR.

Manyinitiativesandstandardshavebeenestablishedworldwideintheareaofenvironmentalandsocialresponsibility.TheleadingonesaretheUNGlobalCompactandtheCSRcentresallovertheglobe,whichbringtogethercom-mercialandnon-commercialentities,theGlobalReportingInitiative(GRI),theАА1000SES,i.e.theStakeholderEngagementStandard,theInternationalFinancialCorporation(IFC)Standards,aswellasISO26000:2010GuidanceonSocialResponsibilityapprovedinMarch2013andmanyothers.

In2009,SakhalinEnergyjoinedtheUNGlobalCompact(UNGC)andpledgeditscommitmenttoconsistentlyfollowtheUNGC’sprinciplesconcerninghumanrights,labour,environment,andanti-corruption.In2011,SakhalinEnergybecamethefirstand(asperbeginningof2016)theonlyRussiancompanychosenbytheUNtoparticipateinitsnewSustainableCorporateLeadershipplatform—theUNGlobalCompactLEAD,establishedintheframeworkoftheUNGlobalCompact.LEADcompa-niesmustperformcertainactivitiesintheenvironmental,socialprotection,andmanagementspheresandcreatenewCSRstandards.

ThemaininternationalstandardsthatSakhalinEnergyappliesareasfollows:

• ISOstandards(environmentalmanagement,qualitycontrol,health,andsafety);

•EuropeanUnionandUnitedNationsstandardsanddirectives(environ-ment,humanrights,indigenouspeople,etc.);

•WorldBankandInternationalFinanceCorporationstandards(governancesystems,riskandimpactassessment,biodiversity,publichealth,culturalheritage,indigenouspeople,involuntaryresettlement,stakeholderengagement,grievancemanagement,etc.);

•GRIandAA1000SESstandards(non-financialreporting,stakeholderengagement).

PLANNING

IMPROVEMENT IMPLEMENTATION

CONTROL AND ANALYSING

Company’s CSR System

• Statement of General Business Principles

• Code of Conduct• Sustainable Development Policy• Human Rights Policy• Commitments and Policy on

Health, Safety, Environment, and Social Performance

• Defining the Standards:Russian and International

• Risks and Impacts Assessment• Health, Safety, Environment,

and Social Action Plan (HSESAP)• HSE and SP Standards• HSE and SP Plans

• Monitoring• Audit and Checks• Reporting• Tracking Through Automatic

Monitoring System (Fountain)• Public Opinion Survey

Implementation Mechanismsare according to:

• Public Consultation and Disclosure Plan

• Community Grievance Procedure• HSE and SP Plans and Other

POLICIES


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3.4.SustainableDevelopmentPolicy 3.5.HSEandSocialPerformanceManagement

TheSustainableDevelopmentPolicyhasbeenpursuedsincethefoundationofSakhalinEnergybyincorporatingSDprinciplesintothecompanybusinessstrategies,plans,andprocesses.AccordingtotheUNdefinition,sustainabledevelopmentisaboutensuringthattheneedsofthepresentgenerationaremetwithoutcompromisingtheabilityoffuturegenerationstomeettheirownneeds.Initspractice,SakhalinEnergyreliesuponthisdefinition.Thisapproachpresumesandensureseconomiceffectiveness,environmentalsafety,socialjustice,andethicalbehaviourofthecorporationanditsemployees,combinedwithanoverallreductionofhumanimpactontheecosphere.Thisisimplementedviastrong,transparent,constructive,andsystematiccooperationandtwo-waycommunicationwithallthestakeholders.

In2015,SakhalinEnergyconsistentlyimplementedtheprovisionsoftheSus-tainableDevelopmentPolicy—thepublicstrategicdocumentapprovedbytheCom-mitteeofExecutiveDirectorsin2003.ThePolicysetsforththecompanyprinciples,directions,andresponsibilitiesinthisarea.

Thecompanypursuesthegoalsofnotharmingpeople,protectingtheenviron-ment,andcontributingtosustainabledevelopment.ThisattitudeisbeneficialtotheresidentsoftheSakhalinIslandandotherkeystakeholders.TheRussianFederationandtheSakhalinOblastreceivenumerousbenefitsfromtheSakhalin-2project,includingbillionsininvestments,increasinglocalemployment,contractsforRussiancompanies,etc.(seeSection6.1ImportanceoftheSakhalin-2ProjectfortheRussianFederationandtheSakhalinOblast).Duetoitsscopeandcomplexity,theprojectcanpotentiallycauseenviron-mentalandsocialimpacts,andSakhalinEnergyiscommittedtodealingsystematicallywiththeseimpactssoastomitigaterisksandpreventnegativeconsequences.Thecompanyusesapreventiveapproachwithastrongfocusonproactiveriskmanagementandimpactassessment(seeSection5.6RiskManagement).

Health,Safety,Environment,SocialPerfor-mance,andIndustrialSafetyManagementisanintegralpartoftheentirecorporategovernancesystemandisregulatedby

ThemainprovisionsofthecompanySustainableDevelopmentPolicyareasfollows:

•SakhalinEnergywillcarryoutitsbusinessresponsiblyandefficientlysoastodeliverarobustprojectthatwillmaximisebenefitstotheRussianFederation,theSakhalincommunity,andshareholders.

•SakhalinEnergywillcontributetothepresentandfutureneedsofsocietyonSakhalinIsland,whilekeepingabalancebetweeneconomicdevelop-ment,environmentalprotection,andsocialresponsibility,besidetakingintoaccountculturaldiversity.

•SakhalinEnergywillworkwithallstakeholderstoidentifywaystocontributetothewider,long-termeconomic,environmental,andsocialbenefitsintheSakhalinOblast.

Tocomplywiththeabovementionedprinciples,SakhalinEnergy’scommit-mentsare:

anumberoffundamentaldocuments,including:


• Health,Safety,Environment,andSocialPerformancePolicyandCommitments;

• Health,Safety,Environment,andSocialPerformanceManagementSystem;

• Health,Safety,Environment,andSocialPerformanceActionPlan;

• HydrocarbonFlaringCommitment;

• StatementofSakhalinEnergyInvest-mentCompanyLtd.IndustrialSafetyPolicy;

• RegulationsontheIndustrialSafetyManagementSystem;

• BusinessContinuityPolicy;

• BusinessContinuityManagementSystemManual.

• embedSDprinciplesintoalltheregu-latorydocumentsandstandardsofthecompany;

• ensureongoingcompliancewiththeHSEandSocialPerformancecommit-ments,aswellasregulatorydocumentsandstandardsstipulatedintheHealth,Safety,Environmental,andSocialManagementSystemandActionPlan;

• informandengagewithourstake-holdersonourperformanceandseekfeedback;

• developandimplementsocialinvest-mentandsustainabledevelopmentpro-grammesthatarelinkedtothecompanystrategy,andhaveclearproceduresandcontrols;

• developstrategicpartnershipswithstakeholderstomaximisethepositiveimpactofcommunitydevelopmentpro-grammes;

• maintainnon-financialreportinginaccordancewiththeGlobalReportingInitiative(GRI)standardsandprinciples;

• observeandpromotetheprinciplesoftheUNGlobalCompact(UNGC);

• participateintheGlobalCompactLEADprogrammeoftheUNGlobalCompact,leadingthesustainabledevelopmenteffortsoftheinternationalcommunity.

TheabovedocumentswereapprovedbytheCommitteeofExecutiveDirectors,signedbytheSakhalinEnergyChiefExecutiveOfficer,andcommunicatedtothestaffandcontractors.

ThiscomprehensiveapproachappliedbythecompanytotheHSEandSPmanagementsystemisdesignedtoensurecontinuousimprovementinthisarea.Thecompanyintegratedhealth,safety,environment,andsocialperformancemanagementsystemdescribesthecontrolswhichSakhalinEnergyutilisestomanageimpactsandrisks.Thesystemisappliedtoallassets,projects,andoperations,includingthosecarriedoutbycontractors.SakhalinEnergyconsidersthemanagementofsuchrisksascriticaltoitsbusinesssuccessandregularlyupdatesandoptimisesthismanagementsystem.

ThesystemisbasedonthePlan-Do-Check-ActmethodologyofISO14001andOHSAS18001standards.

3.5.1. HSE AND SOCIAL PERFORMANCE MANAGEMENT SYSTEM


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The commitments adopted by the com-pany on the basis of the ESHIA that was conducted before phase 2 construction began are included in the Health, Safety, Environment, and Social Action Plan (hereinafter — the Plan). The development of the Plan was necessary in order to obtain a loan for Sakhalin-2 phase 2 implementation.

The Plan was developed in compliance with the Russian legislation and international standards, including World Bank Policies and Directives, International Finance Corporation standards, etc. The Plan describes the HSE and Social Performance Management System, provides detailed information on the actions to be taken to minimise potential adverse impacts, the monitoring, the activities in environmental and social areas, as well as on all the internal and external standards regulating the company HSE and SP activities. The Plan has been approved by project lenders. The fourth edition of the document was approved in 2014 and published in 2015.

The Plan was posted on the company website (in Russian and English) and is available at company information centres and libraries of the towns located in the vicinity of the company assets. Some of these materials are available in Japanese for stakeholders in Japan. The implemen-tation of the Plan is regularly monitored by the company, lenders and their advisors, the results are published on the company website (www.sakhalinenergy.com).

Health, Safety, Environment, and Social Performance Management System

ThePlan-Do-Check-Actmethodologyisappliedinorderto:

• SetobjectivesandestablishproceduresrequiredforachievingthedesiredresultsinaccordancewiththecompanyHSEandSPPolicy.Thisincludesadefinitionoflegalandotherrequirements,iden-tificationofhazards,riskandimpactassessment,determinationofcontrols,anddevelopmentofobjectivesandannualimprovementplans.

• Introduceprocedures,includingorganisation,awareness,training,andcompetenceprocesses,contractormanagement,participationandengagement,changemanagement,andemergencypreparednessandresponse;also,operationalcontrolofoccupationalhealth,personalsafety,assetintegrity,andprocesssafety,transportation,environmentalprotection,andsocialperformance,includingculturalheritage,landacquisition,resettlementandsupplementalassistance,plannedpublicconsultationsandinformationdisclosure,addressingofgrievances,andsocialinvestments.

• Monitoranddetermineprocesseffectivenessincompliancewithgiven

tasksaswellaslegalandotherrequire-ments,reportingresults,incidents,andnon-compliance;takecorrectiveandpreventivemeasures;andconductHSEauditsatthecompanyassetsandfunctionalunits.

• ReviewthemanagementsystemonaregularbasisandtakemeasuresforcontinuousimprovementofthecompanyHSEandSP.

ThegovernancestructureoftheHSEandSPManagementSystematSakhalinEnergyincludestheHSEManagementCommitteewhichoverseesoverallcomplianceinthissphere.TheCommitteeischairedbythecompanyCEO.TheHSEGeneralManagerreportstotheCEOandoverseesthedevelopment,implementation,perfor-mance,andmonitoringofthemanagementsystem.HSEteamshavebeenformedinthecompanystructuralandfunctionalunitstoensurecompliancewithindustrialsafetyandHSEstandards.

Thecompanyiscommittedtomakinganimpactassessmentpriortoanynewactivitiesorsignificantchangesinexist-ingprojects.Thisisthebasisoftheduediligenceapproachandallriskmanage-mentprocesses.

Impactmanagementisaprocessofpre-dictingandmanagingthefutureprojectactivitiesbyimprovingprojectsolutions,takingmeasurestargetedatminimisingpotentialadverseimpactsandincreasingbenefitsfromthecompanyactivities.

SakhalinEnergyseekstoavoidorre-ducetheimpacttothelowestpossiblelevelortocompensateforitbytakingappropriatemeasures.Thefollowingmeasuresaretakenwhenanypotentialnegativeimpactisidentified:

• avoid;• prevent;• decrease;• compensate;• useexperiencetoreducetheprobability

ofoccurrence.

3.5.2. IMPACT ASSESSMENT Anintegralpartofanyimpactassessmentcarriedoutbythecompanyareconsul-tationswiththestakeholderstoinformthemabouttheplannedactivities,identifyconcerns,takeintoaccounttheiropinions,anddiscusspossiblemeasurestomanagetheimpact.

Theresultsofpreviousenvironmentalandsocialimpactassessments(includingtheresultsofcomprehensiveandstrategicenvironmentalassessmentsaswellastherequiredadditionalandspecialstudies)aretakenintoaccountinthecompanystandards,whileitsongoingactivitiesarebasedonrelevantplansandprogrammes.

Theimpactassessmentresultsarepostedonthecompanywebsite.Thevalidityandcompletenessoftheassessmentsaremonitoredbygovernmentauthoritiesandprojectlenders.

In 2015, the company completed a comprehensive impact assessment and held public consultations with the stakeholders in regard to the planned OPF Front–End Compression Project construction works (see Section 4.2.2.1).

In 2015, the company carried out an impact assessment in accordance with Russian and international requirements and conducted public hearings and consultations with the stakeholders in regard to the implementation of the Programme of Marine Geophysical (Seismic) Surveys in the waters of the Lunskoye and Piltun-Astokhskoye oil and gas fields.

The results of the assessments for both projects are posted on the company website.

Stages of Impact Assessment

STAKEHOLDER ENGAGEMENT

DESIGN AND DECISION-MAKING

Impact management and monitoring


Impact identification and assessment.

Mitigation measures identification

Baseline information gathering and descriptionImpact scope and borders

PLAN DO

ACT CHECK

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Since2005,tomonitortheintegratedHSEandSPManagementSystem,internalandexternalchecksandauditshavebeenper-formedinaccordancewithapprovedannualplans.Externalauditsareconductedbythecompanyshareholdersandlenders,exter-nalcertifyingauthorities,etc.Forinternalaudits,speciallytrainedauditors(thecom-panyqualifiedemployeesandshareholderspecialists)areengaged.In2015,tenHSEandSPManagementSystemauditswere

Audit level Number of audits Content

External 6 ControloverthecompliancewithHSEandSPstandardsexercisedbytherepresentativeoflenders—anexternaladvisoronenvironmentalissues*RecertificationauditforcompliancewithISO14001andOHSAS18001standardsAuditofflightoperations(helicoptersandcharters)withtheparticipationofShellauditorsMarinetransportationperformancereview(byShellspecialists)Monitoring/finalassessmentoftheSakhalinIndige-nousMinoritiesDevelopmentPlanimplementation*Independentassessmentofsocialinvestments/sustainabledevelopmentprogrammes/projects

Internal 4 ProjectDepartmentHSESystemAuditDivingOperationsHSEAudit(withtheparticipationofaShellSME)OffshoreandDrillingOperationsHSEAudit(withtheparticipationofShellauditors)LNGPlantHSEAudit

*Thereportsarepostedonthecompanywebsite(www.sakhalinenergy.com)

3.5.3. CHECKS AND AUDIT

AbouttheCompany

Checks and Audits of the HSE and SP Management System in 2015

conducted,includingsixexternalandfourinternalones(seetheChecksandAuditsoftheHSEandSPManagementSystemin2015table).

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About4% oftheglobalLNGissup-pliedfromSakhalinEnergy’sLNGPlant.

4.1.SakhalinEnergySakhalinEnergyInvestmentCompanyLtd.(SakhalinEnergyorthecompany)wasfoundedin1994todevelopthePiltun-AstokhskoyeandLunskoyeoilandgasfieldsintheSeaofOkhotsknearSakhalinIsland.

SakhalinEnergyoperatesundertheSakhalin-2ProductionSharingAgree-ment(PSA)thatwassignedbythecom-panyandtheRussianFederationrepre-sentedbytheGovernmentoftheRussianFederationandtheSakhalinOblastAdministration(currently,theSakhalinOblastGovernment).

ThefollowingcompaniesholdsharesinSakhalinEnergythroughtheirsubsidiaries:

Gazprom(50%plusoneshare),Shell(27.5%minusoneshare),Mitsui(12.5%),andMitsubishi(10%).

Todevelopthetwofields,thecompanyconstructedalarge-scaleinfrastructureforextracting,transporting,processing,andthensellinghydrocarbons.Thisin-frastructureincludesthreefixedoffshoreplatforms,offshoreandonshorepipelinesystems,anonshoreprocessingfacility,twoboosterstations,anoilexporttermi-nalwithatankerloadingunit,aliquefiednaturalgas(LNG)plant,andgastransferterminals.Thishasbeenoneofthemosttechnicallycomplexprojectscarriedoutoverthelastfewdecadesintheglobaloilandgasindustry.

4.AbouttheCompany

BecauseofSakhalinEnergy,theRussianFederationhasbecomeoneofthekeyplayersonthepromisingAsia-Pacificmarket.

4.2.MainProductionResultsin2015

In2015,PA-BandLUN-Aplatformsembarkedona10-monthimprovementprogrammeinMaintenanceExecutionandIntegrityAssurance.

Followingaself-assessmentinlate2014,adetailedactionplanwasdrawnupandimplementedbothoffshoreontheplat-formsaswellasonshorewiththesupportteams.TheonshoresupportisfocusedonIntegrityAssurance—makingsurethecorrectmaintenanceroutinesareinplace.Offshorefocusedonmaintenanceexecution—planning,preparing,andexe-cutingthemaintenance.

ShellcompletedanexternalassessmentinOctober2015,andPA-BandLUN-AIntegrityAssuranceachievedthehighestscoreeverinShellglobally.BothPA-BandLUN-Aarenowamongthetop10Shellassets,togetherwithOPF,whichreachedthetop10in2014.

4.2.1.1. Molikpaq Platform (PA-A)

InJuly2015,itwas16yearsfromthetimetheMolikpaqplatformfirststartedproducingoil.Overthefirstnineyears,startingfrom1999,Molikpaqoperatedonlyduringtheice-freeseason.In2008,year-roundproductionofhydrocarbonscommenced.

In2015,theoperatingwellstockoftheMolikpaqplatformincluded13oil-pro-ducingwells,fivewaterinjectionwells,andoneintakewellforre-injectingdrillcuttingsbackintothereservoir.In2015,theaveragedailyproductionrateontheplatformwas6.2thousandt(45.83thou-sandbbl)ofoiland0.99mlnm3ofassociatedgas.

In2015,thedeclineinpressurewasaddressedandstableproductionwasachievedattheAstokhskoyeareabydrillingandcommissioningadditional

waterinjectionwells,wellinterventionsandside-tracking.Thecompanydida4Dseismicsurveytomanageandoptimisethewaterfloodfront.

Normalisedwaterinjectioninconjunctionwithsteadywellperformancehelpedthecompanytoexceedannualoilproductiontargets.

Becauseofthis,thecompanypreparedtheAddendumtotheReservoirManagementPlanfortheAstokhskoyeAreaDevelopmentofthePiltun-AstokhskoyeFieldin2015,whichwasapprovedbytheGasIndustryCommitteeofGazpromandCDCRosnedra.

TwooilproducerswereworkedoverwithsidetrackdrilledtolayersXXI1andXXI-s.ThewellswerecompletedusingFrac&Packtechnologytoprovidesandcontrol.

4.2.1. ASSETS

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AnotheroilproducerwassidetrackedandconvertedtowaterinjectortolayerXXI1.

4.2.1.2. Piltun-Astokhskoye-B Platform (PA-B)

In2015,thePA-Bplatformhadelevenpro-ductionwells,sevenwaterinjectionwells,andtwocuttingre-injectionwells.

Theplatform’saveragedailyproductionratein2015was3.36thousandt(24.78thousandbbl)ofoiland1.2mlnm3ofgas.

In2015,oneadditionalwaterinjectorwellandoneoilproducerwellweredrilledandputintooperation,thelatterwillprovide“newoil”productionfromthesouthernareaofthefield.

Thewaterinjectorwasdrilledaheadofschedulewithhorizontalcompletioninstalledinthewell.Theprimarypurposeofthewellistomaintainreservoirpres-sureinthenorthernpartofPiltun.

Sandcontroltechnologywassuccessfullyimplementedwithdrillingandcompletion

oftheoilwell.Open-holestand-alonescreenswereinstalled.

Pilotholesdrilledintheproducerenabledexpertstoappraisetheareaandiden-tifytheoil-watercontactandgeologicalstructure.

Byyear-end2015,fouryearswillhavebeeninvestedinimprovingVoidageReplacement,primarilybyisolatinggascuspingandmakingtheintegratedwaterinjectionsystemwork.Asaresult,reser-voirpressureandoilproductionhavenowstabilisedintheheartlandofthefield.

A4DseismicsurveywasdoneatthePil-tun-Astokhskoyefieldin2015.Theresultsarenowbeinganalysed.Itisexpectedthatthedatawillhelpclarifyinjectionfrontlocation,localiseundevelopedareas,andidentifyareasforin-filldrillingandwater-floodoptimisation.

4.2.1.3. Lunskoye-A Platform (LUN-A)

In2015,theLUN-Aplatformcontinuedtoperformstably,producinganuninter-ruptedflowofgasfromtheexistingwells.

Theplatform’saveragedailyproductionratewas45.27mlnm3.

Existinggaswellsmetproductiontar-getsandutilisedthefullcapacityoftheLNGplant.

Onewatered-outoilwell(watercutabove99%)wassidetrackedintoBlockIVofLunskoyefieldin2015.Thecom-panystarteddrillingasidetracktothegaslayerattheendof2014,andinApril2015thewellbecameagasproducer.

InDecember2015,asecondcuttingre-injectionwellwascompletedinBlockV.Therewasaconcertedefforttoacquiredatafromthiswell,including180mofcoreandsamplingofdownholefluids.Thiswasthefirstcoreacquisi-tionofthecompany,priorcoreswereobtainedfromappraisalwells.

Duringtheyear,atotaloffivecasedholeloggingwellinterventionswereexecutedsuccessfully.Theresultsfromthishelptoestimatewellinflow,andcontactmovementandwellboreaccess.

Inthesummerof2015,a4DseismicsurveywasdoneattheLunskoyefieldtotracktheimpactofgas-watercontactandpressurevariationonfielddevelopment.The19973Dseismicsurveywasusedasthebaselineforthissurvey.Resultsweresubmittedtoaservicecompanytobepro-cessedandinterpreted.

4.2.1.4. Onshore Processing Facility (OPF)

Theonshoreprocessingfacility(OPF)handlestheinitialprocessingofgasandcondensatefromtheLunskoyefieldbeforetheyarepumpedintothepipelinesfortransportationtotheoilexportterminalandLNGplant.TheoilandassociatedgasfromthePiltun-AstokhskoyefieldarealsoprocessedattheOPF.

OPFdailycapacityreached58mlnm3ofgasandabout25thousandt(195thousandbbl)ofoilandcondensatein2015.

PA-BandLUN-Aachievedanewglobal recordinMIEin2015.

4.AbouttheCompany

4.2.1.5. Trans-Sakhalin Pipeline System, Booster Stations, and Gas Transfer Ter-minals

Thetrans-Sakhalinpipelinesystemcom-prisesabout300kmofoffshorepipelinesandover1,600kmofoilandgasonshorepipelines,aswellas105blockvalvesta-tions,fivepipelinemaintenancedepots,twoboosterstations(BS),andtwogastransferterminals(NorthandSouth).

SakhalinEnergyandGazpromTransgasTomsk(contractedbySakhalinEnergytomaintainthetrans-Sakhalinpipelinesystem)aretaskedwithmaintainingtheintegrityofthepipelinesystems.

SakhalinEnergyhasdevelopedandimplementedanHSEcaseforitspipe-linesystemsthatidentifiesallthepotentialhazardstotheintegrityoftheassets.Thesehazardsincludeinternalandexternalsurfacecorrosion,exces-sivepipepressure,earthquakes,land-slides,soilerosion,seabedgouging,shorescouring,shiptraffic,illegalhottaps,andinadvertentorwilfuldamage.Thefollowingmeasureshavebeentaken

topreventoreliminatethesepotentialhazards:

• todealwithexternalsurfacecorrosion,thepipelinehasacathodicprotectionsystem;

• tomonitorinternalsurfacecorrosion,SakhalinEnergyinternallypigthepipe-linesusingintelligentpigsthatcandetectinternalcorrosion;

• theoffshoreandonshoreoilpipelinesarepiggedonaregularbasistoremovewaterandsediments;

• toensureatimelyresponseincaseofanearthquake,SakhalinEnergyusesitsownseismicmonitoringsystemwithdetectorslocatedalongtheentirepipe-lineandtheUSGS(UnitedStatesGeo-logicalServices)system;

• seismicfaultsaremonitoredeveryyeartoassessmovementsanddisplace-ments;

• priortoseasonaldropsinambientairtemperature,thepipelineischecked

30 31

forwaterinthepipelinefaultcrossingtrenchessoastoavoidfreezingandlimitingpipemovement;

• thepipelineRoWismonitoredregularlywithhelicopteroverflightsandphysicalchecksofallpipelinefeaturesincludingrivers,faultcrossings,swamps,liquefactionareas,roadcrossings,railcrossings,etc.Also,theentirepipelineRoWiswalkedeverytwelvemonths;

• spacetechnologiesarealsousedtomonitorthevegetationgrowingontheRoW.

Accordingtostatistics,70%ofpipelineincidentsintheworldarecausedbyunin-tentionaldamagefromhumanactivity.SakhalinEnergyhasbeenproactivelyeducatingthecommunityabouthowtoidentifythepipelinesystemanditsimpor-tance.Localauthorities,contractors,andlandusersareregularlyinformedaboutlanduselimitationswithintheRoWandareprovidedwiththecontactinformationandtelephonenumbersofthecompany.Additionally,specialnoticeboardsarelocatedalongtheRoWwithfreetelephone

numbersincaseofquestionsorcon-cerns.

SakhalinEnergycontinuestoroutegascondensatefromtheSakhalin-3projectcomplexgastreatmentplant(Kirinskoyefield)intotheSakhalinEnergyoilpipelinesystemaspertheagreementbetweenGazpromExportandSakhalinEnergy.

Thisgascondensateistransportedtotheoilexportterminal(OET)alongwithSakhalinEnergy’soil.

4.2.1.6. The Prigorodnoye Production Complex

ThePrigorodnoyeproductioncomplexissituatedinthesouthofSakhalinontheshoreofAnivaBay,whichstaysice-freenearlyyear-round.ItincorporatestheLNGplantwiththeLNGjettyandtheoilexportterminal(OET)withthetankerloadingunit(TLU)installed5kmfromtheshore.Theplantcovers490haandhastwotrains,eachwithadesigncapacityof4.8mlntofLNGperyear.Overtheyears,efficiencyandreliabilityenhancementprogrammeshavesteadilyincreasedtheplant’scapacityby10%.

MidJuly2015,SakhalinEnergycompletedamajorgassystemshutdownofSakhalin-2.Everyyearthecompanyperformsmaintenanceonitsgasfacilities.Thisyearwasthefirsttimetheshutdownlasted28daystoperformamajorturnaround.Theextensivepreparationsfortheshutdowntookmorethanayear,includingorderingspareparts,equipment,andmaterials.Variousdivisionsanddepartmentswereinvolved.Thecompanydrewfromitsprevious

experienceandwasabletocompletetheworkintimeandsafely.Uponcompletion,theworkwasdiscussedandanalysedinordertooptimisefutureshutdowns.

ThewholegassectionoftheSakhalin-2projectwassuspended,howevergassupplytosouthgastransferterminalwasnotinterrupted.ThisallowedYuzhno-SakhalinskHeatandPowerPlanttokeeprunningongasandsavetheenvironmentinsteadofrevertingtocoal.

AnimportanteventforthePrigorodnoyeproductioncomplexinAugust2015wasachievingmorethan9mlnman-hourswithoutalosttimeinjury(LTI)forsevenyears.ThecountdownforthesesevenyearsstartedinAugust2008,evenbeforethecommencementofLNGproduction.ThePrigorodnoyeproductioncomplexsuccessfullymaintainsISO9001foritsQualityManagementSystem(QMS).

4.AbouttheCompany

4.2.2. DEVELOPMENT PROJECTS

4.2.2.1. OPF Front-End Compression Project

ThecompanycompletedFEEDworksontheOPFfront-endcompressionproject,whichwillhelptomaintaintheprojectedproductionlevelsasthewellheadpressureattheLunskoyefieldbeginstodecline.

In2015,acontractwithREPHoldingwassignedformanufacturingandsupplyingthreedrivers/compressorsfortheOPFcompressionproject.

ItisanticipatedthattheEarlyWorksandЕngineering,ProcurementandConstruc-tion(EP+C)contractwillbeawardedin2016.

4.2.2.2. South Piltun Area Development Project

ThedecisionwhethertodeveloptheSouthPiltunareawillbebasedonthedepletionoftheLunskoyefield,theconstructionofLNGtrain3,themacroeconomicsituation,andthesituationontheenergymarket.

SakhalinEnergyisupdatinginformationonthegeologicalstructureandgeologicalandrecoverablereservesatthePiltun-As-tokhskoyefield,includingtheSouthPiltunarea,andisplanningtosubmitaninte-gratedreservoirmanagementplantotheStateReservesCommitteeofRosnedra.

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4.AbouttheCompany

4.2.2.3. LNG Train 3 Construction Project

In2015SakhalinEnergysigneddesigndevelopmentcontractsforSakhalin-2LNGtrain3.

Accordingtothecontracts,ShellGlobalSolutionsInternationalandGiprogaztsentr,aRussiandesigninstitute,areentrustedwithdevelopingthedesignforSakhalin-2LNGtrain3.

TheSakhalin-2LNGexpansionprojectistheoptimalandeconomicallysoundwaytostrengthenRussia’spresenceontheworldLNGmarket.

4.2.3. HYDROCARBON PRODUCTION AND EXPORT

4.2.3.1. LNG

Liquefiednaturalgas(LNG)isacolourlessandodourlessliquidwithadensityhalfthatofwater.Itconsistsmainly(upto90%)ofmethane(CH4),thesimplestnaturalgasinthegroupofgaseoushydrocarbons.Whencooledtoapproximately-160°C(-250°F)atstandardatmosphericpressure,natural

gasliquefiesandcontractsto1/600thofitsinitialvolume,becomingsuitableforcollection,storage,andseashipment.

Duetosuccessfuldebottleneckingandequipmentadjustment,theLNGplantexceededitsdesignoutput(9.6mlntperyear)byproducing10.82mlntofliquefiednaturalgasin2015.

SakhalinLNGistransportedinspheri-cal-holdcustomervesselsandinGrand-se-riesLNGtankers(GrandElena,GrandAniva,andGrandMereya)thatwereconstructedespeciallyforthisprojectandprovidedtothecompanyunderlong-termchartersbytwoRussian-Japaneseconsortiums.ItisalsotransportedontheAmurRiver,ObRiver,FujiLNG,andEnergyFrontiervesselscharteredonashort-termbasis.AmurRiverstartedtooperateon1July2015inplaceofFujiLNGandEnergyFrontiervessels.Thus,thecompanyfleetconsistsoffiveLNGtankers.

In2015,SakhalinEnergyshippedLNGtoJapan,SouthKorea,China,andTaiwan.Sakhalin’sshareofLNGintheAsia-Pacificregionwasabout6%,andtheyhadabout4%oftheglobalmarketin2015.

Sakhalin Energy announced the Best LNG Project Operator

Sakhalin Energy was awarded first prize in the Best LNG Project Operator cate-gory at the 10th Annual Russia Offshore Conference held in Moscow on 3–4 March 2015, with the theme of “Strengthening partnership for the development of offshore and LNG projects in Russia.”

Top managers of Russian and interna-tional companies and representatives of scientific and expert communities and research centres took part in the conference and in the voting.

Among the projects considered by the expert commission were current as well as forthcoming developments, including large-scale projects for constructing oil and gas infrastructure on the arctic shelf that are being currently implemented.

4.2.3.2. Oil

SakhalinBlendisanoilgradeintroducedbySakhalinEnergytotheAsia-Pacificregion.Itisalight,low-sulphuroilblend.

In2015SakhalinEnergyreceived3.49mlnt(25.77mlnbarrels)ofoilgradeand1.64mlnt(14.47mlnbarrels)ofcondensate.Thecompanyreceived92.55thousandt(765.5thousandbarrels)ofcondensatein2015fromtheKirinskoyefieldSakhalin-3project.

In2015,SakhalinEnergyexported5.22mlnt(41.01mlnbarrels)ofoilgradefromthePrigorodnoyeproductioncomplex.

Intotal,10companiesfromfivecountriespurchasedtheoilblendin2015.SakhalinBlendwasdeliveredthrough17transitanddestinationportsinJapan,China,SouthKorea,SingaporeandIndonesia.

Historically,themainmarketsforSakhalinBlendhavebeenJapan,SouthKorea,andChina,whichdidnotchangein2015.Thesearestrategicallyimportantmarketsbecauseoftheirgeographicalproximityandtheirstabledemandforlightsweetcrudeoil.

JapanbecamethelargestSakhalin-2oilcustomerin2015(45%oftotalvolume).

About3.5%oftheoilproducedwassoldandsuccessfullydeliveredtoIndonesiaandSingapore.Thatshowsthereissta-bledemandfromAsia-PacificrefineriesforSakhalinEnergycrudeoil,eveninanover-suppliedmarket.

In2015,theshareofSakhalinBlendexportedbythecompanyintheAsia-Pacificregionwas0.4%.

4.2.3.3. Natural Gas

Since2011,SakhalinEnergyhasbeensupplyingnaturalgastothegasmainlinesystemofGazpromtopayroyaltiespayableinkindtotheRussianParty.ThegasistransferredviatwoterminalsinthenorthernandsouthernpartsofSakhalinIsland.SincethecommencementofnaturalgasdeliveryviatheYuzhno-SakhalinskSouthernGasTransferTermi-naltoYuzhno-SakhalinskHeatandPowerPlantandotherSakhalininfrastructureassets,morethan2.1blnm3ofnaturalgashavebeendelivered(including617mlnm3deliveredin2015).In2015,about467mlnm3ofnaturalgasweredeliveredviatheNorthernGasTransfer

TerminaltotheSakhalin–Khabarovsk–VladivostokgasmainlineforfurtherusageaspartoftheFarEastandPrimoryefuelandenergysectordevelopmentprogrammes.Intotal,about1.084blnm3ofgasweresuppliedtotheRussianpartyin2015.

4.2.3.4. Oil and LNG Supply Safety

SincethecompanybegantosupplyoilandLNGfromPrigorodnoyePort,ithasbeencommittedtoensuringthesafetyofshipmentsandsupplies.Thecompanyhasavoidedincidentsthatcouldhaveadverseconsequences.Thishasbeenachievedbyfollowingkeyprinciplesfororganisingtheshipmentsandsuppliesofourproducts,themainofwhichare:

• charteringvesselsthatmeetinternationalstandards(internationalconventions,regulatoryacts,etc.)andadditionalsafetyrequirementsadoptedintheindustry(OilCompaniesInternationalMarineForum,etc.);

• workingwithshipownersthathaveimplementedandeffectivelyuseasafetymanagementsysteminaccordance

InAugust2015,totalLNGproductionreached65 mln tonnes.

34 35

4.AbouttheCompany

Sakhalin LNG Sales Market Structure in 2015, %

70.62

25.16

1.832.39

JAPAN

SOUTH KOREA

TAIWAN CHINA

Structure of Oil Blend Sales Market in 2015, %

INDONESIA SINGAPORE

SOUTH KOREA

JAPANCHINA

28.89 44.56

23.15

2.92 0.48

withtheInternationalSafetyManage-mentCode,thathaveexperienceandareinternationallyrecognised;

• identifying,assessing,andreviewingcur-rentrisks(commercial,environmental,professional,etc.)aswellasdevelopingandimplementingprogrammestoreducethelikelihoodandimpactoftheserisksonthesupplyofproducts;

• settinghighrequirementsforthequalifica-tionsandexperienceofthecrewsofves-selscarryingcompanygoods(mandatorytraininginandexperienceofsailinginicyconditions,traininginandexperienceinsteeringlarge-capacityvessels,etc.,inadditiontotherequirementsoftheInternationalConventiononStandardsofTraining,CertificationandWatchkeepingforSeafarers);

• closecooperationalongthe“shipowner–crew–charterer”chain,whichallowstofindthebestsolutionsforissuesrelatedtothesafetyofsupplyandfleetmanage-ment(saferoutes,optimalspeed,andsafetyanalysisofportsandmooringsystems);

• developmentofincidentresponseplans;interactionwithterritorial,fed-eral,andinternationalbodiesregardingresponses;andinsuranceofcargoes,vessels,andcrewsagainstaccidentsandincidents.

Becauseoftheabovemeasures,buyersarefullyassuredthatthecargoeswillbedeliveredontimeandsafely.

4.2.4. SANITARY PROTECTION AND SAFETY ZONES

ToensurethesafetyofthepopulationandaccordingtoFederalLawNo.52-ФЗOntheSanitaryandEpidemiologicalWelfareofthePopulationof30March1999,aspecial-usearea,i.e.asanitaryprotectionzone(SPZ),wasestablishedaroundassetsandproductionsitesthatmayimpactthehumanhabitatandhealth.Thesizeofsuchazonemitigatestheimpactofpollutionontheatmosphere,keepingitinlinewithhealthstandards.

ThesanitaryprotectionzonelimitsconfirmedbytheChiefStateMedicalOfficeroftheRussianFederationforthe

Prigorodnoyeproductioncomplex,theOPF,andBS2werenotchangedin2015.

Theonshoremainpipelinesruninthesameright-of-wayandareclearlydesignatedwithspecialsigns.Asafetyzoneisestablishedalongtheentirepipelineroute,anditsboundariesareclearlymarkedwithsigns.

Asafetyzonewasestablishedforthemainpipelinestopreventanypossibledamagetothem.

ThiszoneismandatedbytheRulesforMainPipelinesProtection,approvedbyRulingNo.9ofGosgortekhnadzor(currently,Rostekhnadzor,theFederalServiceforEnvironmental,Technological,andNuclearSupervision)oftheRussianFederation,dated22April1992.Thesafetyzonealongthepipelinestransportingoilandnaturalgasisastripoflandextending25moneithersideofthepipeline.

The 400th oil standard cargowasloadedon18August2015.

The 1000th LNG standard cargowasloadedon22August2015.

36 37

In2015,SakhalinEnergycontinuedimplementingtheOperationalExcellenceprogramme.Mostoftheseimprovementswerecarriedoutinternally,butexternalexpertswerealsoengagedintwocross-directorateimprovementdrives(intheCPcontractawardprocessandWellandFacilitiesReservoirManagement(WRFM)).Significantreductionsinwasteandimprovementsintheprocesseswereidentifiedandarebeingimplementedin2015andinto2016.

Duringthesetwoprojects,approximately120staffcompletedLEANtraining,followedbyon-the-jobpracticalapplicationofthistraining.

4.3.OperationalExcellenceProgrammeTheCEDhadatwo-dayintensiveLEANworkshop.TheCEDiscommittedtocontinuouslyimprovingourbusinessprocessesbasedonthefollowingkeysuccessfactors:

• Managementmakingcommitmentsonthebasisofunderstanding:leadersandmanagersarepersonallyconvinced,involved,andengagedwithstaff.

• Linkedtothebusinessimperative:improvementislinkedtoafew(2-4)performance/strategicimperatives.

• Managementandworkprocessesaresupportedandengagedatalllevels.

• Expertiseandorganisationalcapability:leadershipcreatesanenvironmentwhere“continuousimprovement”ispartofwhoweare.

In2016,theOperationalExcellenceprogrammewillberenamedContinuousImprovement,makingitclearthatthefocusisacrosseveryareaofourbusiness.

Lean Execution

Excellence in PeopleCompetitive Cost and Value

World Class Field Development/ Wells, Reservoir and Facilities

Management

Total Reliability

Fully Engaged Customers and Stakeholders

Best Practice Contractor Management

Goal Zero Safety, Environment and Asset Integrity

Continuous Sustainable Growth

Operational Excellence Programme Main Directions

OPERATIONAL EXCELLENCE

CorporateGovernance

38 39

SakhalinEnergyisguidedbygeneralbusinessprinciples,withunderlyingcorevaluesofhonestyandintegrity,respectandcareforpeople,individualaccountabilitysupportedbyteamwork,professionalism,andcontinuousimprovement.Theseprinciplesareexemplifiedbythecompanyresponsibilitiestoitsshareholders,theRussianparty,customers,companyemployees,andbusinesspartners—i.e.allpartiesthathavebusinessrelationswiththecompany,aswellastothecommunity.

VISION:To be the premier energy source for Asia-Pacific.

MISSION: Sakhalin Energy is committed to being a premier energy supplier, recognised for its operational excellence, reliability, and safety. We conduct our business in an ethically, socially, and environmentally responsible manner.

5.1.CompanyMission,Vision,Values,andPrinciples

SakhalinEnergyactivityunderliesoncore valuesofhonestyandintegrity,respectandcareforpeople,individualaccountabilitysupportedbyteamwork.

Thegeneralbusinessprinciplescover,amongotherareas,economicfeatures,competition,businessintegrity,politicalactivities,health,safety,security,environment,localcommunities,aswellascommunicationandengagementwithstakeholders.ThefulltextofthecompanyGeneralBusinessPrinciplesisavailableontheSakhalinEnergywebsite(www.sakhalinenergy.com).

Corporategovernanceisaprocessensuringduediligenceinorganisation,management,andoversightwithinSakhalinEnergy.CorporategovernanceisaccomplishedbyengagingtheSakhalinEnergyseniormanagementwithitsshareholdersandtheRussianpartytodeterminethedirectionofthecompanyactivities,establishareasofresponsibility,andassessperformance.

TheSakhalinEnergyBusinessManage-mentSystemManualdescribesthemainprinciplesandapproachtomanagingthecompany.

Leadership and Commitment

SakhalinEnergyseniormanagementisfullycommittedtotheBusinessManagementSystem.Compliancewithseniormanagementdecisionsismandatoryforallstaffandcontractors.Theseniormanagementplaysaleadingroleintheconstantimprovementofbusinessprocessesthroughtheirdecisionsandactions.

5.2.CorporateGovernanceSystemandStructure

LEADERSHIP AND COMMITMENT

Policy and Strategic Objective

Planning

Organisation, Responsibilities, Resources, Competences

Assurance

Risk Management

Implementation

Processes, Assets, and Standards

Communication

Corr

ectiv

e Ac

tions

Corporate Governance System

Monitoring

5.CorporateGovernance

40 41

In 2015, the company improved the management of non-technical and IT projects and introduced the uniform Change Management Policy. This will help to respond to emerging needs in a more structured and effective way based on risk assessment and the objectives of the company, while involving a wide range of experts not only in production and technical areas but also when introducing changes in corporate functions.

Policy and Strategic Objectives

ThecompanypoliciesandstandardscomplywithRussianlawsandregulationsaswellaswiththerequirementsofitsshareholdersandlenders.SakhalinEnergystrategicobjectivesareinspiringandcleartoeveryoneandareconsistentlyincorporatedintothepolicies,standards,processes,andplansadoptedbythecompany.

Risk Management

Whenestablishingobjectives,thecom-panyidentifies,assesses,andconsidersoverallrisksrelatedtoachievingthesegoalsandidentifieswaystomanagerisks,includingdecreasing,mitigating,orpreventingthem(seeSection5.6RiskManagement).

Organisation, Responsibilities, Resources, and Competency

Theorganisationandresourcesareadequatetomeetthestrategicobjectives.Responsibilitiesatalllevelsareclearlydescribed,communicated,andunder-stood.Theemployeesarepreparedandtrainedinaccordancewithtrainingplanscoordinatedwithstructuredcompetencyassessmentsystems.

Processes, Assets, and Standards

Processesandassetsaredefinedwithclearlyassignedresponsibilities.Process/assetstandardsandproceduresincorporatingcontrolsandmeansofrisk

managementareinplaceandunderstoodattheappropriateorganisationallevels.Processownersensuretheproperimplementationofcontrolproceduresthroughregularassuranceandcompli-anceactivitiesadoptedbythecompany.

Planning

Allapprovedplansareoptimisedandfullyresourced.Performancetargetsaresetthatwillensureprogressiontowardsthelong-termobjectives.Thefive-yearplans,whichareannuallyassessedandadjusted,formthebasisofplanning.Theyareestablishedthroughactiveandopendiscussionswiththecompanystafffromalldirectoratesattheannual100Work-shops(seeSection7.3EngagementwithPersonnel).

Contingencyandemergencyresponseplansareimplementedandregularlyevaluated.

TheJourneyBook,whichispublishedannually,isusedtoinformallcompanyemployeesaboutthecompanygoals,strategy,targets,andmeasurestoachievethem.

Implementation

Performanceindicatorsareestablishedandmonitored,andresultsarereported.Correctivemeasuresaretakenasnecessary,andpolicies,organisationalstructure,risks,plans,andprocessesareupdated.Allincidentswithsignificantpotentialoractualconsequencesare

thoroughlyinvestigatedandreported.Anylessonsthatarelearnedaredisseminatedthroughoutthecompany.

Assurance

Assuranceisinplacetoensurethemanagementsystemisreasonablyeffective.Itincludesindependentauditsofprocessesandassets.Auditsarefollowedupinatimelymanner.Managementregularlyreviewsthesuitabilityandeffectivenessoftheassuranceframework.

Communication

Transparentandopencommunicationisessentialtoensurethecompanybusi-nessobjectivesaremet.Linemanagersengagewiththeirstaff,communicatingbusinessgoalsandpriorities.TheCEDreceivestheirfeedbackforinformationandpossiblefollow-up.TheCEOandothermembersoftheCEDreinforcethiscommunicationframeworkwithregularstaffengagementsessions(seeSection5.4CorporateCultureandSection7.3EngagementwithPersonnel).

5.3.CorporateGovernanceModelStrategicplanningiscarriedoutthroughengagingtheSakhalinEnergyseniormanagementwiththeRussianparty(representativesofthefederalexecu-tiveauthoritiesandtheSakhalinOblastGovernment)andcompanyshareholdersthatdeterminepolicydirections,establishareasofresponsibility,andassesstheresultsachieved,includingthoseintheareaofsustainabledevelopment.UndertheshareholdingstructureofSakhalinEnergy,whichhasnotchangedsince2007,Gazpromholds50%plusoneshare,Shellholds27.5%minusoneshare,Mitsuiholds12.5%,andMitsubishiholds10%.Alltheshareholdersoperatethroughtheirsub-sidiaries.

TheSupervisoryBoardistheSakhalin-2projectstrategicmanagementbodyestablishedandoperatinginaccordancewiththeAgreementontheDevelopmentofthePiltun-AstokhskoyeandLunskoyeOil

andGasFieldsontheBasisofProductionSharing(PSA).TheSupervisoryBoardsupervisesthefulfilmentofthePSAtermsandapprovesthecompanylong-termdevelopmentplansandbudgets,annualworkprogrammesandbudgets,LNGsalesagreements,procurementprocedures,Russiannationalemploymentandtrainingplans,etc.TheSupervisoryBoardalsoreviewsthecompanyannualreportsandappointsauditors.TheSupervisoryBoardconsistsof12members:sixrepresentativesfromthecompanyandsixrepresentativesfromtheRussianparty.InformationonmembersoftheSupervisoryBoardisavailableontheSakhalinEnergywebsite(www.sakhalinenergy.com).

SakhalinEnergyusesathree-stagecorpo-rategovernancesystem,inwhich:

• certainkeydecisionsaremadebyshare-holders;

• theBoardofDirectorsisresponsibleforoverallcompanygovernance;

• dailymanagementandoperationofthecompanyistheprerogativeoftheCom-mitteeofExecutiveDirectors.

Thecompanygoverningbodieshavethefollowingtasksinthegovernancemodel.

Board of Directors (BoD), appointedbycompanyshareholders,isresponsiblefortheoverallgovernanceofthecompanyandforkeydecisionsregardingeconomic,environmental,andsocialactivitiesaswellasthestrategyandbusinessdirectionofthecompany.

TheBoDmembersin2015includedalltheexecutive(7)andnon-executive(8)directorsofthecompany.OlivierLazare,Vice-PresidentofRussiaatShell,servedastheChairmanoftheBoardin2015.

Corporate Governance Model


SAKHALIN ENERGY INVESTMENT COMPANY LTD.

RUSSIAN FEDERATION

SAKHALIN OBLAST

SHAREHOLDERS

COMMITTEE OF EXECUTIVE DIRECTORS

RUSSIAN PARTY

Supervisory Board PSA (1994) Shareholder Agreement Board of Directors

50%+1share

27.5%–1share

12.5%

10%

42 43

TheBoDactivitiesaresupportedbythefunctionsofseveralcommittees.

Commercial Committee—chairedbythecompanyCommercialDirectorandconsistingoftherepresentativesfromSakhalinEnergyanditsshareholderswhomeettodiscusscommercialissuesandrelatedproposalsandstrategiespertainingtoPSA/share-holderissues,PSAamendments,LicenceSecurityproposals,infrastructuresharing/cooperationissues,andbusinessstrategiesrelatingtocrudeoil,LNGandnaturalgas,andothercommercialissues.

Technical Committee—chairedbythecompanyTechnicalDirectorandconsistingoftherepresentativesfromtheSakhalinEnergyTechnicalandProductionDirecto-ratesanditsshareholdercompaniesthatmeettodiscusstechnicalissuessuchasvalueassurancereviews,developmentproposals,welldrillingandcompletion,developmentworkprogrammesandrelatedbudgetproposals,operationalactivities,contractingplanandstrategy,tenderboardpolicy,projectdevelopmentschedules,HSEmanagement,andengineering,procure-mentandconstructionplans.

Finance Advisory Committee—chairedbytheFinanceDirectorandconsistingoftherepresentativesfromSakhalinEnergyandshareholdercompaniesthatmeettodiscussfinancialissues.ThestandardagendaofaFACmeetingincludesthefollowingitems:equity/projectfinancingarrangements;assuranceframework(includingfinancialbusiness);costrecoveryissues;internal/externalaudits;work/servicecontracts,agreementsandamendments;taxliabilities;insurance;treasury;accountingpolicyandsupplychainmanagementmatters.

External Affairs Committee—anadvisorycommitteetotheBoD.TheCommitteeischairedbytheSakhalinEnergyHeadoftheGovernment,ShareholdersandExternalAffairsDivision,andconsistsofrepresentativesfromthecompanyanditsshareholders

thatmeettodiscussexternalaffairs,suchasformulatingandcoordinatingcompanypositionsandcommunicationswithshareholders;monitoringandrespondingtopressreports,releases,andinquiries;andcoordinatingissuesassociatedwithmanagingthecompanyreputation.

Board Assurance Committee—consistsoftworepresentativesfromeachofthecompanyshareholders,oneofwhichisaNon-ExecutiveDirector.ThemeetingsareattendedbythecompanyChiefExecutiveOfficer,FinanceDirector,LegalDirector,andanyotherexecutivedirectorswhoareresponsiblefortheagendaitemsofaCommitteemeeting,theAuditManager,andotherindividualstheCommitteeinvites.

Board Remuneration Committee—anadvi-sorycommitteetotheBoD.ThisCommitteereviewsandmakesrecommendationswithregardtoannualperformanceagainsttar-getsbyexecutivedirectorsaswellasover-allHRpolicies.TheCommitteeincludestworepresentatives(oneofwhichshouldbeaNon-ExecutiveDirectorofthecompany)fromeachoftheshareholders.

Committee of Executive Directors (CED)—headedbythecompanyCEO.TheCED,whichconsistsofalltheexecutivedirectorsofthecompany,isresponsiblefortheday-to-daymanagementofthecompany.Itdesignates,directs,andoverseestheoperationsofSakhalinEnergythroughbusinessplansandstrategiesandbydecidinghowbesttoimplementthem.TheCEDmembersasof31December2015areshownintheCommitteeofExecutiveDirectorsorganisationalchart.

TheCEDissupportedbyinternalcommit-tees,including,butnotlimitedto:

• TenderCommittees;

• ManagementDevelopmentCommittee;

• BusinessIntegrityCommittee;

• BusinessAssuranceCommittee;

• ClaimsSteeringCommittee;

• HSESManagementCommittee;

• OperationalExcellenceCommittee.

Thecompanyorganisationalstructureensuresthatfunctionaltasksrelatedtobothassetsandprocessesarecompleted.

Roman DashkovChiefExecutiveOfficer

Committee of Executive Directors

Company’s Organisational Structure

CHIEF EXECUTIVE OFFICER

Finance Directorate

Production Directorate

Internal Audit Department

HSE Department

External and Corporate Affairs Department

Corporate Security Department

Legal Directorate

HR Directorate

Technical Directorate

Commercial Directorate


Rob van Velden

FinanceDirector

Alexander Sheykin

HRDirector

Ole MyklestadProduction

Director

Ruslan Oblekov

TechnicalDirector

Benjamin LambLegal

Director

Andrey Okhotkin

CommercialDirector

44 45

5.4.CorporateCultureRespect,support,andpromotionofhumanrightsarecoreprinciplesforSakhalinEnergy,andcompanyemployeesarefun-damentaltoitssuccess.Thebasicqualitieseachcompanyemployeeshouldstriveforareprofessionalism,responsibility,initiative,integrity,self-development,improvedeffi-ciency,andstrictobservationofethicalprin-ciplesandstandardsofconduct.Strength-eninganddevelopingcorporatecultureisanimportantcomponentofachievingandimprovingoperationalexcellence.

Inordertoensurecompliancewithpro-fessionalandbusinessethicalstandards,thecompanyCodeofConductexplainsthenormsofbehaviourwhichSakhalinEnergyexpectsfromitsemployeesanddescribeshowthesenormscorrelatewiththecom-panybusinessprinciplesandcorevalues(seeSection5.5CodeofConduct).SakhalinEnergyemployeessharethecorevaluesofthecompany,whichare:

• honestyandintegrity;

• respectandcareforpeople;

• applyprofessionalismandtakeindividualaccountabilityforperformance;

• continuousimprovementandteamwork.

ThesevaluesarereflectedinSakhalinEnergystandards,policies,andprocedures,suchas:

• StatementofGeneralBusinessPrinciples;

• CodeofConduct;



• WhistleBlowing/GrievanceProcedure;

• ConflictofInterestProcedure;

• Anti-BriberyandCorruptionProcedure.

ThesedocumentsensurethatSakhalinEnergyoperateswithintheframeworkofapplicablelawsandinaccordancewiththeethicalrequirementssetoutintheSakhalinEnergyGeneralBusinessPrinci-ples.Thehumanrightsprinciplescontrolsystemrequiresthecompanyseniormanagementtoprovideemployeeswithasafeandconfidentialsettingforraisinganyconcernsandreportingnon-compliance.SakhalinEnergyemployees,intheirturn,areexpectedtoreporttothecompanyanyincidentsofnon-compliancewiththeGeneralBusinessPrinciples.

SakhalinEnergyoperatesinamannerthatisintendedtocomplementthecorevaluesandprovideawayofthinkingandbehavingthatisinthebestinterestsoftheoverallbusiness.Leadership,accountability,andteamworkcharacterisethisbehaviour.

Thecompanyconstantlyworkstorein-forceengagementwithstaffandinter-nalcommunications,usingsuchmethods

asdirectcommunication(all-staffcom-municationsessions,internalmeetingsofallunits,etc.),aswellasvarioustypesofelectronicandwrittencommunicationsandfeedback(seeSection7.3Engage-mentwithPersonnel).

The company has developed and applies the Conflict of Interest Procedure. Under the procedure, an annual con-flict of interest declaration must be com-pleted by all the employees. This pro-vides an understanding of the ethical principles of the company activities and allows the company to assess potential conflicts and take measures to protect both Sakhalin Energy and its personnel from the risk of actual conflict between the employees’ private and professional interests.

Corporate Values

5.5.CodeofConduct

TheCodeofConductistheprimarydocumentthatexplainsthefundamentalrulesandstandardsacceptabletothecompanytoensurecompliancewiththeStatementofGeneralBusinessPrinciples.Itregulatesbehaviourandspellsoutrequirementsandguidance,expressedasclearly,concisely,andcon-sistentlyaspossibleinasingle,compa-ny-widedocumentforallouremployees.TheCodeofConductincludes,butisnotlimitedto,thefollowingmainrules:

•SakhalinEnergyendeavourstocom-plywithprinciplesofrespect,support,andpromotionofhumanrightsinallitsactivities.

•SakhalinEnergyaimstooperateinenvironmentallyandsociallyresponsibleways.

•SakhalinEnergydoesnottoleratebribery,insiderdealing,marketabuse,fraud,ormoneylaundering.

•SakhalinEnergyiscommittedtofree,fair,andethicalbusinessdealings.

• Intellectual,physical,andfinancialassetsofSakhalinEnergyarevaluableandmustbepreserved,protected,andproperlymanaged.

In 2015, the company conducted a Business Integrity poll to assess staff awareness on how to use confidential hotline channels such as the HR Grievance Procedure, the Whistleblowing Procedure, and the Community Grievance Procedure. The questionnaire was distributed to all the staff and was turned in by 333 people. Of these, 67% demonstrated that they understand the procedure for using the hotline channels.

The General Business Principles of the company are communicated to newcomers during the regular onboarding sessions.All employees biannually complete online trainings dedicated to the Code of Conduct, Anti-Bribery and Corruption principles and Conflict of Interest procedure.


VALUESHonesty and integrity

Respect and care for people

Apply professionalism and take individual accountability

for performance

Continuous improvement and team work

Operational Excellence

Internal communication

Engagement

Corporate culture

46 47

COMPANY OBJECTIVES

5.6.RiskManagementSakhalinEnergybelievesthateffectiveriskmanagementplaysanimportantroleinachievingcompanyobjectives.

Thegoalofriskmanagementistomaximiseopportunitiesorminimisetheadverseimpactoftheidentifiedrisks,includingtherisksoflossesorfailuretoachievethegoals,aswellastherisksofadversefactorsinvariousareassuchassafety,productioneffectiveness,environment,socialareas,observanceofhumanrights,labourrelations,occupationalhealthandsafety,counter-actingbriberyandcorruption,etc.

AtSakhalinEnergy,ariskisunderstoodtobeapotentialsituationinthefuturewhichmayimpacttheachievementofgoals.Allrisksarethereforedividedintothreatsandopportunities.Risksreflectthedegreeofuncertaintyaffectingtheintendedcourseofactionofthebusiness.Thisuncertaintymustbetakenintoaccount,monitored,andcontrolled,i.e.managed.

TheprocessformanagingrisksatSakhalinEnergyinvolvesidentifyingandassessingrisks,planningandimplementingaresponse,monitoringperformance,andreassessingrisksonanongoingbasistoensurethatareasforimprovementarecapturedandsuchimprovementsareimplemented(seetheRiskManagementLifecyclechart).ThisprocessisregulatedbythecorporateRiskManagementProcedure.

Theriskassessmentmatrixisavitaltoolforassessingriskswhichisappliedtoclassifyactualandpotentialconsequences,deter-minerisksignificance,andguideappropriateriskmanagement.Therisksareassessedintermsoftheirprobabilityandlevelofimpactontheprocesstoachievegoals.

One of the most important components of an efficient risk management process is impact assessment. This process must be carried out prior to commencement of any operation which may potentially affect various spheres of activity (see Section 3.5.2 Impact Assessment).

Riskmanagementistheresponsibilityofthosewhoareaccountableforachievingtheobjectivesassociatedwiththeserisks.Allexecutivedirectorsofthecompanyshallapplyproactiveriskmanagementasanintegralpartoftheirmanagementactivities.Riskcontrolisexercisedbythepersonresponsiblefortherisk(riskcoordinator),thecompanyBusinessAssuranceCommitteewhichincludescompanyexecutivedirectors,andtheBoardAssuranceCommittee(seeControlsFrameworkchart).

Risk Management Lifecycle

Monitor and reassess controls framework

Identify and assess risks to achieve the objectives

Implement responces and controls

Develop and plan responses / internal controls

Continuous improvement




Controls Framework

POLICIES AND PROCEDURES

REPORTING

AWARENESS

COMPLIANCE AND ASSURANCE

COMPANY OBJECTIVES


Risks Description / Controls Reference

Operationalexcellence(opportunity)

ManySakhalinEnergyprocessescanbeimprovedtobecomemoreeffectiveand/ormoreefficient,toenablethecompanytorealiseitsvisionofbecomingthepremierenergysourceforAsia-Pacific.Controlsinplace:In2010,thecompanydevelopedastrategytoachievemaximumperformanceindicators,referredtoastheOperationalExcellenceprogramme

Fordetails,seeSection4.3

Economic risks

Costmanagement Themainelementsofcostmanagementaremakinginvestmentdecisionsthatoptimisescarceresourcesandchallengingthecoststouseresourcesmoreeffectively.Transparency,awareness,andefficiencyinmanagingcostsandcontractsallaidinachievingthegoalofreducinglong-termcosts.ThecostmanagementstrategyofthecompanyissupportedbytheJourneyBook,BusinessPlan,andOperationalExcellenceprogramme

Fordetailsaboutmanagingcontractorsandsuppliers,seeSection6.4

Potentialsanctions TheEU,US,andanumberofothercountrieshaveimposedsanctionsrelatedtothesituationinUkrainethatmayaffectthecompanybusiness.Across-disciplinesanctionsworkinggrouphasbeenestablishedtomonitorthisrisk

Risks Which are Believed by the Company to Be Significant, and Ways to Control Them

• HSES• Reliability and Integrity• Production and Development• Costs and Value• People

• Customers• Stakeholders• Operational Excellence

Journey• Growth

48 49


Cashflowmanagementintheconditionsoffallingoilprices

Significantandcontinuousdropsinoilpricesaffectthecompanyperformance.Thecompanymonitorsthemarketcontinuouslyinordertomakeinformeddecisionsoncashflowmanagementanddividendspolicy,onoilsalesunderthemostfavourableconditionsonthemarket,aswellasonthelevelofcommitmentsforfutureexpenditures

Roubledevaluation Thedevaluationoftheroublehasimpactedthecompanyfinancialandoperationalperformance.TheriskisregularlydiscussedattheCED.Thecompanymonitorsandanalysesmarketfluctuationsinordertomakebalanceddecisionsandprovideoptimalvaluepropositionstoitsemployeesandcontractors

Social and reputational risks

Staffretention,competence,andsuccessionplan

Itisimportantforthecompanytoretainthenecessaryleveloftrainedandqualifiedpersonnel.Losingprofessionalsandspecialists,especiallythoseintechnicalfields,canleadtoinsufficienttrainedpersonnelintheskillpooltofillcriticalpositionsandcanlowerthegeneralqualificationleveloftechnicalexperts.Inordertomitigatetherisk,thecompanystrivestosupportthesuccessionprocess,includingatthelevelofmanagerialtargetsandgoals.Programmesofmanagerialandleadershipskillsdevelopmentarebeingimplemented.Thecompetitivenessoftheemployeevaluepropositionisregularlyassessed.TheTraineeshipAgreementisupdatedannuallyincooperationwiththeshareholders.TheProgrammeforEmployingandTrainingRussianNationalsisbeingupdated


Riskofoccupationaldiseases Thecompanyappliesthefollowingcontrolstoreducetheriskofoccupationaldiseases:personnelhealthriskassessmentatthefacilities,harmfulfactorsproductioncontrol,specialworkplaceattestation,periodicmedicalandclinicalexaminations,controloverthecompliancewiththeworkinstructionsduringwork,controlovertheuseofPPE,andeducationonthepreventionofoccupationaldiseases


Riskofnotmeetingtheutilisationrateof95%forassociatedpetroleumgas

Inordertominimisetheflaringofassociatedpetroleumgas,thecompanyisconstantlytakingstepstoenhanceequipmentreliability,increaseoperatingtime,andminimisethenumberofunplannedshutdowns


Environmental risks

Riskswithregardstotheenvironment

Thecompanyusesthefollowingcontrolstoreducetheriskofnegativeimpactonenvironmentandtheriskofitscontaminationinlinewiththerequirementsoftheenvironmentallegislationandinternationalstandards:• identifyingallenvironmentalaspectsandperforminganenvironmentalimpactassessment

whenplanningbusinessactivitiesandimplementingaproject;• developingandoperatingwithinacceptablelimitsforemissionsanddischarges,waste

generationvolumes,obtainedapprovals,andlimits;• developingandimplementingcomprehensiveprogrammesforindustrialenvironmental

control,localenvironmentalmonitoring,andbiodiversityconservationintheareasoftheproductionassets;

• analysingresultsofmonitoring,assessingtheefficiencyofcontrols,anddevelopingandimplementingenvironmentalprotectionplans.

RisksaremanagedinaccordancewiththegeneralrequirementsoftheRiskManagementStandardandAtmosphericAirProtectionStandard,WaterUseStandard,WasteManagementStandard,SoilUseStandard,GroundwaterUseStandard,LandPlotUseStandard,MarineEnvironmentProtectionStandard,andBiodiversityStandard

Fordetails,seeSection8



Safety risks

Processsafety Processsafetyisthemanagementofhazardsthatcancausemajoraccidentsthatreleasepotentiallydangerousmaterialsorenergysuchasafireorexplosionorboth.Potentialsourcesofmajoraccidentsare:hydrocarbonreleasesfromproductioninstallationsorwells,onshoreandoffshoreassetsandpipelineswhichcouldresultinafireorexplosion;lossofstructuralintegrityofoffshoreinstallations;marinehazardssuchasashipcollidingwithaninstallationoranothervessel;aviationhazardssuchasahelicoptercrash;majorroadtrafficaccidents;contaminationoffoodorwateraffectingpersonnelattheassets;lossofpowertoremotelocationsduringthewinter;droppedobjects;andtransferringpersonnelbetweenoffshoreinstallationsandvessels.TheProcessSafetyControlSystemconsistsofthreeelements:• DesignIntegrity—designingandbuildingcompanyassetssothatrisksareaslowas

reasonablypracticable(ALARP);• TechnicalIntegrity—applyingtechnicalcontrolmeasuresthrougheffectivemaintenance,

inspection,repair,andqualityassurance;• OperatingIntegrity—applyingtechnicalcontrolmeasuresandmanagingcriticalwork

processesbyusingworkpermits,monitoringtechnicalprocessesmanually,overseeingchangesinprocesses,etc.

Seniormanagementmusttakealeadingroleinensuringprocessintegrityinorderforthissystemtobesuccessful.Leadersshouldhavetheabilitytopickuponweaksignalsandcreateanatmosphereinwhichpeoplecanhaltunsafeworkandspeakupwhentheyfeelsomethingisnotright.TheprocesssafetyriskshavebeenassessedateachcompanyassetbasedonRussianFederationlegislationandinternationalpractice

Fordetails,seeSections4and9.2

Personnelsafetyrisks Theserisksmainlyincludepersonnelsafetyrisksduringliftingoperations,risksoffallingobjects,risksoffallingfromheightorasaresultofslippingortripping,andelectricalsafetyrisks.Toreducethesafetyrisks,relevantprecautionarymeasuresandcontrolsarebeingimplemented


Roadtrafficsafety Trafficdecreasedduringtheoperationsphase,buttherisklevelsremainhighovertheentireservicelifeoftheassets.Trafficvolumesarestillhigh,oftenindifficultweatherandroadconditions.Themostcommonviolationamongcontractordriversisspeeding.Tomanagerisksandpreventtheviolationsoftheroadtrafficrules,thecompanymonitorsspeedlimitviolationsusingIVMSandTrafficSafetyTeaminspectors,conductstrainingsessionsanddiscussionswithdrivers,andperformsstrictjourneymanagement.Otherprecautionarymeasuresandcontrolsarealsobeingimplemented


50 51

5.7.Anti-BriberyandCorruptionInordertocounteractbriberyandcorruption,thecompany:

• doesnottoleratebribery,insiderdealing,marketabuse,fraud,ormoneylaundering(facilitationpaymentsareconsideredbribesandarenotallowed);

• complieswithallRussianandapplicableinternationallawsandregulatoryacts;

• adherestotheprincipleofintegrityandlegalityinallcompanyactivities.

SakhalinEnergyassistsitsemployees,businesspartners,contractors,andsuppliersinfulfillingrequirementsforcounteractingbriberyandcorruption.TheprimarycompanydocumentregulatingtheissuesofcounteractingbriberyandcorruptionistheAnti-BriberyandCorruptionProcedure(hereinafterreferredtoastheProcedure).

Risksassociatedwithnon-compliancewiththisProcedurecomefromthecompanyfailingtofollowanti-briberyandcorruptionlegalrequirementsorfailingtocomplywithethicalbusinessstandards.Theserisksmayleadtoreputationaldamage,financiallosses(throughfines),andcriminalliabilityassociatedwithcompanyemployeesaswellaswiththeactivitiesofitsagents,contractors,andintermediaries.TheProcedureincludesalistofcategoriesofemployeeswhoareconsideredtobehigh-riskforviolatinganti-briberyandcorruptionlawsandmustattendindividualtrainingontherequirementsofthisProcedure.

The company Anti-Bribery and Corruption programme was reinforced in 2015 by developing new focused training for categories of personnel at risk. Supply chain management employees and personnel involved in the company social investment and targeted

financing activities have undergone this additional training.

Additionally,allnewlyhiredstaffmustbebriefedabouttherequirementssetforthintheProcedureaspartoftheirinduction.TheFinanceControllerincollaborationwiththeGovernance,Risk,andAssuranceManagerisrequiredtoensurethatSakhalinEnergyemployeesaremadeawareofthisProcedure(includingthroughtrainingsessions)andthatallemployeescomplywiththeAnti-BriberyandCorruptionProcedure.

Furthermore,thecompanyLegalDirectoratewillconsultemployeesonanti-briberyandcorruptionlegalissuesandthelegalrisksassociatedwithnon-compliance.

TheAnti-BriberyandCorruptionProcedureestablishesanoverallsetofcontrolsforcompliancewiththeanti-briberyandcorruptionlaws,including:

•meetinganti-briberyandcorruptionrequirements;

• identifyingviolations;

• reportingtotheBusinessAssuranceCommittee;

•utilisingpotentialriskindicators,ortheso-called“redflags”(e.g.risksassociatedwithdemandsforpaymentforservicesnotcoveredbyacontract,lackoftransparencyininvoicesupportingdocuments,etc.);

•utilisingpre-contractualduediligence,mandatorycontractprovisions,etc.

Inordertointegrateanti-briberyandcorruptionrequirementsintothecompanysupplychainmanagementprocessesandtoimplementfurthercontrols:

•TheLegalDirectorateshallmonitoranychangesinstandardcontractclauseswhichspecifythecompanyanti-briberyandcorruptionrequirements.

•TheSupplyChainManagershallensurethatstandardcompanycontractscontainsuchclausesandthatcontrolsestablishedbythisProcedureareeffectivelyintegratedintothecompanysupplychainmanagementprocesses.

TheBusinessAssuranceCommitteeshallreviewmonitoringresultsforcompliancewithanti-briberyandcorruptionrequirements.

EconomicImpactManagement

52 53

About

US$ 5.2 blnSakhalinEnergypaidtotheRussianFederationin2015including

US$ 2.4 blntotheSakhalinOblastbudget.

TheRussianFederationandtheSakhalinOblasthavegainednumerousbenefitsfromtheSakhalin-2project.

• SinceSakhalinEnergystarteditsopera-tions,theRussianFederation’sproceedsfromtheSakhalin-2projecthavetotalledoverUS$18.8bln,includingUS$6.7blnthatwasreceivedbytheSakhalinOblast.

• Russiancompanieshavegainedaccesstonewtechnologiesandbusinessdevelopmentopportunities.

• OverUS$23blnworthofcontractshavebeenawardedtoRussiancompaniesandorganisations.

In1994,SakhalinEnergysignedtheAgreementontheDevelopmentofthePiltun-AstokhskoyeandLunskoyeOilandGasFieldsontheBasisofProductionSharing(PSA)withtheRussianFederation,representedbytheGovernmentoftheRussianFederationandtheSakhalinOblastAdministration.APSAisacommercialcontractbetweenaninvestorandastate,allowingtheinvestortomakelarge-scale,long-term,andhigh-riskinvestmentsunderastabletaxregime.

Production sharing between the company and the state is triggered when the inves-tor recovers all of its costs (the specific shares of each party are not fixed but depend on the profitability of the project). The PSA also stipulates that the company should pay a profit tax, and the profit tax for the company is currently payable at a rate higher than the profit tax rate for non-PSA tax payers.

• TheRussianFederationhasgainedvaluableexperienceinmanagingcomplexhigh-techprojectsinremotelocationsandinsubarcticconditions.

• TheinfrastructureonSakhalinIslandhasundergonelarge-scaleupgrades(overUS$600mlnwasinvestedbythecompany).

• Localemploymentlevelsandlocalworkforcequalityhavenotablyincreased(bothdirectandindirecteffect).

• Incomesandlivingstandardsforthelocalpopulationhaverisen.

6.1.ImportanceoftheSakhalin-2ProjectfortheRussianFederationandtheSakhalinOblast

6.2.FinancialBenefitstotheRussianFederationandtheSakhalinOblast

6.EconomicImpactManagement

• ManycontractsandsubcontractshavebeenawardedtoSakhalincompaniesthattookpartintheSakhalin-2project.Theircapacityandcompetitivenesshasbeenenhancedsignificantly.

• ThecompanyhascarriedoutextensivesocialandpublicinitiativesonSakhalinIsland.

In2015,accordingtotheInternationalAccountingStandard(IAS),revenuesofSakhalinEnergyamountedtoUS$6,192mln,anditstotalnetincomewasUS$1,962mln.

AccordingtothePSA,thestateretainstheownershiprightstothefieldandgrantstheinvestoranexclusiverighttodevelopthemineralresources.Theinvestordevelopstheresourcesbyitsownmeansandatitsownriskandinvestsfundsrequiredfortheexplorationanddevelopmentofthefields.

UnderthePSA,sometypesoftaxes,levies,anddutiesarereplacedwithproductionsharing.Thiseffectivelymeansthatinsteadofsometaxes(includingmineralextractiontax,propertytax,etc.)andlevies,SakhalinEnergyisusinghydrocarbonsasaformofroyaltypayment,andafterproductsharingstarts,itwillusethemastheprofitshare.FinancialbenefitstotheRussianpartyincludetheprofittaxpaidbythecompanyandanumberofmandatorypayments,contributions,andlevies.Inaddition,theRussianpartyreceivesincomeonR-sharedividends(aspecialpreferenceshareprovidingtherighttoreceivedividends).

Intotal,forthereportingperiod,SakhalinEnergypaidaboutUS$5.2bln(inkindandincash)totheRussianFederation.

Royalties(inkindpayment)amountedtoUS$409mln.

TheRussianparty’sproductionprofitsharewasUS$434mln.Inaddition,the2014fiscalyearprofittaxtotalledUS$2.7blnanddividendstotalledUS$1.6bln(paidbythecompanyin2015).

Basedontheperformanceresultsfor2015,theprofittaxintheamountofap-proximatelyUS$1.4blnwillbepaidtothebudgetin2016.

54 55

For the entire period of project implemen-tation (1995–2015), the Russian party has received US$ 18.8 bln from the Sakhalin-2 project, taking into account the 2015 amounts.

The amount of taxes and other mandatory payments made to the Sakhalin Oblast budget and to local budgets totalled US$ 2.4 bln in 2015 (which is US$ 177 mln more than in 2014).

Revenues from the Sakhalin-2 project were a significant part of the total fiscal revenues of the Sakhalin Oblast in 2015 (over 60% of the total amount).

TheRussianContentmeanstheutilisationofRussianlabour,equipment,andser-vices.InaccordancewiththePSArequire-ments,theRussianContentismeasuredinlabourinput(inman-hours)aswellasmaterialsandequipment(inweightunits)deliveredbyRussiancontractors(bothlegalentitiesandnaturalpersons).SakhalinEnergywillmakeitsbesteffortstoachieveaRussianContentlevelof70%overthelifeoftheentireSakhalin-2pro-ject.In2015,thecompanyreachedaRus-sianContentlevelof89%man-hoursand79%ofmaterialsandequipmentused.

During the Sakhalin Oil and Gas 2015 conference, Sakhalin Energy signed two important documents with Russian manufacturers.

The first document is the contract between Sakhalin Energy and JSC REP Holding to supply equipment for the Sakhlain-2 project. Under the contract, three gas pumping units (GPU) will be manufactured and supplied for Sakhalin Energy OPF Compression Project. This contract provides new prospects for REP Holding to increase supplies of high-performance equipment to develop the Far East region and achieve oil and gas industry improvements in Russia.

The second document is the Memoran-dum of Understanding between Sakhalin Energy and TMK (Pipe Metallurgical Company). The Memorandum provides the framework for cooperating on TMK’s tubular product qualification and certifi-cation with a view to testing its suitability for Sakhalin Energy’s operations.

SakhalinEnergyhasidentifieditskeyactivitiesandmechanismsformaximisingtheRussianContent,whicharefeaturedintheRussianContentPolicyandtheRus-sianContentDevelopmentStrategy.Thecompanyeffortsareprimarilyfocusedonthelong-termplanningforSupplyChainManagementrequirements,identifying

6.3.RussianContentopportunitiesforRussianContentdevel-opment,providingtargetedassistancetoRussiancompaniesinordertoincreasetheircompetitivepotential,anddevelopingtheworkforceandsuppliers.

The total value of contracts awarded to Russian companies since the project was launched through the end of 2015 has reached approximately US$ 23.2 bln. In 2015, the value of new contracts and amendments to existing contracts with Russian companies totalled approxi-mately US$ 628.4 mln or 46% of the total value of the contracts.

SomeofthecontractsawardedtoRussianenterprisesin2015:

• JSCREPHOLDING(St.Petersburg)—supplyofcompressorpackagesandassociatedservicesforOPFCompres-sionProject;

• SEACORMARINESAKHALIN—charteringofaccommodationsupportvessel;

• SCFGEO—provisionof4Dmarineseismicservices;

• POLARUS—provisionofcrewboats;

• SAKHALINBRANCHOFMRSROSMORRECHFLOT—provisionofstandbyOSRsupport;

• FAREASTHYDROMETEOROGICALRESEARCHINSTITUTE(Vladivostok)—offshoreenvironmentalmonitoring;

• BUSINESSPROFI(Moscow)—supplyofOEMmaterials;

• ENKICONSTRUCTIONCOMPANYLLC(Yuzhno-Sakhalinsk)—repair/constructionwork(ZimaRC,thecompanyoffices);

• SAKHALINZAPCHASTSERVICE(Yuzhno-Sakhalinsk),AVTO-LIDER

(Yuzhno-Sakhalinsk),SLTTRADINGHOUSE(Yuzhno-Sakhalinsk)—anumberofpurchaseordersforprovidinglightvehicles,passengercoaches,heavyvehi-cles,roadconstructionandspecialisedequipmentforSakhalinEnergyassets.

Russiancompaniesinvolvedintheprojecthaveuniqueaccesstointernationalbestpractices,globalbusinessopportunities,andmanagementskills.

Inadditiontonewjobsaswellasperson-nelandcapacitydevelopment,Russiancompaniesalsobenefitfromthefollowing:

• improvingthequalityofservicesandmaterialsaswellassafetystandards;

• introducingtechnologiesthatarenewtotheRussianFederationandacquiringuniqueexperience;

• doingbusinesswithinternationalpartnersandsettingupjointventures;

• increasingtheircompetitivenessasbiddersinotherprojecttenders,bothintheSakhalinOblastandworldwide.


Total Amount of Payments to the Russian Party from the Project in 1995–2015, US$ mln

Taxes and Other Mandatory Payments Made to the Sakhalin Oblast Budget and to Local Budgets from the Sakhalin-2 Project in 1995–2015, US$ mln

5,188 2,411

6,077 2,234

2,655 947

1,813 391

1,230 60

539 60

2015

2014

2013

2012

2011

2010

1995–20091,298 608

56 57

ThecompanypayscloseattentiontotheeffectivenessofSupplyChainManage-ment(SCM).

OurfundamentalSupplyChainManage-mentdocumentisSakhalinEnergySupplyChainManagementPolicy(hereinafterreferredtoasthePolicy).ThisPolicyappliestoallcompanyemployeesandcontractorsbutprimarilytocompanyper-sonnelthataredirectlyengagedinsupplychainmanagement.ThePolicyappliestoallactivitiesthatinvolvespendingcompanyfundsonequipment,materials,resources,services,andworks.

TheSupplyChainManagerisresponsibleforensuringthatourmodelcontractscontaintheappropriatetermsandcondi-tions,foreffectivelyimplementingthesetermsandconditionsintheprocurementprocessesandforensuringcontrolandassurancemeasuresthatarespecifiedinthePolicyandotherPolicy-baseddocuments.

SakhalinEnergyadherestothefollowingSCMprinciples:

6.4.SupplyChainManagement

• safety—causingnoharmtopeople,theenvironment,ortoproperty;ensuringthecontractorscomplywiththecompanysafetystandards;

• additionalvalueinSCM—valuemaximi-sation,economicefficiency,andlong-termcommercialbenefit;

• zerotoleranceforpersonalgains,bribery,orcorruption—inallSCMoperationsinaccordancewiththesupplytransparencyprinciple;

• competition—developmentofopencompetitioninmarkets;

• Russiancontent—maximisationoftheRussiancontentanddevelopmentofRussiansuppliersandcontractors;

• humanrights—ensuringrespectfor,observance,andpromotionofhumanrightsbythecounterparties;

• sustainabledevelopment—ensuringsus-tainabledevelopmentintheprocessofselectingacounterpartyandinmakingsupplychainmanagementdecisions.

ThePolicylistsrulesandmeasuresthatensurecompliancewiththeseprinciples.

Inaccordancewiththeabove-listedprinciples,thecontractawardandmanagementprocessfollowsthesesteps.

Creating a List of Qualified Vendors (for Certain Scopes of Resources / Services or for Specific Tender Scopes):

• conductingworkshopsforpotentialvendors(seeSection6.5VendorDevelopmentProgramme);

• pre-qualifyingpotentialvendors.

Conducting Tenders for the Purchase of Materials / Equipment or Provision of Services:

• competitivebiddingispreferredwhenasufficientmarketcapacityexists;

• distributingInvitationstoTender(ITTs)andClarificationBulletins;

• submittingbids(proposals);

• conductingtechnicalbidevaluation(includingHSE,etc.);

•conductingcommercialbidevaluation.

Contract Award:

•uponcompletionofallstagesofthebiddingprocess,thecompanyawardsthecontractunderthetermsandconditionsspecifiedintheITT.

Contract Management:

•duringtheperformanceofthecontract,thecompanymonitorscontractoractivitiesbytrackingthemutuallyagreedKeyPerformanceIndicators(KPIs)andbyorganisingmeetingstoreviewthecontractorperformance;

• thecompanyraisesawarenessandconductstraininginordertoensurecompliancewithitsrequirements(includingthoserelatedtoHSEandsocialperformance,anti-corruptionandbribery,humanrights,etc.);

• thecompanyconductscontractperformanceaudits.

Sakhalin Energy Requirements for Contractors and Suppliers

SakhalinEnergyattachesgreatimpor-tancetothefulfilmentofthecompanyrequirementsbycontractorsandsuppliers.Theserequirementsinclude:

Health, Safety and Environment (HSE) Requirements

Contractorsmust:

• includecompliancewithHSEprinciplesintheperformanceassessment;

• performchecksandinvestigateanybreachesoftheHSErulestoensurethecompanyHSEpolicyisproperlyfollowed;

• independentlyevaluatetheHSEmanagementsystemforcompliancewithgenerallyrecognisedstandards;

• verifythattheyareincompliancewithsimilarHSEstandardsandprovidethenecessaryadviceontheseissues,etc.

Requirements for the Quality of Supplied Materials, Equipment, and Services

Contractorsmust:

• developandcomplywiththecompanyqualityassurancepolicy;

• specify(develop)andcomplywiththequalitycontrolprocessanditsproce-dures;

• specify(develop)andcomplywithqualityassuranceprocedures.

Russian Content Requirements

SakhalinEnergyRussianContentrequire-mentshavearisenfromtheProductionSharingAgreementconcludedwiththeRussianparty.TheparametersbeingusedtomeasuretheRussiancontentareweightsofmaterialandequipment,man-hoursandtheircostequivalents.


58 59

Forseveralyears,SakhalinEnergyhasbeenactivelyimplementingtheRussianVendorDevelopmentProgramme,whichmainpurposeistooffergreateropportunitiestoRussianbusinessesandtoincreasetheRussiancontentintheSakhalin-2project.

AnimportantcomponentoftheVendorDevelopmentProgrammeisitsedu-cationalmodulethatprovidesregularworkshopsonthefollowingimportantsubjects:

•HSES;

•QualityManagementSystem;

•Tenderingskills.

AspartoftheVendorDevelopmentProgramme,in2015,thecompanyheld15workshopsforpotentialcontractorsofSakhalinEnergy,includingoneoff-siteworkshopinMoscow.Theworkshopswereattendedbymorethan238special-istsfrom99Russiancompanies,includ-ing60Sakhalincompanies.

6.5.VendorDevelopmentProgramme

StakeholderEngagementManagement

Open Workshop for Potential Contrac-tors and Vendors (Joint Vendor Day)

Joint Vendor Day for potential Russian contractors and contractors of Sakhalin-1 and Sakhalin-2 projects was held in Moscow in June 2015. This event, the first of its kind, was organised in cooperation with Exxon Neftegas Limited. The purpose of the workshop was to identify potential opportunities for Russian companies to participate in supplying materials and providing services for the projects.

The workshop was attended by representatives of over 70 companies (including Sakhalin companies) from different sectors of business.

Inadditiontoofferingthetrainingmodule,theVendorDevelopmentProgrammetargetsparticularRussiancompaniestoensurethattheyreceivethetechnicalqualificationsnecessarytobeaddedtotheapprovedvendorlistofSakhalinEnergy.

Requirements for a Tender Proposal

Atenderproposalshallclearlydemon-strateandconfirmthefollowing:

• acompanyisfinanciallystableandsolvent;

• acompanyhastherelevantexperience;

• servicesprovided,worksperformed,andmaterialssuppliedarehighqualityandreliable;

• HSEmanagementsystemsandproceduresareinplace;

• aqualityassurancesystemandprocedureareinplace;

• resourcesareavailabletomeetthework/supplyschedule.

60 61

About 3000 people visited SakhalinEnergyinformationcentresin2015.

Assumingthatregularandmeaningfulengagementwithcommunitiesandkeystakeholdersisanimportantelementofsuccessfuloperations,SakhalinEnergyhasbeensharinginformationandconsultingwithstakeholderssincethestartoftheSakhalin-2project.

Stakeholdersareorganisations,com-panies,individuals,orgroupswhohaveavestedinterestinthecompanyortheproject,i.e.individualsorentitiesthatareinfluencedbythecompanyorthemselvesinfluenceorcanpotentiallyinfluencethecompanyoperations.

Thecompanyhasdefinedthestakeholderstoincludethefollowingkeygroups:shareholders,personnel,lenders,governmentauthorities,customers,suppliersandcontractors,community,stakeholdersinJapan,internationalorganisations,publicorganisationsandothernon-governmentalandnon-profitorganisations,massmedia,etc.

7.1.EngagementStrategy,Principles,Mechanisms,andTools

7.StakeholderEngagementManagement

SakhalinEnergy’sengagementwithstakeholdersisbasedonitscommitmentsassetforthinkeycorporatedocuments,whichinclude:


• CodeofConduct;


• Health,Safety,Environment,andSocialPerformancePolicyandCommitments;

• SocialPerformanceStandardoftheCompany(PublicConsultationandDisclosuresection);

• PublicConsultationandDisclosurePlan(updatedannually).

Thesedocumentsdefinethestrategy,principles,process,mechanisms,andtoolsofstakeholderengagementandareavailabletothegeneralpublic.

Company Stakeholders

COMPANY

Community Contractors

Authorities Japanese stakeholders

Shareholders International organisations

Lenders NGOs

Customers Media

Company personnel Other stakeholders

Theselectionofthemosteffectivemechanismsandtoolsisdeterminedbythegoalsandobjectivesofengagementanddependsonaparticularstakeholdergroup(seePublicConsultationandDisclosurePlanatthecompanywebsite).

62 63

7.2.StakeholderEngagementPerformancein2015

In2015,SakhalinEnergycontinuedsystematicandconsistentengagementwithkeystakeholders.

Thekeyactivitiesincludedthefollowing:

• engagementwithpersonnel(formoredetails,seeSection7.3);

• public,groupandindividualmeetingstoupdatetheparticipantsonthelatestdevelopmentandotheraspectsofthecompanyactivitiesandtoreceivefeedback;

• informationsharingthroughthecompanywebsite,EnergyweeklyTVprogrammebroadcastonSakhalin,Vestimonthlycorporatenewspaper;distributinginformationreportsandprintedmaterialsinthecommunitiesandthroughthemedia(radio,newspapers,TV);

• workofthecompany’sinformationcentresestablishedinlocallibraries(formoredetails,seeSection7.4);

• engagementwithindigenouspeopleun-dertheSakhalinIndigenousMinoritiesDevelopmentPlan(formoredetails,seeSection7.5);

• engagementwithnon-governmentalandnon-profitorganisations(formoredetails,seeSection7.6);

• engagementwithJapanesestakeholders(formoredetails,seeSection7.7);

• engagementwithcustomers,suppliers,andcontractors(formoredetails,seeSections7.8,6.4,and6.5);

• engagementwithstateandlocalgovernmentauthorities(formoredetails,seeSection7.9).

Key statistics on engagement in 2015:

• 11 public meetings held in commu-nities located near the company’s facilities, with the participation of 68 Sakhalin residents;

• 2,919 visitors to the information centres;

• 2 rounds of public consultations under the preparation of Sakhalin Indigenous Minorities Development Plan 3 (for more details, see Section 9.5.8.4);

• 2 rounds of dialogues with the stake-holders as part of preparation of the Sustainable Development Report.

Moreover, to prepare non-financial reports in accordance with international standards, additional opinion surveys and meetings with stakeholders were held to determine the range of topics to be included in the Report (for more details, see Section 2 About the Report).

Stakeholder Engagement Process

STRATEGY• Regular and constructive

engagement• Open and wide informing

KEY PRINCIPLES• To be constructive

and target-oriented• To be open and transparent• To hold positive relationships• To apply efficient mechanisms,

opinion exchange regarding issues and ways for solution

Development of engagement plans


7.3.EngagementwithPersonnel

Engagementwithpersonnelisanimpor-tantcomponentofstrengtheninganddevelopingthecompanycorporateculture(seeSection5.4CorporateCulture)andiscarriedout,amongotherways,throughtheinternalcommunicationsystem,whichincludesthefollowing:

• regularstaffcommunicationsessionstoinformtheemployeesoftheresultsofthemeetingsoftheCommitteeofExecutiveDirectors,theBoardofDirectors,andtheSupervisoryBoardaswellasotherimportanteventsinSakhalinEnergy;

• opinionsurveys.In2015,aregularsurveywasconductedtostudytheopinionofthecompany’semployees.Thequestionsconcernedpersonnelengagement,theirattitudetowardthecompanyanditsmanagement,responsibilities,workingconditions,teamwork,participationinthecompanyheldactivities,andrespectfornational,cultural,andindividualdifferences.Inaddition,quickpollsonvarioussubjectswerepublishedonthecorporateintranetwebsite(tofindoutifthe

employeesareinterestedinsports,toidentifystaffcommitmenttoworksafetyinwinterconditions,etc.);

• Vesticorporatenewspaperandvariousinformationalandreferencematerials.Vestiisdistributedwithinthecompany,senttotheinformationcentres,andpostedonthewebsite;

• newsreleasesdistributionthroughthedailynewsbulletinandemailmessagesonbehalfofthecompanydirectors;

• distributionofprintedinformationmaterialssuchasposters,leaflets,brochures,etc.toinformtheemployeesaboutthevariousaspectsofsafety,operationalexcellence,HRissues,andupcomingevents;

• postingadvertisements,posters,andotherinformationonspecialinforma-tionboardsinthecompany’soffices;

• trainingworkshopsandinformationsessionstoexplainnewproceduresandprogrammesofthecompany.Forexample,lunch-and-learnsessions

werecontinued.Thesesessionsraiseemployees’awarenessabouttheworkandachievementsofvariousdepart-mentsandareverypopularamongthestaff;

• corporateintranetsiteavailabletoalltheemployeeswheretheycanfindinformationonthecompany’sactivitiesanddocuments,includingpolicies,procedures,schedules,etc.

The 100 Workshop

The 100 Workshop was traditionally held in November 2015. This was the seventh annual workshop. About one hundred employees attended it. Along with the directors, the company’s leadership forum members and heads of business units, representatives of all directorates participated in its work. The results of the discussions formed the basis of the Journey Book for 2016–2020, with a focus on the objectives for the next year.

Improvement

Analysis and controls

Plans implementation, keeping records of results

Scope of engagement, methods and tools

Identification of stakeholder

Identification of interests and potential

issues

64 65

7.4.LocalCommunitiesEngagementThroughtheCompanyInformationCentres

7.5.EngagementwiththeSakhalinIndigenousMinorities(SIM)

Theinformationcentresestablishedatdistrictandvillagelibrariesarelocatedinthecommunitiesalongthetrans-Sakha-linpipelinesystemandincloseproximitytoothercompany’sfacilities.Theyareequippedwithrequiredofficeequipment,computerswithInternetaccess,andinformationstands.Thishelpsmeetthecompany’sobjectivesandincreasethefunctionalcapacityofthelibraries.

Thelibrariansprovideconsultationstoinformationcentrevisitorsontheissuesrelatedtothecompanyactivitiesduringworkinghours.

InDecember2015,thelibrariansparticipatedintheregularworkshoptoobtainfirst-handknowledgeofthecompany’sactivities.

ThecompanyconsiderstheSIMtobeaspecialgroupofstakeholdersforwhichtheissuesofindustrialandenvironmentalsafety,aswellasofpreservationoftheirculture,areofparamountimportance.SakhalinEnergytakesthisintoaccountinitsoperationsandimplementationofsocialprogrammes.

Since2006,thecompanyhasbeenimplementingtheSakhalinIndigenousMinoritiesDevelopmentPlan(hereinafter—theSIMDPorthePlan;forinformationaboutthePlan,seeSection9.5.8).FollowingtherecommendationsofthestakeholdersreceivedduringthepreparationofSIMDP2for2011–2015,in2015,thepartnersfocusedonraisingthecommunityawarenessabouttheprogrammesimplementedandthenewopportunities(seewww.simdp.ru).

Inearly2015,thefinalyearofSIMDP2implementation,aWorkingGroupwasformedtodevelopSIMDP3for2016–2020.Thisgroupconsistedofrepresentativesofthreepartners(theRegionalCounciloftheAuthorisedRepresentativesoftheIndigenousMinoritiesoftheNorthof

Theworkoftheinformationcentresincludedthefollowing:

• regularlyupdatingmaterialsofthecom-pany’sinformationstands;

• helpingpeoplefindinformationonthecompanywebsite;

• providingassistancetothecommunityinpreparingandsubmittingcomplaintsinaccordancewiththeCommunityGrievanceProcedure;

• providingrequestedcompanyinforma-tionmaterials;

• providingsupportincarryingoutcompa-ny’ssocialcampaignsinthecommuni-ties(e.g.,St.George’sRibboncampaign).

The Donated Book Project

In 2015, the company continued The Donated Book project. The company donated sets of books on the history of Russian literature and about the winners of the Nobel Prize for Literature to 25 libraries of Sakhalin Island, including 23 libraries that host the company infor-mation centres and two regional libraries. The selection of books is not random, as 2015 was announced the Year of Literature in the Russian Federation.

In 2015, 2,919 people visited Sakhalin Energy information centres. The statis-tics is presented in the Statistics about Inquiries at the Information Centres in 2015 chart.

Sakhalin,SakhalinOblastGovernment,andSakhalinEnergy),aSIMrepresentativeintheSakhalinOblastDuma,arepresenta-tiveoftheSakhalinPublicChamber,arepresentativeoftheRussianAssociationofIndigenousMinoritiesoftheNorth(RAIPON),andanexternalexpert.TheobjectivesoftheWorkingGroupweretojointlyprepareconsultationswiththeindigenouspeopleofSakhalinOblast,torespondtotheirconcernsandwishesregardingSIMDP3,andtodevelopthePlan(forinformationonpreparingSIMDP3,seeSection9.5.8SakhalinIndigenousMinoritiesDevelopmentPlan).

Since2006,theSIMDPhasbeenthekeydocumentthatSakhalinEnergyusesinitsworkwiththeSIM.Inaddition,thecompanyimplementsotherprojectsrelatedtoindigenousethnicgroups.In2015,thecompany:

• jointlywiththeOfficeoftheUNHighCommissionerforHumanRightsinRussia,publishedacollectionofbasicUnitedNationsdocumentsinthelanguagesoftheSakhalinIndigenousMinorities.Thiseditionincludesthe

declarationstranslatedintothelan-guagesofthefourmajorethnicgroupsofindigenouspeoplelivingontheisland;

• preparedandpublishedacalendarfor2016inthelanguagesoftheSakhalinIndigenousMinorities.Thecalendarwaspreparedwiththesupportofnativespeakers,representativesoftheSakha-linIndigenousMinorities,aswellastheInstituteofthePeoplesoftheNorthofHerzenStatePedagogicalUniversityofRussia;

• jointlywiththeSakhalinOblastGovern-ment,implementedaspecialprojectdedicatedtotheanniversaryofVladimirSangi,theclassicauthorofNivkhliterature,topreserveandpromotetheculturalandlinguisticheritageoftheSakhalinNivkhsusinghisworkasanexample.On18March2015,VladimirSangicelebratedhis80thbirthday.

ThemostsignificantprojecteventsinRussiaandabroad:

• PreservationandPromotionoftheCulturalandLinguisticHeritageofthe

Statistics about Inquiries at the Information Centres in 2015, %

Vesticorporatenewspaper

Generalinformationabouttheproject(website,informationstands,printedmaterials)

Employment

Socialprogrammes

SeriesofbooksaboutthenatureofSakhalinIsland

Other(environmentalprotection,theprogrammeforsafebehaviouronthepipelineroute,etc.)

2

5

28

2329

13


66 67

SakhalinIndigenousMinorities(Nivkhs)roundtableatUNESCOHeadquartersinParis(seeSection7.10InternationalandRegionalCooperation).BydecisionoftheMinisterofForeignAffairsoftheRussianFederationSergeyLavrov,theeventwasheldundertheauspicesoftheCommissionoftheRussianFederationforUNESCO;

• publicationandpresentationofacollectionthatincludedtheworksoftheclassicwriter;

• digitisationofthewriter’sworksandtheirpublicationontheRussianStateLibrarywebsite(www.rsl.ru),whichwasajointprojectofthecompanyandtheRussianStateLibrary;

• preparationofaseriesofprintedproductstopromotelinguisticheritage:books,postcards,bookmarkswiththewriter’spoems,puzzles,etc.;

• informationboardpresentationaboutthecultureandlanguagesoftheSakhalinIndigenousMinoritiesunderthe10thInternationalTreasuresofthe

North2015Exhibition-Fair.ThemainideaoftheexhibitionwastointroducethegeneralpublictotheliteraryworldofVladimirSangiandgiveeveryvisitoranopportunitytoreadthedigitisedworksoftheauthorandreceivehisautograph;

• meetingofthewriterwithreadersattheEthnomirEthnographicPark-Museum;

• twoexhibitionsatSakhalinRegionalArtMuseum,whichcompletedtheprogrammeofevents.Thefirstexhibitioncalled“TalesoftheNivkhLand”displayedtheresultsoftheliteraryandartcontestinwhichmorethan200childrenaged3to14yearsoldfromdifferentpartsoftheregiontookpart.Thesecondexhibi-tion,“TheWorldofNivkhs,”displayedpaintings,graphics,sculptures,worksofdecorativeandappliedartsrepresentingthelifeoftheNivkhs:people,traditions,andethnographicallyprecisedetailsofeverydaylife.

Sakhalin Energy’s “Sakhalin: Cultural Heritage of Mankind” exhibition received an award in the “Best Thematic Exhibition: Relevance and Professionalism” category at the 10th International Treasures of the North 2015 Exhibition-Fair.

Thecompany’sdedicationofcommunicatingwiththeSIMwashighlyacknowledgedatthefollowingevents:

• parliamentaryhearingson“LegislativeSupportfortheLivelihoodsoftheIndige-nousPeoplesoftheNorth,Siberia,andtheFarEastoftheRussianFederation”(RussianStateDuma)inApril;

• 17thInternationalEthnicRealityScien-tificandPracticalConference(HerzenStatePedagogicalUniversityofRussia)inNovember.


Message from Ms Irina Bokova, Director-General of UNESCO on the occasion of the 80th anniversary of Vladimir Sangi

I wish to extend my greetings to all the participants of the Inter-national Round Table on Preservation and Promotion of Cultural and Linguistic Heritage of the Sakhalin Indigenous Minorities (the Nivkhs), which is timed to coincide with Mr Sangi’s anniver-sary.

UNESCO has always highlighted the importance of preserving cultures, languages, traditions, and identities of indigenous peoples. Education in mother language is an essential part of achieving these goals. Regrettably, half of the 7,000 contempo-rary languages in the world are endangered. These include the languages of the indigenous peoples of Sakhalin, include the Nivkh language.

Vladimir Sangi is rightly recognised as the founder of the Nivkh literature and the modern Nivkh alphabet. One cannot overesti-mate Mr Sangi’s role in preserving the culture and language of the Nivkh people, as the developer of Nivkh spelling rules, the author of ABC books for Nivkh schools, and a translator of the classics of Russian literature into the Nivkh language.

I believe that it is only by joining the effort of government, business, and civil society that the challenges facing the world today can be addressed effectivity. I am pleased that this Inter-national Round Table, organised with the Sakhalin Government and Sakhalin Energy, builds on strong support from the local indigenous peoples and their contribution. Such cooperation creates new opportunities for society to effectively address social issues, including those connected with safeguarding culture and cultural diversity, on the basis of human rights, as a wellspring of identity, inclusion and sustainable development.

I am confident that this initiative will send a strong message to all societies about the important contribution of indigenous peoples to innovation and creativity, as well as to cultural diversity.

68 69

In2015,thecompanycontinuedtocooperatewithlocal,regional,andinternationalpublicorganisationsinvariousforms,includingmeetingsandcorrespondence.Amongtheimportantareasofengagementare:

• collaborationwithJapanesestakeholders:Hokkaidoauthorities,Hokkaidofisheryassociations,andotherstakeholdersinHokkaidoregardingoilspillresponseandpreservationofbiodiversity(seeSection7.7EngagementwithJapaneseStakeholders);

EngagementwithJapanesestakeholdersisofspecialimportancetoSakhalinEnergy,consideringthegeographicalproximityoftheSakhalinIslandtotheHokkaidoIsland.Japanesespecialists,businessmen,andrepresentativesofNGOs,fishermen,andotherstakeholdersareconcernedaboutissuesrelatedtoenvironmentalaspectsofthecompany’sactivities—forexample,oilspillresponseoperationsandbiodiversitypreservation.

Thecompanyhasbeensuccessfulinestablishingaregular,open,andcon-structivedialoguewithJapanesestake-holders.During2015,SakhalinEnergyheldanumberofconsultationsandmeetingswiththeJapanesestakeholders,including:

• meetingswithrepresentativesoftheHokkaidoGovernment(February,Sapporo,Japan);

• participationinthe30thInternationalSymposiumontheSeaofOkhotsk(seminaronoilspillresponse—February,Mombetsu,Japan);

7.6.EngagementwithNon-GovernmentalandNon-ProfitOrganisations

7.7.EngagementwithJapaneseStakeholders

• collaborationwiththeWesternGrayWhaleAdvisoryPanel(WGWAP)todevelopoptimalsolutionstominimisetheimpactonwhales.Withintheframe-workoftheconsultationsoftheAdvi-soryPanelin2015,thereweremeetingsofSakhalinEnergyrepresentativeswithscientistmembersofthePanel,aswellasrepresentativesofenvironmentalorganisationsincludedintheWGWAPasobservers.

• meetingwiththeHokkaidoFisheriesEnvironmentalCentre(February,Sapporo,Japan);

• participationinthemeetingofstake-holdersonsafetyandpreventionofaccidentsduringnavigationoftankersaspartofSakhalinprojects.ThemeetingwasorganisedbytheJapaneseCoastGuard(May,Tokyo,Japan);

• participationintheForumonSakhalinProjects(September,Rumoi,Japan).


Maintainingconstructive,respectfulrelationshipswithcustomershelpsthecompanyresolveoperationalchallengesthatariseinthecourseofoilandLNGcontractexecutionandenterintonewagreementswiththebesttermsandcondi-tionsforbothparties.Duringthereportingyear,therewerenocomplaintsfromthecustomersaboutthequalityordeliverytermsofSakhalinEnergy’sproducts.

Partnerships with the customers and reliable supplies of hydrocarbons are among the company’s priorities. In May 2015, Sakhalin Energy held a regular annual customers reception in Tokyo. The event was attended by over 200 people, including representatives of oil and gas-buying companies, international financial institutions acting as lenders, representatives of the Russian party, and company shareholders. The participants discussed the prospects of cooperation and stressed the importance of the further development of Sakhalin-2 project.

Thecompanyholdsannualforumswithcustomersthathelpfosterconstructiverelationships.Therangeoftopicsfor

7.8.EngagementwithCustomers

discussionincludesissuesoftransporta-tion,maintenance,safety,environmentalprotectionandmanyothers.

InMarch2015,Yuzhno-SakhalinskhostedtheAnnualLNGBuyersForumforentitiesthatchartervesselsfordeliveringLNGfromPrigorodnoyeport.Theforumwasattendedby19representativesofsevenLNGbuyingcompaniesfromJapanandSouthKorea.

The6thAnnualOilBuyersForumwasheldinAugust2015.Amongtheparticipantswereemployeesofninecustomers:TonenGeneral,Mitsui&Co.EnergyTrading,GSCaltex,JXNipponOil,FujiOil,SKEnergy,CosmoOil,IdemitsuKosan,ShowaShell,aswellasrepresentativesoftheSakhalinEnergyshareholders,MitsuiandMitsubishi.ItwasthefirsttimetherepresentativesofSKEnergy,CosmoOil,IdemitsuKosan,andShowaShellvisitedSakhalin,whichindicatesthegrowinginterestoftheAsia-PacificoilrefineriesintheSakhalin-2project.

InAugust2015,Yuzhno-Sakhalinskhostedthe10thAnnualConferenceonMaritimeHydrocarbonTransportation,whichfocused

onthecommercialtransportationofoilandgasundertheSakhalin-2project.Theconferencediscussedtheissuesrelatedtotheprospectsandopportunitiesofthemaritimetransportationmarket,ship-buildingdevelopment,andimprovementofshippingmanagement.Theconferenceparticipantsdiscussedtheissuesrelatedtoimprovingandoptimisingmarineindus-tryoperationalprocesses,theorganisationandperformanceofvessel-to-vesselcargooperations,modernsystemsforballastwatermanagement,etc.Theconferencewasattendedby26representativesofshipownersprovidingvesselstoSakhalinEnergyforshort-andlong-termcharter.

SuchforumsallowparticipantstostrengthenbusinessrelationsandsharetheuniqueexperiencegainedduringtheimplementationoftheSakhalin-2project.

70 71

SincethestartoftheSakhalin-2project,SakhalinEnergyhasbeenengagingwithvariousstateauthoritiesoftheRussianFederation,includingthelegislativeandexecutivebodiesoffederal,regionalandlocallevels.

In2015,asinthepreviousyears,engagementwithstateauthoritieswascarriedoutinvariousways,themostsignificantofwhichistheworkoftheofficialgroupsoftheSakhalin-2project,suchastheSupervisoryBoard(SB)andtheSBWorkingGroup.Besides,there

7.9.EngagementwithStateandLocalGovernmentAuthorities

wasroutineinteractionataworkinglevelonvariousissuesoftheproject,includ-ingwastemanagement,reconstructionoftheroadsectionneartheLNGplant,borderclearanceoftankersatPrigorod-noyeport,andmanyothers.

RepresentativesofstateauthoritiesregularlyparticipateindialogueswiththestakeholdersconductedbythecompanyduringthepreparationofthisReport.Theresultsofthe2015dialoguesarepresentedinAppendix2CommentsandSuggestionsofStakeholderson


In 2015, the Coordination Council for cooperation between the Administration of Yuzhno-Sakhalinsk and Sakhalin Energy was established to effectively deal with various operational and long-term tasks. Its working groups deal with the safety and environment issues, the development of operations and office infrastructure, education, establishment of the Sakhalin Tekhnopark, as well as land use and legislative compliance.

7.10.InternationalandRegionalCooperationIn2015,SakhalinEnergycontinuedtovigorouslypromoteitsbusinessreputa-tionandimageasasociallyresponsiblecompanybothwithinandoutsideoftheRussianFederation.TheparticipationinprestigiousRussianandinternationalforumsenablesthecompanytodetermineandputintopracticethemostadvancedRussianandinternationalexperienceandbestpracticesinsustainabledevelopmentandcorporatesocialresponsibility,whichisnecessaryforthecompanytomaintainitsleadingpositioninthisarea.

SakhalinEnergyattendedanumberofimportantinternationalandregionalevents,including:

14th Annual LNG Conference, 26–27 February, Houston (USA).

Theinternationalconferencededicatedtotheissuesofproduction,transportation,andLNGmarketing.

Round Table on Preserving and Promoting the Cultural and Linguistic Heritage of Sakhalin Indigenous Minorities (Nivkhs), 18 March, Paris (France).

TheeventwasheldatUNESCOHeadquar-ters.ItwasorganisedbythePermanentMissionoftheRussianFederationtoUNESCO,theSakhalinOblastGovernment,andSakhalinEnergy.Theobjectiveoftheroundtablewastocontributetothepreservationandpromotionoftheculturalandlinguis-ticheritageoftheSakhalinNivkhsusingtheworksofVladimirSangiasanexample.

5th International Conference HSE in Oil and Gas. Russia and CIS, 30–31 March, Moscow.

Theinternationaleventwasdedicatedtotheissuesofenvironmentalandindustrialsafety,energyefficiency,andhealth.Attheconference,SakhalinEnergyshareditsexperienceinenvironmentalandindustrialsafetyundertheSakhalin-2project.

LNG Congress of Russia 2015, 31 March – 2 April, Moscow.

Theinternationaleventwasheldtoaddresstheissuesofproductiondevelop-mentandtheuseofliquefiednaturalgasinRussia.Atthecongress,thecompanypresentedinformationontheSakhalin-2project,thefirstandtheonlysupplierofLNGinRussia.

Charity in Provincial Russia Conference, 15 April, Moscow.

Thecompanywasapartnerofthecon-ferenceandparticipatedinthediscussionplatformCharityintheRegions:Chal-lengesofthetime.Viewsoftheregionsandthecentre,andshareditsexperienceatthePartnershipinSolvingLocalProb-lemssession.

10th International Treasures of the North 2015 Exhibition-Fair, 22–26 April, Moscow.

Theexhibitionwasheldtocelebratethe25thanniversaryofthefoundationoftheRussianAssociationoftheIndigenousPeoplesoftheNorth,Siberia,andtheFarEastoftheRussianFederation.TogetherwiththeAssociation,thecompanyorganisedTheSouloftheNorthliteraryreadingsdedicatedtotheworksofwritersandpoetsoftheindigenouspeopleoftheNorth,Siberia,andtheFarEast.ThecompanyreceivedanawardintheBestThematicExhibition:RelevanceandProfessionalismcategory.

Parliamentary Hearings on Legislative Support of Livelihoods of Indigenous People of the North, Siberia, and the Far East of the Russian Federation, 23 April, Moscow.

AtthehearingsheldattheRFStateDuma,thecompanypresenteditsexperienceofengagementwiththeindigenouspeopleoftheNorth.

Russian–Japanese Forum on Cooperation in Business, Investment, and Sport, 21 May, Tokyo (Japan).

Theaimoftheinternationaleventwastofacilitateadirectdialoguebetweentherepresentativesofbusiness,science,culture,andsportsinRussiaandJapan.TheforumwasorganisedbyRossiyskayaGazetaandMainichiShimbun,aJapanesenationalnewspaper.Attheforum,thecompanypresentedinformationabouttheSakhalin-2project,cooperationbetweenRussiaandJapanundertheproject,andplansforcompanydevelopment.

9th Asia LNG Summit held under the auspices of the China Petroleum and Petrochemical Engineering Institute, 27–28 May, Beijing (China).

ThesummitwasdedicatedtotheLNGindustryinAsia(inparticular,inChina).Itwasattendedbyabout200representativesfrom15countries—existingandpotentialLNGbuyersfromChina,foreignLNGsuppliers,andexpertsfromAsia.SakhalinEnergydeliveredareportentitledLNGSupplyfromRussiatoAsia:ExperienceofSakhalinEnergy.

18th Annual General Meeting of the European Business Congress, 28–29 May, Belgrade (Serbia).

Thecongressdealswithpracticalissuesofeconomiccooperation,thedevelopmentofproposalstoremoveobstaclesandcreatefavourableconditionsforaneffectiveandsafebusinessenvironment.

Round Table on Corporate Social Respon-sibility and Social Partnership: Models of Effective Cooperation and Development Prospects, 31 July, Khabarovsk.

Thecompanydeliveredareportonmoderntrendsincorporatephilanthropyandpresenteditssocialprogrammes.

IndividualAspects,Indicatorsand/orProgrammesandCompany’sResponseandCommitments.

72 73

Eastern Economic Forum, 3–5 September, Vladivostok.

Itwasthefirsteconomicforumtobeattendedbymorethan1,500delegatesincludingofficials,businessrepresentatives,andexpertsfrom26countriesofSouth-EastAsia,Europe,andAmerica.Attheforum,thecompanydeliveredareportontheSakhalin-2projectandthemeasuresaimedattheconservationofgraywhaleslistedintheRedBookofRussia.

19th International Conference Sakhalin Oil and Gas-2015, 28 September – 1 October, Yuzhno-Sakhalinsk.

ItistheonlyinternationaleventdedicatedtooilandgasprojectsofSakhalinandtheFarEast,wheretheparticipantsdiscussissuesofenergysupplytothegrowingeconomiesoftheAsia-PacificRegion.SakhalinEnergypresentedseveralreportsrelatedtothestatusofworkundertheSakhalin-2project,LNGproduction,safetyandenvironmentalresponsibility,importsubstitution,marinetransportation,etc.

Far-East Civil Forum, 15–16 October, Khabarovsk.

Thecompanyparticipatedintheforumandshareditsexperienceincorporatephilanthropyandevaluationofsocialprogrammes.

4th Annual UN Forum on Business and Human Rights, 16–18 November, Geneva (Switzerland).

ThecompanygaveapresentationentitledIndigenousPeoples:AnEffectiveGrievanceMechanism

PEOPLE INVESTOR Business Forum, 19 November, Moscow.

Thecompanymadeapresentationonitspartnershipinitiativeinroadsafety.

Shanghai International Petroleum Petrochemical Natural Gas Technology Equipment Exhibition (SIPPE 2015), 24–26 November, Shanghai (China).

Duringthebusinessprogramme,theSakhalinEnergydelegationlearnedaboutmoderntechnologiesandinnovativesolutionsintheoilandgasindustry,metwiththeleadersofthelargestindustrialoilandgascompanies,discussedtheissuesofequipmentsupplies,etc.

Leaders of Corporate Philanthropy, 25 November, Moscow.

Thecompanyparticipatedinthebusinesspartoftheawardceremonyofthe8thAnnualLeadersofCorporatePhilanthropyprojectandpresenteditsculturaldevelop-mentprojects.

4th International Scientific Conference Environmental Safety in the Gas Industry (ESGI 2015), 2–3 December, Moscow.

Attheconference,SakhalinEnergypre-sentedinformationonthedrillingwastere-injectiontechnologiesintheframeworkoftheSakhalin-2project.

4th Moscow Forum Corporate Volunteer-ing: Business and Society, 8 December, Moscow.

ThecompanydeliveredareportentitledProfessionalSkillsandCompetenciesfortheBenefitofSociety:Myth,Reality,orProspectsfortheDevelopmentofCorpo-rateVolunteering.

Round Table on Business and Human Rights: Promotion and Implementation of the Guiding Principles on Business and Human Rights, 9 December, Moscow.

TheeventwasorganisedbytheOfficeoftheUnitedNationsHighCommissionerforHumanRightsandSakhalinEnergy.Theeventwasheldinthecelebrationof

the70thanniversaryoftheUnitedNationsOrganisation.Duringtheroundtable,thecompanyshareditsexperienceintheuseoftheGuidingPrinciplesonBusinessandHumanRights.

4th St. Petersburg International Cultural Forum, 14–16 December, St. Petersburg.

ThecompanyparticipatedintheCharityinCulturepaneldiscussionorganisedaspartoftheprogrammeoftheeducationsection,andshareditsexperienceofsocialinvestmentintheculturalsector.

EnvironmentalImpactManagement

74 75

In 2015, Sakhalin Energy was ranked thirdintheannualEnvironmentalResponsibilityRatingofOilandGasCompaniesinRussia,andwas given a special awardforitscontributiontothedevelopmentofcorporatepre-servingbiodiversityprogrammes.

TheenvironmentalpolicyofthecompanyisapartofthecompanyGeneralBusinessPrinciples,SustainableDevelopmentPolicy,andHSEandSPPolicyandCommitments.

TheenvironmentalmanagementsystemisdescribedinSection3.5onHSEandSocialPerformanceManagement.Initsenviron-mentalprotectionactivities,thecompanyfollowstheRussianFederationlegislationonenvironmentalprotection,takingintoaccounttheinternationalstandardsandbestinternationalpracticesoftheoilandgasindustry.

Theenvironmentalmanagementsystemofthecompanyisfocusedonorganisingand

SakhalinEnergyexercisesindustrialenvi-ronmentalcontrolofitsassetstoensurethecompliancewithlegislationonenviron-mentalprotection,toobserveestablishedenvironmentalregulations,andtoprovidetherationaluseofnaturalresourcesandfulfilmentoftheplansforminimisingtheenvironmentalimpact.

Thecompanyexercisesindustrialenviron-mentalcontrolinthefollowingareas:

• airemissionscontrol;

• wateruseanddischargecontrol;

• wastemanagementcontrol.

ThecompanyhasdevelopedandimplementstheAirEmissionsandEnergyManagementStandard,WaterUseStandard,andWasteManagementStandard.

8.1.IndustrialEnvironmentalControl

8.EnvironmentalImpactManagement

implementingindustrialenvironmentalcon-trol,environmentalmonitoring,andbiodi-versityconservation.

In 2015, Sakhalin Energy was ranked third in the annual Environmental Re-sponsibility Rating of Oil and Gas Com-panies in Russia. The company was also given an award for its contribution to the development of corporate biodiversity conservation programmes.

The rating is run by the World Wildlife Fund (WWF) of the Russian Federation and CREON Energy, the provider of advisory services to the fuel and energy industries, with the participation of the

National Rating Agency. The rating is aimed at promoting the efficient use of hydrocarbon resources, environmental protection, and socially responsible business administration.

The list of rated companies included leading oil and natural gas producers (over 1.5 mln t per year).

According to its organisers, the rating “is an opportunity to effectively influ-ence the environmental decisions made by oil and gas companies, reinforcing the feedback channels between the industry and the society.”

SakhalinEnergyseekstominimiseenvi-ronmentalimpact,includingbyreducingairemissions.

Inordertoreduceemissions,thecom-panyusesgasturbinesequippedwithlow-NOxburners.Asystemthatincreasesgasturbulenceisusedonflaringunits,whichfacilitatesthegasflaringinasoot-freemode.

8.1.1. IMPACT TO THE ATMOSPHERIC AIR

Thecompanyusesfueltanksequippedwithfuelvapourrecirculationsystemnoz-zlesconnectingthetankwiththetanker.

Thisleadstothereductionofvolatilehydrocarbonemissionsby90%duringtherefuellingoperations.

In2015,thetotalgrossemissionsre-mainedatthepreviousyear’slevel.

Pollutant 2012 2013 2014 2015

Carbonoxide 4.0 4.3 4.2 4.1

Nitrogenoxide(inNO2equivalent) 4.7 4.8 4.1 4.1

Methane 0.86 1.08 1.1 1.0

Sulphurdioxide 0.06 0.07 0.05 0.04

Otherpollutants 1.08 1.15 1.15 1.1

Total 10.7 11.5 10.6 10.3

Gross Air Emissions in 2012–2015, thousand t

76 77

Activity Value UoM

Hydrocarbonproduction 0.19 kg/toe

Hydrocarbontransportation 0.06 kg/thousandt-km

LNGproduction 0.24 kg/toe

Activity Water consumption for in-house needs

Disposal of polluted water into surface water bodies UoM

Hydrocarbonproduction 1.0 0.002 m3/toe

Hydrocarbontransportation 0.001 – m3/thousandt-km

LNGproduction 0.01 0.001 m3/toe

Thecompanystrivestoreducewaterconsumptionforproductionneedsandtominimisetheenvironmentalimpactfromwastewaterdischarge.

In2015,thetotalwaterintakeremainedatthepreviousyear’slevel.

8.1.2. IMPACT ON WATER BODIES


Specific Air Emissions in 2015, by areas of activity

Specific Water Use in 2015, by areas of activity

Nounitexceededwaterintakelimitssetfor2015.Thewaterdisposallevelremainedthesameasinthepreviousyear.Only1%ofthewastewaterwasinsuffi-cientlytreated,4%ofwastewatertreatedtostandardquality,andtheother95%metminimumstandardswithouttreatment.

fromsurfacesourcesfromundergroundsources

intosurfacewaterbodiesonthesurface

forproductionneeds(notincludingconsump-tionforreservoirpressuremaintenanceneeds)

forreservoirpressuremaintenanceneeds

Water intake, including: Water consumption, including: Water discharge, including:

Consolidated Figures of Water Use in 2012–2015, thousand m3

2012 28,483.93 387.88 3,390.75 122,329,538.09

25,142.9828,858.15

25,866.2925,999.47

2013 26,981.85 316.76 4,099.38 229.0928,041.90

22,862.1727,313.55

23,602.4923,843.03

2014 27,094.88 300.78 4,765.14 169.7227,991.58

22,344.3327,432.14

22,803.9123,003.41

2015 28,225.09 310.19 6,104.22 193.5629,489.71

22,126.7228,573.81

22,988.0123,212.21

Environmentalmonitoringdidnotrevealanyadverseimpactonthewaterbodieslocatedintheareaofthecompanypro-ductionassets.

Theobjectivesofthecompanywithregardtowastemanagementareto:

• complywithregulationsandotherrequirements;

• protecttheenvironmentandminimiseriskrelatingtowastemanagement;

• providereliablewastemanagementsolutionstosupportprojectsandoperations;

• optimisewastemanagementbyapplyingtheWasteManagementHierarchyandencouragingahealthycompanycultureregardingenvironmentalwastemanage-ment.

TheWasteManagementHierarchyliststhefollowingsolutions,orderedfromhighesttolowestpriority:

• avoidingwastebychoosingalternativedesign,maximisinguseofrawmaterialsbeforetheybecomewaste,avoidingpackaging;

8.1.3. WASTE MANAGEMENT

• separatingwastetoallowforreuseorrecycling,reusingcontainersandpackaging,recyclingwastebackintotheplantprocess,recyclingmaterialswhereamarketsolutionisavailable;

• utilisingwastesbyreusing,recycling,orrecoveringenergyfromthewaste;

• treatingwastetoreducerisksviadecontaminationorvolumereduction;

• disposinginasafeandsecurelocationsuchasalandfillthatmeetsregulations.

Mostofthecompanywasteisclassifiedaslow-hazard(hazardclassIVandV);itismainlydrillingwasteandsolidhouseholdwaste.

Comparedtothepreviousyear,thetotalvolumeofwastedecreasedby68%duetoreductionsintheamountofdrillingwaste,associatedwater,andwaterusedforin-ternalproductionandtechnologicalneedsthatisdisposedofdeepinthesubsoil.

Waste Breakdown by Hazard Class in 2015 (not including drilling waste), %

I0.06

II0.99

III9.86

IV46.91

V42.18

78 79

Ascomparedto2014,thevolumeofwastetransferredforuseordisposaldecreasedby24%duetoareductioninthetotalvolumeofhazardclassIIwastegeneratedaswellasduetotheincreaseinhazardclassIIIwasteusedatthecompany.

Thevolumeofwastedisposedatlandfillsin2015decreasedby25%comparedtothepreviousyearsinceitwastemporarilyimpossibletodisposewasteattheSakhalinOblastlandfills.Aportionofthewastewastransferredfordisposalatlandfillsinotherregions.Wasteaccumu-latedattheendoftheyearwillalsobetransferredfordisposalin2016.

2012 2013 2014 2015Amountofwasteatthebeginningoftheyear(allhazardclasses) 0.000097 0 0 0

Wastegeneratedinthereportingyear(allhazardclasses) 105.37 154.07 95.87 30.52

Wasteusedforinternalproduction 0.04 0.04 0.01 0.02

Transferredtootherorganisationsforuseanddisposal 6.86 2.72 2.37 1.81

Transferredtootherorganisationsforburialatlandfills,including: 4.05 3.60 2.67 2.01

intheSakhalinOblast 3.22 3.46 2.52 1.82

outsidetheSakhalinOblast 0.83 0.14 0.15 0.19

Wastedisposedatownfacilities(burialofdrillingwaste) 94.42 147.71 90.82 26.54

Amountofwasteattheendoftheyear(allhazardclasses) 0 0 0 0.14


Waste Management Indicators (including drilling waste) in 2012–2015, thousand t

SakhalinEnergyiscommittedtousingmaterialsandenergyefficientlywhenprovidingproductsandservices.Tofulfilitscommitment,thecompanyimplementsefficientandleanproductionmethods.

Thecompanyassetswerebuiltbasedonmoderntechnologiesandstate-of-the-artsolutionsintheoilandgasindustry.Allpro-ductionassetshavetheirownautonomouspowersupplysources.Processequipment,boilerunits,andpowerplantsrunongas.Dieselfuelisusedforassetsstandbypowersupply,withlow-sulphurfuelpreferred.

2013 2014 2015

Primaryenergygenerated 867.80 864.92 846.85

Primaryenergysold,including: 758.39 754.16 790.36

energytransferredtotheRussianparty 51.42 53.58 38.61

Primaryenergyconsumed,including: 58.89 58.45 58.26

energydirectconsumption* 56.93 56.59 56.45

primaryenergyacquired 1.96 1.86 1.81

Secondaryenergyacquired/consumed 0.12 0.12 0.11

8.1.4. ENERGY Yuzhno-SakhalinskandKorsakovinfra-structureassetsarepower-suppliedfromthecentralelectricalnetworksbutgeneratetheirownenergyforheatsupply.Theenergyconsumptionbalanceisshowninthetable.

Sakhalin Energy assets are highly energy efficient and meet international standards. In 2014–2015, specific energy consumption by the assets producing hydrocarbons was less than 1 GJ/t of hydrocarbons produced. The value of this indicator for hydrocar-bon-producing assets was 1.4 GJ/t of hy-drocarbons produced in 2014, according to the International Association of Oil and Gas Producers.

Energy Consumption Balance of the Company in 2013–2015, mln GJ

*Generatedfromthenaturalgasproduced

Specific Energy Consumption, by areas of activity

Activity Value UoM

Hydrocarbonproduction 0.71 GJ/tofhydrocarbonsproduced

Hydrocarbontransportation 0.14 GJ/thousandt-km

LNGproduction 4.01 GJ/tofLNGproduced

Energy Consumption in 2015, %, by areas of activity

3.9

74.6

21.5

LNGproduction

Hydrocarbonproduction

Hydrocarbontransportation

80 81

SakhalinEnergysharestheglobalconcernaboutclimatechangeandroutinelymeasuresandcontrolsgreenhousegas(GHG)emissionsincompliancewiththePetroleumIndustryGuidelinesforReportingGreenhouseGasEmissionsdevelopedbytheAmericanPetroleumInstitute(API).Greenhousegasesincludethefollowingsubstances:carbondioxide,methane,dinitrogenmonoxide,andhydrofluorocar-bons(HFC).In2015,theglobalwarmingpotential(GWP)indicesofgreenhousegaseschanged.

Thecompanyemittedslightlymoregreenhousegasesin2015comparedtothepreviousyears.ThisisbecausetheGWPindicesforgreenhousegaseswerechangedandemissionsfromacidgasincinerationduringLNGproductionwereadded.

8.1.5. GREENHOUSE GAS AND OZONE-DEPLETING SUBSTANCE EMISSIONS


Activity Value UoM

Hydrocarbonproduction 0.054 tСО2eq./tofhydrocarbonsproduced

Hydrocarbontransportation 0.008 tСО2eq./thousandt-km

LNGproduction 0.242 tСО2eq./tofLNGproduced

Specific Emissions of GHG, by areas of activity

Greenhouse gas 2014 2015

Methane 21 25

Dinitrogenmonoxide 310 298

Hydrofluorocarbons 1300 1430

GWP Indices of Greenhouse Gases in 2014–2015

GHG Emissions in 2013–2015, mln t of CO2 equivalent

Source %

Fuelconsumption 89.510

Gasflaring 6.290

Uncontrolledleakages 0.793

Mobilesources 3.128

Gasventingemissions 0.120

HFCemissions 0.015

Indirectemissions 0.143

Structure of GHG Emission Sources in 2015, %

GHG Emissions in 2015, %, by areas of activity

3.6

70.7

25.7

LNGproduction

Hydrocarbonproduction

Hydrocarbontransportation

In 2015, the company continued imple-menting the action plan aimed at the gradual cessation of using ozone-depleting substances (ODS) by 2020 in accordance with the Montreal Protocol requirements.

2013 2014 2015

Directemissions(coverage1) 3.502 3.518 3.699

Indirectemissions(coverage2)* 0.006 0.006 0.005

GHGemissions 3.508 3.524 3.705

*Fromelectricpowerpurchased

Thecompanystrivestoreduceassociatedgasflaringtoaminimum.AssociatedgasproducedatPA-AandPA-Bplatformsistransportedviaoffshorepipelinestotheshore.PA-AandPA-Bgasistransportedtothenortherngastransferterminal,andexcessgasgoestoOPF,whereitismixedwithLUN-AgasforfurthertransportationtotheLNGplantandtheSouthernGasTransferTerminal.Apartoftheassociatedgasisusedasfuelforproductionassets.

Currently,thecompanydoesnotre-injectassociatedgasintothereservoir.

ThecompanyhasincludedtargetsforassociatedgasutilisationintheReservoirManagementPlansforthePA-A,PA-B,andLUN-Aplatforms.Theactualassociatedgasutilisationin2015was96.1%.

8.1.6. UTILISATION OF ASSOCIATED GAS IN PRODUCTION

Utilisation of Associated Gas During Production in 2015, %

3.9

96.1

Produced

Flared

TocomplywithinternationalstandardsandRussianlegislation,SakhalinEnergyim-plementsmeasurestoprotecttheenviron-ment.Thecostofthesemeasuresin2015was2,248mlnroubles.

TheactionsofSakhalinEnergytoprotecttheenvironmentareoverseenbyfederalandregionalauthorities,including:

• MinistryofNaturalResourcesandEnvi-ronmentoftheRussianFederation;

• FederalServiceforSurveillanceonConsumerRightsProtectionandHumanWellbeing;

• FederalSubsoilResourcesManagementAgency;

• FederalServicefortheSupervisionofNaturalResources;

• FederalWaterResourcesAgency;

8.1.7. ENVIRONMENTAL PROTECTION COSTS AND PAYMENTS FOR THE NEGATIVE IMPACT

• AmurWaterBasinCommitteeoftheFederalWaterResourcesAgency;

• MinistryofNaturalResourcesandEn-vironmentalProtectionoftheSakhalinOblast.

In2015,regionalofficesoffederalsuper-visoryagenciesconductedinspectionsandrevealedviolationsrelatedtopermissiondocumentation.

Nosignificantviolationsofenvironmentallegislationthatcouldhavehadanegativeimpactontheenvironmentwereidentifiedin2015.

Theshareofpaymentsabovetheper-mittedstandardsinthetotalpaymentforthenegativeimpactswas0.25,whichwasmainlyduetothelackofdisposallimitsforwasteatthelandfillsoftheSakhalinOblastthatarenotincludedinthestateregistryofwastedisposalsites.

2012 2013 2014 2015

Airemissions 4,664.7 3,498.8 11,516.884 4,931.253

Dischargesintowaterbodies 242.5 127.1 166.208 91.602

Wastedisposal 850.2 886.7 684.210 13,263.975

TOTAL 5,757.4 4,512.6 12,367.302 18,286.830

Payments for Negative Environmental Impact in 2012–2015, thousand roubles

Environmental Operating Expenses Breakdown in 2015, %

56

6

1

17

3

17

Atmosphericairprotectionandclimatechangeprevention

Wastewatercollectionandtreatment

Wastemanagement

Protectionandrestorationofland,surfaceandsubsurfacewater,includingoffshorezone

Biodiversityconservationandprotectionofnaturalterritories

Otherenvironmentalprotectionactivities

82 83

Thecompanyissupportinganumberoflocalenvironmentalmonitoringandbiodiversitypreservationprogrammestodeterminetheconditionoftheenvironment,assesstheimpactsofproductionassets,anddevelopmeasuresforeliminatingormitigatingsuchimpacts.

Thecompanyobjectivescompeltocontinueenvironmentalmonitoringandbiodiversitypreservationprogrammes.Theobjectivesare:

• riskmanagement;

• complyingwiththeRussianlegislationandinternationalbestpractices.

Local environmental monitoring and biodi-versity preservation programmes have confirmed that the company is minimising the effects its production activities have on the environment through its environmen-tal protection management system, which includes risk assessment and prevention, and prompt mitigation of identified risks.

8.2.EnvironmentalMonitoringandPreservingBiodiversity

In2015,expertswerebroughtintoconductthefollowingenvironmentalmonitoringandbiodiversitypreservationactivities:

• soilmonitoringintheareaofimpactfromtheonshorepipelinesandPrigorodnoyeproductioncomplex;

• riverecosystemmonitoringintheareaofimpactfromtheonshorepipelines,OPF,andPrigorodnoyeproductioncomplex;

• floraandvegetationmonitoringintheareaofimpactfromtheonshorepipelines,OPF,andPrigorodnoyeproductioncomplex;

• wetlandsrecoverymonitoring;

• protectedbirdspeciesmonitoringintheChaivoSpitarea;

• Steller’sSeaEaglemonitoring;

• offshoremonitoringintheareaofimpactfromtheoffshoreplatformsandmarineassetsatthePrigorodnoyeproductioncomplex;

• ballastwatercontrolintheAnivaBaycoastalareanearthePrigorodnoyepro-ductioncomplex;

• GrayWhalesmonitoring.

ThestepsSakhalinEnergytakesinac-cordancewiththeBiodiversityActionPlan(BAP)helpthecompanyfulfilitscommit-mentstominimiseimpactsonbiodiversityandtheenvironment.

In2015,theBiodiversityWorkingExpertGroupoftheEcologicalCouncilundertheSakhalinOblastGovernorfoundedbytheinitiativeofthecompanyin2008continueditsactivities.Representativesofsupervisoryauthorities,non-governmentalorganisa-tions,oilandgascompanies,andresearchinstitutionsmeettwiceayeartodiscusstheresultsofthestudiesconductedintheareaswherethecompanyassetsarelocatedaswellastheissuesofbiodiversityconservationontheisland.Inparticular:

• InMarch2015,themeetingoftheBiodi-versityWorkingExpertGroupwasheld


todiscussSakhalinEnergyandExxonNeftegasLimitedpartneringtoconductseismicsurveysonthenorth-easternshelfofSakhalinIslandwherethefeedinggroundofgraywhalesissituated.Also,groupmembersdiscussedandapprovedthefinalversionoftheBiodiversityActionPlanintheSakhalinOblast.

• InMay2015,theGroupmeetingwasfocusedonassessingthepreparednessofoilandgascompaniesforrescuingoiledwildlifeandbirds.

In 2015, Sakhalin Energy continued to cooperate with the UN Development Programme / Global Environmental Facility (UNDP/GEF) and the RF Ministry of Natural Resources on Mainstreaming Biodiversity Conservation into Russia’s Energy Sector Development Policies and Operations. As part of this project, a training session was held on reclamation and recovery of oil-contaminated and disturbed soils on Sakhalin Island at which scientists, experts, representatives of state authorities, public organisations,

and oil and gas companies discussed the best practices for reclaiming and recovering oil-contaminated and disturbed soils.

8.2.1. SOIL MONITORING

Themonitoringprogrammeinvolvesassessingthesoilconditionalongtherouteoftheonshorepipelines,includinginfrastructureassets,andwithintheareasaroundthePrigorodnoyeproductioncomplexandOPF.

Thesystemofregularsoilmonitoringallowsidentifyingnegativetendenciesinchangingsoilcharacteristicsovertime.

In2015,soilmonitoringwascarriedoutat100testsites.Accordingtothesurveyresults,thesoilcharacteristicsaroundthecompanyassetswereclosetothebaselineindicatorsoftherelevantsoiltypes.

ThesoilsoftheecosystemsadjacenttothePrigorodnoyeproductioncomplexareingoodcondition,withanincreasedcon-tentoforganicmatterforblackbogsoils,relativelylowcontentforraisedbogsoils,andlowcontentforbrownforestsoils.In2015,noincidentswererecordedrelatedtosoildamageordegradationcausedbytheoperationofthecompanyassets.

Benzopyrene,akeyindicatorofpotentialcontamination,wasnotdetectedinlayer0–25cmatthemonitoringsitesaroundthePrigorodnoyeproductioncomplex.TheaveragecontentofoilhydrocarbonsinthesoilsoftheareapotentiallyaffectedbythePrigorodnoyeproductioncomplexwas42mg/kginlayer0–5cmand15mg/kginlayer5–25cm,whichismanytimeslowerthanthemaximumallowablelevelof1,000mg/kg.

Reclaimedareasgraduallyrecoverinbiological,geological,andchemicalcyclesofplantmineralnutritionelements,whichpositivelyaffectstherateofvegetationgrowth.In2015,aparticularfocuswasmadeonassessingthemeasurestakentoeliminatethedegradationidentifiedinsomeareasoftheright-of-wayinthepreviousyears.Monitoringin40areaswithatotallengthofover70kmshowedthat33areashavenoevidenceoferosion.Recommenda-tionsweremadefortheareaswhereerosionwasidentified.

ThesoilsofthetestsitesinthevicinityoftheRoWdonotdifferintheircharac-teristicsfromthesoilsinbaselineareaslocatedbeyondthepipelinepotentialimpactarea.

In2015,noworkscausingsoildistur-bancewerecarriedout.Bytheendof2015,theareaofdisturbedlandwas6.4ha,wherelogginghadbeenconductedfortheOPFCompressionProjectin2013(formoreinformationontheproject,seeSection4.2.2.1OPFFront-EndCompres-sionProject).

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8.2.2. RIVER ECOSYSTEMS MONITORING

Specialprogrammeshavebeendevelopedtomonitortherivers.Underthesepro-grammes,thequalityofsurfacewatersandthebedsedimentsismonitored,andchangesinthewaterbodiesduetonaturalandman-madefactorscanbedetected.Moreover,itispossiblebothtoassesstheimpactofproductionassetsonwatercoursesandaquaticecosystemsandtoidentifytheinverseimpactoftheenvironment(changesintheriverbottomstructureandriverbedconfiguration,changesinthehydrologicalregime,etc.)ontheintegrityoftheengineeringstructures.

Asapartofthemonitoringprogrammes,thefollowingissuesaretackled:

• hydrologicalcharacteristicsofwater-ways;

• hydrochemicalcharacteristicsofwater;

• conditionofthebottomsedimentsinriverbeds;

• hydromorphologicalchangescharacteristics;

• benthiccompositionandabundance;

• areaandqualityofpotentialPacificSalmonspawninggrounds;

• ichthyologicalcommunityinmodelwaterways.

In2015,hydrologicalandhydrochemicalsurveyswereconducted:

• alongthepipelineroutefromtheValRiverinthenorthoftheislandtotheMalyTakoyRiverinthesouth(33waterbodies);

• intheareaofpotentialimpactfromthePrigorodnoyeproductioncomplex(theMereyaRiverandtheGoluboyStream);

• intheareaofpotentialimpactfromOPF(theVatungRiver).

Asinpreviousyears,thesurveyswereconductedduringthreephasesofthehy-

drologicalcycle:springfloods,summerlowwater,andautumnhighwater.Samplingwascarriedoutattwocross-sections—theupstreambaseline(withnoimpactfromthecompanyinfrastructureassets)anddownstreammonitoringsections.

Onthemostriver-crossingsitesinvestigated(fromtheupstreamtothedownstreamcross-sections)nosignificanthydromorphologicalchangeswerefoundintheriverbeds.Engineeringsurveyswereconductedatthesiteswhereriverbeddeformationswereidentifiedtodrawupdesigndocumentationforfuturerepairs.Thecrossingsareinsatisfactorycondition,andnodamagedutilitylineswerefound.

Theanalysisofthephysicalandchemicalcompositionofsurfacewatersshowedthefollowingresults:

• Physicalpropertiesofthewaterwaysmeettheregulatorycriteria.

• Thecontentofbiogenicsubstancesiswithinstandardlimits.

• Seasonalfluctuationsintheconcentra-tionofsuspendedsubstancesarewithinthenaturalvalue.

• ThewaterwaysarecleanbasedintermsofthecontentofhighlyoxidisingmatterspecifiedbyBOD5(biochemicaloxygendemandforfivedays)values.

• Ofallthestudiedmetals,concentrationsofironandcopperhadthehighestvariability.Inthemostofwaterways,thecontentofthesemetalsexceededrelevantMPCstandards,whichistypicalforthelocalsurfacewatersofSakhalinduetoitsgeochemicalspecificity.

• Nocontaminationofsurfacewaterwithoilproducts,phenols,orASAS(anionicsurface-activesubstances)wasrevealed.

• Thecontentofoilproductsinbottomsedimentschangedjustslightlyindifferentseasons.Theconcentrationsinthemonitoringcross-sectionscorrespondedtothevaluesmeasuredinthebaselinecross-sections.

• Theparticlesizedistributionofbottomsedimentsinalmostallofthewater-wayswashomogeneousinallseasons.

In2015,benthosmonitoringstudiescontinued.Thevariabilityofbenthosquantitativeindicatorswascausedbynaturalprocesses.Differencesinthecompositionandabundanceofbenthosatdifferentcross-sectionsareassociatedwiththegranulometriccharacteristicsofsoilandthevariabilityofthehydrologicalcharacteristicswithintheriverbed.

ThewaterqualityandenvironmentalstateofwaterwayswereanalysedusingtheWoodiwissbioticindexandstructuralindices.Overall,mostofthewaterwaysstudiedwerecharacterisedas“clean”,thewaterqualitylevelwasClassII.

In2015,athree-yearcycleofstudiesoftheichthyicfaunawascompletedinthebasinoftheLazovayaRiveranditstributariesclassifiedasfreshwaterwaterwaysofsouth-easternandsouthernSakhalin.Duringthemonitoringperiod

(2013–2015),16speciesoffishandfish-likevertebratesfromsevenfamilieswerefoundinthebasinoftheLazovayaRiver.Thestructureofspeciescompositionoftheriverisfairlystable.Seasonalchangesinfishspeciescomposition,abundance,andbiomassduringthestudiesintheLazovayaRiverwereassociatedwiththespawningrunofPacificSalmonandotherspeciesaswellasfeedingmigrationsoffishes.Itwasnotedthattherewasareductioninthequantityoffishthatareofinteresttoamateurfishermen.

In2015,thePacificSalmonmonitoringwascontinuedintheGoluboyStream,whichflowspartlythroughtheareaofthePrigorodnoyeproductioncomplex.Thespawninggroundsinthestreamwerelesspopulatedthanthelong-termaverageannuallevel,thevaluesvariedfrom0.01(intopareas)upto40individuals/100m2(intheLNGplantarea).TheestimatednumberofPinkSalmonspawnersthatenteredthewaterwayin2015was0.5thousandindividuals.Accordingtothestudyresults,theoccupancyrateinSeptemberwas25%ofthenorm,whichinsomecasesexceededtheoccupancyrateoftheriversinAnivaBay.

Ingeneral,theresultsofthewaterbodiesmonitoringdidnotrevealanyimpactofproductionassetsonthequalityofsurfacewaters,theirfloraandfauna.

86 87


Vegetationisakeybiotacomponentwhichdeterminesthesceneryandplaysasignificantpartinthelifeofnature.Vege-tationpreventsriverbanksandhill-sidescouringaswellassoilerosion;itaffectstheatmosphere,waterways,lakesandswamps,undergroundwater,andwildlife.Plantsaresensitivetoenvironmentalchangescausedbybothnaturalphenom-enaandman-inducedimpacts.Thelattercanalsoleadtotheextinctionofsomeplantspeciesandemergenceofnewones,whichcanultimatelyresultinapartialorcompletechangeoftheexistingvegetationcommunity.

SakhalinEnergyimplementstheEnvi-ronmentalMonitoringProgrammeforvegetationcover,whichallowsassessingthecurrentvegetationconditionandtimelyrespondtoanyadverseenvironmentalim-pactsfromtheoperatingassets.

TheMonitoringProgrammeincludesthefollowingobjectives:

• tocontroltheconditionofvegetationontheareasadjacenttothecompanyassets;

• toevaluateandforecastnaturalandman-inducedchanges/successionsintheplantcommunities;

• tocontrolstateofrareandprotectedspeciesofplants,lichens,andmushrooms;

• tocontroltherestorationofvegetationwithintherights-of-wayandgeneraterecommendationsforadditionalworksrequiredinsomeareas.

In2015,thecompanymonitoredthestateoftheenvironmentinthevicinityofthePrigorodnoyeproductioncomplexontheshoreofAnivaBay,alongtheright-of-wayoftheonshorepipelineswhichrunfrom

8.2.3. FLORA AND VEGETATION MONITORING

thenorthtothesouthoftheisland,andinthevicinityofOPF,atapointwhichis6kmfromLunskyBay.Asin2014,162speciesofvascularplantswereidentifiedatthesamplesitesaroundtheproductionassets.About570speciesofvascularplantswerefoundalongtheonshorepipelines,whichisapproximatelyone-thirdofSakhalinplants.

Theresultsofthe2015MonitoringPro-grammeshowthatthetreelayeratthesamplesitesdoesnotshowanydecreaseinthenumberofindividualtreespecies.Insignificantvariationsinthepopulationofshrubsandherbsatsomesamplesitesareduetonaturalreasonsassociatedwiththespecificsoftheirbiology.

Man-inducedimpactsonvegetationareobservedonlyattheboundaryoftheright-of-waypassingthroughdarkconiferousforestsduetostrongerwindandlightfactors.Toimprovethemicroclimaticcon-ditions,thecompanyimplementsarangeofactionsdesignedtoprotecttheyoungundergrowthalongtheforestedgeinthoseidentifiedareas.

Thestudiesdemonstratedthatsomeepiphyticlichenshadexperiencedacertainimpactinitiallyassociatedwiththechangeinthemicroclimaticconditions(strongerlightingandwind,dustingcausedbysoildenudation)occurredduringtheconstructionofthecompanyassets.Ontheotherhand,almostallofthesamplesitesshowedrudimentyoungthallusesalongsidewiththeolderthalluses,whichindicatestherestorationofthelichencover.TwelveprotectedlichenspeciesareincludedintheMonitoringProgrammetocontroltheirhabitatcondition.Theresultsofthe2015MonitoringProgrammeindicateallhabitatsofprotectedspeciesareinsatisfactorycondition.

Studiesofhabitatsandconditionsof18protectedspeciesofvascularplants,three

ofwhichareontheIUCNRedList(Cho-seniaArbutifolia,SakhalinSpruce,andJapaneseYew),indicatetheyareingoodcondition.Thereisonlyoneexception,alocalareaintheMereyaRiverfloodplain,whereindividualSakhalinSprucetreeswerefoundtobedistressedduetosoilwaterlogginginthepreviousyears.Aftercorrectivemeasuresweretakentoimprovethesoilhydrologyinthatarea,nonewtreesappeartobedistressed.

In2015,theassessmentofthedegreeandnatureoftheright-of-wayregrowthshowedagoodgrowthofvegetationovermorethan80%ofthesurveyedsamplesitesontheright-of-way.Herewith,morethan60%ofthesamplesitesarecoveredbyadensegrasscanopyand30%haveaprojectivecoverofatleast50-60%.Indi-viduallightlyovergrownareasarelocatedmostlyonsteepslopesandinthenorthernpartsoftheisland,whichisexplainedbyinsufficientsoilfertilityinsandyandclayeylandplots.However,evenintheseareastherearechangesforthebetter.

SakhalinEnergyimplementsthelong-termWetlandsRecoveryMonitoringPro-grammewithintheright-of-way,theob-jectivesofwhichare:

• tocontrolwetlandsrecoveryprocesseswithintheright-of-wayandadjacentareas;

• toassessallpotentialnegativeimpactsonwetlandsresultingfromonshorepipelineconstructionandoperationactivities;

• todevelopimpactmitigationmeasures.

In2015,30wetlandareasalongtheentirepipelinerouteweresurveyed.Thesurveyedareasbelongtothecategoryofacidbogscharacterisedbypoormineralnourishmentofpeatsoils,acidicenvironment,andapeculiarplantspeciescomposition.

Itwasnotedthatthedegreeofgrasscoverreinstatementontheright-of-waywasgoodinalltheareas.In17of30wetland

8.2.4. WETLANDS RECOVERY MONITORING

areas(57%)recoveryofnaturalwetlandecosystemscanbeseenontheright-of-way.Inotherareas,vegetationisreinstatedwiththespeciestypicalforthevegetationcoverofadjacentwetlandsandthespeciesnottypicalfortheseecosystems.Thisistypicalfortheinitialstagesofvegetationrecovery.Insomeareasoftheright-of-way,recoveryofmoss,lichen,andshrubcoversisobserved.Noneofthesurveyedareasdemonstratedunderfloodingordry-ingoutasaresultofhydrologicalregimeviolation.

Theconditionoftheprotectedplantspe-cies(PogoniaJaponicaandDicranumDrammondiimoss)foundinthesurveyedareasisgood.The2015monitoringsea-sondidnotidentifyaggressiveinvasivespeciesatthecrossingsofwetlandecosystems.

Generally,monitoringofthewetlandsintheright-of-wayshowsthattheirrecoverygoeswiththeexpectedspeed.

88 89


Steller’sSeaEagleisoneoftheworld’slargestbirdsofprey.ItisendemictotheRussianFarEastandhasalocalisedhabitatandsmallpopulation.ThisspeciesislistedintheRedBooksofdifferentlevels(IUCN,Russia,andSakhalinOblast).ThisdeterminestheneedtodevelopandimplementspecialprotectionmeasureswithintheframeworkoftheSakhalin-2project.

TheNorth-EasternSakhalinSeaEaglePopulationMonitoringProgrammewasdevelopedandhasbeenimplementedsince2004.Themainobjectiveoftheprogrammeistoobtainreliabledataonlong-termvariationsinthemainpara-metersoftheindicatorspecies(Steller’sSeaEaglesandWhite-TailedEagles)withinthecontrolzoneandintheimpactzone.Basedonacomparativeanalysisofthedata,theman-madeimpactandtheeffectivenessofmeasurestomitigateitareassessed.

MonitoringisbeingconductedinNoglikiDistrictwithinthe2-kmcorridoralongthe

8.2.6. STELLER’S SEA EAGLE MONITORING

onshorepipelines,3-kmzonearoundOPFboundaries,andinthecontrolzoneatadistanceofupto2kmfromtheLunskyBayshoreline.

The2015breedingseasonwasmorefavourablethanthe2014one.Duringthefieldstudies,172birdswereidentified(119individualsin2014).In2015,theSeaEaglesbredup12younglingsintheareaofpotentialimpact(6younglingsin2014),and22younglingssuccessfullybredupinthecontrolzoneaswell(sevenyounglingsin2014).

TheconditionofSteller’sSeaEaglenestingpoolwithintheimpactzoneandthecontrolzonecanbeconsideredtobegood.Withinthepotentialimpactarea,80%ofallmarkednestswereingoodorsatisfactorycondition,withinthecontrolzoneofLunskyBay—84%.

Duringtheten-yearperiod,therewerenosignificantchangesintheconditionofSteller’sSeaEaglesnestingpool.

In2015,themonitoringofprotectedbirdspeciestookplaceintheChaivoSpitwet-landsinhabitedbytheSakhalinDunlinandAleutianTerncolonies.

Overtheyearsofmonitoring,thetotalnumberofavifaunaspeciesontheChaivoSpithasreached193,and33ofwhichareclassifiedasprotectedattheregionallevel(RedBookoftheSakhalinOblast,2001),andtenspeciesareontheRedListofIUCN(IUCN,2010).

Inthe2015breedingseason,83speciesofbirdswererecorded,14ofwhicharerareandprotectedspecies.ThekeyspeciesthathavebeenmonitoredontheChaivoSpitsince2004arefourregularlynesting

8.2.5. PROTECTED BIRD SPECIES MONITORING

species:Steller’sSeaEagle,SakhalinDunlin,AleutianTern,andLong-ToedStint.In2015,nestingwasreliablyascertainedforallthekeyspecies,i.e.nestswitheggsandyounglingswerefound,andclutchesandyoungbirdswereobserved.

Inaddition,threenewspecieswereobserved:theLittleBittern,whichislistedintheRedBookoftheSakhalinOblastasalimitedspeciesnestingontherangeperiphery;andtheWhite-WingedBlackTernandWinterWren,whicharevagrantspeciesnottypicalfortheChaivoSpithabitats.

Basedontheresults,ornithocomplexesontheChaivoSpitappeartobeinstablecondition.

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In2015,SakhalinEnergycontinuedtheMa-rineEnvironmentalMonitoringProgramme,withaviewtoanalysethehydrological,hy-drochemicalandhydrobiologicalcharacte-risticsofthemarineenvironmentandbiotaconditionwithintheareaofpotentialimpactfromitsoffshoreproductionassets.

Asaresultofthestudies,whichwerecarriedoutwithaconsistentmethodologi-calapproach,multi-yearcomparativedatawereobtainedonthedistributionofthequalitativeandquantitativecharacteristicsofmarinebiotaanditshabitatbothneartheproductionassets(inthecross-sectionarea)andoutsideitsboundaries(intheareaofpotentialimpactandinthebaselinearea).

Basedonthiscomparativedata,scientificallyrobustconclusionscanbemadeontheconditionoftheoffshoreecosystem;andimpactscanbepromptlydetected,prevented,orminimised.

Thus,thecomprehensiveoffshoresurveyprogrammein2015includedenvironmental

Everyyear,morethan200oilandgastankersfromvariousworldwideports(Japan,SouthKorea,China,Taiwan,etc.)arriveatthePrigorodnoyePort.Interna-tionalexperienceshowsthattheballastwatertakenintheseportsforthepurposeofvesselstabilitymaycontaindangerousinvasivespeciesoffloraandfauna.ThecompanytakesawholerangeofactionsonballastwatercontroltopreservetheuniqueecosystemofAnivaBay.

ExchangingballastwaterintheopenseaisaneffectivewaytopreventtransferringinvasivespeciesinaccordancewiththeInternationalConventionfortheControlandManagementofShip’sBallastWaterandSediment.AccordingtotheConven-tionandtakingintoaccounttheinterna-tionalbestpractices,in2009,SakhalinEnergydevelopedandintroducedacorporateBallastWaterManagementPolicy.RussiajoinedtheIMOConventioninApril2012.

ToensurecompliancewiththisPolicy,thedocumentationofeachvesselischecked,

8.2.7. OFFSHORE ENVIRONMENT AND BIOTA MONITORING 8.2.8. BALLAST WATER CONTROL

monitoringstudiesaroundthePA-A,PA-B,andLUN-Aoffshoreplatformsandthewell-headsofabandonedappraisalwellslocatedinthePiltun-AstokhskoyeandLunskoyefields,andalsointheareasofoilandLNGexportterminalsatthePrigorodnoyePortinAnivaBay.

Thekeyconclusionsofthe2015monitor-ingare:

• Hydrochemicalparametersincludingoilhydrocarbons,heavymetals,phenols,anddetergentscompliedwiththebase-linevaluesapprovedforthesewaterareasandwiththestandardsestablishedforthefisherywaterbodies.

• Thecontentofchemicals(phenols,detergents,oilhydrocarbons,andheavymetals)inbottomsedimentswasdistributedunevenlyduetotheregionalgeologyandthedistributionofdifferenttypesofseabed.Asawhole,theconcen-trationswerevariedwithinthebaselinerangesandhadlowervalues,whichcouldresultinbiologicaleffects.

• Oilhydrocarbonsandmethanewerenotdetectednearthewellheadsofaban-donedappraisalwells.

• Benthosandplanktoncommunitiesdemonstratedhighspeciesdiversitywithhighquantitativevalues,whichindicatesthehabitatneartheproductionassetshasfavourableenvironmentalconditions.Thecharacteristicsidentifiedinthestudiedareasweregenerallyconsistentwiththebaselinevalues.Nonoticeableeffectonthemarinebiotawasdetectedfromproduction.

andballastwaterundergoesexpressphysicalandchemicaltests.Onlyafteritisconfirmedthatballastwaterwasex-changedintheopensea,waterdischargeispermittedinthePrigorodnoyeport.

Alongwiththesecontrolmeasures,thecompanyconductsbiologicaltestingoftheballastwaterintankersandmonitorsfloraandfaunainAnivaBay.IntheperiodfromApriltoNovember,whentheriskishighestforinvasivespeciestobeintro-ducedandadapted,samplesofphyto-andzooplanktonaretakenfromeachvessel,whentechnicallypossible.TheresultsofmultiyearmonitoringindicatethattherearenodangerousinvasivespeciesintheballastwateroftankersenteringthePrigorodnoyeport.Thismeansthatalltankersarefollowingcompanyrulesand,consequently,complywiththeInterna-tionalConvention.

Environmentalmonitoringhasbeenconductedsince2007toassesstheconditionoffloraandfaunaintheAnivaBaycoastalarea.Spatialandseasonal

variabilityofqualitativeandquantitativecharacteristicsisanalysedwithintheplanktonicandbenthiccommunitiesmonitoringprogramme.

Asaresultoflong-termmonitoring,asignificantamountofnewdataonAnivaBayfloraandfaunahasbeenobtained.Over600speciesofphytoplankton,over90formsofzooplankton,about40speciesofichthyoplankton,and160benthicspecieshavebeenidentified.NewspeciesofplantsandanimalshavebeendiscoveredthathadnotbeenobservedinAnivaBaybeforebutthatarebiogeographicallyandenvironmentallyrelatedtolocalinhabitants.

Duringtheenvironmentalmonitoring,noprotectedspeciesoffloraandfaunawereobservedinthePrigorodnoyeportwaterarea.

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Thecompanyiscommittedtograywhalesmonitoringandpreservation,astheOkhotsk-KoreangraywhalesarecurrentlyclassifiedintheRFRedBookasthreatenedandbyIUCNRedListascriticallyendangered.SakhalinEnergyallocatesconsiderableresourcestothemonitoringprogramme,farmorethanrequiredbystandardproceduresincludedinthecompanyareaofliability.OtherprotectedcetaceanssuchastheBow-headWhale,NorthPacificRightWhale,FinWhale,Curvier’sBeakedWhale,andHarbourPorpoiseandpinnipedssuchastheSteller’sSeaLioncanbeobservedinthevicinityofthecompanyoffshoreassetsaswell.Inaccordancewiththeprinciplesofsustainabledevelopment,thecompanybelievesthatriskstomarinemammalsarisingfromindus-trialactivitiesmustbeconsideredandmitigatedinatimelymanner;notonlyforendangeredspecies,butforallmarineinhabitants.

In2015,asinpreviousyears,SakhalinEnergy(inclosecooperationwith

8.2.9. GRAY WHALES MONITORING

Sakhalin-1operator,ExxonNeftegasLimited)continuedtheIntegratedMonitoringProgrammeneartheNorth-EasterncoastoftheSakhalinIsland.TheProgrammeconsistsofscientificstudyandresearchofwhaledistribution,foodresources,acousticmonitoring,photographicidentificationofindividualwhales,andassessmentoftheirexternalappearance,andgatheringbiopsysamplesforgeneticanalysis.

Accordingtopreliminarydataobtainedduringthefieldseasonin2015,168graywhaleswereidentified,including11newcalvesandthreeadultwhalesthathadnotbeenpreviouslyregisteredinnorth-easternSakhalinwaters.Theyhavebeenrecordedinthephotocata-logue,whichincludes259animals.Asinthepreviousyears,graywhaleswereobservedinbothfeedingareas,Piltun(coastal)andMorskoy(offshore).Samecommonfactorsasinthepreviousyearswerenotedinregardstotheirdistribu-tion.Afullscopeofacousticmonitoring,surveyofstructureandvarietyofbenthic

communitywasperformed.Thescien-tistsalsotooksamplesoftissuesfromninewhales.

In2015,thecompanyconducted4DseismicsurveysinLunskoyeandPiltun-Astokhskoyelicencedareas.TheseismicsurveysweredesignedandcarriedoutincompliancewithRussianlegislationandinternationalstandards.In2015,SakhalinEnergyandExxonNeftegasLimitedcarriedoutgeophysicalresearchesnearthePiltunfeedingarea.Inordertoreducethecumulativeimpactofsimultaneousoperations,thecompa-niesworkedsequentially,accordingtoascheduletheyhadagreedupon.

IncompliancewiththeSEERconclusion,SakhalinEnergy,inco-operationwithexpertsfromtheWesternGrayWhaleAdvisoryPanel(WGWAP)totheInternationalUnionforConservationofNature(IUCN),developedsomeadditionalmitigationmeasurestoreducetheimpactongraywhales.Inparticular,safetyzoneswereestablishedaround

theresearchvessel;additionalreal-timeacousticandvisualmonitoringwasconducted(topreventthenoiseimpact).Inthecourseoftheseismicsurvey,anindependentobserverfromIUCNsupervisedallmitigationmeasures.

Notasinglegraywhalewasobservedwithinthebufferzonearoundtheseismicsurveyvesselduringthesurveys.Accord-ingtotheonshoremonitoringdata,therewerenograywhales(motherandcalfpairs)presentwithintheareaaffectedby156dBsound(behaviouraleffectlevel).TheseismicsurveyoperationswerestartedandcompletedinJuly,beforemostofthegraywhalesreturnedtothefeedingareasofnorth-easternSakhalin.

94 95


Currently,regularmonitoringandgeo-technicalsurveysareinplaceontheRoW.Theirresultsarerecordedinordertohaverelevantactionstaken.

ThelistofRoWmonitoringactionsfor2015included:

• helicopterfly-oversandphotoshooting;

• rivercrossingsurveys;

• riversurveysbasedongeomaticsprinciples;

• monitoringofriverhydrologicalcharac-teristics;

• surveysofgeologicalhazards,coverthickness;

• plantgrowthandsoillocalmonitoring;

• groundwatersurveys;

• satellitesurveysofthepipelineRoW;

• boggyareassurveys.

Oilspillpreventionandoilspillresponse(OSR)preparednessarethetopprioritiesforSakhalinEnergy.Thecompanyappliesacomplexapproachtoaddressingthisimportantmission.

ThecompanyhasestablishedaCrisisManagementTeamandanEmergencyCoordinationTeamthatareonduty24/7tocoordinatetheresponseinemergencysituations.

TheOSRplanshavebeendevelopedanddulydeployedatallofthecompanyassets.

ThecompanyhasconcludedcontractsforOSRservicestobeprovidedbytheprofes-sionalemergencyresponseteamsof:

• CREO(CenterofRescueandEcologicalOperations)foronshoreassets;

• EcoshelfandSakhalinbranchoftheRosmorrechflotOffshoreRescueServiceforoffshoreassets.

Also,certifiedNon-ProfessionalEmergencyResponseTeams(NERTs)havebeenestablishedatSakhalinEnergyproductionassets.

TheOSRvesselsarecontinuouslyonstandbyneartheoffshoreplatformsandinthePrigorodnoyeport.

Thenumberandvolumeofoilspillshavedecreasedsignificantlyinrecentyears(since2010),withonly23emergencyoilspillstotalling118.50litresreportedbetween2010and2015versus21emergencyspillsreleasing3504.46litresofoilin2008–2009.

In2015,thetotalamountofcrudeoilandpetroleumproductsspilledwasjustabout8litres.

8.3.PipelineRight-of-WayMaintenance8.4.OilSpillPreventionandResponse

Preparedness

BasedonoutcomesofRoWmonitoring,aRoWmaintenanceplanhasbeendeveloped.

RepairandmaintenanceoftheRoWwerecompletedinDecember2015,asplanned.Workwasperformedat22plotsandincludedeliminatingtheconsequencesofnaturalerosionaswellasrepairingexistinganti-erosionstructures.

LandslidesiteshavebeenidentifiedinMakarovandDolinskdistricts.Landslidesonthosesitesweretriggeredbytheconstructionoftelephonelinesdonebythirdparties.Stabilisingmeasuresforthreesiteswillbecarriedoutin2016.

Asforonewatercrossingandonelandslidewhichbecameactive,aspecialsubcontractorcompletedbankprotectionrepairandright-of-waystabilisation.Severallandslideswereobservedduringthe2015monitoring.Designengineerscompletedrequiredsurveyingandstartedtodevelopplanstomitigatetheimpactoflandslides.

8.4.1. GENERAL INFORMATION

Theratioofthetotalhydrocarbonsspilled(26.54bbl)tothetotalhydrocarbonsproduced(ca.396MMbblin1999–2015)islessthan0.0000067%.

Noneoftheproject-to-datecrudeoiland/orpetroleumproductspillsfromthecompanyassetscanbedefinedasan“emergencysituation”.

Global practices of providing response to large-scale emergencies have proven that an effective response to major oil spills is possible subject to an integrated application of mechanical and non-mechanical technologies. Namely, using dispersants allows significantly mitigating the environmental damage, reducing the time to be spent on oil spill response, and rescuing unique wildlife species. Sakhalin Energy has conducted surveys based on the results of which a package of documents was developed and approved by government authorities that allow the company to use disper-sants in emergencies. The company is ready to implement burning—yet another non-mechanical method of responding to emergency oil spills.

Inordertoincreasethepersonnel’sOSRlevelandimprovetheirpracticalskills,thecompanyregularlyconductspracticalandtheoreticaltrainingsessions,drillsandexercisesofvariouslevels,includingperiodiccorporateexercises.AllbasicIncidentCommandmembersreceiveLevelIandIIOSRprogrammeaswellasLevelI(ICS-100)andII(ICS-200)IncidentCommandSystemtraining.LevelIoftheprogrammeisbasicandisdesignedforregularrescuersandemergencyresponders,whileLevelIIisdesignedfortrainingsupervisors,teamleaders,andoilspillresponders.KeyIncidentCommandmemberscompletedLevelIIItrainingforassetmanagers,departmentheads,crisismanagers,andERcoordinators.

TheyareissuedLevelIIIIncidentCommandSystem(ICS-300)certificates.TheOSRdrillsareconductedregularly.

Anintegratedemergencyoilspillresponsedrillinvolvingover10vesselstookplaceinAnivaBayinMay2015.

Accordingtoobservers,thecompanyandcontractorsactedinawell-coordinatedandeffectivemannerduringthedrill.Theobjectivesofthedrillwerefullyrealised.Asafollow-uptothedrill,recommendationsweredevelopedandappropriatemeasuresweretakentoimprovetheOSRsystems.Theanalysisofthedrillsandexercisesconductedbythecompanyshowedittobefullypreparedtorespondintheeventofanemergencyoilspill,whetheroffshoreoronshore.

96 97

SocialImpactManagement

Inkeepingwithitscommitmenttobiodiversitypreservationandinlinewiththeinternationalbestpractice,SakhalinEnergyhasbeenimplementingtheOiledWildlifeRehabilitationProgrammetotrainpersonnel.

TheProgrammewasdevelopedincooperationwiththeInternationalFundforAnimalWelfare(IFAW)andwiththeInternationalBirdRescueResearchCentre(IBRRC),takingintoaccountSakhalin’sflora,fauna,andsevereclimate.In2009,theOiledWildlifeResponsePlanwasdevelopedtopreventandrescueanimalscontaminatedwithoilandpetroleumproductsandtoidentifyresourcesandprocedurestocoordinateactionsofcorporateandexternalentities.

AspartofitsintegratedOilSpillResponsePlan,thecompanydevelopedtheWildlifeRehabilitationSiteImplementationManual(hereinafter—theManual).In2011,theOiledWildlifeRehabilitationSitewasestablishedontheterritoryofthePrigorodnoyeproductioncomplex.

ItremainstheonlyoneofitskindonSakhalinandinRussiaatlarge.

TheManualincludesgeneralrecommen-dationsandguidelinesforthedeploy-mentanduseofequipment,assets,andinfrastructureneededtoputintooperationthewildliferehabilitationsiteatthePrigorodnoyeproductioncomplex.

Coastalbaysandlagoonstemporarilyorpermanentlyinhabitedbybirdsandotherwildlifespecies,manyofwhichareprotectedspecies,aswellasriversandwetlands,areespeciallyvulnerabletooilspills.

ToimplementtheProgramme,thecompanyinstalledspecialisedequipmentinthecentralandnorthernpartsoftheisland,attheonshoreprocessingfacility(OPF)nearLunskyBayandatthepipelinemaintenancedepot(PMD)inGastello.

InMay2015,duringaregularOSRexerciseontheAnivaBaycoast,company

8.4.2. OILED WILDLIFE REHABILITATION

personnelpractisedcapturing,hazing,andtransportingbirds.InOctober,atwo-daytheoreticalandpracticaltrainingcourseinbirdhazing,capturing,andcleaningwasconducted.Thecompanymaintainsadatabaseoftrainedperson-nelwhoareabletoprovideaidincaseofemergenciesonSakhalin.

Inautumn2015,SakhalinEnergyparticipatedinameetingwithexpertsfromMERRACNOWPAP(MarineEnvironmentalEmergencyPreparednessandResponseRegionalActivityCentre)todiscusstheissuesofoiledwildliferesponse.

98 99

In2015,theemployeeopinionsurveyshowed

that98% of the company employeeswerereadytorecommendSakhalinEnergyasaresponsibleemployer.

TheHRDirectoratemeetsthecompa-nymanpowerneeds,whichincludespreparingorganisationalchangesforupcominglarge-scaleprojects,trainingandretainingcurrentstaff,andattractingskilledemployeesfromshareholdercompaniesandtheexternallabourmarket.TheDirectorateisguidedbythefollowingstrategicpriorities:

•attract,hire,andretainthemosttal-entedemployeesintheglobalenergymarketbyrelyingoninternaltalentpool,theexpertiseofshareholdercompanies,andothersources;

• investintheprofessionalandpersonaldevelopmentofRussianexpertstoensurestaffisretainedandatalentpoolforkeymanagerialandengineeringpositionsiscreated;

•offeranattractiveandcompetitiveemployeevalueproposition;

•promotesimpleandclearHRprocessesusingleanmanufacturingmethodologiesandhigh-qualityHRinformationsystems;

•developacollaborativeworkenvi-ronmentthatunitesthecompanyofficesandfacilities.

Thecompanyseniormanagementbelievesthatallemployeesshouldfeelengagedintheirwork,beconfidentthecompanysupportsandrespectsthem,andbegiventheopportunitytocontributetothegrowthofthecompanyusingtheirknowledge,skills,andabilities.Employeeengagementismeasuredannuallyviaemployeeopinionsurveysandisviewedasoneofthemostimportantindicatorsofemployeeworksatisfactionatthecompany.

9.SocialImpactManagement

In 2015, 1,901 people participated in the employee opinion survey, which is about 90% of the employees in the company. The survey showed that the general level of employee engagement was very high—84%. Employees continue to point out how seriously the company commitment is to safety and work quality, occupational safety and the environment, and equipment reliability and process safety. They would recommend Sakhalin Energy as a reliable and socially responsible employer that offers an attractive remuneration and benefits package. At the same time, employees expect the company to continue to make gains in optimising and improving work processes, enhancing the quality of communications, and accelerating the rate at which important operational decisions are made.

Topursuethesegoalsandobjectives,SakhalinEnergyimplementsitsHRstrategythroughitsHRpolicy.

TheHRpolicyisanintegralandstrategicsetofdocuments,methods,andtoolsthatgovernsthecompanyrelationswithitsemployeesandhelpsittopromptlyrespondtochangingcon-ditionsintheglobaloilandgasmarketandthemarketofqualifiedprofessionals.AllrequirednotificationsregardingchangesinemploymentconditionsarecommunicatedtotheemployeesasrequiredbylabourlegislationoftheRussianFederation.

TheHRDirectorandtheCommitteeofExecutiveDirectorsoverseethedevelop-ment,modification,andapprovalofthecompanyHRpolicy.TheseprocessesarebasedonourHRmanagementpolicy,whichisinlinewithinternationalstandards.

TheHRDirectoratemakesmaximumuseofhumancapitalmanagement(HCM)softwarefromSAP.ThisallowstosignificantlyreducetimeandcostsandtooptimisemanyprocessesintheHRDirectorateandotherunitsofthecompany.Inparticular,thesystemmodulesusedbythecompanynotonlyautomatetheprocessofpreparingHRdocumentsandreports,butalsoaidinmanagingimportantprocessessuchaslearninganddevelopment,successionplanning,performancereviews,andrecruitment.

9.1.Personnel:ManagementandDevelopment9.1.1. APPROACHES TO HR MANAGEMENT AND HR POLICY

100 101

5/2 Rotation-based Shift work

Offices

LNGplant

OPF

Platforms

Other

Asof31December2015,therewere2,230peopleonthecompanypayroll,including1,959Russianemployees,whichis88%ofthetotal.SakhalinEnergyoperatesmostlyontheterritoryoftheSakhalinOblast,RussianFederation.Therewere2,199peopleworkinginSakhalin,and31workingintheMoscowoffice.

ThecompanystrivestohireasmanyRussiancitizensaspossible,mostlySakhalinresidents,toworkontheSakhalin-2project.ThisapproachissetforthinthecompanyHRpolicyandcomplieswiththetermsofthePSA.Attheendof2015,1,192people,whichis53%ofthepersonnel,wereresidentsoftheSakhalinOblast.

Attheendof2015,26%ofcompanyemployeeswereworkingonarotationalbasisandlivinginhotelsandrotationalcampsthathavebeenbuiltinaccordancewithRussianlegislationandbestinterna-tionalpractices.

Threehundredseventy-fouroftheRussianemployeeswereinmanagerialpositions(seetheStructureofPerson-nelinManagerialPersonnelStructurediagram),200ofwhichareresidentsoftheSakhalinOblast.Inadditiontotrain-ing,developing,andpromotingexistingRussianstaff,thecompanyisactivelyre-cruitingnewqualifiedRussianspecialistsinordertoincreasetheshareofRussianexecutivepersonnel.Byhiringtrainees,wecanguaranteeaconstantinfluxofyoungtechnicians(seeSection9.1.7.3PersonnelTrainingandSection9.1.7.4TraineeshipProgramme).

In2015,63employeesweregrantedchildcareleaves.Amongemployeeswhotookadvantageofthisrightweretwofathers.Duringthesameperiod,47employees(46womenandoneman)resumedtheirjobdutiesattheendoftheirchildcare

leave.Ofthese,41peoplecontinuedtheiremploymentwiththecompany.

About28%oftheemployeesarewomen(627peopleattheendof2015).Ofthese,78occupyexecutivepositions,makingup17%ofthecompanymanagementteam(seetheStructureofPersonnelinManagerialPersonnelStructurediagram).

Thenumberofemployeeshasbeenincreasingsteadilyoverthepastthreeyears.Thisismainlyduetothenewprojectsunderwaytoconstructaboosterstationandupgradetheoffshorefacilities.Unlikethetourismoragriculturalindus-tries,thecompanydoesnotexperiencesignificantseasonalfluctuationsinthenumberofpersonnel.

SinceSakhalinEnergyisactivelyreplacingforeignworkerswithRussianpersonnel,weareinneedofRussianexperts,includ-ingtechnicallyskilledones.

In2015,171employees(133menand38women)resignedfromtheirpositionsinthecompany.Thisnumberincludes50foreignersand121Russianemployees(including52residentsoftheSakhalinOblast).Thisgivesaturnoverrateof8.14%.Thevoluntaryturnoverrateofcriticaltechnicalpersonnelwas4.95%in2015.

Thenumberofemployeeswholeftthecompanyin2015isbrokendownbyagegroupinthetablebelow.

Number of Employees Who Left the Company in 2015, by age group

Persons %Below30years 35 20

31–50years 99 58

Above50years 37 22

Total 171 100

9.1.2. GENERAL INFORMATION

Attheendof2015,theaverageageofemployeeswas38years.Employeesagedunder50accountedformorethan87%.

TheworkinghoursestablishedbythecompanyarefoundintheInternalWorkingRules:

• everydayworkunderfive-dayworkingweekwithtwodays-off;

• rotation-basedworkwith28calendardaysofworkand28calendardays-off;

• shiftwork.

TheworkingschedulesatthecompanyassetsareshownintheCompanyEmployeeWorkingSchedulestable.

Russianpersonnel

IncludingSakhalinresidents(61%oftheRussianpersonnel)

Foreignpersonnel

Russianpersonnel

IncludingSakhalinresidents(53%oftheRussianpersonnel)

Foreignpersonnel

Russianpersonnel

OfwhichSakhalinresidents(61%oftheRussianpersonnel)

53%1,192 pers.

12%271 pers.

Total 2,230 pers.

88%1,959 pers.

Offices

LNGplant

OPF

Platforms

Other

Personnel Structure by FacilitiesPersonnel Structure

Total 2,230 pers.

63%1,378 pers.

16%361 pers.

6%142 pers.

14%316 pers.

1%33 pers.

Managerial Personnel Structure

Total 470 pers.

80%374 pers.

20%96 pers.

43%200 pers.

83%392 pers.

17%78 pers.

Changes in the Number of Personnel in 2012–2015, persons

Company Employee Working Schedules

Total

2015 2,2301,959 (1,192) 271

2014 2,1981,921 (1,194) 277

2013 2,1441,862 (1,163) 282

2012 2,0521,806 (1,129) 246

Below30

31–50years

Above50years

Personnel Age Structure

13%287 pers.

22%487 pers.

65%1,456 pers.

Total 2,230 pers.


Foreignpersonnel

102 103

AtSakhalinEnergy,werecruitnewper-sonnelbasedonthemanpowerplanandrecruitmentplandevelopedandapprovedannually.Varioustoolsandmethodsareusedtoattractpotentialcandidatesandadvertisenewvacancies,suchas:

• postingontheofficialwebsiteofSakhalinEnergy(in2015,themethodforsubmittingCVsonthewebsitewassimplified).ThewebsiteoffersguidelinesforuploadingCVs;applicantscanedittheirCVsintheirpersonalaccounts;

• providinginformationtoYuzhno-SakhalinskLabourCentre(monthly);

• workingwithrecruitmentagencies;

• participatingincareerfairs;

• publishingvacancylistsinotheronlineresourcesandprintmedia;

• usingsocialnetworkstosearchforcandidates;

• promotingthecompanyEmployeeReferralProgramme,accordingtowhichSakhalinEnergyemployeescanrecommendcandidatesandaregivenabonusifthesecandidatesarehiredtoworkatthecompany;

• attractingskilledemployeesfromshareholdercompanies.

Theremunerationsystemusedbythecompanyisbasedongradesandestablishesremunerationdependingontheemployees’skillsandposition.Thisencouragesefficientworkandprovidesmotivationforexcellentperformance.

Sakhalin Energy main principles of remuneration are to pay its employees competitive salaries that are not lower than the average salary in the Russian oil and gas industry, and to use a transparent bonus system for all staff categories.

RemunerationofSakhalinEnergyemployeesincludes:

•basesalary,hourlyrateaspertheemploymentagreement;

•compensatingorincentiveallowancesandupliftstothebasesalariesandhourlyratespayableaspertheRegulationsonLabourRemuneration,Bonuses,andSocialBenefits,RFLabourCodeandothernormativeacts;

•bonusespayableaspertheRegu-lationsonLabourRemuneration,Bonuses,andSocialBenefitsandotherlocalnormativeacts.

SakhalinEnergyremunerationpolicy,practices,andmethodsaredesignedtorecogniseandencourageexcellentpersonalandproductionperformance.Thecompanyremunerationsystemisthesameformenandwomen.

Theexistingincentivesystemusesasingleunified,standardapproachtomotivatingemployeesinallthecompanysubdivisions.ThisisachievedthroughthefollowingtypesofbonusesaspertheRegulationsonLabourRemuneration,Bonuses,andSocialBenefits:

9.1.3. RECRUITING PERSONNEL AND ONBOARDING NEW EMPLOYEES 9.1.4. REMUNERATION AND BONUS SYSTEM

In 2015, Sakhalin Energy participated in three career fairs in Yuzhno-Sakhalinsk and in similar events in Moscow, Tomsk, Ufa, Vladivostok, Sochi, and Ukhta. As a result, Sakhalin Energy received more than 500 applications for vacancies.

In2015,thecompanyhired206people(150menand56women).Forty-nineofthepersonnelhiredwereforeignem-ployees,and157wereRussiannationals(including73residentsoftheSakhalinOblast).

Thenumberofemployeeshiredin2015isbrokendownbyagegroupinthetablebelow.

One of the key performance indicators of the HR Directorate remains the percentage of critical technical jobs that are filled. In 2014, the figure was 93.8%, and in 2015, 95.7%.

SakhalinEnergycontinuesitsnewemployeeonboardingprogramme,whichaimstomaximiseproductivityofnewemployeesfromtheirfirstdayatwork.In2015,newworkerscomingfromotherregionsreceivedthecompanyguidebook,whichdescribesthemainstagesofmovingtoSakhalinandthelivingconditionsontheisland.

Onceeverytwomonths,newemployeesaregivenapresentationaboutthecom-panywithafulloverviewofthespecificfeaturesoftheproductionactivitiesandprocessesandtheinteractionbetweentheunitsandstakeholders.

•annualperformancebonus;

•specialrecognitionaward(SRA);

• longserviceaward(10yearsormore);

•employeereferralreward;

•one-offpaymenttotheemployeesinconnectionwithrewarding;

•bonusforparticipationinaresearch-to-practiceconferenceheldbythecompanyonaregularbasis;

•CommitteeofExecutiveDirectorsawardtoemployeeswhoachievedspecialsuccessinteamwork.

Employeesmaybeawardedcertificatesofhonourandhonoraryletterformanyyearsofexcellentworkandforachievementsinthedevelopmentoffuelandenergysectorandpetrochemicalindustryontheoccasionofprofessionalholidays(OilandGasIndustryWorkersDay)orcompanyanniversaries.Awardingemployeesmayalsobegiventocelebrateanniversarydatesofemployees(50yearsandthenevery5years).

Tomakesurethatitssalariesarecompetitive,SakhalinEnergyregularlymonitorsthefinancialsegmentofthejobmarketandannuallyadjustssalariestoaccountfortheemployees’individualperformance(seeSection9.1.6IndividualPerformanceReviewoftheEmployees).

In2015,theminimumsalaryinthecompanywasfivetimeshigherthantheminimumwageestablishedbyRussianlegislation.SakhalinEnergylabourremunerationexpensestotalled13.85blnroublesinthereportingyear,withaward/bonuspaymentstotalling3.56blnroubles.

Below30years

31–50years

Above50years

Number of Personnel Hired in 2015, by age group

8.2%17 pers. 37.4%

77 pers.

54.4%112 pers.

Total 206 pers.


104 105

9.1.5. SOCIAL GUARANTEES, BENEFITS AND COMPENSATIONS

Thecompanymakeseveryefforttoprovideacompetitivecompensationandbenefitspackagetoattracthighlyskilledworkforce.Thecompensationsandbene-fitsprovidedtoSakhalinEnergypersonnelensurethewellbeingandsocialsecurityofemployeesandtheirfamilies.

InadditiontotheguaranteesandbenefitsprovidedbyRussianlabourlaw,SakhalinEnergyprovidesitsemployeeswithasocialbenefitspackagethatincludes:

• voluntarymedicalinsuranceforemployeesandtheirfamilies;

• healthbenefits;

• accidentandsicknessinsurance;

• travelinsurance;

• freemealsatthecompanyassetsandfreemealsinthecompanyoffices;

• housingforemployeesandtheirfamiliesforthedurationoftheiremployment(forthoseemployedontermsofrelocationfromotherRussianregionsandCIScountries,aswellasfromtheFarNorthandequivalentareas),orpaymentforhousingrentforsuchemployees;

• mortgageprogramme;

• annualpaymentofround-triptravelex-pensestotheemployees’chosenplaceofvacationwithintheRFterritory;thisappliestoemployeesandnon-workingmembersoftheirfamilies(spousesandchildrenuptotheageof18years)livinginFarNorthareasandequivalentareas;

• corporatepensionprogramme;

• materialassistanceincaseofthebirth(oradoption)ofachild;anddifficultpersonalcircumstances;

• sportandrecreationfacilities(seeSection9.3OccupationalHealth);

• additionalbenefitsforfemaleemployeesonmaternityleave;

• programmesforthecompanyemployees’children.

Housing for Employees (and their Family Members)

Presently,mostofthecompany-ownedhousingislocatedatZimaresidentialcomplex.Therearealsosportsandenter-tainmentfacilitieswithintheterritoryofZimaresidentialcomplex,inparticular:

• Oasisrecreationandsportscomplex;

• Hubleisurecentre;

• RecCentreZima-1sportscentre;

• RecCentreZima-3sportsandenter-tainmentcentre.

ThecompanyalsohasleasedresidentialpremisesinStrawberryHillscomplex.

Medical Insurance

Aspartofthehealthinsurancecontracts,thecompanycontinuestocontractwithSOGAZInsuranceGroupforvoluntarymedicalinsuranceprogrammes,voluntaryinsuranceagainstaccidentsanddiseases,travelinsurance,andinsuranceagainstaccidentsforchildrenparticipatingintheHappyHolidaysProgramme.Thecom-panyalsoaidsemployeesinpurchasingvoluntarymedicalinsurancepoliciesforfamilymembersonfavourableterms.

In2015,theVoluntaryMedicalInsuranceProgrammewasexpanded.Itwassupplementedwithanumberofadditionalservices,andnewmedicalinstitutionswereaddedtotheexistinglist.

InthefiveyearsofworkingwithSOGAZ,132companyemployeeshavereceivedinsurancepaymentsundertheContractofVoluntaryInsuranceagainstAccidentsandDiseasestotallingmorethan121mlnroubles,includingmorethan38mlnroublesin2015.

Mortgage Programme

ThemortgageprogrammeisgovernedbytheRegulationsonPaymentstoEmployees.Sincethebeginningofthemortgageprogramme,126Russianemployees(6.6%oftotalstaff)haveparticipatedinit.

Theprogrammeprovidesforcompensatingapartofmortgageinterestforpurchase(construction)ofdwellingpremises.Undertheprogramme,thecompanyreimburses40%ofinterestpaymentsactuallypaidbyanemployeeduringtheaccountingperiod,notexceedingtheamountsetbythecompany.

Corporate Pension Plan

Thecompanyoffersacorporatepensionplanunderwhichemployeesandthecompanypaycontributionstowardsoccupationalpensionschemes.

Participationinthecorporatepensionplanisvoluntaryandallowseachem-ployeetoindependentlypayintotheirretirementpension.

Attheendof2015,24%ofthecompanyRussianemployeesareenrolledinthecorporatepensionplan.

Thecompanycontributedatotalof145mlnroublestoGazfondfrom2011to2015.

Additional Social Guarantees and Benefits Package at Sakhalin Energy

Voluntary medical insurance

and other insurance

Housing Mortgage programme

Free meals

Benefits for employees on

maternity leave

Material assistance

in special cases

Annual vacation

travel

Programmes for children

Pension programme


In 2015, in order to provide staff with health benefits aimed at improving health, preventing and early detection of diseases, as well as health protection and treatment, the company launched a new project as part of the expansion of the Voluntary Medical Insurance Programme. The programme provides comprehensive specialised medical care for Russian employees working on a rotational basis. This benefit includes treatment at sanatoriums, rehabilitation treatment, and a complete medical examination at leading medical and preventive treatment facilities of the Russian Federation.

106 107

Programmes for the Children of the Company Employees

Wonder Island Leisure and Development Club Since2012,WonderIslandLeisureandDevelopmentClubinZimaHighlandsRChasbeenprovidingearlychildhoodeducation,artclasses,andafternoonchildcaregroupsforchildrenwhodonotattendkindergarten.

Happy Holidays Programme for School-childrenChildrenofcompanyemployeeshavetheopportunitytoattendHappyHolidaysLeisureandRecreationProgrammeduringthesummeratthesportsandculturalfacilitiesofZimaHighlandsRC.Theprogrammehasbeenofferedforfiveyearsalready,andisdesignedforchil-drenfrompreschoolupto16yearsold.Theprogrammehasadifferentthemeeveryyear,andeachofthefivesummersessionsisunique.

In2015,thethemewas“TheWorldofYourCapabilities.”Theactivitieswereaimedatdevelopingeachchild’sindividualqualities.

Thenumberofchildrenparticipatingintheprogrammeincreaseseveryyear.In2015,652childrenattendedthefivesessions.Thisis5%morethanin2014.

Other Employeesandtheirfamiliescanusecompanyshuttlebuses,whichrunonasettimetableandstopatcityeducationalinstitutions.

Schoolcounsellorsareavailableforemployeesandtheirchildren.HighschoolstudentscantaketheProforientatortest,whichcanhelpthemidentifycareersthatmayinterestthem.

TheIndividualPerformanceReviewprocessisoneofthemaintoolsusedtoachievethecompanystrategicgoalsofbuildingaperformanceculture.

9.1.6. INDIVIDUAL PERFORMANCE REVIEW OF THE EMPLOYEES

Allemployeesundergoannualperfor-mancereview.Anemployee’sperformanceisassessedbasedonthedegreetowhichhe/shereachesbusinessandindividualgoalssetatthebeginningoftheyear.


Thisassessmentshowswhetherprofes-sionaltrainingisrequiredfortheem-ployeetocontinuetogrowprofessionallyandimprovethecompanyefficiencyingeneral.

Employee achievements in accordance with his/her

individual goals and objectives

Contribution to the achievement of company goals

Personnel training in accordance with

the needs for professional development

Development of sustainable culture of professional

efficiency

INDIVIDUAL PERFORMANCE REVIEW

Individual Performance Review of the Employees

108 109

9.1.7.1. General Information

Staffdevelopmentatalllevelsisakeyelementincreatingandmaintainingahighlevelofprofessionalismandmo-tivatingpersonnelaswellasretainingthematSakhalinEnergy.Toensurethebestperformance,thecompanystrivestomaximisethepotentialofitsemployees,takingintoaccountdiversityandindividualcharacteristics.

Thecompanyusesacomprehensiveap-proachtostaffdevelopment,inparticular:

• personneltrainingplanningandimple-mentation;

• annualcompetencyassessment;

• careerplanninganddevelopment;

• recruitmentanddevelopmentofthetalentpool;

• developmentofyoungprofessionals;

9.1.7. STAFF LEARNING AND DEVELOPMENT

• developmentofscientificpotential;

• retentionofknowledge;

• scholarshipprogramme;

• traineeshipandpre-graduationinternshipprogramme.

New Cooperation Models

In September 2015, representatives of the Sakhalin Energy shareholders Sergey Khomyakov, Deputy Chairman of the Board of Directors of Gazprom, and Hugh Mitchell, Chief HR and Corporate Officer of Shell, visited Sakhalin. The main purpose of the visit was to discuss cooperation in personnel issues in the framework of the Shareholders Agree-ment on the Strategic Cooperation. This new model of cooperation opens up opportunities for company personnel such as participating in joint training programmes, developmental assign-ments programmes, etc.

9.1.7.2. Staff Assessment

ThecompanyusesthecompetencyapproachforHRmanagement.Aprofileoffunctional,leadership,andpersonalcompetencieshasbeendevelopedforeachposition.Theassessmentofthesecompetenciesisusedtorecommendfurtherdevelopmentandtrainingfortheemployeeatthispositionaswellasforotherpersonneldecisions.Jobcompe-tencyprofileisalistofcompetencesandlevelsofthoseneededforacertainjob.

Competence Based Assessment is a process that gives a clear picture of the professional and behavioural require-ments for employees depending on their skill pool, position, and current duties. Identifying employee competency levels in their functional areas and further developing them are important for successful business tasks fulfilment. Company employees can assess their competencies and have them approved by their line manager via an electronic automated system—ESS/MSS portal (a SAP HCM module).

In2015,98%ofcompetencyprofilesforpersonnel(officestaff,specialists,andmanagers)werepostedinSAPHCM,and86%ofpersonnelunderwentafullcompetencyassessment.Thecompanycontinuestousecompetencylevelreportsforpersonnelasatoolthathelpstoidentifycaseswhentheactualcompetencylevelofanemployeedoesnotmatchthestandardcompetencylevelofthatemployee’spositionintermsoforganisationalunitsorskillpools.

To assess the leadership potential and managerial qualities of personnel,thecompanyusesmoderntools,including:

• Current Estimated Potential (CEP) Ranking Exercise—acurrentestimateofthehighestpositionthattheem-ployeecanoccupyatthepeakofhis/

hercareerduringhis/herworkatthecompany.CEPisevaluatedonceeverytwoyearsforcompanyemployeesJG5andabove.TheassessmentcriteriaareknownbytheacronymCAR:Capacity,Achievements,andRelationships.

In2015,CEPwascalculatedfor993employees.Theassessmentresultsareusedforhumanresourcesplan-ning,creatingasuccessorspoolinthecompany,planningtheindividualandcareerdevelopmentoftheemployees,aswellasdevelopingstaffretentionprogrammes.

• Assessment Centre—atechnologyofintegratedexpertassessmentoftheemployees’leadershipcompetency,whichhasbeenwidelyusedinthecompanysince2009.Thismethodincorporatessuchcomponentsasbusinessgames,structuredinterviews,andfeedbackwithadetailedanalysisoftheemployee’sstrengthsandareasforfurtherdevelopment.

ThetargetaudienceoftheAssessmentCentreishigh-potentialemployeesincludedinthesuccessorspoolforseniorpositions.In2015,92employeesofthiscategorypassedtheAssessmentCentre.

Since2009,thecompanyhasassessedtheleadershipcompetencyof423com-panyemployeesusingtheAssessmentCentre.

• 360 Degree—anadditionaltoolusedtoassessleadershipcompetencyandpersonaleffectivenessofemployeesthatwasdevelopedandimplementedinthecompanyattheendof2014.In2015,86peopleunderwentthisassessment,including74individualandtwoteamassessments,followedbysessionstointerprettheresultsandpreparedevelopmentplans.

The360Degreeassessmentiscar-riedoutbysurveyingtheemployee’sbusinessenvironment.Todothis,theemployee,hissupervisor,subordinatesandpeersfillinanonlinequestionnairedesignedonthebasisofthecompany’smodelofleadershipcompetences.Thefinalresultsarepresentedasaverageratingsofeachgroupandareaccom-paniedbythekeyfindingsregardingtheemployee’sstrengthsandweaknessesaswellasrecommendationsforem-ployeedevelopment.

• Structured Interview. In2015,theLearningandDevelopmentdepartmentdevelopedinformationsessionsonthestructuredinterviewmethodologyduringwhichvideoswereshownthatgaveexamplesofproperandimproperbehaviourofmanagersduringthecom-petencyassessment.Onehundredandsixty-sixlinemanagerswereintroducedtothismethodology.

• Personal and Business Competences Assessment Tests. Thisnewtoolforassessingbusinessskillshasbeensuccessfullyappliedthroughouttheyear.Currently,acompanyspecialistcanassesseachbusinesscompetencyusingacomprehensive,professionallydesignedtesttohelpthelinemanagerwiththeassessment.In2015,124employeesunderwentthiskindofassessmentusingatotalof266tests.Itisimportantthat,inadditiontothecompetencylevel,thetestsdeterminethebasicknowledgerequiredforthegivencompetency.

Thecompanycontinuestoimprovethepersonnellearninganddevelopmentsystembasedonthecompetencyassess-ment.

TheCompetence Assurance Programmewasdesignedtoencouragesafeandtrouble-freeoperationsattheproductionassets.Theprogrammeisasystem

Pers

onne

l dev

elop

men

t

Training planning and implementation

Competence assessment

Career planning and development

Recruitment and development of talent pool

Development of young professionals

Traineeship and pre-graduation internship

Development of scientific potential

Retention of knowledge

Scholarship programme


110 111

9.1.7.3. Personnel Training

Thecompanypreparesannualplansforpersonneltrainingandprofessionaldevelopmentbasedonnewproductiontargets,careerdevelopmentplans,andemployeecompetencyassessment.

Personneltrainingoptionsincludeon-the-jobtraining,e-learning,conventionaltrainingcourses,workshops,andcasestudies.In2015,1,747peopleattendedworkshopsandprofessionaldevelopmentcourses,includinge-learning(oneormorecoursesperindividual).Thecompanyprovidestrainingforallcategoriesofpersonnelwithoutexception.Theaveragedurationoftrainingwas10.5trainingman-daysperemployee(excludingon-the-jobtraining).In2015,SakhalinEnergyinvested325mlnroublesinpersonneltraining.

SakhalinEnergyuniquetrainingresourcesincludebothRussianandforeigntrainingserviceproviders.Employeesthemselves,theirlinemanagers,theHRDirectorate,andcompanyseniormanagementallseethattrainingplansareimplemented.

ThetopprioritiesforSakhalinEnergytrainingpolicyareasfollows:

• compulsorytraininginaccordancewithRussianlaws;

• HSEtraininginaccordancewithinter-nalcompanystandards;

• vocationaltraining;

• personneldevelopmenttraining.

In-House Technical Training Thegrowthofthecompanyandtheuseofadvancedtechnologiesinconstructingandoperatingproductionassetsrequiretechnicianstohaveaparticularknowledgebaseandskillswithintheframeworkoftheirtechnical

competenciesandtheabilitytosafelyandefficientlyperformproductiontasksofanycomplexity.

Thedevelopmentofthetechnicalcompe-tenciesoftheemployeesiscarriedoutinthein-housetechnicaltrainingsystem.Todothis,thePrDTechnicalTrainingSubdivisionwasestablished,whichprovidescontinuoustechnicaltrainingfortechniciansworkingatcompanyproductionassetsandforemployeesofthemaincontractors.

ThePrDTechnicalTrainingSubdivisionimplementsprogrammesandin-housetechnicalcourses:

• intheexistingdisciplines(LNGprocesstechnology,operation,repair,andmaintenanceofproductionequipment);

•on-the-jobandoff-the-jobtraininginalldisciplines;

• indevelopingpracticalprocesscontrolskillsonexistingprocesstrainingsimulatorsandtrainingequipment;

• intargetedmodulesaimedatdevelopingspecifictechnicalcompetenciesandspeciallyadaptedtotheproductionassets;

• insafeproductionassetoperations,developedinaccordancewithbestinternationalpracticesaswellasbasedonthefindingsofauditsandinvestigationsofindustrialaccidents;

• intechnicalareasdevelopedbyequipmentvendors;

• inthetargetareasforthemaincontractorswhosepersonnelworkatthecompanyproductionassets;

• indevelopingtechnicalcompetenciesinaccordancewiththeapprovedcareerdevelopmentschemeandwithregard

Categories Number of personnel

Number of trained personnel

% of trained personnel

Managers 470 361 77Specialists 1,433 1,066 75Clerks 18 11 62Workers 309 309 100TOTAL 2,230 1,747 79

toexaminetheknowledgeandskillsoftechniciansinvolvedintechnicalprocessesandrepairandmaintenanceofproductionequipment.Itisbasedonthecriteriadevelopedinaccordancewiththeprofessionalnormsandthestandardsforperformingjobfunctions/tasksonaspecificproductionsiteortypeofequipment.

Duringtheassessment,theemployeesdemonstrateprofessionalknowledgeacquiredthroughlearningandprofessionaldevelopmentaswellastheskillsandabilitiesdevelopedinthecourseoftheirduties.Assessingemployeecompetenciesalsoprovidesanopportunitytodrawattentiontotherulesandstandardsoflabourbehaviourintheteamandtheattitudeoftheemployeestowardstheirwork,whichisanimportantcomponentofoperatinghazardousproductionassets.

Theassessmentisconductedbyexperiencedemployeesfromamongtheproductionpersonnel.SpecialisedtrainingandsubsequentcertificationfromCity&Guildsinternationalorganisationallowsthemtomastermodernassess-mentmethodsandbecomefamiliarwiththebestinternationalpractices.Theassessmentisoverseenbytrainedandaccreditedinternalverifiersinordertoensuretheassessmentsaremadeobjectively,assessmentconclusionsarevalid,andfollow-upactivitiesareofferedtocloseanygaps.

Competencyassessmentresultsareusedlatertorecommendareasforemployeedevelopment,prepareindividualdevelopmentplans,andmakedecisionstopromoteandtransfertootherunitsandareasofworkwithintheproductionasset.


tothecompetencyassessmentresultsoftechnicians.

Trainingiscarriedoutatthecompanyhands-ontrainingworkshopbytrainersandinstructorsinproductiontechnology,maintenance,andrepairaswellasbyinstructorsusingoperationstrainingsimulators.

Learning Priority Areas at Sakhalin Energy

CompulsorytraininginaccordancewithRussianlaws

HSEtraininginaccordancewithinternalcompanystandards

Vocationaltraining

Personneldevelopmenttraining

• labour and safety;• industrial safety;• ecological safety.

• process safety; • prevention of emergencies and protection of facilities from emergencies;• health protection.

• targeted professional training in technical and other disciplines;• professional development;• training of personnel in the operation of equipment (vendor training);• international professional qualification (CIMA, ACCA, CIPS, NEBOSH, etc.).

• leadership skills development for all levels of managers in programmes developed by the leadership competence model;

• PC skills, Internet and Intranet training and other IT courses;• language proficiency.

The company has made it a priority to study the best practices in industrial training, the integration of Russian and international approaches, the use of modern technologies in the educational process, as well as the development of classroom training, material, and technical equipment for industrial training.

Employee Training in 2015, by personnel categories

112 113


9.1.7.4. Traineeship Programme

Inordertoensurethereareenoughqualifiedtechnicalspecialistsattheproductionassets,thecompanycontinuestoimplementthetraineeshipprogramme.Since2003,236peoplehavebeentrainedunderthisprogramme.

Attheendof2015,27peoplecontinuedtrainingascompanytrainees.TheprogrammefocusesonprofessionaldevelopmentandfurtheremploymentforyoungresidentsoftheSakhalinOblastwithblue-collarprofessionswithspecialisationsthecompanyneeds.Programmeparticipantsaremainly

graduatesofthePolytechnicCollegeoftheSakhalinStateUniversity.

Thetechnicaltrainingfocusesonhelpingthetraineesdeveloppracticalskillsandacquireworkexperience.Practicallessonsduringwhichthetraineesputintopracticetheskillstheyhavelearned

Comment on the traineeship programme by Dmitry Merkuryev, a trainee who enrolled in the programme in 2010, currently a Mechanical Technician at the PA-A offshore oil production platform:

“The Traineeship Programme gives a graduate or junior staff member a great opportunity to start his or her career by acquiring the necessary set of knowledge about oil and gas production, industrial processes and principles of repair and maintenance of oil and gas equipment.

I now know English well enough to work with technical documents and communicate with foreign colleagues. What’s more, we were taught by expe-rienced industrial training instructors

in key technical disciplines right in the Industrial Training subdivision at the LNG plant. They emphasised industrial safety and working with flow charts and technical documents for the equip-ment, which was later used for practi-cal training.

The theoretical training and practical mastering of the material are struc-tured so that future employees acquire the most relevant information. The management of the subdivision have taken significant steps to improve the programme. For example, they intro-duced mandatory rotation for trainees across all production areas of the LNG plant, and the trainees now have the opportunity to work at other produc-tion assets of the company under the programme.”

E-learningIn the past three years, the company strategy has been to teach general business skills online. The company has developed the Competence Gap Closure Programme based on the competency as-sessment, which offers a series of online courses for developing each competency. E-learning at the Shell Open University and on ESS/MSS portal of SAP HCM

makes all employees aware of mandatory industrial safety standards and general principles of work and business ethics, making other resources obsolete. The number of e-learning courses designed specifically for the needs of the company is constantly growing. Building on this trend, the company is saving money, involving more employees in training, and providing them with necessary informa-tion in modern electronic formats.

ensurethattheymasterthematerialattherequiredlevel.Differenttrainingmethodsareactivelyused,suchas:

•havingtraineesprepareprojects;

•havingtraineesindependentlydevelopanddeliverpresentations;

•simulatingvariousproductionscenarios.

Atallstagesofthetraineeshipprogramme,industrialandpersonalsafetyareemphasisedforvarioustypesofwork,andthetraineesaretaughtthesafetyculture.

Theprogrammegraduatesareindemandatallproductionassets.Inhands-onsetting,theydemonstrateahighlevelofknowledgeandpracticalskillsacquiredduringtheprogramme,steadymotivationforfurtherprofessionaldevelopment,andcommitmenttotheprinciplesoftheindustrialsafetyculture.

English

English, HSE standards/ requirements

of the RF legislation, and technical

disciplines

Technical training

Essential knowledge and skills

Combined training

Intensive technical training

On-the-job training

Recruitment and selection of Sakhalin Energy personnel

Traineeship Programme (a three-year course)

• Intensive training in English (3months)

• Training in technical disciplines• SAP• ISSOW• Training on process training simulators,

work with training equipment (12months)

• Mentoring• Interim competence assessment• Competence assessment in accordance with Sakhalin Energy

standards and identification of gaps (18months)

• Combining lessons in English with elements of technical disciplines

• Training in company HSE standards and requirements of the RF legislation

(3months)

114 115


9.1.7.5. Successors Pool Planning and Development

Successorspoolplanninganddevelop-mentisahighpriorityactivityforfurtherdevelopmentofpersonnelcapacityofthecompany.Thekeystagesoftheprocessareasfollows:

• identificationofpotentialcandidatesfromamongtheRussianpersonneltofillpositionsoccupiedbyexpatriatespecialistsandkeyandmanagerialpositionsoccupiedbyRussiannationals;

• assessmentofthepotentialsuccessors’readinesstosucceedthepositionsaccordingtothesuccessionplan;

• thepotentialsuccessors’developmentinaccordancewiththejobrequirementsforthepositionsplannedforsuccession.

Duringthesuccessionplanningprocessfor2015–2019,potentialsuccessors(intheshort-andlong-term)wereidentifiedfor612ofthe673positionswithinthescopeofthesuccessionplanning(91%).Forallemployeesincludedintothesuccessor’spool,individualdevelopmentplansweredevelopedincorporatingtraininganddevelopmenteventstobetakenunderthecompany’slearninganddevelopmentframework(professionaltraining,develop-mentofleadershipandmanagementskills,developmentalassignments,coaching,overseeingofprojects,etc.).

9.1.7.6. Leadership and Management Development Programmes

Inordertoachieveitsstrategicandproductiongoals,thecompanyrequireshighlyqualifiedleaders.Theleadershipskillsofthecompanystaffareenhancedbydevelopmentalclassroomandonlinetrain-ingcourses,on-the-jobtraining,aswellaslearningmethodsbasedonrelationshipssuchascoachingandmentoring.

LeadershipdevelopmentprogrammeshavebeendevelopedforallmanagementlevelsbasedontheNinePlanetsleader-shipcompetencyframework.

In2015,147Russianemployeesofthecompanyoccupyingmanagerialpositionsatvariouslevelsweretrainedundertheleadershipprogrammes.

Alsothecompanydevelopsitsleadersthroughtwotypesofmentoringpro-grammes:

• Individualmentorship.Setupaspairingofemployeesofdifferentlevelsofresponsibilityinordertoencourageprofessionalandpersonaldevelopmentoftheemployeewiththelowerlevelofresponsibility.In2015,87employeesparticipatedintheprogrammeasmentees,and37employeesasmentors.

• Groupmentorship.AseriesofsharingknowledgesessionsundertheJourneytoNinePlanetsproject.Thecompanyleaderssharetheirexperienceinbuildingacareerandmanagingprojectsandpeopleastheyrelatetoleadershipcompetences.Theaudienceincludeshighpotentialemployeesinmanagerialandsupervisorypositionsandpotentialsuccessorstoleadershiproles.Ninesessionswereconductedin2015.

Leadership and Management Development Programmes

Management level Course title

9.1.7.7. Graduate Development Programme

Since2010,thecompanyhasbeenimple-mentingtheGraduateDevelopmentPro-grammeaimedtomeetSakhalinEnergyneedsfortalentedstaff.In2015,repre-sentativesofcompanyshareholdersbegantoparticipateintheprogramme.

Thecompanyorganisessystematicworkwithgraduatesinaccordancewiththethree-yeardevelopmentprogramme(seeStagesoftheGraduateDevelopmentProgrammeabove).

In2015,thecompanyhired12graduatesundertheprogramme.Since2010,94peoplehaveparticipatedintheGraduateDevelopmentProgramme.

Young Energy Graduates Club

Since 2012, the Young Energy Graduates Club has been functioning in the company to help graduates adapt quickly and develop their business and leadership skills. In 2015, the Club organised a num-ber of events, including a visit to the LNG

plant, and a meeting with the heads of various company divisions, during which the participants discussed career- building strategies.

Future Horizons Programme

In order to improve competency of graduates and provide them with basic management skills, the Future Horizons modular programme was developed in 2014. The main objectives of the programme are to realise the potential of young professionals, develop skills needed for effective team collaboration and for understanding tasks and manager’s role as well as to create conditions to identify their own strengths and areas for development. In 2015, 30 graduates participated in the programme.

Stages of the Graduate Development Programme

ME AND MY COMPANY ME AND MY PROFESSION ME AND MY CAREER

Input assessment of business and personal skills of a graduate

Building and consolidation of the junior staff member’s professional skills

Further professional development of a graduate

Preparing and approval of the graduate’s individual development plan

Creation of motivation for further professional growth

Evaluation of prospects for career in the company

Assignment of a mentor and coach Individual development plan implementation

Professional competencies assessment

Assessment of business and personal skills using the Assessment Centre

9.1.7.8. Personnel Development Assign-ments

AnintegralpartoftheSakhalinEnergyHRstrategyregardingtherecruitment,retention,anddevelopmentofemployeesisarrangingpersonneldevelopmentassignments.

Participationinthedevelopmentassign-mentsallowsemployeestogainextensiveexperienceinprojectworkandreceiveadditionalopportunitiesforpersonalandcareerdevelopment.

In2015,SakhalinEnergysignedsevenFrameworkAgreementsonArrangingDevelopmentalAssignmentswithshare-holdercompanies.

In2015,developmentalassignmentsatshareholdercompanieswerearrangedforsevenSakhalinEnergyemployees,andsixdevelopmentalassignmentsofshareholdercompaniesemployeeswerearrangedinSakhalinEnergy.

Highest management

level

JG 1

JG 2

JG 3

JG 4-3

JG 5-4

JG 7-5

CCL Leadership Programme Standard

Leadership Mastery ModuleProgramme

Transformational Management ModuleProgramme

Way to Success ModuleProgramme

Access Code ModuleProgramme

Horizons of the Future ModuleProgramme

Basic Management Skills ModuleProgramme

Effective Team Management, Executive Management, Performance Management, Effective Business Meetings, Coaching

StandardProgrammes

Medium management

level

Initial management

level

116 117


9.1.7.9. Developing Scientific Potential

SakhalinEnergypaysgreatattentiontothedevelopmentofscientificpotentialofitsemployees.Aspartofdevelopingjointtechnicalprojects,thecompanycooperateswithuniversitiesandresearchinstitutes.Companyspecialistsareinvolvedintheworkofstudentscientificsocieties,inpreparinganddeliveringlectures,etc.

Thecompanyholdsscientificandpracti-calconferencesforyoungprofessionalsannually.AllSakhalinEnergyemployeesaged35oryoungerthathaveworkedatthecompanyforatleast12monthsareinvitedtoparticipateintheseconferences.

InOctober2015,thecompanyheldthe7thScientificandPracticalConferenceofYoungProfessionals.Participantspresented25reportsinthreeareas:EngineeringandGeology,ProductionandMaintenance,InformationTechnology,andHRManagement.ThiswasthefirstconferencethatwasattendedbysomeoneoutsideSakhalinEnergy:oneofthepaperswaspresentedbyastudentofthePolytechnicCollegeoftheSakhalinStateUniversity.

TheConferenceEvaluationCommitteeincludedexpertsfromtheProduction,Technical,andHRDirectoratesofthecompanyaswellasrepresentativesoftheGubkinRussianStateOilandGasUniver-sityandtheSakhalinStateUniversity.

9.1.7.10. Internship Programme

Inordertoformanexternalsuccessorspoolfor“Graduate”positions,thecompanyhasbeenimplementingtheInternshipProgrammesince2000.Workingalongsidehighlyqualifiedprofessionals,studentsofRussianuniversitiesandvocationalschoolscanbecomeacquaintedwithadvancedproductiontechnologiesandthebestinternationalanddomesticbusinesspracticesaswellasgainuniquepracticalexperience.

In2015,88universitystudentsand21studentsofvocationalschoolsunderwenton-the-jobtrainingandpre-graduationinternshipsatthecompany.In2015,about75%oftheinternswereresidentsoftheSakhalinOblast.

ThecompanyhasasuccessfulpartnershipwiththePolytechnicCollegeoftheSakhalinStateUniversityintheareaofvocationaleducation:

• Everyyear,thecompanyprovideson-the-jobtrainingandpre-graduateinternshipopportunitiesforthird-andfourth-yearstudentsatthePrigorodnoyeproductioncomplex.Theinternshipprogrammeforcollegestudentsbeganin2009.From20to30studentsstudyinginfieldsrelevanttoSakhalinEnergyreceiveinternshipsatthecompanyannually.

• Everyterm,thecompanyholdscareerguidanceseminarsforsecond-,third-,andfourth-yearstudents.ThestudentsreceivegeneralinformationabouttheSakhalin-2projectandaboutSakhalinEnergyasapotentialemployer.Theseeventshelptomotivateyoungpeopletoworkintheirchosenprofessionaftergraduatingfromthecollege.Variouskindsofinternshipsatthecompanyproductionassetsandthetraineeshipprogrammearealsodiscussedwiththestudents(seeSection9.1.7.3PersonnelTraining).

9.1.7.11. Scholarship Programme

ThescholarshipprogrammewaslaunchedbySakhalinEnergyin2003.

TheprogrammefocusesontalentedgraduatesofsecondaryschoolsandvocationalschoolsoftheSakhalinOblastwhoareinterestedinobtaininganindustry-specificeducationandbuildingacareerwiththecompany.

TheeducationalgrantsofferedbySakhalinEnergyareawardedintheformofascholarship(forthosereceivingstatefundstostudyatauniversity)orreim-bursingoftuitioncosts(forthoseadmit-tedtothefee-basedslotsforafull-timestudyatauniversity).

In2015,10graduatesofSakhalinschoolsbecamethecontestwinners.

Asoftheendof2015,30Sakhalinresi-dentswhoparticipatedinthescholarshipprogrammestudiedatRFuniversitieswiththefinancialsupportofthecompany.

Inordertosuccessfullyimplementmajorprojectsandoperateproductionfacilities,themainfocusmustbehealthandsafety.SakhalinEnergyhasmadeacommitmenttoindustrialsafetyandcausingnoharmtopeople.

Attheendof2012,theHealth,Safety,Environment,andSocialPerformance(HSEandSP)SteeringCommitteedecidedtorevisethecompany’sexistingLifeSavingRulestobringtheminlinewiththecompanynewRiskProfile.Atpresent,thecompanyuseseightLifeSavingRulesadoptedinMarch2013.Theserulesareparticularlyassociatedwiththehigh-riskzones.

9.2.LabourSafetyandProtection9.2.1. GENERAL INFORMATION

DataoninstancesofemployeesandcontractororganisationsviolatingtheLifeSavingRulesin2015areshowninthechartViolationsoftheSakhalinEnergyLifeSavingRulesin2015,numberofcases.

Any violation of the Life Saving Rules leads to serious consequences, including dismissal.

ThecompanyusesaconsistentapproachwhenhandlingHSEissues(seeSection3.5HSEandSocialPerformanceManagement).Thisapproachcomplieswithbothlegisla-tionandriskmanagementsoastoensurecontinuousimprovementinthisarea.

ThecompanyalsorequirescontractorstomanageHSEissuesincompliancewiththisapproachandinternationalstandardsadoptedbythecompany.Thecompanymainfieldsofactivityintheareaofsafetyremain:

• occupationalsafety;

• industrialsafety;

• roadsafety.

LIFE SAVING RULES

I WILL NOT APPEAR AT WORK UNDER THE INFLUENCE OF DRUGS OR ALCOHOL

I WILL NOT USE COMMUNICATION DEVICES WHILST DRIVING

I WILL NOT SMOKE, CARRY OR USE IGNITION SOURCES IN ACTIVE HYDROCARBON AREAS

I WILL COMPLY WITH THE REQUIREMENTS OF PERMIT TO WORK

I WILL NOT WALK UNDER A SUSPENDED LOAD I WILL NOT EXCEED THE SPEED LIMIT

I WILL WEAR A SEATBELT WHEN TRAVELLING IN A VEHICLE

I WILL ONLY DRIVE ON COMPANY BUSINESS WITH A VALID DEFENSIVE DRIVING TRAINING AND JOURNEY AUTHORIZATION

118 119

2013 2014 2015

Numberofpeopleinjuredinaccidentsattheworkplace,total 12 6 9

includingfatalities 0 0 0

Numberofaccidentsforcontractororganisationsatcompanyfacilities 9 4 9

includingfatalities 0 0 0

Totalregisteredincidents(per1mlnman-hours) 0.89 0.46 0.68

Numberofpeopleinjuredinroadtrafficaccidents(per1mlnman-hours) 0 0 0.07

Injury Rates for the Company and Contractor Organisations in 2013-2015

Alcohol/drugabuse

Smoking/useofignitionsourcesinahydrocarbonarea

Failuretofollowtherequirementsofaworkpermit

Failuretousesafetybelts

Failuretoprovideavaliddefensivedrivingcertificate/trippermit

Speedinglimitexceeding

Useofhandheldcommunicationdeviceswhiledriving


9.2.2. INDUSTRIAL SAFETY

SakhalinEnergyhasanindustrialsafetypolicyandanIndustrialSafetyManage-mentSystem(ISMS)thatcomplywithRussianlegislationandinternationalbestpractices.Thecompanymainindustrialsafetygoalistoensureindividualsandsocietyareprotectedfromaccidentsathazardousproductionfacilitiesandtomitigatetheireffects.

AnintegralpartofISMSisoverseeingcompliancewiththeindustrialsafetyrequirements.Thisisdonebyevaluatingthefunctioningofallhazardousproduc-tionfacilitiesofthecompany,preventingaccidentsatthesefacilities,andensuringwearepreparedtorespondtoaccidentsandincidentsandtheirconsequences.

AllaspectsofindustrialsafetyarecontinuouslyandregularlyinspectedbycompanyexpertsundertheISMS.Theseinspectionsareplannedandcarriedoutsothatthesafetyofalloperationsiseffectivelymonitoredathazardousproductionfacilities.

ThecompanysubmitsproductioncontroldatatoRostekhnadzorannuallyasrequiredbylaw.

Thecompanyoperateshazardousproduc-tionfacilitieswiththefollowinghazards:

• reception,use,processing,generation,storage,andtransportationofhazardoussubstanceslistedinAppendix1totheFederalLawOntheIndustrialSafetyofHazardousProductionFacilities;

• useofequipmentoperatedunderexcesspressure(over0.07MPa);

• useofpermanentlyinstalledliftingequipment.

Asrequiredbylaw,thecompanyhasregistered10hazardousproductionfacilitiesinthestateregister,andhazardclasseswereassigned.

ForhazardclassIandIIfacilities,itismandatorytodevelopindustrialsafetydeclarations.Thecompanyhasdeveloped

suchdeclarationsforallhazardousproductionfacilities.

ThecompanyconductsindustrialsafetytrainingandcertificationforemployeesworkingatthecompanyhazardousproductionfacilitiesincompliancewithlawandtheISMS.Theprocedureforindustrialsafetytraining,examination,andcertificationisincompliancewiththecurrentlegislation.

Thecompanyachieveshighproductivityandobservesallindustrialsafetyregu-lationsbyusingthelatesttechnologiesandregularlyassessingandmanagingindustrialsafetyrisks.Thecompanytakesmanymeasurestoimproveperformance,including:

• settingupandoperatingthecompanyIndustrialSafetyManagementSystemasrequiredbylaw;

• auditingatdifferentlevelsandregularlyreviewingtheISMS;

Violations of the Sakhalin Energy Life Saving Rules in 2015, number of cases

10

9

5

5

31 1

120 121

• havinganefficientandunbiasedprocedureforaccidentandincidentinvestigationattheassets,preparingreportsasrequiredbylaw;

• monitoringcompliancewiththeindustrialsafetyrulessetforthinfederallaws,otherregulations,andlocalregulations;

• developingpreventivemeasuresandorganisingaccidentandincidentpreventionworkatallhazardousproductionfacilitiesofthecompany;

• offeringindustrialsafetytrainingandacertificationsystemforcompanyemployeesasrequiredbylaw.

Alltheabovemeasuresimplementedbythecompanyalongwithanumberofthebestpracticetoolsguaranteethatthecompanycomplieswithindustrialsafetyregulationsatallstagesofproduction,startingfromdesigningeachnewwelluptothemomentoilisloadedintotankersandliquefiednaturalgasisloadedintoLNGcarriersinAnivaBay.


9.2.3. SAFETY CULTURE

OneofSakhalinEnergyprioritiesistodevelopacorporateculturethatwillhelpachieveGoalZero,whichisnoharmtopeople,bringingtheincidentratetothelowestpossiblelevel,andencouragingproactiveHSEbehaviourinpersonnelbothinthecompanyandincontractororganisations.

PersonnelfromSakhalinEnergyandcon-tractororganisationsdemonstratetheircommitmenttosafetyprinciplesandGoalZero.GoalZeroistopreventincidentsbyrecognisinghazardsearlyandmanagingrisks.Itispossibletoachievethisgoalonlyifeachandeveryemployeemaintainsaresponsiblepersonalattitudetowardssafety.

Ifemployeestakepersonalresponsi-bilityforcomplyingwiththeHSERulesandinterveninginunsafesituations,thecompanycanreachitssafetytargetsandproductiongoals.

InApril2008,theCEOawardwasestab-lishedtopromotesafebehaviourandHSE

achievements.Companyandcontractoremployeesareawardedmonthlyforcon-tributionstodevelopingasafetyculturesuchasexcellentandsafework,timelyresponse,andpreventionofhazardoussituations.

Twenty-ninenominationswerereceivedin2015.Sixcompanyemployeesreceivedthisaward.Also,sixawardsweregiventocontractors.

TheSafetyCultureEvolutionLaddershowshowasafetycultureevolvestowardthegenerativelevel.Atthislevel,companyemployeestrusttheirmanagerssufficientlytoshareinformationthatwillpreventincidents.Achievingthislevelofcorporatecultureistheprimarygoalofalllaboursafetyprogrammesimplementedbythecompany.

Whenemployeeschangetheirbehavioursothatsafebehaviouristhenormatproductionsites,intheoffice,andathome,itwillbeatremendoussteptowardsachievingthehighest(generative)levelofHSEculture.

ThecompanyhasbeenholdingSum-merandWinterSafetyDaysforthelasteightyears.Allcompanyandcontractoremployeesmeettodiscussrelevantsafetyissues,suchashowouractionsandbehaviouraffectthesafetyofothersandwhatwecandotomakeworksafer.Theyalsodiscussfollowingsafetyrulesbothattheworkplaceandoutsideworkinghours.

The key factor in developing a successful safety culture is to have the company

senior management committed to an HSE culture. In 2015, supervisors at all levels (directors, facility managers, and heads of subdivisions) visited the company and contractor production facilities 93 times.

By doing this, they personally demon-strated their commitment to a safety culture to company and contractor employees. This is an important factor in motivating employees and improving the safety culture in general.

In 2015, 115 line managers, HSE specialists, and HSE critical contract holders underwent training to demon-strate a commitment to HSE. Seven-teen people were promoted to trainers under the programme. The aim of the programme is to achieve a common understanding of the current HSE situation, motivate employees to seek continuous HSE improvement, and remind them of the company’s goal to be an HSE leader.

Pathological

Reactive

Calculative

Proactive

Generative

Increasing in

formed

Increasing tr

ust and acc

ountability

Safety Culture Evolution Ladder

122 123

andcontractoremployeestookatrainingcourse.

Aworkshoponmanagingsafetytechnology,partoftheAnnualSakhalinEnergyHSEPlan,washeldinOctober2015andwasacontinuationoftheseriesofworkshopsstartedin2012forthecompanyexecutivemanagement.Theworkshopin2015wasinteractiveandcoveredthefollowingmaintopics:

• majorinternationalprocesssafetyincidents;

• learningfromprocesssafetyincidentsatSakhalinEnergy;

• thinkingbiasesandtheirimpactonprocesssafety;

• reflectivelearningtrainingforfrontlinestafftobringthelessonslearnedfromprocesssafetyincidentstoremoteassets(withsupportfromShellRussia);

• roleofleadershipinpreventingmajorprocesssafetyincidents;

• continuousimprovement:howtocreatechronicuneasewhenthingsaregoingwell;

• improvedfrontlinecollaborationbetweenTechnicalandProductionDirectorates.

Participantsattheworkshopincludedfrontlinesupervisors,technicalexpertsandcontractorrepresentatives.Morethan50processsafetyleadershipcommit-mentsaswellaseightprocesssafetyimprovementplansweredevelopedbyparticipants,allaimingtoimprovethesafetycultureatSakhalinEnergyassets.

Thecompanycontinuestopromotetheeffectiveobservationandinterventionprogramme.Theobjectiveofthepro-grammeistopreventseriousincidentsbyrespondingquicklytopotentialhazardoussituations.

Asthisprogrammeisimplementedinthecompanyandcontractorandsubcontrac-torcompanies,asafetycultureisbeingcreatedandimproved.

AccordingtotheHealth,Safety,Environ-mental,andSocialPerformancePolicyandCommitments,itistherightanddutyofeveryemployeetointerveneinapoten-tiallyhazardoussituation.

Theeffectiveobservationandinterventionprogrammehasbeensuccessfullyusedatallcompanyfacilities.In2015,about45,000interventionsbycompanyandcontractoremployeeswererecordedatallfacilities.

Observationandinterventioncardscanbefilledinwhenanemployeeseespositiveexamplesofsafetycomplianceorwhenbestpracticesareappliedatthework-place.In2015,over36,000cardswerefilledinwithsafetycultureexamples.

Thecompanyalsohasahazardiden-tificationprogramme.Thegoaloftheprogrammeistoidentifyandeliminatepotentiallyhazardoussituationsassociatedwithequipmentorsystembreakdown.Everyemployeewhoidentifiessuchahazardshouldfillinahazardidentifica-tioncardtoreporthazardousconditions,factors,ortechnicalfailuresthattheycannotcorrectthemselves.ThesecardsshouldbeimmediatelysubmittedtothemanagerinchargeorHSEstaff,soseri-ousincidentsareprevented.

Trainingsessionsfordevelopingasafebehaviourcultureareofferedatallproductionfacilitiesofthecompany.In2015,morethan1,200SakhalinEnergy

An interactive online course

An interactive online course was developed in International Minimum Industry Safety Training (IMIST) to be used by companies and their contractors. The course describes basic elements of safety for the oil and gas industry as well as potential hazards and controls for all employees. The course helps to reduce the number of injuries and incidents by ensuring that all personnel have the safety knowledge and basic skills necessary to recognise and minimise risks. In 2013–2015, more than 500 employees of the company and contractors received the training.


9.2.4. ROAD SAFETY

In 2015, the Sakhalin Energy Road Safety Programme received the Shell CEO’s Special Award for HSE&SP excellence in 2014, in the Achieving Good HSE and SP Results category.

Company’svehiclesdrovemorethan9mlnkmduring2015.InNovember2015,SakhalinEnergyreachedalevelofhighsafetyperformance.Wehadfouryearswithnoroadtrafficacci-dentsinwhichpeoplewereinjured.Thisachievementisespeciallyim-portanttakingintoconsiderationthedifficultsituationontheroadsoftheSakhalinOblast.

Tomaintainandimproveitsroadsafetyperformancethecompanycontinuestoimplementthefollowing:

• monthly meetings of the Road Safety Steering Committee chairedbythecompanyCEO;

• analysis of IVMS reports.IVMSmonitorsdriverbehaviour,identifies

non-compliance,andallowsthecom-panytotakestepstopreventsituationsthatmayleadtoroadtrafficaccidents.Thisyear,theIVMSreportsdemon-stratedanimprovementindriving.Theentiremonitoringsystemcoversmorethan1,500driversand640vehicles;

• defensive driving training.Allprofes-sionalandnon-professionaldriverstakedefensivedrivingcourses.In2015,thecourseswereconductedformorethan1,400driversofvariouscatego-ries.Moreover,thecompanyallowedanyemployeestoattendthedefensivedrivingtraining;

• vehicle compliance control. Allcompanyand(sub-)contractorvehiclesusedinproductionactivitiesarechecked,andcompanyand(sub-)contractordriversaremonitoredtoseethattheycomplywithroadsafetyrulesandstrictlycomplywiththeRFtrafficlegislationandthecompanyRoadSafetyManagementStandard.ThreeRoadSafetyMonitoringteams

performoversightonadailybasisindifferentregions;

• interaction with other organisations. ThecompanyinitiatedcooperationwithGazpromDobychaShelf,whichdevelopstheKirinskoyefield,inordertojointlysolveroadsafetyissuesatthesouthaccessroadtoLunskyBay.TheRoadSafetyMonitoringteamandtheStateTrafficSafetyInspectoratekeepwatchoverthesouthaccessroad;

• active participation in various forums,wherethecompanysharesitsexperi-enceinensuringroadsafetyundertheproject;

• implementation of the safe journey management programme at the com-pany facilities.EachSakhalinEnergyproductionfacilityhasappointedpersonsresponsibleforroadsafetywhomonitorthedailyoperationofallvehicleswithinthefacility,includingjourneymanage-mentandcheckupsofthetechnicalstateofvehiclesandtransportedcargoes;

124 125


•developmentandintroductionofthecargo securing and vehicle transpor-tation training course. SakhalinEnergyoperationsinvolvetransportationofmaterialsandheavyequipmentusingtheroadsoftheisland.Improperlysecuredcargoesareoneofthemainreasonsbehindasignificantnumberofroadtrafficaccidents.Itbecameap-parentthatatrainingcoursehadtobeintroducedwhenitwasdiscoveredthatnon-compliantcargotransportationhadrisenundertheprojectandthattherearenoclearrecommendationsintheregulationsoftheRussianFedera-tiononpropersecuringofcargo.

AnimportantobjectiveoftheRoadSafetyProgrammeistomaintainhighcorporatesafetystandardseveninareasoutsidetheliabilityofthecompanyanditscontractors,especiallyinSakhalincommunitieswherethecompanyoperates.ThisobjectiveisbeinghandledbytheSakhalinRoadSafetyCouncil,whichwasestablishedattheinitiativeofthecompanybackin2005(seeSection9.5.3SakhalinRoadSafetyCouncil).

All company vehicles are equipped with monitoring devices that record drive, work and rest times (tachographs) and dashboard cameras. Moreover, in 2015, all company vehicles were equipped with parking radars.

In 2015, more than 1,400 Sakhalin Energy and contractor employees received defensive driving training.

Thecompanyusesasystematicapproachinprotectingthehealthofitspersonnel.SakhalinEnergyhasdevelopedandapprovedacorporateoccupationalhealthandhygienestandard,includingthefollowingsections:

• healthriskassessment;

• medicalemergencyresponse;

• medicalexaminations;

• medicalrequirementsforcontractors;

• monitoringtheuseofalcoholandpsy-choactivesubstancesatworkplaces;

• chronicfatiguemanagement;etc.

ThecompanyOccupationalHealthandHygieneStandardwasupdatedin2015inaccordancewithcorporateprocedures.Moreover,aspecificationwasdevelopedformonitoringionisingradiationatpro-ductionfacilities.InaccordancewiththechangesmadetotheMedicalRequire-mentsforOccupationalFitness,companyemployeesunderwentclinicalscreen-

9.3.OccupationalHealth

ing.Thecompanycontinuestofocusonpreventingemployeefatigue.Todothis,additionalmeasuresweredevelopedandintroducedtoassesstherisk.Companyemployeeshaveaccesstointeractivein-formationonmanagingrisksassociatedwithfatigue.

Healthrisksareassessedatallcom-panyfacilities.Amonitoringsystemforharmfuloccupationalfactorshasalsobeenintroduced.Causeandeffectwereanalysedtocomparetheproductionenvironmentdata(airinworkingzones,vibration,noise,microclimate,ionisingradiation,etc.)andemployeehealthdata.Risksofharmfulfactorsinfluencingem-ployeehealthattheproductionfacilitiesareassessedbasedontheanalysis.

Correctivemeasuresaresubsequentlydevelopedtominimiseanyrisks,andtheFountainelectronicdatabaseisusedtomakesurethemeasuresareputintoplace.In2015,therateofreportedoccupationaldiseasesremainedatarelativelylowlevel(seetheRateofReportedOccupationalDiseasesin2011–2015table).

In2015,allcompanyemployeesliftingheavyloadsorworkinginharmfuland/orhazardousconditionsunderwentmanda-torymedicalexaminations.Over85%oftheofficepersonnelunderwentmedicalexaminations.

Performanceindicatorsareanalysedonaregularbasisinordertoimproveworkingconditions,preventillness,andpromoteahealthylifestyle.

In2015,anincreasingnumberofcon-tractorsappliedthecompanyapproachtoassessingcardiovasculardiseaserisksandbodymassindex.Thisallowsthemtoeffectivelymonitortheriskofdevelopingacutecoronarysyndrome.Thecompanyusessoftwarethatallowsonlyemployeeswhoarefitintermsofhealthtoworkatremotefacilities.Thecompanyap-proachtoriskassessmentofcardiovascu-lardiseaseandbodymassindexcalcula-tionisbasedonananalysisofmortalityforreasonsotherthanoccupationalinjuries.Theseprogrammeswereintroducedatthecompanyremoteproductionfacilitiesin2010,andasaresultthemortalityleveldroppedtovirtuallyzeroin2012–2015.

Sakhalin Energy Occupational Health and Hygiene Standard

Medical examinations

Medical requirements for contractors

Chronic fatigue management

Health risk assessment

Control over the prohibition of alcohol and psychoactive

substances use at workplaces

Medical emergency response

Additional programmes of disease prevention, other

OCCUPATIONAL HEALTH AND HYGIENE STANDARD

126 127

Besidesmandatoryhealthprogrammes,in2015,thecompanycontinueditspolicyofencouragingpersonneltokeepfitandpreventdiseases.

Todothis,additionalstepsweretaken,suchas:

•preventingacuterespiratoryviraldis-easesandinfluenza,includinghealtheducationandvaccination;

• implementingaprogrammepromotingahealthylifestyleandengaginginsports.Aninitiativegroupofthecompanydevelopedascheduleofactivitiestoimprovegeneralhealthandpromotefitnessandsports.Accordingtothisschedule,employeesparticipatedinsportsandcompetitionsbothwithintheirsubdivisionsandatthecorporatelevelaswellasinopenlocalandregionalchampionshipsinvarioussports(football,volleyball,tennis,swimming,hiking,etc.);

•providingaccessforcompanyemployeesandtheirfamiliestothecorporatesportsandfitnesscentreinYuzhno-Sakhalinsk(gym,swimmingpool,footballfield,andtenniscourts).Moreover,therearegymsandsportsfieldsatthecompanyremotefacilities;

• implementingaprogrammetopreventalcoholanddrugaddictionbyraising

theawarenessoftheimpactalcoholanddrugshaveonhealth;

• introducingacampaignagainstsmoking.Everyyearon31May,SakhalinEnergycelebratestheWorldNoTobaccoDaywhenemployeesmeettodiscusstheproblemoftobaccoaddiction.Smokersareofferedfreemedicaladviceandsupportivemedicaltreatment.Also,thereisanextensiveinformationcampaignduringwhichpostersandleafletsaredistributed;

•continuingtoimplementhighstand-ardsformedicalemergencyresponse.In2015,over300employeesofSakhalinEnergyandcontractorscompletedfirst-aidtraining.

CompanyemployeesandcontractorsatremotefacilitiesoftheSakhalin-2projectaswellascompanyemployeesonforeignbusinesstripsareprovidedwithhigh-qualitymedicalsupportguaranteedbyZAOAEAInternational(Sakhalin).CompanyemployeescanalsoreceivemedicalservicesatotherhealthcarefacilitieslistedbySOGAZinsurancecom-panyundertheVMI(voluntarymedicalinsurance)programme(seeSection9.1.5SocialGuarantees,BenefitsandCom-pensations).


OneofSakhalinEnergykeybusinessprin-ciplesistorunthebusinessinasociallyresponsiblemanner,complywiththelawsoftheRussianFederation,andrespectfundamentalhumanrightswithinthelegalbusinessframework.

The company management provides a safe and confidential setting for employees and external stakeholders to express any concerns, questions, and raise issues of human rights violations. The whistle blowing / grievance procedure (see Section 9.4.2 Grievance Mechanisms) is a key mechanism to implement that.

Thecompanyintegratedapproachtohumanrightshasseveralinseparablylinkedcompo-nents,including:

• HumanRightsPolicycommitment;

• incorporationofcommitmentsintothecompanystrategy;

• humanrightsrisksandimpactassessment;

9.4.HumanRights

9.4.1. HUMAN RIGHTS: PRINCIPLES AND MANAGEMENT SYSTEM

• stakeholderengagementinconnectionwithhumanrightsissues;

• efficientgrievancemechanism;

• trainingofthecompanyandcontractorpersonnel;

• humanrightsmonitoringandreporting.

Thecompanyhumanrightsstandardsarelaidoutinthefollowingprincipaldocumentstoensuretheyareimplementedonaday-to-daybasis:



• CodeofConduct;

• BusinessManagementSystem;

• CommitmentsandPolicyonHealth,Safety,Environment,andSocialPerformance;

• SecurityPolicy;

• ContractingandProcurementPolicy;

• WhistleBlowingProcedure/CommunityGrievanceProcedure;

• SustainableDevelopmentPolicy.

TheHumanRightsPolicy(availableonthecompanywebsite)setsforththehumanrightscommitmentsanddiscussesman-agingrisksassociatedwithpotentialoractualviolationsofhumanrightsresultingfromcompanyactivities.

SakhalinEnergyhasadoptedstandardsforobservinghumanrightsinallsituationsinwhichthereisapotentialforviolatingtheserights,namely:

• employeerelations;

• workingincommunities;

• contractingandprocurement;

• assetsecurity.

Total rate of reported occupational diseases 2011 2012 2013 2014 2015 2016

target

Companyalone 0.6 0 0.56 0.61 3.33 5.0

Companyandcontractors 0.6 0.8 0.5 0.39 1.15 5.0

Withtemporarydisability(companyalone) 0 0 0.28 0.36 0.67 –

Withtemporarydisability(companyandcontractors) 0.2 0.1 0.07 0.23 0.15 –

Rate of Reported Occupational Diseases in 2011–2015

128 129

Working in communities

Contracting and procurement


Thecompanyholdstrainingcoursesandinformationsessionsonhumanrights(seeSection9.4.4HumanRightsTraining).Securitycontractorsinparticularareinformedaboutthecompanyhumanrightsstandards.

Thecompanystakeholderengagementstrategyisfocusedonminimisingimpactsonhumanrights.Itisobvious,however,thatitisimpossibletoeliminatealladverseimpactsofaprojectaslargeasSakhalin-2.Thisiswhythecompanyadoptedagrievancemechanismrightasconstructionstartedtoeffectivelyaddressgrievancesraisedinconnectionwiththeproject.Themechanismincludesthefollowing:

• WhistleBlowingProceduretoaddressviolationsoftheStatementofGeneralBusinessPrinciples,CodeofConduct,orotherproceduresofthecompany(relatedtoconflictofinterest,bribery,corruption,etc.).

The company fully acknowledges the rele-vance of the Guiding Principles on Business and Human Rights (Guiding Principles) approved by the UN Human Rights Council in 2011.

In 2015, upon the invitation of the Russian Federation Ministry of Foreign Affairs, Sakhalin Energy participated in the 4th UN Forum on Business and Human Rights in Geneva.

At the Forum, the company annually pre-sents its experience and achievements in applying the Guiding Principles.

THE COMPANY’S HUMAN RIGHTS STANDARDS

The company’s activities

9.4.2. GRIEVANCE MECHANISMS

• GrievanceProceduretoaddresslabourissuesofcompanypersonnel(violationofemployeerightsunderthelaws,regulatorylegalacts,thecompanylocalregulatoryacts;violationoflabouragreementsandtermsoflabourcon-tractswithemployees;othersituationsaffectingtheinterestsorviolatingthelabourandpersonalrightsofemploy-eesinthecourseoftheirworkforthecompany).

• CommunityGrievanceProceduretargetedtoaddressgrievancesfromthepublicandcontractor’s/subcontrac-tor’semployeesinconnectionwiththeSakhalin-2project.InadditiontotheCommunityGrievanceProcedure,thecompanyestablishedaseparateproce-

dureforaddressinggrievancesrelatedtotheSakhalinIndigenousMinoritiesDevelopmentPlanin2011(seeSection9.5SocialInvestmentandContributiontoSustainableDevelopmentoftheHostRegion).

Thesemechanismscanhelpresolvegrievancesquicklyandefficiently,theythoroughlydocumentgrievancesandcorrectivemeasures,andreducethelike-lihoodthatsimilarsituationswillreoccur,therebycontributingtobuildingstrong,long-termrelationshipswitheveryoneaffectedbythecompany.

In2015,aspartofvariouscorporategrievancemechanisms,54grievancesandappealswerereceivedfromcompanypersonnelandexternalstakeholders,including:

• 16grievancesundertheWhistleBlowingProcedure;

• 4grievancesfromemployeesofthecompany;

• 34grievancesfromthepublicandem-ployeesofcontractorandsubcontractororganisations.

ThegrievancesrelatedtoviolationsoftheGeneralBusinessPrinciples,theCodeofConduct,orothercompanyprocedureswerehandledundertheWhistleBlowingProcedure.Thesegrievancesconcernedtenderprocedures,conflictofinterest,

9.4.3. GRIEVANCE HANDLING IN 2015

The company handles grievances based on several principles (in compliance with the Guiding Principles):

• legitimacy, and incorporation into the corporate system;

• accessibility;

• transparency and openness;

• stakeholder engagement and ensuring dialogue during the grievance process;

andrecordinghoursworkedbytheemployees.

Bytheendof2015,eightgrievancesoutofthe16receivedundertheWhistleBlowingProcedurehadbeenresolved.Inaddition,threegrievancesreceivedattheendof2014hadbeenresolved.All11grievanceswereresolvedwithinthetimeframeestablishedintheTermsofReferenceforcarryingoutinvestiga-tions.Bytheendof2015,eightinternalinvestigationsbasedonreviewsofthegrievancesrelatedtoviolationsoftheGeneralBusinessPrinciples,theCodeofConduct,orothercompanyproceduresremainedunresolved.Theseinvestiga-tionswillbecompletedin2016.

GrievancesfromcompanypersonnelwereexaminedassetforthintheGrievanceProcedure.

Grievance category %

Impactoncommunities 18

Labourrelations 9

Informationdisclosure 14

SIMDPimplementation 41

Otherissues(managementofcontracts,laboursafety,theCodeofConduct) 18

Total 100

• setting target dates and taking con-certed actions to address grievances;

• confidentiality;

• applicability for both the company and contractors;

• using continuous learning, taking pre-ventive measures and proactive steps.

In2015,fourgrievanceswerereceivedfromcompanyemployees.Thesegrie-vancesconcernedlabourrelationsissuesaswellastheapplicationoftheemployer’slocalregulations.Allfourgrievanceswereresolvedwithinthetimeframestipulatedintheprocedure.

Thegrievancesfromcommunitiesandemployeesofcontractorandsubcon-tractororganisationswereaddressedincompliancewiththeCommunityGrievanceProcedure.Theymainlyconcernedcom-munityimpact(e.g.conditionoftheroads,impactonthelocalinfrastructure),labourrelations(contractorandsubcontractororganisations),disclosureofinformation,andtheSakhalinIndigenousMinoritiesDevelopmentPlan(seetheCategoriesofPublicGrievancesin2015table).

Asoftheendof2015,31grievancesoutofthe34receivedfromthepublicandemployeesofcontractorandsubcon-tractororganisationshadbeenresolved.Inaddition,threegrievancesreceivedattheendof2014hadbeenresolved.All34grievanceswereaddressedwithinthetimeframestipulatedintheGrievanceProcedure(lessthan45businessdays).Bytheendof2015,threegrievancesremainedunresolved.Thestatusofthesegrievanceswillbepresentedinthe2016SustainableDevelopmentReport.

Employee relations Asset security

Categories of Public Grievances in 2015

130 131


Acertainlevelofemployeeawarenessisrequiredtoincorporatehumanrightsstandardsintothedailyoperationsofthecompanyanditscontractors.Therefore,thecompanyofferssystematictrainingandawarenesssessionsforthepersonnelofSakhalinEnergy,itscontractors,andotherstakeholders.

Thecompanyrequirementsintheareaofhumanrightsareincludedinanumberofeducationalinstructionsandcoursesthatallcompanyemployeesandcontractorsarerequiredtotake.

Monitoringisimportantforensuringhu-manrightsareobserved.Monitoringandreportingofhumanrightsaredonebothinternallyandexternally.

Asarule,monitoringincludes:

• visitingcommunities;

• surveysconductingamongthepersonnelofthecompanyandexternalstakeholders;

• meetingwithinternalandexternalstakeholders,includinglocalcommunity,

9.4.4. HUMAN RIGHTS TRAINING

9.4.5. MONITORING HUMAN RIGHTS

Examplesofthistrainingareasfollows:

• generalinstruction;

• CodeofConduct;

• health,safety,environmental,andsocialperformancetraining.

Thecompanyconductsdedicatedcoursesforspecificpersonnelthathaveahigherriskofviolatinghumanrights.Thepro-cessofidentifyingthecorrecttrainingisshowninthechartbelow.

CommunityGrievanceProceduretrainingisofferedforthoseemployeeswho,duetothenatureoftheirduties,mayreceiveorresolvegrievancesfromthepublic(e.g.subdivisionheads,receptiondeskem-ployees,andcompanyrepresentativeswhodirectlymanagecontractororgani-sations).

In2015,personneloftheRoadTransportDepartment,theFacilitiesManagementDepartment,theEnvironmentalProtectionDepartment,andemployeesoftheTechni-calDirectoratereceivedsuchtraining.

andrepresentativesofcontractororganisations,forreceivingfeedback;

• reviewingcontractstomakesuretheycontainhumanrightsprovisions.

Internalmonitoringisdoneatthesub-divisionlevelaswellasbytheInternalMonitoringDepartment.Externalmonitoringincludesregularauditsbylenders,shareholders,andindependentexperts.

TheBusinessIntegrityCommittee,whichincludestheCEOandanumber

APPROPRIATE TRAINING / AWARENESS RAISING PROGRAMME

• Asset security• Hazardous work conditions• Addressing grievances

• Contractors• Contract holders• Security department personnel

(and respective contractors’ personnel)• Reception personnel

• Corporate social responsibility• Grievance procedure• Occupational safety• Human rights observance

by security contractors

Identifying the Correct Training

ofCEDmembers,overseescompliancewiththeestablishedgrievanceprocess.

ConclusionsoncompliancewithhumanrightsstandardsareincludedinregularinternalreportsforthemanagementandshareholdersaswellasinthecompanyannualSustainableDevelopmentReports.

Sinceitsestablishmentin1994,thecompanyhaspaidcloseattentiontoimplementationofsocialprogrammesonSakhalinIsland.Significantandcon-sistentinvestmentsinsocialsphere,aswellasalong-termpolicyfocusedonaddressingthesocialissues,arethecoreofSakhalinEnergy’scommitmenttosus-tainabledevelopmentprinciples.SakhalinEnergypursuesapolicyofmutualinvest-mentsofresourcesforthebenefitofallstakeholders.

In 2015, Sakhalin Energy was among the winners of the Corporate Philanthropy Leaders project, it was awarded the third prize in the Russian ranking. Corporate Philanthropy Leaders is a joint project of the Donors Forum, Pricewater-houseCoopers and Vedomosti business newspaper and is aimed at supporting, developing, and promoting corporate philanthropy.

In2015,thecompanyinvestedover60mlnroublesinvariousexternalsocialprogrammesintheSakhalinOblast.

9.5.SocialInvestmentsandContributionstoSustainableDevelopmentoftheHostRegion

9.5.1. SOCIAL INVESTMENTS AND SUSTAINABLE DEVELOPMENT: SAKHALIN ENERGY’S PRINCIPLES AND APPROACHES

In accordance with the company’s Social Investments Strategy, Sakhalin Energy is implementing projects that:

• result from consultations with the public and meet the identified needs of the communities impacted by the company’s activity;

• relate to issues that affect the compa-ny’s reputation;

• may not directly relate to the com-pany’s activity, while contributing to economic, environmental, and social development of Sakhalin Island;

• contribute to sustainable economic, environmental and social develop-ment of Sakhalin and demonstrate the company’s commitment to sustainable development to stakeholders.

TheSocialInvestmentStrategyisapartoftheSocialPerformanceManagementStandard.PursuanttotheStrategyandinaccordancewiththecompany’sinternal

auditrequirements,SakhalinEnergycon-ductcontinuousinternalmonitoringandabiannualindependentexternalevaluationofsocialinvestmentprojects.

Thesocialinvestmentmanagementsystemusedbythecompanyissimilartoitsmanagementofotherbusinessactivities.Itinvolvesprioritisationanddetaileddescriptionsoftheprogrammeimplementationplans,decision-makingprocessesandsocialinvestmentmanage-mentprocedures.

SakhalinEnergy’ssocialinvestmentprogrammesarealignedwiththecom-pany’slong-termgoalsinitshostregion,Sakhalin.

Intheareaofsocialinvestments,Sakha-linEnergyfocusesonimplementingstrategiclong-termpartnershipprojectswithexternalstakeholders,andonusingvarioustoolsandtechniquestoimple-mentsocialprogrammes,includingcompetitivefunding.

In2015,SakhalinEnergywasawardedthe third prizeintheRussianrankingoftheCorporatePhilanthropyLeadersproject.

RISK GROUPS IDENTIFICATION

RISK ASSESSMENT

132 133

Thecompanydefineditsmainpriorityareasforsocialprogrammesthroughconsultationswiththepublic.Theseare:

• safety;

• education;

• environmentalprotectionandbiodiversity;

• cultureandarts;

• health;

• contributingtothedevelopmentoftheSakhalinIndigenousMinorities.

Focus on the Implementation of Strategic Long-Term Partnership Projects

Overtheyearsofsocialinvestmentpro-grammedevelopment,SakhalinEnergyhasbuiltitsownmodelformanagingexternalsocialprogrammesthatisbasedoncompanypoliciesandthebestinter-nationalcharitypractices.Thecompanydoesnotonlyseektoadaptandusethebestinternationalpractices,butithasbecomeanexampleofcorporatephilan-thropy.

Partners:company, Sakhalin Oblast Government and Regional

Council of Authorised Representatives of Sakhalin

Indigenous Minorities

Partners:company, Sakhalin

EMERCOM, Sakhalin Ministry of Education

Partners:company, Korsakov

Administration, public

Partners:company, Sakhalin Oblast

Government, Department of the RF Ministry of Internal

Affairs for the Sakhalin Oblast, public

SAKHALIN INDIGENOUS MINORITIES

DEVELOPMENT PLAN

WHAT TO DO IN EMERGENCY

SITUATIONS

KORSAKOV SUSTAINABLE DEVELOPMENT PARTNERSHIP

COUNCIL

ROAD SAFETY PARTNERSHIP

FPIC (free, prior and informed consent). SIMDP case has been included into the Stakeholder Engagement Handbook, issued by the International Finance Corporation. The Plan was recommended at the parliamentary hearings in the Russian Council of Federation as an example for Russian regions

A complex educational programme, targeted on schoolchildren and aimed at teaching system development in the sphere of life safety

Initiated by the company in one of the most critical and malcontent communities on the island. Now the parthership of the public, business and authorities contributes a lot to local sustainable development and is moving to a new level of interaction with UNDP expertise

The first partnership of such kind established on the territory of the Russian Federation with support of Global Road Safety Partnership (2005). Later on this succsessful example was replicated in other regions


SakhalinEnergyiscommittedtohighstandardsandfollowscorporateprinci-plesandvalues,amongwhichtoppriorityisgiventosafety.Duetoitsgeographicallocationandgeologicalfeatures,theSakhalinOblastisoneofthefewregionsintheRussianFederationwherealmostanykindofnaturaldisastersmayoccur.Theregionfrequentlydealswithearth-quakes,floods,hurricanes,blizzards,forestfires,etc.Therefore,itisessentialthatchildrenonSakhalinandtheKurilIslandsknowwhattodoincaseofanemergency.SincechildsafetyissuesareapriorityandobviouslyrelevanttotheSakhalinOblast,in2005thecompanyinitiatedapro-grammethatiscarriedoutinpartnershipwithSakhalinEmercomandtheMinistryofEducationoftheSakhalinOblast.

Theprogrammehasseveraldirections,oneofwhichiscreationoftheshorteducationalcartoonsonsafebehaviourinvarioussituations.

Anniversary of the Programme

In November 2015, the programme celebrated its 10th anniversary. In total, 35 cartoons on safety issues have been released over the project lifetime. Children participated as co-authors of a number of them. By now, children have learned by heart the motto of all the cartoons featuring Senya: “Everyone should know for certain—safety is very important.” The project is popular not only on Sakhalin but also in the Russian Far East, St. Petersburg, Arkhangelsk, and Khakassia.

Twonewcartoonsaboutplaygroundsafetyandpreventingburnswerereleasedin2015.

ComicbookshavealsobeenpublishedbasedontheBewareofFrost!,BewareoftheFlu!,andFlickerscartoons.

On15–19September2015,theDaysofRussianChildren’sFilmsFestivalwasheldinNis,Serbiawiththetheme

“ChildhoodTales.”TheFilmForumorganisedbytheRFMinistryofCulture,theRussianEmbassyinSerbia,andtheRussian-SerbianHumanitarianCentre,includedcartoonsfeaturingSenyaaboutsafebehaviourinemergencies.

Over100schoolchildrenparticipatedintheSafetyIsImportantquiz,anopeneventheldon1September,tochecktheirknowledgeofsafetyrules.Inaddition,severalschoolsinYuzhno-SakhalinskheldsafetylessonswithSenya,andtheCadetSchoolhostedacomputergamethattestedknowledgeofsafebehaviourinvariousdangeroussituations.

OntheInternationalDayforDisasterReductioninOctober2015,theAnnualRegionalChildren’sSafetyHolidaywasheldonSakhalinforthesixthtime.Itwasattendedby16teamsofchildrenaged11–12yearsfrom15districtsoftheSakhalinOblast.Theparticipantspractisedtherulesofsafebehaviouronthewaterandonahike,athome,andincaseofanaturaldisaster.Theylearnedto

9.5.2. CHILDREN’S SAFETY (WHAT TO DO IN EMERGENCY SITUATIONS PROGRAMME)

134 135

givefirstaidtotheinjuredandansweredquestionsabouttrafficrulesandfiresafetyregulations.Thechildrenwerejudgedbyexpertssuchasrescuers,firemen,doctors,andinspectorsoftheStateSmallVesselsInspectorateandtheStateRoadSafetyInspectorate.

In2015,SenyaWarns:InformationBoardsinTsunami-HazardousCommunitiesandAvalanche-HazardousAreasoftheSakhalinOblastwassuccessfullycom-pleted.During2015,informationboardsweresetupinOkhaandAlexandrovsk-SakhalinskyDistricts.

In2015,anewprogrammecomponentcalledSenyaTeacheswasdeveloped.Thiswasaworkshopaimedatdevelopmentofawareness-raisinghealthandsafetycam-paignsforhighschoolstudentspartici-patingintheregionalSchoolofSafety.Attheendoftheworkshop,eachteamgaveashortpresentationandshowedaposterononeofthetopicsrelatedtopromotingsafebehaviourtothejury.Thewinnersreceivedprizesaswellasfundingforimplementingtheinformationcampaignstheyhaddesigned.Themostimportantresultsoftheprojectwerethewillingnessandabilitythatolderstudentsdemon-stratedtosharetheirknowledgewithyoungerschoolchildren.ItwasalsothebeginningofSenya’sVolunteerSchool.

The Children’s Safety Programme initiated by the company was awarded the first prize in the KonTEKst PR contest. The contest has been held with the support of the Ministry of Energy of the Russian Federation since 2009. The main objec-tive of the contest is to identify and sum-marise the best practices in information, social, charity, environmental, and other programmes that benefit the community and have a positive impact on the image and reputation of energy companies.

The Children’s Safety Programme of the company was also included in the “Best Social Projects of Russia” collection, which comprises materials of the pro-gramme under the same name created to support the Russian Government policy to strengthen the social policy with the partnership of the state, society, and private business. It is supported by the RF Ministry of Natural Resources and Environment, the Agency for Strategic Initiatives, WWF, FSC, and a number of other organisations.

In December, the CEO of Sakhalin Energy received an award from the Sakhalin Oblast Government during a meeting held to review civil defence and emer-gency prevention and response initiatives taken by the executive branch of the Sakhalin Oblast and local governments. The award was given to the company for many years of building a culture of safe behaviour in the community through the implementation of road safety and child safety programmes.

Thecartoonsandothermaterialscreatedundertheprogrammeareavailableatwww.senya-spasatel.ru.


Safetyisauniversalterm.Therefore,asasociallyresponsiblecompany,SakhalinEnergyisseekingtoinspirethegeneralpublictoadoptitshighindustrialsafetystandardsinordertodevelopasafetycultureinthesurroundingcommunities.AnimportantobjectiveoftheRoadSafetyProgrammeistoinstilcorporatesafetystandardsintheareasoutsidetheliabilitylimitsofthecompanyanditscontrac-tors,especiallyintheSakhalinsettle-mentswherethecompanyoperates.ThisisbeingdonebytheSakhalinRoadSafetyCouncil(RoadSafetyPartnership)establishedattheinitiativeofthecompanyin2005.

ThePartnershipisoneofthecompany’sflagshipsocialprogrammes,andallthestakeholdersactivelyparticipateinit.TheSakhalinOblastGovernmentandtheDepartmentoftheRFMinistryofInternalAffairsfortheSakhalinOblastpartnerwiththecompanyonroadsafety.

TheCouncildevelopsandimplementsprojectsaimedtoreducethenumberof

9.5.3. SAKHALIN ROAD SAFETY COUNCIL

victimsinroadtrafficaccidents(RTA)andthenumberofroadtrafficaccidents.

Undertheimplementationofroadinfrastructuredirectionoftheprogramme,theequipmentofthepedestriancrossingswiththelatesttrafficcontrolwasconfirmed.Ithelpsdriversbeawareofroadsignsandpedestriansincrosswalks.Theeffectivenessofthisproject,whichwasstartedin2013,hasbeenconfirmedbythestatisticsoftheDepartmentoftheStateRoadSafetyInspectorateoftheRFMinistryofInternalAffairsfortheSakhalinOblast.Thenumberofaccidentsatthesenewlymarkedpedestriancrossingshasdecreasedbyseveraltimes.

Regardingeducationandawarenessdirection,acampaignwasheldtopromotesafetyatpedestriancrossings.Itsmainpurposewastoeducatethepubliconsafebehaviouratpedestriancrossings.Theseissueswerepromotedontelevisioncommercialsandbanners,radiocontests,internetpublications,andpubliceventsthattookplaceinYuzhno-Sakhalinsk,Kholmsk,Korsakov,andAniva.

During 2010–2015, 196 information boards warning of the risk of a tsunami or avalanche were installed in 12 Sakhalin districts.

10

45

29

11

12

16

17

21

5

6

18

6

Map of the Information Boards Location

Uglegorsk district

Makarov district

Poronaysk district

Smirnykh district

Alexandrovsk- Sakhalinsky district

Okha district

Tomari district

Dolinsk district

Kholmsk district

Korsakov district

Aniva district

Nevelsk district

136 137

Theroadsafetyclassescontinueditsactivityin2015.TheseclassesareheldatsixeducationalinstitutionsintheSakhalinOblast(theHouseofChildrenandYouthCreativity,secondarycomprehensiveschoolsNo.31and32inYuzhno-Sakhalinsk,secondarycomprehensiveschoolNo.1inKorsakov,secondarycomprehensiveschoolNo.6inKholmsk,andsecondarycomprehensiveschoolNo.7inOkha).Theclassroomsareequippedwithmoderninteractiveequipmentandsoftwaresothatclassesandactivitiescanbeofferedforavarietyofagegroups.

Anniversary of the Programme

In June the Road Safety Partnership programme celebrated its’ 10th anniver-sary. Sakhalin Energy and its partners, the Sakhalin Road Safety Inspectorate, and the Sakhalin Oblast Government organised a festive event with the motto “Together for Safety on the Roads.” The participants of the event painted road signs, played a road safety game, and entered their drawings in the Road and Us contest. Young participants took tests to demonstrate their knowledge of

the traffic rules, made light-reflective souvenirs, and showed off their skills in giving first aid to victims of traffic accidents. The parents used a computer programme to test their own knowledge of the road safety rules and found out how well they knew the construction of mopeds.

InformationontheSakhalinRoadSafetyCouncilisavailableatwww.sakhalinroadsafety.ru.


TheEnergySocialInitiativesFundisoneoftheSakhalinEnergycharitablepro-grammesthatdemonstratesthecom-prehensiveandconsistentapproachtopromotingsocialtransformationinthehostregionandcommitmenttosolvingrelevantissuesoflocalcommunities.Launchedin2003thegrantcontesttosup-portsociallyimportantinitiativesallowstoidentifyinterestingandeffectivesolutionstocommunityissues.Thesupportofsuchinitiativesatthelocallevelcangoalongwaytowardsolvingtheseproblems.More-over,itgivessociallyactivecitizenscon-fidencethattheycanimprovethelivesofpeoplearoundthemandincreasecapacityofpublicorganisations.Inconsideringproposals,thecompanyadheresrigorouslytotheprinciplesofopennessandtrans-parency.TheExpertCouncil,consistingofrepresentativesofthecompany,NGOsandgovernment,evaluatesproposalsandse-lectsthewinningprojects.InformationonthetermsandconditionsofthecontestsandtheselectioncriteriaisavailableonthewebsiteoftheEnergySocialInitiativesFund(www.fondenergy.ru).

9.5.4. ENERGY SOCIAL INITIATIVES FUND

In2015,fundingwasgrantedto39pro-jects(outofthe98applicationssubmit-ted).Theseareallsociallysignificantpro-jectsinthefieldofart,culture,education,sports,promotinghealthylifestyles,andenvironmentalprotection.

Since 2003, more than 240 organisations and institutions have received financial support, 450 projects have been imple-mented in 64 Sakhalin settlements under the Energy Social Initiatives Fund. The company has invested 40 mln roubles.

120

57

40

34

33

26

24

21

18

18

17

16

12

8

6

Yuzhno-Sakhalinsk

Tymovsk

Dolinsk

Kholmsk

Poronaysk

Smirnykh

Nogliki

Aniva

Makarov

Uglegorsk

Nevelsk

Okha

Alexandrovsk-Sakhalinsky

Korsakov

Tomari

Number of Projects Supported in 2003-2015, by districts

Corporatevolunteeringisoneoftheofthewaystoincorporatecorporatesocialre-sponsibility.Theopportunitytocontributeintosolvingsocialissuesformspositiveattitudetowardsthecompanyandprideforselfandthecompany.Thecompanyactivelyintegratescorporatevolunteeringinitscharitableprogrammes,providingsupporttoemployeeinitiatedvolunteeractivities.Volunteeringimmersesemployeesintoanewenvironmentandenrichestheirpersonalexperience,stimulatescreativethinking,andinspiresthemtofindinnovativesolutions.TheHurryUpforGoodDeedsProgramme,whichwaslaunchedin2003tosupportemployeecharityinitiatives,isanexampleofthis.

In2015,theprogrammewascarriedoutinthreemainareas:

• charityprojects;

• volunteerdays(VoluntaryCommunityWorkDays),whichinvolvevolunteer-ingforoneofthesocialinstitutionsonSakhalin;

• fundraisingcampaignsorganisedbythecompany.Employeeseithermakefinancialdonationsorvolunteertohelporganisethecampaign.

TheDolinskBoardingSchoolforDeafandHearingImpairedChildrenreceivedfinancialsupportfromthecorporatecam-paignsin2015.Employeescollectednearly1.88mlnroubleswithintwocam-paigns,oneofwhichwastimedtothecompanybirthdayandanotherone—totheOilandGasWorkersDay.Thisamountwasmatchedbythecompany;thus3.7mlnroubleswasusedtopurchasenewequipmenttoeasethelivesoftheboardingschoolstudents(ahearingloop,aninfra-redsoundintensifier,anewsensoryroom,sewingandembroidery

9.5.5. HURRY UP FOR GOOD DEEDS

equipment,andnewsportsequipmentweredonated).

TheNewYearMiraclesisanannualcharityeventtoraisefundsfordisabledchildren,lonelyelderlypeople,andchildrensufferingfromhardships.In2015:

• EmployeesdressedupastheRussiantraditionalNewYearcharactersFatherFrostandSnowMaidenhandedoutNewYeargiftstochildrenwithdisabilitiesfromlow-incomefamiliesthatthechildrenhadaskedforintheirletterstoFatherFrost.

• OnNewYear’sEve,thestaffoftheCen-treofSocialSupportforthePopulationoftheSakhalinOblasthandedout200giftsdonatedbythecompanyemployeestoelderlypeoplelivingalone.

In2015,employeesandtheirfamilymembersparticipatedinVoluntaryCommunityWorkDaysinAugustandOctober.SummervolunteeringwasheldatSakhalinBotanicalGardens,andtheautumnworkwasdoneattheDolinskBoardingSchoolforDeafandHearingImpairedChildren.

Attheinitiativeofcompanyemployees,severalcharityeventswereheldduringtheyear.TheDepartmentofAdaptivePhysicalEducationoftheSakhalinChildren’sandYouthAlpineSkiingOlympicReserveSportsschoolreceivedmountainboardsunderthesocialinitiativeoftheCompanyHealthyLifestylePromotionCommittee.Now,youngsnowboarderscanpractiseyearround.TheMiracleIslandChildren’sClub,whichisattendedbythechildrenofcompanyemployees,organisedanautumncharityfair.Thefundstheyraisedwereusedtopurchasecomputersandotherequip-mentforstudentsoftheAnivaCentreforSocialRehabilitationofChildren.Anothercharityeventwasinitiatedbyemployeesto

purchasebooksforchildreninorphanagesandsocialrehabilitationcentreslocatedfarfromthecapitalofSakhalin.

In November 2015, life safety lessons were held in primary schools and kindergartens at the initiative of company staff. Company employees told the children about how to properly set off firecrackers and fireworks and dress in winter, explained to them the rules of safe behaviour on ice, and much more. The lessons were held in Yuzhno- Sakhalinsk, Korsakov, Dolinsk, Nogliki, and Val.

138 139


Followingoneofthebasicprinciplesofsustainabledevelopment—tomeettheneedsofthepresentwithoutcompro-misingtheabilityoffuturegenerationstomeettheirownneeds—SakhalinEnergyinitiatedaSocialInvestmentsandSus-tainableDevelopmentprogrammeintheKorsakovDistrictoftheSakhalinOblast.Thecompanyfinancessocialprojectsunderthisprogramme,includingtheKorsakovInitiativescontest.

9.5.6. KORSAKOV SUSTAINABLE DEVELOPMENT PARTNERSHIP COUNCIL

TheprogrammeismanagedbytheKorsakovSustainableDevelopmentPartnershipCouncil,whichconsistsofninemembers,threefromeachpartner:SakhalinEnergy,governmentauthorities,andthecommunityoftheKorsakovDistrict.

Inadditiontobeingastakeholderengagementtoolandexpertcounciltoreviewsocialprojects,theKorsakovCouncilalsoplaysaroleinmonitoringsocialdevelopmentinthedistrict.

In2015,publicconsultationswereheldontheKorsakovSustainableDevelopmentPartnershipCouncilactivitiesinthecommunitiesoftheKorsakovDistrict.TheresidentswereinformedabouttheKor-sakovPartnershipCouncil,itsachieve-ments,completedprojects,andplansforthefuture.

MaterialsontheCouncilareavailableatwww.korsakovsovet.ru.

Tomarkthe70thanniversaryoftheVictoryintheGreatPatrioticWarthecompanyfocuseditseffortsontakingcareofwarveteransandhomefrontworkers.In2015,theVeteransProject,whichwasheldonSakhalin,continued.

• OntheeveofVictoryDay,thecompanypresentedacheckfor700thousandroublestotheSakhalinRegionalCoun-cilofVeteranstoholdtheCouncil’s

9.5.7. VICTORY DAY PROJECT

plenumandconferenceandsupportdevelopmentofdistrictveterans’organisations.

• SixtyveteransfromYuzhno-Sakhalinsk,Aniva,andDolinskweregivenanoppor-tunitytoseethetheatreperformanceVasilyTerkin.

• Eventswereheldinthesettlementsoftheislandforveteransandyouthat

thecompanyinformationcentresinthelocallibraries(seeSection7.4LocalCommunitiesEngagementthroughtheCompanyInformationCentres).

• VeteransinYuzhno-Sakhalinskand25otherSakhalincommunitiesreceivedgiftsandgreetingsfromcompanyemployees.

9.5.8.1. Goals and Structure of the SIMDP

SakhalinEnergy,theRegionalCounciloftheAuthorisedRepresentativesoftheIndigenousMinoritiesofNorthofSakhalin,andtheSakha-linOblastGovernmenthavepartneredtogethersince2006toimplementtheSakhalinIndigenousMinoritiesDevelopmentPlan(SIMDPorthePlan)intheSakhalinOblast.Theprogrammehasbeendividedintofive-yearphases,with2011–2015beingSIMDP2.

The mitigation matrix was developed as a result of the 2005–2006 multipartite con-sultations. The matrix included potential issues and mitigation measures. It was updated as necessary and reviewed at each meeting of the Governing Board of SIMDP 2. Under implementation of SIMDP 2, the matrix contained five issues:

• concern of the consequences of oil and other substances spill;

• provision of information about the measures aimed at biodiversity con-servation;

9.5.8. SAKHALIN INDIGENOUS MINORITIES DEVELOPMENT PLAN

• the process for informing Sakhalin In-digenous Minorities of any Sakhalin-2 project expansion;

• provision of information about the mechanism of funds distribution under the SIMDP programmes;

• Grievance Procedure.

Therepresentativesoftheindigenousmi-noritieselectedfromeachdistricttoworkintheSDFCouncilandTEASPCommitteewereresponsiblefordistributingfundsal-locatedforprojects.ThishasbecomeanimportantdistinguishingfeatureofSIMDP2.ThebudgetofthePlanwasdividedbetweenthetwoprogrammesequally(50/50).In2015,theTEASPandSDFpro-grammeseachreceived8.2mlnroubles.

The final external evaluation of SIMDP 2 was held in June 2015. The objectives of the final evaluation were to determine if the Plan achieved its goals and to provide recommendations on developing SIMDP 3 (2016–2020). The Plan Completion

Evaluation Team included G. E. Guldin, an international expert, Head of Cross-Cul-tural Consulting Services; V. E. Valdiu, a representative of the indigenous peoples of the Khabarovsk Krai; and A. T. Konkov, Chair of the Sociology Department of the Sakhalin State University. The following monitoring was done: a sociological survey of the population in the areas of traditional residence of the Sakhalin Indigenous Minorities; meetings in 12 settlements with Plan participants, stakeholders, representatives of government authorities, and Plan partners; participation in the meetings of the SIMDP management bodies; an analysis of the implementation of the SIMDP projects and programmes; etc.

The final evaluation of the programme can be found on the website of the Plan at www.simdp.ru.

Note:TheissuewasclosedbythedecisionoftheGoverningBoardon29June2011.

140 141

9.5.8.2. Traditional Economic Activities Support Programme of SIMDP 2

TheTraditionalEconomicActivitiesSupportprogrammeassistsindevelopingemploymentandbusinessopportunitiesforindigenousminorities.

Theresourcesoftheprogrammearedistributedthrough:

• BusinessPlanning;

• Self-SufficiencyGrants;

• MicroloanFund.

Intotal,72applicationswerereceivedin2015inthefirsttwoareas.ThePro-grammecommitteeselected41projects(supportofclanandfamilyenterprises,communitiesandotherassociationsoftheSakhalinIndigenousMinorities,andaidforrepresentativesoftheSakhalinIndigenousMinorities)submittedfromthefourdistrictsoftraditionalresidenceoftheSakhalinIndigenousMinorities.Outboardmotors,fishinggearandnetmaterials,snowmobiles,consumables,andcertaintypesofelectricalappliancesusedfortraditionaleconomicactivitieswerepurchasedundertheprogramme.

TheMicroloanProgrammewasdesignedtopromotethetraditionaleconomicactivitiesoftheSakhalinIndigenousMinoritiesandtoincreasetheavailabilityoffundingsources.ThepartneroftheprogrammewastheBataniInternationalDevelopmentFundforIndigenousPeoplesoftheNorth,Siberia,andtheFarEastoftheRussianFederation.Sincethepro-grammewascompleted,noapplicationsforissuingcreditwerereceivedin2015.

9.5.8.3. Social Development Fund of SIMDP 2

Fundsaredistributedinthefollowingareas:

• education,health,capacitybuildingoftheindigenouspeoples;

• culture—LinkofTimescompetitiveprogramme.

In2015,theSocialDevelopmentFundCouncilsupported26projectsaimedatthedevelopmentoftraditionalculture,education,health,thepreservationandstudyofindigenouslanguages,andcapacitybuilding.Theprojectsweredevelopedandselectedbyrepresentativesoftheindigenouspeople.ThepartnerinimplementingtheSDFlong-termprojectswastheKykh-Kykh(Swan)CentreforSIMTraditionalCulturePreservationandDevelopmentOkhaLocalPublicOrgani-sation.Thus,intheareaofeducation,48studentsofsecondaryvocationaleduca-tioninstitutionsanduniversitiesreceivedfinancialsupport.Fordetailsabouttheprojects,seethewebsiteofthePlanatwww.simdp.ru.

“The Secrets of Promotion,” a project of the School of Young Leaders 2015, was conducted in Yuzhno-Sakhalinsk. The purpose of this workshop was to inspire the youth and to teach organisational and leadership skills to representatives of the indigenous peoples of the Island. Eighteen young people from Okha, Nogliki, Tymovsk, and Poronaysk Districts and Yuzhno-Sakhalinsk completed the “I Am a Leader” training course, aimed at teaching leadership skills, competen-cies, and abilities.

9.5.8.4. SIMDP 3: Development

SIMDP3,likethepreviousones,isbasedoninternationalstandardsonindigenouspeoplesandisimplementedincom-pliancewiththem.SIMDP3takesintoaccounttheexperiencegainedoverthepastdecade.ToincreasetheparticipationoftheSakhalinIndigenousMinoritiesatthedistrictlevelandtofurtherpromotethePlaninthesevendistrictsoftraditionalresidenceoftheSakhalinIndigenousMinorities,districtcommitteeshavebeenaddedtoitsmanagementstructure.

ThedevelopmentofSIMDP3wascarriedoutinaccordancewiththeprincipleoffree,prior,andinformedconsent(FPIC)containedintheUnitedNationsDeclara-tionontheRightsofIndigenousPeoples(2007)andPerformanceStandard7onIndigenousPeoplesoftheInternationalFinanceCorporation(IFC).Theobjectivesofeachfive-yearphaseoftheprogrammeareidentifiedbytheindigenouspopula-tionduringconsultations.TheobjectivesofSIMDP3include:

• capacity building. EnhancingthecapacityofSakhalinIndigenousMinoritiestoactivelyparticipateintheself-managementoftheirownaffairs.Suchcapacity-buildingcouldrangefromleadershiptraining,totechnicalskillsenhancing(e.g.,foraccounting,report-writing,budgetpreparation,traditionaleconomicandculturalactiv-ities,businessplanning),toheightenedculturalandethnicself-awareness;

• social, cultural, and economic develop-ment. Improvingthelivesandliveli-hoodsoftheIndigenousMinoritiesofSakhalinOblastthroughtheimplemen-tationofsocialandeconomicdevelop-mentplansinaculturallyappropriatemanner.Culturalrevival,economicviabilityoftraditionaleconomicenter-prises,andimprovedsocialconditionswillbetargetedareasforsupport.


Long-termstrategicplanningwiththeconceptofsustainabledevelopmentasanobjectivewillalsobeemphasised;

• independent fund preparation. Assist-ingSakhalinIndigenousMinoritiestopreparefortheeventualestablishmentofanindependentIndigenousMinoritiesdevelopmentfund;

• project environmental effects disclo-sure. Providingtimely,objectiveandcompleteinformationtotheSakhalinIndigenousMinorities’communityoftheactualand/orpotentialimpactsoftheSakhalin-2projectontheenvironment,andthemeasurestakentopreventand/orminimiseanypotentialnegativeimpacts.

ToensurethattheopinionsoftheSakhalinIndigenousMinoritiesaretakenintoaccountduringthepreparationofSIMDP3,tworoundsofextensiveandopenconsul-tationswereconductedinalltheareasoftheirtraditionalresidenceandeconomicactivities.Theconsultationswereheldin13Sakhalincommunitiesandwereattendedbymorethan500people.

ThefirstroundoftheconsultationswasheldinFebruary2015togatheropinionsandproposalsandtosetprioritiesfordevelopingprogrammesandthePlan’smanagementstructure.

AsurveywasconductedtoassesstheresultsofSIMDP2andtomakeproposalsregardingthepreparationofSIMDP3.QuestionnaireswerehandedovertothelocalrepresentativesoftheSIMDPgoverningbodiesforfurtherreceiptofproposals;peopleweregivenanoppor-tunitytofillinthequestionnairesonthePlanwebsite.

Duringthesecondroundoftheconsulta-tions,stakeholderswereprovidedwithadraftofthePlan’sselectedcomponents,subcomponents,andthegovernancestructure;alistofthePlan’scoordinatingbodies;mitigationmatrix;andthegrievanceprocedureformanagementofgrievancessubmittedbythelocalpopulationregard-ingimplementationoftheSIMDP.ThissecondroundoftheconsultationswasheldinOctober2015intheareasoftradi-tionalresidenceandeconomicactivitiesoftheSIM.

Under development of SIMDP 3, special attention was given to discussing the Grievance Procedure (Procedure) with the population. The Procedure regulates the process of submitting, recording, and resolving grievances related to the implementation of SIMDP 3. The Proce-dure was developed in accordance with the general principles and approaches of the Grievance Procedure for handling grievances of the population and the requirements of Sakhalin Energy in re-spect of human rights (see Section 9.4.2 Grievance Mechanisms). In addition, the Procedure is in line with the provisions of the Guiding Principles on Business and Human Rights.

ManyoftherecommendationsobtainedinthecourseoftheconsultationsaswellastheresultsofthefinalevaluationandthepublicopinionsurveywerealsotakenintoaccountindevelopingthePlan.Therefore,itunderwentsignificantmodifications.

142 143

2016PlansandDevelopmentStrategyupto2020

9.5.8.5. SIMDP 3: Free, Prior, and Informed Consent (FPIC)

Duringthefirstroundofconsultations,theWorkingGroupestablishedtoprepareSIMDP3collectedrecommenda-tionsandopinionsofthestakeholders.

Duringthesecondroundofconsulta-tions,theWorkingGrouppresentedapreliminarydraftoftheselectedcomponents,sub-components,andsectionsofthePlan.

TakingintoaccountthecommentsreceivedduringtheconsultationsoftheWorkingGroup,adraftversionofSIMDP3wasdrawnupandsenttoallthestake-holders,includingtheindigenouspeoplesatlargeinallthedistrictsoftraditionalresidenceoftheSakhalinIndigenousMinoritiesforreviewandcomments.

In November 2015, a special conference organised by the Regional Council of the Authorised Representatives of the Indigenous Minorities of the North of Sakhalin was held in Yuzhno-Sakhalinsk to approve and/or amend the Plan. The conference was attended by the Sakhalin Indigenous Minorities representatives elected in all the communities of traditional residence of the SIM and dele-gated for participation in this event. The conference participants agreed that the consultations were carried out without compulsion, were held early enough to discuss the issues at length, and were accompanied by the relevant information regarding SIMDP 2 and SIMDP 3 to formulate our own independent assessment of the SIMDP.

OnthebasisoftheConferencedecisionthestatementofconsenttothecontentsofSIMDP3wassigned.

TheCooperationAgreementtoimplementthefive-yearSakhalinIndigenousMinoritiesDevelopmentPlan3(2016–2020)wassignedbythepartnerson16December2015.

144 145

SakhalinEnergyhassetthefollowingprioritiesfor2016:

• ensurethesafetyandreliabilityofproduction;

• improvetheefficiencyofoilandgasfielddevelopmentandtheproductionofhydrocarbons;

• optimisecosts;

• developtheprojectwithregardtotheprinciplesofcontinuousimprovementandleanprocesses.

In2016,thecompanywillcontinueitshealth,safetyandenvironmental(HSE)protectionprojects.GoalZero,i.e.workwithnoharm,spills,ordamagetoproductionfacilitieswhilepreservingtheenvironment,remainsatoppriorityforthecompany.Thekeyactivitiesinthisareaareasfollows:

• increasingthecommitmentofthecompany’sleadershipandemployeestoapositiveHSEculture;

• increasingtheawarenessofHSEwithinthecompanyandcaringforthehealthofthecompanypersonnel;

• handlingtransportsafetyissuesandjobhazards;

• ensuringthetechnicalintegrityofthecompany’sassetsandprocesssafety;

• ensuringcompliancewithRussianandinternationalrequirementsandpromotingindustrybestHSEpractices.

Themainproductionprojectsfor2016involve:

• intensiveoperationsatthethreeoffshoreplatforms,includingdrillingoptimisationprojectsandworktomaintaincoil,gasandLNGproductionatconsistentlyhighlevels;

• thedevelopmentoftheOPFCompressionProjectandLNGtrain3project.

In2016,thecompanywillcontinuetoworkwithcustomerstoensurethemostfavou-rableconditionsforthesaleofoilandgas.

Robustat$40corporateprogrammelaunchedin2015willbeevenmorefocusedoncontinuouscostoptimisationin2016.NowitwillbeimplementedasRobustat$35andwillhaveafocusonmaximisingtheoptimi-sationofproductionprocesses,continuousimprovementandleanprocess.

Thecontinuousimprovementprogrammeinvolvestheestablishmentofacorporatecultureinwhicheveryonefeelsinvolvedandisawareofowncapacityforactionandoftheimportanceofcontinuingthesearchformoreeffectivemethodsofwork,theresultofwhichwillmeettheexpectationsoftheenduserandtheneedsofthecompany.

HRmanagementstrategyfor2016andsubsequentyearsinvolves:

• attractingandretainingthebestindustryexperts;

• investinginprofessionalandpersonaltraininganddevelopmentofRussianspecialists;

• deliveringanattractiveandcompetitiveemployeevalueproposition(EVP);

• deliveringsimpleandclearHRprocesses;

• implementingcollaborativeworkenvironment(CWE)intheofficesandatthecompanyassets.

OPFCompressionProjectandLNGtrain3projectareanintegralpartoftheHRstrategyandtheHRpolicyfor2016andsubsequentyears.

Regularandmeaningfulstakeholderengagementremainsanimportant

componentofSakhalinEnergy’ssuccessfulperformance.Thestrategyandplansforengagingthegeneralpublicfor2016areincludedinthePublicConsultationandDisclosurePlan(publishedonthecompanywebsite).

Initssocialinvestmentandsustainabledevelopmentprogrammes,SakhalinEnergywillcontinuetogiveprioritytopartnershipswithexternalstakeholdersandtolong-termsocialprogrammes.

SakhalinEnergywillcontinuetoconductitsbusinessincompliancewiththeadoptedGeneralBusinessPrinciples,CodeofConduct,SustainableDevelopmentPolicy,andcorporatesocialresponsibilitystandards.SakhalinEnergywillendeavourtomakefurtherimprovementsinsustainabledevelopment.

SakhalinEnergyPlans

VISION: TobethepremierenergysourceforAsia-Pacific.

MISSION:SakhalinEnergyiscommittedtobeingapremierenergysupplier,recognisedforitsoperationalexcel-lence,reliability,andsafety.Weconductourbusinessinanethically,socially,andenvironmentallyresponsiblemanner.

146 147

APPENDICES

149148

Appendix1.GRIGuidelinesComplianceTable(rev.4.0)GENERAL STANDARD DISCLOSURES

GRI index Element/indicatorDisclosure of the element/

indicatorReport section

Page in the report

Comments and references to other sources

STRATEGY AND ANALYSIS

G4-1 Statementfromthemostseniordecision-makeroftheorganisation

Full MessagefromtheChiefExecutiveOfficer

6

G4-2 Descriptionofkeyimpacts,risks,andopportunities

Full MessagefromtheChiefExecutiveOfficerRiskManagementHSEandSocialPerformanceManagementEconomicImpactManagementEnvironmentalImpactManagementSocialImpactManagement2016PlansandDevelopmentStrategyupto2020

6

46–49

21–23

53–55

75–96

99–142

145

ORGANISATIONAL PROFILE

G4-3 Nameoftheorganisation Full AbouttheCompany 27

G4-4 Primarybrands,products,and/orservices Full AbouttheCompany 32–33

G4-5 Locationoforganisation’sheadquarters

Full Ontheoutsiderearcoverwww.sakhalinenergy.com/en/feedback/feedback.wbp

G4-6 Numberofcountrieswheretheorganisationoperates,andnamesofcountrieswhereeithertheorganisationhassignificantoperationsorthatarespecificallyrelevanttothesustainabilitytopicscoveredinthereport

Full AbouttheCompany 27–35

G4-7 Natureofownershipandlegalform Full CorporateGovernance 41

G4-8 Marketsserved(includinggeographicbreakdown,sectorsserved,andtypesofcustomersandbeneficiaries)

Full AbouttheCompany 27,35

G4-9 Scaleofthereportingorganisation Full AbouttheCompanyEconomicImpactManagementPersonnel:ManagementandDevelopment

27–3453–55

100

ECONOMIC IMPACT MANAGEMENT

G4-10 Totalnumberofemployeesbyemploymenttypegender,employmentcontractandregion

Full GeneralInformation 100–101

G4-12 Organisation’ssupplychain Full SupplyChainManagement 56–58

G4-13 Significantchangesduringthereportingperiodregardingtheorganisation’ssize,structure,ownership,oritssupplychain

Full Nosignificantchangesin2015



Page in the report


G4-14 Explanationofwhetherandhowtheprecautionaryapproachorprincipleisaddressedbytheorganisation

Full SakhalinEnergy’sCSRSystemSustainableDevelopmentPolicyRiskManagementImpactAssessment

17–1820

46–4923

G4-15 Externallydevelopedeconomic,environmentalandsocialcharters,principles,orotherinitiativestowhichtheorganisationsubscribesorwhichitendorses

Full PerformanceStandards 19

G4-16 Membershipsofassociations(suchasindustryassociations)andnationalorinternationaladvocacyorganisations

Full PerformanceStandardsInternationalandregionalcooperation

1971-72

InNovember2009,thecompanyjoinedtheUNGlobalCompact.In2015,thecompanyisamemberof:• GlobalCompactLEAD;• WorkingGrouponHuman

RightsoftheUNGlobalCompact;

• EuropeanBusinessCongress(EBC)

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17 Entitiesincludedintheorganisation’sconsolidatedfinancialstatementsorequivalentdocuments

Full AbouttheReport 14

G4-18 Processfordefiningthereportcontentandtheaspectboundaries.Reportingprinciplesfordefiningreportcontent

Full AbouttheReport 10–14

G4-19 Listofallthematerialaspectsidentifiedintheprocessfordefiningreportcontent


G4-20 Materialaspectswithintheorganisation


G4-21 Materialaspectsoutsidetheorganisation


G4-22 Restatementsofinformationprovidedinpreviousreports,andthereasonsforsuchrestatements


G4-23 Significantchangesfrompreviousreportingperiodsinthescopeandaspectboundaries


STAKEHOLDER ENGAGEMENT

G4-24 Listofstakeholdergroupsengagedbytheorganisation

Full AbouttheReportStakeholderEngagementManagementin2015

10

62

Appendix1

151150



Page in the report


G4-25 Basisforidentificationandselectionofstakeholderswithwhomtoengage

Full StakeholderEngagementManagement

62

G4-26 Organisation’sapproachtostakeholderengagement,includingfrequencyofengagementbytypeandbystakeholdergroup,andanindicationofwhetheranyoftheengagementwasundertakenspecificallyaspartofthereportpreparationprocess

Full AbouttheReport


10

61–62

G4-27 Keytopicsandconcernsthathavebeenraisedthroughstakeholderengagement,andhowtheorganisationhasrespondedtothosekeytopicsandconcerns,includingthroughitsreporting.Stakeholdergroupsthatraisedeachofthekeytopicsandconcerns

Full AbouttheReport


Appendix2

10–13

62

157–164

REPORT PROFILE

G4-28 Reportingperiod(suchasfiscalorcalendaryear)forinformationprovided


G4-29 Dateofmostrecentpreviousreport(ifany)

April2015

G4-30 Reportingcycle(suchasannual,biennial)

Full AbouttheReport Annual

G4-31 Contactpointforquestionsregardingthereportoritscontents

Full AbouttheReport

Appendices5–6

9

169–170

G4-32 ‘Inaccordance’optiontheorganisationhaschosen.GRIcontentindex.Referencetotheexternalassurancereport

Full AbouttheReport

Appendix1

Appendices7-8

9

148–156

171–175

G4-33 Organisation’spolicyandcurrentpracticewithregardtoseekingexternalassuranceforthereport

Full AbouttheReport

Appendices7-8

14

171–175

GOVERNANCE

G4-34 Governancestructureoftheorganisation,includingcommitteesofthehighestgovernancebody

Full CorporateGovernanceModel 41–43

G4-36 Executive-levelpositionorpositionswithresponsibilityforeconomic,environmentalandsocialtopics


G4-38 Compositionofthehighestgovernancebodyanditscommittees




Page in the report


G4-39 Whetherthechairofthehighestgovernancebodyisalsoanexecutiveofficer

Full Thechairpersonofthehighestgovernancebodyisnotanexecutiveofficer

G4-42 Highestgovernancebody’sandseniorexecutives’rolesinthedevelopment,approval,andupdatingoftheorganisation’spurpose,valueormissionstatements,strategies,policies,andgoalsrelatedtoeconomic,environmentalandsocialimpacts

Full CorporateSocialResponsibilityandSustainableDevelopmentCorporateGovernance

17

39–50

G4-46 Highestgovernancebody’sroleinreviewingtheeffectivenessoftheorganisationriskmanagementprocessesforeconomic,environmentalandsocialtopics

Full RiskManagement 46–47

G4-48 Highestcommitteeorpositionthatformallyreviewsandapprovestheorganisation’ssustainabilityreportandensuresthatallmaterialaspectsarecovered


ETHICS AND INTEGRITY

G4-56 Organisation’svalues,principles,standardsandnormsofbehaviorsuchascodesofconductandcodesofethics

Full CorporateSocialResponsibilityandSustainableDevelopmentCorporateGovernance

19

44–45

G4-57 Internalandexternalmechanismsforseekingadviceonethicalandlawfulbehavior,andmattersrelatedtoorganisationalintegrity,suchashelplinesoradvicelines

Full CorporateGovernanceSystemandStructureCorporateCultureStakeholderEngagementManagement

404461

G4-58 Internalandexternalmechanismsforreportingconcernsaboutunethicalorunlawfulbehavior,andmattersrelatedtoorganisationalintegrity,suchasescalationthroughlinemanagement,whistleblowingmechanismsorhotlines

Full CorporateCultureHumanRights

44127–129

SPECIFIC STANDARD DISCLOSURESBasis of Aspects materiality is given in Section 2 About the Report.



Page in the report


CATEGORY: ECONOMIC

G4-DMA Disclosuresonmanagementapproach Full AbouttheCompanyCorporateGovernanceModelEconomicImpactManagement

2741–4353–58

Appendix1

153152



Page in the report


G4-EC1 Directeconomicvaluegeneratedanddistributed

Full AbouttheCompanyEconomicImpactManagementRemunerationandBonusSystemSocialInvestmentandSustainableDevelopment:SakhalinEnergy’sPrinciplesandApproaches

2753–55

103

131

G4-EC3 Coverageoftheorganisation’sdefinedbenefitplanobligations

Full SocialGuarantees,BenefitsandCompensations

104–105

G4-EC4 Financialassistancereceivedfromgovernment

Full Thecompanyreceivednofinancialassistancefromthegovernmentin2015

G4-EC5 Ratioofstandardentrylevelwagebygendercomparedtolocalminimumwageatsignificantlocationsofoperation

Full RemunerationandBonusSystem 103

G4-EC6 Proportionofseniormanagementhiredfromthelocalcommunityatsignificantlocationsofoperation

Full PersonnelRecruitmentandAdaptationofNewEmployees

102

G4-EC7 Developmentandimpactofinfrastructureinvestmentsandservicessupported

Full ImportanceoftheSakhalin-2projectfortheRussianFederationandtheSakhalinOblastSocialInvestmentandSustainableDevelopment:SakhalinEnergy’sPrinciplesandApproaches

53

131

G4-EC8 Significantindirecteconomicimpacts,includingtheextentofimpacts

Full EconomicImpactManagement 53

G4-EC9 Proportionofspendingonlocalsuppliersatsignificantlocationsofoperation

Full RussianContent 55

CATEGORY: ENVIRONMENTAL

G4-DMA Disclosuresonmanagementapproach Full HSEandSocialPerformanceManagementSystemEnvironmentalImpactManagement

21–2275–96

G4-EN3 Energyconsumptionwithintheorganisation

Full Energy 78–79

G4-EN5 Energyintensity Full Energy 78–79

G4-EN8 Totalwaterwithdrawalbysource Full ImpactonWaterBodies 76–77

G4-EN9 Watersourcessignificantlyaffectedbywithdrawalofwater

Full ImpactonWaterBodies 76–77 Nowatersourcesaremateriallyaffectedbythecompanywithdrawalofwater

G4-EN11 Operationalsiteson,oradjacentto,protectedareasandareasofhighbiodiversityvalueoutsideprotectedareas

Full EnvironmentalMonitoringandPreservingBiodiversity

82–93



Page in the report


G4-EN14 TotalnumberofIUCNredlistspeciesandnationalconservationlistspecieswithhabitatsinareasaffectedbyoperations

Full EnvironmentalMonitoringandPreservingBiodiversity

82–93

G4-EN15 Directgreenhousegas(GHG)emissions

Partly GreenhouseGasandOzone-DepletingSubstanceEmissions

80

G4-EN16 Energyindirectgreenhousegas(GHG)emissions

Partly GreenhouseGasandOzone-DepletingSubstanceEmissions

80

G4-EN20 Emissionsofozone-depletingsubstances(ODS)

Full GreenhouseGasandOzone-DepletingSubstanceEmissions

80

G4-EN21 NOX,SOX,andothersignificantairemissions

Full GreenhouseGasandOzone-DepletingSubstanceEmissions

80

G4-EN22 Totalwaterdischargebyqualityanddestination

Partly ImpactonWaterBodies 76–77

G4-EN23 Totalweightofwastebytypeanddisposalmethod

Full WasteManagement 77–78

G4-EN24 Totalnumberandvolumeofsignificantspills

Full OilSpillPreventionandResponsePreparedness

95

G4-EN29 Monetaryvalueofsignificantfinesandtotalnumberofnon-monetarysanctionsfornon-compliancewithenvironmentallawsandregulations

Full EnvironmentalProtectionCostsandPaymentsfortheNegativeImpact

81

G4-EN31 Totalenvironmentalprotectionexpendituresandinvestmentsbytype

Full EnvironmentalProtectionCostsandPaymentsfortheNegativeImpact

81

G4-EN34 Numberofgrievancesaboutenvironmentalimpactsfiled,addressed,andresolvedthroughformalgrievancemechanisms

Full GrievanceHandlingin2015 129

CATEGORY: SOCIAL

Sub-Category: Labour Practices and Decent Work

G4-DMA Disclosuresonmanagementapproach Full ApproachestoHRManagementandHRPolicyLabourSafetyandProtectionOccupationalHealth

99

117–124125–126

G4-LA1 Totalnumberandratesofnewemployeehiresandemployeeturnoverbyagegroup,genderandregion

Full GeneralInformation 100–101

G4-LA3 Returntoworkandretentionratesafterparentalleave,bygender

Full GeneralInformation 100

Appendix1

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Page in the report


G4-LA4 Minimumnoticeperiodsregardingoperationalchanges,includingwhetherthesearespecifiedincollectiveagreements

Full InaccordancewiththeeffectiveLabourCodeoftheRussianFederation,federallaws,andotherregulatorylegalactscontainingnormsoflabourlaw,agreementsandemploymentcontracts

G4-LA6 Ratesofinjury,occupationaldiseases,lostdays,andabsenteeism,andtotalnumberofwork-relatedfatalities,byregionandbygender

Partly LabourSafetyandProtectionOccupationalHealth

118126

G4-LA9 Averagehoursoftrainingperyearperemployeebygender,andbyemployeecategory

Partly PersonnelTraining 111

G4-LA10 Programmesforskillsmanagementandlifelonglearningthatsupportthecontinuedemployabilityofemployeesandassisttheminmanagingcareerendings

Partly StaffLearningandDevelopment 108–116

G4-LA11 Percentageofemployeesreceivingregularperformanceandcareerdevelopmentreviews,bygenderandbyemployeecategory

Partly IndividualPerformanceReviewoftheEmployees

107

G4-LA12 Compositionofgovernancebodiesandbreakdownofemployeesperemployeecategoryaccordingtogender,agegroup,minoritygroupmembership,andotherindicatorsofdiversity

Full GeneralInformation 101

G4-LA13 Ratioofbasicsalaryandremunerationofwomentomenbyemployeecategory

Full Basicsalariesofmenandwomenofallpersonnelcategoriesdonotdiffer

G4-LA16 Numberofgrievancesaboutlaborpracticesfiled,addressed,andresolvedthroughformalgrievancemechanisms


Sub-Category: Human Rights

G4-DMA Disclosuresonmanagementapproach Full HumanRights:PrinciplesandManagementSystem

127–128

G4-HR2 Totalhoursofemployeetrainingonhumanrightspoliciesorproceduresconcerningaspectsofhumanrightsthatarerelevanttooperations,includingthepercentageofemployeestrained

Partly HumanRightsTraining 130

G4-HR3 Totalnumberofincidentsofdiscriminationandcorrectiveactionstaken

Full Noregisteredcasesofdiscriminationin2015



Page in the report


G4-HR4 Operationsandsuppliersidentifiedinwhichtherighttoexercisefreedomofassociationandcollectivebargainingmaybeviolatedoratsignificantrisk,andmeasurestakentosupporttheserights

Full Nooperationsinwhichtherighttoexercisefreedomofassociationandcollectivebargainingmaybeatsignificantrisk

G4-HR5 Operationsandsuppliersidentifiedashavingsignificantriskforincidentsofchildlabor,andmeasurestakentocontributetotheeffectiveabolitionofchildlabor

Full Nooperationsriskofinvolvingchildlabour

G4-HR6 Operationsandsuppliersidentifiedashavingsignificantriskforincidentsofforcedorcompulsorylabor,andmeasurestocontributetotheeliminationofallformsofforcedorcompulsorylabor

Full Nooperationsriskofinvolvingcompulsorywork

G4-HR7 Percentageofsecuritypersonneltrainedintheorganisation’shumanrightspoliciesorproceduresthatarerelevanttooperations

Full HumanRights:PrinciplesandManagementSystemHumanRightsTraining

128130

100%

G4-HR8 Totalnumberofincidentsofviolationsinvolvingrightsofindigenouspeoplesandactionstaken

Full NoregisteredcasesofviolationofrightsofIndigenousPeoplesin2015

G4-HR12 Numberofgrievancesabouthumanrightsimpactsfiled,addressed,andresolvedthroughformalgrievancemechanisms


Sub-Category: Society

G4-DMA Disclosuresonmanagementapproach Full CorporateSocialResponsibilityandSustainableDevelopmentStakeholderEngagement:Strategy,Principles,MechanismsandEngagementToolsSocialInvestmentandSustainableDevelopment:SakhalinEnergy’sPrinciplesandApproaches

17–20

61

131–132

G4-SO1 Percentageofoperationswithimplementedlocalcommunityengagement,impactassessments,anddevelopmentprogrammes

Full ImpactAssessmentStakeholderEngagement:Strategy,Principles,MechanismsandEngagementToolsSocialInvestmentandSustainableDevelopment:SakhalinEnergy’sPrinciplesandApproaches

23

61

131–132

100%

G4-SO2 Operationswithsignificantactualandpotentialnegativeimpactsonlocalcommunities

Full ImpactAssessment 23 Nosuchoperationsin2015

G4-SO4 Communicationandtrainingonanti-corruptionpoliciesandprocedures

Full Anti-BriberyandCorruption 50

Appendix1

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Page in the report


G4-SO5 Confirmedincidentsofcorruptionandactionstaken

Full Nocasesofcorruptionwereregisteredin2015

G4-SO6 Totalvalueofpoliticalcontributionsbycountryandrecipient/beneficiary

Full AsperthecompanyCodeofConduct,SakhalinEnergydoesnotsupportanypoliticalpartiesortheirrepresentativesfinanciallyanddoesnotparticipateinpoliticalactivities

G4-S011 Numberofgrievancesaboutimpactsonsocietyfiled,addressed,andresolvedthroughformalgrievancemechanisms


Sub-Category: Product Responsibility

G4-DMA Disclosuresonmanagementapproach Full AbouttheCompanyOilandLNGSupplySafetyEngagementwithCustomers

2733–3469

G4-PR2 Totalnumberofincidentsofnon-compliancewithregulationsandvoluntarycodesconcerningthehealthandsafetyimpactsofproductsandservicesduringtheirlifecycle,bytypeofoutcomes

Full Noincidentsofnon-compliancewithregulationsandvoluntarycodesconcerningthehealthandsafetyimpactsofproductsandservicesin2015

G4-PR4 Totalnumberofincidentsofnon-compliancewithregulationsandvoluntarycodesconcerningproductandserviceinformationandlabeling,bytypeofoutcomes

Full Noincidentsofnon-compliancewithregulationsandvoluntarycodesconcerningproductandserviceinformationandlabellingin2015

Appendix2.CommentsandSuggestionsofStakeholdersonIndividualAspects,Indicatorsand/orProgrammesandCompany’sResponseandCommitmentsDetailedinformationontheresultsofthestakeholderengagementprocessthatwascompletedtodevelopthisReport,includingdialoguemeetings,questionnairesurveys,etc.,isavailableintheMaterialTopicstoBeIncludedinthe2015ReportBasedonStakeholders’OpinionsandMostPriorityTopicstoBeIncludedinthe2015ReportBasedonStakeholders’OpinionstablesfoundinSection2ofthisReport.

Besidesidentifyingmaterialsubjects,stakeholdersalsomadecommentsandsuggestionsonindividualaspects,indicators,and/ortheprogrammesofthecompanyforinclusioninthe2015Report.

InNovember2015,SakhalinEnergyheldthefirstdialogueaspartofthe2015Reportpreparation.Atthismeeting,thecompanyprovidedstakeholders

Comment, question, critical remark or suggestion Company’s response and/or commitment

Dialogue meeting. Open statements

A. V. Buryka, Director of the Sakhalin Regional Art Museum:IwouldliketosaythankyoutoSakhalinEnergyforthekindwordsexpressedtous,andtocommentontheexcellentrelationshipwehavewiththecompany.Itcanbedividedintotwoparts:eventsandthefinancialsupport.Wehaveheldsignificantevents.Oneofthemwasmentionedinthepresentation—the80thanniversaryofthewell-knownNivkhwriterVladimirSangi.ForeacheventsupportedbySakhalinEnergy,wereceivedthenecessarytechnicalequipment,andwearegratefultothecompanyforthis.Forexample,thankstothecompany,physicallychallengedresidentsofSakhalinnowhavetheopportunitytoattendourevents.ThecompanysupportsourexhibitionsandhelpedtorepairtheCentreofAppliedArtsthatwastransferredtoustwoyearsago.OurcooperationwithSakhalinEnergyhascontinuedsuccessfullyforseveralyears

Thecompanyappreciatesthefeedbackandlooksforwardtofurtherfruitfulcooperation

Е. G. Chernyavskaya, Advisor of the Subdivision of State Registration and Cadastre for Wildlife and Specially Protected Natural Areas, Department of Hunting and Use of Wildlife, Ministry of Forestry and Hunting of the Sakhalin Oblast:MyquestionisaboutthepipelinethatrunsacrosstheSakhalinIsland.Everyyearthecompanyconductsanumberofgeologicalworksinresponsetodangerousprocessesalongthepipeline,includingprotectingthebanksoftheriversthepipelinecrossings.Whatworksdidthecompanyconductinthisareain2015?

Thecompanyhasbeenpermanentlymonitoringgeologicalhazardsbothduringpipelineconstructionandoperation.Now,wearecarryingoutbankprotectionworksintheMakarovdistrict.Atthebeginningoftheoperationsweconductedsuchworkson20–30riversperyear.Nowthesituationhasstabilised,andsuchworksarerequiredonlyfortwoorthreeriversperyear.Generalinformationonmaintainingright-of-waysforonshorepipelineisincludedinSection8.3oftheReport

withinformationonitsactivitiesandachievementsduringthereportingperiod.InFebruary2016,theseconddialoguewasheldtoprovideresponsestocomments,suggestionsandques-tionsreceivedduringthefirstdialogue.Duringthismeeting,participantsmadeadditionalcomments.Apartfromthedialogues,thecompanyconductedelectronicquestionnaires,personalinterviews,aswellassurveysatvariouseventsinNovemberandDecember2015(seeSection2.2DefiningMaterialandPriorityTopicstoBeIncludedIntheReport).

Stakeholders’commentsandsugges-tions,aswellastherelevantresponsesandcommitmentsofSakhalinEnergy,arelistedinthetablebelow.

Theleftcolumncontainsthequestions,commentsorcriticalremarksmade

duringtheeventslistedabove.Iftheywereexpressedatthedialoguemeet-ings,theparticipant’sname,positionandorganisationareindicated.Inothercases,theformatoftheeventinwhichthestakeholder’sopinionwascollected(electronicquestionnaires,interview,etc.)isspecified.

Therightcolumncontainstheresponsesthatthecompanyprovidedeitherattheeventsorafteraperiodoftime(incaseaquestionrequiredadditionaltimetoresearchand/orpreparetheanswer).

Appendix1

159158


L. V. Kirillova, Head of the Subdivision for Supervision over Water and Land Resources, Hunting and Specially Protected Natural Areas, Sakhalin Oblast Department of the Federal Service for Supervision of Natural Resources: Atwhichwaterbodiesalongthepipelineroutedidthecompanyconductprotectionandrestorationworksinthereportingyear?

Thecompanyconductedsomebankprotectionworksinwinter2015–2016wherethepipelinesystemcrossedtheDuetRiverandtheSeredkaRiver.Generalinformationonmaintainingright-of-waysforonshorepipelineisincludedinSection8.3.oftheReport

N. Е. Samarina, Head of Natural Resources Management and Environmental Protection Subdivision, Yuzhno-Sakhalinsk Urban District Administration:Willthecompanyincludeanyinformationonindustrialmonitoringofthelandconditioninthe2015Report?

TheinformationisincludedinSections8.2.1.and8.3.oftheReport

T. S. Voskoboynikova, Secretary of Stroitel Dacha Cooperative, Prigorodnoye:ThereisstillaquestioninregardstothecompensationofthedachaownersfortheirlossesfromtheoperationsoftheLNGplant.Yourproductionandfinancialindicatorsareveryimpressive.However,weaddressthisrequesttothecompanyonceagain.

TheenvironmentalimpactofthePrigorodnoyeproductioncomplexislimitedbythesizeofthesanitaryprotectionzone(SPZ)establishedforthisfacilityincompliancewiththeRussianFederationlegislation.StroitelCooperativeislocatedoutsidetheSPZ,andthereforethedachaownershavenolegalgroundstorequestresettlement.Nevertheless,thecompany,fromtheverybeginning,hasrespectedtheconcernsofdachaownersabouttheproximityofthePrigorod-noyeproductioncomplexandproposedanintegratedcompensationprogrammethatthedachaownersandprojectlendersagreedto.Alldachaownersreceivedthecompensation.Accordingtotheprovisionsofthestandardagreementsignedbyalldachaowners,theseowners:• acceptedthecompensationundertheagreementandrecognised

itasthefullandfinalreimbursementforanymarketvaluelossoftheirplotsofland;

• confirmedthattheywereactingontheirownfreewillundertheagreementandwaivedanyclaimsagainstthecompanyinrelationtotheagreement.

Thecompanybelievesthat,havingsignedtheseagreements,dachaownersrecognisedthecompensationtheyreceivedwassufficientandwaivedanyclaimsagainstthecompany

N. P. Sharukhina, Lead Specialist of the Chief Directorate of the MChS for Sakhalin Oblast:Iwouldliketothankyourcompanyforourwonderfulproject—theWhattoDoinEmergencySituationspartnershipprogramme—whichhascelebratedits10thanniversaryWedidalotofwork,in2015wecompletedtwoprojects:SenyaWarns,aseriesofinformationboardsinstalledintsunami-andavalanche-hazardousareasoftheSakhalinOblast,andSenyaTeaches,materialsprovidedtoteamsfrommunicipalitiesthatparticipatedintheSchoolofSafetycompetitions.Thesetwoprojectshavebeenimplementedwiththefinancialsupportofthecompany,andthepartnersaregratefultoSakhalinEnergy.In2015atripartiteagreementwassignedbetweenthepartnersoftheWhattoDoinEmergencySituationsprogramme.Thisprogrammewillbefurtherdeveloped.Earlier,wesaidthatourSenyawasstillsmallandshouldgrowalittle.Theyearof2015showsthatthetargetaudienceofSenyaincludesnotonlypreschoolersandyoungerstudents,butalso13–14yearolds,andthatSenyaiswellreceivedbyadults.It’sverygood,itistherealresultofourwork.Iwishtosaythankyoutoallparticipantsofourprogramme.Ithinkourcooperationwillcontinuefordecades.

Thecompanyappreciatesthefeedbackandlooksforwardtofurtherfruitfulcooperation.WewouldalsoliketodistinguishtheSenyaWarnsproject,aseriesofinformationboardsinstalledintsunami-andavalanche-hazardousareasoftheSakhalinOblast,andtosaythattheSakhalinOblastisthefirstregioninRussiawhereaprojectlikethishasbeenimplemented


N. I. Cherkavsky, Vice-President for Continuing Education and Affiliates, Sakhalin State University:Iwouldliketotellaboutourlong-termcooperationwithSakhalinEnergy.Initially,itwaslimitedtoone-timeevents,butinFebruary2015,theCEOofthecompanyandthePresidentoftheSakhalinStateUniversitysignedtheJointActionPlan.I’dliketohighlightthekeyevents.Firstofall,thecompanyhelpsustopreparehigh-qualityprofessionals.Over100graduatesfromouruniversityworkatthePrigorodnoyeproductioncomplexandotherassets.Ibelievethatoverthetime,duetothefactthatwetrainpersonnelatthespecialisedsecondaryeducationandhighereducationlevels,thenumberofRussiannationalsworkingatSakhalinEnergywillreach100%.WeagreewithSakhalinEnergyonthecompetenciestobedevelopedforourstudents.Thecompanyprovidesuswithfacilitiesforpracticaltraining.Whenstudentsattendclassesandpracticaltraining,theyseenewtechnology;theyseeanewattitudetowardwork.Moreover,thecompanyprovidesfinancialsupport,inparticular,grantstouniversitystudents.SpecialistsofSakhalinEnergytakepartinscientificandpracticalconferences,whileweparticipateinconferencesofyoungspecialists.Ourcollaborationisveryclose

ThecompanyappreciatesthefeedbackoncooperationwiththeleadinghighereducationalinstitutionoftheSakhalinOblast

A. V. Lomteva, Head of Science and Education Subdivision, Sakhalin Regional Art Museum:Iwanttosaythankyoutothecompanyforourlong-termcooperationwithintheframeworkoftheFundofsocialinitiativesEnergy.Wehavepreparedalargenumberofprojects.Itisgreatsupportforourculture,andIlookforwardtofurthercooperationandfurthercompanycontributionstothedevelopmentofcultureandeducation.Itseemstomethatwithoutthiscontribution,ourculturewoulddevelopmoreslowlyandmodestly

Thecompanyappreciatesthefeedbackandpositivecommentsonourcooperation

I. G. Malkova, Deputy Director of the Sakhalin Regional Art Museum:IwouldliketosayafewwordsabouttheReport.Ilikeitverymuch.Inmyopinion,itisoneofthemostinterestingreports.Ihavebeenattendingtheseeventsformanyyears.Idonotknowwhetherourstickersthatwestuckonthestandsatthepreviousmeetingshadanyeffect.Butitseemstomethatthecompanyworkedwiththem,withourrequestsandquestions.Somefiguresaresurprising—thecompanyemploysalittlemorethan2,000people,butgenerates70%oftheregion’sincome.It’samazing.Thankyou.

Thecompanyappreciatesthefeedback

A. Ya. Nachetkina, Yuzhno-Sakhalinsk Urban District Administration, Indigenous Minorities Council:Thefiguresofoilandgasproductionandsalesinourregion,aswellasthetaxesyouhavepaid,areimpressive.Ireallylikethesectiononsocialprojects,environmentprotection,andengagementwithSakhalinindigenousminorities.AsrepresentativesoftheSakhalinindigenousminorities,wegetalotofhelpandsupportfromtheSIMDP,andIwouldliketosaymanythankstoSakhalinEnergyforthat.Iwouldliketoseeandhearsuchatransparentreportfromotherpartnersaswell

ThecompanyappreciatesthefeedbackandpositivecommentsregardingourcooperationwithintheframeworkoftheSakhalinIndigenousMinoritiesDevelopmentPlan,aswellasyourcommentonthetransparencyofourcompany

Appendix2

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V. K. Gorokhov, retiree:Ihaveenjoyedwell-deservedretirementforeightyears,butfrom1996to2005IwasdirectlyinvolvedintheSakhalin-1andSakhalin-2projectsatZarubezhneftandRosneft.That’swhymanyissuesareinterestingtome.ThisisthefirsttimeIhaveattendedaneventlikethis.Twodaysago,IreadaboutthiseventonSakh.comanddecidedtoattendit.SafetyandtheenvironmentprotectionwerenumberoneissuesbothatExxonandSakhalinEnergywhenIworked.Anditwasnicetohearthattheindicatorsarestillatthesamehighlevel.Myquestion:WhatisthevolumeofgasflaringattheLNGplantinPrigorodnoyein2015?Hasitbeenreducedordoesitremainatthesamelevel?

Thecompanyisgratefulforthefeedbackandpositivecommentsregardingitssafetyandenvironmentalprotection.Asfortheutilisationofassociatedgas,in2015itreached96.1%.ThisishigherthanthetargetvaluerequiredbyRussianlegislation.TheinformationisincludedinSection8.1.6oftheReport

N. V. Nikitina, Head of the Subdivision of Programme and Estimate Documentation Analysis and PSA Implementation, Ministry of Natural Resources and Environmental Protection of Sakhalin Oblast:Iwanttonotethatthecompanyhastakenourrequestsintoaccountandaddedtothe2015ReportsomeexamplesofsuccessfulcooperationbetweenSakhalinEnergyandSakhalincompaniesandpromotionoftheiractivities.ThecompanyhasaRussianvendordevelopmentprogramme.In2015,therewereaboutfifteenworkshopsunderthisprogramme,nineofwhichwereheldintheSakhalinOblast.Eachworkshopconsistsofthreeunits:qualitycontrol,occupationalhealthandlifesafety,andtenderparticipation.Companiesgainexperienceintheseareasattheseworkshops.Thisisaverygoodinitiative,andweexpectthatthesecompanieswillsuccessfullyparticipateintendersheldbySakhalinEnergyandwillbeawardedthecontracts.ThismeanshighertaxrevenuesfortheSakhalinOblastandmorejobsforSakhalinpeople.

SakhalinEnergyappreciatesthefeedbackaboutthecompany’svendordevelopmentprogramme.Moreinformationaboutitisincludedinsection6.5oftheReport

N. S. Koltunovich, Director of the Department of Environmental and Water Resources Protection, Ministry of Natural Resources and Environmental Protection of the Sakhalin Oblast:Inhisspeech,AndreySamatovtouchedongasificationandreductionofemissionsinYuzhno-Sakhalinsk.Ididn’thearthefigures.Ofcourse,wecannotevaluate2015becausethedataisnotyetavailable.Butaccordingtotheresultsof2014comparedto2013,wecouldmakeourownassessment.Iwouldliketoconfirmtheimportanceofgasification,especiallyfortheenvironmentalsituationinYuzhno-Sakhalinsk.In2014,pollutantemissionswere7.5%lowerthanin2013.OvertheentireperiodofgasificationinYuzhno-Sakhalinsk,emissionshavedecreasedby27%,withasignificantdecreaseintheairpollutionindex.AlthoughYuzhno-Sakhalinskstillremainsonthelistofthemostpollutedcities,theindexhasdecreasedandshiftedfromveryhightohigh.In2014,theairpollutionindexwas14.4%.Intotal,duringthewholeperiodofgasification,emissionshavedecreasedby87%.Gasification’scontributiontotheenvironmentalsituationinYuzhno-SakhalinskandgenerallyintheSakhalinOblastcannotbeoverestimated.

Thecompanyappreciatesthefeedback


Other activities (electronic questionnaires, personal interviews, etc.)

Impactassessmentofnewprojects ThecompanyperformsanimpactassessmentforplannedprojectsinaccordancewiththeRussianlegislationandinternationalstandards.Anintegralpartofthecompanyimpactassessmentisconsultingwithstakeholdersinordertoinformthemaboutplannedactivities,identifyconcerns,learntheopinionsofstakeholders,anddiscusspossibleimpactmitigationmeasures.TheinformationisincludedinSection3.5oftheReport.Theimpactassessmentresultsarepublishedonthecompanywebsite

InterestedinthedisclosureofallsectionsaboutCSRandsustainabledevelopment

InformationonthecompanyactivitiesinCSRandsustainabledevelopmentisincludedinSection3oftheReport

MoreinformationontheassistancegiventopromoteSakhalincompanies

TheinformationabouttheassistancethecompanygivestopromoteRussianenterprises,includingSakhalincompanies,isincludedinSection6oftheReport

ExamplesofsuccessfulcooperationwithSakhalincompanies ExamplesofsuccessfulcooperationwithSakhalincompaniesareincludedinSection6oftheReport

Lackofinformationonthecompanyactivitiesinthemedia.Maybeitwouldbeagoodideatoissueacorporatenewspaper?

SakhalinEnergyhasbeenpublishingaregularinformationbulletinsince2007.ThebulletincontainsinformationaboutthecompanyactivitiesandtheimplementationoftheSakhalin-2project.Youcanfinditinthecompany’sinformationcentresandonthecompanywebsite.ThedetailsofotherwaysofinformingandengagingwithstakeholdersareincludedinSection7oftheReport.Besides,youcanfinddetailedinformationinthePublicConsultationandDisclosurePlanandtherelatedreport.Bothdocumentsareupdatedannuallyandavailableonthecompanywebsiteandattheinformationcentres

Thelistofpermitsrequiredforconductingtheriverbankprotectionworks

Riverbankprotectionworksaremaintainedbythecompanygeneralcontractorresponsibleformaintainingthepipelinesystem—OOOGazpromTransgazTomsk.AllnecessarypermitsanddocumentationhavebeenappliedforandobtainedbythecontractorasrequiredbytheRussianlegislation

Interestedinthedisclosureofallstatedtopicsassociatedwithenvironmentalimpactmanagement

AllaspectsofenvironmentalimpactmanagementpresentedduringthefirstdialoguearedisclosedinSections3and8oftheReport

Productionresultsforeachasset TheinformationisincludedinSection4.2oftheReport

Riskmanagementsystemofthecompany TheinformationisincludedinSection5.8oftheReport

Anti-briberyandcorruptionpolicies TheinformationisincludedinSection5.6oftheReport

ResultsofindustrialenvironmentalmonitoringofwastewatercollectionintheZimaRiver,theKorsakovkaRiver,aswellascollectioninthesea

ThecompanypresentsasummaryofitswateruseandtheimpactonwaterbodiesasrequiredbytheG4SustainabilityReportingGuidelinesundertheGlobalReportingInitiative(GRI).ThisinformationisincludedinSection8.1oftheReport.Dataonthequalityofwastewaterdischargeforindividualsourcesaregivenbythecompanyinstatisticalreportsthataresenttogovernmentcontrolandsupervisoryagencies.Thetotalamountofwastewaterdischarged,only1%wasinsufficientlytreated,4%ofthewastewaterwastreatedtostandardquality,andremaining95%wastreatedtominimumstandardsormetminimumstandardswithouttreatment

GrayWhaleMonitoringProgramme—disclosedetails InformationontheGrayWhaleMonitoringProgrammeisincludedinSection8.2oftheReport

Appendix2

163162


Continuousimprovementofprinciplesandapproachesinsocialinvestmentandsustainabledevelopment

Overmorethan20years,thecompanyhasbeendevelopingprinciplesandapproachesthatarebasedonthebestpracticesprovenbothinRussiaandabroad.Currently,thebasicprinciplesincludefundingsociallysignificantprojectsonacompetitivebasis.Representativesofexpertcommunitiesandstakeholdersareinvolvedindecision-makingtoensurethecompetitiveprocessisobjectiveandtransparent.Thecompanyalsoconsiderspartnershipprogrammestobeakeyapproachinsocialinvestment.TheinformationonprinciplesandapproachesinsocialinvestmentandsustainabledevelopmentisincludedinSection9.5oftheReport

Howisthepartnershipprogrammeinitiatedandplanned?Cantheadvancededucationbecomeoneoftheprogrammes?

Thepartnershipprogrammeisacomprehensiveprogrammethatincludesaseriesofprojectsaimedattacklingsociallysignificantproblemsidentifiedduringthepublicconsultations.Ifitisconfirmedthattheproblemisrelevantandiftheprogrammeideamatchesthecompany'ssocialinvestmentprinciples,aworkinggroupisestablished.Aworkinggroupcomposedofpotentialpartnersanalysesaproblem,determinesthemosteffectivewaystosolveitandnecessaryresources.Presently,therearefourlong-termpartnerships.Advancededucationinstitutionscanparticipateinexistingpartnerships(forexample,thechildrensafetyprogramme),aswellassubmittheirprojectsforfundingfromthecompetitivegrantprogrammesofthecompany(e.g.“Energy”Fundofsocialinitiatives)

Thesystemofadditionalbenefitsforthecompanypersonnel TheinformationisincludedinSection9.1oftheReport

Jobvacanciesatthecompany TheinformationisincludedinSection9.1oftheReport

Tohighlighthealthandsafetyissuesinmoredetail(documents,currentactivities,etc.) TheinformationisincludedinSection9.2oftheReport

Company’sengagementwithindigenousminoritiesishighlycommend-able

Theinformationonthecompany’sengagementwithSakhalinindige-nousminoritiesisincludedinSections7and9oftheReport,includingactivitieswithintheframeworkoftheSakhalinIndigenousMinoritiesDevelopmentPlan

Theresultsofgrievancessubmittedin2015 TheinformationisincludedinSection9.4oftheReport

Distributebooksonecology(Steller’sseaeagles,etc.)atthedialoguesunderthepreparationoftheReport

Booksofthisserieshavebeenreleasedinlimitededitions.Thesebookscanbefoundinthecompany’sinformationcentresandSakhalinOblastlibraries;electronicversionsareavailableonthecompanywebsite

HowistheproblemwithStroitelCooperativelocatednexttothePrigorodnoyeproductioncomplexbeingresolved?

ThecompanyhasbeenengagingwithStroitelCooperativesince2004andtillpresent.TheinformationaboutthisengagementcanbefoundinthePublicConsultationandDisclosurePlanandtherelatedreportthatareannuallypublishedbythecompany,aswellasinthecompany’ssus-tainabledevelopmentreportsforpreviousyears.Thedatacanbefoundonthecompanywebsite,aswellasinitsinformationcentres

Growthprojects(LNGtrain3) TheinformationisincludedinSection4.2.1oftheReport

Thestructureofexportsdeliveries TheinformationisincludedinSection4.2.3oftheReport

Environmentalpollutionpayments TheinformationisincludedinSection8.1.7oftheReport

Students,trainees(statistics) TheinformationisincludedinSection9.1oftheReport

Charityprojects TheinformationisincludedinSection9.5oftheReport

Vendordevelopmentprogramme TheinformationisincludedinSection6.5oftheReport

RussianContentdevelopmentstrategy TheinformationisincludedinSection6.4oftheReport

Externalinspectionsandaudits TheinformationisincludedinSection3.5.2oftheReport

Inspectionsandaudits:resultsandachievements TheinformationisincludedinSection3.5.2oftheReport

Sakhalin-2projectinfrastructure TheinformationisincludedinSection4oftheReport


Protectionofwildfish/salmonhabitats ThecompanyconductsmonitoringofthePacificsalmonintheGoluboyBrook.Italsomonitorstheconditionofichthyofaunainsamplewatercourseswithintheframeworkoftheproject.In2015,theLazovayaRiverwasusedasasamplewatercourse

Generalinformationaboutthecompany:localinvestments/Russianinvestments TheinformationisincludedinSections6and9.5oftheReport

Corporatesocialresponsibility(CSR)andsustainabledevelopment:examplesofworkdoneinoccupationalhealthandsocialperformance TheinformationisincludedinSections8and9oftheReport

Productionandshippingofhydrocarbonsindollars ThecompanyisimplementingtheSakhalin-2projectwithintheAgreementontheDevelopmentofPiltun-AstokhskoyeandLunskoyeOilandGasFieldsontheBasisoftheProductionSharingAgreement(PSA).Accordingtothisagreement,informationonthecostofoilandgassoldbythecompanyisstrictlyconfidentialandnotsubjecttodisclosure.Thecompanyhastorefrainfrompublicationofthisinformation

Corporategovernance:publicationofthecompanyfinancialresults.Distributionofprofitstoshareholders

ThekeyfinancialresultsareincludedinSection6oftheReport.Informationonprofitsdistributedtoshareholdersisstrictlyconfidentialandisnotsubjecttodisclosure

Personnel:managementanddevelopment,assessmentofworkingconditionsatproductionassets

In2015,thecompanyassessedworkingconditionsattheworkplacesofSakhalinEnergyandcontractors

NumberofemployeesintheSakhalinOblast,otherregionsofRussiaandforeignemployees TheinformationisincludedinSection9.1oftheReport

Environmental,healthandsocialimpactassessmentresults ThereportsontheEnvironmental,HealthandSocialImpactAssessmentarepublishedonthecompanywebsite.TheinformationisincludedinSection3.5.2oftheReport

Environmentalimpactmanagement:systemandresults.Localmonitoringresults,amountandresultsoflandrestoration TheinformationisincludedinSection8oftheReport

Handlingofcompany’spersonnelgrievances:categoriesandnatureofgrievances,handlingresults TheinformationisincludedinSection9.4oftheReport

Engagementwiththeindigenouspeoples TheinformationisincludedinSection7.5oftheReport

Socialinvestmentandcontributiontosustainabledevelopmentoftheterritoryofpresence(aimedatsupportingSIM) TheinformationisincludedinSection9.5.8oftheReport

Industrialsafety TheinformationisincludedinSection9.2oftheReport

Itwouldbenicetoseeinformationonpersonnelgrievances TheinformationisincludedinSection9.4oftheReport

Industrialsafetymanagementathazardousproductionassets TheinformationisincludedinSection9.2oftheReport

GeneralinformationaboutSakhalinEnergy.Keyproductionachievementsin2015.Keypositionsofthecompanyinthesustainabledevelopmentstrategy

TheinformationisincludedinSection3oftheReport

Corporategovernance:conciselybutsignificantlyaboutbusinessethics TheinformationisincludedinSections5.4and5.5oftheReport

Corporatesocialresponsibility(CSR)andsustainabledevelopment:afewexamplesillustratingthelong-termfocus


Appendix2

165164


Recommendations of the RUIE Council for Non-Financial Reporting Board concerning the Results of Examination of the 2014 Sustainable Development Report of Sakhalin Energy Investment Company Ltd. for the Purpose of Public Endorsement

Balance: itisrecommendedtoensurebalancedcoveragenotonlyoftheachievementsbutalsooftheexistingproblemsinSakhalinEnergyoperationsandapproachestosolvingthem

Bothfavourable(achievements)andunfavourable(problemstobesolved)aspectsofthecompany’operationsduringthereportingperiodareincludedintheReport.Thedegreeofattentionpaidisproportionaltothemateriality,aswellasinterestsandrequestsofstakeholdersforincludingcertaintopicsandquestionsinthisReport(seeSections4and8oftheReport)

Consultations: itisrecommendedtocontinueworkinthisareaandtoraiseawarenessofhowmaterialtopicsarechosentobedisclosedinreports.Itisnecessarytoreportnotonlytheopinionsofthestakeholders,butalsotheresultsofanalysingthematerialityoftheseopinionsandtojustifythechoiceoftopicsandprioritiesincludedinaReport.


Disclosure of indicators: itisrecommendedtoprovidecommentsonthedataintablestoexplainthedynamicsofindicators,particularlyinthecaseofongoingsignificantchanges;toexpand,wherepossible,comparativedatabycomparingthecompanyindicatorswithnational,industry-wide,andinternationaldata,particularlyonenergyefficiencyandtheachievementsinrestoringbiodiversity;aswellastouseanindustryappendixthatincludestherespectiveindicatorsinreports,andtoexpandthenumberofcorporategovernanceIndicators.

TheReportincludesdataincomparisontoindustry-wideindicatorsinenergyefficiencyandrestorationofbiodiversity.TheReportincludesindicatorsoftheindustryappendixfortheoilandgassector,andanexpandednumberofindicatorsincorporategovernance(seeAppendix1totheReport)

Supply chain, engagement with suppliers and contractors: itisrecommendedtofurtherexpandtheinformationaboutresponsibilitiesinthesupplychainandthecompanyexperienceinresponsibleengagementwithsuppliersandcontractors,tomorefullycovertheenvironmentalandsocialresponsibilityrequirementsexpectedfrompartners,andtoshowtheresultsachieved.


Advanced production processes and impact assessment of them: itisrecommendedtoprovideinformationabouttheuseofadvancedproductionprocessesforrecoveringhydrocarbonsthatincreaseoperationalefficiency,andtoaddinformationabouttheassociatedenvironmentalimpactsandmeasurestoprevent/reducenegativeconsequencesiftheyoccur.ThisappliesinparticulartotheinformationonusingthefloodingprocessattheMolikpaqplatform

Whendevelopinganynewtechnology,animpactassessment,includingtheEnvironmentalImpactAssessment,isconducted.TheinformationabouttheimpactassessmentisincludedinSection3.5.2oftheReport

Analysis of social investment results: itisrecommendedtogiveacomprehensiveassessmentofthelong-termresultsofsocialinvestment,inparticular,intheSakhalinIndigenousMinoritiesDevelopmentPlan;itwouldbeusefultoanalysetheimpactofthisplanontheconditionsandqualityoflifeofSIMandtoincludethisinformationinthenextReport.Inthefuture,itisrecommendedtomorefullycovertheeffectivenessofthecompanysocialinvestments

AnanalysisoftheresultsofsocialinvestmentisprovidedinthereportofthefinalimplementationassessmentofthesecondSakhalinIndigenousMinoritiesDevelopmentPlan(2011–2015)andinthethirdDevelopmentPlan(2016–2020),whichareavailableontheprogramme'swebsitewww.simdp.ru

Appendix3.TheListofParticipantsofDialogueswithStakeholdersforPreparationofthe2015SustainableDevelopmentReport

Appendix2

AnchorEnergyServices V.Tkachuk,SupplyDevelopmentCoordinator

ChiefDirectorateoftheMChSforSakhalinOblast N.P.Sharukhina,LeadSpecialist

KorsakovUrbanDistrictAdministrationV.V.Goryachev,ViceMayor,HeadofSocialDevelopmentDepartmentO.I.Manukhin,DeputyHeadofSocialDevelopmentDepartment

LiteraryandArtMuseumofAntonChekhov’sBookTheSakhalinIsland

A.A.Zhuk,DirectorYe.P.Firsova,DeputyDirectorforMuseumDevelopmentandScientificWork

LyudiYkh-MifEthnicandCulturalCentre A.V.Bugrei

OOOStroikaConstructionCompany A.N.Zhukov,CEO

Preodoleniye("Overcoming")Centre N.S.Dunav,HeadofPhysicallyChallengedChildrenDevelopmentSubdivision

SakhalinOblastDepartmentoftheFederalServiceforSupervisionofNaturalResources

L.V.Kirillova,HeadoftheSubdivisionforSupervisionoverWaterandLandResources,HuntingandSpeciallyProtectedNaturalAreas

SakhalinOblastGovernment,Governor’sOfficeO.S.Kutaybergey,LeadSpecialistoftheIndigenousMinoritiesDepartmentN.V.Mizinin,HeadoftheIndigenousMinoritiesDepartment

SakhalinOblastGovernment,MinistryofEducationofSakhalinOblast N.O.Nersesyan,DeputyMinister

SakhalinOblastGovernment,MinistryofForestryandHuntingofSakhalinOblast

Ye.G.Chernyavskaya,AdvisoroftheSubdivisionofStateRegistrationandCadastreforWildlifeandSpeciallyProtectedNaturalAreas

SakhalinOblastGovernment,MinistryofHealthCareofSakhalinOblast

A.A.Kucherenko,LeadAdvisorofSpecialMedicalCareManagementSubdivisionK.V.Sakharova,PressSecretary

SakhalinOblastGovernment,MinistryofNaturalResourcesandEnvironmentalProtectionofSakhalinOblast

N.S.Koltunovich,DirectoroftheDepartmentofEnvironmentalandWaterResourcesProtectionN.V.Nikitina,HeadoftheSubdivisionofProgrammeandEstimateDocumentationAnalysisandPSAImplementationO.S.Rozhkova,AdvisoroftheEnvironmentalProtectionSubdivisionN.V.Starodubtseva,ActingHeadoftheEnvironmentalProtectionSubdivision

SakhalinOblastPublicChamber’sOffice O.V.Santalova,Director

SakhalinRegionalArtMuseum

A.V.Buryka,DirectorA.V.Lomteva,HeadofScienceandEducationSubdivisionI.G.Malkova,DeputyDirectorYe.S.Nitkuk,HeadofRegionalArtProjectsSubdivisionZ.V.Turmanova,DeputyDirector

SakhalinRegionalCentreofArtsandCrafts

G.A.Samenko,HeadofSakhalinIndigenousMinorities’CultureSubdivisionO.Yu.Khuryun,LeadSpecialistofSakhalinIndigenousMinorities’CultureSubdivision

SakhalinRegionalCentreofExtracurricularEducation S.I.Rudenko,SubdivisionHead

167166

SakhalinRegionalCouncilofVeteransofWar,Labour,MilitaryForcesandLawEnforcementAuthorities Z.V.Glyogover,Chairperson

SakhalinRegionalDivisionoftheRussianUnionofIndustrialistsandEntrepreneurs,andtheRegionalAssociationofEmployersUnionofIndustrialistsandEntrepreneursofSakhalinOblast

I.V.Andreyev,ExecutiveDirector

SakhalinRegionalLocalLoreMuseum N.V.Vishnevsky,Director

SakhalinRegionalUniversalScientificResearchLibrary V.A.Malysheva,Director

SakhalinResearchInstituteforFishingandOceanography D.S.Zavarzin,SeniorResearcher

SakhalinStateUniversityN.I.Cherkavsky,Vice-PresidentforContinuingEducationandAffiliatesE.N.Lisitsina,HeadoftheSustainableDevelopmentChair

StroitelNon-CommercialGardenCooperative,Prigorodnoye

T.S.Voskoboynikova,SecretaryV.V.Kshetskaya

V.K.Gorokhov,retiree

Yuzhno-SakhalinskChildren(Youth)CreativityCentre Ye.A.Kharlamova,DeputyDirectorforInstructionalResearch

Yuzhno-SakhalinskCityDuma Ye.A.Stolyarova,DeputyChairperson

Yuzhno-SakhalinskUrbanDistrictAdministration

N.V.Belyaeva,Category1ChiefSpecialistofPublicRelationsSubdivisionN.Ye.Samarina,HeadofNaturalResourcesManagementandEnvironmentalProtectionSubdivision

Yuzhno-SakhalinskUrbanDistrictAdministration,IndigenousMinoritiesCouncil

M.V.KraginaA.Ya.Nachetkina

Companypublicwebsite www.sakhalinenergy.comSustainabledevelopment www.sakhalinenergy.com(sectionSocialPerformance)Aboutthecompany www.sakhalinenergy.com(sectionAbouttheCompany)Contractingwithus www.sakhalinenergy.com(sectionContractingwithUs)JobandCareer www.sakhalinenergy.com(sectionJobandCareer)Mediacentre

www.sakhalinenergy.com(sectionMediaCenter)VesticorporatenewspaperEnergyTVprogramme

WhistleBlowingProcedure www.sakhalinenergy.com(sectionAbouttheCompany–OurPrinciples)

COMPANY DOCUMENTS AND MATERIAL REFERRED TO IN THE REPORTStatementofGeneralBusinessPrinciples

www.sakhalinenergy.com(sectionAbouttheCompany–OurPrinciples)SustainableDevelopmentPolicyHumanRightsPolicyCodeofConductSakhalinEnergyCommitmentandPolicyonHealth,Safety,Environment,andSocialPerformance

www.sakhalinenergy.com(sectionSafetyandEnvironment–Health,Safety,EnvironmentandSocialActionPlan)HealthSafetyEnvironmentalandSocialActionPlan,Policiesand

StandardsonHealth,Safety,Environment,andSocialPerformance(note:complexofdocuments)Lenders’IndependentEnvironmentalConsultantReportsonConductedMonitoring www.sakhalinenergy.com(sectionSafetyandEnvironment–Health,Safety,

EnvironmentandSocialActionPlan)CompanysocialperformancemanagementstandardContractingandProcurementPolicy www.sakhalinenergy.com(sectionContractingwithUs)PublicConsultationsandInformationDisclosurePlan(updatedannually) www.sakhalinenergy.com(sectionSocialPerformance–CommunityAwareness)

PublicConsultationsandDisclosureReports www.sakhalinenergy.com(sectionSocialPerformance–CommunityAwareness)

BiodiversityActionPlan www.sakhalinenergy.com(sectionMediaCenter–Library–EnvironmentalDocuments)

StatementonapplicationofISO26000:2010GuidanceonSocialResponsibility

www.sakhalinenergy.com(sectionSocialPerformance–SustainableDevelopmentPrinciples)

SustainableDevelopmentReports www.sakhalinenergy.com(sectionMediaCenter)

PROJECTS AND PROGRAMMES WEBSITES

KorsakovPartnershipCouncilforSustainableDevelopment www.korsakovsovet.ru

SakhalinIndigenousMinorityDevelopmentPlan www.simdp.ru

‘“WhattoDoinEmergencySituations”Programme www.senya-spasatel.ru

TheEnergySocialInitiativesFund www.fondenergy.ru

TheSavetheSalmonTogetherproject www.salmon-friend.ru

PRINTED MATERIALS

ABC-bookoftheUiltalanguage www.sakhalinenergy.com(sectionMediaCenter–Library–Publishededitions)

TheUniversalDeclarationofHumanRightsintheNivkhlanguage

www.simdp.ru(sectionMultimedia–OtherMaterials)TheUniversalDeclarationofHumanRightsintheUiltalanguage

TheUniversalDeclarationofHumanRightsintotheNanailan-guage

Comics www.senya-spasatel.ru

Appendix4.Usefullinks

Appendix3

169168

Appendix4

District Locality Organisation Address

Aniva Troitskoye Rurallibrary,BranchNo.7,Sub-divisionoftheMunicipalInstitutionAnivaMunicipalCentralisedLibrarySystem 13,SovetskayaSt.

Dolinsk

Vzmorye Rurallibrary,BranchNo.6,Sub-divisionoftheMunicipalInstitutionDolinskMunicipalCentralisedLibrarySystem 22,PionerskayaSt.

Sovetskoye Rurallibrary,BranchNo.10,Sub-divisionoftheMunicipalInstitutionDolinskMunicipalCentralisedLibrarySystem 127а,TsentralnayaSt.

Dolinsk DolinskCentralCityLibrary,Sub-divisionoftheMunicipalInstitutionDolinskMunicipalCentralisedLibrarySystem 31,LeninaSt.

Sokol Rurallibrary,BranchNo.5,Sub-divisionoftheMunicipalInstitutionDolinskMunicipalCentralisedLibrarySystem 14,ShirokaySt.

Kholmsk Kholmsk CentralRegionalLibrarynamedafterYuryNikolayev,Sub-divisionoftheMunicipalInstitutionofCultureKholmskCentralisedLibrarySystemofKholmskMunicipality 124,SovetskayaSt.

Makarov

Vostochnoye Rurallibrary,BranchNo.2,Sub-divisionoftheMunicipalInstitutionMakarovMunicipalCentralisedLibrarySystem 8,PrivokzalnayaSt.

Makarov MakarovCentralLibrary,Sub-divisionoftheMunicipalInstitutionMakarovMunicipalCentralisedLibrarySystem 9a,50LetOktyabryaSt.

Novoye Rurallibrary,BranchNo.4,Sub-divisionoftheMunicipalInstitutionMakarovMunicipalCentralisedLibrarySystem 11a-7,TsentralnayaSt.

Poronaysk

Poronaysk PoronayskCentralLibrary,Sub-divisionoftheMunicipalInstitutionofCulturePoro-nayskMunicipalCentralisedLibrarySystem 45,GagarinaSt.

Gastello Rurallibrary,BranchNo.4,Sub-divisionoftheMunicipalInstitutionofCulturePoro-nayskMunicipalCentralisedLibrarySystem 42-2,TsentralnayaSt.

Vostok Rurallibrary,BranchNo.13,Sub-divisionoftheMunicipalInstitutionofCulturePoro-nayskCentralLibrarySystem 10a,GagarinaSt.

Smirnykh

Onor Rurallibrary,BranchNo.3,Sub-divisionoftheMunicipalInstitutionofCultureSmirnykhCentralisedLibrarySystem 21,SovetskayaSt.

Pobedino PobedinoRuralLibrary-Museum,BranchNo.4,Sub-divisionoftheMunicipalInstitutionofCultureSmirnykhCentralisedLibrarySystem 60,TsentralnayaSt.

Smirnykh SmirnykhCentralLibrary,Sub-divisionofMunicipalInstitutionofCultureSmirnykhCentralisedLibrarySystem 12,LeninaSt.

Roschino Rurallibrary,BranchNo.6,Sub-divisionoftheMunicipalInstitutionofCultureSmirnykhCentralisedLibrarySystem 4,KomsomolskayaSt.

Buyukly Rurallibrary,BranchNo.7,Sub-divisionoftheMunicipalInstitutionofCultureSmirnykhCentralisedLibrarySystem 1,KosmonavtovSt.

Tymovsk

Molodezhnoye Rurallibrary,BranchNo.17,Sub-divisionoftheMunicipalInstitutionofCultureTymovskCentralisedLibrarySystem 13,SovetskayaSt.

Tymovskoye CentralDistrictLibrary,Sub-divisionoftheMunicipalInstitutionofCultureTymovskCentralisedLibrarySystem 68a,KirovskayaSt.

Yasnoye Rurallibrary,BranchNo.13,Sub-divisionoftheMunicipalInstitutionofCultureTymovskCentralisedLibrarySystem 2,TitovaSt.

Kirovskoye Rurallibrary,BranchNo.8,Sub-divisionoftheMunicipalInstitutionofCultureTymovskCentralisedLibrarySystem 70,TsentralnayaSt.

Nogliki Nogliki NoglikiDistrictCentralLibrary,Sub-divisionoftheMunicipalInstitutionofCultureNoglikiCentralisedLibrarySystem 5a,PogranichnayaSt.

Korsakov Korsakov KorsakovcityYouthLibrary,BranchNo.13,Sub-divisionoftheMunicipalInstitutionofCultureKorsakovCentralisedLibrarySystem 7,MolodezhnyPer.

Appendix5.CompanyInformationCentresListResettlement:ExperienceofSakhalinEnergy

www.sakhalinenergy.com(sectionMediaCenter–Library–Publishededitions)

HumanRights:ExperienceofSakhalinEnergy

BirdsofSakhalinIsland(photoalbum)

EA.BestPracticesBookVol.1

EA.BestPracticesBook.Vol.2

AmethodicbooktitledLifeSafetyFundamentals www.senya-spasatel.ru

GrayWhales.TheSakhalinStory

www.sakhalinenergy.com(sectionMediaCenter–Library–Publishededitions)

Liquefiednaturalgas(collectionofinterestingfacts)

Photoalbum“theWorldthroughalens”

PoisonousPlantsandFungi

RiversofSakhalinIsland

SakhalinBirds(photoalbum)

Sakhalin-2Encyclopedia

Steller’sSeaEagle

NivkhMythsandFairyTales

REFERENCE MATERIAL AND OTHER

GlobalCompactLEAD www.unglobalcompact.org(sectionHowtoparticipate–GlobalCompactLEAD)

GlobalInitiativeSustainabilityReportingGuidelines www.globalreporting.org

UNGlobalCompact www.unglobalcompact.org

UNGlobalCompactinRussia www.undp.ru/index.php?iso=RU&lid=1

UNGCNetwork,Russia.CorporateSocialResponsibilityPractices www.undp.ru/index.php?iso=RU&lid=1&pid=160

WesternGrayWhaleAdvisoryPanel(WGWAP) www.iucn.org/wgwap/wgwap

170 171

Appendix6.FeedbackForm

1. After reading Report, do you have a better idea and understanding of Sakhalin Energy activities in sustainable development?oYesoMostlyYesoEqualoMostlyNooUnsurePleaseprovidecommentsinsupportofyouranswer

_____________________________________

_____________________________________

_____________________________________

2. What is your impression on information con-tained in this Report?oVeryinterestingoMostlyinterestingoEqualoMostlyuninterestingoGreatlyuninterestingoUnsure

3. How do you rate this Report in terms of credi-bility and unbiassness of information provided?oVeryfavourableoMostlyfavourableoEqualoMostlyunfavourableoVeryunfavourableoUnsure

Pleaseprovidecommentsinsupportofyouranswer

_____________________________________

_____________________________________

_____________________________________

4. How do you rate the Report in terms of how easy it to find required information?oVeryeasyoMostlyeasyoEqualoMostlyuneasyoVeryuneasyoUnsure

Pleaseprovidecommentsinsupportofyouranswer

_____________________________________

_____________________________________

_____________________________________

_____________________________________

DEARREADERS,Youhavejustread2015SakhalinEnergySustainableDevelopmentReport(hereinafter–Report).YouropiniononthisReportisveryimportanttousandwewouldreallyappreciateifyouhelpusimprovethequalityofreportingbyansweringquestionsstatedinthisForm.

5. What Section of the Report was most interest-ing and valuable to you?

1o2o3o4o5o6o7o8o9o10o

Appendiceso

6. What aspects of Sakhalin Energy activity, in your opinion, are to be improved in order to enhance its social responsibility?

_____________________________________

_____________________________________

_____________________________________

7. What other information would you like to have in the next Sakhalin Energy Sustainable Development Reports?

_____________________________________

_____________________________________

_____________________________________

8. Please provide general comments on the Report:

_____________________________________

_____________________________________

_____________________________________

_____________________________________

9. Are you or your organisation interested in participating in dialogues about preparation of 2016 Sustainable Development Report?oYes(pleaseprovideyourcontactinformation)oNo

10. What other organisations in your opinion may be invited to take part in subsequent dialogues about preparation of the Sustainable Development Report?

_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

11. Which group of parties or persons concerned do you belong?oCompany’semployeeoInvestoroShareholderoCustomer(Buyer)oPartner(Contractor)oRepresentativeofauthoritiesoRepresentativeofpublicorganisationoMassmediaoOthergroupofpersonsconcerned(comment)

_____________________________________

_____________________________________

_____________________________________

Please indicate your contact information below:Name:

_____________________________________

_____________________________________

Jobtitle: _____________________________

Telephone: ____________________________

Organisation:

_____________________________________

Fax:_________________________________

Address:

_____________________________________

E-mail:

_____________________________________

What type of communication is preferable?oBymailoE-Mail

PleasereturnthecompletedFormonthe2015SustainableDevelopmentReportto:35 Dzerzhin-skogo Str., Yuzhno-Sakhalinsk, Sakhalin Region, Russian Federation, 693020.YoumayalsosendthisFormbye-mail:[email protected]’sInformationCentre.ListandaddressesofinformationcentresaregiveninAppendix5totheReport.

THANK YOU FOR YOUR FEEDBACK

Appendix7.CertificateofPublicEndorsementRussianUnionofIndustrialistsandEntrepreneurs(RUIE)

CERTIFICATEof Public Assurance of Corporate Non-Financial Report

Sustainable Development Report of Sakhalin Energy Investment Company Ltd.

haspassedpublicassuranceattheRUIECouncilforNon-FinancialReporting

ThedetailedRUIECouncilconclusionregardingpublicendorsementof2015SustainableDevelopmentReportofSakhalinEnergyInvestmentCompanyLtd.

hasbeenprovidedtotheCompany,whichmaypublishitwithoutanyamendmentsanduseitforin-housepurposesaswellasinengagementswithstakeholders.

RegistrationNo.081.01.004.01.15

Signed:RUIEPresidentA.Shokhin,

RussianUnionofIndustrialistsandEntrepreneurs

Moscow,2016

172 173

Appendix8.ConclusionontheReviewofSakhalinEnergy2015SustainableDevelopmentReportbytheRUIECouncilforNon-FinancialReportingforthePurposeofPublicEndorsement

Appendix8

TheNon-FinancialReportingCouncil(theCouncil)oftheRUIE(RussianUnionofIndustrialistsandEntrepreneurs),establishedbytheBureauoftheBoard(Resolutiondated28June2007),hasreviewedthe2015SustainableDevelopmentReport(thereport)attherequestofSakhalinEnergyInvestmentCompanyLtd.(SakhalinEnergy,orthecompany).

ThecompanyaskedtheRUIEtoarrangeforapublicendorse-mentprocessbytheCouncilforNon-FinancialReporting,whichissuesitsopinionontherelevanceandcompletenessofinforma-tionprovidedincompanynon-financialreportonthecontextoftheSocialCharterofRussianBusinessthatpromotesresponsi-blebusinessprinciples.

Duringtheperiodfrom27Februaryto14March2016,theCouncil’smembersreviewedthecompanyreportandpreparedthisConclusionbasedontheCouncil-approvedRulesforPublicEndorsementofNon-FinancialReports.TheCouncilmemberspossesstherequiredcompetenciesinareasofcorporaterespon-sibility,sustainabledevelopmentandnon-financialreporting;theyabidebyethicalrequirementsformakingindependentandobjectiveassessments;andtheyexpresstheirpersonalopinionsasexperts,butnottheopinionsoftheirrespectiveorganisations.

Therelevanceandcompletenessofthereportwereassessedbasedonthefollowingcriteria:

Informationisrelevantsinceitdemonstratesthecompanycom-pliancewithresponsiblebusinesspracticesassetforthintheSocialCharterofRussianBusiness(www.rspp.ru).

Completeinformationmeansthatthecompanyreportprovidesintegratedinformationonallmainaspectsofthecompanyactivities—theunderlyingvaluesandstrategicgoals,managementsystemsandstructures,stakeholderengagementprocesses,majorachievementsandkeyperformanceandeffectivenessindicators.

TheCouncilnotesthatprogresshasbeenmadeinthisreportintermsofinformationdisclosureascomparedtothepreviousone.

Thefactthatthecompanyhasappliedinternationalreportingprinciplesistakenintoaccountaspartofthepublicendorse-mentprocess.However,itisoutsidethescopeofthisconclu-siontoassesstheextentofthecompliancewithinternationalreportingprinciples.

SakhalinEnergybearsallresponsibilityfortheinformationandannouncementsinthereport.Theauthenticityofthefactualdataprovidedinthereportisoutsidethescopeofthepublicendorsementprocess.

ThisConclusionisissuedforSakhalinEnergy.Thecompanymayusethisconclusionforinternalpurposes,aswellasforitsengagementswithstakeholders,providedtheconclusionispublishedasis,withoutanychanges.

Basedonthereport’sreviewandthepublicinformationpub-lishedonthecompanywebsite,andfollowingadiscussionoftheindependentreviewofthereportbytheRUIECouncilforNon-FinancialReporting,theCouncilconfirmsthefollowing.

The 2015 Sustainable Development Report of Sakhalin Energy Investment Company Ltd. contains material information and covers key areas of responsible business practices in accord-ance with the Social Charter of Russian Business. It provides sufficiently detailed information on the company activities in these areas.

The 2015 report addresses the RUIE Council’s recommenda-tions for the 2014 Sakhalin Energy Sustainable Development Report. Information on the sustainable development manage-ment system of the company and the promotion of corporate responsibility principles in its relations with suppliers and contractors has been expanded; more details have been provided regarding the procedure for defining material subjects to be disclosed in the report and the stakeholder engagement in the course of its preparation.

FINAL OPINION

Thecompany2015reportcontainsmaterialinformationregardingthefollowingaspectsofresponsiblebusinesspractices.

Economic Freedom and Responsibility:

Thereportgivesanoverviewofthepoliciesandperformanceofthecompanyinthefieldofsustainabledevelopment,themainfinancial,economicandproductionfiguresforthebusinesssegmentsandthemostimportantproductionassets.ItalsohighlightsthevalueoftheSakhalin-2projectfortheeconomicdevelopmentoftheFarEastre-gionandthewholecountry,includinginformationontheincreaseofRussiancontentintheproject.Itbrieflycharacterisesthedevelop-mentprojectsaimedatoptimisingthebusinessprocesses,improvingtheoperationalexcellenceandsafety.Theprinciplesunderlyingtheactivitiesofthecompany,thebasicelementsandtheorganisationalstructureofthemanagementsystemarede-scribedinthereport.Thereportalsohighlightscompanyimpactmanagementissues:ontheeconomy,societyandtheenvironment.Themodelofcorporategovernanceispresentedinthereport.Thereportcontainsdetailedinformationonriskmanagementandde-scribesanti-corruptionprocedures.ItcoversthecurrentcorporatepoliciesandstandardsgoverningtheresponsiblebusinesspracticesofSakhalinEnergy.

Business Partnership:

Thereportaddressesthecompanysystematicapproachtoengage-mentwithstakeholders.Itidentifieskeystakeholdergroups.Thestrategies,theprinciples,thetoolsofengagement,andthepracticeofbusinesspartnershiparehighlightedinthedocument.Thereportprovidescomprehensivedescriptionofpersonnelmanagementsystem,HRpolicies,incentives,andsocialguaranteesforemploy-ees.ThecompanyindicatesinthereportthatHRmanagementisregardedinthecontextofstrengtheningthecorporateculture,andisbasedonthedevelopedsystemofinternalcommunications.Therelationshipswithsuppliers,towhichthecompanyapplies,asisreported,thebasicrequirementsofinternalcorporatedocumentsforcompliancewiththerulesofbusinessethicsandsocialrespon-sibility,areconsideredinthecontextofresponsibilityinthesupplychain.Thereportdescribesthevendordevelopmentprogrammeimplementedwithaviewtoensurevendors’compliancewiththeserequirements.Itcoversthemeasurestakentoensurethetranspar-encyoftenderproceduresandopencompetition.Thereportcon-tainsinformationontheengagementwithoilandgascustomers,basedonregardfortheirinterests,exchangeofinformation,andsecurityofsupplies.Informationonengagementwithshareholdersandinvestors,inparticularontheissuesofsustainabledevelop-ment,hasalsobeenincludedinthereport.Thereportspecifiesmainareasandformsofcooperationwithgovernmentauthoritiesatvariouslevels,aswellaswithpublicandnon-profitorganisa-

tions.Specialattentionispaidtotheengagementwithlocalcom-munitiesofSakhalinIsland,includinginformationongrievancepro-cedure.ItisstatedthatthecompanyattachesspecialimportancetoengagementwithSakhalinindigenousminoritiesbasedonthedevelopmentplansagreedwiththemandconsistentlyimplemented.Thereportgivesanaccountoftheresultsoftheeffortsaimedatengagementwithstakeholdersaspartofthereportingprocess,aswellasinformsaboutthecompanyresponsetotheproposalsandsuggestionsreceivedduringtheseevents.

Human Rights:

Thereportreflectsthecompanycommitmenttohumanrightsobservance.Itcoversmanagementsysteminthisarea,presentsthemainregulatorydocuments,includingtheHumanRightsPolicy,aswellastheproceduresandeventsensuringtheirimplemen-tation.Itisstatedthatthecompanyhasimplementedthehumanrightsstandardsinallareaswherethereisariskofhumanrightsinfringement;relevantemployeetrainingisconductedonaregularbasis.Theresultsofgrievanceshandlingarehighlightedinthereport.Itisalsoreportedthat,inaccordancewiththeUNrecom-mendations,thecompanyappliestheprincipleof«free,priorandinformedconsent»(FPIC)whenworkingwithSakhalinindigenousminorities.Thereportcontainsinformationonthecompanypartici-pationinthepromotionofhumanrightsissuesinabusinesssettingattheinternationallevelandintheRussianbusinesscommunity.

Environmental Preservation:

Thereportprovidesdetaileddescriptionoftheenvironmentalimpactmanagement,whichisregardedaspartofanintegratedsustainabledevelopmentmanagementsystem.Itcharacterisesthecompanyintegratedhealth,safetyandenvironment(HSE)managementsystemwhichisbasedontheapplicationofinternationalstand-ardsISO14001andOHSAS18001.Itisreportedthatindustrialenvironmentalcontrolisconductedregularlytakingintoaccountthecompanystandardsforairprotection,energymanagement,wateruse,andwastemanagement.Environmentalimpactstatis-tics,aswellasthecompanyeffortstoreducetheadverseeffectsofproductionactivities,includingdataonoilspills,arepresentedinthereport.Itisnotedthatthecompanymaintainsaccountingandcontrolofgreenhousegasemissions.Thereportdisclosesenergyconsumptionfigures,aswellasinformationconfirmingthehighlevelofenergyefficiencyofthecompanyassets.Italsoincludesinformationonbiodiversitypreservation,andtheenviron-mentalmonitoringconductedbythecompany(soil,riverecosys-tems,vegetation,protectedspeciesofanimals,etc.).Thedataonenvironmentalcosts,aswellasontheresultsofindependentassessmentofenvironmentalresponsibilityofSakhalinEnergyarespecifiedinthereport.

174 175

Appendix8

Local Community Development:

ThereportcontainsinformationonsocialandeconomicimpactofSakhalinEnergy,itscontributiontosustainabledevelopmentofthehostedregionandlocalcommunitiesintheareasofproductionactivityintheSakhalinOblast.Thereportgivesanoverviewofthecompanyprinciplesandapproachesinthefieldofsocialinvestment.Specialattentionisgiventothespecificprogrammesimplementedinpartnershipwiththegovernmentauthoritiesandrepresentativesofthecommunities.Theseincludechildsafetyandroadsafetyprogrammes,theTraditionalEconomicActivitiesSupportProgrammeaspartoftheSakhalinIndigenousMinoritiesDevelopmentPlan,theprojectsoftheEn-ergySocialInitiativesFund,theKorsakovSustainableDevelop-mentPartnershipCouncil,andthecorporateprogrammetosup-portcharityandvolunteerinitiativesofthecompanyemployees.Thereportshowsevidenceofthepublicrecognitionthecompanyreceivedforitsactivitiesinthisarea,anditscontributiontothedevelopmentofthehostedregion.

Concluding Statements

Overall,thereportofSakhalinEnergyprovidessufficientinfor-mationonthebusinesspracticeofthecompanywhichisbasedontheprinciplesofcorporatesocialresponsibilityandsustainabledevelopment,presentsdatasupportingtheintegrationoftheseprinciplesintothestrategyandmanagementsystemsatalllevels.Itcontainsdetailedinformationoncorporatepolicies,regulations,standardsandmonitoringproceduresthatensure

theimplementationoftheseprinciplesinthecompanyactivitiesinallareasofcorporatesocialresponsibility.Thereportprovidesaconsiderableamountofdataoneconomic,socialandenviron-mentalperformanceofthecompany,anditsimpactsonsocietyandtheenvironment.Particularattentionispaidtosafetyinallkeyaspects.

ThereportwaspreparedusingtheSustainabilityReportingGuidelines(GRIG4),whichensuresthecontinuityofinformationacrossreportingcycles,aswellascomparabilitywithothercompanies’reports.Evidenceisprovidedthatthematerialsubjectstobeincludedinthereportweredefinedtakingintoaccountstakeholders’opinions.

The2015SustainableDevelopmentReportofSakhalinEnergyInvestmentCompanyLtd.isitsseventhannualreportofthiskind,whichdemonstratescontinuityinthedevelopmentofnon-financialreportingprocessandthecompanyadherencetotransparencyandopennessprinciples.

RecognisingthemeritsoftheSakhalinEnergy2015SustainableDevelopmentReport,theCouncilwouldliketobringtothecom-panyattentionanumberofaspectsrelatedtotheinformationalvalueandcompletenessofdisclosurethatareessentialforthestakeholders.Werecommendthecompanyconsiderthisadviceinsubsequentreportingcycles.Therecommendationsregardingthecompanypreviousnon-financialreportsremainrelevantandshouldalsobeusedinfurtherwork.

Thereportcontainsinformationontheplansforthecomingyearandthemediumterm,whichareformulatedprimarilyindescriptiveform.Itisrecommendedthatinfuturemeasurabletargetsfortheupcomingplanningperiodbeincludedinreporting,whichwillallowthecompanytobetterassesstheresultsachievedandprogressmadetowardsthesetgoals.

Thereportliststheprojectsthatthecompanyisimplementinginordertopromotesustainabledevelopmentoflocalcommu-nities.Itisrecommendedthatthemonitoringconductedbythecompanyandtheevaluationofsuchprojectsimplementationbecoveredingreaterdetailinthefuture.

Itisstatedinthereportthatengagementwithpersonnelisanimportantcomponentofstrengtheninganddevelopmentofthecompanycorporateculture.Itisrecommendedtofurtherexpandinformationonthistopic,supplementthelistofactivitieswithinformationontheirresultsfromthestandpointofsustainabledevelopment.Forexample,itwouldbehelpfuliftheinformationontheavailabilityofatalentpoolwereillustratedwithinforma-tiononhowitisused,andhowexactlythecareerladderworks.

RECOMMENDATIONS

ThecompanyinformsthatCSRtrendsandindicatorsareregu-larlyassessedbyauthorisedpersonnelandseniormanagementwithintheinternalcontrolandauditframework,aswellasbylenders,theirconsultantsandindependentevaluatorsthroughexternalprofessionalassessment.Itisrecommendedthatthefuturenon-financialreportsdiscloseinformationonthekeyresultsofthecompanyCSRtrendsandindicators,andincludecommentsonthedynamicsofchangesintheseindicators.

Althoughthereportcontainsaconsiderableamountofenviron-mentalindicators,itisrecommendedthatinthefuturedynamicsbytheyearbeshownnotonlyfortheabsolute,butalsoforthespecificvaluesoftheenvironmentalperformanceindicatorssoastoensuregreatercompletenessandclarity.

Itshouldbenotedthattheinformationalvaluewouldbehigherifthedatashownindynamicswereaccompaniedwithcomments,givingaclearpictureofthefactorsthatcausedthesignificantchangesofrelevantindicators.Thisapplies,inparticular,toreportdataoncasesofoccupationaldiseases(growth),andonwastegeneration(reduction).Theinclusionofsuchclarificationswillenableabetterunderstandingoftheprocessestakingplaceinthecompany.

ThefocusonthenewversionofG4Guidelinesinthepreparationofthereportisinlinewiththemoderntrendsinthenon-finan-cialreporting.Consistentlyadvancinginthemasteringofthisnewtool,thecompanyshouldpayparticularattentiontotherecommendationsregardingthedisclosureofinformation,inparticular,theformulationofthematerialaspectstakingintoaccounttheGRIrequirements,theindicatorsreflectingtheseaspects,andthecompletenessoftheirdisclosure.

TheRUIENon-FinancialReportingCouncilexpressesaposi-tiveopiniononthereport,and,supportingthecompanyinitsadherencetotheprinciplesofcorporatesocialresponsibilityandnotingtheconsistencyofthereportingprocessdevelop-ment,confirmsthatthe2015SustainableDevelopmentReportofSakhalinEnergyInvestmentCompanyLtd.hasreceivedpublicendorsement.

ChairmanoftheRUIECouncil

DeputyChairmanoftheRUIECouncil

F.T.Prokopov

E.N.Feoktistova

176

Appendix9.AbbreviationsALARP AsLowAsReasonablyPracticable

ANPO AutonomousNon-ProfitOrganisation

APR Asian-Pacificregion

RS Roadsafety

BAP BiodiversityActionPlan

BoD BoardofDirectors

BS2 Boosterstation2

CED CommitteeofExecutiveDirectors

CER CommitteeforEmergencyResponse

CSR Corporatesocialresponsibility

ESHIA Environmental,SocialandHealthImpactAssessment

FEC Fuelandenergycomplex

GRI GlobalReportingInitiativeforSustainableDevelopment

HSE Health,safetyandenvironment

HSEandSP Health,safety,environmentandsocialperformance

IC Informationcentre

IEC&LM IndustrialEnvironmentalControlandLocalMonitoringSystem

IFC InternationalFinanceCorporation

IFRS InternationalFinancialReportingStandards

IMO InternationalMaritimeOrganisation

ISO InternationalOrganisationforStandardisation

ISO InternationalOrganisationforStandardisation

IUCN InternationalUnitforConservationofNature

IVMS In-Vehiclemonitoringsystem

LNG Liquefiednaturalgas

LUN-A Lunskoye-Aplatform

MChS MinistryofEmergencySituations/Emercom

MHMS MinimumHealthManagementStandards

MNR MinistryofNaturalResources

MPC Maximumpermissibleconcentrations

MPE Maximumpermissibleemissions

NPO Non-profitorganisation

OET Oilexportterminal

OPF Onshoreprocessingfacility

OSR Oilspillresponse

PA-A Molikpaqplatform(Piltun-Astokhskoye-A)

PA-B Piltun-Astokhskoye-Bplatform

PERC PacificEnvironmentandResourcesCenter

PMD Pipelinemaintenancedepot

PSA ProductionSharingAgreement

RAIPON RussianAssociationofIndigenousPeoplesoftheNorth,SiberiaandtheFarEastoftheRussianFederation

RAS RussianAcademyofSciences

RTA Roadtrafficaccident

RUIE RussianUnionofIndustrialistsandEntrepreneurs

SIM Sakhalinindigenousminorities

TEOC TEO(FeasibilityStudy)ofConstruction

TLU Tankerloadingunit

UN UnitedNations

UNDP UnitedNationsDevelopmentProgramme

UNGC UnitedNationsGlobalCompact

WGWAP WesternGrayWhaleAdvisoryPanel

WWF WorldWildlifeFund

Sakhalin Energy Investment Company Ltd. Sustainable … · 2018. 5. 23. · Sustainable Development...

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Transcript of Sakhalin Energy Investment Company Ltd. Sustainable … · 2018. 5. 23. · Sustainable Development...