Oil/gas industry knows it has a crisis of image. At last, we’re really doing something about it

By Katie Mazerov, contributing editor

In a world where perception is often reality, an industry that is perceived, albeit unfairly, as dirty, dangerous and greedy can suffer a crisis of image that threatens its foundation and future. But getting the truth out can be a challenge.

In the drilling industry in particular, efforts have accelerated to communicate the advances in technology and greater focus on HSE that are transforming the way contractors do business.

“The industry has had a black eye regarding safety and environmental stewardship, and while it is still a difficult and dangerous business, we’re doing a lot of things right,” said John Lindsay, executive vice president of domestic and international operations for Helmerich & Payne International Drilling Co and 2008 IADC chairman.

Maersk Drilling has put steps in place to duplicate its safety record with an environmental one as well. “Safety has always been a top priority in our company and has become important for the entire industry, including the contractors, rig owners and operators,” said Claus Hemmingsen, CEO of Maersk Drilling and partner at A.P. Moller – Maersk. Mr Hemmingsen serves as 2008 IADC vice chairman.

“For more than 20 years, we have been building some of the most superior rigs in the industry, both in terms of safety and from an environmental standpoint, but we’ve never put much effort into telling people about that, except those we work for directly,” he said.

“I certainly expect to see that changing within the industry as a whole to work together to benchmark our performance and focus on real efforts to improve,” said Mr Hemmingsen, who is preparing for his ’09 IADC chairmanship. Earlier this year, IADC established the Environmental Policy Advisory Panel (EPAP) to formally address the industry’s environmental activities and image.

Noble Drilling has created a system-wide culture of HSE responsibility for its 6,000 employees worldwide.

“I think the industry has a worldwide image problem, operators and contractors alike, and that’s a pity,” said Ronald Hoope, Noble commercial director, based in The Netherlands. “We are known to be a business that is not environmentally friendly, but that is changing as we are implementing stringent procedures and policies and seeing more technicians and well-educated people coming to the offshore industry. Offshore is not visible, so the industry needs to do a better job of promoting itself as being safe and environmentally responsible.”

How did we get here?

To understand how the industry reached this crossroads, it is important to understand where it has been, and to take a reality check on public perceptions.

In the case of the US oil and gas industry, that reality check came three years ago with a major shift in external audience engagement. Industry leaders recognized it was time to educate the public and policymakers in a big way about a little-known truth: Oil and gas drilling is safe, clean and technologically advanced, and earnings are being reinvested in exploration that costs billions of dollars.

“What was needed was a thorough understanding of what the industry is all about,” said API president and CEO Red Cavaney.

After measuring consumer and government attitudes through research, the industry embarked on what Mr Cavaney calls “the battle for the public mind”: a focused, collaborative, multi-faceted effort culminating in one mission – educational advocacy.

“For several decades, companies in the industry appeared to view their advertising as more focused on product and brand, and not much in institutional advertising or education,” Mr Cavaney explained.

But events such as the 1969 oil spill off the coast of Santa Barbara in California prompted environmental concerns among the general public, which some believe led to the ban on offshore drilling.

“When impacts on public policy development began to shift outside the domain of state legislatures and Congress, to where the public had a much stronger voice in influencing policymakers and elected officials, the industry was slow to change with the times,” Mr Cavaney continued. “As a result, for several decades, the stronger voices being heard were opponents of the industry. So you have at least one or two generations of people who have grown up hearing principally the negative side of the oil and gas industry.”

The industry began to address the problem in the late 1990s, but efforts were limited because not everyone believed there was a problem. It was also questioned whether audience engagement, advertising and education could really change minds, he explained.

The “game changer” came in the wake of the 2005 hurricanes. “After Katrina and Rita, the industry performed in a Herculean manner, unlike anything that had occurred before in terms of minimizing lost lives, getting people to rally and respond, bringing refineries back online, getting offshore back producing and pipelines to go back online,” Mr Cavaney said. “And when all was said and done, virtually nobody went without the natural gas or other fuel products they needed.”

Much to the industry’s surprise, instead of receiving recognition for a job well done, the opposite happened. Public outcry over the high price of gasoline sparked hearings in Washington, D.C., where oil company executives were criticized for violating laws and being irresponsible.
“That served as an absolute wake-up call and underscored the understanding throughout the industry that we did not have an option on whether to engage external audiences or not,” Mr Cavaney said. “We needed to do it.”

What resulted is a broad-based effort that includes national advertising promoting the industry’s clean technologies, outreach programs, increased visibility in local communities and specific audience engagement. Technology is a key element of the message.

“We found that the more people understand the extent to which technology drives our business, their appreciation and understanding of our industry as being important to them in the future is increased,” Mr Cavaney said. API began mobilizing “tech tours” featuring interactive displays to college campuses and state capitals.

“What we’ve seen happen is exactly what we hoped,” he said. “When people begin to understand some of the basics regarding the industry and its role in providing energy, common sense prevails over a lot of opposition.”

One example of that shift came late this year when the federal government lifted the 26-year-old ban on US offshore drilling. Mr Cavaney noted that as the price of gasoline moved toward $4 per gallon, people’s attitudes about offshore drilling shifted from three in 10 in favor to seven in 10, or better, in favor.

The collaborative nature of the educational advocacy effort is critical. No one element is considered to be more successful than the others. “You use different approaches for different audiences and different objectives,” Mr Cavaney explained. “Advertising is good for conveying a simple message. If you’re trying to get a more technical message across … then print medium or personal contact/direct audience engagement is a much more powerful way to do it. Radio is good for repetition and reinforcement. They are all important.”

Education efforts also are being ramped up by nonprofit agencies providing materials for schools and museums, and through audience engagement with trade groups.

“We have been dismayed at how ignorant and uninformed people, including elected officials from oil-producing states, are about our industry,” said Brian Petty, IADC senior vice president – government affairs. “We have gone into classrooms, and kids’ impressions are of an industry that is dirty and dangerous, kills fish and is bad for the environment.”

Offshore drilling is a key example of why the industry has a responsibility to “step out” in its efforts to inform the public, Mr Petty pointed out. “Oil and natural gas royalties is the second-largest source of revenue for the US government, after income taxes.”

The National Ocean Industries Association (NOIA) represents the offshore energy industry and works closely with associations that represent key end users of energy, like the American Farm Bureau, the National Association of Manufacturers and the American Chemistry Council. “Our message is that the oil and gas industry, particularly offshore, is more advanced than most people think it is,” said Michael Kearns, NOIA director of external affairs.

“The technology today is cutting edge and rivals the space program in terms of the places we’re able to operate,” he continued. “Add to that an enviable safety record. Also, we talk about the fact that this is a vital energy source for the nation.”

An example of where NOIA has made an impact is with the Farm Bureau. “Farmers across the country are finding their fertilizer costs are going up because natural gas is a necessary prerequisite in making fertilizer. So their energy costs are going through the roof,” Mr Kearns said. “So, when inland farmers realize that the resources beneath the Outer Continental Shelf belong to the United States as a whole, they want to know why they are being prevented by coastal states from having access to them.”

Mr Kearns emphasized that NOIA does not advocate one form of energy over the other. “The fact is, as a nation and as a world, we need all the energy resources we can find,” he said. “And it doesn’t make sense for us to simply cut out consideration of offshore oil and gas, especially when the environmental record is so much better than the general public thinks it is.”

Going on the offensive

Oil companies – the “face” of the industry – also have embarked on television advertising campaigns to dispel the outdated perceptions. Some ads acknowledge the need for developing alternative energies such as solar, wind and biofuels, a goal supported by API and other groups that are calling for a balanced energy policy.

“A study done last year for the Department of Energy, ‘Facing the Hard Truths,’ concludes – and this is backed by other studies – that for our economy to continue to enjoy the economic growth and improved standard of living we’ve had over the last 10 to 20 years, we’re going to need all the energy we can produce in an environmentally sensitive way here in the United States,” Mr Cavaney noted. “We are supporters of alternative energy, all economically viable forms of it.”

ExxonMobil has put education at the center of a program that includes national advertising, an employee speaking program to generate awareness about how the company is meeting energy challenges, media relations and corporate citizenship.

“There has never been wider spread interest in energy,” said spokesman Alan Jeffers. “People have an incredible appetite for information about the industry, and it’s important for us to provide that directly.”

A TV campaign launched in June focuses on commitment to science and technology that is environmentally clean. “The advertising is not promotional, but designed to increase awareness and energy literacy,” Mr Jeffers said. “We need people to understand that the investments it takes to develop new supplies of energy are massive.

“We employ 14,000 scientists and engineers throughout the world,” he continued, noting that ExxonMobil was the founding sponsor of the National Math and Science Initiative in the United States. “We’re a high-tech industry that is challenged to tap new energy supplies and at the same time reduce greenhouse gas emissions.”

The speaking program encourages people to visit the company’s website, where they can learn about corporate citizenship efforts and the ExxonMobil Foundation, which in 2007, together with employees, retirees and affiliates, donated nearly $207 million to HSE and educational causes worldwide. In 2005, the company launched the Educating Women and Girls Initiative in developing countries to improve health conditions, reduce poverty and slow the spread of HIV/AIDS. More than $12 million has been invested in the program in Africa.

At Chevron, the supermajor is delivering an energy efficiency and conservation message through its “I Will” campaign.

“Our intent is to raise awareness of the importance of energy efficiency and conservation and to lead the discussion about what we can do as individuals every day to increase energy savings,” said representative Kimberly Beman. The campaign reflects a culture of conservation the company has embraced since 1992, she said. “As a company, we are 27% more efficient that we were in 1992.”

Chevron’s website features interactive tools like the energy generator, which “demonstrates how simple, individual actions can yield large energy savings,” Ms Beman explained. “For example, if 1,000 people lower their thermostat in the winter by one degree in an average US residence, they will save enough energy to power a hospital for 10 days.”

Better rigs, better technologies

For the drilling and service industries, new technology has enabled them to tap previously unattainable resources in an environmentally friendly way. Many companies are increasing their visibility as good corporate citizens as well.

“The industry has come a long, long way since some of the environmental incidents of the 1960s, ’70s and ’80s,” said Mr Lindsay at H&P. He noted that onshore spills have been greatly reduced, and offshore spills have been all but eliminated.

The FlexRig, an AC-drive design equipped with state-of-the-art technology, has significantly impacted H&P’s drilling operations in Colorado’s Piceance Basin, in the Rocky Mountains, and in heavily populated areas of the Barnett Shale by reducing rig footprint, noise, traffic and improving efficiency.

“In 2005, we joined with Williams Companies to look at ways we could improve our environmental footprint and change the way wells were being drilled in the Piceance Basin,” Mr Lindsay said. Conventional rigs were drilling three to five wells on a pad and being moved manually from well to well, which required bringing in trucks and bulldozers.

“Working with Williams, we designed a rig that took offshore technology to an onshore environment,” he continued. “The FlexRig could drill 22 wells on a single, 1.5-acre location. Once on a new location, we didn’t need outside trucking or bulldozer companies to move the rig on the remaining 20-plus wells. It was all done with internal hydraulics on the rig.”

The design has allowed the company to drill in much shorter periods of time, thereby lessening impact on wildlife and local residents.

“This was a game-changer,” Mr Lindsay said. “It really made a difference in terms of reducing noise, truck traffic and building fewer locations. The new rigs also have the latest technology diesel engines, which reduce emissions, improve fuel efficiency and burn less fuel.

“And on the safety side, we’ve significantly cut the number of incidents because the rig design is much safer than rigs designed 30 years ago,” he added. “As drilling contractors retool their fleets, they are seizing an opportunity to utilize safety-by-design that heretofore has not been seen.”
The FlexRigs also enable H&P to simultaneously produce gas and drill. “They are able to frac wells in batches, which offer some attractive benefits,” Mr Lindsay explained. “Advantages include fewer frac trucks going up and down the road; re-using and thereby conserving water; and limiting the frac footprint. In this case, everyone wins.”

In the Barnett Shale, the FlexRig has been employed in populated areas, next to schools and residential areas where children play and where truck traffic and noise are big concerns. “Drilling is a 24/7 activity,” Mr Lindsay said. “People want rigs that are quiet. One of the many advantages of AC-drive technology is the elimination of the screeching brake heard with a conventional rig that echoes for miles. The AC rigs drill faster so, again, we’re able to develop the fields more quickly, and get the drilling rigs out of the public eye more quickly.”

The FlexRig also has been instrumental to fostering good community relations. “Through our work with Devon Energy, Encana and other E&P companies in the Barnett Shale, we’ve been able to use the FlexRig as recognition that we are doing things differently,” he said. “We also focus our people’s efforts on not littering in the area, driving cautiously and to treat these areas like it’s their own. The bottom line is that this is the right thing to do.”

At Maersk, Mr Hemmingsen points to his company as an example of action he would like to see the industry take. In 2007, the company put an environmental reporting system in place and began collecting data on emissions and fuel consumption to establish a baseline for improvement. “Now that we have more than a year of data, we are starting to set targets for our performance,” he said.

Another important issue is making the industry an attractive one for people to join. “I think we have a huge challenge in attracting people to the industry in general due to growth of the industry and the demographics of the current workforce,” Mr Hemmingsen pointed out. “We need to make an effort to communicate that the drilling business is a good career platform and holds good potential and a good record.”

Maersk Drilling also has been visible in communities where the company has a long-term presence.

“For example, we have been in Norway for close to 15 years and have been engaged with the local communities both on an advisory level and in the community at-large,” Mr Hemmingsen said. “In Venezuela, where we have been operating for 20 years or so, we have huge programs where we work for the betterment of local communities, assisting with education efforts and local projects.”

At Noble Drilling, “HSE is embedded in our culture and part of our daily operations in everything we do,” Mr Hoope noted. “Each year we provide leadership courses to all our crews worldwide, in effort to mold responsible behavior and have everyone in the company moving in the same direction.” The company considers the $2 million it spends on the course to be an investment.

“We also sponsor Noble Safety Day, where we invite our third-party contractors, which are related to 25% of our incidents, to come and learn about how Noble works, including our policies, procedures and protective equipment,” he said. “Our incident records are already low, but we want to reduce incidents even further, to zero.”

Noble also has daily and weekly safety-related conference calls, so if an incident occurs on a rig, the company can implement measures if needed.
“We promote waste reduction and recycling of waste in our efforts to be environmentally focused and not leave any footprint behind,” Mr Hoope said. “We are very aggressive in cleaning rainwater. Any drip of oil from a cable is cleaned.”

Noble also produces an annual Sustainability Report and is listed on the Dow Jones Sustainability Index. “This shows that we are very transparent because we publish our problems and our mistakes,” Mr Hoope noted.

The company also is visible in the communities where it operates. “We support charities and work as much as we can in communities to hire local people, vendors and contractors, such as rig builders,” he pointed out. “Our next step is to go to the local schools and recruit employees who are educated and can provide the technical expertise the industry needs,” he said. “Education is better for safety.”

Giving back

Halliburton’s corporate citizenship efforts include volunteer efforts worldwide and a corporate giving program that in 2007 raised nearly $353 million for education, health and social services organizations, the environment and arts. Employees volunteered more than 30,000 hours in 2007 in communities in Russia, India, Egypt, Saudi Arabia, Brazil, Venezuela, Nigeria and Norway.

“At Halliburton, we believe in giving back to the communities where we live and work – it’s as much a part of our culture as providing exceptional service to the customer,” said Diana Gabriel, senior manager, communications for the company. “We support a wide variety of charitable organizations around the world, with an emphasis on those that are most important to our employees, customers and communities.”

Donating blood, raising money for medical research, tutoring and mentoring students, delivering meals to the elderly, planting trees and helping with environmental cleanup are among ways employees can volunteer, Ms Gabriel said. Another program, Giving Choices, allows employees to donate to the charity of their choice.

“Another way we contribute to our local communities is through Halliburton Volunteer Councils, which are created by local employees who establish their own bylaws, elect officers and decide which local organizations to support,” she said. “All around the world, you’ll find Halliburton employees building playgrounds, feeding the hungry, raising money to fight diseases and caring for those who need our help the most.” The councils partner with local charities to focus on the immediate needs of the community.

“Being a considerate and helpful neighbor has been fundamental to Halliburton’s culture from the earliest days of the company,” Ms Gabriel said. “We believe that improving the quality of life in the communities where we operate is good business. It’s the right thing to do.”