Corporate Responsibility Report 2007

Our People

BG Group’s people are central to our success. In a complex global business that needs to excel in innovation, project execution, relationships with governments, businesses and communities and in environmental stewardship, we depend on the expertise, integrity and creativity of our teams.

We encourage all employees worldwide to develop relevant skills and advance their careers. We value diversity; we recruit, promote and reward employees on merit and without discrimination. We are committed to maintaining a healthy, safe and secure work environment.

Our workforce represents more than 65 different nationalities, and the large majority of our staff work outside the UK.

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Respect for the individual and his or her contribution to our business is at the heart of BG Group’s approach to employee relations. Our Group-wide Human Resources Policy, Equality and Diversity Statement and Harassment Policy articulate our commitment to a work environment free from discrimination and harassment of any kind.

Respect begins with listening and responding to our people. In 2006, we reported the top-line results of our first-ever Group-wide Employee Survey, and in 2007 we focused on addressing the key issues that this brought to light.

For example, we acted on concerns raised about workplace stress by introducing the Pressure and Stress Management Standard, requiring every BG Group location to train managers and provide adequate resources to enable managers to implement the Standard. For more information on this Standard, please see below.

Although overall the Group scored well with employees on communications, our South America region was disappointed with its performance in this area and responded by inviting employees to join conversation groups where they could make suggestions and ask questions. Bringing together staff from all levels of the business, the conversation groups led to new initiatives including regular intranet and email updates, a regional newsletter and postings on notice boards.

A further Group-wide survey is planned for the first half of 2008, and we aim to improve the response rate for this survey compared to our 2006 survey. Our 2008 target response rate is 60%.

Attracting and retaining talented individuals also involves respect for personal lives. In 2007, 93 BG Group employees in the UK had formal flexible working arrangements, including part time working, annualised hours and job sharing. Flexible working patterns allow our people to balance their working lives with other responsibilities, interests and aspirations. We also believe that these arrangements contribute to employee commitment and motivation, and support the retention of skilled and experienced staff.

BG Group’s people represent a very diverse cross-section of cultures and backgrounds. At the same time, we have been more successful with diversity in some areas than in others, as the following statistics suggest:

• our workforce represents more than 65 different nationalities;
• 48% of our asset management teams are on local terms;
• within our core management team, 16% are nationals other than UK/US, and 8% are women;
• 22% of our global workforce is covered by trade union agreements, and we are committed to working effectively with trade unions; and
• our global workforce gender split in 2007 was 75% male, 25% female (2006: 77% male, 23% female).

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A new remuneration framework

To increase our ability to attract, retain and motivate employees throughout the world, during 2007 we conducted the first Group-wide remuneration review since we were de-merged in 2000. We developed and refined the conclusions from this review through wide-ranging consultations including discussions with internal focus groups and line managers as well as the Group Executive.

The remuneration review produced two key recommendations: a clearer link between individual performance and reward, and tailoring of compensation to local markets. In order to implement the recommendation, in 2008 we will launch a new remuneration framework, which will include a ‘Performance Scorecard’ for each employee, setting out his or her expected contribution to the business plan and a personal action plan. A proportion of the existing annual discretionary bonus payments will be linked to HSSE performance, following the example set with our Chief Executive’s bonus for 2006 (paid in 2007), of which 15% related directly to HSE (and will relate to HSSE going forward).^(a)

Overall employee turnover for 2007 was 9%.

(a)

Throughout this Report, we use the terms HSE (Health, Safety and Environment) and HSSE (Health, Safety, Security and Environment). The difference in use always relates to Security

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BG Group is a growing company which provides exceptional career opportunities. In 2007, 646 promotions, progressions or transfers took place and 582 employees were on international assignments.

BG Group is committed to the development of local staff in our countries of operation. During 2007, the Board and Group Executive approved a localisation framework that follows a McKinsey model based on a survey of more than 20 international companies and that we believe to be best practice. The objective is, “The development of managers at each of our locations who are able to provide the local knowledge, stability and experience to sustain performance, achieve our growth ambitions and provide succession options for local and international operations.”

The framework establishes a localisation plan owned by each asset and includes a number of initiatives aimed at increasing the number of employees on local terms in each asset and, in particular, within the management team. The case study to the left gives an example of how we are pursuing this aim.

Localisation of staff is a challenging area, in many cases limited by the fact that ours is a very complex industry, and many countries of operation are only recently beginning to develop the full breadth of skills required within local employment markets. Whilst the Group is making good progress in many assets, we have more work to do. We will continue to report on progress in this area.

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Case study: Localisation

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We provide all employees with the opportunity to have a wide-ranging discussion about their development during the annual personal career development review process (ADR). In response to concerns expressed in the Employee Survey, during 2007 we published ‘career ladders’ that explicitly state the different stages of progression within each level of a specific profession, together with the necessary competencies to perform each role effectively as well as requirements for promotion. Each individual’s position on this career ladder, and paths for promotion, can be discussed at the ADR.

During 2007, we launched the Learning and Development Core Curriculum, consisting of training courses arranged around the themes of ‘Managing myself’, ‘Managing others’ and ‘Business Skills’ – all aimed at helping employees develop their potential, learn more about the business and understand management responsibilities. Details of all courses are available through the BG intranet, and employees can apply with their managers’ support. During 2007, 118 courses were attended by a total of 984 delegates in 12 countries. Whilst the core content was developed centrally, assets are encouraged to adapt material to meet their local requirements.

In 2007, 41 new graduates were employed across four different countries. Our plans for 2008 are to recruit at least 60 graduates while further enhancing our development and placement schemes.

In the USA, the shipping resources development programme addressed a shortage of skilled LNG mariners through the creation of the BG LNG Shipping Management Development Programme in partnership with Ceres, BG Group’s vessel management contractor. In addition to the six graduates hired in 2006, two graduates were employed through this programme in 2007 and have spent time sailing on the Group’s vessels. A further scholarship programme has been introduced with the YES College Preparatory School to assist students who wish to seek careers in the maritime industry.

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Our core safety goal is simple, communicated across every part of our business and commonly understood. It is to ensure that there are zero injuries in all of our operations. Our performance has improved steadily against the standard industry safety benchmarks:

• Lost Time Injury Frequency (LTIF) measures the number of injuries (that result in the injured person being unfit for work on any day following the injury), including fatalities occuring per million hours worked. Measured by LTIF, BG Group’s safety performance has improved from 0.55 in 2004 to 0.26 in 2007, which compares well to the International Association of Oil and Gas Producers (OGP) comparator figure for E&P of 0.99 for 2006. Meanwhile, we have reduced Recordable Injuries – which includes fatalities, lost time injuries, medical treatment cases and restricted workday cases – from 285 in 2004 to 128 in 2007; and
• Total Recordable Case Frequency (TRCF) measures the number of recordable safety incidents which occur per million hours worked. Measured by TRCF, BG Group’s safety performance has improved from 3.49 in 2004 to 1.56 in 2007, compared to the OGP average figure (for E&P) of 2.92 for 2006. However, we deeply regret that there have been two contractor fatalities in 2007, and a further contractor fatality in early 2008.

In Kazakhstan, a joint venture company vehicle collided with a third party caravan being towed by a tractor on a public highway. The driver, a contractor working for the Karachaganak Petroleum Operating B.V. joint venture, sustained fatal injuries. The driver had received defensive driving training and the road and weather conditions were good. The investigation, supported by forensic crash specialists, concluded the collision was caused by loss of control of the vehicle. There was no evidence that the vehicle was faulty. In response to lessons learned from the investigation, the venture has strengthened its driver training and control of vehicle and journey management procedures.

In South Korea, a welder working on the construction of one of the Group’s new LNG ships in a contractor shipyard died when working on a pipe weld as a result of asphyxiation caused by argon gas in a vertical pipeline on the deck. A full investigation of immediate and system causes has been carried out. This investigation is being followed up by BG Group and high-level management in the shipyard. Whilst this is not a reportable or recordable fatality for the Group as the incident was outside BG Group’s control, we have been concerned with the circumstances surrounding the fatality and have worked to capture any lessons learned for both the contractor and BG Group.

In February 2008, a Gujarat Gas Company Limited pipelaying contractor died following an incident during street works. This incident has been investigated to identify any lessons learned.

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STEP UP

STEP UP, a Group-wide programme to drive an improvement in our safety culture and performance, was launched by our Chief Executive in October 2005 following a major review of the way the Group manages safety. In 2007, the STEP UP programme was enhanced with a new HSSE Management System including Standards and Guidelines on best practice.

Through STEP UP, employees and long-term contractors are trained in safety intervention skills, which raises their safety awareness and gives them the skills with which to carry out task risk assessments. These skills are reinforced through regular safety updates communicated via the intranet and during staff meetings. This training, combined with the Group’s Behaviour-Based Safety (BBS) observations programme, has contributed to increased safety observations through hazard and near-miss reporting, allowing us to take preventive actions before further incidents can occur.

In 2007, an independent third-party assessment was carried out by DuPont Safety Resources to review BG Group’s progress in delivering the improvement in safety culture and performance required to achieve a goal of zero injuries. The review concluded, “Over the past two years BG Group has invested significantly in improving safety management and performance across their operations. The STEP UP programme is at the forefront of this effort and is a well recognised ‘initiative brand’, visibly championed from the top of the organisation. The new HSE Policy, the much-improved Behaviour-Based Safety (BBS) programmes, BG Life Savers and BG Safety Behaviours amongst others, are all high quality outputs of the programme.” BG Group is currently addressing the report’s recommendation to accelerate the rollout of some of the safety improvement tools developed as part of STEP UP.

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A focus on safety behaviours

Central to the strategy to improve safety performance at BG Group is the emphasis on employee behaviours, identified as the trigger for up to 95% of all workplace incidents. In 2007, an HSSE Accountability Framework was developed with pilot programmes in several assets. This Framework aims to ensure that safety is foremost in our employees’ and contractors’ thinking at all times and in all environments – on site, travelling, in the field, in the office or at home. This model complements and builds on the Group’s BBS programme, which similarly monitors safety behaviours in a manner aimed at reinforcing safe behaviours and eliminating the root causes of unsafe behaviours.

This same emphasis on behaviours led us to introduce the ‘Life Savers into Action’ programme in 2007. BG Life Savers are simple, mandatory rules which govern the most hazardous activities in our business. New BG Standards gave additional instructions on implementation and a Life Savers booklet was translated into multiple languages and distributed to staff. We have also undertaken initiatives to develop additional Life Savers reflecting specific factors in the Group’s countries of operations, for example focusing on helicopter travel, boat landing transfers, working above water and road traffic accident reduction. Life Savers are also included in the ongoing HSSE induction modules, reinforced through ‘Touch Base’ daily meetings and emphasised to contractors through group discussions.

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Case study: Reducing road traffic incidents

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Community safety programmes

During the year, a number of our assets extended safety promotion to the wider community. In Kazakhstan, a campaign aimed at both children and drivers has sought to improve road safety through better infrastructure and education. Crossings, speed-bumps and road signs have been installed outside schools, and an education campaign has used television and radio commercials (in both Kazakh and Russian), booklets and billboards to increase road safety awareness. Volunteers have spoken with children and their parents about road safety at schools and public events, earning positive feedback from transport police and schools.

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Enhanced HSSE audit

During the year we revised the Group HSSE audit process, introducing a new Framework supported by tools, protocols and training as well as a more defined team structure, standard reporting formats and fixed timelines. In addition, actions are tracked to completion and key findings reported to the HSSE Committee, providing assurance that key risks in our business are identified and appropriate controls effectively implemented.

We carried out a Safety Plan Implementation Review of 28 active projects to identify best practice in the preparation and delivery of project safety plans. The projects identified as implementing safety measures to an excellent standard included the Central Block Project in Trinidad and Tobago and the Condensate Pipeline Project in Tunisia. The examples of best practice identified in the review were incorporated into amended Standards and Guidelines for future projects.

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Health

As a global organisation operating in countries at varying stages of development, BG Group faces challenges in protecting the health and wellbeing of our workforce as well as those who come into contact with our activities. We seek to meet these challenges by identifying and managing specific risks and providing Occupational Health (OH) support to our employees.

In 2007, highlights of our efforts towards a healthier workforce included:

• the launch of the Pressure and Stress Management Standard. We formed a multidisciplinary steering group and engaged an external training provider to implement training for managers. In 2007, we held pilot training programmes at our Group headquarters, with further pilots to follow before rollout across the Group later in 2008;
• meetings with industry colleagues and experts to monitor the potential of an avian flu pandemic. A corporate plan to deal with a pandemic has been in place since 2006 and anti-viral medication is stocked at all assets, where permitted. All BG Group assets have their own contingency plans that take account of local considerations, these have been updated in 2007 although a small number still require further improvement;
• the extension of our Wellness Programme in Nigeria and India (previously focused on educating the workforce about the nature of HIV and means of prevention) to health campaigns including ‘Well Woman Week’, personal fitness and healthy eating. There is no evidence of a significant HIV problem in the BG Group workforce, and we have not entered any additional high risk countries in 2007. The Group does not and will not discriminate on the basis of HIV status, does not undertake pre-employment testing for HIV antibody status, and offers support to any employee who informs the Company that he or she is HIV-positive;
• increased engagement by assets with the Group OH team in response to Group concerns regarding the consistency of our OH provision across different assets. In BG Algeria, early consideration of occupational health issues has ensured that quality health provision is part of the asset structure and has allowed early review of emergency medical provision as the project moves from seismic data acquisition to drilling; and
• improved collection and reporting of data on occupational illness. The Group has decided not to set targets until we have full confidence in their value and relevance. This approach reflects our recognition that demanding adherence to targets may discourage reporting, providing an inaccurate picture and preventing appropriate intervention. Our discussions with colleagues in industry groups (such as the Energy Institute Health Technical Committee and the International Association of Oil and Gas Producers’ Health Committee) have revealed that under-reporting of occupational illness statistics, especially those involving contractors, is an industry-wide problem.

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Case study: BG Bolivia

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Safety

Due to the nature of our business and the often difficult environments in which it is conducted, BG Group faces significant challenges in fulfilling its commitment to a safe working environment for its workforce and meeting all applicable legislation in this area.

Accordingly, the Group pursues a rigorous risk management approach – a continuous process of identifying, analysing, mitigating, monitoring and communicating uncertainties – to protect workers in all environments, from an office to an onshore LNG facility, an offshore oil and gas platform or a ship at sea.

All operating assets are required to develop an Operational Safety Case (OSC) – a document that demonstrates to our staff and other stakeholders that the risks involved in operation are as low as reasonably practicable. In 2007, BG Group completed a thorough review of asset OSCs, which revealed a variation in quality between assets. To help remedy this, Group HSSE provided assistance to improve these safety cases, and a Group Standard for Safety Cases has been issued. We will continue to report on the status of OSCs in future years.

During the year BG Group also developed a new Standard for Management of Change, which is especially critical to safety systems. Management of Change involves the identification, analysis and appropriate management of equipment, systems, critical documentation or organisational aspects affected by a change to facilities, processes or in personnel.

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Asset Integrity

Asset Integrity is defined by the UK’s Health and Safety Executive as, “The ability of (an) asset to perform its required function effectively and efficiently whilst safeguarding life and the environment.” Whilst Asset Integrity has long been a central concern of BG Group, this issue gained renewed public focus with the publication in January 2007 of the Baker Report examining the implications of the 2005 BP Texas City refinery incident in the USA. This report included a broad range of specific recommendations on Asset Integrity of relevance to all industrial plant operators worldwide.

BG Group began a programme of detailed Asset Integrity assessments in 2004 and has since developed a series of leading indicators. The Group began reporting on activity against these indicators on a quarterly basis in 2007, with the aim of recognising and addressing potential Asset Integrity issues at the very earliest stages. The indicators vary according to the type of asset in question. Around ten are reported centrally, including maintenance backlogs, the number of unclosed modifications and number of alarms received by control rooms. Reports to date have reflected improvements across almost all indicators.

After the publication of the Baker Report, the Group established its own panel to examine the key recommendations of relevance to our own facilities and processes. That analysis led to further enhancements to our existing Asset Integrity systems, such as ensuring temporary accommodation is not situated close to process units.

Two major Baker Report recommendations concern the importance of an organisation’s leadership setting the ‘tone from the top’ in underlining the importance of safety and Asset Integrity. Those conclusions supported BG Group’s own established approach, under which all senior executives are required to demonstrate personal commitment to ensuring a safe operating environment. This includes an annual STEP UP webcast by the Chief Executive, which demonstrates to all employees worldwide the extent to which the most senior executive in the Group is personally focused on these most critical of issues.

The second recommendation consisted of establishing clear Board-level oversight of Asset Integrity. The BG Group Board receives quarterly updates on progress in both safety and Asset Integrity initiatives from the HSSE Committee.

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Security

A safe and secure working environment is fundamental to BG Group’s business success. Many of our employees travel abroad, or work in countries with unfamiliar customs and differing levels of security threat.

During 2007, in response to changes in the security risk environment, we introduced and improved on security measures designed to protect our personnel, physical assets, information and reputation, including:

• establishing a travel tracking service to capture automatically the travel plans of our employees globally. All employees who travel internationally are also required to attend regular security briefings, and in countries considered to be high risk, travel security plans are put in place;
• initiating the development of a Group-wide programme of training to raise security awareness in response to the perceived increased risk of violent crime in some locations;
• introducing new Physical Security Guidelines for our operating facilities in light of an assessment of an increased threat from terrorism. This included strengthening office and site security at a number of locations;
• launching an Information Protection Standard setting out minimum requirements for information security, including the requirement that all staff receive information protection awareness training;
• holding a workshop to address both the Voluntary Principles on Security and Human Rights and Crisis Management for Security representatives from across the Group; and
• updating and improving the Group Crisis Management Plan.

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Stakeholder Commentary

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Ernst & Young remarks

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