Reporting guidelines for 2015 Key Performance Indicators

The Key Performance Indicators (KPIs) that we are reporting for 2015 were drawn from our materiality process and overall business objectives. They align with the Global Reporting Initiative (GRI) G4 Guidelines. Here, we provide a methodology and definitions for selected KPIs from subject areas that were assessed to be the most important to Cairn and its stakeholders, as follows:

Material issue KPI no. Key Performance Indicator
Supply chain and contractors 1

Percentage of new suppliers that were screened for corporate responsibility risks in four areas:

  • Labour practices.
  • Environmental.
  • Impacts on society.
  • Human rights.
2 Number of contractors
3 Percentage of contractors that are national
Preventing major accidents 4 Number of process safety events
Preventing major spills 5 Oil spills – number and volume*
6 Fuel spills – number and volume*
7 Chemical spills – number and volume*
8 Waste spills – number and volume*
9 Other spills – number and volume*
Operational environmental footprint 10 Total mass of waste by type and disposal method
Transparency 11 Payments to governments
Non-operated joint venture and international investments 12 Investment proposals that covered results of Corporate Responsibility (CR) due diligence
13 Total number and percentage of significant investment agreements and contracts that include human rights clauses or that underwent human rights screening
Sustainable project funding - Covered in text of report
Workplace health and safety 14 Number of fatalities
15 Lost Time Injury Frequency (LTIF)*
16 Total Recordable Injury Rate (TRIR)*
Climate change 17 Greenhouse gas emissions (GHG) – Scopes 1*, 2 and 3

* Included within the Annual Report and subject to review by the Company's independent auditors.

For each of these KPIs we provide a definition and an explanation of the methodology used in collecting the data, where appropriate.

1. Percentage of new suppliers that were screened for CR risks in four areas:

  • Labour practices.
  • Environmental.
  • Impacts on society.
  • Human rights.

Definition

New supplier: for the purposes of this indicator we are assessing the new suppliers that require approval from Cairn’s Contracts Committee.

This data is compiled by reviewing Cairn’s Contracts Committee records to identify new suppliers that Cairn considered selecting or contracting with during the reporting year. Tender and contract documentation for those suppliers are then reviewed to identify which CR risks are covered in the screening process for each one. Note: all suppliers are included in the figures regardless of whether or not they are considered likely to present CR risks. For example, data processing companies and suppliers of materials are included in the figures.

Calculation

Number of new suppliers that Cairn considered selecting or contracting within the reporting year that were screened for CR risks in each of the four key areas/number of new suppliers that Cairn considered selecting or contracting within the reporting year x100

2. Number of contractors

Definition

Contractor: someone contracted to work on company business on a temporary basis in field-based positions or a subcontractor through another company. These people are not paid directly by Cairn but through their employing organisation.

Many contractors work on rotation (back-to-back), e.g. one month on, one month off, so it is not practical or meaningful to give the total number of individuals who have worked as contractors on Cairn projects through the year. Instead, we provide the total number of contractor positions during 2015.

Data on numbers of contractors is collected from field operations each month. At the end of the year, the highest monthly figures are taken from each vessel/rig/base and these are added together to give the total number of contractors.

Estimates and uncertainties

An occasional day worker, who is on a project very briefly, might be omitted from the total contractor numbers.

3. Percentage of contractors that are national

Definitions

National (contractor): from the country of operation, i.e. having the nationality (born or naturalised) of that country.

Non-national (contractor): not from the country of operation, i.e. not having the nationality of that country.

This data is collected for the purpose of measuring Cairn’s impact on the communities in which we work and the definitions are simply regarding whether a contractor is from the country of operation or not.

When contractor numbers are collected each month, the numbers that are national and non-national are provided. At the end of the year, the same highest monthly figures that are used to calculate the number of contractors are used to calculate the number of national contractors.

Calculation

Number of national contractors/total number of contractors x 100

4. Number of process safety events

Definitions

Process safety event, Tier 1: an unplanned or uncontrolled loss of primary containment (LOPC) of any material, including non-toxic and non-flammable materials (e.g. steam, hot condensate, nitrogen or compressed air), from a process, resulting in one or more of the following consequences:

  • an employee, contractor or subcontractor lost work day injury and/or fatality;
  • hospital admission and/or fatality of a third party;
  • community evacuation or community shelter-in-place (officially declared by a local authority);
  • fires or explosions resulting in greater than or equal to US$25,000 of direct cost to the Company;
  • a pressure relief device discharge resulting in rain out, discharge to an unsafe location, on-site shelter-in-place, or a public protective measure, and in excess of the Tier 1 threshold quantities (detailed in American Petroleum Institute (API) Recommended Practice (RP) 754); and/or
  • a release of material greater than the threshold quantities, as described in the Tier 1 table in the API RP 754, in any one-hour period.

Process safety event, Tier 2: a less-severe event than in the Tier 1 criteria above, which results in one or more of the consequences listed below and is not reported in Tier 1:

  • an employee, contractor or subcontractor recordable injury;
  • a fire or explosion resulting in greater than or equal to US$2,500 of direct cost to the Company;
  • a pressure relief device discharge resulting in rain out, discharge to an unsafe location, on-site shelter-in-place, or a public protective measure, and in excess of the Tier 2 threshold quantities (detailed in API RP 754); and/or
  • a release of material greater than the threshold quantities described in Table 2 in the API RP 754, in any one-hour period.

RP 754 is Recommended Practice 754, Process Safety Indicators for the Refining and Petrochemical Industries, April 2010 (available on the American Petroleum Institute website).

IOGP guidance states that Tier 1 and Tier 2 process safety events are applicable to drilling and production activities only when operating ‘in hole’ or when ‘connected to the process’. It lists various activities that are outside the scope of process safety event reporting and these include marine transportation unless connected to the facility or process, office and warehouse activities, and fuel/oil leaks involving other vehicles.

Records of incidents are kept in our online incident reporting system. Contractors are required to report all incidents to Cairn management as soon as possible after the event and the details are logged into our incident reporting system, which keeps key personnel informed, by email, about progress with the reporting and investigation. Incident reporting forms in the system include a specific field to be marked in the case of a process safety event. Records of incidents involving loss of primary containment are also reviewed annually to verify if any process safety events have occurred.

5–9. Spills to the environment – number and volume (GRI)

We categorise spills by type: oil, fuel, chemical, waste, other.

Definitions

Oil: crude oil.

Fuel: diesel, gasoline, kerosene, heating oil, aviation fuel.

Chemical: any other raw material or ancillary.

Waste: any material (solid, liquid, gas) that is introduced into the work location as a product of the work but that fulfils no further useful purpose at that location.

Other: other material not included in categories above.

Note: if something fits into more than one category, we report against the category that provides the most information, e.g. chemical rather than waste when reporting waste chemicals.

We collect figures on the number of spills in the following size categories: less than 1 barrel; between 1 and 10 barrels; between 10 and 100 barrels; and greater than 100 barrels. We also record the actual volume spilled.

We report figures on spills to the environment, but also collect data on spills contained before reaching the environment for monitoring purposes.

Estimates and uncertainties

Spill volume is usually based on an estimate.

10. Total mass of waste by type (hazardous/non-hazardous) and disposal method

Definitions

Hazardous waste: all waste that is defined as hazardous, toxic, dangerous, listed, priority, special, or some other similar term as defined by an appropriate country, regulatory agency or authority. We use the European Union definitions and waste codes.

Non-hazardous waste: industrial wastes resulting from company operations, including process and oil field wastes (solid and liquid) disposed of either on-site or off-site. Includes trash and other office, commercial (e.g. retail) or packaging-related wastes. Excludes hazardous waste as defined above.

Disposal method: the method by which the waste is disposed. This is split into the following categories in line with GRI reporting requirements: reuse, recycling, composting, incineration, landfill, on-site storage, other. Waste data, including information on disposal method, is provided by our waste disposal contractors where applicable, or by contractors who are responsible for waste generated during short-term operations. We use the European Union definitions and codings.

We generate waste during rig, marine vessel and shore base operations, as well as from our offices in the UK and other locations.

Waste from field-based operations: waste generated during field-based (including offshore - except where offshore treatment is allowed such as garbage incineration under the International Convention for the Prevention of Pollution from Ships (MARPOL)) operations is transferred to shore-based waste disposal facilities and waste transfer notes are used to record and track each transfer as part of our ‘Duty of Care’. Waste figures are submitted to Cairn at the end of each month by the vessels themselves (in the case of short-term operations such as seismic) or by the waste disposal contractor (in the case of longer-term operations such as current drilling operations in Senegal). This data is then checked and entered into our database, split by hazardous/non-hazardous and by disposal method.

Waste figures are reported in tonnes. We ask our contractors to weigh waste wherever possible and report by mass (tonne, kg). Where this is not possible, tonnage is calculated by multiplying the volume of waste by a conversion factor. We provide contractors with a set of standard conversion factors from Waste & Resources Action Programme (WRAP), a non-government organisation working with UK governments, the EU and other funders, to help deliver their policies on waste prevention and resource efficiency (see WRAP website).

Office waste: waste data is collected from our offices at the end of each year. This covers all types of waste including general office waste, controlled waste and recycling waste, e.g. paper and toner cartridges. Figures for Cairn’s head office in Edinburgh are received from the waste contractors that service the building, and are partly estimated. Figures for Cairn’s Stavanger office are obtained from the building managers. For both these offices some figures are calculated as a proportion of the overall building. For other offices waste figures are estimated using per person per month Edinburgh office figures.

Estimates and uncertainties

There is a degree of uncertainty in the volumes of waste measured and in the conversion factors used to convert volume to tonnes and these will arise from the method used.

Waste figures for offices are, for the most part, estimated as a proportion of the overall building or using per person per month Edinburgh office figures.

11. Payments to governments

Definition

Payments to governments: any payments made to governments.

Figures for any payments made to governments during the reporting year are collated by Cairn’s finance department at the end of each calendar year. Payments are listed by country under the following categories.

  • Other.

In the interests of transparency, we cover operated as well as non-operated assets for this indicator. Gross payments are disclosed for assets that Cairn operates and net payments are disclosed for Cairn’s non-operated assets. Negative figures in the data reflect refunds received. Figures disclosed represent a net of payments and refunds.

Cairn reports these figures in support of two transparency initiatives, namely the European Union Accounting Directive and the Extractive Industries Transparency Initiative (EITI). The figures include both payments to government included in our EITI reporting, such as corporate income tax, licence fees and withholding tax suffered, and additional payments made including VAT and payroll taxes and social security costs.

12. Investment proposals that covered results of CR due diligence

Definition

Investment Proposals (IPs): in 2015, Cairn required that any new investment with a net expenditure in excess of US$1 million should be assessed against specified investment criteria, which include an assessment of the potential CR risks involved with the opportunity. For those investment opportunities that are taken forward to the Board for approval, an IP is required that summarises the outcome of the review (including the CR assessment), the recommended terms of the offer and how the opportunity would be managed in the event of success. These IPs are signed off by all functional department heads, the Chief Operating Officer (COO) on behalf of the Management Team (MT) and the Chief Executive Officer (CEO) on behalf of the Executive Team (ET).

This indicator measures the proportion of IPs approved in the reporting year that covered the results of CR due diligence. Figures are compiled by reviewing all investment proposals approved in the reporting year.

Calculation

Number of IPs approved in the reporting year that covered the results of CR due diligence/number of IPs approved in the reporting year x 100

13. Total number and percentage of significant investment agreements and contracts that include human rights clauses or that underwent human rights screening

Definition

A significant investment agreement is defined as one that requires Board approval.

Significant investment agreements and contracts are assessed against specified investment criteria, which include an assessment of the potential CR, including human rights, risks involved with the opportunity. The IP summarises the outcome of the review (including the CR assessment), the recommended terms of the offer and how the opportunity would be managed in the event of success. These IPs are signed off by all functional department heads, the Chief Operating Officer (COO) on behalf of the Management Team (MT) and the Chief Executive Officer (CEO) on behalf of the Executive Team (ET).

Data for this indicator is compiled by reviewing all investment proposals that were approved in the reporting year. While all significant investments are screened broadly for human rights issues at the investment proposal stage, only those that make specific reference to human rights are counted as having undergone human rights screening.

Calculation

Number of investment proposals approved in the reporting year that make specific reference to human rights/number of investment proposals approved in the reporting year x 100

14. Number of fatalities (IOGP/GRI)

Definition

Fatalities: cases that involve one or more people who died as a result of a work-related incident or occupational illness (International Association of Oil and Gas Producers (IOGP)).

We report employee, contractor and third-party fatalities.

Records of incidents including fatalities are kept in our online incident reporting system. Contractors are required to report all incidents to Cairn management as soon as possible after the event, and the details are logged into our incident reporting system, which keeps key personnel informed, by email, about progress with the reporting and investigation.

15. Lost Time Injury Frequency (LTIF) – employees and contractors (IOGP/GRI)

Definitions

LTIF: the number of lost time injuries (fatalities + lost work day cases) per 1,000,000 hours worked (IOGP).

Employee: person employed by and on the payroll of Cairn. Persons employed under short-service contracts are included as Cairn employees provided they are paid directly by Cairn. Cairn has a lot of other individuals who work on behalf of Cairn in the office. Those who are contracted for more than three months to an organisational position are categorised as ‘other workers’ and these individuals are included as employees for the purposes of reporting health and safety statistics. They are not paid directly by Cairn but through their employing organisation.

Contractor: someone contracted to work on company business on a temporary basis in field-based positions or a subcontractor through another company. These people are not paid directly by Cairn but through their employing organisation. We record contractor work-related activities in line with IOGP definitions of mode 1 and mode 2 contractors; mode 3 are excluded as per the IOGP guidelines.

Records of all incidents, including fatalities and lost work day cases, are kept in our online incident reporting system. Contractors are required to report all incidents to Cairn management as soon as possible after the event, and the details are logged into our incident reporting system, which keeps key personnel informed, by email, about progress with the reporting and investigation.

Hours worked are collected for employees and for contractors. Employee hours are derived from Cairn’s time-writing system, which all employees use to log their working hours. Employee hours include hours worked by ‘other workers’ as these are captured in the time-writing system. Cairn’s Human Resources department compiles the figures and enters them into the database each month. Contractor man hours are collected monthly along, with the rest of the KPI data, from contractors (rig, vessels, aircraft, shore bases) working on field operations. For offshore workers, the hours are often calculated on a 12 hours per work day basis.

16. Total Recordable Injury Rate (TRIR) – employees and contractors (IOGP/GRI)

Definition

TRIR: the number of recordable injuries (fatalities + lost work day cases + restricted work day cases + medical treatment cases) per 1,000,000 hours worked (IOGP)

See above (KPI no. 15) for definitions of employees and contractors and for details of how incidents are recorded and how ‘hours worked’ are calculated.

17. Greenhouse gas emissions – Scopes 1, 2 and 3 (GRI)

We report our GHG emissions in accordance with the GHG Protocol Corporate Accounting and Reporting Standard (World Resources Institute/World Business Council for Sustainable Development). All GHG emissions are reported in tonnes of carbon dioxide equivalent (CO2e).

To meet UK reporting requirements, GHG emissions need to be normalised to an appropriate performance measure representative of the business. As Cairn did not have revenue or operated production facilities in 2015, or the previous four years, and activities were of an exploration nature only (i.e. seismic surveys and exploration drilling), its GHG emissions have been normalised to total employee and contractor hours.

Scope 1 emissions

Definition

Scope 1 emissions: direct GHG emissions that occur from sources that are owned or controlled by the Company, for example, emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.

At present, Cairn is undertaking exploration activities only. We are not operating any production assets. Our Scope 1 emissions arise from:

  • fuel combustion during offshore rig, marine vessel and aircraft operations as well as a very small amount during use of land-based vehicles (total: 99.999%); and
  • incineration of waste on marine vessels/rigs (0.001%).

The rig, vessels and helicopters keep a daily log of fuel usage and each provides us with a total figure for fuel consumption, in litres, at the end of each month. Fuel consumption figures for land-based vehicles (<0.3% of total fuel consumption) are partly drawn from accurate fuel consumption records and partly from estimates when exact fuel usage is impractical to track.

A fuel density figure is used to convert litres of fuel into tonnes. The fuel density is provided by the rig, vessels or helicopter operator when available (most of the time in 2015). Otherwise, a typical density is used from the ‘Compendium of Greenhouse Gas Emissions Methodologies for the Oil and Natural Gas Industry’, API, 2009. Figures in tonnes are then converted into CO2e using emission factors.

For calculating Scope 1 GHG emissions we use emission factors for carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) from the API Compendium 2009.

Estimates and uncertainties

Petrol and diesel consumption for land-based vehicles at shore bases/offices was partly estimated. This represents less than 0.3% of fuel consumption during operations in Senegal and overall. The mass of waste incinerated on board vessels is usually based on estimates, however, this represents a tiny amount compared to overall emissions (<0.0001 tonnes CO2e).

We use the most applicable emission factors available but there will always be a small margin of error from these as they may not match fuel type exactly.

Scope 2 emissions

Definition

Scope 2 emissions: electricity indirect emissions are from the generation of purchased electricity consumed by the Company. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organisational boundary of the Company.

Our Scope 2 emissions arise from:

  • use of electricity in our offices and shore bases.

In 2015, we updated our methodology for calculating Scope 2 emissions in line with the new Greenhouse Gas Protocol Scope 2 Guidance that was launched in January 2015. As a result, we now report Scope 2 emissions in two ways: according to a location-based method and a market-based method. For the location-based method we use emission factors from the International Energy Agency (IEA) Report ‘CO2 emissions from Fuel Combustion Highlights’ (2013 Edition), p110-112 ‘CO2 emissions per kWh from electricity generation’. These are grid average emission factors for each country. For district heating and cooling we use location-based emission factors from the UK Department for Environment, Food & Rural Affairs (Defra) 2015.

For the market-based method we use emission factors, where available, in the following order of preference:

  1. Supplier-specific emission factor - obtained from Cairn offices’ electricity suppliers.
  2. Residual mix emission factors - obtained from the RE-DISS II document ‘European Residual Mixes 2014’, last updated in June 2015.
  3. Location-based emission factors. These are the same IEA and Defra emission factors that we use for calculating location-based emissions.

Supplier-specific emission factors were requested from the electricity suppliers of all Cairn’s offices but were only available for the Edinburgh and London offices. Market-based Scope 2 figures for Norway were calculated using the residual mix emission factor for Norway. For Morocco and Senegal there were no residual mix factors available, so the location-based factors were used.

We are not able to obtain supplier-specific emission factors for previous years, so all Scope 2 data prior to 2015 is calculated according to the location-based method.

Estimates and uncertainties

Most of our electricity consumption happens in our head office in Edinburgh (77% of our total electricity consumption in 2015), followed by London and Stavanger (both 9% of total). Electricity consumption for the Edinburgh, London, Dakar (5% of total) and Rabat (0.5% of total) offices is taken from meter readings. The figure for the London office covers October 2014 to October 2015 because fourth-quarter figures are not available in time for this report. Electricity consumption for the Stavanger office is calculated as a proportion of the overall building consumption.

There is always a degree of inaccuracy in emission factors. Also, there is no electricity emission factor available for Greenland, so we use the Denmark factor instead.

Scope 3 emissions

Definition

Scope 3 emissions: Scope 3 emissions are a consequence of the activities of the Company, but occur from sources not owned or controlled by the Company.

Cairn currently reports Scope 3 emissions from business travel, including air and rail travel, but not tube travel.

For calculating Scope 3 (business travel) GHG emissions we use the Department for Environment, Food and Rural Affairs (DEFRA) methodology, including its recommendation to include an uplift for the influence of radiative forcing in air travel emissions. This uplift ensures that the maximum climate impact of an organisation’s travel habits is captured. In our air travel GHG emissions calculations we use journey type (domestic, short haul, long haul), seat class (economy, premium economy, business, first) and distance travelled. In our rail travel GHG emissions calculations we use rail type (national rail, international rail) and distance. We updated to Defra 2015 emission factors this year.

It is Cairn policy that all travel for Edinburgh- and London-based staff, and usually the smaller offices, is booked using its corporate travel agent the Hogg Robinson Group (HRG), except under special exception. As a result of this, the majority of our travel data is obtained in a report from HRG and includes details on journey type, seat class and kilometres travelled. Travel data is also obtained from other Cairn offices, from a travel expense claim report from Edinburgh’s accounts department, and through communication with executive assistants in the Edinburgh office. Where journey kilometres are not provided with the data, these are obtained from internet resources, e.g. air miles calculator.com, travelmath and Virgin trains.

Estimates and uncertainties

Not all HRG flight data can be broken down into flight sectors with the corresponding seat class, so there is a degree of uncertainty in this, e.g. GHG emissions for some of the domestic flight sectors may be calculated using short- or long-haul flight emission factors.

Travel data obtained from travel expenses does not always show whether a journey is single or return, so this sometimes has to be assumed. In addition, the seat class of these flights is not shown, however, flights booked outside the HRG system are usually with budget airlines so the majority are known to be economy class. These flights are not broken down into sectors but the majority are domestic or short-haul/European flights, which are only one flight sector.

Rail travel data is obtained from travel expenses, some of the journey distances are based on estimates.

Travel data provided by Cairn’s Norway office (from their travel provider Berg-Hansen) does not include train journeys, so an estimate has to be made for these.

Occasional flights/train journeys booked by individuals, based in Cairn’s offices outside the UK, might get missed, however, this possibility is considered minimal.

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