Global Investment Watch

In the course of our reporting on the human right practices of public companies around the world, it is rare for us to review a company in favorable terms. Here is the exception – StatoilHydro. The company is not perfect from a labor and human rights perspective. However, what makes the company stand out, in our opinion, is the fact that it is a leading business in an industry notorious for its problems vis-à-vis these issues. Yet it manages to balance its business mission with the concerns of workers, communities and the environment in an acceptable manner.

StatoilHydro (formerly Statoil) is Norway’s oil and gas exploration, production, transport, refining, and marketing giant. The company operates in 40 countries, focusing its upstream activities on the Norwegian continental shelf, the North Sea, the Caspian Sea, Western Africa, and Venezuela. It has proven reserves of 6.8 billion barrels of oil equivalent. It has a retail network of about 1,800 gas stations in nine north European countries. In 2007 Statoil acquired the oil and gas operations of Norsk Hydro in a $30 billion deal and became StatoilHydro. The Norwegian government owns 62.5% of StatoilHydro.

Recent Challenges

Karsto Gas Terminal

According to an April 2008 report by Thomson Financial News StatoilHydro ASA said the Norwegian government has instituted legal proceedings against it regarding the construction of new facilities at the Karsto gas terminal, and that its own estimates suggest that a successful compensation claim could cost it as much as 7 billion Norwegian crowns. The company says it rejects the government’s claims. According to StatoilHydro, the writ concerns the costs of construction of the Karsto gas terminal between 1997 and 2000, and the resultant outcome of legal action taken by Total, Norsk Agip and Fortum Petroleum, the last two of which have now merged to become ENI Norge.

Niger Delta

According to an October 2007 report by the World Business Council for Sustainable Development foreign oil firms are not often welcomed in parts of Nigeria. But for Statoil, wise community investment is paying off. The company set up the Akassa Community Development Project in Nigeria ten years ago, after deciding the Akassa people were those most likely to suffer if there was ever an oil spillage in the Niger Delta. Today, with the help of non-governmental organisations Pro-Natura International (PNI) and Voluntary Service Overseas, the project provides a model for NGOs and oil and gas companies to follow worldwide.

StatoilHydro’s Sustainability and Social Responsibility Practices

Based on our review, the company has addressed all areas of concern with respect to it’s environmental, social and governance (ESG) policies.

• • Code of Conduct/Code of Ethics YES
  • Human Rights Policies YES
  • Environmental Policies YES
  • Health and Safety Policies YES
  • Community Investments YES
  • International Labor Organization (ILO) Principles YES
  • Freedom of Association and Collective Bargaining YES
  • Elimination of Forced and Compulsory Labor YES
  • Elimination of Discrimination in Respect of Employment and Occupation YES
  • Abolition of Child Labor YES
  • UN Global Compact YES
  • Carbon Disclosure Project YES

In addition, the company supports the Extractive Industries Transparency Initiative and has signed on to the Voluntary Principles on Security and Human Rights.

Human, Labor and Stakeholder Rights in Practice

Irish Corrib Fields Pipeline

On August 5, 2006, Statoil, along with consortium partners Shell and Marathon, agreed to change the route of a planned gas pipeline in the west of Ireland following a protest campaign. The group, led by Shell, had controversial plans to refine gas they acquired from the newly discovered off-shore Corrib fields on land in Ireland. The process was to involve an untested high-pressure pipeline carrying raw, untreated gas across the farmer’s land and close to their homes. According to reports, the companies had rejected an alternative plan that would see the gas treated at sea because of the higher operating costs involved. Construction on the project has been held up for months amidst legal proceedings and local protesters. Five farmers- the “Rossport Five” -spent three months in prison for contempt of court over their opposition to the plans. Despite Shell’s agreement to change the route of the pipeline, the “Shell to Sea” organization, which runs the opposition campaign, has allegedly said that it will not accept the new plan. News reports are unclear as to whether the consortium’s recent announcement will diffuse the situation.

Baku-Tbilisi-Ceyhan Pipeline

Statoil is also part of an international consortium of 11 partners involved in the construction of the 1,100 mile long Baku-Tbilisi-Ceyhan oil pipeline, which runs from Baku, Azerbaijan, through Georgia to the Turkish seaport of Ceyhan. Statoil has around an 8% stake in the project. The oil pipeline project, which opened in late May 2005, has led to allegations of human rights abuses and environmental damage and sparked regional conflict over the displacement of local people. The construction of the pipeline is being monitored by the Baku-Ceyhan Campaign, a consortium of NGOs. The campaign has allegedly uncovered 173 violations of World Bank environmental and social standards in the Turkish section of the project during the design stage alone. The Baku-Ceyhan Campaign is working to raise public awareness of the social problems, human rights abuses and environmental damage caused by the pipeline.

Country Risk Factors

The company operates in Angola, China, Iran, Kazakhstan, Qatar, Saudi Arabia, and the United Arab Emirates, which are on the AFL-CIO Country Watch List. Countries on this list are either lacking labor legislation that recognizes fundamental worker rights or they have labor legislation, but it is not enforced.

Union and Labor Relations

Statoil workers are represented by the Norwegian Federation of Trade Unions, the International Federation of Chemical, Energy, Mine and General Workers’ Unions, and the Norwegian Oil and Petrochemical Union.

Corrpution and Litigation

According to the Wall Street Journal, in 2004 Statoil and the company’s former head of international operations, Richard Hubbard, paid hefty fines handed down by Norwegian police over a business deal with an Iranian consulting company. The national economic crime police, Oekokrim, found that a $15.2 million consulting deal that Statoil made with Iran’s Horton Investment Ltd. in June 2002 was part of an attempt to improperly influence Iranian oil officials. Statoil later canceled the contract in 2003, and stating that the deal violated its internal ethical standards. Statoil agreed to pay its $3 million fine without admitting or denying guilt. (“Former Statoil executive to pay fine over Iran deal”, Wall Street Journal, October 19, 2004). Subsequent news accounts in 2003 revealed that the company was quick to respond going so far as to remove the company’s CEO in the process.