Environmental action 
a shared responsibility

An address to ?Building global partnerships?, the second international conference on health,
safety and the environment in oil and gas exploration and production, co?sponsored by the
Society of Petroleum Engineers and the Society of Indonesian Petroleum Engineers
Jakarta, Indonesia, 25 January 1994.

Moody-Stuart

A Group managing director and Exploration and Production coordinator
for the Royal Dutch/Shell Group of Companies

 

 

Mark Moody-Stuart was appointed a managing director of
The ?Shell? Transport and Trading Company, and a Group managing director of
the Royal Dutch/Shell Group of Companies in July 1991.

As a Group managing director his spheres of interest cover Middle East, Francophone
Africa and South Asia, Exploration and Production, and Procurement and Logistics.

He was born in Antigua, West Indies, in 1940 and educated in Antigua and the UK.
After graduating in Natural Sciences and obtaining a doctorate at the University of
Cambridge, he joined Shell Internationale Petroleum Maatschappij BV in 1966 as
a geologist.

He served as a geologist in Spain, Oman and Brunei. In 1972 he was appointed
chief geologist in Australia and in 1976 he transferred to London to head up oil
exploration teams in the UK North Sea. In 1978 he became services manager in
Brunei, leaving in 1979 to become manager of the Western Division of Shell
Petroleum Development Company of Nigeria?s operations. From 1982 he was general
manager of the Shell Group of Companies in Turkey and in 1986 he became chairman
and chief executive of the Shell Companies in Malaysia.

Mr Moody-Stuart was appointed Exploration and Production coordinator for the
Royal Dutch/Shell Group of Companies in February 1990, and a director of Shell
International Petroleum Company Limited in July 1991.

He is married and has four children.

 Moody-Stuart

The upstream oil and gas industry?s
concern over the environmental
implications of its activities is nothing
new. Clean operations have always made
for productivity and good neighbourliness.
From the 1970s, however, environmental
concerns ceased to be limited to the
immediate vicinity of an operation. Acid
rain gave pollution an international
dimension, and globalisation rapidly
followed with the debate over ozone
depletion and the enhanced greenhouse
effect. Since then, environmental issues,
not least concerning our own industry,
have been at the centre of economic and
political debate.

Oil and gas together supply three?
fifths of the world?s energy. Most industry
studies forecast that demand will continue
to increase. Much of this will be in
developing countries, to meet energy
needs from increasing populations and to
raise living standards towards the levels
enjoyed by the industrialised world.
Renewable energy sources, even under the
most favourable scenario, cannot offer a
realistic, economic alternative to fossil
fuels for at least several decades. Nor, of
course, are renewables by any means
universally environmentally?benign.
Together, oil and gas will continue to be
the dominant source of world energy.
They thus remain absolutely essential for
economic development, economic life, or,
in many cases, any life at all.

Yet the present position of the
industry is far from cOmfortable. Real?
term oil prices over 1993 were the lowest
for two decades, and there is little
prospect for any substantial increase over
the next few years. Nor will cost
pressures ease; existing fields mature and
decline, and new discoveries are likely to
be smaller or in more difficult areas.
Cost?effectiveness is therefore crucial.
To achieve this, the industry needs to

retain the maximum flexibility of action.

Environmental action a shared responsibility

At the same time, environmental
and safety expectations will continue to
increase. Two possibilities face the
industry one leads towards increased
regulation, restricted flexibility, and
reduced efficiency. The other leads
towards increased self?regulation, and
greater efficiency. To be allowed to
follow the second route, we must
demonstrate through our actions a
responsible and constructive attitude to
the environment. The industry as a whole
will be judged by its poorest performer,
so this commitment to improved
environmental performance must be
shared. Hence my title: ?Environmental
action a shared responsibility?.

This conference provides a timely
opportunity to discuss the choices and
judgements that ?environmental action?
involves. The commitment of the Society
of Petroleum Engineers (SPE), through
the sharing of information and the
development of common understanding,
has been an important step forward for
the industry.

One of the key events that have
shaped the environmental debate was the
publication in 1987 of the Brundtland
Report, ?Our common future?. This
defined the concept of sustainable
development as ?meeting the needs of the
present without compromising the ability
of future generations to meet their own
needs?. We all suffer if economic activity
degrades the environment; yet clearly,
our own and future generations can only
meet their needs through economic
development. With this comes the clear
recognition that development is needed
to pay for environmental protection. In
that sense, ?sustainable development?
really means ?environmentally?
sustainable economic development?.

When we talk of the environment,
we should not automatically assume that
the best solution is to leave it totally

 

 Moody-Stuart

unaltered in perpetuity, or to return it to
its original state whatever that might
have been. Indeed, mankind is
consciously and steadily introducing
change into his surroundings and
societies, whether through land
reclamation and ?ood control, or through
housing, industry and infrastructure, or
through agriculture and irrigation to feed
growing populations. We cannot develop
our economies without having an impact
on our environment. Indeed, our very
existence has an impact. It is our duty to
ensure that changes are introduced
thoughtfully and with care, particularly
when they relate to potential effects that
are not fully understood and yet could be
very significant.

The basic activity of the oil and gas
industry is the production of
hydrocarbons a finite resource. Quite
clearly, what is produced now cannot be
produced by our descendants in the
future. In itself, like any extractive
industry, it is therefore a fundamentally
unsustainable operation, and we should
not pretend otherwise. But without the
economic development that oil and gas
makes possible, we will not be able in
due course to develop truly sustainable
alternatives, or at least alternatives with
extremely long reserve lives. Thus our
primary responsibility must be to use oil
and gas very efficiently, extracting the
maximum from each development, and
putting it to the best possible use.

Yet already dilemmas appear. How
should society weigh the impact of
different forms of pollution, or balance
environmental with other societal needs 
health, education, transportation, housing
and so on? How do we reconcile
international environmental goals with
national economic priorities? The status
quo is unsustainable and, for much of the
world?s population, also undesirable.
Ultimately, society itself must determine

Environmental action a shared responsibility

the balance of risk and benefit in
environmentally-sensitive activities. This
is a matter of political management and
leadership, and we must expect
governments and societies to be
in?uenced by perceptions, emotions and
human nature, and not always to follow
strict scientific logic. We in industry
cannot claim to have all the answers.
However, we do have a responsibility, as
well as an incentive, to try to help make
sure that the solutions offered are indeed
the most effective responses to the real
problems. We also have expertise. So

we must join in the discussion, keep
open minds, and try and help cast the
light of analysis on what is often a heated
debate.

We will only qualify for the debate if
our stance on the environment is built on a
firm foundation. The ?negative? reasons for
environmental commitment are abundantly
clear the extremely high cost of ?getting
it wrong?; the potential liabilities arising
from emissions or waste disposal; and the
disturbance that can be caused to local
communities. In the environmental world,
as elsewhere, prevention is almost always
much better than cure.

Negatives, however, are no basis
for a vision. A company?s environmental
programme can only be built around
?doing it right?, integrating technological,
economic and managerial aspects to yield
demonstrable cost?effective
environmental benefits.

Introducing such a programme is
not a simple matter, but it can be
achieved if the right policies and
strategies are in place. Our experiences in
Shell upstream companies have been
positive. Success requires that the
environment becomes a real line
management responsibility. Then the
achievements and experience gained in
one situation need to be disseminated
rapidly and applied elsewhere.

 Moody-Stuart

Environmental programmes must
re?ect the fact that expectations have
changed dramatically over the past decade,
and are continuing to change. The older
members of this audience will no doubt
remember practices quite commonplace 30
or 40 years ago that would be unthinkable
nowadays. Indeed, past operations 
perhaps long since concluded may still
raise problems. Existing operations,
previously accepted, may be overtaken by
tougher standards or improved industry
practices, while new installations must be
planned in the light of environmental
standards that might apply decades into the
future, thus escalating expectations of what
is possible. Each category of activity 
past, present and future requires separate
consideration.

Let me start with the residue of
past operations. Decommissioning, even
if done in compliance with every
standard then prevailing, may now be
judged to be inadequate. Under these
circumstances, governments may be
tempted to introduce retroactive
legislation however unfair the principle
may be. Equally important, in litigation,
adherence to standards that were fully
acceptable in the past may not always
carry the day. The fact that society often
actively sought the development brought
about by an operation is ignored. These
are very serious concerns: any company
that practises continuous performance
improvement inevitably lays itself open
to charges of past under-performance.
Conformance to the requirements
prevailing at the time should therefore be
sufficient defence. If all parties would
accept the realities of changing
technologies and standards, it would be
more straightforward to agree with the
appropriate authorities the most cost?
effective way of resolving situations no
longer considered acceptable. I suspect

that few companies have a complete

Environmental action a shared responsibility

inventory of their past activities, let alone
plans for appropriate clean?up work. In
part, this is due to a fear that a
company?s own efforts will be used as a
stick with which to beat it. However, if
we fulfil our obligations conscientiously,
society is less likely to be misled by
those only seeking idealistic solutions.

For existing operations, the first

step is to inventorise all discharges to the
environment emissions, ef?uents and
wastes. For Shell upstream operations,
we have found that the awareness and
understanding thus created in itself leads
directly to improved performance. Then,
specific waste reduction programmes and
projects with quantified targets can be
established, in order to achieve
continuous, demonstrable improvement.
The overall goal is to minimise and,
where possible, ultimately eliminate all
emissions that have a negative impact on
the environment.

For our upstream companies, the

key objectives are to:

0 Eliminate continuous gas
venting;

0 Reduce and ultimately eliminate
gas ?aring, except for
emergencies;

0 Prevent loss of drilling ?uids to
the environment;

0 Re?inject production waters
unless discharge is fully
compatible with the surface
environment;

0 Reduce solid and other waste;
Avoid CFCs or halons in new
projects; control existing stocks
to avoid loss, and phase these
out with alternatives;

0 Minimise the use of resources of
all kinds land, energy and raw
materials; and

0 Integrate the cost and benefit of
environmental protection into

investment appraisals.

 

 Moody-Stuart

All these objectives have the same
common goal to minimise environmental
impact. However, the specific solutions 
for example, the actual levels of emissions
to be achieved will depend on the
receiving environment and on individual
circumstances. Further, socio?economic
factors will in?uence the rate of
improvement. These considerations are
embodied in Principle ll of the
Declaration of the 1992 UN Rio
Conference on Environment and
Development: ?States shall enact effective
environmental legislation. Environmental
standards, management objectives and
priorities should re?ect the environmental
and developmental context to which they
apply. Standards applied by some
countries may be inappropriate and of
unwarranted economic and social cost to
other countries, in particular developing
countries.?

We in Shell, and the oil industry in
general, are currently being accused by
some organisations of applying ?double
standards? in our operations around the
world, for example in West Africa as
compared to the North Sea or California.
We do not apply different standards in
the dishonest or cynical sense, but neither
do we pretend that we operate in an
identical manner around the world.
Rather, it is a matter of aiming to
improve each operation in the light of its
own individual circumstances.

Flaring of gas in Nigeria is a good
example. Nigerian oil has a very high
content of associated gas. The
governments of developed countries,
where there is a ready existing market for
such gas, would not permit such ?aring
and neither would producers need to
?are. In Nigeria, re?injection is only a
limited alternative, because of the nature
of most of the reservoirs. The
government the owner of the resource,

and a partner in the operation 

4

Environmental action a shared responsibility

concludes that revenue from oil
production today, and that is essentially
the only revenue the Nigerians have, is
more important than the loss of resources

and the potential local environmental

impact. They are not comfortable with
thatthe short term 3
it is difficult to see a way around the 
complexities that include domestic energy
prices. Nevertheless, we are working
actively in Nigeria and elsewhere to
develop frameworks in which associated
gas can be effectively used.

I venture to suggest that those
people who accuse us of ?double
standards? would be among the first to
accuse us of cultural insensitivity if we
did indeed try to impose identical
standards everywhere in the world.

Of course, we should not pretend
that we do not make mistakes. However
high the standards, and however good the
systems in place, unforeseen emissions
can occur, whether from equipment
failure, human error or management
deficiencies. Here, the test is to have a
system that can rapidly take the
appropriate remedial action, and also
learn from the experience.

I am sure that no company
represented here feels totally satisfied
with the standards of every one of its
operations everywhere in the world or
even in a single country. Most obviously,
this is because environmental

performance is often in?uenced by the

m.4.

age of an installation. Older plants,
however extensively upgraded and
refurbished, cannot expect to compare
with ?state of the art? technology. But I
would go further: our own commitment
to continuous improvement underlines
that we are not satisfied with our
performance today. By striving for
continuous improvement, we are
automatically rejecting consistency. To
put it another way: striving for

 Moody-Stuart Environmental action a shared responsibility

consistency would be the kiss of death
for continuous improvement.

Although any fair?minded person
will at least acknowledge such progress,
there will still be those who argue that
we are not improving rapidly enough. A
key to improvement, environmental or
otherwise, is to set oneself tough targets.
The wording of the Rio Declaration is
not a ?let?out? to avoid our responsibility
to improve environmental performance.
We can all probably cite examples of
operations where we continue to improve
performance at levels well in excess of
regulations.

We always need to keep the
original objective in mind limiting
environmental impact and not let one
particular solution come to dominate.
Consider oil-based mud. This has many
benefits safer drilling, lower energy
consumption while drilling, and
increased efficiency of resource
recovery. The problems occur when oil?
based mud enters the environment. There
is a danger that we could move rapidly to
the perception that oil?based mud is
inherently bad, and should therefore be
totally banned. If, however, we can limit
the negative side-effects by restricting its
escape, we can continue to benefit from
its many advantages.

The same principle applies to
waste disposal. Here the objective is to
reduce the amount of waste to the
minimum. We should certainly reuse and
recycle wherever possible, but to use
materials only if they are recyclable is,
although seductive, probably inefficient.
It may be more energy-efficient, even
when every environmental consideration
is taken into account, to burn some kinds
of waste than to recycle. This is true of
many plastics, especially if incineration
is combined with heat and power
generation. Perhaps in both these cases,
the perceived solution (banning oil?based

mud or recycling all plastic waste) has
come to dominate, and the original
objective may have been forgotten.
Perhaps the industry does not put
enough effort into trying to improve
projects that are already environmentally
?good?, or that already easily pass
accepted levels. Environmental
economics can be used in prioritising
projects to help achieve the most cost?
effective reductions in emissions. The
process being used in our own operations
was developed to provide a common
yardstick to rank the cost of reduction for
each emission stream. Although this is a
great step forward, it does not overcome
all the difficulties. Different
environments will always have different
ecological requirements. Different
societies have different social and
environmental values and priorities: each
local community or government will
understandably place greater emphasis on
one or other impact. The final decision
still requires judgement and balance: in
other words, management 
environmental management. If no
judgement were required, common global
standards would have evolved long ago.
An example of nationally-based
response is the kind of environmental
research project many companies support
at local universities. This demonstrates
that industry does indeed have an active
concern for the environment, is good for
the universities, can be very cost?
effective and, if there is a problem,
ensures that there is someone
knowledgeable in the academic world to
comment on appropriate solutions. It
keeps the academic world informed of
industry?s concerns, and also provides
the company with information on the
local environment and local sensitivities.
Our industry must use the
opportunity offered by new projects to
demonstrate that we can indeed do things

 

 Moody-Stuart

right. Environmental impact assessment
has proved to be the key tool for project
planning. It is then essential to involve
everybody in the company through
detailed plans, implementation,
supervision, audit and review.
Environmental responsibility must be
seen to be as much a part of individual
accountability as is safety.

In Shell upstream companies,
management systems for the
environment are already following those
for safety into a full?scale HSE
management system. I see this as a major
tool in integrating the environment into
the Shell upstream business and into line
management. Nowadays, HSE
management systems and HSE cases are
becoming common practice in, for
example, Shell seismic ventures.
National and international standards are
starting to appear, such as BS 7750, the
British Standard on environmental
management, and the European Union?s
Eco-Management and Audit Scheme.
Common approaches on management
systems are to be welcomed, but we
should remember that they are
management systems to allow a company
to meet its objectives, not prescriptive
targets in themselves.

The existence of an international
management system, once fully thought
through and agreed, could make for
greatly eased working relationships. New
opportunities, often in countries where
current operational standards are not
those we expect elsewhere, may well
involve joint ventures with both
established operators and new partners,
both governments and private industry.
Additionally, arrangements with
contractors will be much simplified and
thus more cost?effective if they do not
have to follow different specifications
and practices for each individual project.
International bodies such as the SPE, the

6

Environmental action a shared responsibility

Forum and the International
Chamber of Commerce, as well as
national associations, play a vital role in
developing viable industry standards and
then disseminating knowledge and
expertise for our common benefit.

The next step is to communicate
the industry position more effectively, so
that stakeholders can understand our
viewpoint and be more inclined to trust
industry with the degree of self?
regulation that is crucial for efficient
operation. External environmental
reporting, rather than being seen as an
obligation, can be a valuable way for a
company to demonstrate its performance
and progressive improvement. But this
reporting should be in the first instance at
a national level, because it is at a national
level where choices have to be made and
trade?offs evaluated.

Governments will of course
continue to play a key role as legislators
and regulators. I believe that they will be
most effective in achieving their
objectives if they use a goal?setting
approach: a mix of ?command and
control?, self?regulation and economic
instruments that offers industry an
incentive to achieve the greatest
improvement at the least cost. The
authorities can then check compliance. A
good example, although not from the
upstream, was the joint EPA/Amoco
study of the company?s Yorktown
Refinery in the USA. Following the
original regulations on emission controls
would have resulted in very substantial
expenditure. Reducing the emissions to
the same level but in other ways could be
achieved at something like a quarter of
the cost.

We have to deal with, and strive to
convince, not only government bodies
but many other different groups, ranging
from employees and local communities

to environmental pressure groups, on a

 Moody-Stuart

local, regional, national and worldwide
basis. Enhanced environmental
performance can certainly boost
corporate reputation. This is fundamental
because, if our industry is to ?ourish, it
must be seen not just as necessary,

but as beneficial in its contribution

to society.

Ladies and gentlemen: all my
comments add up to one conclusion: the
need for an industry approach to the
environment that is recognised by

Environmental action a shared responsibility

legislators and other stakeholders as
consistent and constructive. The industry
is seen as an entity, and judged by the
worst performer. This conference
presents an outstanding opportunity to
demonstrate progress in cooperation. If it
can help to build a common
understanding based on the realities of
upstream operations and a commitment
to continuous improvement, then we can
indeed consider this conference to have
been a success.

 

 Shell International Petroleum Company Limited (SIPC), 1994.
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