Integrated HSE management system

According to its corporate HSE policy, LUKOIL Group’s top priorities are to create a safe work environment, protect the health of its employees and people living in the areas where we operate, and ensure sustainable use of natural resources drawing on the best available technologies to preserve a healthy environment. We apply the precautionary principle and prioritize preventive measures over reactive ones as part of the existing risk management system.

The Integrated System of Management of Industrial, Fire, Radiation Safety, Emergency Prevention and Mitigation, the Protection of Civilians, Occupational Safety and Environmental Protection (the Integrated HSE Management System) has been implemented and operating for more than 20 years to address these tasks. The Integrated HSE Management System was introduced on the Company’s own will; it is compliant with Russian legislation and best international practices and covers all Group entities as part of the operational control of PJSC LUKOIL.

Elements of the Integrated HSE Management System

The Integrated HSE Management System provides for the identification and management of risks and environmental issues. The risk-oriented approach is applied to system planning, implementing targeted functional programs, and monitoring results by assessing KPIs and reporting to the Management Committee and the Board of Directors of PJSC LUKOIL.

The targeted functional programs are aligned with the corporate mid-term planning procedures; they are developed for three years, reviewed annually and approved by the management of PJSC LUKOIL. Measures implemented as part of the targeted programs are funded and form an integral part of the LUKOIL Budget and the Investment Program. In addition, research and engineering projects are undertaken as part of the R&D program.

The incentives system for managers and employees based on the “Ensuring the Required HSE Levels” KPI is a critical element of the Integrated HSE Management System shaping our corporate culture. The Management Committee of PJSC LUKOIL annually sets KPIs for each Group entity, for PJSC LUKOIL, and LUKOIL Group. Heads of the Group entities receive quarterly bonuses based on their safety record. The requirements include a record of zero fatal on-the-job accidents among their full-time employees, and the absence of accidents and incidents resulting in significant property damage or facility downtime of more than thirty days. If any of the above occur, the Group’s entity receives the maximum number of penalty points.

Annual HSE training programs ensure that we maintain employee awareness and skills as appropriate under legal regulations and corporate standards.

Leadership and Safety Culture

We enhance the Integrated Management System by using leadership and safety culture tools that focus primarily on minimizing human error, which is most often the principal cause of accidents. Implementation of safety culture tools at our entities is intended to stimulate safe employee behavior.

PJSC LUKOIL holds annual Safety DaysSafety Days are held in each LUKOIL Group entity at least twice a year. Heads of PJSC LUKOIL subdivisions and LUKOIL Group entities take part in Safety Leadership Visits. We work continuously on raising awareness and competence of the Group’s specialists and executives. For example, the Safety Days program always includes discussions of best practices and challenging cases, as well as training sessions.

Projects are under way to introduce leadership tools and to involve personnel at all levels in conscious and active efforts to improve safety and develop strong beliefs and behavioral patterns in employees. In our daily operations, we already use electronic work permits and on-the-job training for more than twenty occupationsThis project will be completed across the LUKOIL Group entities in 2021., digital video surveillance and intelligent video analysis systems, instructional videos on the safe operation of certain types of activities, and the Mobile Inspector application, among other safety tools. Every year, we hold competitionsIn the Group’s entities and PJSC LUKOIL. where we award the participants developing the best projects, and the success of safety culture measures is taken into account when drawing up the results.

Liability insurance

The Integrated HSE Management System includes voluntary third-party civil liability insurance of the Group entities and compensation for personal injury and environmental damages. The insurance principles, including those concerning catastrophe coverage, are defined by the Insurance Policy of PJSC LUKOIL and LUKOIL Group entities.

In the event of an accident or incident at a hazardous production facility, the Company is committed to taking responsibility and providing compensation for the damage caused. All the Group entities that operate hazardous production facilities are insured and compensated for damage using insurance coverage or profits, if the insurance coverage is insufficient.

Efficiency assessment of the Integrated HSE Management System

The Integrated HSE Management System is constantly updated following the results of internal and external audits for compliance with legal requirements and corporate standards, the result is the development of systemic actions to eliminate violations both at the audited facilities and at similar LUKOIL Group sites. Internal audits are intended to assess the system’s performance and provide the Company’s management with unbiased and relevant information on the HSE status. In 2020, due to the COVID-19 pandemic we adjusted the number of routine internal audits to focus on unscheduled, targeted audits of facilities operating in the most vulnerable areas — the Arctic and the Baltic Sea.

Number of entities where audits of management systems were performed
2018 2019 2020
External audits (for compliance with ISO 14001 and ISO 45000 standards) 19 20 16
Internal audits (for compliance with corporate requirements) 27 23 17
Notes. External audits are conducted in a three-year cycle in accordance with ISO committee recommendations. During this period, all 42 LUKOIL Group entities that had applied for certification, and where certification or supervisory audits take place, are examined.

Changes in the Integrated HSE Management System during 2020

During the reporting year, the HSE Policy, risk assessment system and target program structure were modified. We updated the KPI evaluation criteria and introduced new leadership and safety culture tools.

  • The HSE Policy reflects changes related to PJSC LUKOIL’s transition to the new ISO 45001 Occupational Health and Safety Management Systems standard (instead of OНSAS 18001); it adds an accident risk reduction goal and obligations to consult with employees on HSE requirements and effective management of GHG emissions (see the “Climate change” section for details). We successfully passed an external audit, confirming our compliance with the requirements of ISO 45001.
  • The risk management system introduced criteria for a more comprehensive analysis of the causes of risk events and responsibility for their occurrence. When compiling the registers of significant risks, a new risk typical for all Group entities associated with the COVID-19 pandemic and potential similar events in the future was identified.
  • The following changes were introduced into the assessment methodology of “Ensuring the Required HSE Levels at LUKOIL Group Entities” KPI:
    • a new criterion for evaluating the Group entities (“an unsatisfactory assessment based on the results of HSE compliance audits”) was incorporated;
    • a procedure for interaction between PJSC LUKOIL structural subdivisions during the KPI evaluation was added.
  • The structure of targeted functional programs was amended to focus on emergency prevention. From 2020, all activities related to ensuring the reliability of production processes and equipment are formulated within the Industrial Safety Program, resulting in more funding for the program.
  • The Regulation on Best HSE Practices was approved to ensure continued strengthening of our safety culture Full name of the document: Regulation on Best HSE Practices of LUKOIL Group to fulfill the objective of improving industrial safety, reducing injuries and ensuring accident-free operation of production and other facilities, as well as continuous reduction of environmental impact and systematization of the experience accumulated in LUKOIL Group entities. . Identifying and sharing best practices will help improve existing practices and implement new management and manufacturing processes and operations, and this will enhance safety overall.
  • In addition to the leadership programs of the Group’s entities, the Technical Inspectorate of the Trade Union Association (IATUO of PJSC LUKOIL) also rolled out activities on safety culture through the Occupational Safety commissioners. In 2020, a new method of improving occupational safety — the Leadership and Safety Culture System of Occupational Safety Commissioners. Its principal objective is to convince each employee of their ability to become a safety leader, thus shaping a new mindset in the workforce. The IATUO Chairman has already held his first Leadership Visits. We have organized seminars attended by 479 occupational safety commissioners and created the e-learning course on “Leadership and Safety Culture” to continue the training.
Financing of HSE targeted and investment programs at LUKOIL Group, RUB million
Program 2018 2019 2020
Environmental Safety Program 35,529 35,903 22,440
including:
  • capital costs
28,498 30,046 17,857
Industrial Safety Programs, Better Working Environment, Emergency Prevention and Response Program 10,093 12,008 31,161
including:
  • costs to improve labor conditions and protect health, reduce occupational injury and occupational disease rates
4,946 5,281 6,532
  • costs to reduce accident, incident, fire, and emergency risks
5,147 6,727 24,629
R&D, experimental engineering, and scientific technical works in Russia 80 57 29
including:
  • environmental protection
58 34 19
  • industrial safety
22 23 10
Total, RUB million 45,702 47,968 53,630
Note. Following the decision of the HSE Committee in 2020, expenses for several activities related to emergency prevention and response (including activities to improve the reliability of pipeline transportation) were reallocated from ESP to ISP. Cost changes for R&D projects depend on funding schedules for approved projects.