Saipem Sustainability Talent

C a s e s t u d y

NIGERIA

Nigeria

Saipem Sustainability Talent

C a s e s t u d y

INDEX
SAIPEM AT A GLANCE Saipem activities Saipem throughout the world Main financial results Saipems human resources SAIPEM SUSTAINABILITY Sustainability organisation Methodology Saipems sustainability policy Saipems sustainability talent FEDERAL REPUBLIC OF NIGERIA OVERVIEW The country in brief Most of Nigerias - Oil production and Consumption The environmental issue The social aspect SAIPEM GROUP IN NIGERIA The company Saipem Group organisation in Nigeria Saipem Group temporary activities in Nigeria Recent acquisitions Company Organisation and management system Mission and policies STAKEHOLDERS RELATIONS Saipem Employees in Nigeria Trade unions Local communities Clients Local suppliers and subcontractors PERFORMANCE INDICATORS THE ENVIRONMENTAL PERFORMANCE Water Consumption Energy Consumption Waste Gas Emissions THE SOCIAL PERFORMANCE Employees distribution Training Safety Health THE ECONOMIC PERFORMANCE Saipem contribution to the Local Economy Safety expenditures Medical expenditures Environmental expenditures Employees salaries & benefits FUTURE CHALLENGES GLOSSARY & KEY WORDS
SAIPEM

6 7 7 8 8 9 10 11 12 12 13 14 14 15 15 17 17 18 18 19 20 20 22 23 23 23 24 24 25 25 26 26 27 27 28 28 28 30 30 31 31 32 33 33 33 34 35

SUSTAINABILITY

INTRODUCTION

This report is part of Saipem's Sustainability programme for the years 2003-2005. For the first time in its history, Saipem has published local reports illustrating its socio-economic and environmental performance in Nigeria, Kazakhstan,
Azerbaijan and Peru. Since 1997, Saipem has been developing HSE reports, providing in-depth analyses of the Saipem Group's overall performance. The ever-increasing interest by stakeholders in companies' socio-economic data has spurred the Oil&Gas sector to produce sustainability reports, and Saipem has reacted accordingly. Saipem felt that, by producing a single report for the whole Saipem Group, it would overlook important country-specific aspects. Therefore, the Company decided to publish several reports on various countries of operation. In 2004, Saipem focused on operations in Nigeria, Kazakhstan, Azerbaijan and Peru for the period 2001 to 2003. All reports share the same structure, although available data and the individual nature of each site make each document unique. These reports are prefaced by a general introduction to Saipem's approach in developing operations throughout the world; they contain an analysis on the environmental, social and economic impact of the company's activities, so as to illustrate Saipem's endeavour, in quantitative terms, to develop actual Local Content in the Country.

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SUSTAINABILITY

MESSAGE FROM THE GROUP CHAIRMAN AND THE MANAGING DIRECTOR

The industrial development of the Saipem Group reflects that of the Oil and Gas industry itself in many respects. This is especially true in frontier areas, where Saipem is committed not only to resolving technological challenges, but to contributing to social, cultural and environmental development. This also responds to the input of a growing number of stakeholders, whose interest is not limited to strict economic or technological performance, but also in the concept of sustainable development in our business. As clearly reflected in our Mission Statement, globally, Saipem is adopting an approach that combines sustainable development with other business needs. The methods are based on a simple but ambitious concept: embracing diversity; developing an everexpanding, truly international organisation comprising multi-local teams working together to achieve predetermined targets. The Sustainability Programme that Saipem started implementing in 2002, is the result of thoughtful, comprehensive, internal assessment. The diversity of our projects and the specificity of environments in which they are performed, are the reason for adopting a Local Approach to Sustainability. Our path towards Sustainability has an over-riding objective: beneficial integration of our activities within a local context, and leveraging the Company's talents to create better opportunities for local communities. We need to evaluate and present our performance to date to our stakeholders, and to improve it in future. These reports on Saipems Sustainability Initiative in Nigeria, Peru, Azerbaijan and Kazakhstan are a first step. Pietro Franco Tali Chairman & C.E.O. Hugh James O'Donnell Managing Director

LETTER FROM THE CORPORATE QHSE MANAGER

In 1987, the World Commission on Environment and Development - the Brundtland Commission defined Sustainable Development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. But how can we effectively contribute to sustainable development? This is the question that Saipem has been trying to answer for some time now. The European Commission recently stated that a business is defined as sustainable if it voluntarily encompasses social and environmental factors in its activities and interactions with the so-called stakeholders, seen as milestones in the development of its activities. Working on the integration of the sustainability issues in the Saipem's day-to-day operations has been a challenge from the very beginning. We started from an in-depth analysis and assessment of our global activities and realized that both Saipem's business and experience are based on the involvement of local communities in the business activity and on our effort to integrate into their specific social and environmental context. Our challenge is to strengthen this mutual flexibility and to empower the innovative approach we chose as a corporation, through the principles of Corporate Social Responsibility (CSR). Sustainability, just like health, safety and environment are of primary importance in the development of our operations. These are innovative issues that aim at improving our relationships with the local communities. Saipem can improve the local economy by favouring the growth of economic activities, local employment and the spread of professional knowledge. The local context, in turn, provides opportunities for the optimisation of costs of materials and services. Finally, Saipem's approach has a strategic value in projects acquisition, as the Oil & Gas companies generally require the CSR approach from contractors. These driving forces have led Saipem to include in its mission statement the concept of sustainable development, to produce a corporate sustainability policy and realise four local reports that illustrate in detail the work we have been carrying out in frontier areas for many years. These local reports on Saipem's activities in Nigeria, Peru, Azerbaijan and Kazakhstan represent our proposal for an open dialogue with our stakeholders at local level; we also welcome their feedback and support in improving our information on sustainability issues. We have set ourselves targets, we'll be able to reach them by the creation of actual local competences and with the full support of our Stakeholders. Sabatino De Sanctis QHSE Senior Vice President

Saipem Corporate Milan

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SUSTAINABILITY

LETTER FROM THE MANAGING DIRECTOR OF THE SAIPEM NIGERIA GROUP

The Saipem Group started operating in Nigeria over 30 years ago. The going wasn't always easy, but our advantage was the concerted effort we made to understand the country and the approach we used to develop activities that were compatible with the local culture. Saipem decided to incorporate and develop two branches of the Saipem Group, which are the points of reference for all Nigerian operations. The establishment of Saipem Nigeria Limited in 1967 and Saipem Contracting Nigeria Limited in 1989 supported the development of a growing number of onshore and offshore projects. Today we are still expanding our operations, performing activities that are increasingly challenging from a technological point of view and constantly adding new Saipem Group companies to our Nigerian Operations. Our efforts and the principles that drove the Nigerian operations from their inception are exactly the same as they are today. They are of paramount importance to us and we refer to them in as Local Content. The local content of our companies in Nigeria has always been considerable; however, recently we have been progressively more focused on increasing the number of local employees and procuring materials and services locally. Our local content in Nigeria is a best practice for the Saipem Group and of great advantage to our clients. The QHSE department's suggestion to produce this report, with the aim of analysing and describing the sustainability approach to our activities, seems of interest not only in recognition of our efforts but also gives us the tools to improve. I hope that our Nigerian, Italian and International stakeholders will find this report useful and believe that it will provide the basis for other Saipem Group companies to follow the same approach. Pietro Varone Managing Director Nigeria

SAIPEM

SUSTAINABILITY

A GLANCE
SAIPEMS MISSION

SAIPEM AT

Pursuing the satisfaction of our clients in the energy industry, we tackle each challenge with safe, reliable and innovative solutions.We entrust our competent and multi-local teams to provide sustainable development for our company and the communities in which we operate.
Saipem is one of the world leaders in supplying services to the oil & gas sector, particularly in offshore engineering and construction. Between 1998 and 2001, the Company invested heavily to strengthen its offshore fleet, both in offshore construction and in offshore drilling. As a result, Saipem's fleet is amongst the most technologically advanced and efficient in the sector. In May 2002, Saipem acquired the French engineering company Bouygues Offshore, this allowed the Company to become a leading contractor in the field of complex EPIC projects (Engineering, Procurement, Installation and Construction). In addition this operation allowed the constitution of a group which is a real global contractor, with relevant local presence in strategic and emerging areas, such as Western Africa, the former Soviet Union, Central and South East Asia, North Africa and the Middle East.

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SUSTAINABILITY

SAIPEM ACTIVITIES
The new Group is organised in six worldwide business units. It enjoys superior competitive positioning for the provision of EPIC services to the oil and gas industry, with a particular focus on activities in remote areas, deepwater environments and gas related projects. Offshore Construction: Saipem is the consolidated leader in offshore construction, with main activities covering engineering, construction, and installation of platforms, subsea structures, floating production systems, and subsea pipelines. The most powerful asset in Saipem's fleet is Saipem 7000, a semi-submersible vessel capable of lifting structures of up to 14,000 tons and laying pipelines in ultra deep waters. Other vessels include Castoro 6 and Semac 1, capable of laying large diameter pipelines, Saibos FDS (Field Development Ship), a specialised vessel used for the development of deep water fields and Saipem 3000, a vessel capable of lifting structures of up to 2,400 tons. The company's recent acquisitions further strengthened its engineering and project management expertise. Drilling: Saipem's mobile offshore drilling fleet consists of one state-of-the-art drillship (Saipem 10000), five semi-submersibles and four cantilevered jack-ups. Saipem drilling operations are carried out on behalf of the major corporations in the oil and gas sector. Saipem owns 23 drilling rigs and 15 workover rigs capable of operating at depths ranging from 2,500 to 10,000 meters at elevated temperatures and in high pressure environments. Leased FPSO: Saipem entered this sector in 1996 as a new player offering a unique combination of the capabilities of a major EPIC contractor with the worldwide presence of an owner of first class drilling and construction vessels. Saipem's wholly owned fleet enables the company to provide a full range of installation, construction and transportation services suited to the most challenging floating system installations. Onshore Construction: Saipem is world leader in the onshore construction sector having laid more than 60,000 km of pipelines over five continents and built some 100 oil refineries, petrochemical plants, power plants, oil and water pumping stations and natural gas compression stations. The Company specialises in the laying of large diameter pipelines, above all in adverse climatic conditions and difficult to reach areas. Liquefied Natural Gas: Saipem entered this high-potential market by establishing a new group which has the necessary technological capabilities to construct LNG tanks and is experienced in the construction of offshore and onshore LNG import and export terminals. Maintenance Modification and Operation: Saipem's presence in the last link of the value chain enables the Company to offer end-to-end solutions to energy service providers. This kind of activity allows Saipem to streamline processes, increase productivity and offer clients plans of continuous improvement.

SAIPEM THROUGHOUT THE WORLD

Saipem carries out both onshore and offshore operations in a very large number of countries throughout the world. As a contracting company operating in the Oil&Gas sector, Saipem's worldwide presence and the geographical distribution of its backlog are determined by where the Oil Companies' investments are in the world. Saipem's backlog by geographical area shows that 37% of future projects will be located in West Africa and 20% in Russia. Others important areas will be North Africa and Asia.
Backlog by geographical area

North Africa 16% Asia 14% Europe 10%

West Africa 37% Americas 3% Russia 20%

Data updated at December 2003

Principal Operating Centers Offshore Offshore Drilling float. Prod. Lng & maritime works Engineering Centers Onshore Drilling Maintenance Modification and Operation (MMO) Yards/bases Other Offices/Activities

Onshore

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SUSTAINABILITY

MAIN FINANCIAL RESULTS

Operating revenues Production costs Idle costs Selling expenses Research and development costs General and administrative expenses NET INCOME OFFSHORE CONSTRUCTION PIPELINES LAID (KM) INSTALLATION (TONS) OFFSHORE DRILLING METRES DRILLED ONSHORE CONSTRUCTION PIPELINES LAID (KM) INSTALLATION (TONS) ONSHORE DRILLING METRES DRILLED 2001 1,923 (1,518) (41) (27) (2) (79) 168 2001 781 73,028 2001 106,797 2001 552 18,120 2001 189,683 2002 (*) 3,149 (2,637) (48) (56) (6) (102) 191 2002 1,798 55,960 2002 124,761 2002 687 30,060 2002 348,040 2003 4,231 (3,658) (78) (66) (9) (115) 196 2003 1,409 118,211 2003 128,839 2003 612 23,930 2003 385,976

(*) Includes Saipem s.a. (formerly Bouygues Offshore) figures from the third quarter

SAIPEM'S HUMAN RESOURCES

Saipem Group Employees
30000 25000 20000 15000 10000 5000 0 1999 2000 2001 2002 2003

The trend in human resources from 1999 to 2002 shows significant growth, culminating in 25,196 employees in 2002 following the acquisition and integration of Saipem s.a. (formerly known as Bouygues Offshore). In 2003, the new Group was rationalised with the total number of employees at the end of the year falling to 21,556. Saipem has always been a truly international company, constantly focusing on integration at local level. In 2003, non-European international employees represented 67% of the total workforce. If we analyse Saipem's personnel by nationality, we see that the majority are French (17%), followed by Italian (11%). The third largest nationality within the Saipem Group is Nigerian making up 10% of the total number of employees.

European

Other Nationalities

Data updated at December 2003

Saipem Employees by Country of Origin

20%

15%

10%

5%

0%
Fra

nce Italy geria ssia aijan pines hstan India ngola A Ru zerb hilip zak Ni A P Ka

ru Pe

UK lgeria aysia rabia nesia oatia l A o A Cr Ma audi Ind S

y A er US orwa Oth N

Data updated at December 2003

SAIPEM

SUSTAINABILITY

SUSTAINABILITY
Consistent with its policy on continual improvement of the management system, Saipem has undertaken a comprehensive assessment of its approach in several strategic countries.In particular, Saipem has begun analysing the sustainability approach used
on certain projects with the aim of providing information for current initiatives. A dedicated team has been working since May 2002 to identify and raise awareness on all initiatives concerning sustainable development and look at possible areas of improvement. Their activities focused firstly on the identification of the relevant indicators of Saipem's worldwide operations from the socio-economic standpoint. This required an assessment of the accounting system and the collection of data both at Corporate and site level. The identification of indicators was followed by the assessment of social and environmental initiatives at site level. Having analysed strengths and weaknesses of its sustainability approach, Saipem resolved that the modus operandi to adopt in the future would be based on the ideals of sustainability. This means achieving the following milestones: Economical: to increase Saipem's contribution to the local and global economy through its economic results; Social: to safeguard the development of local communities, human rights, guaranteeing good working condition, freedom of association, repudiating any form of discrimination, forced or juvenile labour, corruption, safeguarding dignity and promoting health and safety; Environmental: to minimise any environmental impact Saipem activities may have.

SAIPEM

SAIPEM

SUSTAINABILITY

SUSTAINABILITY ORGANISATION
Managing social issues along with policies on local content have long been a commitment of Saipem Group. In 2002, Saipem produced a new mission statement which underlined the importance of a proactive approach to sustainability, concurrently setting up a dedicated team with proven experience. The Corporate Sustainability Team's responsibility is to propose, assess and support the development of local level initiatives based on Saipem's mission. The team is part of the Corporate QHSE Department, which has a long-standing presence within the Saipem Group organisation. An essential role in sustainability management is played by the Sustainability Network, which was set up by the Sustainability Team, bringing together different departments from the various operating companies, which can aid the development of socioeconomic initiatives with their own distinctive competencies. Other corporate departments, such as the Human Resources and Administration and Finance Department, also play a pivotal role in the Sustainability Network, along with Saipem Sustainability Facilitators who represent Saipem Sustainability Team in Key Areas. To streamline efforts related to the development of the Sustainability approach, Saipem has identified certain geographical areas of business which are deemed to be of key importance. The identification of these key areas varies in line with the evolution of the business activities throughout the world. In 2003, the Sustainability Key Areas were: Algeria, Angola, Azerbaijan, Kazakhstan, Malaysia, Indonesia, Thailand, Nigeria, Peru, Venezuela, Russia, Saudi Arabia, Oman, and UAE (United Arab Emirates). In each key area, a Sustainability Facilitator appointed by the Saipem Group Resident Area Manager is responsible for the co-ordination of sustainability initiatives at local level. The sustainability facilitator mainly promotes and develops, with the involvement of the local senior management, initiatives for the increase and improvement of local content, for the good relationships with the local stakeholders and the sustainability accounting.

Sustainability Facilitators

Nigeria Peru Algeria Angola Azerbaijan Kazakhstan Russia Saudi Arabia, Oman, UAE Malaysia, Indonesia, Thailand

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10 SUSTAINABILITY

METHODOLOGY
The approach adopted in the preparation of this report is the result of several analyses Saipem recently carried out, together with Eni and the Fondazione Eni Enrico Mattei. Many contributions came from a benchmarking survey of sustainability publications and the following Corporate Social Responsibility Guidelines: Global Reporting Initiative (GRI) guidelines, International Network for Environmental Management (INEM) guidelines, World Business Council for Sustainable Development (WBCSD), among others. In the development of Saipem local reports an approach consistent with the GRI guidelines was chosen, in order to adopt indicators relevant to most of the reporting organisations and of interest to most of the stakeholders. The Global Reporting Initiative (GRI) is a multi-stakeholder process and independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines. These Guidelines are for voluntary use by organisations for reporting on the economic, environmental, and social dimensions of their activities, products and services. Begun in 1997, GRI is an official collaborating centre of the United Nations Environment Programme (UNEP) working in cooperation with UN SecretaryGeneral Kofi Annan's Global Compact. The aim of the GRI Guidelines is to assist reporting organisations and their stakeholders in articulating and understanding contributions of the reporting organisations to sustainable development. The assessment of Saipem's activities in terms of sustainability allows us to evaluate the merits of each indicator proposed by GRI Guidelines and introduce more specific ones. The information contained in this report was collected both at site and corporate level. A specific Sustainability Accounting Standard was created to gather qualitative and quantitative data from sites. Whenever possible, this report spans a period of three years, from 2001 to 2003. This report is one of four Local Sustainability Reports Saipem published in 2004 and illustrates Saipem's approach in Nigeria. Data encompasses onshore construction and drilling as well as offshore construction projects performed by two Group companies operating in Nigeria. Environmental data has been separately provided for onshore and offshore activities, whereas social and economic figures are inclusive of all areas of business. Data was collected from the following sources: Accounting system for HSE data Accounting system for the management of medical expenses Financial Accounting system for the Group Interviews and sustainability accounting system at local level This is the first attempt by Saipem to analyse the social, economic and environmental impact of specific operations in a particular country; this effort has been supported by the recent introduction of the sustainability accounting system and the ever increasing involvement of Saipem's personnel in sustainability issues.

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SUSTAINABILITY 11

SAIPEM'S SUSTAINABILITY POLICY

Saipem's Sustainability Policy was formalised in May 2003, reflecting the senior management's commitment to attaining specific targets in terms of Saipem's approach. A network where everybody's commitment contributes to the common well-being Sustainability incorporates three principles that are of particular significance within Saipem: protection of environment, respect of social rights of employees and contribution to local economic development. Saipem is committed to promoting Sustainable Development in all facets of its global activities in a manner that is compatible with the socio-economic and environmental needs of its Clients. Saipem employees should have the opportunity to develop while working in an environment that is increasingly healthy and safe, whether on site or on board a vessel. Saipem's approach to Corporate Sustainability is based on the creation of long term shareholder value by contributing to the development of the local communities where we operate. Saipem is committed to achieving such development through environmental protection, economic growth and social progress, attention to local suppliers and professional training for local employees. This commitment is managed through these shared Sustainability Practices: Conducting operations and relationships with integrity and honesty, valuing the richness of each culture and respecting Human Rights; Managing the Health, Safety and Environmental aspects in compliance with existing HSE Policy and Principles; Maintaining an open and transparent dialogue in decisions which affect stakeholders; Researching the possible impacts of activities in host countries, both prior to and during, project execution; Monitoring social, economic and environmental performance with the aim of measuring Saipem's impact so as to ensure compliance with legal requirements and best practice guidelines; Establishing a reliable verification system for the performance of suppliers according to Sustainability Principles; Providing training to develop human capital and build competencies in the management of field of Sustainable Development; Implementing an effective and transparent Sustainability communication network within the Group. Saipem Sustainability Policy and Program will be constantly updated in order to achieve continuous improvement. The Corporate Sustainability Team assures constant monitoring and co-ordination of this Policy. The implementation of this Policy is the responsibility of all Saipem Group employees.

SAIPEM SUSTAINABILITY TALENT

The Saipem Sustainability Talent is the program Saipem is currently implementing to increase the projects' local content, train employees and develop their know-how in addition to establishing a closer relationship with local stakeholders. This slogan and the sustainability logo, that represent the integration of the elements of the triple bottom line (social, environmental and economical), have been developed to spread and root this business approach within all Saipem's world.

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12 SUSTAINABILITY

FEDERAL REPUBLIC

OVERVIEW
Nigeria has been producing oil since 1958. Its the 11th ranked Nation in the world for its reserves and the second in Africa, with estimated proven oil reserves of 22.5 billion barrels. Daily oil production stands at over 2 million barrels, half of
which is produced offshore. The share of offshore production is increasing as all the recently discovered fields and development projects are offshore. Oil and gas companies operate in Nigeria through joint venture contracts with the National oil company, the Nigerian National Petroleum Corporation (NNPC). Most of Nigeria's crude exports are destined for the United States and Western Europe, with Asia also becoming an increasingly important market. In 2002, Nigerian crude exports to the United States averaged 567,000 bbl/d (6.27% of U.S. imported crude oil) a decrease versus 842,000 bbl/d in 2001 (9.03% of U.S. imported crude oil). According to the International Monetary Fund (IMF) and the Energy Information Administration (EIA), in 2002 the oil export revenues totalled 17.2 billion of dollars; i.e. 90% of total export revenues.

OF NIGERIA

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SUSTAINABILITY 13

THE COUNTRY IN BRIEF

Social Indicators Population (2003) Age Structure (2001 est.) 133,881,703 0-14 years: 43.71% 15-64 years: 53.47% 65 years and over: 2.82% total: 18 years male: 18.1 years female: 17.9 years 51 years 2.53% Muslim 50%, Christian 40%, indigenous beliefs 10% English (official), Hausa, Yoruba, Igbo (Ibo), Fulani Purchasing power parity - $112,5 billion 3.2% Purchasing power parity - $900 Agriculture 45%; Industry 20%; Services 35% 14.2% 0.4% 66 million Agriculture 70%, Industry 10%, Services 20% 28% 923,768 sq km arable land: 30.96% permanent crops: 2.79% other: 66.25% 0,92 quadrillion Btu 23,5 million CO2 eq

Median age (2002)

Life expectancy (2003) Population growth rate (2003 est.) Religions Languages Economic Indicators Gross Domestic Product (GDP) (2002) GDP - real growth rate (2002) GDP - per capita (2002) GDP - by sector (2002) Inflation rate (consumer prices) (2002 est.) Industrial production growth rate (2002 est.) Labour force (1999) Labour force - by sector (1999) Unemployment rate (1992) Environmental Indicators Area Land use (1998 est.)

Total Energy consumption COx emissions

Source: Energy Information Administration, Country Analysis, Nigeria 2003 and Central Intelligence Agency (CIA), The world Fact Book, Nigeria 2003

MOST OF NIGERIAS - OIL PRODUCTION AND CONSUMPTION

Nigeria Crude Oil Production
2500 Thousand barrels/day 2000 1500 1000 500 0 1980 1985 1990 1995 2000 2001 2002 2003

U.M.

2001

2002

2003

Reserves Production

Millions of barrels Thousand barrels per day

24,000 2,199

27,200 2,013

25,000 2,275

% on total Reserves in Africa 29% 26%

% on total Reserves in the world 2% 3%

Source: Eni World Oil and Gas Review 2004

Source: Eni World Oil and Gas Review 2004

Nigeria Oil Comsuption

300 Thousand barrels/day 250 200 150 100 50 0 1995 2000 2001 2002 2003

Source: Eni World Oil and Gas Review 2004

Nigeria's total primary energy consumption has more than doubled since 1980. Owing to its continuing population boom and the further development of the country's economy (fuelled by oil development), Nigeria's energy consumption has risen from just 0.42 quadrillion Btu (quads) in 1980 to approximately 0.92 quads in 2001. Petroleum consumption accounted for the lion's share of Nigeria's total energy consumption in 2001, making up 61.4% of the total. Natural gas accounted for the bulk of the remainder with 31.7%, with hydropower (6.8%) and coal (0.2%) rounding out the country's fuel mix. In recent years, natural gas has made inroads in Nigeria, up from 22% of the country's primary energy consumption in the mid-1990s to nearly 32% today. Nigeria's government is keen to expand natural gas consumption to relieve some of the pressure on native forests, which continue to be burned for fuel in many rural areas. There are four refineries in Nigeria (Port Harcourt 1 and 2, Warri and Kaduna), but the level of output is quite low. While Nigeria's state-held refineries are slated for privatization, plans for several small, independently-owned refineries are being developed. Nigeria has awarded 18 private refinery licences after opening up

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14 SUSTAINABILITY

the country's downstream sector to private investment. The lack of refinery capacity in the country has been a key factor in Nigeria's latest fuel crisis, in February 2003.
Supply and Consumption Coal Crude Oil Petroleum Products Gas Nuclear Hydro Geotherm Solar, etc Renewable and Waste Electricity Heat Total Production 39 119,115 0 13,285 0 595 0 73,990 0 0 20,7024 Imports 0 0 4,802 0 0 0 0 0 0 0 4,802 Exports 0 -107,176 -1,296 -6,634 0 0 0 0 0 0 -115,107

Source: IEA Energy Statistic 2001 - in thousand tonnes of oil equivalent (ktoe) on a net calorific value basis

THE ENVIRONMENTAL ISSUE

Oil has been an integral part of the Nigerian economy since vast reserves of petroleum were found in the country in the 1950s, but exploration and development of that oil has had severe environmental impacts and human consequences. The Nigerian government has indicated a desire to change this situation, and in recent years, it has taken actual measures to effect this change. In this regard, the Government is promoting the performance of environmental risk assessments, prior to project initiation. Tighter regulation and better enforcement of existing environmental laws should help stem the degradation of the environment and prevent the same type of problems in the future. One of Nigeria's main challenges, similar to many other developing countries, is how to provide energy to a rapidly growing population in a sustainable manner. The energy choices that Nigeria makes, whether to increase oil exploration, develop its coal resources or move towards development of renewable energy resources, will have a significant impact on Nigeria's environment in the future. With the country's oil production slated to rise and the country's population, already the largest in Africa, continuing to increase, the pressure on Nigeria's environment is likely to continue. As such, the Nigerian Federal Government, nongovernmental organizations and international oil companies will have to work together to slow the degradation of Nigeria's environment and take steps to mitigate the problems that a half-century's worth of oil production already has caused. The Nigerian Government has now committed to ending the process of gas flaring from oil production by 2008. The continued process of gas flaring has not only meant that a potential energy source and source of revenue has gone up in smoke, but it is also a major contributor to air pollution and acid rain. The phasing-out of gas flaring has been consistently pushed back as Nigeria has focused on boosting oil exploration and production in order to generate much needed revenue for the government, but the 2008 deadline now appears firm as infrastructure to monetize the associated gas from oil production is in place. The end of gas flaring by 2008 should have a threefold positive effect, with a reduction in air pollution from carbon emissions, an increase in natural gas available for domestic consumption and export, and an added source of revenue for the Nigerian government from the sale of the natural gas that will be produced rather than flared. The Nigerian government also is looking to promote the use of coal for domestic consumption and industrial uses as a means of combating deforestation and over-reliance on oil. However, the Country has limited coal reserves, much of which are lignite and sub bituminous, and Nigeria's coal production never very high to begin with has declined by around 50% since 1997.

THE SOCIAL ASPECT

Nigeria is a young democracy with a multi-ethnic and multi-religious population. Nigeria is one of the countries with the highest growth rates of population, after India and Pakistan. Nowadays, population is around 133 million, and according to United Nation's estimations will double in 24 years. Nigeria has the largest population of any country in Africa and the greatest diversity of cultures, ways of life, cities and terrain. Nigeria became an independent Nation on October 1, 1960, and a Republic in

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SUSTAINABILITY 15

1963, with a federal structure and three regional governments based on the compass points of north, east, and west. A fourth region, the Midwest, was later added. The Country's political structure was increased to nineteen states in 1976, with Abuja as the new federal capital. Between 1987 and 1991, a total of eleven states were created, and just recently in 1996, six additional states were added, bringing the administrative structure of the federation to thirty-six states. The Framework for Nigeria's Economic Growth and Development (2003 - 2007), established interesting targets of improvement in the social issues as stated in the report, the Government will optimize its provision of an enabling environment, involving the support of basic healthcare, appropriate education, water supply, sanitation and communication. These services or facilities will be used to ensure support for robust economic activity from the priority areas identified by Government. Education Government will support the provision of appropriate education and skills for running a private sector led economy. Priority will also be given to facilities that provide training to workers. In the health sector, the main policy objective of Government is the provision of sustainable basic health care delivery systems to all Nigerians. With this and other facilities, Government will aim at improving the quality of life for the average Nigerian. Government will also seek to raise the National life expectancy rate from 53 years to 65 years and reduce the infant mortality rate.

Nigeria's Population Trend

300

250

200

150

100

50

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Target 2027

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16 SUSTAINABILITY

IN NIGERIA
The Saipem Group has a structured organisation operating in West Africa. It has been operating in West Africa for over 30 years, with Nigeria serving as the pivotal base for the major projects, resulting in:
Drilling: over 350 onshore wells and over 120 offshore wells Pipelines: over 1000 km of pipe laid Plants: over 30 EPC Plants Installations Saipem operates in Nigeria through the following four subsidiaries: Saipem Contracting Nigeria Limited, involved in Engineering, Procurement, Construction and Fabrication for onshore activities; Saipem (Nigeria) Limited, involved in drilling activities both onshore and offshore; Saipem Logistic Services Limited, established in 2002, providing logistic support to group companies in Nigeria; FPSO Mystras Nigeria Limited, set up to support purchasing and operations of the FPSOs. Saipem S.p.A., Saipem S.A., Sonsub and Saibos develop specific projects as foreign companies even if registered with the Nigerian Department of Petroleum Resources (DPR).

SAIPEM GROUP

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SUSTAINABILITY 17

SAIPEM GROUP ORGANISATION IN NIGERIA

Nigerian Subsidiaries

Saipem Contracting Nigeria Limited

Onshore EPC, Fabrication, Maintenance, Modification and Operations

Saipem (Nigeria) Limited

Onshore & Offshore Drilling Operations

Saipem Group Nigeria Port Harcourt Base

FPSO MYSTRAS Nigeria Limited

Supply & Operator of FPSO

Saipem Logistic Services Limited

Services and Logistics Support to the Saipem Group activities in Nigeria

Joint Joint Venture Company 50%

Saipem has been always characterised by a local presence in Nigeria but several years ago, Saipem recognized the need to consolidate the Company's operational requirements. This has resulted in the construction of a purpose built Operations Base in Port Harcourt. Saipem activities are supported by three logistic bases and a maintenance centre: The Nigerian Head Office for the Saipem Group, based in a recently constructed building in Lagos and performs activities of contract administration, cost control and project management. The Saipem Operations Base complex of about 460,000 m2, located on riverside on the Bonny River at Rumuolumeni and has a production capacity of 100,000 man-hours per month. During 2003, it has been expanded and refurbished to increase its capability to support platform construction and all Saipem Group Nigerian activities. Onne Free zone Maintenance centre in Port Harcourt

SAIPEM GROUP TEMPORARY ACTIVITIES IN NIGERIA

In 2003, Saipem performed both onshore and offshore operations in Nigeria. Offshore activities in the 2003 were as follows: The semi-submersible platform Scarabeo 4 carried out operations in Nigerian waters on behalf of NAOC and TotalFinaElf; subsequently it performed in Equatorial Guinea. The semi-submersible platform Scarabeo 7 carried out activities in Nigerian waters on behalf of NAE in the ABO field; following upgrading works concluded in August, it began operations on the Erha field, as part of a three-year contract on behalf of Exxon Mobil Nigeria. The jack-up Perro Negro 5 continued drilling operations offshore the Nigerian coast on behalf of Belbop until November; it was then transferred to Cameroon to undergo upgrade and maintenance works. The deep-water drillship Saipem 10000, was transferred to Nigeria where it operated on behalf of NAE (Nigerian Agip Exploration Ltd) on the ABO field. The production vessel Jamestown operated continuously throughout the year on the Okono/Okpoho fields, at depths ranging from 60 to 130 metres. At the end of the year the unit was replaced by the larger FPSO Mystras. The Okpoho project on behalf of Agip Energy Natural Resources Ltd, comprising engineering, provisioning, construction and commissioning of an offshore platform. The first phase of the project involving the construction of the platform was carried out by Saipem Contracting (Nigeria) Ltd., Intermare Sarda S.p.A. and Pelfaco Nig. Ltd; installation was performed by SaiBos Construes Martimas Lda., utilising the derrick pipelay vessel Castoro Otto; The EPIC project Amenam was completed on behalf of Elf. It comprised the construction of a

SAIPEM

18 SUSTAINABILITY

platform and its installation using the 'float-over' method. The project was carried out utilising the pipelay and heavy-lift vessel Castoro Otto and the work lay barge SaiBos 230; Preparatory activities have begun on the EPIC project East Area EPC2 on behalf of Exxon Mobil; the project comprises engineering, procurement, construction and installation of three plat forms, in addition to the laying of subsea pipelines. The project will be carried out utilising the derrick pipelay vessel Castoro Otto and the work lay barge SaiBos 230; On behalf of TotalFinaElf, operations have started on the EPIC project Amenam 2, comprising engineering, procurement, construction of a platform and its installation utilising the 'float-over' method. The contract will be performed in joint venture with Technip-Coflexip (30%). In addition to projects performed by SaiBos (Saipem Group) and its participation to the Group's engineering and project management activities, Saipem s.a., directly or through several direct subsidiaries, carried out the following works: On behalf of Esso Exploration & Production Nigeria Limited, involvement in the EPIC project Erha for the fabrication of pipe racks, power generation module and flare. On behalf of Mobil Producing Nigeria Unlimited, fabrication of the Jacket for the Yoho platform. 2003 onshore activities in Nigeria were as follows: On behalf of NAOC, engineering activities for the NLNG Phase 3 Obiafu/Obrikon project have been completed, whilst material procurement and construction activities relating to prefabrication and installation works are progressing. On behalf of NAOC, construction and installation works for the fourth compression module at Obiafu-Obrikon have been completed. On behalf of NAOC, mobilisation of the Construction Project Team has been completed for the Okpai Power Plant project; civil, mechanical and electro instrumentation works are progressing, whilst engineering and material procurement activities are underway. On behalf of NAOC, civil works are progressing in various areas. On behalf of NGC (Nigerian Gas Company), having completed the Rehabilitation of NGC Gas Metering Stations project, extra works requested by the Client have been carried out. On behalf of TotalFinaElf, installation operations of two Screw Compressors at the Obaji plant have been completed. Drilling onshore activities in 2003 were developed by Saipem rigs: Rig 5892, Rig 5832, Rig 5823. A high-depth drilling rig concluded operations on behalf of NAOC as part of a contract for the drilling of four wells; a medium/high-depth rig operated on behalf of NAOC within a one-year contract with an option of an additional 12 months; another medium/high-depth rig successfully completed drilling operations on behalf of Elf Petroleum and was transferred to Algeria at the end of the year.

Saipem Group Nigeria Lagos Offices

RECENT ACQUISITIONS
Offshore activities: On behalf of Elf Petroleum Nigeria Ltd, the EPIC contract for the 'Amenam II' project, comprising engineering, procurement, construction and installation of a platform and a bridge for the Amenam field. The contract was awarded to the JV comprising Technip-Coflexip (30%); On behalf of NNPC (Nigerian National Petroleum Corporation)/Mobil, the EPIC contract for the 'East Area EPC2 Additional Oil Recovery' project, comprising engineering, procurement, construction and installation of three platforms, in addition to the laying of subsea pipelines; On behalf of Exxon Mobil Nigeria, the three-year charter of the semi-submersible drilling platform Scarabeo 7. Onshore activities: On behalf of NAOC, the Okpai Power Plant project, involving the construction of a 'combined cycle' Power Generation Plant. The contract was awarded to Saipem S.p.A. in consortium with Alstom Power Italia (leader). On behalf of Shell Petroleum Development of Nigeria Ltd., the debottlenecking for Soku LNG Gas Supply Plant Facilities. On behalf of Naoc, GTS-4 EPC project for the gas pipeline in the River State.

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SUSTAINABILITY 19

COMPANY ORGANISATION AND MANAGEMENT SYSTEM

Saipem activities in Nigeria are under the responsibility of the Managing Director who is supported by a very well organised structure. Company organisation has been structured in order to reflect the operational activities. Drilling, onshore and fabrication have their specific departments for commercial purpose and operations. All these, are supported by shared departments as Human Resources, Organisation and ICT, Security, Administration, Finance and Control, Contracts and QHSE. The sustainability approach is the result of the competent management displayed by all Company's departments. The HSE and the Local Content Department (part of the HR department) are more directly involved in the organisation of the sustainability issues. The HSE team comprises 45 personnel and is responsible for the HSE management for all Saipem projects in Nigeria. The HSE manager is responsible for all activities and is supported by HSE project supervisors and safety officers. An HSE training co-ordinator is also features in this organisation. The HSE system in Nigeria follows the same structure adopted at group level. Saipem Corporate defines policies, guidelines and standards suitable for all the operative companies inside the Group. Then, the operative companies establish specific policies, targets, organisation, procedures and work instructions. At last, at project level, plan and specific procedures are set. The Local Content Department was established in 2002 in order to improve the relationships between Saipem and its local stakeholders and to develop significant local initiatives to raise Saipem local content percentage. Although this is a new structure, in Nigeria as well as in the whole Saipem world, the link between this office and the Corporate office are guaranteed by the structure described for the management of socio-economic issues. The Sustainability Facilitator, responsible for the Local Content Department, is part of the international network working on these issues.

HSE Team

MANAGING DIRECTOR

Human Resources, Organisation & ICT

Administration, Finance and Control

Security

Contracts

QHSE

Commercial Drilling

Onshore Commercial

Onshore Operations

Drilling Operations

Fabrication

Procurement, Assets & Logistic Center

Maintenance, Modification and Operations

Saipem Group in Nigeria has a well structured management system covering all company core and support processes. The system has been designed in line with the Saipem Corporate Policies, Guidelines and Standards. In order to ensure a proper implementation of the policies and procedures, dedicated teams have been appointed for the various disciplines such as Quality Assurance, HSE, Local content, etc.

MISSION AND POLICIES

Saipem's business approach is consistent with its mission, policies and procedures which are in force at all Saipem companies worldwide. Each operative company, if necessary, can adopt its own statements and policies following the Corporate requirements. Saipem Group Nigeria Managing Director issued the Group mission and based on this, a series of policies statements have been approved (i.e. HSE, quality, security, etc.). Among the other, the most relevant in this reports' perspective are the Community Relations Policy and the Local Content Policy later on included.

SAIPEM

20 SUSTAINABILITY

Community Relations Policy Saipem Nigeria is highly committed to developing and maintaining friendly and mutually beneficial relationships with its host communities. The Company intends to achieve this objective by: Establishing and maintaining an effective communication channel with host communities Identification and implementation of fair procedures for hiring of local personnel Establishing a rapid response approach to complains from the communities No interference in local affairs of employees as well as behaviour that could be offensive to local traditions, customs or religious practices Participation in some local activities of the communities to promote social integration Assisting the communities in harnessing and developing available local manpower
Mr Otobo Evi Local Content Manager

Local Content Policy A company with a Human Face In line with the Corporate Sustainability Policy, Saipem Logistics Services Ltd has established a Local Content Policy based on the following principles: Implementation of an effective and transparent sustainability communication network within the Group Provide training to develop human capital and building competencies in the management of field of Sustainable local capacity developments Maintain an open and transparent dialogue in decisions, which affect all stakeholders Maintain the Health, Safety and Environmental aspects in compliance with existing HSE policy and principles Protect the Environment, respect of Human and Social rights of employees and Contribution to local economic development Establish a reliable verification system for the performance of suppliers according to sustainability principles

SAIPEM

SUSTAINABILITY 21

RELATIONS
Saipem has always adopted a direct approach with its stakeholders, especially at operating sites, such as in Nigeria. This approach often results in initiatives aimed at answering specific requirements from clients, local communities
and authorities. So far, no formalisation system for the management of the stakeholders' requirements had seemed necessary. With the development of the operations and their diversification, Saipem has experienced an increase in the number of stakeholders and of their requests. The Company, therefore, reached the conclusion that a formalised management system would facilitate the job and simplify the relationship with stakeholders. Saipem now needs a more formalised approach that would enable it to answer all stakeholders exhaustively. At Corporate level Saipem is developing guidelines to formalize the mapping, analysis and consultation of local stakeholders. This procedure will be implemented during major Saipem stakeholders' relationships at local level. In 2003, Saipem Group in Nigeria improves its external communication through the development of a booklet titled Here to Stay. This brochure presents the base and the operations, but also Saipem efforts to develop local content. This report is further attempt to achieve a more formalized relationship with stakeholders. This chapter details several initiatives carried out by Saipem for its major stakeholders.

STAKEHOLDERS

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22 SUSTAINABILITY

SAIPEM EMPLOYEES IN NIGERIA

At December 2003, the total number of employees is currently 2,506, of whom 2,030 are Nigerians and 476 International. This means that the 81% of the Saipem Group employees in Nigeria are locals. One of Saipem's targets is to increase the percentage of local employees. This will be achieved through a local manpower development program and a training program, both described in detail in the following paragraphs. Local employees agreed to different contractual conditions according to the Memorandum of Procedural Agreement, signed by Saipem and by local trade unions. These contracts are linked to the different employment categories existing within the company: junior staff, senior staff and special workers. These agreements define the basic salary, detailed conditions, benefits and allowances paid by Saipem and are renewed every two years following negotiations between the two parts. Basic salary and benefits will be described in the social performance analysis of this report.

TRADE UNIONS
Saipem Group employees in Nigeria are represented by four main trade unions; they act on behalf of senior and junior staff and for the construction and drilling workers. Trade unions as representative for Saipem local employees, support Saipem in maintaining positive and strict relationship with workers. Trade Unions sign the contractual agreement, which is updated and revised every two years. The last agreement was signed in October 2002 and is effective until September 2004. The percentage of workers who subscribed to the trade union is 75% of the total local employees, the vast majority being Junior staff (75% of subscribers).

LOCAL COMMUNITIES
One of the main stakeholders of Saipem Nigeria is the local community. A successful relationship with the local communities is a prerequisite for the success of Saipem's operations, as communities have a big influence in Nigeria's Oil&Gas market. Saipem aims to develop the relationship with the local communities and find the best balance between local communities' requirements and company's ability to fulfil them alongside the business needs. Saipem's approach is based on direct contact with the local communities. This is the reason why Saipem developed a well-organised internal structure, thereby avoiding the risk connected with the use of intermediaries. Saipem's main considerations are for the needs of three different communities in the area of Rumuolumeni. Attention is also given to various communities local to the areas where the projects are developed, especially at the beginning of onshore projects. Local communities' requirements consist mainly of finding jobs for their members and gaining an advantage for existing industrial and commercial enterprises from Saipem presence. Saipem is implementing an intense program to maximise local content, in terms of local employment and also local purchasing, as described in the local contribution paragraph. On the other hand, Saipem bound by the technical and contractual requirements set by the client. Communities' relations are mainly based on memorandum of understanding, an agreement signed by Saipem and local communities before the beginning of a project. This sets the percentage of local employment and purchasing and states Saipem's commitment in the development of the community. In most of the cases a memorandum of understanding doesn't satisfy the community in the long term and a continuous process of consultation is necessary. In order to facilitate the consultation process with local communities, Saipem regularly involves all the communities in a consultation forum. During this event, Saipem is used to describe the project and underline the main socio-economic and environmental effects of the project. This assures transparency with regard to the real possibilities for Saipem to maximise local content. A consultation forum was organised in April 2002, at the beginning of the third phase on the OB/OB project. With the support of the client and the local authorities, Saipem managed to convene all the necessary parties to the forum. The main communities were represented by over 1,000 people. This interesting also aimed at facilitating relationships with local suppliers. In 2003, Saipem started the construction of a power generation plant in the area of Okpai. This plant will supply approximately 480 MW of electricity to the region and thanks to the 'combined cycle' the project will optimise the power output and minimize gas emissions. Okpai communities are involved for the first time in oil and gas activities and this is the main reason why negotiations and mutual knowledge will require long process and a high level of attention from both parties. After signing the Memorandum of Understanding with the Communities, Saipem periodically meets communities' representatives by organising consultative forums that are managed by Saipem local lawyer.
SAIPEM

SUSTAINABILITY 23

CLIENTS
During the period under consideration, projects developed by Saipem were commissioned by many different clients, such as Eni, Exxon Mobil and Total. Oil companies are operating and producing in Nigeria through locally registered branches. Nigerian Branches can often sign joint venture agreements with the Nigerian National Petroleum Company (NNPC). The Nigerian Government has recently introduced a Production Sharing Contract (PSC) for offshore activities. This agreement implies that oil companies can invest in exploration and development of new fields, which remain the property of NNPC. During the production phase, the operator pays taxes and royalties on products, whereas revenues are divided between the operator and national government. This contract, which is supposed to be the future in the Nigerian oil and gas sector, lasts 30 years. Oil companies are expected to comply with local development requirements, measured in percentage of local content. Today, no law is in force that sets the minimum percentage of local content of the various projects but the Nigerian Government is expected to change this soon. An official document by the National Committee on Local Content - Synchronised Report on Enhancement of Local Content in the Upstream Sector of the Oil & Gas Industries in Nigeria - already targets improvement for local content percentage at 95% for the multinational operating and service companies. Saipem efforts to improve the local content for its activities are seen as an advantage for clients with regard to the local authorities' requirements. Saipem informs its clients about the percentage of local content of its projects and initiatives important for the local development. Again the relationship between Saipem and its clients is very close and different departments involved in operations discuss specific issues directly with the clients' representatives. During new project acquisition, clients' requirements on local content and on the management of socio-economic aspects are increasingly important. Saipem, pursuant to the HSE management system, is developing a formalised approach to be implemented during projects proposal phase.

LOCAL SUPPLIERS AND SUBCONTRACTORS

Increasing the number of local suppliers and subcontractors is challenging for Saipem; not only would it mean an increase in local content but also costs reduction in terms of the overall purchasing activities, resulting in logistics and custom saving and local based advantages. As stated before, in 2003 Saipem developed a Local Content Policy and organised initiatives aimed at meeting key local suppliers and subcontractors to discuss mutually satisfactory deals. In October 2003, Saipem convened a workshop to create room for improvement between vendors/ suppliers and Saipem. The majority of Saipem's vendors and suppliers were invited and the total number of participants was 50. During the forum, Saipem explained its ethical, HSE, quality requirements as well as its payment procedures. On the other hand, local vendors and suppliers had the chance to understand better the Company and its rules. Saipem also reiterated to local subcontractors the need for complete compliance with Nigerian law on corruption (Corrupt Practices and other Related Offences Act, 2000). Following the workshop, an intense schedule of meeting was established for the 2004. Saipem's departments for Local Content, Quality, Safety and Procurement are to meet major local subcontractors and table each others requirements and expectations.

SAIPEM

24 SUSTAINABILITY

INDICATORS
THE ENVIRONMENTAL PERFORMANCE

PERFORMANCE

The Nigerian Federal Government established the Federal Environmental Protection Agency (FEPA) in 1988 to protect, restore and preserve the ecosystems in Nigeria. The Federal Ministry for the Environment is one of theGovernment Environmental
Authorities for monitoring, controlling and coordination environmental issues for companies operating in the Country. Saipem activities are audited by FEPA as per the regulatory compliance requirements existing in Nigeria. The aim of this section is to show the Saipem Group's environmental performance in Nigeria. Saipem is implementing a planned and systematic Environmental Management System at Rumuolumeni operational base. This process is already underway and steps have already been taken to fulfil the requirements of ISO14001. Saipem is to expand its operational base in Rumuolumeni in order to take into consideration future projects requirements. As per the existing Regulatory Compliance requirements, new industries and major development projects are to submit Environmental Impact Assessment (EIA) reports to the local Authority. For this, in 2003, Saipem developed an EIA report and fulfilled all legal requirements. All environmental data in this section, comes from the HSE accounting system, which has helped Saipem over the years to develop the accountability for the Corporate HSE report. As already mentioned, Saipem is involved in both offshore and onshore activities. Sometimes offshore and onshore data are presented separately to emphasise the results from the two different activities. Whenever possible, environmental data has been integrated with other indicators in order to present a more comprehensive performance evaluation.

SAIPEM

SUSTAINABILITY 25

WATER CONSUMPTION
On Saipem offshore vessels, water is mostly used by the engine cooling systems and ballasting operations, for which sea water (non desalinated) is mainly utilized. Water is also used for general services on offshore vessels. Water consumption for onshore activities mainly involves general services. Water's consumption trend is also strictly related to the pipelines commissioning; this activity requires large amount of water that really influence the early overall consumption. In Nigeria, the main source of water comes from ground (47%) rather then other sources. This is clearly evident at the Rumuolumeni base where there are two boreholes to cater for the base's entire water requirements. In the new camp at Okpai, established for the development of a power plant project, the service water supply and treatment have been particularly well planned, with the implementation of advanced systems. Most of the onshore projects camps have water treatment facilities which are monitored on monthly basis. The water analysis data clearly indicates that all the parameters are in strict compliance with the local regulations. In 2003, total water consumption for Saipem Group operations in Nigeria is approximately 120,000 m3. To easily analyse water consumption trend, the data are compared to Worked Man Hours (WMH).

Okpai water conditioning plant

Onshore Water Consumption

6,000,000 5,000,000 4,000,000
WMH

120,000 100,000 80,000 60,000 40,000 20,000 0 2001 2002 2003

m3

3,000,000 2,000,000

Offshore Water Consumption

3,000,000 2,500,000 WMH 2,000,000 1,500,000 1,000,000 500,000 0 2001 2002 2003 60,000 50,000 40,000 30,000 20,000 10,000 0 m3

1,000,000 0

WMH

Water Consumption

WMH

Water Consumption

ENERGY CONSUMPTION
Offshore & Onshore Drilling - TOE/Drilling mt
0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Offshore 2001 2002 Onshore 2003

12.00 TOE/ employees 10.00 8.00 6.00 4.00 2.00 0

Rumuolumeni Base TOE/employees

2001

2002

2003

Since the electricity supplied from public network is not suitable for Saipem use, power is generated by power generators using diesel at almost all Saipem projects sites. Approximately 75% of the fuel is used by the power generators and the remaining 25% by vehicles. In 2003, a spillage in the fuel pumping station area in Rumuolumeni occurred. A spillage occurred whilst offloading from the pumping station to the oil tanker, due to a pressure build-up in the pipeline, caused by rags and plastic materials clogging the pipe's filter. This resulted in the rubber gasket failing and approximately 800 l of diesel oil spilling out; as a result; the area in and around the fuel pumping station was impacted. HSE Emergency Response Team responded immediately and brought the situation under control. In 2003, total diesel consumption was 25,000 tons. To show the energy consumption through graphs; TOE (tonne of oil equivalent) are compared to drilling meters for the offshore and onshore drilling activities and TOE versus number of employees to evaluate energy consumption in Rumuolumeni base. In 2003, a spillage in the fuel pumping station area in Rumuolumeni occurred. A spillage occurred whilst offloading from the pumping station to the oil tanker, due to a pressure build-up in the pipeline, caused by rags and plastic materials clogging the pipe's filter. This resulted in the rubber gasket failing and approximately 800 l of diesel oil spilling out: as a result, the area in and around the fuel pumping station was impacted. HSE Emergency Response Team responded immediately and brought the situation under control.

TOE/ drilling mt

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26 SUSTAINABILITY

WASTE
In 2003, waste generation decreased versus previous years (1,470 tons in 2002 to 910 tons in 2003). This is true for both hazardous and non hazardous waste. This performance improvement is attributed to better management in the collection and discharge of waste particularly at the Rumuolumeni base, which is also supporting various Saipem offshore units. Waste volumes may increase on account of various news projects. Since ISO 14001 certification process started in 2003, efforts have been made to improve waste management. In 2003, 36% of non hazardous waste consisted of ferrous refuses, 14% urban waste and 13% organic cooking waste. All waste were disposed off by local accredited waste disposal contractors. 76% of hazardous waste comprised exhausted engine oil, 6% was waste from the water treatment plant. To describe the waste production trend, waste materials are compared to drilling meters and number of employees in Rumuolumeni Base.
2003 Non Hazardous Waste

Offshore 44% Rumuolumeni Base 28% Onshore drilling 14% Onshore construction 14%

Waste Generation: Offshore activities Ton/Drilling mt

0.015

2003 Hazardous Waste

0.012

Ton/Drilling mt

0.009

Offshore 46% Rumuolumeni Base 21% Onshore drilling 31% Onshore construction 2%

0.006

Waste generation: Rumuolumeni Base Ton/Nemployees

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Ton/Nemployees

0.003

0.000 Non Hazardous Waste Hazardous Waste

Non Hazardous Waste Hazardous Waste 2001 2002 2003

2001

2002

2003

GAS EMISSIONS
Gas emissions from Saipem operations in Nigeria are estimated based on its diesel and gasoline consumption. Main air pollutants such as CO, NOx, SO2, CO2, are calculated based on the fuel consumption in the reference period. In 2003 estimated CO2 emissions were 87 Ktons, CO emission was 1.2 Ktons, NOx 0.95 Ktons and SO2 0.1 Ktons. Emission's coefficients adopted to calculate gas emission from operations are based on studies and analyses carried out by Saipem. These coefficients

CO2 Emissions/WMH
0.06 0.05 Ton/WMH Ton/WMH 0.04 0.03 0.02 0.01 0.00 n.a. 2001 2002 2003

0.00006 0.00005 0.00004 0.00003 0.00002 0.00001 0.00000

SO2 Emissions/WMH

n.a. 2001

2002

2003

Offshore 0.0006 0.0005 Ton/WMH

Onshore

Offshore 0.0008 0.0007 0.0006 0.0005 0.0004 0.0003 0.0002 0.0001 0.0000 Offshore

Onshore

NOx Emissions/WMH

CO Emissions/WMH

0.0003 0.0002 0.0001 0.0000 n.a. 2001 2002 2003

Ton/WMH

0.0004

n.a. 2001 Onshore

2002

2003

Offshore

Onshore

SAIPEM

SUSTAINABILITY 27

can be considered, at present, as the most appropriate ones to estimate the emissions produced by operating activities. Tons of gas emissions are easily compared in the reference period by applying the indicator for tons of emissions versus worked man hours.

THE SOCIAL PERFORMANCE

Employees Distribution

The aim of this section is to analyse the main data related to the social area of the Saipem Group operations in Nigeria. For the first time Saipem is disclosing in a structured document the specific social performance information on Nigeria. In particular this section includes employee distribution, training, safety performance and health and safety programs. One of the Saipem's targets for 2004 is the formalisation of an accounting system through the adoptions of a specific procedure that will ensure the evaluation of each projects local Content.

Expatriates 19%

Locals 81%

EMPLOYEES DISTRIBUTION
The increase of local manpower is a Top Management commitment for the whole Saipem Group. The Saipem Group in Nigeria has been endeavouring to increase the number of local employees since starting operations in this Country. In 2003, Saipem consistently increased the number of employees (107%), thanks to new project acquisitions and the high backlog of the Saipem Group in Nigeria. The number of local employees in 2003 increased by approximately 145% versus 2002, i.e. an even greater percentage than the overall increase in employees. In 2003, local employees made up 81% of the total, versus 68% in 2002. .
TOTAL NUMBER OF EMPLOYEES Expatriates Local % of Local employees 2002 1,211 384 827 68% 2003 2,506 476 2,030 81%

Local Content Trend and Targets

100% 80% 60% 40% 20% 0% 2002 2003 2005 Target 2006 Target

N 3,000 2,500 2,000 1,500 1,000 500

Total Employees Distribution

0 Local Saipem Subcontractors Data updated at December 2003

Non local

Saipem's long term activity in Nigeria has enabled the development of long-standing Nigerian employees professional skills. One of the main targets of Saipem Group in Nigeria is to improve the standard of local content as well as the number of local workers. In 2005 Saipem Group in Nigeria aims to achieve 90% of local workers and to increase this percentage to 95% by 2006. This is a very challenging target that can be attained thanks to a strategic local content development plan and an intensive professional training program. Starting from the selection of its subcontractor, as will be explained later on, Saipem is favouring local companies, adopting internationals subcontractors only where goods are not available locally. Both local and international subcontractors are driven by Saipem to use local manpower and increase their local content. As consequence, the number of local employees working for Saipem's subcontractors at the Rumuolumeni base is even higher than that of Saipem (84% of local subcontractors employees).

TRAINING
Saipem construction and drilling activities uphold the highest professional and safety standards. This depth of knowledge can be achieved only through comprehensive training programs. With regard to professional training, local employees are flanked by their supervisor, who can support them in the execution of daily activities. The organisational structure adopted gives expatriates the responsibility to teach and transfer knowledge to a small number of local employees who work under them. Following this on the job training some local employees have the chance to develop their professional skills further. Saipem couldn't currently quantify the value of this on the job training but formalisation of the training system is planned for the next year. The efficiency of the on the job training is demonstrated by employees experience shown below. During 2003 Saipem was focused on an intense HSE training program, spending 17,017 training hours on HSE items. The following graph shows HSE training hours for general induction and technical training for specific operations. Saipem also developed health training courses for employees focused on: Sexually Transmitted Diseases (STDs), including HIV/AIDS; First Aid training and Malaria awareness.

SAIPEM

28 SUSTAINABILITY

Details on the health programs will be described in-depth in the following paragraphs. Saipem training activities are also aimed at local students who are undertaking a one year internship at Saipem. This internship gives to some young local graduate the possibility to complete their background with practical and technical skills that will be necessary to be involved in the Oil & Gas sector. In 2002 all trainee students were employed by Saipem at the end of their internship. In 2003 the number of these Industrial Trainees was 13, who were involved mainly in the logistic department.

HSE Training by topics

5,000

4,000 Training Hours

3,000

2,000

1,000

e g e ur s tion urs iftin Co Co ven dL fety an Pre ion Sa uct l ing ting Ind era igg gh n R Fi Ge Fire

e re g is id ng ers ling tion urs din lys tA sho rivi nd Oth Co era na ffol Off Firs eD Ha Op ent ty A Sca al siv sic ne afe nu fen Ba gem Cra bS Ma De na Jo Ma fety l sa na atio cup Oc

Mr Adeniji Ramoni Operation Manager

INTERVIEW WITH ADENIJI RAMONI - OPERATION MANAGER RIG 5832 How long have you been working for Saipem? Since 1988 How old were you, when you joined Saipem? I was 27 years old What was your professional role at the beginning? Tool pusher trainee What was your professional skill before enjoying Saipem? I had got some professional experience with an oil company, the then Petroleum Inspectorate now Department of Petroleum Resources (DPR). How old are you now? 43 years old Where do you came from? From the South- west of Nigeria - about 100 km from Lagos. My family still lives there because I prefer them to stay in my original town. What are main steps of your professional development? After four years of working as a tool pusher, in 1992 I was promoted to operation manager for Rig 5847, a mechanical rig that was dismissed by Saipem some years ago. Since 1994 I have been operation manager for Rig 5892 and now I'm working for Rig 5832. I'm also Logistic operational manager for some Saipem Offshore activities. I've been following the projects from Rumuolumeni Base since 2001. How many people are working under your supervision? Saipem employed about 114 people working on Rig 5832. About 11 expatriates, 73 local staff, about 30 contractors. How did you improve your professionalism? Saipem was a very challenging experience for me. Saipem gave me the possibility to grow but my own endeavour was very strong since the beginning. I followed the training courses needed to develop my job skills and I received on job training from very enthusiastic people who shared with me the feeling of being part of a great Company. I think the Company can improve and encourage professional growth of locals, focusing more and more on professional training. From my point of view, local workers must be proud to work for Saipem and this could be achieved if people transmit their commitment to the job and to the Company itself. What are your future professional target? I'm going to give the maximum I can to this Company as I've been done since the beginning, but I would like also to share my know-how with other local employees who can grow as I did. Do you think some of your colleagues are following your professional growth? I think same of them can really improve their professional skills but the general number of professionals is falling due to the decrease in onshore drilling operations. This is a general trend of the onshore drilling operations in this Country; there are many

Training Center at Rumuolumeni Base

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reasons for this but I think that the main reason is connected to the costs that the contracting companies and the oil & gas companies have to support working with the communities. Local Communities are asking more and more to the Companies and operating in certain areas is no longer profitable for them. What initiatives can Saipem take in order to let more Nigerians improve their skills? First of all, expatriates and especially Italian people, should share their passion for working in this sector and the Saipem Group. We need to improve the chances of retaining who we have already trained giving them career opportunities and training them on additional skills. This will allow us to allocate people to different professional role if necessary.

SAFETY
Saipems commitment to safety is one of the daily targets for all operations personnel. Safety performance has been recently characterised by an improvement obtained by a huge effort of the HSE staff. The safety training developed to almost all employees, the particular care in the use of Personal Protective Equipment (PPE) and the top management's commitment are some of the key issues of the HSE management in Nigeria. The graphs below show the LTIFR (Lost Time Injuries Frequency Rate) of the Saipem Group in Nigeria in 2003 compared with the previous years (2.85 versus 2.93). Although all data points to an improvement in the safety performance, the Saipem Group in Nigeria experienced a fatality in May 2003. During maintenance operation on a grader, a team of 3 heavy duty mechanics was removing the right front wheel in order to repairing the bearing of the wheel drum. Whilst hammering the wheel on the internal side, the rim locking ring blew off striking the left leg of one of the mechanics, semi-amputating the leg under the knee. The worker died in the hospital. The investigation following the incident underlined ones more the need for ongoing training at all levels and an increasingly precise assessment of operational risks.

Safety Statistic - all operations

8,000,000 7,000,000 4 6,000,000 5,000,000 WMH 4,000,000 3,000,000 2,000,000 1 1,000,000 0 2001 WMH LTlfr 2002 2003 0 2 3 LTlfr 5

HEALTH
At all Saipem's site and/or project worldwide, medical assistance is internally managed by Saipem's staff. The Rumuolumeni base has a clinic and a team of 12, comprising both doctors an nurses, employed to assure medical service to employees and subcontractors working at the base and on nearby operational sites. All other main Nigerian projects involve at least one doctor and in most cases one local nurse. The total number of people working for the medical department in Nigeria in 2003 was 28, 18 of whom are locals. In particular, the Medical Staff is in charge of preventive activities, curative, administrative and organizational activities. With regard to preventive activities, Saipem's medical department performs medical examinations (pre-employment medicals and periodical examinations); immunization and chemoprophylaxis programs; health risk assessment in addition to hazard identification, evaluation and control (location, biological, chemical, physical and psycho-social factors). Training and educational programs are also part of the preventive activities. The 2003 training programs focused HIV/AIDS, Sexually Transmitted Disease and Malaria awareness. The Sexually Transmitted Disease (STDs) program was developed by Saipem Corporate Medical Department and implemented by Medical staff at local level. The program is based on an Information-Motivation-Behaviour Skills model and focuses on three fundamental determinants for

Dr. Prso and Nurse at Saipem Clinic in Rumuolumeni Base

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STD, HIV/AIDS risk reduction: 1. Information regarding STD, HIV/AIDS transmission and prevention; 2. Motivation to change high risk sexual behaviour; and 3. Behavioural skills for performing specific STD, HIV/AIDS preventive actions/measures. About 60% of the employees were involved in STD, HIV/AIDS training in 2003. The health training program for 2004 is to be very intense and Saipem strives to achieve at least 70% of overall targets. Beside the STD, HIV/AIDS, another significant initiative is the Malaria Control Program (MCP) developed by Saipem's Corporate Medical Department and implemented in Nigeria. The program consists of: Awareness - through a specific education program Avoidance of Bites by mosquitoes Compliance with recommended chemoprophylaxis Early Diagnosis and prompt treatment Although information on Malaria risks is widespread among employees, certain difficulties in convincing people on the effectiveness of chemoprophylaxis still subsisted. A recent statistic (2003) developed among 623 expatriates, shows that, in spite of information received, 454 decided not to adopt the suggested chemoprophylaxis. Next following table shows justifications given by interviewees.
Reasons for non-compliance 1. Adverse effects 2. Did not consider necessary a). Longer stay in endemic area b). Ready access to prompt diagnosis & treatment c). Confident about the effectiveness of bite prevention 3. Contraindication due to medical reasons Mefloquine 17.84% 56.60% 45.91% 43.96% 10.11% 6.82% Drug prescribed Atovaquone+Proguanil 10.79% 5.94% 77.77% 14.81% 7.40% 1.98%

The medical department is also responsible for curative activities, the performance of diagnostic procedures and of the therapeutic methods, both medical and surgical. The referral and/or transport of the sick/injured to a higher level medical if required. Finally, medical staff is also involved in administrative and organisational activities of all issues related to their responsibilities.

THE ECONOMIC PERFORMANCE

The paragraph aims to analyse the economic performance of Saipem Group in Nigeria, which is linked to Saipem's position as a driving force for local development. The data provided comes from both Nigerian official economic accounting systems (SAP System) and the HSE accounting system. Saipem companies operating in Nigeria belong in a very strictly way to the Saipem Group. They produce an annual economic report that is used internally to consolidate Nigeria's economic data with those of the group. Saipem Group Nigeria annual report is best analysed in conjunction with the results of the Saipem Group, as all their activities and projects are in some way integrated with other companies of the Group or with Saipem Corporate. For this reason, economic data regarding only Saipem Nigeria are not included in this report. Items described are related to Health, Safety and Environmental expenditures; local employees salaries and purchasing of local materials and services. HSE expenditures data were collected using the HSE accounting system from all sites. This data has been also included in the HSE corporate report. In 2003 we assessed the possibility to gather this data from Saipem's financial accounts system. An internal working group (ASTAF Accounting for Sustainability Task Force) was established in order to identify expenditure related to HSE issues within Saipem's financial accounting system. The working group developed an accountability report produced by the existing financial accounts system considering HSE expenditures and investments. This new approach will be available for the 2004 financial year.

SAIPEM CONTRIBUTION TO THE LOCAL ECONOMY

Saipem's long standing operations in Nigeria made it possible for the company to develop in depth local market awareness. Saipem now can buy locally most materials and services necessary to carry out operations. All purchasing activities carried out in the reference period were analysed. This evaluation showed that Saipem expenditures at local level exceed 93% of the total purchase, with

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Local costs distribution

Services 34% Raw materials 10% Work 18%

Taxes16% Materials 7% Leases 15%

only minor variations over the years. These costs were compared with the overall expenditure of the Saipem Group in Nigeria. This figure includes purchasing of materials and services at local level, labour costs for local employees and local taxes. The cost distribution shows that, in 2003, approximately 30% of the local expenditure is on services, 18% on labour and 16% on taxes.15% of the local costs were on renting of infrastructures and 10% on purchasing of raw materials. The costs for materials, subcontracts and training are less significant comparing to other issues. Comparing the local costs breakdown with the total costs of the Saipem Group in Nigeria, it is evident that most services and taxes costs are local costs, because their percentages decrease when included in the total costs graphs. On the contrary, labour costs are mainly non local costs.

Total costs distribution

SAFETY EXPENDITURES
As part of the Saipem group costs, particular attention is paid to safety expenditures. Saipem safety costs for 2003 were estimated at 1 million euro. This data refers to safety expenses and not safety investments, which could not be assessed as integrated part of the overall investments done in Nigeria. Safety expenditures comprises consultancy, equipment, personal protective equipment, safety publications, periodic maintenance and control, audits, training and insurance. The majority of safety costs is on Personal Protective Equipment which represents 43% of the total. Training costs are also quite significant (13%). These data do not include the expenditures of the HSE team personnel, which as we said consist of more than 40 people.

Leases 5% Raw materials 10% Work 45%

Materials 10% Taxes 8% Services 23%

2003 Safety expenditures distribution

Trend of Safety expenditures (Euro/WMH)

0.15 0.12 0.09 0.06 0.03 0.00 2001 2002 2003

Safety equipment: gas detention 2% Safety equipment: fire fighting equipment 4% Safety equipment: signs and posters 6% Safety equipment: other 12% Personal protective equipment (PPE) 43%

Safety publication 1% Periodic Maintenance & Control 4% Safety training 13% Insurance 14% Other actual expenditures 1%

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MEDICAL EXPENDITURES
Medical expenses are recorded on a dedicated accounting system by the medical department. In 2003, medical expenditures were higher comparing to the previous year, especially for the occupational health program. This is due to a steep increase in local staff during 2003.

2003 Health expenditures distribution

Trend of Health expenditures (Euro/WMH)

0.15

Equipment 10% Others analysis 1% Vaccines 4% Pre-employment exams 1% Control 3%

Hospitalisation 3% Consumables 10% Medicines 28% Medical Personnel Costs 38% Less than one percent 2%

0.12 0.09 0.06 0.03 0.00 2002 2003

ENVIRONMENTAL EXPENDITURES
The largest share of environmental expenditures, is connected to the management and disposal of waste 55% of the total in 2003. Environmental investments data was not available for analysis.

2003 Environmental expenditures distribution

Trend of Environmental expenditures (Euro/WMH)

3.5 3.0 2.5 2.0 1.5

Environmental consultancy 19% Air pollution prevention and analysis 15% Water discharge management 6%

Supply water treatment & management 1% Waste management and disposal 55% Other environmental actual expenses 4%

1.0 0.5 0.0 2001 2002 2003

EMPLOYEE SALARIES & BENEFITS

As previously mentioned, local employees salaries are agreed by Saipem and Trade Unions in the Conditions of services. The minimum monthly salary for a local junior employee ranges is from 6,877 Naira to 9,343 Naira depending on the category. This is the minimum salary, which will increase with each year of service. The basic monthly salary for local senior staff ranges from 43,647 Naira to 50,457 (350 D ), including monthly benefits. The minimum monthly salary received by Saipem local employee is approximately 2.3 times higher than the minimum required by Nigerian law (5,000 Naira). In addition to these amount Saipem pays the monthly benefits described below, which give a total salary ranging from 16,767 Naira to 20,328. Hereafter is a brief description of the main benefits Saipem

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agreed with the unions. The most relevant benefits offered by Saipem to local employees (senior, junior and special contract staff) are as follows: Each employee receives, in addition to medical assistance during service, a monthly allowance for the medical care of his family. The allowance varies depending on the category of the worker; for junior staff the allowance is about 37% of the minimum wage; for senior staff it's over 60% of minimum monthly wage. Another important benefit for local workers is the housing allowance. The value varied depending on the category, however it's over 40% of the minimum monthly wage for junior staff and over 60% for senior staff Local workers receive an allowance to cover transport costs from accommodation to the workplace. It's a relevant amount in relation to the minimum monthly wage: over 50% for junior and over 80% for senior Saipem gives a monthly grant to employees for electricity, water, gas and phone services (around 10% of the minimum monthly salary for each category of worker). Other minor benefits are set out in the contractual agreement between Saipem and the individual employees. All these underline the company's commitment not only towards its employees, but also towards their families. Among these are the annual allowance for children's education and the loan to by a house.

FUTURE CHALLENGES
Saipem Group in Nigeria, following the continual improvement approach, fixed some specific targets in order to increase even more its integration in the Country. As already described, Saipem's target is to have 95% of local employees by 2006. This challenging objective can be achieved also through an intensification of the professional training activity that is already planned. The Training manager and the Local Content manager will be involved in the organisation of new professional training programs as well as in the coordination of already existing training initiatives. The formalisation of some already existing usual procedures will facilitate the managing of them as for example the relationship with the local stakeholders, the assessment and evaluation of the local content. The need to assess the local content has spurred the Company to study the most suitable way to analyse Saipem's local costs. The result is a project cost sheet for each project, on which local costs are presented as percentages. The Local Content evaluation of each project comprises the following: Worked Man Hours by Senior and Junior Local Staff Labour costs for Senior and Junior Local Staff Costs for locally purchased materials Costs for locally purchased services Training costs for Senior and Junior Local Staff Medical expenditures for local staff Donations to local communities The Nigerian Government recently assigned the National Local Content Committee the task of identifying a method to evaluate local contribution of companies operating in Nigeria, in order to set the legal requirement. The commission suggested an approach very similar to that adopted by Saipem. Differences in the two approaches are inclusion by the commission of the costs related to local taxes. For this reason it can be said that Saipem calculated Local Content is undervalued because the project cost sheet doesn't currently consider local taxes. For major projects, Saipem developed a Nigerian Local Content Report, in which the project team sets targets and actual percentage for local content. This report is also a tool for monitoring the achievement of targets in the different project phases. Saipem targets for local content differ from project to project due to their peculiar characteristic. Many obvious differences exist between Onshore and Offshore projects. The average percentage of Local Content target for all Saipem project is 50%. Today, projects achieve 59% of local contribution. These results enable Saipem to fully comply with requirement set by National Committee, which is expected to become law.

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GLOSSARY & KEY WORDS

Bbl/d: Barrel(s) per day. 1 barrel (bbl) of petroleum or related products = 42 gallons. Brundtland Commission: The United Nations World Commission on Environment and Development, published a report entitled Our Common Future in 1987 that defined the concept of sustainable development. The report was the basis for the Rio Earth Summit in 1992. BTu: The British thermal unit. It is the amount of energy required to raise the temperature of 1 pound of water by 1 degree Fahrenheit when the water is at 39.2 degrees Fahrenheit. CO2 eq: Carbon Dioxide Equivalent. A metric measure used to compare the emissions of various green house gases based upon their global warming potential (GWP). EC: European Commission. In July 2001, the Commission presented a Green Paper Promoting a European Framework for Corporate Social Responsibility. The aims of this document were firstly, to launch a debate about the concept of corporate social responsibility (CSR) and secondly, to identify how to build a partnership for the development of a European framework for the promotion of CSR. The consultation process on the Green Paper has supported Community action in the field of CSR. In the Communication Corporate Social Responsibility: A business contribution to Sustainable Development (2002), which constitutes a follow-up to the Green paper, the Commission presents an EU strategy to promote CSR. The Communication is addressed to the European institutions, Member States, Social Partners as well as business and consumer associations, individual enterprises and other concerned parties, as the European strategy to promote CSR can only be further developed and implemented through their joint efforts. The Commission invites enterprises and their stakeholders as well as Social Partners in candidate countries to join this initiative. EIA: Environmental Impact Assessment. EIA: Energy Information Administration. FPSO: Engineering, Procurement and Construction; EPIC: Engineering, Procurement, Installation and Construction. FEPA: Federal Environmental Protection Agency. FPSO: Floating, Production, Storage and Offloading System GDP: Gross Domestic Product. The total value of goods and services produced by labor and property. Global Reporting Initiative: The Global Reporting Initiative is a private initiative started in 1997 by the Boston-based coalition for Environmentally Responsible economies (CERES) and the United Nations Environment Program. In 2000, the GRI published voluntary Sustainability Reporting Guidelines. The GRI has worked in co-operation with the United Nation Environment Programme and the Global Compact. IMF: International Monetary Fund. Industrial production growth rate: gives the annual percentage increase in industrial production (includes manufacturing, mining, and construction). Inflation rate (consumer prices): provides the annual percent change in consumer prices compared with the previous year's. Lost Time Injury (LTI): A LTI is any work-related injury which renders the injured person temporarily unable to perform any regular Job or Restricted Work on any day/shift after the day on which the injury occurred. In this case any day includes rest day, weekend day, holiday. The day of the Accident is not counted when calculating Lost Workdays. Fatalities and Permanent Total Disabilities are included in the calculation of the total the number of the Lost Time Injuries. Lost Time Injury Frequency Rate (LTIFR) NNPC: Nigerian National Petroleum Corporation OECD: The ORGANISATION FOR ECONOMIC CO-OPERATION and DEVELOPMENT (OECD) groups 30 member countries sharing a commitment to democratic government and the market economy. With active relationships with some 70 other countries, NGOs and civil society, it has a global reach. Best known for its publications and statistics, its work covers economic and social issues from macroeconomics to trade, education, development and science and innovation. The OECD produces internationally agreed instruments, decisions and recommendations to promote rules of the game in areas where multilateral agreement is necessary for individual countries to make progress in a global economy. In 2000, OECD produced the OECD Guidelines for Multinational Enterprises. The Guidelines are recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from the 30 adhering countries. TOE: Tonne of oil equivalent. Worked man-hours (WMH) Worked man-hours are the total number of hours of direct working activities within the Site Boundaries, including paid overtime and training but excluding leaves, sickness and other absences. WBCSD: World Business Council for Sustainable Development

LTIFR=

N LTI x 1,000,000 Total WorkedManHours

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A Joint Stock Company with Registered Office in San Donato Milanese (MI), Italy Fully paid-up Share Capital Euro 440,958,400 Fiscal Code and Milan Companies Register No. 00825790157 Other offices: Cortemaggiore (PC) - Via Enrico Mattei, 20

Saipem S.P.A. Contact us: QHSE Dept.- Sustainability Team Daniela Mauri daniela.mauri@saipem.eni.it Tel. +390252044452 Fax. +390252034617 via Martiri di Cefalonia, 67 20097 San Donato Milanese (MI)

Societ per Azioni Via Martiri di Cefalonia, 67 20097 San Donato Milanese (Mi) Tel +39 02520.1 Fax +39 02520.44667 www.saipem.eni.it