Community Investment

Guideline

OMV-EP Guideline

Community Investment

Prepared by: Date 19 May 2003

Peter E Neal, Senior HSEQ Advisor

Approved by: Date 20 May 2003

Ulrich Peball, Vice President EP-HSEQ

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1 Scope and Application

This guideline applies to all OMV exploration and production activities in least developed
countries (see Definitions below) where OMV has an asset equity share of 50% or greater, or
where OMV is the designated operator acting on behalf of a consortium. It shall apply from
the conceptual stage of a project and would continue right through to successful handover to
production operations. It applies to both ‘greenfield’ and ‘brownfield’ developments. It also
applies to major changes and upgrades to existing operating facilities.

The requirements of this guideline are not stand-alone: they are the final part of an overall
community relations strategy that is described more fully in Community Relations, document
no HSEQ-HQ-11-01 latest revision.

2 Cross-references
Corporate Responsibility – Code of Conduct published by the corporate group of OMV AG,
January 2003

HSEQ Policy Elements and Objectives, document no HSEQ-HQ-00-01 latest revision.

Guidelines for HSEQ in Projects, document no HSEQ-HQ-04-01 latest revision.

Community Relations, document no HSEQ-HQ-11-01 latest revision.

3 Management responsibilities
The country General Manager shall be responsible for implementing this guideline.

Where no country General Manager has been appointed, the Senior Vice President
Exploration and Production International shall be responsible for implementing this guideline.

4 Definitions
Project – Any physical activity that results from OMV oil and gas operations. It will cover the
normal phases: seismic, drilling, facilities and pipeline construction, facilities operation and
decommissioning (abandonment). However, a ‘project’ can also be defined as the work being
done in Vienna to assess business opportunities at the region or country entry stage;
relevant parts of these guidelines may be used for a social impact risk assessment.

Stakeholders - Any individual or group who are affected by a project, negatively or

positively, can themselves affect a project or have an interest in the outcomes of the project.

Stakeholder dialogue - A process through which the views of interested stakeholders are
integrated into project decision-making. This dialogue can take the form of:
à Information dissemination: one-way flow of information;
à Consultation: two-way flow of information;
à Participation: shared control over decision making;

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à Empowerment: transfer of control over decisions and resources.

Indigenous Peoples1: People descended from the populations which inhabited a region at
the time of conquest or colonisation or the establishment of state boundaries. Indigenous
people self-identify themselves as having a social, cultural and economic condition that
distinguishes them from other sections of the national community. The status of indigenous
peoples is regulated wholly or partially by their own customs or traditions or by special laws
and regulations.

Social Impact Assessment: a consultative and analytical process that aims to anticipate the
impacts of an activity on, and its interactions with, people and communities; identify
strategies to prevent, control and mitigate those that are considered to be adverse, while
enhancing benefits; and understand and respond to community and other stakeholder
concerns.

Social and Environmental Assessment: a consultative and analytical process that aims to
identify potential environmental and social impacts and issues; develop prevention, control,
mitigation and monitoring strategies; and understand and respond to community and other
stakeholder concerns.

Social Capital: is the term used to describe the mechanisms and attributes by which a
community interacts to utilise its social assets to the well being (development, enhancement
and benefit) of the community as a whole.

Least Developed Countries: these countries are designated as such by the United Nations
General Assembly. The current listing of these countries are available on the internet URL
http://esa.un.org/unpp/definition.html

1
This definition is drawn from the ILO Convention 169 on Indigenous Peoples.

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5 Procedure
These guidelines (including Community Relations, document no HSEQ-HQ-11-01 latest
revision) aim to enable OMV to play a responsible role in the community whilst developing a
viable business operation by:
à Screening for social risks;
à Building mutual understanding between the community and OMV;
à Minimising negative impacts on the community;
à Forming partnerships with key individuals and organisations.

Individual managers need to be made responsible for this in each business or country
The overall process is shown in Figure 1 below and the sub-process relevant to community
investment described in Section 5.1.

Step Key Tools Application

Screen for
1 social risks Risk screen
(Document no
HSEQ-HQ-01-XX)

2 Assign
responsibility
Stakeholder All projects
dialogue
(Document no
HSEQ-HQ-01-XX)
3 Integrate into
operating Social and
practices environment
assessment
(Document no
HSEQ-HQ-01-XX)
4 Develop
procedures Only projects in
Community
and ‘least developed
Investment
reporting countries’
(Appendix A)

Figure 1 - Social Issues Management

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5.1 Community Investment

5.2.2 Community Investment

Community investment - encompassing compensation and community projects - is an
approach by which OMV involvement can benefit local communities and the wider society.
The benefits of community investment activities to both the local communities and to the
reputation of OMV can be maximised by adopting a professional and results oriented
approach.

Guidelines on community investment are provided in Appendix A. These guidelines should

be followed by country operations in developing and implementing community projects. The
key aspects are that country operations should:
à Determine clear objectives for community involvement;
à Prepare transparent criteria for selecting community investment activities and partner
agencies;
à Work in partnership with affected communities and other stakeholders to identify,
develop and implement community investment activities;
à Avoid making ad-hoc donations of cash/materials except in emergencies;
à Where finance is provided, ensure (and provide support for) proper accounting;
à Aim to use OMV funds to leverage additional finance or support;
à Require recipients to contribute to projects, for example by providing labour for
construction projects, in order to encourage project ownership, raise capacity and
reduce dependency on OMV;
à Determine objectives for each project that can be measured through verifiable
indicators; and
à Monitor project success using indicators and report regularly to OMV corporate.

5.2.3 Management planning, monitoring and reporting

Monitoring and reporting requirements should be included within the SEA Management Plan.
This plan should specify:
à What parameters should be measured, both environmental and social;
à How the parameters will be measured and analysed, e.g. direct measurement,
surveys, use of indicators;
à The frequency of measurement;
à Performance targets and ranges of acceptable values;
à Measures to be taken if unacceptable values or unexpected impacts are identified;
à Internal reporting mechanisms;
à How the values will be verified and reported to external audiences.

6 Record of Revisions
None.

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APPENDIX A

Community Investment Guidelines

Community investment - encompassing compensation and community projects - is only one
area where OMV involvement can benefit local communities and the wider society. It can
form an important input to communities close to OMV operations and tends to be of a high
profile. As in all company activities, a professional and results oriented approach should be
adopted in order to maximise the benefits of community investment activities to both local
communities and OMV.

Benefits to OMV can accrue by:

à Enhancing the reputation of OMV in the local community and more widely;
à Generating information that can be used to market OMV as a socially responsible
company;
à Building relationships with influential organisations that may assist OMV to work
effectively within the country;
à Making services and resources such as supplies and manpower available to the
project; and
à Enhancing employee morale by the provision of opportunities for positive
contribution to communities.

Success Factors for Community Investment

à Determine clear objectives for community involvement

à Avoid making ad-hoc donations of cash/materials except in

emergencies

à Where finance is provided, ensure (and provide support for) proper

accounting

à Aim to use OMV funds to leverage additional finance or support (e.g.

public-private partnerships or similar schemes with competitors)

à Require recipients to contribute to projects, for example by providing

labour for construction projects, in order to encourage project
ownership, raise capacity and reduce dependency on OMV.

à Work in partnership with affected communities and other stakeholders

to identify, develop and implement community investment activities

à Determine objectives for each project that can be measured through

verifiable indicators

à Monitor project success using indicators and report regularly to OMV

Head Office

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A.1 Purpose

The purpose of these guidelines is to establish a common standard for community

investment activities across OMV and to focus major community investment activities on the
achievement of common goals. They will assist OMV to contribute to communities in an
appropriate and effective manner and ensure that justified benefits accrue to OMV within the
country and more widely. These guidelines cover:
à Selecting the appropriate type of community investment;
à Establishing a framework for community investment;
à Preparing, implementing and reporting on community projects.

In all cases, before entering into any partnerships, the OMV Corporate Responsibility Group
should be consulted to establish if any international arrangements with NGOs already exist.

These guidelines are aimed at OMV operations in countries where consultation is an

accepted practice, where there is willingness by the public to participate and where such
participation will not compromise OMV or the people being consulted. Where this is not the
case, the guidelines will require amendment and consultation may be restricted to
intermediaries.

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A.2 Selecting the Appropriate Type of Community Investment

Community investment in OMV operations commonly takes the form of compensation
payments, infrastructure projects and community programmes (that may include
infrastructure as one of many components). The appropriate type of community investment
depends upon the nature of impacts, duration of OMV involvement and the local situation.
The generalised table below indicates the type of investment that should be considered:-

Phase of E&P Cycle Characteristic Recommendation

Seismic à Extensive areas Compensation + infrastructure projects

à OMV involved short term

Drilling (E&A) à High impacts to nearby community Compensation + infrastructure projects

à OMV involvement short term

Plant construction à High impacts to nearby community Infrastructure projects + community

investment programme
à OMV involvement long term

Pipeline construction à High short term impacts, low long term Compensation payments
impacts
à Potentially large numbers of people
affected

Long term operation à Cumulative impacts on nearby Community investment programme

community
à OMV involvement long term

As a rule OMV operations should avoid cash as compensation for impacts. Monetary
compensation, although simple to provide, is often ineffective and is potentially divisive.
Particular care should be exercised when compensating for loss of livelihood (e.g. land,
fishing rights etc) where compensation should provide assistance towards developing
alternative sources of livelihood. Where financial compensation2 is most appropriate, national
recommendations should be followed. Where no national recommendations exist,
independent organisations such as the UN should be approached.

Any support towards establishing facilities or providing equipment, such as health centres
and schools, must be backed up by plans agreed with the beneficiaries and partners (e.g.
government agencies, NGOs) about how the operation of the facility and or maintenance of
equipment will be financed.

The following guidance refers mainly to the design and implementation of community
programmes.

2
In these cases amounts paid should be considered relative to local income levels.

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A.3 Establishing a Framework for Community Investment

Country operations need to prepare a transparent framework for community investment that
sets out how projects will be selected and implemented. This is a pre-requisite for the
involvement of many NGOs and other prospective partners and helps to manage the
expectations of local communities. The following steps should be undertaken.

Step 1: Determine Criteria for Project Selection

Country operations should determine criteria for selecting community investment activities
based on the results of local consultation. The following criteria are suggested as guidance:-

Suggested criteria Examples

Use OMV skills and resources most
effectively to increase the social capital
in the communities where OMV works
à Management training for e.g. local businesses, government
agencies, community groups, NGOs, etc
à Technology transfer activities
à Extend access to project infrastructure (water, electricity,
transport) to local communities

Build partnerships à Become involved in ongoing activities with government, other

oil & gas companies, NGOs
à Look for joint funding, involvement of government,
community, NGOs

Respond to community needs whilst à Water

avoiding taking the place of
government à Health
à Education

Build capacity of community to reduce à Support alternative sources of income, e.g. local business
dependency on OMV development
à Support local supply chain

General guidance from United Nations suggests that, in order of priority, community
investment should target:
à Water supply (e.g. improving the accessibility and quality of drinking water)
à Basic community health (e.g. immunisation programs)
à Education (e.g. schools for juveniles)

However, needs must be decided on individual community circumstances and the

stakeholder dialogue process is an important stage in ensuring investment is properly
targeted.

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Step 2: Determine Criteria for the Selection of Partners

Country General Managers should determine criteria for selecting partners for community
investment activities. The following criteria are suggested as guidance:
à Experience of working with, and acceptance3 by, the community;
à Acceptance by other stakeholders such as government and NGOs;
à History of undertaking similar projects;
à Commitment to acting in an ethical and transparent manner.

Step 3: Prepare a Budget for Community Investment

A budget for community investment is required. This budget needs to be clearly divided into
sums that are:
à Contractual requirements - payments for community projects made, for example,
to the state oil company as a condition of the development;
à For the community investment programme;
à In the General Managers fund for discretionary distribution.

It is recommended that this budget maintains a three year time horizon. For guidance it is
recommended that this budget should be between 0.5% and 1% of net income after tax for
full field development projects depending on the level of potential impact to communities.

Step 4: Set up a Community Investment Steering Group

A steering group should be set up to implement and monitor the programme. This steering
group should be composed of OMV and non-OMV people and should have broad
representation of key stakeholder groups. It is essential that community representation is
included. This group would be responsible for:
à Making the final decision of projects that should be implemented and reporting
their decision against the agreed selection criteria;
à Ensuring that projects are adequately defined;
à Controlling the release of funds;
à Quality assurance of the project implementation and initiating correcting action
where necessary;
à Preparing an annual report that includes the financial accounts and achievements
against objectives.

The group should be formally established and roles and responsibilities defined, for example
through a memorandum of agreement.

3
Some countries have complex social/political relationships and factors to consider are: tribal
loyalties, ethnic/religious structures, local language/dialect variations.

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A.4 Preparing, Implementing and Reporting on Community Projects

All community projects should be adequately defined in a project document that is agreed by
all parties. This document should include:-
à The project goal;
à Definition of objectives - objectives should be measurable and verifiable and
should be linked clearly to the achievement of the goal;
à An explanation of how the project will contribute to meeting the needs of the
community;
à A description of the activities that will be undertaken, including timescales,
responsibilities and outputs;
à The expected outputs of the project;
à The process and timetable for reviewing progress and disbursing funds.

Community investment should always be controlled using project management disciplines. In

particular ‘stop’ points must be defined and actioned as necessary. For a long term OMV
development, community investment may well stretch over many years. However, the
investment strategy should be structured as a series of stand-alone finite projects each with
defined objectives, budgets (with financial controls), performance measures and end dates.

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