How Petrofac is working with clients and suppliers to place a greater emphasis on the welfare of workers
HOW WE WORK
Migrant workers form the lifeblood of the workforce on Gulf construction sites, and Petrofac is no different in its reliance on these workers in its supply chain. Most are lower-skilled migrants, recruited from the remotest regions of countries like India and Bangladesh. For many, limited viable options to sustain a livelihood at home increases their willingness to accept the risks inherent in migrating for work abroad. Almost by definition, these are vulnerable people. They could be easily exploited. And this is exactly the type of scenario that’s under growing scrutiny from human rights campaigners.
Greg Ross, Head of Social Performance at Petrofac, says: “If you’d asked me a couple of years ago, I’d have assumed that issues like forced or bonded labour were a thing of the past, and very far removed from the world of modern business. But the more involved I’ve been with the issue of worker welfare, the more I’ve come to realise that the oil and gas sector, and particularly its wider construction supply chain, is very much in the spotlight. And, as one of the most prominent companies in the region, we have a moral and business responsibility to ensure that our business and its supply chains take the issue of worker welfare seriously.”
Typically, in the oil and gas sector, there have always been one or two steps separating engineering procurement and construction (EPC) contractors from most of the people who work on their sites. The details were generally left to the subcontractors who actually employed them. But that situation is changing. Elie Lahoud, Group Managing Director, Engineering & Construction for Petrofac in Iraq, Oman and Saudi Arabia, explains: “These days, the question of worker welfare is high on the business agenda. It’s a high-profile issue, it’s also the subject of tighter regulation and, increasingly, clients and other stakeholders want explicit assurances about the wellbeing of everyone on our sites.”
A big turning point came in 2015 with the UK Modern Slavery Act (MSA). This new piece of legislation requires UK registered companies such as Petrofac to publish an annual statement detailing what steps they have taken to understand and tackle modern slavery in their operations and in their supply chains. By the end of 2018, seven other G20 countries had introduced similar laws.
“Our position at Petrofac has always been clear,” Elie continues. “Apart from being the right thing to do, we believe there is a strong commercial case for high standards of worker welfare. When people are content and engaged, they tend to work more safely and productively, and the risk of delays and disputes is minimised. And now, with the introduction of new legislation, it is necessary for us to prove that the realities on our sites match up to our words.”.
PUBLISHED SEPTEMBER 2019
“These days, the question of worker welfare is high on the business agenda. Clients and other stakeholders want explicit assurances about the wellbeing of everyone on our sites.”
Getting a deeper understanding
In the type of regions Petrofac works, and on the type of projects it delivers, there are some innate risks to understand and mitigate. And an important step forward has been to get a clearer, deeper understanding of the circumstances of the workforce, the conditions under which they have been recruited, and their experience of living and working as part of the company’s projects.
This is where Greg Ross comes into the picture. Following the introduction of the UK Modern Slavery Act (MSA) in 2015, Petrofac developed a Labour Rights Standard to codify the company’s expectations and requirements. And, as Head of Social Performance, Greg is responsible for making sure the company lives up to the Standard. He puts the worker welfare programmes into place, checks up on the conditions at project sites through audits and verification checks, and provides advice and guidance to senior management. He also sets the objectives in the annual statement required by the MSA, measures the Group’s progress against them, and plays an important role in and fields any related questions from clients or shareholders or other stakeholders, like charities or NGOs.
“We have been running a series of labour rights due diligence exercises, and addressing the subject with suppliers and subcontractors, and two big risks have emerged,” explains Greg. “Recruitment practices in the worker’s home country, and how are they treated when they arrive onsite. We have good oversight of what happens on our projects. But we haven’t really known how people have been recruited. And, often, the subcontractors who employ them via agents don’t know the details either.”
The danger is that unscrupulous recruitment agents get involved in the worker’s home country. They may talk up the job and the salary, and demand illegal large up-front payments from potential recruits. People who are desperate for a job and want to send money back home to support their family will take out a loan at extortionate interest rates, only to find themselves trapped in a cycle of debt.
To address such issues, Greg has been raising awareness of the subject across the company, discussing it with subcontractors, actively monitoring the realities when projects are initiated and workers begin to arrive onsite, and aiming to resolve any issues that do emerge.
Above: The onsite supply chain on Khazzan has many links, and encompasses more than 5,000 people
Below: A commitment to worker welfare by BP is reflected in the quality of onsite leisure facilities
Partnering across our supply chain
A great example of the approach is the Khazzan Phase II project that Petrofac is delivering in Oman on behalf of BP. Among the Gulf States, Oman is known as having a progressive attitude to human rights. And, as a company, BP is committed to seeking to identify, prevent and address human rights risks and impacts associated with its business activities in line with the UN Guiding Principles on business and human rights. So, it is a perfect opportunity for Petrofac to work with a client, its suppliers and the wider contractor community to understand and address the true conditions faced by all workers.
Andrew Morton, BP Project Manager, says: “It’s very easy to set-out your policy on labour rights. It’s much more of a challenge to make sure that it’s being followed across the entire site, among all contractors, subcontractors, sub-sub-contractors, and so on. The onsite supply chain on Khazzan has many links, and encompasses more than 5,000 people. And, as the operator, we want to be reassured that everyone’s rights are being upheld, irrespective of who employs them and where they were recruited. Practically, that means a number of things, including that workers haven’t had to pay money to get their jobs, are able to freely access their passports and are paid in full and on time.”
“It’s very easy to set-out your policy on labour rights. It’s much more of a challenge to make sure that it’s being followed across the entire site.”
The views of 1,200 people
“To get a better picture of the worker experience, Petrofac supported a BP-commissioned survey of more than 1,200 of the Khazzan workforce,” says Andrew. “Along with the issue of recruitment fees, people were asked about a full range of welfare-related issues. For example, had they received and understood an employment contract? Were they paid on time? Could they keep hold of their passport or access it easily? What about the attitude to onsite safety? And the quality of their accommodation? And the state of their physical and emotional wellbeing?”
“Overall, the results were very positive,” says Greg. “Of course, there are always some areas to improve. But, armed with an in-depth review, we’re working to make changes and agree solutions to implement.”
This commitment to worker welfare is also reflected in the size and quality of the onsite accommodation and leisure facilities. To give people the opportunity to shop, transfer money and benefit from a change of scene, weekly bus trips travel several hundred kilometres to the nearest cities. Also, bi-weekly Welfare Committee meetings are held to get a clear sense of the onsite morale and address any emerging concerns.
Listening more attentively
At Khazzan, Petrofac Construction Director Mohammed Shaheen is in no doubt about the wider benefits of a more content workforce. “The level of productivity here is at least 1.25-times higher than I used to get on other sites. And the things that are most appreciated tend to cost us the least. For example, listening more attentively and communicating more openly has a huge impact on the overall morale.
“I often sit in on the bi-weekly Welfare Committee meetings. It gives me a better line-of-sight to the mood of the workforce. And, like day follows night, the better the mood, the better the project progresses.”
What’s particularly interesting is the way the Committee’s discussions have evolved. “Early on, it was more about hard business issues, like hours, contracts and conditions, which we effectively addressed. Now it’s about softer issues, like the temperature of the water in the canteens and the spiciness of the dahl. These are easy problems to deal with. And, when people see that we do deal with them, they really appreciate it. It costs nothing, but has a big positive impact. My eyes have really been opened to the opportunities and the benefits.”
Of course, the Khazzan Phase II project does benefit from a progressive client and it is located in a progressive country. But Petrofac is keen to export the learnings related to labour rights – passport retention, contracts, recruitment fees and associated remedies – and ensure that the same high levels of worker welfare and productivity are consistent across the Group.
A sector-wide emphasis
Importantly, Petrofac is not working on its own. The entire oil and gas sector is subject to the increased awareness of human rights issues. “We’re seeing an increasing number of bids with human rights questionnaires,” explains Greg. “Many clients and stakeholders, such as international investors and project finance providers, are seeking assurances that Petrofac is doing what it can to eradicate the potential for issues. And vendors and suppliers are under pressure, not just from Petrofac but also its peers, to introduce new protections and report on their performance. Companies are increasingly judged as much on their character as the quality of their work, and nothing speaks more to character than the way we support human rights.”
Meanwhile, definite progress is being made at Petrofac. Subcontractors and suppliers now go through labour rights screening as part of their registration onto the vendor management system. Also, a third of new Engineering and Construction projects have completed labour rights assessments, with more scheduled. And there is a push on raising awareness across the business. That is not to say that all risks have been eliminated, especially as you go further down the supply chain. But incremental improvements are being made. “I’m convinced that the industry is at an inflexion point,” Greg concludes. “At Petrofac, we are committed to getting it right. I am confident that we can take a negative issue that affects our industry and turn it into a positive differentiator for our business.”