European Union Environmental Audit – Premier Oil
Introduction
Premier’s origin dates back to 1934 when it was founded in Trinidad under the name of
Caribbean Oil Company. Its core business is oil and gas exploration. Today it has expanded in
many regions worldwide. These regions are Asia, Middle-East including Pakistan, the North Sea,
and parts of West Africa. In 1999, Premier oil formed a strategic and well calculated alliance
with Petronas and Hess both of whom acquired a consolidated shareholding of 25% stake in
Premier Oil Company.
Premier Oil strategy is to increase significant value for its owners through exploration
successes and optimal management in its activities and operations.
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With reference to Premier oil (company based in Europe), Construct an E.U.business
environmental audit to show how E.U policies can affect the company’s decisions and strategy
European Union Business environment.
The rules and policies that govern and protect the four basic freedoms of movement i.e. for
goods and services, people or labor and capital, are by themselves not enough to attain the
objectives and targets of the policies of Single Market. These objectives are only attainable if the
E.U can create, implement and manage favorable and friendly yet efficient and effective policies
that will improve the business climate and encourage businesses to grow across borders. Firms
need the confidence that they are operating in a free and fair environment, that has equal
opportunity for growth and is based on the existence of legal and relevant legal structures that
protects all businesses whether big or small.
Premier Oil, according to its official website is committed to identifying and applying all
the policies that govern the E.U trading practices and policies and maintaining high ethical
standards in accordance to its reputation as a famous world-class operator in exploration of gas
and oil.
The European Union main aim is to improve the regulative environment under which
businesses operate and also provides assistance for their success in global markets.( Gallagher,
Moomy, Susskind, 2002)
European Union also harmonizes the rules and regulations relating to corporate
governance and company law, accounting and auditing whose inputs are the key elements in its
policies. Harmonizing these rules reduces the difficulties of operating in all European countries
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as only one set of rules and a centralized management and efficient reporting system is
operational. These system increases transparency and accountability in the corporate world and
protects the rights of investors, the employees and the general public from exploitation, corporate
cheating, mismanagement and outright fraud.
The European Union policy on public procurement main aim is to improve the
transparency and competition in the European Market. It modernizes and opens up new markets
across many borders and provides more opportunities, higher and better value for the businesses
and quality services for the taxpayer.
The E.U. policy on contract law and taxation aims at removing cross border obstacles that
affect trade. It removes obstacles that face companies that wish to trade within the Single Market
but have to deal with several and different tax regimes.
Premier Oil operates in many countries and is subject to many tax regimes. To obtain
exploration licenses, it must comply with the host tax system and general requirement of
company registration and mode of trading. The major laws are found under the company’s act
and the contract act. These require harmonization as Premier Oil has interest in many countries.
Among other European Union’s objective is to encourage and create a favorable and
friendly environment in Europe for promotion, development and encouragement of social
entrepreneurship and the social economy in general. (Gallagher, 2008).
Premier Oil supports social activities and investments in sustainable development in
partnership with the countries they are operating in. It focuses on development of local
infrastructures and participation in relief operations and general welfare of the local community.
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These additional expenses have to be factored in its strategic plans and in its decision making
organs. Lack of implementing these social policies will be tantamount to violating EU’s social
policy and is punishable by fines or expulsion from the union.
Adopting these policies allows Premier Oil to operate in all EU’s territories and creates
limitless opportunities for growth and expansion. It also encourages more participation in trade
and creates a positive image for the firm.
Open, fair and effective competition is critical in an open and free market economy. It
cuts down prices and raises the quality of products and services and encourages growth in
technological innovation .Single Markets depend mainly on effective competition and the
regulatory nature of authorities to set and maintain a level and balanced playing field for all
competitors for the free movement of all goods and services. The European Commission is the
EU’s head in competition authority and its main task is to ensure free and fair competition in the
open market economy of the Single Market.
Firms are not allowed to fix prices or carve up markets among the EU’s robust and
competitive anti-trust policy and the public subsidies are monitored closely to check and ensure
that the subsidies do not give unfair and unjust advantage to their competitors.
Premier Oil will have to adopt these policies to operate in the North seas. These will
allow it to enter into the large European market. These will impact positively on its strategies to
widen its markets and extend its network of activities to other parts of the world and also
maximizing its profit both in the short and long run. Failure to implement any of the above
policies will mean heavy fines for Premier Oil and it will also face major difficulties and
challenges operating in E.U. affiliated countries.
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The implementation of the E.U. policies and requirements translates into major costs for
the Premier Oil Company. These costs adds extra expenses in its activities and operations which
in turn increases its prices for the final products making them less competitive as they are more
expensive than the average market prices for companies that don’t operate under stringent
measures like the Asian firms in countries like china. Premier Oil products will face stiff
competition from such countries because of the extra costs incurred in implementing the E.U.
policies.
Environmental management policy is governed under the Environmental Management
Act which is the major eco-legislation and which determines the legal tools that can be used to
protect the natural environment. The main legal tools are environmental plans, procedures and
programmes as well as other legal requirements on environmental standards and quality, permits
and licenses, general rules procedures and enforcement of the regulations. The Act also contains
rules on fines and levies, contributions and monetary compensation or restitution.(Gallagher,
2008).
Waste management policy.
Waste management policy is geared towards preventing the overall appearance of waste. The
following are the facts and figures on waste disposals in E.U. European Union produced 2.25
billion tons of waste between the years 1998 and 2001. In 2002, (Eurostat. 2003) 2044 tons of
NiCd batteries waste was generated and disposed in municipalities in European countries. These
were incinerated or disposed of in landfillings whose major side effect is the generational effect
and the emission of leachate into the environment. Incineration clears most of the quantities and
reduces drastically the disposal quantities that are land filled. These methods are convenient and
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relatively economical. However, the decision on location of incinerators draws a lot of
controversies as the effect of the emissions from the incinerators are well known. Land filling
also requires land parcels which are limited and expensive.
The impact on Premier Oil on the implementation of the Environmental Act, with special
reference to waste management will be profound. Premier Oil is affiliated to the European Union
through the North Sea and under the European Union Emissions and Trading Scheme (ETS).
The cost implication on management and control of emission and discharges can’t be ignored.
The constant modernization and improvement on new technology to handle unplanned
discharges and hydro-carbon emission during oil and gas exploration is enormous and depletes
its profit. For instance in 2010, Premier Oil generated 1880 tons of waste material of which 30%
were hazardous material that required special handling and disposal. This poses a big challenge
in terms of cost.
The European Union Treaty and Waste Policy is based on Article 175 of the European
Commission and it states that the member states can undertake more stringent measures to
protect the environment than those undertaken by the E.U. These may involve restriction on
transportation of hazardous material. It’s important to note that the European Union waste policy
considers and treats all waste as movable i.e. its treated as a product hence it’s bound by the
treaty of free circulation of goods.
Premier oil has an obligation to implement the environmental policy under the EU
agreements and concessions. Failure to adhere to these policies will mean facing hostilities from
the host countries and being sanctioned by the EU, resulting in loss of business in the wider
European market.
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On the other hand implementing these policies allows Premier Oil to expand and extend
its trading activities to other regions.
Water policy.
The European Union water policy is contained in the following sub-categories;
Groundwater objective and protection- Article 4.1 (B).
Ground water is the home of many microorganisms and other animals. Under the Water Frame
Work Directive (WFD), its major objective is to achieve a sustainable and reliable quantitative
water management by 2015. Saltwater due to pollutants to the groundwater, must be avoided and
prevented at all costs. The pollution in ground water has to be reversed and prevented as per the
guidelines of WFD, i.e. all hazardous chemicals need to be controlled to prevent them from
reaching groundwater. WFD also prohibits direct and deliberate discharges of pollutants into
groundwater. Premier Oil when exploring and drilling for oil must take reasonable measures to
ensure that it does not pollute the groundwater. These may involve spending on such measures
like investing in environmental management staff and equipment needed to check pollution
levels. These costs will translate into extra expenses for the firm and reduce the profit margin.
(Ackerman,1997)
River basin planning-Article 3 and 13.
The WFD requires a long and comprehensive long-term, iterative planning process and adequate
administrative staff including the employment and designation of competent river basin staff.
The main tool is the River Basin Management Plan (RBMP).
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Premier Oil industrial policy is to increase material exploration better known as geologies
targeting new areas or expanding new ones and focusing on the high impacts opportunities and
follow up in potential areas. All these activities involve major operations in terms of drilling and
waste generation. For instance Premier Oil has over 80 exploration licenses worldwide. (From its
official website).
All these good intention may not materialize if Premier Oil fails to implement the
requirements mentioned above by the EU. It will not be allowed to operate without first putting
in place measures to check pollution on ground water, rivers and other open surface water
sources.
EU’s industrial policies of controlling waste and prevention of pollution affects Premier
Oil’s decisions and strategy in that all the processes involved in exploration must adhere to the
requirements of the Water Frame Directive (WFD) as mentioned above. (Ackerman,1997)
Competent staff in ground and surface water management must be employed.
Contaminated water must be purified or neutralized before being released back to the sea. These
are additional measures in its production process that will incur extra cost in implementation and
which will affect negatively the decisions in its strategic management. But the benefits of
operating in the wider EU market outweighs any of the above measures which in consideration
to what will accrue to the firm after implementation of the requirement under the European
Union Environmental policies will in no doubt be enormous. The accessibility to the European
Union market is the greatest motivation for companies to restrict their commercial activities to
the requirements of the European Environmental policies and laws.
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