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.
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 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. 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.
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 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.
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).
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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