REPSOL ESG Road Show. Repsol S.A.

Transcription

1 REPSOL 2013 ESG Road Show Repsol S.A.

2 Disclaimer ALL RIGHTS ARE RESERVED REPSOL, S.A Repsol, S.A. is the exclusive owner of this document. No part of this document may be reproduced (including photocopying), stored, duplicated, copied, distributed or introduced into a retrieval system of any nature or transmitted in any form or by any means without the prior written permission of Repsol, S.A. This document does not constitute an offer or invitation to purchase or subscribe shares, in accordance with the provisions of the Spanish Securities Market Law (Law 24/1988, of July 28, as amended and restated) and its implementing regulations. In addition, this document does not constitute an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities in any other jurisdiction. Some of the resources mentioned in this document do not constitute proved reserves and will be recognized as such when they comply with the formal conditions required by the U.S. Securities and Exchange Commission. This document contains statements that Repsol believes constitute forward-looking statements which may include statements regarding the intent, belief, or current expectations of Repsol and its management, including statements with respect to trends affecting Repsol s financial condition, financial ratios, results of operations, business, strategy, geographic concentration, production volume and reserves, capital expenditures, costs savings, investments and dividend payout policies. These forward-looking statements may also include assumptions regarding future economic and other conditions, such as future crude oil and other prices, refining and marketing margins and exchange rates and are generally identified by the words expects, anticipates, forecasts, believes, estimates, notices and similar expressions. These statements are not guarantees of future performance, prices, margins, exchange rates or other events and are subject to material risks, uncertainties, changes and other factors which may be beyond Repsol s control or may be difficult to predict. Within those risks are those factors and circumstances described in the filings made by Repsol and its affiliates with the Comisión Nacional del Mercado de Valores in Spain, the Comisión Nacional de Valores in Argentina, the Securities and Exchange Commission in the United States and with any other supervisory authority of those markets where the securities issued by Repsol and/or its affiliates are listed. Repsol does not undertake to publicly update or revise these forward-looking statements even if experience or future changes make it clear that the projected performance, conditions or events expressed or implied therein will not be realized. The information contained in the document has not been verified or revised by the Auditors of Repsol. 2

3 1. Company Overview 2. Our Strategy 6. Annexes I. Main KPI evolution II. CSR Model and Sustainability Plans 3. Upstream III. IV. Safety and Environment Processes Repsol s Technology and R&D 4. Downstream 5. Corporate Governance V. Integrated Risk Model VI. Main sustainability indexes and initiatives VII. Repsol Foundation Repsol S.A. 3

4 Company Overview 4

5 1. Company Overview Repsol Today E&P R&M Core Businesses Non Operated Shareholding E&P / R&M (1) Waiting for official ratification Upstream Downstream Gas Natural Fenosa 5

6 1. Company Overview Repsol Today M As of Jun.13 FY M 2013 Capitalization (1) 23,431 EBITDA 6,956 3,376 (4) Capital Employed (2) 34,085 EBIT 4,286 1,991 (3) Net Debt + Preferred Shares 10,754 Net Income 1, Equity 28,528 CCS Adj. Net Income 1,954 1,185 (5) Investments 3,721 1, As of July, 31 st 2. Considering Gas Natural stake as a financial investment: 29,172 M 3. Ex-Gas Natural: 6,320 M 4. Ex-Gas Natural: 2,582 M 5. Net income from continuous operations 6

7 Our Strategy 7

8 2. Our Strategy Key strategic targets Production growth (1) : > 7% CAGR (2) RRR (3) : > 120% Upstream average capex: 2.9bn/year (4) (+120% vs. average ) Downstream average Free Cash Flow: 1.2bn/year Downstream average capex: 0.7bn/year (-50% vs. avg ) High growth in Upstream Maximize return on capital Downstream Financial strength Competitive shareholder compensation Self-financed plan generating bn cash for dividends & debt reduction in base case, resilient to stress scenario Maintain investment grade rating Divestments & treasury stock: up to bn in (5) Dividend 2012: ~1 /share (scrip option) 40-55% pay-out ratio production adjusted for Libyan revolution. It considers 2010 Libya production (14.7Mboe) instead of Libya 2011 production (3.4Mboe) 2. Compound annual growth rate 3. Average Reserve Replacement Ratio Net Capex. excluding G&G and G&A 5. Targets in Up to date divestments: 10% of treasury stock ( 2.4bn); LPG Chile & Amodaimi ( 0.6bn) and LNG business ( 4.4bn). 8

9 Upstream 9

10 3. Upstream World-class exploration success 32 firm wells in 2013 (9M13: 18 wells+1 appraisal completed, 9 positive) Success ratio: 20-25% 6 discoveries among annual (1) top 10 in Developed a sizeable position in world s most attractive basins Built strong growth project pipeline (1) Historical success ratio above 30% Transformation into a world-class explorer Leading RRR(1): 204% in 2012 (194% organic) 250% 200% 150% 100% 50% 0% 65% 94% 131% 162% 204% Discoveries in global annual top 10 since 2008(2) 1. Reserve Replacement Ratio 2. Source IHS Country Basin Field Operator Brazil Santos Sapinhoa (Guara) Petrobras Peru Ucayali Kinteroni 1X Repsol Bolivia Chaco Huacaya Repsol Venezuela Upper Guajira Perla 1X-Cardon Repsol - others Brazil Gavea Campos Repsol Brazil Campos Pão Açucar Repsol-Sinopec 10

11 3. Upstream Upstream Strategy Focus on Exploration Average investment above USD 1.0bn/year (1) 6.5 USD/boe produced, among industry leaders Add between Mboe of contingent resources per year. Center in 3 geological themes: Atlantic break-up analogies, carbonates in offshore,, and underexplored folded belts. Producing assets Production decline below 1.7% p.a. Delivering growth 10 key growth projects on course, 5 already producing >200 kboed of incremental net production by 2016 Key strategic targets >7% CAGR (2) net production growth Reserve Replacement Ratio >120% 1. Including G&G and G&A 2. Compound annual growth rate 11

12 3. Upstream Delivering Growth: 10 key growth projects in Brazil Sapinhoa Mid-continent Reggane Lubina-Montanazo Carioca (Guara) (USA) (Algeria) (Spain) Kboed WI: 15% FID: 2010 FO: 2013 Margarita-Huacaya (Bolivia) 102 Kboed WI: 37.5% FID: 2010 FG: Kboed WI: 15% FID: 2012 FO: 2016 Kinteroni (Peru) 8 40 Kboed WI: 53.8% FID: 2009 FG: 2013 North Latam USA 40 Kboed (1) net production (1) - FO: Carabobo (Venezuela) 370 Kboed WI: 11% - FO: Kboed WI: 29.25% FID: 2009 FG: 2016 Cardon IV (Venezuela) 53 Kboed (2) WI: 32.5% FID: 2011 FG: 2014 Africa & Europe 5 Kboed WI: % FID: 2009 FO: 2012 Russia AROG (Russia) 50 Kboed WI: 49% - FO: 2012 Post 2016 Next wave of growth Exploration Contingent resources Alaska: Quruk 1, 3, 6. Brazil: C-33 (Seat, Gavea, Pao de Açucar) Presalt Albacora Malombe Iguaçu Piracuca-Panoramix-Vampira Sagitario GoM Buckskin Other NC200 (Libya) Sagari (Peru) TIHS-1 (Algeria) TD1 (Algeria) Prospective resources GoM Beaufort Sea Louisiana East Canada Brazil: Campos, Santos & Espiritu Santo Colombia RC11, RC12 & Tayrona Guyana Angola and Namibia Spain and Portugal Norway offshore Key growth projects increasing Repsol net production: more than 200 Kboed in 2016 Note: all production figures indicate gross plateau production; WI = Repsol Working Interest; FID = Final Investment Decision; FO: First Oil; FG: First Gas; Net capex , excluding G&G and G&A. 1. Average Repsol net production post royalties 2. Phase I gross production Producing as of September 1 st

13 3. Upstream Challenges 32 countries Political Risk Safety & Environmental Latin America Africa Russia Deepwater offshore HPHT and Heavy Oil Tight hydrocarbons Arctic (?) Exposure to non-operated activities Social Impact Human rights 13

14 3. Upstream Political risk Reshaping portfolio Custom made approach Balance of exposure to OECD countries : US, Canada, Norway, Europe Russia: Low profile, local alliances Latin America: work closely with local governments North Africa: limited activity to maintain current position Namibia, Angola: offshore * As of dec ** Strategic plan estimate 14

15 3. Upstream: A parenthesis on YPF YPF Expropriation : YPF - A solid company before the expropriation (USDbn) 6 YPF EBITDA and investment YPF key financials Investments EBITDA YPF crude production and reserve replacement (kbbld) YPF crude production (1) CAGR (4) :-3% (%) RRR (2) crude oil (3) x Vaca Muerta discovery Outstanding value creation through exploration in unconventionals Vaca Muerta discovery among global top-5 (5), with 1,525 Mboe gross contingent resources and 21,167 Mboe gross prospective resources in 8,071 km 2 audited Repsol net acreage of 12,000 km 2 Intense unconventional exploration plan in Argentina 1. Discounting the impact of the strikes 2. Reserve Replacement Ratio 3. Considering Securities Exchange Commission (SEC) criteria 4. Compound Annual Growth Rate 5. IHS 15

16 3. Upstream: A parenthesis on YPF YPF Expropriation Reducing exposure Legal actions As of August 2013 Divestment of 41.6% of YPF between 2008 and 2011 Current Shareholding 11,9% Repsol (stake subject to 37,1% 51,0% expropriation) Others Repsol (stake not subject to expropriation) 5.3 (1) The lack of a fair compensation for the expropriation has compelled Repsol to implement a legal strategy in Claims filed in: US COURTS several jurisdiction to protect its rights. ICSID ARGENTINEAN COURTS 11/07/2013: Constitution of the Tribunal SPANISH COURTS Progressing according to the legal procedures. The unlawful expropriation of YPF does not affect the growth capacity of any of Repsol's businesses outside Argentina 1. Book value of YPF as of December 2007 and December Corresponding to shareholders loan in Dec. 2011, 6% of YPF shares as collateral 16

17 3. Upstream Safety & Environmental risk Deepwater Offshore Brazil, GoM, Africa, Canada and others Non operated run by experienced operators: Petrobras, Chevron, BHP, Statoil, Eni. Members of: Oil Spill Response (OSR), Joint Industry Project (JIP), project of IPIECA and OGP, and Global Well Containment Response Strategy HPHT Operations Guyana and others Same oil spill response alliances as in Deepwater Offshore Careful well design No-risk decisions: first Guyana well was abandoned because the conditions did not meet the design Norway: Darwin well was designed for HPHT as a preventive measure Tight hydrocarbon operations US Mississipian Lime Frack fluids, slick water and sands utilized are nonhazardous in nature Federal and local environmental and operational requirements Experienced operator who follows all aquifers protection steps Zero Discharge operations 17

18 3. Upstream Safety & Environmental risk (2) Heavy oil Venezuela Orinoco Belt Heavy oil key to our refineries profitability Conventional drilling Lower impact first phase with dilutants Higher impact in the upgrader phase Arctic (?) Alaska Chukchi Sea & Beaufort Sea: no operations in the medium term Norway/Barents Sea: North-sea-type operations Alaska North Slope: onshore activity. Russia: onshore activity. Exposure to non operatorship 62,4% Operated 5,6% Joint operations 68% of concessions operated or with direct influence 32% Non operated 90% IOC operated Operations plans are scrutinized internally with same rigour as those operated Non operated assets audits including environment, ethics and human rights topics Comprehensive due dilligence prior to the asset acquisition No exposure to oil sands, iced covered arctic sea operations or CBM 18

19 3. Upstream Technical Quality Operational Responsibility Operational responsibility requires two fundamental processes: Technical Quality and Knowledge Management. Their co-ordination provides assurance for operational decisions, in critical processes such as well construction, while promoting and enriching evolving technical processes. Both are connected to a complex network of participants, capturing new perspectives and increasing technical transparency. Deep water track record: 13 wells from 2009 until today. 8 wells deep water (>300 mts water depth) and 5 wells ultra deep water (>1500mts water depth). No incidents. 19

20 3. Upstream UN Guiding Principles on Business and Human Rights Integration of human rights in impact assessments. Reinforcement of leverage to prevent human rights impacts arising from our business relationships. Pilot grievance and remediation mechanism. Training and awareness raising among all employees. Adhesion to the Voluntary Principles of Security and Humans Rights. Indigenous Communities First O&G company operating in Latin America with an official policy explicitly supporting indigenous rights protected by ILO Covenant 169, including right to free, prior and informed consultation. Ecuador, Peru, Bolivia, Alaska & Venezuela Team of 40+ people dedicated to dialogue and relations with indigenous communities, 35% women, in Peru, Bolivia, Ecuador, USA and Venezuela. Signed agreements in most areas, ongoing dialogue and consultation with all communities, currently no major disagreements. Controversies focused on people living in isolation. Operating with special preventive measures in Block 39 Peru, and Block 16 (Ecuador). 20

21 3. Upstream Margarita- Huacaya in Bolivia : Excellence in Project Integration Challenging project Geologically complex Remote location Indigenous communities Multidisciplinary Project Management Team 76 people: Geology, Reservoir, Drilling, Facilities, HSE, Community Relations, Procurement Excellent Results Results: 6 Lost Time Injuries LTI FR: 0.46 Budget: $611M vs. $505M TIC Statistics: 300,000 Hours Owner PMT 13,018,656 Hours Worked 12,813,674 km travelled the field 3,800 people peak Project executed in 22 months, with a lower cost and time than similar competitors projects (IPA) Friendship and Cooperation Agreement with the Assembly of the Guarani People * By the APG IG (Assembly of the Guarani People). 20 years Periodical environmental impact assessments plus compensations Environmental performance reports Environmental training on locals 10-year fiduciary fund where the perceived interest will be used un Health, Education and Housing Considered the first agreement of its nature in Latin America.* Surrounding areas workers were hired during construction and trained on safety and health issues from the beginning. 21

22 Downstream 22

23 4. Downstream Downstream: Premium asset base Integrated R&M margin (Repsol vs. Sector) Repsol margins Industry peer group maximum margin Industry peer group minimum margin Presence in a premium market for refining Completion of expansion and conversion projects % FCC equivalent 100% 1Q 2Q 3Q 4Q 80% 60% 40% 20% Integrated refining portfolio, working as a unique system Efficient integration between the refining and marketing businesses 0% Europe Mbpd Competitive Downstream business, linked to quality assets and geographical situation Note: Integrated R&M margin calculated as CCS/LIFO-Adjusted operating profit of the R&M Segment divided by the total volume of crude processed (excludes petrochemical business) of a 14-peer-group. Based on annual reports and Repsol s estimates data as of May 9 th public information. Source: Company filings 23

24 4. Downstream Downstream Strategy Fully invested asset portfolio and portfolio management Refining margin to increase approx. 3 USD/bbl in 2016 due to new projects Leading middle-distillate yield in a short market Continue selective divestments of non-core assets during period Maximize margins and return on investment Investment in Downstream of 0.7bn/year in (vs. 1.6bn/year in ) Downstream to generate + 1.2bn/year on average of free cash flow Profit improvement through operational excellence and efficiency Operational excellence and debottlenecking initiatives Integrated margin enhancement Working capital reduction program Exploit focused high-value growth options with low capital requirements Leverage our premium portfolio to exploit in high return niche opportunities 24

25 4. Downstream Challenges SPAIN PERU CORUÑA BILBAO PUERTOLLANO TARRAGONA LA PAMPILLA CARTAGENA Competitiveness Operational excellence Energy and Climate Change: energy efficiency and CO2 emissions in industrial sites Zero accidents Product differentiation Business Restructuring 25

26 4. Downstream CO2 Operational Excellence: Energy and Climate Change Energy Efficiency Repsol achieved a total reduction of 2,000,000 t CO 2 e from in the Downstream business, all of them certified according to the ISO standard. Repsol uses international energy schemes standards to systematically implement energy management systems (EnMS) using ISO standard as a reference (4 installations already certified). We are conducting energy studies and audits to identify opportunities to reduce our consumption and emissions (15 Energy audits on all of our industrial refining and petrochemical centers in Spain). In 2012, over 175 efficiency actions were taken in our facilities and activities as part of the long term plans to reduce energy consumption and CO 2 emissions. On the other hand, Repsol is continuously monitoring the development of current/new CO 2 markets and project mechanisms that could promote the implementation of new emissions reductions opportunities in all our Business Units. 140 M investment in CO2 and energy efficiency measures in

27 4. Downstream Operational Excellence: Zero Accidents Total Company 4 3, ,42 2,25 1, Repsol IF evolution 1,39 1,40 1,09 0, Refining 2,27 0,94 0,73 Real LTIFR Petrochemicals 2 1,6 1,6 1 1, Refineries Insurance Companies Qualification 27

28 4. Downstream Operational Excellence: Zero Accidents REFINING MAJOR PROJECTS SAFETY FIGURES C10 CARTAGENA URF PETRONOR OAI = 1,1 OAI = 0,9 Man-hours: 30,5 millons training hours 32 Acc. with lost days* Man-hours: > 8 millons training hours 7 Acc. with lost days* 133 Acc. without lost days 51 Acc. without lost days 208 Near misses 275 First Aids Acts and unsafe conditions 80 Near misses 64 First Aids Acts and unsafe conditions (*) Low severity index 28

29 4. Downstream Petrochemical business restructuring and product differentiation Product Differentiation Increase production of high value added products EVA resins, Polyols Gas reactor for increased polypropilene product array Produce high density polyethilene with high optical and mechanical properties Feedstock Flexibility Replace chemical naphta by propane, ethane and naphta Units shutdown Shutdowns of the Polydux EPS unit and the Puertollano high density polyethilene unit Only 84 jobs reductions. Employees have the option to be relocated in other industrial complexes. 29

30 Corporate Governance 30

31 5. Corporate Governance Shareholder Structure 12,02% 62,94% 9,38% 9,34% 6,32% 6.41% Caixabank Sacyr Pemex Temasek Free Float SHAREHOLDERS % Caixabank 12.02% Sacyr 9.38% Pemex 9.34% Temasek 6.32% Free Float 62.94% Number of Shares: 1, million (as of September 2013) 31

32 5. Corporate Governance Board of Directors The company's Board of Directors recognizes that a solid commitment to corporate governance is critical to establishing trust and credibility with investors. Directors may not hold more than 4 mandates in other listed companies Repsol currently has no overboarded Directors Presence of External Directors Rotation of independent Directors % of Board independence % of Committee Independence The majority of the Board (87.5%) consists of External Directors Market Practice: The tendency is to decrease the presence of Executive 6.41% directors None of the Independent Directors have been on the Company s board for more than 12 years Implementation of the international standard (12 years cap) in our legal framework 50% of the Board is independent Market Practice: Unified Good Governance Code recommends having 1/3 of the Board Independent Audit and Control Committee: Composed exclusively of independent directors Nomination and Compensation Commitee: Majority independent / Chairman is independent Strategy, Investments and CSR: Composed exclusively of external directors Number of Shares: 1, million (as of September 2013) 32

33 5. Corporate Governance Board of Directors Combined Position, Diversity and Transparency Combined positions of CEO and Chairman The Company has undertaken specific counterweight measures to mitigate what could be perceived as concentration of power: 50% of the Board consists of Independent Directors All Board committees, with the exception of the Executive Committee, are composed exclusively of external Directors only Appointment of a Lead Independent Director (Artur Carulla Chairman of the Nomination and Compensation Committee) Gender Diversity Geographical diversity Transparency on remuneration Female directors make up 25% of the Boards Independent Directors Repsol has committed to increase the proportion of women in leadership positions in Spain to 29% by 2020 Repsol s Board recognizes that the presence of foreign Directors can add value to the decision-taking process In line with the multinational nature of Repsol, the Board is committed to include foreign born members with solid international experience, such as Henri Philippe Reichstul (Brazil), Arturo Henríquez (Mexico) and Rene Dahan (Dutch) The Company continues improving the disclosure on the remuneration issues and the implementation of international best practices. The Annual Remuneration Report is submitted for consultation vote to the General Shareholders Meeting. On 2013 AGM the Report was approved by the % of the share capital present on the meeting (In 2012 AGM the percentage had been %) Since 2009 to 2013 the increase of the fix pay for Directors has only increased 2.5% in total As from March 12, 2013 the Company will not make further pension payments in respect of the CEO, as per his decision. The Company has committed to consider and analyze the application of the limit of 2 years severance payment when proposing the appointment of new Executive Directors as well as any other best practice on this regard 33

34 34

35 Annexes Main KPI Evolution Social Repsol personnel (number) 22,888 23,623 23,995 Accident frequency rate (Repsol and contractor staff) [10] Training in safety and occupational health (hours) 163, , ,899 Deaths (number) Personnel covered by collective agreement (percentage) Women staff (percentage) Women in management posts (percentage) Women on the Board of Directors (number) Total turnover rate (percentage) [11] Investment in training (millions of euros) Training per employee (hours) Repsol staff who receive performance evaluations (percentage) Disabled persons (number) Teleworking staff (number) ,037 Incidents of discrimination (number) Voluntary social investment (millions of euros) Local purchases as percentage of total purchases Evaluations of the performance of contractors and suppliers (number) 1,283 1, Audits on contractors and suppliers (number) Expenditure on private and public security (millions of dollars)[12] Litigation due to allegations of anticompetitive behavior (Number of cases initiated) [13] Communications received under the Ethics and Conduct Regulation (number) [14] Dismissals for failure to comply with the Ethics and Conduct Regulation (number) [10] Measured as the number of lost-time accidents and fatal accidents accumulated during the year, per million hours worked. [11] Total number of persons leaving the company/total personnel on 31 December of each year. Data for 2011 have been restated in relation to the expropriation of YPF, whereas 2010 data have not, which means they are not comparable. [12] Data for 2010 and 2011 include expenditure corresponding to YPF, and are therefore not comparable with those of [13] In 2012, no penalty proceedings were conducted on account of anticompetitive behavior by Repsol Group companies, for an amount equal to or greater than five million euros. For further details on the 2012 data, see the Annual Consolidated Accounts Report, Note 18, Current and non-current provisions, Note 35, Liabilities, contingencies and commitments and Note 36, Information on the environment. [14] Data include communications under the Ethics and Conduct Regulation received through several channels, including the communication channel with the Ethics Committee. 35

36 Environmental Comments Atmospheric emissions (metric tons) SO 2 (2) In 2012 our SO2 emissions decreased by 26% compared to the previous year as a result of replacing fuels and a lower sulfur 54,936 50,131 36,949 concentration during refining. NO x 34,073 32,922 33,566 Emissions of NOx increased by 2% due to an increase in upstream drilling activities NMVOC (2) Emissions of NMVOCs increased by 3% caused by the increase in production levels at the Cartagena Refinery after the 41,933 41,809 42,885 implementation of the C-10 project at the end of CO 8,832 8,804 8,696 Particulates 2,446 2,235 1,655 TOTAL 142, , ,751 Water management (metric tons) Fresh water withdrawn 58,017 61,156 56,243 Annual reduction due to facilities maintenance (Puertollano, Sines) and increase in reused water Discharged 38,271 39,728 38,925 Reused 6,982 6,971 8,375 20% increase in 2012 due to the reactivation of water reuse in the refinery of Puertollano Produced 58,408 56,758 58,556 Injected 52,895 51,976 53,678 Discharges (metric tons) Hydrocarbons Annexes Main KPI Evolution During 2012, the discharge of hydrocarbons increased due to temporary operational issues in our Sines chemical plant. However, the discharges stayed within legal limits and did not reach the environment. The flow is processed in a neighboring urban waste water purification plant. Suspended solids 1,413 1,594 1,581 Suspended solids and chemical oxygen demand decreased mainly in E&P operations in Trinidad and Tobago. COD 5,372 10,758 8,752 Suspended solids and chemical oxygen demand decreased mainly in E&P operations in Trinidad and Tobago. Waste management (metric tons) Hazardous waste (3) Non-hazardous waste Spills (4) Number of hydrocarbon spills greater than one barrel that reach the environment Volume of hydrocarbon spills that reach the environment (metric tons) Environmental fines /sanctions (M ) (5) 122, ,734 80, ,856 93,195 71,700 During 2012, the amount of hazardous waste treated decreased by 32% compared to 2011; this is mainly attributable to the completion of exploration operations in E&P Brazil. In 2012 we earmarked 67% of the hazardous waste for reuse, and recycling. The treatment of non-hazardous waste also decreased by 24%, mainly in the Petronor and Tarragona refineries.. In 2012 we earmarked 27% of the non-hazardous waste for reuse, and recycling Although the amount of hydrocarbons spilled this year has increased compared to 2011, mainly due to a spill in Tarragona s Industrial Complex, the number of hydrocarbon oil spills has decreased by 28%. Excluding this incident, hydrocarbon spills would have decreased by 82% compared to , (1) In order to establish common bases for comparison over time, data for previous years have been adjusted in line with changes in the company's asset structure. The criteria for changing the baseline are included in oil-industry guidelines (API/IPIECA/OGP). In March 2012, the Government of Argentina expropriated Repsol's majority holding in YPF, as a result of which 2012 inventories and those of previous years have been adjusted, eliminating the data from expropriated facilities. (2) For data on emissions from mobile sources, only those associated with own transport are included. (3) Operational hazardous waste (4) We report spills greater than one barrel that have reached the environment. (5)Arising from litigation or administrative proceedings finalized and paid in the year, with an amount equal to or greater than materiality thresholds set in the individual litigation letters of Group companies. For further details on the 2012 data, see the Annual Consolidated Accounts Report, Note 35 Contingencies, commitments and Liabilities and Note 36 Environmental information.

37 Annexes CSR Model Stakeholders expectations regarding Repsol performance on: 1. Governance 2. Human Rights 3. Labour practices 4. Environment 5. Fair operating practices 6. Consumer issues 7. Community development and engagement Identifying expectations Measuring progress CSR Coordination System at Repsol Reviewing performance Aligning performance to expectations Sustainability plans CORPORATE COUNTRY OPERATION Corporate CSR Committee Country CSR Committee 37

38 Annexes CSR Model: Sustainability Plans Sustainability Plans 367 actions, 7 programs. 80% of the actions linked to Variable Remuneration Program Some issues analized by the CR Committee during Sustainability Plans Nº of Actions Governance 43 Human Rights 32 Labor Practices 57 Environment 61 Fair operating practices 77 Consumer issues 16 Community involvement and development 81 Total 367 Follow up the 2012 Sustainability Plan and update the 2013 Sustainability Plan. Develop the Human Rights online training module Analyze the external expectations from the stakeholders identified in Update the Ethics & Conduct Regulation. Implementation of the UN "Protect, Respect and Remedy" Framework. The proposal to apply the CR Coordination System at the operational site level. The progress carried out by the National Corporate Responsibility Committees. 38

39 RESPONSE PREVENTION Annexes Safety and Environmental Processes Facilities Design - Based on the best International Standards Internal and External Environment Analysis Hazard Identification Risk Analysis and Evaluation (throughout all phases of the facility life cycle) Operational Control : - Strict procedures - Permit to work Emergency Management: - Sound - Drills and international response mechanisms Zero Accidents Highlights in Safety and Environmental Risk Management In 2012, 2013 risk analysis studies were carried out, with 95% of fulfillment over the plan. New standards: prevention and mitigation of fires, explosions and toxic releases; and safety barriers design guide Focus on spill prevention and response: Marine and fluvial oil spill management standard Members of Oil Spill Response (OSR) Recently joined Joint Industry Project (JIP) project of IPIECA and OGP Standard for safety during loading, carriage and unloading of goods by sea/river R&D of mechanisms for the early detection of spills and the remediation of damaged soils On-going training 39

40 Annexes Safety and Environmental Processes The management system is the basis of safety and environment management. It consists of policies, procedures, technical guides and management tools, which are applicable to all company activities and include strict requirements. It is constantly updated to adapt to best sector practices. Environmental Management System New score card, with more preventive indicators (35% currently and plan to get 60% at the end of 2014) Implementation of the Environmental Management Information System (EMIS): Improve the traceability of environmental information to support data quality and auditing. Pilot implementation project in the Industrial Complex of Puertollano in The implementation will continue during 2013 in large industrial sites and all the company's operational assets will be progressively incorporated. We carried out over 400 safety and environment audits in We increase our ISO certifications. 40

41 Annexes Safety and Environmental Processes: Incidents Management Graphic Investigation Tool (HGI) GAMA software to register, investigate and follow up incidents Incident = accident and near misses Communication of the incident Investigation of the incident: identification of root cause Improvement actions / lessons learned: prevent similar incidents Zero accidents Performance indicators Preventive Indicators The 31st of July 2013: LTIF rate = 0,54 Number of spills: 9 Evolution of the number of oil spills Number of hydrocarbon oil spills > 1 bbl that reached the environment New score card, currently with 35% of preventive indicators and plan to get 60% at the end of During 2012, 847 out of 850 incidents were investigated (99,6%) During 2012, 1356 out of 1358 improvement actions were established (99,8%) Preventive measures on transport safety in countries with high traffic accident rates and poor infrastructure: 800 drivers with a portable passport system that shows the training they have received in transport safety Installation of approximately 200 new GPS devices Risk assessments in more than 140 existing client routes and the establishment of marketing criteria based on those risk assessments 41

42 Annexes HSE Department Functions for Drilling Projects 1 Governance Function Provide requirements and guidelines in: Application of Corporate Policies, Norms and Tools Hazard & Incident Management (emphasis on Major Accident Hazards) Occupational Health & Safety (Risk Assessment) Process Safety Environmental & Social Management (Environmental, Social and Health Impact Studies) Emergency Response (emphasis on Blow Out Control, Oil Spill Containment and Response) Consolidation & Report (preventive & corrective KPIs) The drilling function is considered for the development and revision of the above mentioned processes. 2 Advisory Function Provide local (Country and Site) support for HSE requirements implementation, with the participation and validation of operational (drilling) personnel. Identification of Country, Local & Company HSE applicable requirements. Identification of activities and deliverables to ensure Drilling Projects compliance with the identified HSE requirements. 3 Technical Quality Management Function (QA/QC) Monitoring of HSE MS Implementation through: Peer reviews & peer assist (Quality Assurance) Multidisciplinary revision Technical reviews (Quality Control) Multidisciplinary revision Periodic inspection and review (HSE MS Auditing) through in-country / site personnel Typically 1 HSE Manager & HSE technical support for each project (Repsol personnel) Continuous supervision and support through on site HSE supervisors (Repsol personnel) 42

43 Annexes Repsol s Technology applied to operations At Repsol we are convinced that technology research and innovation are key to achieving operational excellence. Technology in E&P operations The Kaleidoscope project improves the success rate when searching for new sources of hydrocarbons in the subsurface. This 100% Repsol technology can process seismic information 15 times faster than other companies in the sector and improves the reliability of the seismic images, increasing the chance of finding oil and gas, through a new generation of computer chips. The Sherlock Project integrates knowledge of geology, geochemistry and high-resolution analytical chemistry. Its objective is to characterize the different elements of a petroleum system in order to reduce the geological risk and increase the exploratory success rate. Repsol Technology Center is the core where we focus our R+D. There, more than 400 researchers design innovative energy solutions in order to turn them into commercial realities clean and competitive. Technology in Downstream We use catalysis processes and technologies to improve energy efficiency and environmental performance of our refining and petrochemical processes: Co-production of biofuels using oils and fats in our refining scheme. Green asphalt technology, that include bitumen developed from used tires, recycling more than 10,000 tons of waste tires annually. 43

44 Annexes Repsol s R&D: anticipating the future At Repsol we believe that through research and innovation, with technology, we are able to create a new smart energy model that anticipates the provision of sustainable and competitive energy. Advanced biotechnology to develop a new generation of biofuels from sustainable energy crops and other micro organisms, optimized for more efficient new engines. Advanced technology in asphalts that can capture NOx emissions from cars, in order to have cleaner air in urban areas. We have developed a new generation of environmentally friendly plastics for greenhouses, and are now developing technology* to obtain plastics that repair themselves automatically and independently after suffering damage, recovering their initial aesthetic and mechanical properties. The self-repairing plastics will give an important boost to productivity in different sectors thanks to the maintenance savings they will bring about, as well as environmental benefits, occupational safety improvements and greater comfort for end users Reducing CO2 emissions by giving this gas a use is one of the objectives of the research programme. The project called CO2 Funnels, coordinated by Repsol under the framework of a Ministry of Science and Innovation initiative, attempts to demonstrate the possibility of capturing CO2 from industrial processes through the carbon fertilisation of energy crops, obtaining biomass, which in turn can be used to produce energy. We are also involved in R&D projects using new materials like graphene, to develop new energy storage model for transportation. *This technology is also being applied in the development of self-healing asphalts 44

45 Annexes Renewable Energy Biofuels Wind Power Others renewables Tech. Transport Electrification The Repsol New Energy Business Unit has continued during 2012, to study comprehensive utilization of biomass from agricultural energy crops, with the aim of developing oil and ethanol production projects, and electricity through cogeneration. In 2012, we acquired a 50% in Neol Biosolutions. Neol is devoted to develop bioprocesses to produce biofuel and bioproducts using the most appropriated naturally- sourced microorganisms. In 2011, purchase of the company Sea Energy Renewables will enable the development of 1,190 MW net of offshore wind power in the UK. Through this adquisition, Repsol Nuevas Energías UK developes three offshore wind energy projects at Scottish coast. In 2013, Repsol New Energy Ventures acquired 31% of Principle Power Inc., the first company in the world that has been able to design, install and operate the first semi-submergible floating structure to generate offshore wind energy. At present, its 2.0 MW turbine has generated over 6 GWh of electrical energy. The Repsol SolarGas combination achieves low CO 2 emissions by combining a cleaner fuel such as gas with a renewable energy such as solar energy. Using the sun as an energy source also allows us to achieve substantial energy savings. In 2013, Repsol New Energy Ventures acquired 18% of Tocardo, a Dutch company owner and developer of a leading technology for the production of energy from river and inshore tidal. IBIL, the company 50% owned by Repsol Nuevas Energías, and EVE (Basque Energy Board), continues to develop a charging network for electric vehicles in Spain. IBIL is the first recharging operator for electric vehicles registered with the National Energy Commission that provides private recharging services (in residential and company garages), as well as public (in public car parks, shopping centers and oil stations). Nowadays, IBIL has implemented a control center to monitor and manage all aspects of infrastructure and business. Also during 2011, Ibil created Ibilek, an electric car-sharing company. 45

46 Annexes Integrated Risk Model Our Company is exposed to numerous risks which can influence the achievement of the Strategic Plan. Geopolítics Competitors Regulation Partners Macroeconomics Image and reputation Information systems Suppliers and contractors People and organisation OPERATIONAL RISKS Ethics and conduct STRATEGIC RISKS Corporate governance Portfolio management Innovation and development Operational excellence Liquidity Project management FINANCIAL RISKS Accidents and singular events Compliance Market Counterpart 46

47 Communication and consultation Monitoring and review Annexes Integrated Risk Model An Enterprise Risk Management (ERM) System creates certainty in order to attain the goals of the Strategic Plan through a systematic approach to risk portfolio management. Our ERM System is being upgraded in order to align it with international standards: ISO 31000: 2009 Risk Management Principles and Guidelines on Implementation ECIIA* / FERMA** Three Lines of Defense Model Shareholders Establishing the context Board of Directors Risk Assessment Executive Committee Audit Committee Risk Identification 1st LINE OF DEFENSE 2nd LINE OF DEFENSE 3rd LINE OF DEFENSE Risk Analysis Management Controls Financial Control Security RISK DECISION POINT 1 Assessment satisfactory Risk Evaluation Yes No Risk Treatment Internal Control Measures Risk Management Quality Inspection Compliance Internal Audit RISK DECISION POINT 2 Treatment satisfactory Yes No Risk Acceptance *European Confederation of Institutes of Internal Auditors ** Federation of European Risk Management Associations 47

48 Annexes Main Sustainability Indexes and Initiatives Repsol has led the Oil & Gas sector for two consecutive years, in the 2011 and 2012 editions of the prestigious Dow Jones Sustainability Indexes. The company also leads the Oil & Gas sector on the European index (DJSI Europe). 48

49 Annexes Main Sustainability Indexes and Initiatives Repsol is the leading oil and gas company in 2012 for carbon management, according to the Climate Disclosure Leadership Index (CDLI), comprising the top 50 international companies in communication and transparency on climate change Maximum Energy sector score Minimum score for Energy sector companies to be eligible for the CDLI Repsol s score Maximum Energy sector score Minimum score for Energy sector companies to be eligible for the CDLI Repsol s score Our Company has won recognition for its energy efficiency and carbon management for the third time in the last five years 49

50 Annexes Main Sustainability Indexes and Initiatives NEWSWEEK GREENIEST COMPANIES 2012: GLOBAL RANKING Company Country Industry Sector Industry Rank Impact Management Disclosure Green Score 2011 Green Score Rank Change 248 Repsol Spain Energy Total France Energy ENI Italy Energy Saipem Italy Energy Baker Hughes United Energy States 287 OMV Austria Energy Statoil Norway Energy Petrobras Brazil Energy Suncor Canada Energy Schlumberger United Energy States 342 Reliance India Energy Industries 348 Shell United Energy Kingdom 368 Tatneft Russia Energy N/A N/A 371 BP United Energy Kingdom 386 ONGC India Energy JX Holdings Japan Energy Weatherford International 407 National Oilwell Varco United States United States Energy Energy Chevron United Energy States 415 Lukoil Russia Energy Halliburton United Energy States 422 Rosneft Russia Energy Sasol South Africa Energy ConocoPhillip United Energy s States 431 Gazprom Russia Energy

51 Annexes Main Sustainability Indexes and Initiatives By being a participant member, Repsol commits itself to gather and disclose all the information required by each initiative. We voluntarily publish the taxes we pay, on a country-by-country basis. We have done so since Taxes paid per country ( m) Country Upstream Downstream Total Spain 7,930 8, ,171 8,183 Bolivia Brazil [84] Italy Libya Peru Portugal 1,043 1,132 1,117 1,117 Trinidad and Tobago Venezuela Other countries [85] 4,619 4, ,336 Total [86] 16,168 16,356 2,058 11,290 13,348 [84] The 2010 figures for Brazil cannot be compared with those for 2011 and 2012 due to Repsol selling its 30% stake in the company Alberto Pasqualini Refap in December S.A. (Refap). The figures for Repsol Sinopec Brasil, S.A. are included according to the percentage shareholding in the company in consolidation (60%). [85] Includes taxes of less than 50 million paid in other countries where the Repsol Group operates and those relating to our Argentinian company YPF up to the time when it was expropriated. [86] The reduction in 2012 with respect to the figures for previous years can be explained primarily by the expropriation of YPF, S.A. (this table only shows the figures up to the time of the exit of this entity). 51

52 Annexes Repsol Foundation Sustainable Energy Model Energy Observatory: Annual publication of global energy markets evolution. Overview of energy life cycle at EU-15 and Spanish level. Social research on energy efficiency and entrepreneurship Learn about Energy: Pedagogic tool for energy diffusion approach in educational centres Mobile Energy technology classroom: awareness and responsibility message for energy efficiency and sustainability Building Future The Entrepreneurs Fund: first Spanish private fund on energy efficiency, supporting innovative start-up projects that improve sustainability in the energy value chain. 17 projects currently supported. Educational and training actions University chairs and scholarships Scholarships for vocational training Scientific workshops at educational centres Social Development and Cooperation Improving the quality of life and promoting health and culture in the communities in which Repsol is present by: Fostering economic development and integration of lower classes and vulnerable groups Supporting health education, assistance and research Helping to preserve the historical heritage Stimulating social responsibility, solidarity and volunteering contribution of Repsol employees Encouraging artistic activities 52

53 REPSOL 2013 ESG Road Show Repsol S.A.