Fueling. Life. Fueling. Hope. Contents. About the Cover

Transcription

1

2 Report Application Level C C+ B B+ A A+ G3 Profile Disclosures G3 Management Approach Disclosures G3 Performance Indicator and Sector Supplement Performance Indicator Fueling Hope. About the Cover We include this GRI Application Level table in our report to support our self-declaration at Application Level B. Report on: , , Not Required Report on a minimum of 10 Performance Indicators, including at least one from each: Economic, Social, and Environmental Report on all criteria listed for Level C plus , , Management Approach Disclosures for each Indicator Category Report on a minimum of 20 Performance Indicators, at least one from each: Economic, Environmental, Human Rights, Labor, Society, Product Responsibility Same as requirement for Level B Management Approach Disclosures for each Indicator Category Report on each core G3 and Sector Supplement Indicator with due regard to the Materiality Principle by either (a) reporting on the Indicator or (b) explaining the reason for its omission A young boy carefully tends to a seedling that he planted. Similarly, Petron Corporation is taking extra care to be responsible in the way we do business by contributing to the Philippines economic growth, being a catalyst for social change, and protecting the environment over the long term. We believe that our business is all about helping meet the needs of the present while ensuring a better future for the next generations of Filipinos. This award-winning image was part of an auction hosted by Citibank to benefit the Mariculture Livelihood Model Farm of Petron Foundation. Proceeds of the auction were donated to this program to help improve the livelihood of fishing communities in the province of Guimaras. Fueling Life. Contents About the Report 2 Message from the Chairman and the President 4 Sustainability at Petron 6 About Petron 7 PRisMS: Petron Risk Management System 10 Stakeholders Engagement 12 Our Performance Indicators Fueling Hope. 14 A Commitment to our Community 15 A Commitment to our Employees 23 In the Pipeline: Volunteers In Action (VIA) 30 Fueling Life. 32 A Commitment to the Environment 33 A Commitment to our Customers 46 In the Pipeline: Going Green with Petron s Nature-Friendly Products 49 Doing Good and Telling it Well : Advocating Corporate Social Responsibility and Sustainability 52 Moving Forward 54 List of Membership in Organizations 55 Global Reporting Initiative Index 56 Petron Foundation Board of Trustees and Officers 58 Health, Safety, and Environment Management Committee 60 Sustainability Steering Committee and Technical Working Group 61

3 About the Report Petron s business touches the lives of millions of Filipinos everyday. This fact gives quality and excellence in our products and services, which fuel our success. We entitled this report Fueling Hope. Fueling Life. because our journey to sustainability has shown us that the natural extension of success is responsibility. It becomes incumbent on a business leader like Petron to go the extra mile to fuel success through innovation in our products, services and programs; to fuel hope through initiatives on education, health, and livelihood for our communities; and to fuel life through an environment that is safe, healthy, and sufficient to our needs and our goals. This is Petron s first sustainability report, prepared in accordance with the Global Reporting Initiative s (GRI) International Guidelines on Sustainability Reporting with B-level application. This first report covers our 2008 performance on 31 indicators in the aspects of environment, economy, labor, human rights, product responsibility, and society. We present the risks, impacts, and opportunities we face in the energy sector and our strategic approach to the planning, management, and fulfillment of our sustainability efforts. Using the Global Reporting Initiative framework for sustainability reporting helps us adopt a standardized approach to presenting our economic, environmental, and social performance according to international benchmarks. Our report discloses the sustainability performance of Petron Corporation, which includes its corporate office; the Petron Bataan Refinery; the Fuel Additives Blending Plant in Subic; 32 depots and terminals; company-owned and company-operated service stations; and Petron Foundation. An attempt has been made to cover the entire scope of the performance of all our companies in each of the selected indicators. Where scope limitations are applicable, they are specified in the report. The data herein serve as baseline information as we progress into various stages of compliance. A roadmap and time frame have been established within the company to achieve full compliance reporting and third-party verification in the next several years. Our employees are a major audience of this report, as we begin to communicate our sustainability principles and practices to our corporate family. The GRI framework will guide management to a better alignment of our business goals with our key result areas. We hope to also influence our partners and other stakeholders to assess their business performance alongside their responsibilities to society and the environment and, consequently, to undertake their own sustainability journeys. In the previous years, Petron published information on its company-wide sustainability practices through the yearly publication of its Health, Safety, and Environment Annual Report and Petron Foundation s Corporate Social Responsibility Annual Report. This sustainability report serves to consolidate substantial highlights from both reports. The Petron Bataan Refinery is a symbol of the company s commitment to be a partner in the Philippines economic growth, social developent and environmental well-being. Finally, we consider this report a milestone in improving our accountability to the public. Your feedback is important to us and a feedback form is included in this report. For more details on the content found here, please sustainability@petron.com. Why use the GRI Sustainability Reporting Framework? GRI has pioneered the development of the world s most widely used sustainability reporting framework and is committed to its continuous improvement and application worldwide. This framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. Sustainability reports based on the GRI framework can be used to: Benchmark organizational performance with respect to laws, norms, codes, performance standards, and voluntary initiatives; Demonstrate organizational commitment to sustainable development; and Compare organizational performance over time. To date, more than 1,500 companies, including many of the world s leading brands, have declared their voluntary adoption of the guidelines worldwide. Consequently the GRI G3 [third-generation] guidelines have become the de facto global standard for reporting. (Source: 2 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 3

4 Message from the Chairman and the President Business conditions have become tougher over the last year and look set to stay this way throughout the immediate future. The volatility in crude oil prices has taken a toll on our margins, and like many companies today, we are faced with an economic environment that makes profitability that much more difficult to come by. Despite this, we remain focused on our strategic priorities, one of which is to develop a business model that will promote sustainability. The economic downturn raises difficult questions about how best to sustain and even accelerate the company s many commitments to its shareholders and to its other stakeholders. The twin crises of the economic recession and global warming make it imperative for us to begin exploring alternative business models. We recognize that we must evolve to meet these new challenges. To this end, we have reached an important milestone in our journey to becoming a better-managed company and it is with great pride that we present our first report on sustainability and corporate social responsibility (CSR). This is a B-level report prepared in accordance with the protocols and key performance indicators of the Global Reporting Initiative (GRI). The indicators allow us to better assess and focus our efforts to operate with a triple bottom line in mind. In short, doing well by our business, our people, and our planet. At Petron, we see to these bottom lines using a three-pronged approach. To ensure economic value, we fuel success; to care for people in the organization and in communities where we operate, we fuel hope; and to protect the planet, we fuel life. These words are not merely catchphrases; they are backed by specific goals and strategies which form the core of our sustainability framework our guide as we grow into a company that fully integrates sustainable practices into our business. In addition, we have established a Sustainability Steering Committee and Technical Working Group that monitors and drives the incorporation of sustainable practices into all areas of our operations. Our CSR programs continued to tackle the issues of poverty alleviation and social progress in our country by helping improve basic education and promote youth entrepreneurship. Our efforts also extend to environmental stewardship, thereby making sure that our business processes, our facilities, our products and our services address the challenges of sustaining the environment, including contributing to the fight against climate change. This report initiates a learning process. It has brought to light specific priority areas that we will address to achieve sustainability: economic value, operational efficiency, environmental stewardship, people management, health and safety, strategic partnerships, product and service innovation, and advocacy and social responsibility. Just as vital in our journey is acknowledging our stakeholders as equal and able partners. Our future success is anchored largely on the relationships with customers, business associates, government, community members that we have built and nurtured over time. This report is our compact with you. It is also an invitation for all of us to take an active role in ensuring that our commitment to society and the environment is as fervent as our drive to attain our business agenda. We are determined to see Petron emerge as a company that not only succeeds as a business beyond our generation, but also one that fuels hope and fuels life for future generations of Filipinos. Ramon S. Ang Chairman and Chief Executive Officer Eric O. Recto President and Chief Operating Officer We are determined to see Petron emerge as a company that not only succeeds as a business beyond our generation but also one that fuels hope and fuels life for future generations of Filipinos. Ramon S. Ang Eric O. Recto 4 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 5

5 Sustainability at Petron About Petron Petron Corporation is the largest oil refining and marketing company in the Philippines. At Petron, sustainability is symbolized by a propeller in motion. Our Sustainability Priorities represent Petron s integrated approach to deliver on its Vision, Mission and Values with the least harm and the most value, and in the best interest of its stakeholders. The harmonious interplay of these priorities gives forward motion to our company even as it shows our dynamism in addressing the evolving needs of our stakeholders. Economic Value. We commit to the creation of long-term economic value and mutual advantage for our company and its shareholders. Environmental Stewardship. We commit to business practices that help protect the environment knowing that this accordingly safeguards the interests of our company and its stakeholders over the long term. Operational Efficiency. We commit to the continuous improvement of our operations guided by global efficiency standards. Health and Safety. We commit to fully abiding by laws and regulations that ensure the health and safety of personnel, contractors, and surrounding communities, with the ultimate aim of going beyond compliance. People Management. We commit to the implementation of personnel development programs and practices that ensure the success of our company is reflected in the lives of the people that work hard for it. Strategic Partnerships. We commit to building on shared strengths with business partners and other stakeholders in our quest to serve customers better while creating more value for our investors. Product and Service Innovation. We commit to investing in research and development for the continuous enhancement of our products, services, and processes in order to delight our customers, achieve competitive advantage, help shape the industry, and fuel environmental protection. Advocacy and Social Responsibility. We commit to ensuring our company s positive contribution to the economic and social needs of our surrounding communities through education, entrepreneurship, health, and livelihood programs. We are guided by our vision to be the leading provider of total customer solutions in the energy sector and its derivative businesses. We supply nearly 40% of the country s oil requirements. Our world-class petroleum and oil-based products come from our ISO certified refinery in Limay, Bataan with a rated capacity of 180,000 barrels a day. From the refinery, we move our products mainly by sea to our 32 depots and terminals nationwide. We supply fuel oil, diesel, and LPG to various industrial customers. The power sector is our largest customer. We also supply jet fuel to international and domestic carriers at key airports all over the country. Through nearly 1,300 service stations nationwide, we retail gasoline, diesel, and kerosene to motorists and public transport operators. Our LPG brand, Gasul, is sold to households and other consumers through an extensive dealership network. Vision Mission Values Petron manufactures lubes and greases at our world-class lube oil blending plant at the Pandacan terminal. These products are also sold through service stations and sales centers. We also operate a facility in Subic Bay which blends fuel additives. At present, we are expanding our non-fuels businesses, which include our convenience-store brand, Treats. By forging partnerships with major fastfood chains and other consumer-service providers, we give our customers a one-stop, full-service experience. We are also putting up additional company-owned and company-operated service stations in strategic locations. In 2008, Petron Corporation generated revenues in the amount of P267.7 billion. The company s operating cost amounted To be the Leading Provider of Total Customer Solutions in the Energy Sector and its Derivative Businesses. We will achieve this by: Being an integral part of our customers lives, delivering a consistent customer experience through innovative products and services; Developing strategic partnerships in pursuit of growth and opportunity; Leveraging our refining assets to achieve competitive advantage; Fostering an entrepreneurial culture that encourages teamwork, innovation, and excellence; Caring for our community and environment; Conducting ourselves with professionalism, integrity, and fairness; Promoting the best interest of all our stakeholders. 6 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 7

6 to P5.2 billion, or a 2% reduction from 2007 figures. We paid a total of P27.1 billion in taxes in Dividends to stockholders amounted to P938 million. With respect to our social investments, we spent a total of P94.1 million on CSR programs through Petron Foundation, with 55% for initiatives on education and 45% spent on efforts for the environment and community relations. The foundation is also tied up with USAID-funded projects, specifically the building of Petron Schools in the Mindanao region. Ownership Petron has been publicly listed since September During this time, the Philippine National Oil Company (PNOC) and the Aramco Overseas Company B. V. (AOC) each owned a 40% share of equity, with the remaining 20% held by close to 200,000 individual shareholders. In May 2008, SEA Refinery Holdings B.V. (SEA B.V.), a subsidiary of the Netherlandsbased Ashmore Investment Management Limited, purchased AOC s entire share and another 10.57% stake from the public through a mandatory tender offer. In December 2008, SEA B.V. subsidiary SEA Refinery Corporation (SRC) purchased the entire PNOC stake and another 10.1% from its parent company, bringing SRC s Petron stake to 50.1%. All these developments effectively made SEA B.V. the majority shareholder of Petron with a total of 90.57% direct and indirect share of equity. In the same month, San Miguel Corporation (SMC) and SEA B.V. entered into an option agreement granting SMC the option to buy out SRC within a two-year period. The option agreement also allowed SMC to take seats in the Petron board and management. As such, SMC representatives were elected to the board and appointed as senior officers by January Governance Good corporate governance is an integral part of Petron that we are committed to upholding, and this practice has resulted in consistent recognition from external award-giving bodies. For the third straight year, Petron was named by the prestigious internationally recognized Institute of Corporate Directors (ICD) as one of the Best- Governed Listed Companies in the Philippines. We were among the top 15 out of 169 publicly-listed companies in the Corporate Governance Scorecard for 2008 with a score of 90%. We adopted our own corporate governance manual on January 1, 2003, and amended our bylaws to provide for the selection procedure for independent directors. This manual is one of several means by which Petron instills good corporate governance. Business policy, the direction of the company, and oversight are handled by the board of directors. The board is composed of ten directors and is assisted by four board committees: nomination, compensation, audit, and executive. There are eight non-executive members of the board, two of whom are independent directors. The chairman is also the chief executive officer of the company. Qualifications of directors are evaluated by the nomination committee, which handles the selection and pre-screening of directors and endorses their election to the board. Compensation of top management is commensurate to their experience and skill at par with oil industry standards. All directors, officers, or For the third straight year, Petron was named by the prestigious internationally recognized Institute of Corporate Directors (ICD) as one of the Best- Governed Listed Companies in the Philippines. We were among the top 15 out of 169 publicly-listed companies in the Corporate Governance Scorecard for 2008 with a score of 90%. employees execute a statement on conflict of interest whereby business interests that may be in conflict with the business of Petron are disclosed. Also, a copy of Petron s Code of Conduct and Ethical Business Policy is given to emphasize our high norm of good business ethics. The company has a conflict of interest committee, which is headed by the vice-president for legal and external affairs. Management continuously conducts performance assessments through quarterly management and safety reviews. Regular vice-presidents meetings provide a venue for periodic updates. Thus, business performance, compliance with business hurdle rates and financial parameters/ratios, as well as health, safety, and environmental requirements are constantly evaluated. We value highly the inputs of our shareholders. Recommendations and feedback from the public are encouraged and may be sent directly to Petron through our company website ( or through the company s investor relations department. The annual stockholders meeting also provides a forum where the shareholders are able to dialogue with Petron officials. Management shares information about the company with employees and to generate feedback. The human resources department organizes quarterly employee assemblies at the Petron head office, where our management is able to address various news items and concerns about the organization and to answer questions or hear comments from our employees. Petron employees from other parts of the country are able to participate through real-time video streaming. We regularly publish an online and print version of our corporate newsletter, PETRONews. Other Petron units periodically issue their own online newsletters to provide employees as well as specific business partners with updates on the company and opportunities for volunteer action. Every year, we publish our financial report, the Health, Safety, and Environment Annual Report, and the Corporate Social Responsibility Annual Report, which are all accessible online. Also utilizing our existing intranet portal technology, Petron introduced a video-feeds program, which features a regular stream of Petron-related news that is reported by employees. Similarly, the company encourages employee contribution to PETRONews through an incentive scheme dubbed I.N.V.O.L.V.E. or Incentives for News, Views, Opinions, Literature, Verses, and other Entries. Traditional communications channels such as bulletin boards called UGNAYAN are also used. This literal Filipino translation of keeping connected is strategically placed in Petron offices and remains an integral part of the information and feedback process within the company. Public Policy Membership in local and international petroleum organizations, public hearings, and public stakeholders meetings on various issues affecting the energy sector are opportunities and venues for Petron to participate in public policy development. We submit position papers, attend forums, and conduct regular engagements with various interest groups and stakeholders, such as government agencies (the Senate, House of Representatives, Department of Environment and Natural Resources- Environmental Management Bureau, Department of Labor and Employment, Department of Energy, Department of Transportation and Communication, Land Transportation and Franchising Regulatory Board, Department of Trade and Industry, Philippine Coast Guard, Marina, the Office of the President); transport groups (Federation of Jeepney Operators and Drivers Association, Integrated Metro Manila Bus Operators Association to name a few); and student groups, non-government organizations, and local government units. Energy sector issues we take interest on include: oil prices; oil deregulation; implementing rules and regulations; the Biofuels Law; Oil Pollution Compensation Fund; product and facility standards; stability of liquefied petroleum gas (LPG) supply and strengthening of government s powers over illegal activities in the LPG industry; Clean Air Act; and emergency response capabilities and road safety. 8 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 9

7 PRisMS: Petron Risk Management System Petron Corporation follows an enterprise-wide risk management framework for identifying, mapping, and addressing the risk factors that affect or may affect its businesses. The company s risk management process is a bottom-up approach, with each division mandated to conduct regular assessment of its risk profile and formulate action plans for managing identified risks. As Petron s operations form an integrated value chain, risks emanate from every process. The results of these activities flow up to the management committee and, eventually, the board. Venue for these are thru the company s annual Risks Identified Financial risks that involve possible losses that arise from fluctuations in interest and foreign exchange rates. Commodity price volatility risks that arise from exposures to fluctuations in the prices of crude oil and products. Risk of operational disruptions that arise from accidents, process or machinery failure, human error, adverse events outside of human control, and delays in major capital expansion projects. business planning process and quarterly updates on major risks and mitigation strategies. Oversight and technical assistance are likewise provided by different corporate units. Major Risks addressed The Petron Risk Management System or PRisMS classifies major risks as having a relatively high probability of occurring and a substantial adverse financial impact. The major risks that the company managed in 2008 were the following: Actions Taken Management has the authority to hedge foreign-exchange and interest-rate risk exposures using derivative instruments such as forwards. It avoids the creation of risk from speculation by limiting the use of hedging instruments to 100% of the underlying values of such risks. Foreign-exchange and interestrate risk exposures are monitored daily by an enterprise-resource-planning system. This allows real-time awareness and response, if needed. Management has the authority to hedge commodity-price-volatility risk exposures using derivative instruments such as swaps and options. It avoids the creation of speculative positions by limiting the use of hedging instruments to 100% of the underlying values of such exposures. The enterprise-resource-planning system is currently being upgraded to improve real-time awareness and response of management to this risk. Petron has been implementing programs designed to directly address the avoidance of operational disruptions through effective maintenance practices and the inculcation of a culture of continuous process improvement. We have a corporate-wide health, safety, and environment program that likewise addresses the risk of operational disruptions. Risks Identified Regulatory risks that arise from changes in national and local government policies and regulations, which may result in substantial financial and other costs for the company, either directly or indirectly. Catastrophic and environmental risks that may arise from external factors that the company tries to mitigate with contingent, protective, and preventive measures. PRisMS at the Forefront The major risks under the current PRisMS structure are the prioritization of identified risks at the management level through comparable quantitative assessments of impact and likelihood. By design, PRisMS mainly addresses threats to profitability under the Petron Sustainability Framework. However, other sustainability issues are touched upon in the bottom-up approach of PRisMS. All personnel participate in the identification, the update of definitions, and the initial quantification process of PRisMS, hence, serve as an empowering tool up to a certain degree across the organization. Because it is based on an Enterprise-Wide Risk Management Framework, PRisMS cuts across divisions and attempts to cover the widest possible spectrum for covering risks. It touches on concerns with the environment regulatory and socio-political Actions Taken Petron maintains strong lines of communication with its various counterparties in government and in the public arena, in both local and national levels. We use these lines of communication to identify potential risk factors and respond to these promptly and proactively. As a protective measure, Petron insures various business activities for these risks. This insurance coverage is balanced with reasonable costs through two wholly- owned insurance subsidiaries. Our insurance provides adequate financial protection, manages costs, and optimizes premium recovery. This setup also allows us to directly access major international reinsurers, that helped minimize our premium costs and widen our risk coverage. For preventive and preparatory measures, we have in place contingency plans, standard operating procedures and manuals, regular drills and practices, regular inspections by authorities, insurers, consultants, and constant training of personnel. Petron is also focused on the risk of oil spills, a risk that is considered to have a high impact, but a low probability of occurrence. issues, competition, strategic partnership, continuous product innovation, and the like. More than 80 risks are identified by the PRisMS bottom-up approach. Hence, PRisMS and the Petron Sustainability Framework will undertake different but parallel journeys. As mentioned, the main focus of PRisMS is on how to protect and enhance the company s profitability by prioritizing mitigating measures on major risks. The Petron Sustainability Framework, on the other hand, prioritizes the quality of our quantitative approaches and how the framework s main aspects will be enhanced toward a more holistic and sustainable coexistence of the company with its external environment. 10 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 11

8 Stakeholders Engagement Our stakeholders are individuals, organizations, and affiliations from every sector of society whose lives are affected by our operations and whose opinions and actions help shape the way we do our business. Our continued success as a company is due largely to the strategic partnerships we enjoy with all our stakeholders. Our values, focus, and commitments including the programs that we conduct, the products we develop, and the plans we make are ultimately guided by what is best for our stakeholders. Regular engagement with our stakeholders, therefore, is crucial to the success of our sustainability efforts. We have in place systems that enable us to best address the needs of our customers, our business partners, and the communities where we are present. In 2008, Petron s main issue was the oil price volatility. As such, engagement with the transport sector to explain fuel prices were made. Petron supported the Department of Energy s Energy Summit, a multi-stakeholder forum on ways to avert all energy crises in the short term and to develop new approaches to accelerate the development of alternative fuels and other sources of energy. Another major stakeholder concern was the continued presence of the Petron terminal in Pandacan, Manila. Regular dialogues were conducted with city and barangay officials, and with nearby residents to discuss and work out resolutions. At the same time, we sustained our CSR programs for the Pandacan community in partnership with barangay leaders. In all issues, Petron engaged in constant dialogues with the stakeholders concerned. We used every possible forum such as multi-media information campaigns and meetings with government agencies. Shareholders. As a publicly listed company, we conduct an annual stockholders meeting, which serves as a forum to report our performance report. Our modes of engagement with them are discussed in the company profile section of this report. Governments. We recognize our role in contributing to national development through public-private partnerships. We believe in working closely with government to provide business solutions to social and environmental concerns. Specifically, we recognize our important role in helping craft legislations, policies, and voluntary agreements particularly those that relate to the oil industry and how economic and social growth can be advanced through our sector. Employees. Through strategic human resource interventions, we ensure engagement with all our employees and their alignment with our vision. Workforce concerns are constantly addressed. Details on these may be found in the company profile and the performance discussion on labor, which are found throughout this report. Business Groups. We work closely with business groups to learn and share best practices, develop opportunities for collaboration, share resources and expand our ability to make an impact, and serve as a catalyst for promoting sustainable changes. Non Government Organizations (NGOs) and Communities. We believe that we are part of all the communities where we are present and have a responsibility to contribute to their economic, social, and environmental well-being. We coordinate with the local government units of the communities affected by our operations, and undertake community-based programs with stakeholders at the local level. Contractors and Service Providers. We are committed to continuously improve business alliances and build productive relationships with contractors and other service providers based on integrity and legal, ethical, and mutual trust. Petron ensures that we will not maintain business relationships with those who violate company standards and policies, which include environmental protection. Media. We work closely with the media to encourage a mutual understanding between Petron and its many publics. This also serves as an important venue to communicate our values and beliefs. We are able to regularly provide the media with information critical to the oil industry and the public, as well as highlight our contributions to improving social well-being and care for the environment. International Agencies / Donor Organizations. We build partnerships by sharing resources, technical expertise, and experiences with international donor agencies to increase the effectiveness of assistance for development in target areas as well as to create access to technology and education that will sustain programs. We also continuously network with international organizations to improve efficiency, maximize capital productivity, streamline the supply chain, support or promote resource conservation and recovery and encourage product innovation. Our values, focus, and commitments including the programs that we conduct, the products we develop, and the plans we make are ultimately guided by what is best for our stakeholders. 12 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 13

9 Fueling Hope. In 2002, one thousand children were chosen to begin elementary schooling as Tulong Aral ng Petron scholars. Six years after, they have completed grade school. Many, like these children, have received honors for excelling in their studies and have continued to enjoy the gift of education as Tulong Aral high school scholars. A Commitment to our Community We realize that the national scope of our business helps us broaden the positive impact we have on local economies and communities. Our journey to sustainability began with Petron Foundation, Inc. (PFI), serving as the prime mover of Petron Corporation s investments and contributions to society. Through the years, PFI has successfully brought corporate social responsibility (CSR) into the mainstream of our operations by integrating a social development agenda into our business goals. Guiding this development agenda are tenets in our vision, mission, and values on caring for the community and the environment. We initiate programs that make sure we are: Making an impact on society; Fueling hopes of children and youth; Building the foundations of education; Encouraging youth entrepreneurship; Nurturing nature; Partnering with the community on health, safety, and the environment PFI funds its operations primarily through the budget allocation of Petron Corporation. A brief discussion of our company s economic distributions to various stakeholders is found in the section on our company profile. Contributions from almost 80% of our employees, which come in the form of time, treasure, and talent, also serve as effective engines of program implementation. Making an Impact on Society Because of the longevity of the lifecycle of our business, it is part of our policy to put in place environmental monitoring and community-partnership programs that create long-term positive impact and ensure the continuity of our operations. It is important for us to see the overall picture of our community engagement in order to fully manage our impacts. To do this, we coordinate with local government units of the communities affected by our operations. We undertake social scanning, environmental mapping, and community engagement to assess the specific needs of our locations, after which CSR programs are developed addressing those local needs and conditions surfaced by these procedures and interactions. Our programs usually involve different stages of implementation throughout a period of several years, and are mainly on education, entrepreneurship, and environmental rehabilitation. Part of our social responsibility is to promote transparency and the principles of good governance in our transactions with the public sector. Fueling Hopes of Children and Youth The centerpiece program of Fuel H.O.P.E. (Helping Filipino Children and Youth Overcome Poverty through Education) is Tulong Aral ng Petron, a long-term and strategic initiative that sends poor children to school. We realize that high-impact educational programs are important long-term investments in our business, where the project lifecycles are long and the technology needed for Fueling Hope. Fueling Life. 15

10 Fueling Hope. our operations requires highly educated and skilled professionals. Our educational programs cover elementary to college level. Every year, Tulong Aral ng Petron sends a batch of 1,000 scholars to Grade 1. Done in partnership with the Department of Education (DepEd), Department of Social Welfare and Development (DSWD), World Vision Development Foundation, and Philippine Psychology Research and Training House, the program assures its scholars of support in the form of school uniforms, books, school supplies, and meal allowances. It also provides mentoring sessions to the scholars, capability building to the teachers, and livelihood programs to the parents. Since program inception in 2002, our company has sponsored a total of 6,068 scholars. At the end of school year , there were 4,479 scholars in Metro Manila and 1,339 in Mindanao, for a total of 5,818. Last year, our first batch of scholars graduated from the grade school level. We are proud of our success. Of the 1,137 graduating scholars, 389 were considered outstanding students and 21 received various top honors. The average score of Grade 6 Tulong Aral ng Petron scholars receive Christmas treats from Manila City Mayor Alfredo Lim, Petron executives, and employee volunteers. Public-private partnerships are key to sustaining our programs for the community. Petron scholars in the National Achievement Test was 62.32%, higher than the national average of 57%. Our partnership with Sa Aklat Sisikat Foundation complements our efforts in basic education by providing resources to motivate Grade 4 students to make reading a part of their daily lives. The annual Petron Gurong Kaakbay event helps sustain the reading program and enables teachers to serve as reading advocates and change agents. Gurong Kaakbay offers additional in-depth training and support to groups of selected teachers from partner schools. The teachers training and enrichment workshops, along with the reading program are considered the most effective support programs to improve the quality of education in the Philippines. Since 2005, we have helped train 522 teachers from 366 schools. The high school scholarship program was also developed in a multi-stakeholder focus-group discussion on more creative interventions for the implementation of Tulong Aral. Partners in this initiative are DepEd, DSWD, Land Bank of the Philippines, and Philippine Business for Social Progress. Petron provides high school scholarships to 200 youths in 18 schools, and Land Bank sends 100 scholars to 7 high schools in Metro Manila. Our refinery scholarship program is for engineering services. We provided full scholarships for nine mechanical engineering students enrolled at the Bataan Peninsula State University. In March 2008, three of these scholars attained their bachelor s degree and passed the government board exam, with two of them ranking fourth and fifth. We also continued to administer the scholarship program of former Petron chairman Jose A. Syjuco, Jr. for a geodetic engineering student at the University of the Philippines. Building the Foundations of Education The proper educational infrastructure must be in place for educational initiatives to be effective. We continued to support DepEd s Adopt-a-School initiative, which started in The classroom construction and repair program is implemented in partnership with the United States Agency for International Development s (USAID) Education Quality and Access for Learning and Livelihood Skills (EQuALLS) program for Last year, we built 7 Petron schools, bringing our total to 28, and repaired 42 classrooms. These facilities are located mostly in conflict-stricken areas, such as the Autonomous Region of Muslim Mindanao, Region 9, and Region 12. Our partnership with the International Youth Foundation-Education and Livelihood Skills Alliance (IYF-ELSA) allowed us to train 584 teachers in English through the National English Proficiency Program, 588 teachers in mathematics, and 82 teachers in science. We also sponsored 86 administrators and school officials in collaboration with the Notre Dame of Marbel University. Petron s partnership with USAID helps expand venues for education in conflict areas of Mindanao. In the Province of Guimaras, we connected 17 public high schools and eight DepEd district offices to the Internet through our donation of computers and the installation of tower relays and repeaters in strategic areas of the province. This was done together with our Business Systems Support and Development group, PortaLink, and DepEd Guimaras. A five-day training on digital literacy and information communication technology integration was conducted by PFI, Microsoft Philippines, and IT Works for 30 elementary and high school teachers and principals. This training equipped the teachers with knowledge and skills to integrate technology into the current curriculum and to promote a learning environment that fosters technological skills. The training also helped develop project-based activities or programs that may be used in teaching and learning activities inside the classroom. Last year, we also coordinated with Sa Aklat Sisikat Foundation for the turnover of the Petron Library Hub to DepEd-Guimaras. Inaugurated in June 2007, the Petron Library Hub has 43,691 storybooks and textbooks in its collection. It follows the DepEd Library Hub concept of providing books and resources to teachers, librarians, and administrators 16 Petron Corporation 2008 Sustainability Report

11 Fueling Hope. Fueling Hope. of several schools from a centrally located warehouse setup. The books are bundled, and each school may borrow a book bundle for their libraries or reading corners for a period of 30 days. Encouraging Youth Entrepreneurship We see enterprise education as crucial to the development of businesses and jobs that help boost the growth of local economies where we operate and invest. As we expand into the non-fuels business, our community engagement also positions Petron as the business partner of choice and particularly encourages the creation of local businesses that, in the future, can be part of our supply chain. PFI actively focuses on enterprise education at the high school and college levels. Our activities include business mentoring and coaching, on-the-job training, and participation in enterprise-education conferences and fairs. Muntinlupa Business High School (MBHS), the country s first public high school for business studies, was a major partner in the Youth in Entrepreneurship and Leadership Development Program (YIELD). A total of 170 MBHS students were qualified to undergo the The youth find a number of opportunities to learn business and entrepreneurship through mentoring from Petron employees and on-the-job training at Petron Square service stations. 240-hour on-the-job training on forecourt operations and food service at five Petron company-owned and company-operated service stations. Two business-mentoring sessions under this program were facilitated by Petron employees and notable entrepreneurs in More than 1,000 MBHS senior high school students attended the sessions on product planning, product development and packaging, business-plan development, and accountancy. To further enhance the program, we collaborated with San Beda College and held a two-day Trainer s Training on Enterprise Development, where the college dean, professors, and staff served as mentors to 15 MBHS teachers in technical and vocational education. Business-management training programs were also facilitated in partnership with HOLCIM Philippines and Education for Youth Enterprise (EYE) Foundation at the University of Makati s (UM) College of Business Administration. Dubbed WIWAG, the program consists of a five-day, computer-assisted training course that enables university students to understand basic inter-relationships in business management using an integrated model of a business enterprise. In 2008, we conducted a WIWAG session for 23 UM students, bringing our total number of participants to 241 since WIWAG started in We are also partners with Junior Achievement of the Philippines, Inc. (JAPI), in running an enterprise education program where participating university students undergo training on managing a company, from creation to dissolution. The program, which starts in August and ends in March of the following year, is credited as six units by the participants respective universities. At present, 88 university students are part of the program. Petron regularly sends employees to both WIWAG and JAPI to serve as advisers and mentors. To date, Petron has four employees from Finance, Operations, and PFI who are licensed WIWAG instructors; six employees served as advisers on marketing, production, and finance in We have a total of 47 JAPI advisers among our employees. Nurturing Nature Petron has been very active in the multi-sectoral coastal management efforts in Bataan where our refinery is located. Petron Foundation ensures the coordinated efforts of the Bataan Coastal Care Foundation and the project management team overseeing the eight-yearold Bataan Integrated Coastal Management Program. Our accomplishments and action plans under this program, including the publication of the Bataan Coastal Landand Sea-Use Zoning Plan, as well as the development Fisherfolk from Nueva Valencia in Guimaras province enjoy a bountiful harvest of their milkfish from their Mariculture Livelihood Program. of the Bataan Forest Park are discussed in detail in the section on the environment. Guimaras continues to be a focal point of Petron Foundation s environmental rehabilitation efforts. Our Mariculture Livelihood Program remains a centerpiece initiative, which provides viable long-term livelihood for the fishing community of Nueva Valencia and helps improve their socio-economic conditions. The program was launched in August 2007 in partnership with the South East Asian Fisheries Development Center, Citigroup Foundation, the province of Guimaras, Philippine Business for Social Progress, local government units, and the community. Before the year ended, PFI and Citigroup once again sealed their partnership for the second phase of the program. The grant from Citigroup will support the establishment of a new milkfish cage in Barangay San Antonio, Nueva Valencia, while initiating a new milkfish cycle in Barangay Igang. The replication of the Mariculture Livelihood Program will ensure its long-term viability. 18 Petron Corporation 2008 Sustainability Report

12 Doing good. Doing it well. Everywhere. Petron s CSR programs span the entire Philippines Pandacan Community Health Center Tulong Aral ng Petron Livelihood/Skills Training Waste Management Medical Outreach Navotas Tulong Aral ng Petron Medical Outreach Petron Head Office Mangrove/Tree Planting Implementation of Life and Livelihood program for Tubbataha Mentoring Program Poro Environment Program Limay Terminal Mangrove/Tree Planting Petron Bataan Refinery Integrated Coastal Management Program Mangrove/Tree Planting Livelihood Training Petron School College Scholarship Reading Program Teachers Training Medical Outreach/Wellness Program Rosario Tree Planting Roxas Mangrove Planting Iloilo Earth Day Caravan Medical Outreach Palawan Environment Program Tree Planting Support to Life and Livelihood program Guimaras Mariculture Livelihood Program Petron School Cagayancillo Petron Library Hub Life and Livelihood: Reading Program Sustaining the Tubbataha Business Week Program Reefs and the Sulu Sea Internet Connectivity Supplemental Livelihood Program Zamboanga Peninsula Petron School USAID-Petron School; Classroom Repair Tulong Aral ng Petron Reading Program Teachers Training Tree Planting Tawi-Tawi Petron School USAID-Petron School Reading Program Basilan Petron School Reading Program Aparri Environment Program Tree Planting Amlan Mangrove Planting Jimenez Petron School Reading Program Tree Planting Iligan Petron School Tulong Aral ng Petron Reading Program Teachers Training Metro Manila Tulong Aral ng Petron Reading Program Mentoring Program Youth Entrepreneurship Program Teachers Training Environment Program Maguindanao Petron School USAID-Petron School; Classroom Repair Reading Program Teachers Training Sultan Kudarat USAID-Petron School; Classroom Repair Teachers Training Sarangani Petron School USAID-Petron School Tulong Aral ng Petron Reading Program Teachers Training Batangas Environment Program Medical Outreach North Cotabato Classroom Repair Teachers Training South Cotabato USAID-Petron School; Classroom Repair Petron School Tulong Aral ng Petron Teachers Training Pasacao Mangrove Planting Bicol Region GK Energy Village 2 Bacolod Environment Program Mangrove Planting Tacloban Mangrove Planting Isabel Mangrove Planting Reading Program Ormoc Mangrove Planting Southern Leyte Philippines-Taiwan Friendship School GK Energy Village 1 Mactan/Mandaue Petron School Reading Program Teachers Training Mangrove Planting Medical Outreach Tagbilaran Petron School Mangrove Planting Nasipit Petron School Reading Program Teachers Training Mangrove Planting Environment Program Tagoloan Petron School Tulong Aral ng Petron Reading Program Teachers Training Mangrove/Tree Planting Environment Program Lanao Del Sur Petron School Reading Program Davao Petron School Tulong Aral ng Petron Reading Program Teachers Training Tree Planting General Santos Mangrove Planting Artificial Reef Rehabilitation Program Social Performance Data Key Result Area / Key Performance Indicator Performance Data I. EDUCATION A. Tulong Aral ng Petron (Elementary) Scholars to date (started in 2002) 5,211 6,068 First batch of graduates (March 2008) -- 1,137 Average of National Achievement Test (NAT) scores of first batch of graduates Completion rate (from Year 1) Dropout rate (in percent) Outstanding students 1, First honor scholars B. Tulong Aral High School Scholarship Program Number of high school scholars (Yr.1) C. Petron School / USAID-Petron School Petron Schools constructed 21 7 Classrooms built Children who directly benefitted from Petron Schools 2,400 2,800 Books distributed 13,625 6,500 Parent-Teacher-Community Association (PTCA) members trained Classrooms repaired Brigada Eskwela (schools repaired) D. Partnership with USAID (through IYF-ELSA) for Capacity Building for Teaching English, Math and Science Teachers / mentors trained in English/Math/Science /588/82 Administrators/officials from assisted schools trained Trainers in English, Math & Science E. Reading Programs: Petron Programang Kaakbay (in partnership with Sa Aklat Sisikat Foundation) Teachers trained in Programang Kaakbay and enrichment workshops 482/ /253 Participating schools F. Youth in Entrepreneurship Program Students who benefitted from the Summer On-Job-Training : Youth in Entrepreneurship & Leadership Development (YIELD) Program Students who benefitted from the mentoring sessions done by Petron employees 887 1,140 II. ENVIRONMENT / LIVELIHOOD PROGRAMS A. Province of Bataan/Depots Programs rendered to the communities / provinces, in coordination with 14 environmental campaigns Publication of the Coastal the Bataan Coastal Care Foundation Land & Sea-Use Zoning Plan and Bataan Sustainability Development Strategy Propagules / seedlings planted 112,800/22,000 36,300 Areas covered by the reforestation program 26.5 hectares 300 hectares B. Province of Guimaras Mariculture Livelihood (Milkfish Cage Culture) in Guimaras * Fisherfolks who completed season-long training program * Households who will benefit from the program Fisherfolks assisted 16,544 1,727 Education Programs: * Schools assisted * Beneficiaries of education programs 154 Teachers 99 Elementary Schools 71 Elementary Schools 17 High Schools * Student beneficiaries of education programs 43,429 students 21,769 Elementary Students 11,039 High School Students * Teachers trained in digital literacy Teachers * High schools with internet connectivity All 17 High Schools C. Municipality of Cagayancillo / Tubbataha Reefs Capability Building: Student and community fellows trained in seaweed farming, eco-tourism and micro-finance Households assisted III. VOLUNTEERISM Employee volunteers 5,914* 654 Employee volunteer hours 90,966 7,197 Non-employee volunteers 23,986* 4,546 Non-employee volunteer hours 175,580 20,796 Employee Mentors: Junior Achievement / WIWAG Business Week / Youth Entrepreneurship Partner Mentors from Ateneo de Manila University / De La Salle University -- 61/96 20 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 21

13 Fueling Hope. A Commitment to our Employees We consider our employees the engine behind the success of our company. Partnering with the Community on Health, Safety, and the Environment Petron has successfully integrated itself into its surrounding communities. We see ourselves as the local governments partner in extending community services. Throughout the year, our depots and terminals support programs that address local challenges and emergencies. The challenges of protecting the local environment and raising awareness on the issue of climate change are priority areas at the grassroots level. Petron personnel conducted special community-related programs on the nature of petroleum products, depot operations, and how industry and community can work together. We distributed information materials on climate change, and supported Motolite s Balik Baterya program, a batterycollection and fundraising campaign for education. In 2008, we donated hundreds of empty drums to various communities to support their solid waste management efforts. Activities such as sponsoring firefighting training give us the chance to foster better relations with the community and help build their capabilities. Aparri depot donated nipa seedlings and funds for the Wetlands Celebration in support of the protection and preservation of the Apagonan River in Cagayan. Iloilo depot donated cleanup materials, including boots, for Maritime Week held in September We see emergency response as a social responsibility in communities where we operate. Our expertise and capabilities and especially the network of facilities and service stations located strategically across the country allow us to respond to emergencies immediately and effectively. We were able to extinguish several community fires even prior to the arrival of city and municipality firemen. Fire emergencies continue to be a problem for local communities, and we do our share by building community-based competent firefighting teams. We provide some relief goods to families displaced by fires as well as to those affected by typhoons and other natural calamities. Finally, community health is another important issue and we assist in whatever way we can. Our depots participated in medical and dental missions and voluntary blood donation. Community wellness programs are being looked at. Our company remains focused on recruiting, retaining, and rewarding professionals who are motivated by teamwork, innovation, excellence, integrity, and fairness. At the same time, it is important that our people consider Petron an important and reliable partner in their success. We believe that the total development of our employees benefits the company, and this can be assured by: Achieving a sense of purpose; Being involved in challenging and interesting projects and are sufficiently rewarded; Maintaining harmonious relationships in the workplace; Working with competent leaders; and Attaining work-life balance. Managing our company s most important asset requires the precise balance between developing our people and supporting continuous organizational transformation. Our Human Resources Management Department (HRMD) is a strategic partner of management in strengthening Petron s capacity for sustainable corporate growth. Its role in the company is structured according to its double-pronged approach of developing people and the organization: human resource planning and services, and talent management. Enhancing Performance and Productivity Through our human resources management, the company ably responds to industry and market forces according to our core values, strategies, and business plans. By communicating a common vision in full consideration of the values and competencies of our 5 (4%) 3 (3%) 42 (38%) 62 (55%) 198 (27%) 176 (24%) 220 (30%) 135 (19%) 97 (22%) 85 (19%) 179 (40%) 83 (19%) 22 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 23

14 employees, we align our people with the goals of the organization. This has proven successful in engendering behaviors that yield improved results for the business. The HRMD oversees the performance of 1,285 employees nationwide. In 2008, as in previous years, 100% of our employees received regular performance evaluation. Petron s evaluation mechanism makes sure that even as the company undergoes strategic transformation in terms of organization and business direction, our people are equipped with open communication lines to management on measuring and managing their responsibilities, expectations, and performance. We also do this to make sure that our employees key performance indicators continue to challenge and reward them. Our rank and file employees, who comprise 35% of our total workforce, are covered by collective bargaining agreements. They are informed about Petron s union organizations during new employees orientation. HR also provides the unions with the list of the new rank and file hirees so they can be invited to join. Petron abides by all local labor laws and strictly adheres to international standards on human rights, we have and observe strict guidelines that ensure against child labor. Providing Training and Incentives Training is an important aspect of talent retention, management, and development. Petron offers an integrated training curriculum that covers the development of both core and functional competencies. Last year s figures posted a total of 67,486 training hours for all employees or an average of 52.5 hours per employee. Leaders are equipped with the competencies necessary to practice good corporate governance. We continued to run our An Hour with the Champions program, a series of interactive sessions Training forms an integral part of ensuring employees continued professional growth in the company. Training Hours for all Petron Employees (2008) Total Average per employee 67,486 hours 52.5 hours with champions of the business community. This gives our employees opportunities to interact with leaders and be informed about best practices, which foster a culture of excellence. We recognize that our people have as much stake in the company as our shareholders, above and beyond their regular compensation and mandated bonuses. The company s success is shared with our employees through Rewarding Excellence through Alternative Pay (REAP), an annual variable pay program that is based on business targets and links our employees individual goals to corporate objectives. This has further motivated employees to boost Petron s profitability to record business growth since We also take pride in the fact that our standard entry-level wage is a substantial 1.83 (average) times higher than the local minimum wage requirement. Working in tandem with financial rewards to boost productivity are programs that address safety in the workplace, physical welfare, and positive attitude. Occupational health and safety are primary issues especially in our business, since we maintain manufacturing and refinery plants that process and transport hazardous materials. One hundred percent of our workforce, from management level to rank and file, are represented in health and safety committees. Promoting Occupational Health and Safety Employee awareness programs and training were conducted regularly on Occupational Health and Safety Administrative Series (OHSAS 18001), an internationally recognized occupational health and safety management system that utilizes a systematic approach to hazard analysis and accident prevention. In-depth sessions were conducted at our Pandacan terminal and Davao depot, while overview sessions on OHSAS and the Globally Harmonized System were provided to Petron employees and contractor personnel at the corporate head office. A total of 17,801 training hours were logged at our refinery, focusing on Petron s Integrated Management Systems, equipment maintenance, emergency response, and the proper handling of chemicals such as Benzene. In December 2008, we engaged the services of the World Safety Organization in preparation for the commissioning of a new Benzene-Toluene-Xylene (BTX) facility in They provided training to augment employees response capability in the event of spills, leaks, or fires involving toxic or hazardous chemicals. There were also training and orientation sessions on safety maintenance, respiratory protection, contractor safety, and basic safety. Fire fighting, basic life-support training, basic safety, and emergency rescue plans 24 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 25

15 Fueling Hope Incident Statistics A. Refinery Petron Bataan Refinery 295,688 B. Luzon Operations Aparri Depot 129,530 Batangas Terminal 370,149 Calapan Sales Office 10,946 JOCASP - Aviation 52,756 Limay Terminal 648,037 Navotas Depot 354,415 Makati Operations 396,032 Palawan Depot 318,034 Pandacan Terminal 2,445,072 Pasacao Depot 64,388 Poro Depot 750,045 Rosario Depot 706,378 San Jose Sales Office 10,154 C. Visayas Operations Amlan Depot 89,297 Bacolod Depot 435,204 Iloilo Depot 535,502 Corplan/ PBR Operations Marketing Finance Total Exec/HR Minor Injury 0 2 (16) (1) (17) Disabling Injury Death (2) 0 1 (2) Vehicular Accident 0 6 (2) 0 (9) (11) Near Miss 0 39 (21) 4 (7) 1 (2) 0 44 (30) Fire, Flash 0 0 (2) 0 0 (1) 0 0 (3) Fire, Minor 0 3 (4) 2 (2) 0 (1) 0 5 (7) Fire, Major Oil Spill 0 9 (1) 5 (1) 5 (2) 0 19 (4) Property Damage 0 1 (3) 1 (1) 2 (2) 0 4 (6) Pilferage (5) (5) Robbery (8) 0 0 (8) Theft (2) 1 (2) 0 1 (4) Product Contamination (5) (5) Note: Figures in () denotes contract personnel or contractor related incident Locations Safety Milestone (Regular Employee Man-hours without lost time accident) Locations Isabel Depot 50,922 Mactan Depot 141,608 Mandaue Terminal 712,845 Ormoc Depot 262,484 Roxas Depot 156,616 Tacloban Depot 163,972 Tagbilaran Depot 54,811 D. Mindanao Operations Safety Milestone (Regular Employee Man-hours without lost time accident) Davao Depot 680,639 General Santos (Bula and Bawing Depots) 92,946 Iligan Depot 121,915 Jimenez Depot 237,771 Nasipit Depot 217,480 Tagoloan Depot 606, 053 Zamboanga Depot 450,784 E. Gasul Plants Legaspi LPG Depot 40,285 Pasig LPG Terminal 1,524,690 San Fernando LPG Depot 500,742 and procedures were regularly covered by the Supply and Operations Division. We have in place a Contractor Safety Management (CSM) program designed to instill safety consciousness among our contractors. The program covered training of contractors on the following issues: work environment and safety; fire and hot work safety; fall prevention and protection; hazardous chemicals and industrial gases; and loading and unloading, to name a few. Petron also invests heavily in the continuous improvement of our emergency response and preparedness facilities. We upgraded our fire-water facility at the refinery and also continued to upgrade storage tanks to comply with the latest industry standards. This minimizes personnel exposure during emergencies as well as reduces facility damage. Depots and terminals are properly equipped to combat any emergency. Our tank farms are equipped with hydrants and fixed monitors for fire control and spread prevention. Critical equipment such as pumps, motors, and loading arms are regularly checked and maintained at required intervals. Depot and terminal personnel actively participate in joint security and safety programs with local industries and communities. The cost of healthcare in the Philippines is among the highest in the world. Petron s healthcare program, which includes substantial coverage of both employees and their families, is considered among the best offered by major companies here. We conducted regular health monitoring and periodic examinations and vaccinations among employees and their dependents. We posted regular advisories on nutrition as well as on health and safety related issues, such as the melamine milk contamination issue in Petron also had a health fair, which extended medical services, laboratory tests, and other health services to immidiate family members and contractual employees, who are otherwise not covered by the existing programs. Attaining Work-Life Balance Employee groups with diverse interests are encouraged. We address their needs through the availability of sports and hobby training and events, such as art, photography, and ikebana workshops. We Incidences, Investigations, and Actions Taken Working in the energy sector, we seek to constantly improve on our safety performance and practices. There was increased activity at the refinery in 2008 in terms of construction, startup, and commissioning of the new process units and maintenance activities. Our marketing group continuously improves the service stations to satisfy the needs of the customers, while the Supply/Operations ensures delivery of quality products on time. Despite our stringent safety measures, there were three fatalities at the refinery in 2008 one refinery employee succumbed to hydrogen sulfide (H2S) exposure, one contractor s employee was caught in a cave-in during excavation at our Benzene-Toluene-Xylene construction site, and one contractor s employee fell in a pit formed by erosion due to a leaking underground sewer line. In one of our service stations, a contractor personnel died due to cardiopulmonary arrest while cleaning the leaching chamber. At the LPG Filling Plant area of our Jimenez Depot, fire incident occurred resulting to death of one personnel of an LPG dealer. To prevent similar incidents from occurring, the refinery has undertaken several precautionary strategies. All areas where H2S may be present have been mapped and identified, additional signages installed, first aid and respiratory training conducted, and personal gas detectors provided for personnel working in H2S-risk areas. The refinery s handbook has also been supplemented with additional H2S guidelines. For personnel working on excavation, the refinery s Safety and Environment group has established Comprehensive Construction and Maintenance Safety Standards that details safety requirements such as the provision of scaffolding, fall prevention and protective equipment, signs, and barricades. The group also conducted a comprehensive study on the refinery s water sewer system to diagram oily and cleanwater sewer systems, assess the current state of sewers, identify high-risk areas, and generate recommendations to prevent incidents caused by underground erosion. At the service stations, Permit to Work System was implemented for all construction and maintenance works. To ensure compliance of contractors on the use of Personal Protective Equipment, requirement was incorporated in the scope of work of Dispensing Pump Maintenance Contracts. The requirement of the Contractor Safety Management program was fully implemented in all contracts. As a result of the accident at Jimenez Depot, company standard and procedures in LPG tank degassing were reviewed and revised as needed. We deeply regret the five fatal accidents that happened last year. Investigations were conducted, and specific actions were undertaken to directly address the circumstances surrounding the 2008 fatalities. We continue to take serious steps to prevent the recurrence of these unfortunate events and apply the lessons we have learned to further improve our safety performance. 26 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 27

16 2007 Watson Wyatt Employee Opinion Survey (by Category) Percentage Responding Line of Sight (75) Diversity (70) Commitment and your Company (58) Values (64) Customer Focus (65) Work Environment/Team (60) Process Improvement/Innovation (61) Trust and Ethics (64) Communications (49) Compensation and Benefits (49) Strategic Direction/Leadership (46) Performance Leadership (62) Worklife Training and Development (51) Hiring and Advancement (53) Favorable Neutral Unfavorable Note: Figures in () denote average favorable percentage results from the Watson Wyatt Employee Opinion Survey in the Asia- Pacific Region. regularly measure employee attitudes and the effectiveness of our programs through employee opinion surveys conducted by independent consultants. The latest Watson Wyatt Employee Opinion Survey results showed that the employee-satisfaction level at Petron is higher compared to levels of local and regional counterparts in the following aspects: line of sight, diversity, commitment, values, and customer focus, among many others. Reaping the Rewards of our Labor Our efforts have been acknowledged by the Department of Labor and Employment s Bureau of Working Conditions (DOLE-BWC), which conferred the Safety Milestone Recognition Award on Petron Corporation, for displaying exemplary safety performance at 12 facilities. A total of 11,932,136 safe-man-hours with no lost time accident (LTA) was attained by these facilities from January 1, 1978 to June 30, In 2008, Pandacan terminal had 2,945,072 regularemployee man-hours with no LTA. Our innovative employee engagement and communications programs have earned multiple awards from respected institutions like the International Association of Business Communicators (IABC), Public Relations Society of the Philippines (PRSP), and University of Asia and the Pacific. In 2008, Petron received the Employer of the Year Award from the People Management Association of the Philippines, a prestigious recognition that is given to companies that put a premium on people development through strategic and innovative human-resource programs. Companies are judged based on strategic human resources, leadership, continuous improvement, business results, and corporate social responsibility. Petron s 2008 Awards and Recognition People Management Association of the Philippines 2008 Employer of the Year Award People Management Association of the Philippines 2008 People Manager of the Year Award One of the Top 15 companies recognized by the Institute of Corporate Directors (ICD) in Anvil Awards of Excellence Tulong Aral ng Petron An Hour with the Champions ArtPetron: 7th National Student Art Competition ArtPetron Website and Social Sites Anvil Awards of Merit ArtPetron Folio Magazine Issue No. 2 ArtPetron 7 Collaterals Philippine Quill Awards of Excellence Art Petron: 8th National Student Art Competition ArtPetron Folio Magazine Petron 2009 Wall Calendar Philippine Quill Awards of Merit Tulong Aral ng Petron Think Green. Live Green. ArtPetron Website ArtPetron Collaterals Readers Digest Gold Trusted Brand Award Department of Labor and Employment Bureau of Working Conditions Safety Milestone Recognition Award Department of Environment and Natural Resources Outstanding Achievement in Environment and Natural Resources (given to General Santos depot) Department of Environment and Natural Resources Regional Office 2 Recognition (given to Aparri depot) Department of Environment and Natural Resources Regional Office 3 Recognition (given to Bataan Refinery) 28 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 29

17 Fueling Hope. In the Pipeline: Volunteers in Action As Petron fuels the dreams of our employees for a better life to fulfill their economic and social goals in a healthy and safe environment they become more involved in fueling the dreams of other Filipinos. Volunteerism has long been an entrenched corporate value in our company, led by Petron Foundation in partnership with our employees. It was in 1999 when we institutionalized all our projects under Volunteers in Action (VIA) and strengthened the role of our employees to the advantage of Petron s corporate social responsibility (CSR). Through VIA, management and employees deepen their engagement with communities affected directly or indirectly by our business. We become stakeholders of a larger community and see ourselves as active agents of meaningful change. Petron promotes the value of CSR as the spirit of bayanihan, a traditional value that resonates in every Filipino. This has proven to be effective, with VIA records showing employee participation peaking at 80%. Family members and business partners also use VIA as a means to become better involved in social development. VIA provides our various stakeholders with an established and effective mechanism to turn their desire to do good into actions that have measurable and lasting impact. Volunteers are free to determine their contributions, whether time, treasure, or talent. In 2008, approximately 654 or 50% of the company s 1,285-strong workforce took part in volunteer work and reached out to approximately 130,000 beneficiaries. Their collective efforts resulted in roughly 27,990 hours of service to the community. Our active employee volunteerism was matched by the enthusiasm of our stakeholders, who joined us in our activities. A total of 4,485 people put in 26,380 volunteer hours. VIA covered numerous activities: Kontra Kalat sa Dagat, a coastal cleanup activity; Lakbayanihan, a series of medical missions; Tulong Kapwa, a disasterrelief program in calamity-stricken areas; and Tulong Aral ng Petron, a send-a-child to school program where employees donate their time, treasure or talent. In observance of Earth Month in April and the International Coastal Cleanup Day in September, PFI helped Operations division and our refinery to mobilize and engage some 4,550 volunteers (employees, family members, business partners, local officials and community residents) from various facilities in Luzon, Visayas, and Mindanao. We participated in 51 separate activities to plant more than 36,000 seedlings and mangrove propagules and clear over 28 kilometers of coastline of trash and other marine debris. One area where our employees have found a niche is in serving as mentors, advisers, and resource Jennifer Jude Majella M. Sulit Trader, Supply and Trading When I was growing up in the province, I had a few classmates who had to quit schooling because their parents could no longer afford it. That s why I m so happy to be part of Tulong Aral. It gives children like them a fighting chance. Andrew S. Fortuno Operations Manager What started as a business strategy of building good relations with the community has now been transformed into a social responsibility. It s now become a must for Petron and its employees to do. speakers to high school and college youths. This is discussed in detail in the community section of this report. Through VIA, our stakeholders get a deeper sense of fulfillment and galvanize their partnership with Petron and commitment to the community. Now on its 10th year, VIA is a continuing employeeengagement program that articulates Petron s corporate positioning of leadership through partnerships. It has received citations from the International Association of Business Communicators and the Public Relations Society of the Philippines. Cristina R. Rellin General Accounting Supervisor All around me, I see volunteers whose lives have been changed through Petron Foundation. I m proud that volunteerism is deeply ingrained in Petron s culture, and I m grateful I am given a chance to become part of it. Petron Foundation does not only make a difference in the lives of our beneficiaries; it makes a difference in ours as well. Volunteer activities such as the cleanup of Manila Bay give Petron employees opportunities to make a difference in society. Cristino R. Rivera Head of Operations of New Ventures Realty Corporation, a Petron subsidiary. You see the children s faces smiling, looking at you with grateful eyes and feeling relieved from hunger and discomfort, and you get a different kind of joy. It s the kind that nourishes my soul. Rolando D. Sante Gasul Administration, Accounting and Security Supervisor I can t explain it, but serving gives our family one of the lightest, best feelings in the world. It s fulfillment like no other. For as long as we can serve, we will serve. Fueling Hope. Fueling Life. 31

18 A Commitment to the Environment Environmental sustainability is intrinsically linked to all human endeavors. Fueling Life. In the summer of 2001, eight-year old Martin Romero joined his mother Malou, Ohlet Apuhin and dozens of other Petron employee volunteers to help save the La Mesa Watershed, the major source of water for Metro Manila and its surrounding environs. Eight years later, Martin and the trees he planted has grown, and the La Mesa Watershed has been completely reforested. We believe that the environment remains an issue that requires an urgent response from everyone. At Petron, we are keenly aware that no natural resource is infinite not the fossil fuels on which our business is anchored, nor the air, soil, and water that must absorb the impact of our operations. This realization makes it glaringly apparent that environmental stewardship must be a necessary part of our efforts given the long cycle of our business and its effects on the environment and our resources over an extended period of time. Despite the lack of consensus in the scientific community regarding the effects of climate change, Petron continues to invest in sustainability, acknowledging environmental stewardship as our responsibility to help mitigate the impact of our business and the industry on the planet. Our stewardship ensures a better quality of life for our stakeholders, including our employees and the communities where we operate. This belief is enshrined as a core principle of our corporate values and is reflected in our various policies, management strategies, and business practices, including the various innovations on the products we develop for millions of Filipinos. Mandating our Stewardship We have mandated the need to care for the environment in Petron s vision, mission, and values. It commits us to integrate environmental responsibility into our decisionmaking process. Guiding us is our corporate-wide Health, Safety, and Environment (HSE) Policy, which states that Petron shall: Strive to fully comply with all government regulations relevant to the promotion of health and safety and the preservation of the environment; Adopt appropriate operational procedures, provide the necessary resources and visible management support, and involve our stakeholders in all related endeavors; Have stringent goals and targets against which we will measure our performance; and Formulate strategies to continuously improve the ways we conduct our business. An HSE Management Committee drives policy implementation and compliance. Pushing us towards environmental sustainability are the Environmental Management Systems (EMSs) of both our Petron Bataan Refinery (PBR), depots, and terminals. Adhering to the standards of ISO 14001:2004, Petron s EMSs defines a framework to direct our efforts to improve over-all environmental performance. This framework includes the management of environmental policy, organizational structure, planning activities, responsibilities, practices, procedures, processes, and resources. In line with the requirements for the granting of Environmental Compliance Certificates (ECC) by the DENR to our refinery, we signed a Memoramdum of Fueling Hope. Fueling Life. 33

19 Fueling Life. Reporting on Health, Safety, and Environment For many years, we published a Health, Safety, and Environment Annual Report (as part of our commitment to the HSE policy to conduct our business in a manner that preserves the environment and protects the health and safety of all our employees and stakeholders). The report disclosed updated information from the different units on aspects of health, safety, and environment, such as: our safety management systems and safety standards for personnel and contractors; compliance and safety audits and reviews; HSE-related capital expenditures, including equipment and facility upgrades; permits and licenses; personnel trainings and safety recognitions; and incident statistics and reports. Starting this year, we represent the richness of our HSE reporting in this sustainability report, specifically in the sections dedicated to labor, human rights, and the environment. We strive to be as comprehensive as possible as we discuss our performance. Reporting has always been an opportunity to engage with stakeholders and improve on both our successes and shortfalls. We have an HSE Management Committee, led by our President and CEO, overseeing strategies and action plans. The committee consists of our Vice-Presidents from Corporate Planning, Supply and Operations, Finance and Subsidiaries, Petron Bataan Refinery (PBR), and our HSE manager. They work in tandem with all divisions on their respective HSE initiatives. In order to be able to operate successfully and responsibly in the ever-dynamic oil industry, we uphold a set of values and behavioral norms that include focus, optimization, foresight, and compassion. For the past two years, our refinery has been recognized by the Department of Environment and Natural Resources for its unwavering support to environmental programs and for its exemplary endeavors in pursuit of sustainable development. Agreement with the DENR s Environmental Management Bureau (EMB) to form a Multipartite Monitoring Team (MMT). This is composed of representatives from DENR-EMB, the refinery, local government units, non governmental organizations, socio-civic groups, and other stakeholders. The agreement allows the MMT to regularly check our refinery s environmental performance. We put up the Environmental Monitoring Fund to support the monitoring process, and the Environmental Guarantee Fund as a ready fund source in case of adverse impacts from refinery projects. Our Environmental Performance Petron has made every effort to comply with all government regulations concerning the environment. There were no significant fines for non-compliance in In March 2008, our refinery passed the recertification audit for ISO 14001:2004 conducted by TUV SUD Philippines, while our Mactan and Tagbilaran depots were awarded their ISO 14001:2004 certification in December This brings the total number of EMS-certified depots and terminals to 15. These management systems are audited regularly by internal and external consultants. We have made environmental training available to our employees, recognizing that Petron can achieve environmental stewardship only if our people share our vision and are equipped with the know-how to implement sound practices. A total of 164 employees participated in 754 hours of training on topics such as ISO 14001, ISO 9001 (Quality Management Systems), OSHAS (Health and Safety Information), as well as Integrated Management System awareness, understanding, and implementation. Our Response to Climate Change Although Petron stringently complies with the Clean Air Act of 1999, we are working to further reduce our greenhouse-gas (GHG) emissions. For 2008, our total GHG emissions were computed based solely on our electric consumption. Moving forward, we will increase the scope of these measurements, so that we can set specific air emission targets. A Quick Look at Climate Change The problem of climate change no longer needs an introduction. It is widely regarded as the most serious environmental challenge that the world faces. At the centre of climate change science are the increasing concentrations of carbon dioxide (CO2) and other greenhouse gases in the earth s atmosphere as a result of human activities. This has been shown to lead to the increases in global atmospheric temperatures (global warming) and associated changes in the earth s climatic system (climate change). The potential economic impacts of climate change were brought into sharp focus in late 2006 with the publication of the Stern Review on the Economics of Climate Change. The report states that our actions over the coming few decades related to climate change could create risks of major disruptions to economic activity, and that costs of extreme weather alone could reach 0.5-1% of world GDP per annum by the middle of the century. The report states that at higher temperatures, developed economies face a growing risk of large-scale shocks, and provides examples such as increasing hurricane speeds, floods, heat waves, and costs of insurance. It warns that if climate change is not addressed, it could create risks of major disruption to economic activity (Source: Reporting the Business Implications of Climate Change in Sustainability Reports: A survey conducted by the Global Reporting Initiative and KPMG s Global Sustainability Services) In response to the requirements of the Clean Air Act, Petron in May 2005 inaugurated a 22,000-barrel-per-day (bpd) Gas-Oil Hydrotreater (GOHT) and a 10,000-bpd Light Virgin Naphtha Isomerization (Isom) unit. The GOHT significantly reduces the sulfur content in diesel production to.05% sulfur while the Isom unit produces a high-octane gasoline within the 35% limit on aromatics 34 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 35

20 and 2% limit on benzene as prescribed by the Clean Air Act. These facilities required an investment of over US$ 100 million. At present, Petron is the only oil company in the country capable of producing Clean Air Act compliant fuels to meet domestic requirements. To ensure that the flue gas fed to our furnaces and boilers generates sulfur dioxide (SO2) / sulfur trioxide (SOx) compliant emissions, our refinery also operates a sulfur recovery unit designed to convert hydrogen sulfide in refinery fuel gas to recoverable elemental sulfur. PBR s ambient air quality for SO2 is from 0.5 to micrograms / normal cubic meter, while ambient air quality for nitrogen oxide is 0.2 to 16.5 micrograms / normal cubic meter. The DENR limit for ambient SO2 is 340 micrograms / normal cubic meter, while nitrogen oxide is 260 micrograms / normal cubic meter. Ambient air quality is affected by the emissions of the 21 furnace/boiler stacks at PBR. Each of these stacks emits SO2 well below the DENR annual limit of 750 tons per stack. Moreover our refinery uses 1% low-sulfur fuel oil for its fuel furnaces and boilers to ensure emission are within levels, if not better. Above 795 thousand barrels of low-sulfur fuel oil was consumed, in addition to 1,026,000 barrels of sweet (i.e., less-sulfur) fuel gas (fuel oil equivalent), 166,000 barrels of industrial fuel oil, and 231,000 barrels cat carbon (fuel oil equivalent). In comparison, our lubes and greases manufacturing plant in Pandacan terminal consumed 276 kiloliters of special fuel oil and 24.4 kiloliters industrial diesel oil, while depots and terminals consumed 33,645 liters of diesel for their generator sets. Our Service Station Engineering, Construction, and Maintenance Department has begun installing vapor scrubbers to control hydrocarbon emissions by service station ventilation lines. The effluents from the scrubber passes through an oil-water separator before it is released into the public sewage system. Meanwhile, our depots and terminals reduce vapor emissions from volatile product tanks by providing internal floating roofs to prevent evaporations. We distribute products mostly through the use of tank lorries to minimize carbon footprint. At our Pandacan terminal, we ensure that all trucks used are non-smoke belching through our own smoke emission testing equipment, that they are roadworthy and properly equipped with safety devices, and drivers trained in defensive driving. We practice trip rationalization to lower fuel comsuption. The Subic Fuel Additives Blending Plant, the first in the Asia Pacific region, provides a steady source of fuel additives which, when added to gasoline, diesel, or fuel oil, improves efficiency, boost engine performance of vehicles, and significantly reduce emissions. Energy-efficient practices are widely employeed in Petron s depots and terminals, offices, and company-owned and company-operated stations. At the Fuel Additives Blending Plant at Subic, Zambales, we distribute finished products in 20,000-liter isotanks to reduce generating packaging materials such as steel drums and wood pallets. Additionally, drums that were used to transport fuel additives are also reused by Petron for compatible materials. Isotanks bound for customers in the Asia-Pacific region are shipped out of Subic Bay Seaport to eliminate the overland transport emissions and reduce likelihood of accidents during transport, minimizing the possibility of spills and leaks. Fuel additive materials from Europe are also delivered through the Subic Bay Freeport. We have also taken it upon ourselves to provide services for clients and customers to help them comply with the Clean Air Act. Our Marketing Technical group s field engineers conducted Engine Diagnostic Tests, Combustion Efficiency Tests, and Industrial Emission Tests for our corporate clients. Emission tests support the government s thrust to monitor and regulate emission levels. Another way by which we help our customers manage their ecological impact is by creating a range of green products that comply with government s environmental standards. A discussion on these products is found in the preceding section, In the Pipeline: Going Green with Petron s Nature- Friendly Products. Lowering our electrical consumption is another way by which we can reduce GHG. We have begun instituting energy-saving initiatives in a few of our divisions. At corporate headquarters, for instance, lighting fixtures are being converted to energy-saving, compact-fluorescent lamps; lighting facilities are being re-circuited; leaks in air-conditioning ducts are being repaired; and air-conditioning run time is being reduced during the cooler months of the year. Fueling Hope. Fueling Life. 37

21 Fueling Life. At our depots and terminals, we regularly conduct tests on our electrical systems. Not only for safety issues, but also to ensure the efficiency of our electrical systems by addressing power leakages or wasted electrical energy due to grounded wires or inefficient equipment. All depot equipment with high power consumption, such as product pump motors and air conditioners, undergo regular checkups and preventive maintenance to ensure performance at optimal power levels. This results to less power consumption while achieving the same output. Moving forward, the depots and terminals are considering applying more energy-efficient options to current office-lighting systems. A review of current outdoor lighting will also be conducted to assess sufficiency and possible power reduction. At our Treats convenience stores, air conditioners and chillers are shut down on certain hours to reduce run time. Treats and the forecourts utilize selected lights during off-peak hours, while those at our offices are promptly switched off at the end of the work day. Our franchised stores switch on lighting and electrical equipment only in areas when they are about to be occupied by customers, and use energy-efficient light emitting diodes (LED) instead of fluorescent lamps for signages. We also regularly review their power consumption to help them develop other energy-saving measures. Responsible Water Use and Wastewater Treatment For a more responsible water use, our refinery has completed a hydrology study, the results of which provide baseline data for future water conservation projects including a watershed rehabilitation. To comply with DENR regulations on wastewater effluent standards for large service stations, Petron installed sequential-batch-reactor wastewater treatment (WWT) facilities at Petron Square C5 Diego Silang in Taguig City, and Petron Square Katipunan in Quezon City. All wastewater generated by the forecourt and locators of these two stations are treated before being discharged into government sewerage. Similar program to install WWT in other service stations will follow. In addition, oils drained from vehicles undergoing changing of oil from our company-operated Car Care Centers are collected by DENR-accredited waste disposal companies. At our Pandacan terminal, barges delivering white products (fuels, gasoline, diesel, kero) are required to install an on-board stripping system to replace the waterpushing method of cleaning their compartments during cargo-discharging operations. The product-stripping system helps reduce the terminal s effluent volume to its oil-water separator. In 2008, we have upgraded our wastewater-treatment and oil-spill facility at our Bawing depot. We installed product recovery systems at our Tacloban and Ormoc depots to minimize the interface of water and products during tanker receiving operations. Wastewater effluents from our depots and terminals pass through an oil water separator (OWS) to discharge to public canals, waterways, and drains. Appropriate permits cover our OWS discharges. Effective Management of Hazardous Waste In compliance with RA 6969/9003 (Hazardous and Solid Waste Acts), our refinery has implemented a Waste Management System to segregate, environmentally dispose of, and treat hazardous waste generated from refinery maintenance, operation, and construction activities. The system includes the creation of procedure manuals for hazardous-waste management and health-care-waste management. Moving forward, Petron aims to implement an enterprise-wide solid waste management program and regularly measure our waste disposal with the intention of reducing the amount of waste Petron sends to landfills. In 2008, our refinery earned around P43 million from the sale and disposal of waste to accredited DENR EMB haulers and treaters. The disposed waste includes used submarine hoses, oily sludge, soil-contaminated asphalts, spent chemicals and catalyst, scrap wood materials, and metal scraps. Moreover, our refiney was able to biologically treat and properly dispose of about 15 thousand barrels (MB) of generated spent caustic. This brings our total to 40 MB of spent caustic that has been biologically degraded and disposed of through our refinery wastewater treatment plant since the installation of a bio-reactor in Our refinery also operates a caustic-regeneration unit to minimize spent caustic generation and a sour-water facility to manage refinery water containing hazardous substances prior to discharge to the wastewater treatment plant. The oil tanker Matikas is among the double-hulled ships that transports Petron s products safely across the seas. This is among the initiatives of the company to significantly reduce the incidence of oil spills. Hazardous waste that cannot be treated and disposed of within the refinery are handled by DENR-accredited treaters and disposers. Petron is an active member of Samahan sa Pilipinas ng mga Industriyang Kimika (SPIK), an association of chemical industries in the Philippines. In June 2008, Petron hosted SPIK s Responsible Care Day at our refinery. Responsible Care is the commitment of member chemical companies to address the public s health, safety, and environmental concerns regarding chemicals and chemical operations. The whole-day activity included a tour of our refinery facilities as well as talks on various topics. Included topics are the chemical regulations of RA 6969, REACH (Restriction, Evaluation, Authorization, and Restriction of Chemicals), and the Globally Harmonized System for the labeling of chemicals and restrictions on the use of chemicals. Initiatives for the Prevention of Oil Spills Oil spill from our operations is a major concern. In the interest of prevention, Petron is fully compliant to the Maritime Industry Authority s Memorandum Circular No as of April 1, This circular 38 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 39

22 states that all domestic and international vessels chartered in Philippine waters to carry heavy-grade and other persistent oils must be double-hulled constructed. Additionally, initiatives to safeguard our seas are in the pipeline for These initiatives include the implementation of a carrier Ballast Water and Sediments Management Plan to prevent the spread of harmful aquatic organisms carried by ships ballast water; Closed Loading Operations to control hydrocarbon vapor emissions during cargo loading and unloading operations at ports; and Closed Seachest Valve Operation to prevent oil releases as a result of cargo backflow pressure. For implementation in 2010 is the use of double-hulled coastal tankers for transporting white products. In May 2007, Petron created a Marine Department to implement closer supervision for vessel inspection and vetting. The department ensures that vessels chartered complies with International Safety Guides for Oil Tankers and Terminals (ISGOTT). Petron also became a member of the Oil Companies International Marine Forum (OCIMF). A major function is the vetting of vessels. Vetting is an in-depth assesment of a ship s quality and suitability for a task. At our depots and terminals, our product tanks regularly undergo inspections and various testing to ensure their integrity. We are now complying with the latest API 650 tank foundation required of having a lining of high density polyethylene materials for new boats and tanks undergoing bottom plate replacement. In addition, tanks are being equipped with intelligent tank-gauging systems with high-level alarm indicators. Product loading pumps are controlled by preset meters, to control truck loading thereby helping, avert spills. Likewise, our product loading racks are fitted with quick-closing valves water on foam deluge systems, and drainage systems that lead to our oil-water separators. Our tank farms are designed to API standards and are equipped with surrounding dikes for containment. As a result of our various efforts, we are proud to say, we have no significant oil spills in To help diminish the risk and environmental damage of potential spills, we initiated the Oil Spill Response Project in January 2008 with funding from the U.S. Trade and Development Agency (USTDA). A U.S.-based consultants Response Management Association (RMA) The company takes oil-spill prevention and response very seriously and ensures that all its facilities are always fully equipped and ready to respond to any incident. Led by Petron, stakeholders in Limay, Bataan, formalize their collective action to establish a forest park in the municipality. were brought in to inspect major facilities at Pandacan, Mandaue, Batangas, Davao, Bacolod, Iloilo, and the refinery, and to assess Petron s Oil Spill Contingency Plans. RMA consultants identified the gaps in our response capability and made recommendations that are now the basis of a five-year replacement and acquisition program for various oil-spill related equipment. We have distributed approximately 3,800 meters of oil-spill booms donated by China to various depots and terminals. At present, all depots that handle heavygrade petroleum products are equipped with spill containment and recovery equipment. Meanwhile, our refinery acquired two 2,300 meters of inflatable booms to upgrade its own oil-spill-response equipment. Petron is a member of Oil Spill Response Limited (OSDL), the world s largest international oil spill response organization. Numerous depots and terminals conducted and participated in training, exercises, and drills to improve their personnel response. Petron Technical organized 10 seminars for 304 representatives of our industrial customers on topics such as safety practices, oil spills, and product knowledge, among others. Petron also participated in the review of the revised National Oil Spill Contingency Plan, coordinated by the Marine Environmental Protection Command of the Philippine Coast Guard. Protecting Habitats Petron had engaged in a number of reforestation activities. In November 2008, our refinery signed a MOA with the municipality of Limay, Bataan, and the DENR for the reforestation of 300 hectares of the Lamao Forest Reserve. Since 2001, Petron had helped reforest five hectares within the La Mesa Reservation Area, designating it the Petron Forest. We also sponsored the construction of the Petron Amphitheater and the Petron Nature and Fitness Trail within La Mesa Ecopark. In 2008, our operating groups led the way in showcasing Petron s efforts for Earth Month in April, Environment Month in June, and the International Coastal Cleanup Day on September 18. A close to 4,550 participants, consisting of employees, family members, business partners, local officials, and community residents, joined coastal cleanups in nearby areas were we operate. A total of 27,350 mangrove propagules were planted. Our coastal cleanup activities cleared 28 kilometers of coastline of trash and other debris. Since 2002, Petron facilities maintained environmental campaigns. Employees and business partners of Petron s depots in Tagbilaran, Bohol, and Roxas City, Capiz, for example, have established their own sustained environment programs to benefit one specific area that they each maintain, monitor, and expand. Tagbilaran depot has been planting mangrove propagules in Barangay Doljo in Tagbilaran since 2004, while Roxas depot has been planting mangrove propagules in Barangay New Fueling Hope. Fueling Life. 41

23 Fueling Life. Fueling Life. Employees throughout the the country regularly take time out to engage in activities that promote a healthier environment. Buswang in Roxas City since To date, 57,346 propagules have been planted in Barangay Doljo and 6,100 in Barangay New Buswang. Petron s presence in Bataan because of our refinery gives us greater impetus to practice responsible corporate citizenship in the province. This is what motivated us to take the lead in the creation of the Bataan Integrated Coastal Management Program, in partnership with the Bataan provincial and local government units, the Bataan Coastal Care Foundation, and Partnerships in Environmental Management for the Seas of East Asia (PEMSEA). Through an integrated planning and monitoring, the program aims to protect, preserve, and improve the management of the environmental, natural, and cultural features of Bataan s coastal environment. Coverage include the biological (flora, fauna), the physical (geological, geomorphological), as well as the aesthetic (cultural, visual). One of the program s key strategies is the Bataan Coastal Land- and Sea-Use Zoning Plan (CLSUZP), which addresses issues contributing to the degradation of Bataan s coastal and marine environment. A multidisciplinary technical working group conducted a thorough review of all existing resources, which resulted in the creation of overlaying maps identifying Bataan s physical characteristics, existing values supported by the province s coastal environment, existing sectoral plans and/or zoning plans, actual land and water utilization of the area, as well as existing and proposed development projects and environmental management programs. The maps enabled the creation of a well-defined distinction between zones, which have been classified according to their level of development, utilization, or abundance and scarcity of resources. Mapping has also facilitated the establishment and management of marine protected areas and sanctuaries for key habitats like mangroves, mudflats, and coral reefs, and for rare and endangered species like marine turtles, waterfowl and migratory birds, giant clams, and capiz or windowpane oysters. SUSTAINED ENVIRONMENTAL CAMPAIGNS: Luzon Visayas Mindanao Bataan (13) Tagbilaran (9) General Santos (14) Head office (8) Isabel (8) Tagoloan (7) Aparri (8) Iloilo (7) Jimenez (7) Navotas (5) Mandaue/Mactan (6) Nasipit (6) Palawan (5) Tacloban (6) Davao (6) Pasacao (4) Bacolod (5) Zamboanga (5) Rosario (4) Ormoc (4) Roxas (4) Note: Figures in () denote frequency of activities for the environment initiated by or participated in by Petron depots and terminals. The coastal land- and sea-use zoning plan is guiding Bataan to conduct economic development in harmony with the efficient use of its natural resources.this landmark project was the result of Petron s partnership with the United Nations Development Programme-International Maritime Organization Partnerships in Environmental Management for the Seas of East Asia (UNDP-IMO PEMSEA), Bataan Coastal Care Foundation, and the provincial and local governments. 42 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 43

24 Fueling Life. Employees, family members, and business partners of Petron s Roxas depot look after the growth of mangroves that were planted as early as 2005 at the Kalibo Bakawan Eco-Center in neighboring Aklan province. Since 2006, the Petron Bawing depot has been supporting the rehabilitation of coral reefs along Sarangani Bay in General Santos City. Concrete domes installed by depot personnel and partner groups have brought back diverse marine flora and fauna to the rehabilitation site. Our Life and Livelihood program in Cagayancillo is helping protect the Tubbataha Reefs by providing alternative livelihood interventions, such as seaweed farming, for the town s residents. Over the years, Petron has made a conscious and constant effort to ensure that caring for the environment is an integral aspect of the way we do business. Wherever we are, we initiate projects or join our stakeholders in events that allow us to think green and live green. These include activities to celebrate Earth Day, Environment Month, and International Coastal Cleanup Day. This continuing process is regularly manifested by our facilities across the country, as employees and our partners in the community engage in coastal and river cleanups, mangrove and tree planting, and artificial reef construction. We also support campaigns that raise awareness about the environment, especially in light of the growing concerns on climate change. Since 2002, at least half of all Petron facilities throughout the Philippines have had campaigns for the environment lasting for at least three years, particularly for our depots in Tagbilaran, Bohol, and Roxas City, Capiz. Employees, their families, and partners from these Petron facilities return to campaign areas every year to see how the seedlings that they planted have grown, and to continue growing and nurturing them for years to come. In 2004, employees from the Petron Tagbilaran depot began planting mangroves along the shores of Barangay Doljo. The propagules have since grown in size and number, due to the annual efforts of volunteers who have committed to sustain this practice every year. 44 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 45

25 Fueling Life. A Commitment to our Customers Our customers mean the world to us. We commit to being an integral part of their lives by consistently delivering innovative products and services. This commitment binds us to conducting business with excellence, as underscored by our own Corporate Quality Policy that states, We, at Petron, are guided by the basic philosophy of quality in all our business undertakings while taking responsible care of the environment and maintaining our competitiveness. Achieving this, we believe, is the true measure of corporate success. Quality Products, Quality Care The satisfaction of our customers needs is one of the factors that inspire product responsibility at Petron. To help ensure that our customers receive the correct quantity and quality of ordered products and services in a timely and cost-efficient manner, 26 of our depots and terminals maintain Quality Management Systems (QMS) certified to ISO 9001:2000 standards. Every aspect of depot operations that affects the quality of our products from receiving products from the refinery, to storage and delivery is subject to regular internal audits and external surveillance. Our Technical Department is responsible for all our product innovations, which must comply with government laws and regulations such as the Clean Air Act of 1999, the Biofuels Law, and RA 6969 for the control of toxic substances and hazardous waste. Another driver of innovation are the requirements of original engine manufacturers and the technological advances we have made in cooperation with technological partners whose expertise helps us develop better products more suited to customers needs. The Technical Department works closely with our Marketing Group to develop products that respond to customer-specific needs. The Marketing group further drives customer satisfaction by ensuring accessibility of our service stations which offer not only fuel and lubes, but also various necessities and conveniences to meet customers varying needs. As such, we have been expanding our Treats convenience-store network and have been carefully selecting locators such as fast-food restaurants, coffee shops, ATMs, bakeshops, health, beauty and wellness shops, branded outlet stores, laundry shops, water-refilling stations, bookstores, and car care services to suit customers tastes. The group also develops innovative services, like the Genuine Customer Hotline LPG home-delivery system, free-towing services for Petron cardholders, and the customer-feedback handling system, and forges valued partnerships with dealers, distributors, equipment manufacturers, and service providers. Communicating with our Customers To spearhead customer relationship management (CRM), Petron created a group called Customer Initiatives. Customer Initiatives, who implements a CRM Master Plan, along with other customer-centric strategies, to help Petron achieve its objective of providing quality customer service. One of Customer Initiative s major projects is the Petron Customer Interaction Center (PCIC). The PCIC will be Petron s central contact point for stakeholders, specifically, our customers. It is expected to provide consistent, high-quality customer service that not only answers customers needs, but also anticipates their wants. Scheduled to launch in July 2009, the PCIC aims to build lasting and valuable relationships with Petron s customers. In addition, Customer Initiatives monitors the pulse of the market through periodic Customer Value Management surveys that gauge what customers value most when it comes to their fuel needs. The Customer Loyalty Index Study is another monitoring tool employed by Customer Initiatives. First conducted in 2006 to determine how Petron and its competitors are perceived and patronized by consumers in Metro Manila, the study showed that Petron s overall score of 81% was better than the following norms: customer loyalty in the Philippines for the industry (74%), and global norms for petrochemical (78%) and retailing (74%). We fell short of achieving the best-in-class index for the Philippines (90%), for global petrochemicals Innovative services, such as the Gasul Customer Hotline, give customers greater accessibility and better information about Petron s products. (92%), and for retailing (88%). To benchmark our progress, a study with a broader scope will be conducted again in 2009 and every two years henceforth. Customer Initiatives has also implemented the use of Customer Feedback Forms as a way to gauge customer satisfaction. Other feedback mechanisms include the SMS-based Txt Fdbak and the Contact Us link on the Petron website. Another way by which we demonstrate the primacy of our customers is by protecting their rights as consumers. As a member of the Philippine Association of National Advertisers, Petron ensures that all its advertising materials and marketing communications programs are screened by and comply with the standards of the Ad Standards Council (ASC) prior to airing or display. The ASC rules uphold consumer protection and safety, as well as the protection of advertisers and the advertising industry in general. 46 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 47

26 Fueling Life. Responsible Product Information Because of the nature of our products, adherence to correct labeling protocols is inseparable from product responsibility. All Petron service stations display the octane number of fuels to help our customers make better choices. Likewise, Petron service stations that offer E10 gasoline conform to the guidelines of the Department of Energy on proper labeling of fuels. All Petron lubricant products and greases are also properly labeled and come with material safety data sheets (MSDS). Petron s product quality claims for lubricants adhere to the American Petroleum Institute (API), the Society of Automotive Engineers, and International Standardization Organization-Viscosity Grade for the service level and viscosity grades applicable to the specific type and make of engine/equipment/vehicle. For greases, Petron adheres to the quality specifications of the National Lubricating Grease Institute. By letting our customers know what quality standards we follow, we again empower them to make better-informed decisions on what product to buy. The Philippines is among the Asia-Pacific Economic Cooperation (APEC) countries that have signed a commitment to implement the Globally Harmonized System of Classification By letting our customers know what quality standards we follow, we empower them to make better-informed decisions on what product to buy. and Labeling of Chemicals (GHS). All Petron operations concerning the manufacturing, marketing, and distribution of petroleum/petrochemical products, as well as the importation of chemical substances for operational needs will be subject to GHS labeling. At present, Benzene, which is one of the petrochemical products of our new Benzene-Toluene-Xylene (BTX) plant that will start operation in 2009, is currently included in the Priority Chemical List (PCL) of the Department of Environment and Natural Resources (DENR). As such, we are required to secure a PCL Compliance Certificate from the DENR s Environmental Management Bureau aside from submitting an annual report, MSDS, and a chemical management plan. The additives manufactured by Petron must also comply with pre-manufacturing and pre-importation (PMPIN) requirements that include submitting information to DENR on the chemical substances to be manufactured. GHS-compliant MSDS are being prepared for petrochemical feed stocks produced at the refinery and for additives, fuels, lubricants, and other petroleumbased products. This is in anticipation of future DENR requirements and existing PMPIN requirements. We are also studying a plan to convert existing labels into GHScompliant labels, rendering Petron products suitable for international markets should there be an opportunity to export. Employees involved in purchasing, forwarding, customs clearing, warehousing, emergency response, and the use of chemical substances in operations have undergone GHS training. In the Pipeline: Going Green with Petron s Nature-Friendly Products At Petron, product research, development, and quality control fall to our Technical Department. Drivers in the development of Petron products are primarily product performance, environmental considerations, and costeffectiveness, by which we mean affordability to our customers. However, our engineers at the Technical Department are not satisfied with mere compliance with government regulations. With the primacy of our customers in mind, our engineers are always on the look out for better solutions that maximize quality and give our customers the products they deserve. XTRA UNLEADED: Xtra Unleaded is a premium motor gasoline that contains a high performance detergent additive for excellent cleaning effect and optimum vehicle power. It also contains a unique gas-saving additive that promotes more efficient combustion and lower fuel consumption, thereby giving motorists extra miles for every liter. Additional enhancements in the formulation of Xtra Unleaded Gasoline resulted in significant improvement in fuel economy (33 kilometers per liter). This was certified by Car Awards Group and Automobile Association of the Philippines. E10 PREMIUM: E10 Premium is a highquality unleaded gasoline blended with 10% bioethanol. Bioethanol is a natural and renewable fuel that burns cleaner and possesses a higher octane compared to gasoline. E10 Premium also contains a high-performance detergent additive that provides excellent cleaning effect for optimum vehicle power and improved fuel efficiency. XCS Plus: This high-quality fuel is formulated with premium organic combustion enhancers for complete combustion. It also has an enhanced detergent additive that delivers more energy to power up and re-energize the engine. It also contains Valvemaster, the superior lead-replacement additive intended for vehicles that cannot run on standard unleaded gasoline. BLAZE: Blaze is an ultra high-performance unleaded gasoline that contains a special blend of octane booster and multifunctional additive that brings about superior combustion performance, reduces emissions, and improves fuel economy. DIESELMAX: DieselMax is a premium quality fuel that contains a multi-functional additive system to provide unsurpassed detergency characteristics for a cleaner engine, better smoke control, more efficient combustion for maximum acceleration and smooth power, and improved burning quality all contributing to better fuel economy. 48 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 49

27 GASUL: A cleanburning liquefied petroleum gas consisting of propane and butane gas. It is used as fuel for cooking, lighting, and industrial applications. Petron s LPG brand used as alternative fuel for transportation is called XTEND AUTOGAS. chainsaws, and other portable equipment. It provides better engine protection even at its low recommended dosage, assuring longer engine life. It has high detergency to keep pistons, piston rings, cylinder liners, spark plugs, and exhaust ports clean. It emits cleaner exhaust and is also economical because 2T Premium only requires half the usual dosage of 50 milliliters per liter of gasoline, thereby reducing cost of oil usage by 50%. ULTRON RACE AND ULTRON RALLYE: These are multigrade synthetic-based engine oils that use advanced functional additives, providing higher thermal stability and oxidation resistance to prevent build-up of carbon and lacquer deposits on vital moving parts. It also provides better wear protection, better engine sludge and soot control, reduced fuel consumption, and extended oil drain intervals. REV-X ALL-TERRAIN: Rev-X All Terrain is an automotive lubricant that meets the demanding needs of modern day low-emission engines. Its application is found in turbocharged or supercharged high performance diesel engines, and in automotive diesel engines using high-sulfur diesel fuels. It offers superior soot control, high resistance to oil thickening and gum formation, exceptional anti-oxidant performance that reduces oil degradation, extended oil drain interval due to enhanced dispersion, and reduced oil consumption, among other features. 2T PREMIUM: This is a premium quality motorcycle oil for twostroke gasoline engines. Twostroke engines are often found in motorcycles, tricycles, small passenger cars, scooters, lawn mowers, small tractors, 2T ENVIRO: 2T Enviro is a semi-synthetic, high quality motorcycle oil specially designed and formulated to significantly reduce heavy, visible smoke from the exhaust of both old and new two-stroke gasoline engines. pchem: Our performance chemicals (pchem) help our industrial consumers reduce maintenance costs and attain a high degree of reliability. pchem is added to heavy fuel oil to improve fuel combustion efficiency, boost engine performance, and reduce soot formation and harmful emissions into the environment. PETRON CARBON FLUSH: Petron Carbon Flush is a non-toxic and non-flammable compound designed for cleaning air intakes and exhaust systems of diesel-powered, directinjected engines. It provides the following performance benefits: (a) reduces servicing costs; (b) breaks down soot, scale, and hardened carbon deposits in airways, exhaust manifolds, and injectors; (c) reduces emissions; and (d) visibly improves smoke emissions immediately after treatment. PETROMATE GAS SAVER: This product for gasolinepowered vehicles is designed to clean carburetors by loosening carbon deposits. Its regular use maintains the cleanliness of combustion chambers, fuel injectors, inlet valves, inlet manifolds, inlet systems, and intake systems. It also increases spark-plug firing efficiency and improves valve operation. All these contribute to lower gasoline consumption and reduced engine emissions. Petron continuously strives to offer consumer products that are not only superior in quality, but also environment friendly. PETROMATE OIL IMPROVER: Petromate Oil Improver is a multi-purpose additive specifically designed to meet today s severe lube requirements and positive crankcase valve (PCV) systems. It is recommended for longer drain intervals, which translates to reduction in lubricant consumption. It protects against rust and corrosion, reduces sludge and varnish formation, reduces engine wear, improves PCV performance, reduces ring and valve sticking, prevents high temperature deposits, and prolongs engine life, and reduces maintenance costs. PETROMATE OIL SAVER: This product for both gasoline and diesel engines enhances engine oil performance even when subjected to changes in temperature. It enables the lubricant to retain adequate viscosity at elevated temperatures, and sufficient fluidity at low temperatures; increases engine compression pressure and restores power; and reduces smoke belching and oil consumption especially for old and worn-out engines. PETROMATE DIESEL POWER BOOSTER: This is an advanced multi-functional diesel additive that provides major environmental benefits by reducing undesirable exhaust emissions, controlling the combustion process, and maintaining cleanliness of key fuel system components. It provides excellent emission control by reducing black smoke, unburned particulates, hydrocarbons, aldehydes, and polynuclear aromatic hydrocarbons. It also improves fuel economy, provides good fuel detergency, improves anti-corrosion properties of fuel, and provides faster ability to separate water particles in diesel. PETROMATE SUPER COOLANT: This coolant is an environment-friendly anti-rust and descalant compound specially formulated for aluminum alloys and cast-iron radiator systems. It prevents the formation of rust, scale, resinous film, or gum on metals to keep the cooling system clean and functioning effectively. It is safe to use because it does not contain heavy and harmful metals. It provides excellent multi-metal protection, prevents formation of insoluble deposits in the radiator, prevents overheating, and contains biodegradable components safe for your engine, radiator, and the environment. 50 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 51

28 Fueling Life. Doing Good and Telling it Well: Advocating CSR and Sustainability At Petron, telling our story began years back with redefining what corporate social responsibility (CSR) meant to us. Our past initiatives had consisted of sporadic and unplanned philanthropy that intended to strengthen relationships with our communities. However, we realized that CSR would make a compelling business case for sustainability. We now see our CSR efforts in the bigger context of national development. We have aligned our goals with the United Nations s Millennium Development Goals (MDG) for 2015, particularly MDG # 2 (achieve universal primary education) and MDG #7 (ensure environmental sustainability). Likewise, our programs were designed to support the Medium Term Philippine Development Plan. Our CSR is now anchored on what the company stands for in terms of social development, and that is to Fuel H.O.P.E. or Helping Filipino children and youth Overcome Poverty through Education. Our focus is on improving basic elementary education and promoting entrepreneurship education for the youth. Parallel to this focus is our commitment to fuel life through environmental stewardship. Fueling H.O.P.E., Fueling Life, and the importance of sustainability in fueling our business success have become the central messages of our advocacy of CSR and sustainability. These are the same messages that we share with all our employees, and which have taken deep root as evidenced by the high level of employee participation in our CSR programs, either in the form of monetary contributions or by sharing time and expertise with beneficiaries. Our story continues to be told outside Petron, where our engagement with stakeholders provides us with more venues to further our advocacy. Our involvement in numerous business associations has enabled us to share our experiences in evolving our CSR. Our long-time affiliation with the League of Corporate Foundations (LCF) not only provides us with a venue for showcasing our successes through the annual CSR conferences, it also, more notably, gives us the chance to be a major part of creating the Roadmaps for Education and for the Environment. To LCF members, these two frameworks become opportunites for the convergence of individual programs and resources towards strategic and collective actions to improve basic education in the country and contribute to the fight against climate change. This advocacy is not confined to the country, as Petron Foundation, through its Executive Director, Fueling H.O.P.E., Fueling Life, and the importance of sustainability in fueling our business success have become the central messages of our advocacy of CSR and sustainability. has taken part in various forums to share the Philippine CSR experience with a global audience. More than telling our story, these engagements allow us to benchmark with other best practices, further improving our capabilities, enhancing our reputation, and deepening our practice of sustainability. We have always believed that Petron is a catalyst for lasting change. In constantly communicating how we practice CSR, we help champion the cause of sustainability. We engage more companies, civil society groups, the media, and the academe to do good and do it well. 52 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 53

29 Moving Forward We will continue to pursue our business goals in a manner that fuels accountability, is responsive to our stakeholders needs and has sustainability at its core. As a leader in the energy sector, we recognize our role as a catalyst for positive change in society. This fact, apart from business value creation, drives our efforts to innovate on our products, services, and processes. We also understand that in order to sustain our leadership over the long-term in an increasingly competitive industry, we need to find the best balance between achieving business results while ensuring the welfare of the community. This is why we continuously pursue ways to fully integrate our corporate citizenship into our business in our quest for sustainable development. Through this, we are able to shape an industry that is very dynamic and challenging given its inherent relationship with society in general. Enhancing Corporate Structure for Sustainability We identified Petron s Sustainability Priorities and organized in 2008 the Sustainability Steering Committee and the Technical Working Group. One of the committee s more immediate goals is to fully integrate sustainability management systems and mechanisms into the existing Petron Risk Management System (PRisMS). Environmental and social responsibilities are already crucial aspects of PRisMS. With GRI s rigorous performance indicators for the energy sector providing additional guidance to our risk management, we envision the enhancement of our risk matrix. We will also ensure that internal systems for monitoring and measuring sustainability performance and in engaging our stakeholders are strengthened and institutionalized. Volunteers in Action, our employee volunteer program, will continue to be used as a channel to cascade sustainability principles and deepen engagement. Improving on our Sustainability Performance We shall monitor and measure our progress as we move to full compliance with the GRI guidelines. Sustainability has already been elevated to the boardroom and our business decisions always take into account our impact on the community and the environment. Our frontline divisions - Refinery, Marketing, and Supply and Operations - have also embedded CSR into their business and operating plans. We will continue to invest heavily in research and development, keep up with recent green product trends, and benchmark our performance against more rigorous standards. These will ensure that our product lines are suited to the unique needs of our stakeholders and, more importantly, responsive to their choice to live more responsibly. We continue to commit to transparency and accountability, because reporting on our sustainability performance further strengthens Petron s position as the brand of choice for quality, excellence, and stakeholder satisfaction. We will continue to report our sustainability performance on a yearly basis. Addressing Climate Change Climate change is affecting us now and will certainly impact on future generations. We continue to implement a multi-pronged approach to this pressing issue, which includes the introduction of more environment-friendly products, adoption of clean technologies, a greener supply chain, and more strategic CSR programs. This approach supports our community development, as we look for ways to create business opportunities for lowincome groups in our surrounding communities and sustainable enterprises linked to our business. We will also intensify efforts to measure our ecological performance, specifically our greenhouse-gas emissions, so that we may set concrete goals to minimize our carbon footprint and our environmental impact as a whole. List of Membership in Organizations Movement 2 Ad Standards Council 3 Advertising Board of the Philippines 4 American Society for Testing & Materials 5 Asia Society Philippine Foundation, Inc. 6 Association of Safety Practitioners of the Philippines, Inc. 7 Association of Securities Analysts of the Philippines 8 Bataan Coastal Care Foundation, Inc. 9 Boston College Center for Corporate Citizenship 10 Corporate Network for Disaster Response 11 Economic Journalists Association of the Philippines 12 Education and Livelihood Skills Alliance 13 Employers Confederation of the Philippines 14 Energy Council of the Philippines, Inc. 15 Feati Alumni Association 16 Global Reporting Initiative 17 Information Systems And Control Association 18 Institute of Corporate Directors 19 Institute of Integrated Electrical Engineers 20 Institute of Internal Auditors Philippines 21 Integrated Bar of the Philippines 22 International Association of Business Communicators 23 International Bar Association 24 Junior Achievement of the Philippines, Inc. 25 Knights of Columbus 26 League of Corporate Foundations 27 Makati Business Club 28 Management Association of the Philippines 29 National Association of Convenience Stores (USA) 30 National Association of Corrosion Engineers 31 Oil and Gas in the Asia Pacific 32 Oil Spill Response International 33 People Management Association of the Philippines 34 Philippine Society of Mechanical Engineers 35 Philippine Association of National Advertisers 36 Philippine Association of Supermarkets 37 Philippine Business for Social Progress 38 Philippine Business for the Environment 39 Philippine Chamber of Commerce and Industry 40 Philippine Council for NGO Certification 41 Philippine Council of Deans and Educators in Business 42 Philippine Institute for Supply Management 43 Philippine Institute of Certified Public Accountants 44 Philippine Institute of Chemical Engineers 45 Philippine Malaysian Business Council 46 Philippine Records Management Association 47 Philippine Retailers Association 48 Philippine Singapore Business Council 49 Philippine Society for Training and Development 50 Philippine Society of Nondestructive Testing 51 Pollution Control Association of the Philippines, Inc. 52 Pollution Control Officers Association 53 Public Relations Society of the Philippines 54 Rotary Club 55 Samahan sa Pilipinas ng mga Industriyang Kimika 56 Subic Bay Freeport Chamber of Commerce 57 Synergos Institute 58 Tax Management Association of the Philippines 59 United Architects of the Philippines 60 United Way Philippines 61 User of SAP in the Philippines 54 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 55

30 Global Reporting Initiative Index GRI INDICATOR AND DESCRIPTION Reference / Page Number 1. Strategy and Analysis 1.1 Statement from the most senior decision maker of the organization Description of the main impacts, risks, and opportunities Organizational Profile 2.1 Name of the organization Primary brands, products, and/or services 7, Operational structure and major divisions Location of the company headquarters Back Cover 2.5 Countries of operations Not Applicable 2.6 Nature of ownership and legal form Markets served Scale of the reporting organization Significant changes during the reporting period Awards and recognitions received during the reporting period 8, Report Parameters 3.1 Reporting period Date of most recent previous report Not Applicable 3.3 Reporting cycle Contact point for questions about the report and its contents Process for defining report content Boundary of the report Limitations on the scope or boundary of the report Basis for reporting on joint ventures, subsidiaries, and other related entities Assessment methods for data and bases for estimates in data compilation Explanation of the effect of any re-statements of information provided in previous reports Not Applicable 3.11 Significant changes from previous reporting period Not Applicable 3.12 GRI Index Page Current policy and practice dealing with external verification 2 4. Governance, Commitments, and Engagement 4.1 Governance structure of the organization Indicate if the chair of the highest governance body is also an executive officer Number of independent and non-executive members Mechanisms for shareholders and employees to provide recommendations Association between the compensation of the members of top management, high directors, 8 and the performance of the organization, including environmental and social performance 4.6 Procedures for avoiding conflict of interest in top management Procedures for determining qualifications and experience of top management for guiding 8 the organization in economic, environmental, and social aspects 4.8 Statement concerning missions and values implemented internally, codes of conduct, and standards 6, 7, 15, 23, for economic, environmental, and social performance, and the status of implementation 33-34, Procedures for top management to supervise the identification and management of the 9, organization s economic, environmental, and social performance, including assessment of risks and opportunities, as well as adherence to international-level codes of conduct and standards 4.10 Process to assess the performance of top management, especially with respect to economic, 9 environmental, and social performance 4.11 Explanation of how the organization has adopted the precautionary principle Externally developed economic, environmental, and social standards adopted or 2,9,10-11, 33, any other related initiatives 35, 39, Listing of groups of interest included by the organization List of stakeholders groups Basis for identification and selection of stakeholders groups Approaches used to include interest groups, including frequency of participation according to the 9, type of group of interest 4.17 Main concerns and topics raised by stakeholders and how the organization has responded to these concerns 9, GRI INDICATOR AND DESCRIPTION Reference / Page Number Economic Performance Indicators Discussion of Management Approaches 7 EC1 Economic value generated and distributed, including revenues, operating costs, 7 employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments EC5 Range of ratios of standard entry-level wage compared to local minimum wage 24 at significant locations of operation EC8 Development and impact of infrastructure investments and services provided primarily 7, for public benefit through commercial, in-kind, or pro-bono engagement Environmental Performance Indicators Discussion of Management Approaches 33 EN3 Direct energy consumption by primary energy source 36 EN4 Indirect energy consumption by primary source 38 EN8 Total water withdrawal by source 38 EN13 Habitats protected or restored EN16 Total direct and indirect greenhouse-gas emissions by weight 37 EN20 NOx, SOx, and other significant air emissions by type and weight 36 EN21 Total water discharge by quality and destination 38 EN23 Total number and volume of significant spills 40 EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with 35 environmental laws and regulations EN29 Significant environmental impacts of transporting products and other goods and materials used for the 36-37, organization s operations, and transporting members of the workforce Social Performance Indicators Discussion of Management Approaches 23 LA1 Total workforce by employment type, employment contract, and region LA2 Total number and rate of employee turnover by age group, gender, and region 24 LA4 Percentage of employees covered by collective bargaining agreements 29 LA6 Percentage of total workforce represented in formal joint management-worker health and 25 safety committees that help monitor and advise on occupational health and safety programs LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of 26 work-related fatalities by region LA8 Education, training, counseling, prevention, and risk-control programs in place 25 to assist workforce members, their families, or community members regarding serious diseases LA10 Average hours of training per year per employee by employee category LA12 Percentage of employees receiving regular performance and career development reviews 24 LA13 Composition of governance bodies and breakdown of employees per category (gender and age) HR5 Operations identified in which the right to exercise freedom of association 24 and collective bargaining may be at significant risk, and actions taken to support these rights HR6 Operations identified as having significant risk for incidents of child labor, and measures taken 24 to contribute to the elimination of child labor SO1 Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting SO5 Public policy positions and participation in public policy development and lobbying 9 PR3 Type of product and service information required by procedures, and percentage of significant products 48 and services subject to such information requirements PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, 47 including advertising, promotion, and sponsorship 56 Petron Corporation 2008 Sustainability Report Fueling Hope. Fueling Life. 57

31 Petron Foundation Board of Trustees and Officers From Left Emmanuel E. Eraña - Trustee Marilou G. Erni - Trustee and Executive Director Jose Jesus G. Laurel - President Felimon E. Antiporta - Trustee Cristina M. Menorca - Trustee Jose K. Campos, Jr. - Trustee Alfred A. Trio - Trustee Eric O. Recto - Chairman Mario S. Lucas - Treasurer Camille B. Buenaventura - Trustee Joel Angelo C. Cruz - Corporate Secretary

32 Sustainability Steering Committee and Technical Working Group Vice-President In Charge Atty. Jose Jesus G. Laurel (Legal and External Affairs) Health, Safety, and Environment Management Committee From Left Eric O. Recto - President Jose K. Campos, Jr. - Vice-President for Marketing Felimon E. Antiporta - Vice-President for Supply and Operations Concepcion F. de Claro - Vice-President for Corporate Planning Alfred A. Trio - Vice-President for Refinery Carlos V. Tan - Health, Safety, and Environment Manager Steering Committee Peter Paul V. Shotwell (Supply and Operations) Chairman Marilou G. Erni (Petron Foundation) Vice-Chairman Cristina M. Menorca (Finance and Subsidiaries) Vice-Chairman Carlos V. Tan (Health, Safety, and Environment) Vice-Chairman Nathaniel R. Orillos (Petron Bataan Refinery) Noel V. Tanglao (Marketing) Wilfredo S. Toledo (Marketing) Lucio C. Batugal (Corplan / Business Systems Support Department) Robert E. Luz (Corplan / Business Development) Virginia A. Ruivivar (Corplan / Public Affairs) Wilfredo A. Galoyo (Human Resources) Technical Working Group Corporate Planning Rafael R. Ledesma (Public Affairs) Stephanie A. Salazar (Public Affairs) Ma. Jocelyn L. Agustin (Strategic Planning) Melvin O. Alfonso (Strategic Planning) Arnel M. Marasigan* (Business Systems Support Department) Lorna M. Ojeda (Business Development) Finance and Subsidiaries Dennis S. Janson (Financial Planning and Corporate Risk Management) Florence M. Villareal* (Financial Accounting) Michael L. Ordinanza (Financial Planning and Corporate Risk Management) Marketing Renato G. Abundo (Service Station Engineering, Construction, and Maintenance) Cristina C. Banogon* (Pandacan Laboratory) Jesus Q. Tanchuco, Jr. (Gasul Trade) Jose Miguel O. Torres (Retail Trade) Rodolfo R. Estrella (Market Planning and Research Department) Supply and Operations Rolando P. Rueda (Depot Network Services) Edward P. Refuerzo* (Office of the Operations Manager) Petron Bataan Refinery Archimedes C. Gonzales* (Safety, Environment, and Facilities) Rodel D. Lopez (Safety, Environment, and Facilities) Executive Offices Muriel Q. Surbano (Human Resources) Nestor S. Evaristo* (Health, Safety, and Environment) Ronald Allan S. Victorino* (Petron Foundation) Sustainability Reporting Consultant Maria Fatima Reyes (CPA, MBA, Founder and Principal, Sustainability Strategics) *Secretariat