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Speech

Nov. 9, 2010

Statement to the National Commission on the BP Deepwater Oil Spill and Offshore Drilling

Rex W Tillerson

Rex W. Tillerson Chairman and Chief Executive Officer

America's oil and natural gas resources are the foundation of our nation’s economy and our standard of living, and it is essential that we ensure the safe production of these resources.

This country — as well as the global energy industry — will benefit from a full understanding of the causes of the Deepwater Horizon incident. I am confident that the commission's findings will help advance our goal, which is to ensure that all our nation's energy facilities are operated at the highest standards of safety.

So, I am grateful for the chance to come before the commission today to share ExxonMobil's approach to safety, operational integrity and risk management. Many would say, especially now, that energy companies must make safety a "top priority" — but I believe that a commitment to safety must run much deeper than simply being a “priority.”

A company's priorities can — and do — evolve over time depending on business conditions and other factors. A commitment to safety therefore should not be a priority, but a value — a value that shapes decision-making all the time, at every level.

Every company desires safe operations — but the challenge is to translate this desire into action.

The answer is not found only in written rules, standards and procedures. While these are important and necessary, they alone are not enough.

The answer is ultimately found in a company's culture — the unwritten standards and norms that shape mindsets, attitudes and behaviors. Companies must develop a culture in which the value of safety is embedded in every level of the workforce, reinforced at every turn and upheld above all other considerations.

I’ve been asked today to explain how ExxonMobil approaches these critically important areas of systems and culture when it comes to safe operations and risk management.

OIMS
The evolution of ExxonMobil's safety culture dates back to the 1989 Valdez spill. As I have said before, Valdez was a low point in our history. It was a traumatic event, with enormous consequences for all involved. But it also served as a catalyst and a turning point which prompted our management to completely reevaluate how ExxonMobil understands and manages risk.

That is not to say that, prior to Valdez, we did not take safety seriously. ExxonMobil had been in business for more than 100 years, and we had always taken steps to maintain safe operations as risks changed and energy technologies evolved.

We were proud of our safety record. We believed, as our safety credo at the time stated, that all accidents and injuries are preventable. Like many companies, we worked to meet or exceed all industry safety standards, trained our employees in safety procedures, and tracked certain metrics that measured our success. But we did not have a comprehensive, systematic view of this aspect of our business that we have today.

And so, in the early 1990s, ExxonMobil's management undertook what I consider to be a visionary approach. The goal was to wholly reorganize the company to make safety — of people, facilities and the environment — the center of everything we do. Safety would come first, period.

It was the beginning of a long journey for our company. And I should make it very clear: this is a journey that we have not completed. We know that we cannot rest or waver from the goal of driving accidents and incidents to zero. And we’re not there.

But we have made significant progress. And, as we have learned, for this progress to be achieved, its impetus had to come from within the company. We could not have government impose a safety culture on us, or hire someone to do it for us. Experts and consultants do provide a valuable service, but for an organization to change its culture, change must come from the inside-out, not the outside-in.

You cannot buy a culture of safety off the shelf — you have to craft it yourself.

So we began. We began by creating a framework that puts our safety commitment into action. Today, that framework is called the Operations Integrity Management System, or OIMS for short.

Because OIMS is multi-faceted, it can be hard to describe briefly. Here are the basics: OIMS is a rigorous 11-point set of elements designed to identify hazards and manage risks. Its framework covers all aspects of safety; management leadership and accountability; design, construction and maintenance of facilities; emergency preparedness; management of change; assessment of performance; and, of course, thorough inquiries into accidents and incidents.

OIMS guides the activities of each of ExxonMobil’s more than 80,000 employees, as well as our third-party contractors, around the world. Over time, it has become embedded into everyday work processes at all levels.

Through OIMS, ExxonMobil monitors, benchmarks and measures all aspects of our safety performance. Its structure and standards are shared and communicated the world over. One of the greatest benefits of OIMS is that it has enabled ExxonMobil — a large organization that operates across diverse cultures and geographies — to be of one mind when it comes to safety and risk management. I can visit a refinery, a lab or an offshore platform anywhere in the world and immediately be on the same page as the local employees and contractors regarding safety practices and expectations.

And I want to stress that the contractors that we work with are embedded within our OIMS processes as well. We expect our contractors to be as knowledgeable and conversant with our OIMS processes as our own employees. Not every company has this expectation, but we have found that when everyone in the workplace speaks the same language of safety — employees and contractors alike — everyone can work collaboratively, safely and effectively.

You may have heard the phrase: "If you can't measure it, you can't manage it." And it’s true. And that is why ExxonMobil measures and analyzes its safety performance — all the time, all the way down to every business level. We record not just our injuries, but we record our near misses and our close calls. Our goal is not just to analyze safety incidents after they happen, but to identify risks and risky behaviors before they lead to a safety incident. The more elements of risk to be managed in an activity, the more frequently we test, measure and analyze the safety approach in that activity.

More broadly, OIMS requires us to audit the health of the overall safety approach in all of our operating environments, on a regular basis. Importantly, these audits at ExxonMobil are performed not only by trained safety personnel, but by cross-functional, cross-regional teams drawn from all over our global organization. In this way, all employees are responsible for each other's safety. Also, the knowledge employees gain by participating in these audits is taken home to their jobs, and spread throughout the organization.

Leadership
Yet, OIMS by itself is only one part of the equation. Even the best safety systems are not fully effective unless they exist as part of a broader culture of safety within the people of the organization.

While ExxonMobil and other energy companies use a lot of equipment — everything from steel pipe to supercomputers — it is people who bring this equipment to life. And people's behavior is heavily influenced by their culture.

By instilling the value of safety in our employees from the first day of hire, ExxonMobil strives to create a working environment in which safe behaviors are internalized; they’re reinforced; and they’re rewarded.

The culture of safety starts with leadership — because leadership drives behavior and behavior drives culture. Leaders influence culture by setting expectations, building structure, teaching others and demonstrating stewardship.

And that is why the first element of OIMS is "management leadership and accountability." ExxonMobil managers are expected to lead the OIMS process by demonstrating a visible commitment to safety and operations integrity. In addition, safety leadership is a significant part of how a manager's overall performance is evaluated.

As chairman and chief executive, I know that a commitment to safety and operational integrity begins with me and the rest of ExxonMobil's management team. But management alone cannot — and should not — drive the entire culture. For a culture of safety to flourish, it must be embedded throughout the organization.

Therefore, safety leadership at ExxonMobil comes not just from supervisors and managers, but from employees and contractors, and through channels both formal and informal.

ExxonMobil's goal is not simply to have employees comply with safety procedures. A culture of compliance alone can lead to complacency. We seek to go beyond compliance, to create a culture in which employees are not only meeting the safety procedures, but they are challenging them so they can be improved wherever needed.

Achieving A Sustainable Culture of Safety
I do not want anyone to think — inside or outside our company — that pride in our safety systems means we can relax our commitment. The exact opposite is true. To get where we need to be on safety, continuous improvement is essential.

In an industry such as ours — which operates 24 hours a day, around the world — the need to manage risk never ends. Even the best safety framework should be viewed as a work in progress.

Developing a culture of safety therefore is not an event, but a journey. For ExxonMobil, that journey began more than 20 years ago, when we put our global safety framework in place.

Once that framework became embedded in our organization, we saw the culture start to change and the results became evident in improved performance. In turn, this allowed us to move from implementing the system to improving it.

That's when ExxonMobil's culture was really transformed. Over the years, I have seen people at all levels understand that our safety systems are put in place for them, that they are about protecting them and their coworkers and the public, and not about catching people doing the things wrong.

Part of that transformation is recognizing that every employee's job involves some degree of risk management — even those employees who work in office settings. That is why OIMS extends even to administrative locations.

When an organization reaches the point where everyone owns the system and believes in it, only then at that point, the culture of safety and operational integrity has been established that can be sustained — when it enters the hearts and minds of the people of the organization and becomes a very part of who we are.

We often use the phrase at ExxonMobil, “Nobody Gets Hurt” to describe our safety objective. Some observers of our company question this; they say it can’t be done. Well, it can be done. We have operating units today that have gone years without a recordable injury.

Our challenge is to sustain that performance where it has been achieved, and to replicate and grow that record of performance across the organization. I have no doubt that every single employee shares this goal.

Risk/Change
Considering that many of ExxonMobil's energy projects can span decades, achieving the goal of a self-supporting, sustainable energy culture means we must be flexible and adaptable to changes in the operating environment.

As a result, management of change is a key component of our OIMS system. Our management of change processes are designed to ensure that with any change in our business or operations, we recognize the changed conditions, we actively identify the new or changed risks, and we apply our disciplined processes for managing the risks and their potential consequences.

Risks are addressed and the change is managed - typically through either technological solutions, or operating changes in response to the potential risk. But most importantly, it is clear who owns the management of change and the subsequent risk management, and every employee and contractor is important to that process.

These very deliberate, well-established processes, embedded in OIMS, have enabled ExxonMobil to pursue challenging new resources and new development projects with the confidence that we will do so safely and responsibly.

Such an approach is not only in the interests of employees and resource owners — but clearly it is also in the interests of our shareholders.

Best Practices
Which leads me to my next point: Upholding the highest standards of safety and operational integrity is not just "the right thing to do" — a phrase we sometimes associate with an act of selflessness; it is also in a company's self-interest, because it makes for more competent, more productive employees and organizations.

The rigor, discipline and degree of accountability required to improve safety performance are the same qualities that produce successful business results — operationally and fiscally.

Safety is not proprietary. And for this reason, ExxonMobil shares its best practices within our industry, and across other industries.

We seek to learn from others. After the 2003 Columbia space-shuttle explosion, ExxonMobil assembled a team of engineers, scientists and safety experts to study the technological and organizational factors that may have led to that disaster, and whether there were any lessons for ExxonMobil's operations.

It is by constantly learning and analyzing — by looking to best practices in other organizations, and by examining incidents and near-misses in our own organization — that we continually improve our own performance.

Deepwater
I know this commission has heard a lot about the importance of deepwater energy supplies, but it bears repeating. The technology that has enabled our industry to reach the oil and gas found in deepwater fields is one of the most significant energy-security developments of the last 20 years. Deepwater production, which did not exist prior to 1989, today makes up 15 percent of all non-OPEC production. By 2030, it will grow to nearly 20 percent. Along with Brazil and West Africa, the Gulf of Mexico is one of the most important deepwater provinces in the world.

In 2008, there was more oil and gas discovered in deep water than in onshore and shallow water combined. For the sake of our energy security, and the economic growth and jobs that depend on the production of these supplies, we simply cannot afford to turn our backs on this resource.

Neither can we miss the opportunity to improve safety in the Gulf of Mexico. The Macondo blowout cost 11 lives, and billions of dollars in economic and environmental damage. If we don't learn lessons from this disaster, it will have been a double tragedy.

As Chairman Reilly said at this commission's first meeting back in July, we must "come to grips with this disaster so we can never see its like again."

MWCS
I spoke earlier about risk management being a constant challenge. While ExxonMobil believes that incidents like the Deepwater Horizon spill should not happen if industry best practices are followed, the spill did expose that our nation, and the energy industry, could have been better prepared for the possibility, however remote, of a deepwater well blowout. That is why ExxonMobil is leading a multi-company effort, along with my colleague [Marvin Odum, Shell] today, to build a new rapid-response oil containment system in the Gulf of Mexico. This system — involving a $1 billion initial commitment from the four sponsor companies — is unprecedented in our industry. It will provide pre-engineered, constructed, and tested containment technology and equipment to be deployed within 24 hours of a deepwater spill in the Gulf.

In addition, ExxonMobil and other operators in the Gulf of Mexico, in conjunction with the Department of Interior, have instituted new requirements regarding inspection and certification of blowout preventers, well casing designs and cementing procedures.

I believe that these steps, in addition to the inspections performed on all deepwater rigs in the months following the Deepwater Horizon incident, will enable the Gulf region, and the entire country, to continue to develop our nation's energy resources with confidence.

Conclusion
In concluding I’d like to share this thought: ExxonMobil is sometimes viewed as a cautious company; we‘re sometimes criticized for being too cautious. And yet, meeting the world's growing demand for energy involves a high degree of risk; our employees operate some of the world's most complex technologies in some of the world's harshest environments.

How we continue to progress technologically while dealing with significant risk is that human progress does not mean avoiding risk; it means managing risk by identifying it, and taking steps to mitigate it. No company — including my own — can lay claim to a one hundred percent success rate in this endeavor. Yet that remains our clear goal.

In closing, there are three points that I hope the Commission will consider in its deliberations:

First, a culture of safety has to be born within the organization. You cannot buy culture. You have to make it yourself.

Second, make no mistake: creating a strong, sustainable safety culture is a long process. If an organization is truly going to overhaul its approach to safety, it has to be committed from day one. But, you can’t start until you start — and you’re never going to finish.

Finally, I want to return to OIMS. I mentioned that there are eleven elements, all of which are fundamental to safe and responsible operations at ExxonMobil. But the first and last elements — the bookends of OIMS — are the most critical.

These are “Management Leadership and Accountability”, and “Operations Integrity Assessment and Improvement”. Without leadership by example and without thoughtful, honest and objective self-assessment, no system is sustainable.

Our nation, and our world, continues to face challenges. Meeting the world's growing demand for energy — safely, and with minimal impact on the environment — is one of our biggest. In examining the causes of the Deepwater Horizon incident, this commission is helping advance our progress toward this goal.

ExxonMobil strongly supports your inquiry, and remains committed to supporting the cause of safety within our company and beyond.

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