Morgan Stanley analysts recently had a discussion with social sustainability expert Freddy Shaoul about the importance of the relationships between oil and gas companies and the local communities in which they operate. Shaoul has more than 14 years of experience as an advisor specializing in social risk management and stakeholder engagement for oil and gas companies. Shaoul focuses on environmental, social and health impact assessment of new projects.
Optimizing Opportunities
According to Shaoul, companies need to consider risk assessment, stakeholder engagement and other ways to optimize value creation when considering new projects. Without a holistic understanding of a company’s relationship with a local community, companies can find themselves dealing with social backlash that could have been easily prevented.
Social Risks
Shaoul lists sabotage, theft and strikes as three examples of social unrest that can disrupt production and cost oil and gas companies money. In extreme cases, these types of social disruptions can result in total production shutdown.
Shaoul points out that the social risks for oil and gas companies are often greatest in countries which have the most social instability. In certain regions of the world, factors as simple as water availability and education facilities can provide the basis of social unrest.
Other social factors that companies should consider when working in “challenging countries” include unemployment rate, infrastructure shortcomings and healthcare.
How To Identify Potential Social Disruptions
For investors who want to know the warning signs of potential social disruptions, analysts included a list of red flags. “These [signs] include negative media campaigns, negative NGO action, local community road blockages and violent disruptions,” analysts explain.
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