Local suppliers and contractors

Cairn, like other oil and gas exploration companies, outsources a number of its activities to its supply chain. As a consequence, the majority of operational man-hours worked are being undertaken by contractors' employees and so their performance is vital to our overall performance.

Meeting Our Standards

In recent years, we have strengthened our relationships with existing suppliers and contractors, encouraging them to meet the standards required by our Group CR Policies and Guiding Principles. Major contractors in all locations are evaluated against these CR criteria prior to any contract being awarded. We also plan to implement a process to monitor our contractors' performance against the criteria following contract award to ensure they deliver on their commitments.

Local suppliers and contractors are used wherever possible. In the remote parts of India and Bangladesh, where many of our activities take place, local contractors often have limited experience of the oil and gas industry and its requirements regarding health and safety, the environment and quality control. In both countries, we have worked with local suppliers, contractors and workforces to improve their knowledge and skills for some years and this has led to increased use of such contractors. In Cairn India, local suppliers and contractors provided more than 94% of the 70 million man-hours worked during 2009.

In our growing operations in Greenland, we are encouraging local companies to respond to the opportunity of providing services to our drilling programmes in the region and to become involved with a diverse range of services, from aviation and marine support to local engineering facilities. The local infrastructure for supporting a drilling campaign is limited and as a consequence, we are also encouraging larger service companies to invest in the longer-term development of the industry in Greenland.

To ensure that our CR agenda is delivered with maximum effect, we are engaging our major contractors. We conducted open sessions with all potential contractors, largely to present to them our expectations on the development of their local capability, and will follow up on this in the tender selection and ongoing management of the services. Where viable, contractors that present a long-term strategy that seeks to enhance the impact of our operations on the local community and environment will be preferred.

Local Suppliers in India

Since the start of construction activities in Rajasthan, local communities have had high expectations of securing contracts for civil activities and other services such as vehicle contracts. As these people live adjacent to the MPT site, there is potential for them to influence Cairn India's activities.

Cairn India has made a conscious effort to offer business opportunities to local suppliers and also work with them to improve their skills and capabilities, widening their potential market beyond Cairn and its contractors. Our Enterprise Centre has also helped to identify 60 potential micro- and macro-vendors able to deliver services, eight of which were offered vehicle contracts when they came up for re-tendering. Cairn India has also tried to engage local contractors directly in the construction of well pads and other areas wherever possible.

The expectations of local suppliers have risen over time and while some have developed business opportunities beyond Cairn's sphere of influence, others have yet to do so, leaving themselves vulnerable to a reduction in opportunities once our operations in the area come to an end.