MESSAGE FROM THE MANAGING DIRECTOR AND HEALTH, SAFETY AND SUSTAINABILITY COMMITTEE CHAIR

In 2018, we faced one of the greatest challenges in the Company’s history when a record 7.5 magnitude earthquake hit our operating areas in Papua New Guinea (PNG). You can judge the strength of a corporate culture when it is tested by a crisis and the speed, dedication and generosity of how our people responded to the PNG earthquake is testament to ours.

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Oil Search’s 2020 Social Responsibility Strategy is guided by the principles of our Social Responsibility Policy and integrated with the Company’s broader strategic objectives and vision. It prioritises initiatives and improvement areas with material business value and provides a framework for optimising the positive impact of our social responsibility activities.

Material developments in 2018

Earthquake in PNG highlands

The first half of 2018 was devastating for PNG and one of the most challenging periods in the Company's history. The 7.5 magnitude earthquake in Southern Highlands of PNG in late February and the numerous aftershocks substantially impacted Oil Search’s project area communities. There were many deaths and essential infrastructure was destroyed.

Our priority following the initial earthquake was to ensure all our staff, across over 20 work sites in the Highland’s Region were safe. Our processing facilities withstood the earthquake well, but our camps and associated facilities were impacted more seriously. As a precautionary measure and to assess any damage to facilities, production was temporarily shut-down at all operated oil fields and ExxonMobil PNG Ltd ceased production from the PNG LNG Project, impacting 2018 production, revenues and profits. Following detailed assessments of our infrastructure to ensure its integrity and to confirm that safe, reliable and sustainable operations could resume, production recommenced at most facilities within two months of the earthquake. Final earthquake-related repairs remain on-going.

As one of the few organisations in PNG able to provide rapid, on-the-ground assistance, Oil Search prioritised relief, recovery and rehabilitation efforts within our local communities. As a result, several planned activities and projects were put on hold. This affected some performance indicators for 2018 reporting, including varying data trends (due to production downtimes), data irregularities (due to damaged infrastructure e.g. meters) and reduced resource reporting capacity. We have identified specific examples in this Report.

Alaska North Slope — appraisal drilling phase

In February 2018, the Company completed the acquisition of oil assets in the North Slope of Alaska for US$400 million and assumed operatorship in March 2018. The acquisition complements the Company’s existing top quartile, high-returning PNG gas assets and creates a more balanced portfolio that is less exposed to one commodity and one country.

During the year, we built a highly experienced local management team, based in Anchorage, to develop and operate the Alaskan assets.  We also prepared for a two-rig appraisal drilling programme, which commenced in late December 2018 and is progressing well. During the year we engaged with key stakeholders, including governments and local Indigenous landowner groups.

Papua LNG MoU with PNG Government

The Papua LNG joint venture (JV) participants — including Oil Search — entered a Memorandum of Understanding (MoU) in November 2018 with PNG to develop the Papua LNG Project. The agreement is a significant step forward and forms the basis for a Gas Agreement that equitably and appropriately allocates Project benefits and returns to stakeholders. The JV participants expect that the Gas Agreement will be executed in 2019.

About this Report

Oil Search believes that conducting business in a socially responsible manner is a strategic and moral imperative. It protects Company value by supporting operational stability and enabling us to achieve our strategic objectives while fulfilling our corporate social obligation to meet society’s expectations.

We encourage and support transparency at a Company, industry and government level, including how we report our approach to, and management of, material social responsibility issues. This Report provides a clear account of our performance against our Social Responsibility Strategy and in relation to the challenges and opportunities that impact our operations and the communities in which we operate. We have presented the information under three key themes: Making lives better, Proud of what we do and how we do it and Engaging and empowering our people.

We regularly engage stakeholders and participate in industry forums to ensure the focus and content of our reporting suite remains relevant to our overall Business Strategy and the needs of our stakeholders.

For this Report, we have presented material information on Oil Search’s social responsibility performance relating to projects under our operational control for the 2018 calendar year. While it focuses on our operations in Papua New Guinea (PNG), we also touch on our newly-acquired operations in Alaska and our plans to address broader social responsibility impacts in our supply chain. Our non-operated equity interests in PNG LNG and Papua LNG are not included. Social and environmental performance for the PNG LNG Project is available on the project website.

We welcome feedback or questions about any aspect of our social responsibility reporting to socialresponsibility@oilsearch.com.

Our 2018 reporting suite

Oil Search recognises the importance of public disclosure. Being transparent about our social responsibility activities and performance makes us accountable to our stakeholders, supports informed decision-making and provides an opportunity to incorporate stakeholder feedback into our strategic planning.

Our 2018 reporting suite outlines the Company’s approach to addressing material issues and creating environmental, social and economic value in the countries in which we operate. Representatives from across the business have worked with the Social Responsibility team to compile it, and it has been reviewed by the Executive Team and the Board Health, Safety and Sustainability Committee (HSSC).

We have compiled the quantitative data for our Report in accordance with Oil Search’s Social Responsibility Basis of Preparation and incorporated indicators from external benchmarks and standards , including:

  • Global Reporting Initiative (GRI) Standards 2016.
  • IPIECA’s Sustainability Reporting Guidelines.
  • The objectives of PNG Vision 2050 and the objectives of the United Nations Sustainable Development Goals (SDGs).

As well as being part of our Company reporting suite, this Report serves as Oil Search’s required Communication on Progress report as a UN Global Compact (UNGC) member.

Other communications in the reporting suite address key stakeholder interests around our performance.

  • The VPSHR Report outlines the Company’s progress on implementing the Voluntary Principles on Security and Human Rights (VPSHR) in 2018. We have developed this Report in accordance with the VPSHR Verification and Reporting Framework, submitted it to the Voluntary Principles Initiative (VPI) and released it publicly.
  • The Transparency Report summarises information about socio-economic payments we made in 2018 to countries where Oil Search has a presence. This information also informs our Extractive Industries Transparency Initiative (EITI) submission for PNG.
  • A Preliminary Modern Slavery Statement is a new addition to our reporting suite. This describes the Company’s modern slavery readiness plan, with clear actions for establishing socially responsible business practices in our supply chain. We will prepare a formal statement in accordance with Australian Commonwealth legislation from 2020 onwards.
  • The 2018 Oil Search Annual Report includes a summary of material aspects of our social responsibility performance in 2018.
  • The Oil Search website describes our overall approach to managing material environmental, social and governance issues.

Independent limited assurance

External assurance enhances the credibility of our social responsibility data and helps us to identify improvements for future reporting. We obtained independent limited assurance over selected social responsibility data in this Report in accordance with Australian Standards on Assurance Engagements ASAE 3000. The limited Assurance Statement prepared by Deloitte outlines the scope and basis of the assurance they have provided for this Report.

Our social responsibility reporting has been subject to independent limited assurance since 2011, with the assurance findings presented to the Executive Leadership Team and the Board HSSC. Deloitte is Oil Search’s external auditor as well as our social responsibility reporting assurance provider. The Audit and Financial Risk Committee oversees the independence of this relationship and governs the approval processes.