Our Business

Overall objective: To provide responsible and sustainable development.

Our objective is to provide responsible and sustainable development. In 2018, key issues in this area included those related to: global climate risk and energy transition; business partners and influence; new country entry; our HSES Management System ("HSES MS") and contractor management.

Climate risk and global energy transition

Climate change is considered a principal risk to SOCO and its business over the medium and long term, and this is discussed in more detail in the Risk Management Report on page 36. Global energy transition is a factor that impacts many of the Group’s principal risks including those associated with commodity price, reserves, operations, political, stakeholder and reputational. We recognise that a global transition to a lower carbon intensity economy in response to climate change could result in reduced demand and increased operating cost, capital cost, regulation and taxation. Our overall risk management integrates climate change and carbon related risks. Established management processes include any physical risks associated with climate change.

We report transparently and participate in the Carbon Disclosure Project (“CDP”). Our greenhouse gas emissions are reported in the Environment section on page 55 (see link at bottom).

Business partners and influence

Relationships with business partners, host governments and local communities where we operate are critical for our business. Our Code sets out our commitment to doing business honestly and ethically and to complying with all applicable laws and regulations. It sets out our expectations to take steps to only do business with others who share our values.

Our ability to influence our business partners depends on our degree of ownership and operatorship. Where we are the designated operator, we fully apply the SOCO HSES MS. Where we are a joint operating partner, we seek to influence and ensure alignment with our systems. Where we have a minority interest, we seek to make our views heard and ensure that minimum standards are met in accordance with our commitment to the IFC Performance Standards.

New country entry

For SOCO, any new business, investment or venture must identify, analyse, assess, address and monitor environmental, social and governance (“ESG”) related issues and risks (alongside commercial, legal, technical and political constraints).

Our new country entry procedure sets out our process for risk screening and due diligence. The process applies to: new country entry; transactions (acquisitions, divestment); expansion of existing projects; and operated and non-operated Joint Venture farm-ins.

In 2018, a key new business assessment for SOCO was the proposed acquisition of the Merlon Petroleum El Fayum Company (“Merlon”), which holds a 100% participating interest in the onshore El Fayum concession in the Western Desert, Egypt, operated in conjunction with the Egyptian state oil and gas company, EGPC, through the 50/50 joint operating company Petrosilah.

Following a preliminary assessment of Environmental, Social and Human Rights issues, we undertook further due diligence commensurate with risk.

There is an opportunity for expansion of the El Fayum concession in Egypt contributing to the country’s energy requirements and development goals. In considering the opportunity we looked at the range of ESG issues locally.

Potential risks and impacts we reviewed included those related to: biodiversity; road safety; emissions; security and human rights; and anti-bribery and corruption.

Neither Merlon nor the joint operating company Petrosilah had a written comprehensive anti-corruption compliance programme in place on signature of the sale and purchase agreement (“SPA”) by SOCO.

Merlon has, before completion and pursuant to an obligation in the SPA, adopted an anti-corruption compliance programme substantially in the terms of SOCO’s current programme. Merlon has in addition undertaken to use reasonable endeavours to ensure Petrosilah adopts a similar programme.

ESG issues identified have been reviewed based on our policies and commitments and the Company’s risk appetite using our Procedure.

Following the planned acquisition we will carry out an audit of SOCO’s New Entry Procedure in 2019.

100% Potential new investments screened for CR issues using new country procedure in 2018.

HSE Management System

We undertake a range of activities to continuously improve our HSE MS to ensure that the Company’s policy commitments are applied. We may work in countries that have different standards and we review any potential gaps to ensure adherence to our policies in dialogue with our business partners. Routine monitoring is undertaken to assess and improve performance and periodic audits are conducted.

In 2018 we continued with a roll out of HSES training for employees and contractors. Over 275 HSE training sessions took place across the UK, Vietnam and in the Congo throughout the year.

Contractor management

Contractors are used throughout all aspects of our business. Our Contractor Management Procedure sets out requirements through all stages from selection through to management and service delivery. In HSES critical activities, bridging documents are put in place to ensure SOCO and contractor alignment with our requirements.

In 2018 we undertook further work to update our contractor and supply chain management procedures, building additional requirements into our contracts. We have introduced additional screening and induction steps to ensure that contractors meet our standards. Training is also being rolled out as part of our supplier due diligence programme.

100% New suppliers screened in accordance with updated HSES requirements in 2018.


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