2004 internal audit report

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Unocal Geothermal, Indonesia Business UnitGood Operations Management Systems

2004Internal Audit Report

August 20 September 3, 2004

Submitted to: Barry Andrews General Manager, UG,IBUJoe Bowen Senior Operations ManagerMark Mosby Resource Technology Manager

Date: 3 September 2004

Submitted by:

Bradley E. Wendt, PE, PMP Paul A. Taylor

Team LeaderManager, Production Engineering

Field Manager, Wayang Windu, MNL

Rex Soeparjadi Bob Djanegara

Field Manager, Salak, UGI Manager Loss Control, UGI - Jakarta

Iman Santoso Ferri Fatra

LC & Security Engineer, UGI - Jakarta Loss Control Specialist, UGI - GunungSalak


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GOMS 2004 Internal AuditExecutive Summary

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Introduction

Following is the report resulting from the Good Operations Management System (GOMS)internal audit conducted for Unocal Geothermal Indonesia Business Unit during August 20 September 3, 2004. The audit was conducted as a requirement of the GOMS to providemanagement, Supervisors and Element Coordinators feedback regarding the current status ofthe business unit good operations management system and to offer suggestions for furthersystem development.

The report contains three sections:

1. Section I: The Executive Summary: This section highlights general observations,commendable programs and key recommendations.

2. Section II: Findings and Recommendations For Each GOMS Element: This sectioncontains a detailed discussion of the findings and recommendations relative to eachOMS Standard.

Distribution of this report will be through the Senior Operations Manager, Joe Bowen and Good

Operations Committee

Action plans addressing the recommendations contained in this report should be sent to BobDjanegara (Attention: to GOC).

Signed Document on file with Loss Control Manager


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Section I

Executive Summary

A Good Operations Management Systems (GOMS) internal audit was conducted for UnocalGeothermal Indonesia on August 20 September 3, 2004. The purpose of the audit was toevaluate the current status of the business unit Good Operations Management System (GOMS)and submit findings and recommendations for additional program development. The audit teamused a Retrospect Methodology to capture learnings from the program rather than a check listaudit approach. This method served the team well in that it encouraged an open andtransparent learning environment.

Audit team members included:

Bradley E. Wendt, PE, PMP, Lead Auditor, UGI Manager, Production Engineering

Paul Taylor, Wayang Windu Field Manager

Rex Soeparjadi, Salak Field Manager

Bob Djanegara, UG,IBU Loss Control Manager Iman Santosa,LC & Security Engineer, UGI - Jakarta

Ferri Fatra, Loss Control Specialist, UGI - Gunung Salak

Scope

The scope of the 2004 audit included:

Salak Geothermal Operations

Wayang Windu Geothermal Operations

Jakarta Geothermal Administration & Technical Support

General Commendations

There has been significant improvement in the GOMS since the last Internal Audit in 2001.Six elements received an Effectively Designed and Implemented (ED&I) rating, anincrease of two from 2001. Considering the 2001 audit was Jakarta & Salak only, and the2004 audit included Wayang Windu this is encouraging results. The majority of Elementsreceiving Exceptions have progressed towards ED&I ratings.

The Salak and Wayang Windu geothermal facilities continue to operate with high reliability.The facilities are clean and orderly. Personnel demonstrated a keen awareness to safety.

The drilling performance in terms of costs and timing is highly commendable. Thedepartment has achieved one year without a lost time accident. Significant progress has

been made to document and disseminate procedures and best practices.

Element Coordinators, Perry Shaza & Maulana Hadi, are to be commended for theirenthusiastic and dedicated efforts at improving GOMS through the implementation of theirassigned Elements. (note: Perry and Maulana were issued a plaque of appreciation and agift voucher for dinner at Lawrys restaurant to promote similar behavior in all EC).

The UG,IBU personnel were open and honest during the audit and demonstrated acooperative attitude and willingness to learn.


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General Observations

There is high safety awareness, but overall low collective knowledge of GOMS. GOMS isstill perceived as something outside of the normal day-to-day work. It is not fullyappreciated as a management system and there is yet to be full alignment on the intent andimplementation.

The Red Book (GOMS Handbook) is confusing and not well structured. There is ahodgepodge of procedures, guidelines and forms that are inserted into the handbook in anad hoc manner with out clear links to PolicyStandards Procedures.

The Personal Performance Standards are not an effective measure of performance. Thestandards are not well understood by the majority of personnel. The recording ofaccomplishment is not verified and seldom substantiated. The process leads to rubberstamping.

The external audit of the corporate OMS standards while excellent in intent has theunintended consequence of diverting attention on developing and implementing a fit-for-purpose management system to chasing corporate audit points. This distraction hashindered the development of some the elements, i.e., the maintenance and inspectionelement.

About half the Element Coordinators were not knowledgeable or properly prepared topresent their elements to the auditors. Numerous Element Coordinators did not receiveorientation upon element assignment.

Key Recommendations

Following are the most significant recommendations resulting from this audit. Additionalrecommendations are detailed in Section II of the report.

Engage in a dialogue with managers to reconfirm the direction and intent of the GOMS as amanagement system. Have work sessions with key personnel (Superintendents,Supervisors, Engineers, and Element Coordinators) to disseminate the philosophy and gain

a greater collective knowledge of the overall GOMS. Consider testing personnel andmaking it a criterion for promotion.

Reemphasize the roles and responsibilities of the Element Coordinators. Encourage moreactive participation of the sponsors and line managers in evaluating performance and takingcorrective actions for mediocre performance.

Develop a GOMS Handbook that has only the Policies, Standards and PPS. Eliminate theprocedures, guidelines, forms from the GOMS and place on a readily accessible share driveand/or portal. Link procedures, guidelines, best-practices, forms, reference materials to thestandards. Link real work documentations to the standards and procedures.

Develop a robust PPS system that holds personnel accountable for real work with reviewand substantiating documents.

Endorse the Integrated Resource Management and adapt the program for the BU.

Support the Finance Departments Sarbanes-Oxley (SOX) Initiative.


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Standards Ratings

Each GOMS Element was rated using the following rating criteria:

Effectively Designed and Implemented:

Written Policy, Standard, Procedures exist Written Personal Performance Standards exist

Procedures Understood and Implemented Effectively Element is periodically Evaluated and Improved System is robust and sustainable

(The 20/80 rule was applied with regards to the element meeting the intent of a fit-for-purpose element. Implementation compliance was expected to be a least 80% acrossthe business unit.)

Exceptions:

Lacks one or more of the criteria above

Deficient:

The Element and/or implementation is not align with the concept of a Program, i.e.,Say what you are going to do, and do what you say, and periodically

check to see that you do what you say you are going to do. No significant progress for improving the exceptions over the years(s).

The table below shows the ratings for each Unocal Geothermal Indonesia Element

No. Element 2004

2001

1 Leadership

2 Risk Profile Evaluation & Assessment

3 Compliance Management

4 GOMS Measurements, Evaluations, and Statistical Process Control

5 Inspections and Maintenance

6 Contractor Management and Procurement Controls

7 Personal Protective Equipment

8 Work Rules, Permits, Procedures and SOPs

9 Workplace Health and Industrial Hygiene

10 Emergency Preparedness, Crisis Management and Business Recovery

11 Environmental Care

12 Community Development, Relations and External Communications

13 Resources Technology Practices

14 Project and Change Management

15 Drilling Program and Practices

16 Communications

17 Incident Investigations, Evaluations and Learning Review

18 Physical Security

19 Information System and Data Security

20 Manpower Planning and Competencies

21 Orientations, Training, Mentoring and Performance Management

22 Accounting Practices

23 General Services


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Note about Audit

This audit was conducted in the spirit of learning and not as a gotcha audit. The ratings are bittougher than an external audit because:

We know our weak points

We are harder on our selves than the corporate auditors

Looking at whole Element not just Corporate OMS standards

Confronting the Brutal Facts (Practicing Good to Great)

Audit Schedule

Team Charter Developed and Approved June

Team Orientation and Training conducted by Team Leader Aug 12

Audit Preparation Aug 13-19

Audit Kick-Off with Management and Element Coordinators Aug 20

Jakarta Interviews Aug 23-25

Salak Interviews and Site Inspections Aug 26-28

Wayang Windu Interviews and Site Inspections Aug 30 Sep 1

Report Prep, Sep 1-3

Close-out meeting Sep 3

Submit Report Sep 6

A retrospect of the Audit will be conducted September 16thand submitted to SeniorManagement for perusal and the Loss Control Manager to place on file.


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Section II

Findings and Recommendations for each Element


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UGI GOMS Element 1Leadership

2004 Internal Audit

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ELEMENT 1 LEADERSHIP

Audit Date : 23 August 2004

Element Coordinator : Barry Andrews

Interviewee : Joe BowenAuditors : Brad Wendt (lead), Rex Soeparjadi

Overview

This standard provides guidelines for effective leadership and administration of themanagement of Geothermal Operations and Jakarta Office. Understanding, active involvementand commitment by all employees to the implementation of Good Operations ManagementSystem (GOMS) are essential and mandatory.

Strong and unwavering leadership at the corporate level and throughout the entire business unitmanagement chain is a critical success factor for developing this understanding, involvement

and commitment.

The GOMS embraces the Total Quality Management concept and strives to translate theUnocals Vision, Mission, and Values into reality through its element standards implementation.

Performance standards have been developed and tracked. The level of awareness isincreasing with the managers and supervisors since the last internal audit conducted in 2001.

Key Point: We need to strive to make the GOMS an integral and congruent managementprocess with the work we are doing. With emphasis on we Say What We Do, We Do What WeSayand periodically review and continuously improve. There is a tendency to see the RedBook (the GOMS manual) as a stand alone safety program rather than a management system.

The ideal model for the whole process to implement GOMS would be:1. Strong, clear and aligned: Mission, Vision, Values2. Presence of Strategic plan (3-5 years)3. Annual goals review, clear metrics, score cards4. Programs in place Implementation of policies, standards, procedures, practices,

training5. Evaluation of point 1 - 46. Sustainable process with continuous improvement.

Overall Business Unit Element Rating: Exceptions

Criteria Jakarta

Salak

Wayang

WinduWritten Policy, Standard, Procedures

Written Personal Performance Standards

Procedures Understood and Implemented Effectively

Element is Periodically Evaluate and Improved

System is robust and sustainable

Thumbs up, A-Okay, no major improvements required Flagged because there are some problems Thumbs down, does not meet intent. Needs immediate attention.


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UGI GOMS Element 1Leadership

2004 Internal Audit

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2001 Internal Audit Ratings

This element received an Exception rating during the 2001 audit. The GOMS Element exceedsCorporate OMS Standards. Overall understanding of GOMS and OMS was found lacking.

2003 Corporate Audit RatingsThe Corporate 2003 audit rated the 3 applicable standards as Effectively Designed andImplemented with suggestions. The suggestions are being acted upon by the Loss ControlDepartment.

2004 Audit Findings

1. GOMS Element 1.1.1 requires process mapping. The majority of the elements and businessprocesses do not have process mapping and/or it is not readily available.

2. There are nine policy statements addressed in Element 3, that can be found in the sharedrive and the GOMS Live-Link. Policies are not displayed in the Jakarta Office 11thfloor.Policies are displayed adequately in the Salak and Wayang Windu field.

3. There is no Policy for Records Management or a program in place and as such theElement 18 received a deficient rating on one Corporate standard.

4. The GOMS handbook is available and distributed and readily available to all employees. Itis considered an overly bulky and confusing handbook. It is still somewhat perceived assomething outside routine work, as opposed to the intent of it being integral and congruentto the way we do business. The handbook is confusing because it lacks structure.

5. Jakarta Staff orientation was notconsistently provided for new employees and transferred-inemployees (note also in Element 21 Training & Orientation). Orientation was not providedfor new element coordinators. GOMS knowledge among element coordinators in general isinadequate.

6. GOMS does not cover Balanced Score Card methodology and other Management

Processes such as Decision Making and Budget Monitoring & Control as it is implied inElement 2.

7. Senior Managers and General Manager have not updated their PPSs (IPSs). Middlemanagers only partially completed.

8. The Personal Performance Standards measuring methodology is not perceived to beeffective.

9. The RATS has been replaced with the AIMS, but is not being used to track Element actionitems for continuous improvement and/or compliance. AIMS does not currently have afunctioning automatic reminding system (this is noted in several other Elements)

Recommendations:

1. Develop a stand alone Policy for Records Management.2. Review the current practice of rating PPS and improve process to assure compliance and

aligned with performance appraisals. (consider WWs PPS compliance form).

3. Provide orientation for new employees, transferees, and new Element Coordinators.

4. Continue fostering and promoting the GOMS and improvement of standards, programs,procedures and best practices.

5. Develop a GOMS Handbook that contains Policies and Standards only, including PPSs(IPSs) and provide references (links) to where supporting Programs, Procedures, BestPractices can be readily located.


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UGI GOMS Element 2Risk Profile Evaluation & Assessment

2004 Internal Audit

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ELEMENT 2 RISK PROFILE EVALUATION & ASSESSMENT

Audit Date : 24 August 2004 (Jakarta) / 30 August 2004 (WW)

Element Coordinator : Iman Santoso

Interviewee : Iman Santoso, David Aulia (Jakarta), Maulana Hadi (WW)Auditor : Rex Soeparjadi (Lead), Ferri Fatra

Overview

The objective identification and evaluation of risk is critical to safe, efficient and environmentallyresponsible operations. Each operation must identify their specific risk profile to determine ifadditional OMS elements and standards are needed beyond the core program.

Performance standards have been written and risk based goals have been developed tomonitor progress. However, the closure of goals using measurable assessment, especially forJakarta and Salak, needs to be improved.

Even though the element as named does not mention the planning component anymore, thestandard still captures the requirement of Business Unit Annual Operating Plan (AOP) process.There are no written procedures for the Business Management processes.

Overall Business Unit Element Ratings: Effectively Designed and Implemented(with suggestion)

Criteria Jakarta

SalakWayangWindu

Well defined Written Policy, Standard, Procedures



Element is periodically Evaluate and Improved

System is robust and sustainable Thumbs up, A-Okay, no major improvements required Flagged because there are some problems Thumbs down, does not meet intent. Needs immediate attention.

2001 Audit Rating

This element received an Exception rating during the UGI audit and had threerecommendations. Except for establishing procedures / process mapping for the planningprocess, other recommendations have been followed-up.

2003 Audit Rating

This element received an Effectively Designed and Implemented rating. However, the

recommendation to establish a measurable methodology with next level approval for actionitem close out has not been completed.

2004 Audit Findings

1. In 2004 the element is being reviewed but this is not a routine practice. Current review isconsidering removing the planning portion from the element.

2. The annual review of business unit risks is routinely implemented.


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UGI GOMS Element 2Risk Profile Evaluation & Assessment

2004 Internal Audit

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3. A finding in the 2003 audit mentioned that a structured and documented methodology bedeveloped for capturing specific actions taken against established risk profile action items.Risk based goals are still tracked manually on Excel spread sheets and close-outs do nothave measurable criteria. WW has implemented specific action monitoring program since2003.

4. Element Standard requires risk profile evaluation process to identify whether new OMSelements and standards are required. No process has been developed to address thisrequirement.

5. Inconsistent use of risk ranking criteria in GO 2.0 and GO 2.1. In one section, the rating of4 indicates almost certain probability and major severity. Whereas in another section,the rating of 4 indicates unlikely probability and minor severity. (Flip-Flop)

Recommendations:

1. Removing the planning portion (as proposed by the LC department) from the elementneeds to be reconsidered. The business unit needs a planning process to address risks

and routine business procedures to engage in best practices and ensure alignment inpractices. (General)

2. Add a procedure to determine whether new OMS elements and standards are requiredbased on the identified risks. (General)

3. Consider removing procedure portion from the standard section. (General)

4. Revise risk ranking criteria in GO 2.0 and GO 2.1 so they are consistent. (General)

5. Consider assigning one person to be responsible for one business unit / area risk basedgoal to maintain clarity in responsible person and accountability. (Jakarta and Salak)

6. Improve on goal completion monitoring methodology so completions can be measured andnot manually updated on Excel spread sheets. Use Project Management methodology toinitiate, plan, execute, control and close-out Risk Based Goals. (Jakarta and Salak)

7. Recommend to assign a planner to handle strategic, business and maintenance planning.(Salak)


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UGI GOMS Element 3Compliance Management

2004 Internal Audit

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ELEMENT 3 COMPLIANCE MANAGEMENT

Audit Date : 23 - 31August 2004

Element Coordinator : Alimin Ginting

Interviewee : Alimin Ginting (Jakarta) Izzat Salim (Salak) Maulana (WW)

Auditors : Iman Santoso, Paul Taylor

Overview

Compliance with legal requirements wherever we work is a fundamental Unocal practice.Unocals Vision and Values may require standards that exceed requirements of existingregulations. Certain Unocal policies have been developed to provide these standards

Compliance with regulations is a critical activity for UGI because of the current political sceneand introduction of Regional Autonomy. The lack of evidence of regular reviews of regulations isa significant finding and confirms that the EC must be given the appropriate support andguidance to facilitate the ongoing implementation of this element.

Renewal and control of certificates at both fields is well controlled.

Overall Business Unit Element Ratings: Exception

Criteria Jakarta

SalakWayangWindu

Written Policy, Standard, Procedures





Thumbs up, A-Okay, no major improvements required Flagged because there are some problems

Thumbs down, does not meet intent. Needs immediate attention.

2001 Audit Rating

This Element received an Exception rating during the audit and had seven recommendations.Minor progress has been made on completing the action plan.

2003 Audit RatingThis corporate auditor rated one standard as an Exception rating during the audit with threerecommendations. Minor progress has been made on completing the action plan. Thisindicates the Element rating of Exception.

2004 Findings:

1. New Element Coordinator appointed 3 weeks ago. No formal appointment letter signed byManagement and no proper hand over between previous and new EC.

2. Based on EC, Jakarta Government Affairs are proactive in trying to contribute to newregulations while they are being drafted. There is no procedure related to this practice inGOMS.

3. There is a matrix of regulatory compliance including responsible person, revised in August2004. EC was not sure who has revised this document and the previous document is still inthe LC directory.


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UGI GOMS Element 3Compliance Management

2004 Internal Audit

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4. There is no information or evidence that assessment of regulatory compliance is conductedevery 2 years as required by GOMS.

5. Copy of certificate of compliance on critical equipment is available in Salak & WW. Someobsolete certificates were found in the same binder with the current certificate.

6. In Salak & WW update on the new regulation is normally by the memorandum fromgovernment bodies. Currently there is no proactive effort to check the new regulationexistence as this is considered EC and Jakarta responsibility.

7. Good finding that WW has developed a certification database and procedure unique forWayang Windu operations. Compliance status on certification database (using MS Access)is checked/reviewed regularly by dedicated person. This database covers all SKPPincluding permit/certification eg building permits (WW)

8. Rollout of Element 3 has been completed in the past and a roll out of the new database isbeing planned. (WW)

9. WW was not aware that based on the procedure, the GOMS Manager is required to beprovided with a copy of letters to GSDM with relation to accidents and well drilling

notification. This audit brought to WW attention and they will follow accordingly in the future.

Recommendations:

1. Develop and implement formal appointment and orientation for the new element coordinatorincluding the requirement on hand over process when there is a change in elementcoordinator (General)

2. Conduct the annual review of the compliance matrix as per the requirement. Include anapproval requirement by Loss Control Manager to ensure that it is being done anddistributed. Change procedure to include this. (General)

3. Conduct assessment of regulatory compliance every 2 years as required by GOMS. State

the PPSs into the PPS compliance form. (General)

4. Use WW certification database system for Salak and Jakarta Office (Salak and JakartaOffice)

5. Influence EC to use project management tools to ensure outstanding actions and elementreviews are quickly completed. (General)


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UGI GOMS Element 4Measurements, Evaluations, and Statistical Process Control

2004 Internal Audit

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ELEMENT 4 - GOMS MEASUREMENTS, EVALUATIONS, AND STATISTICALPROCESS CONTROL

Audit date : 25 August 2004

Element Coordinator : Bob Djanegara

Auditor : Brad Wendt (lead), Ferri Fatra

Place : Jakarta Office Team Room 11.004

Overview

Modern business management is built on a framework of information, measurement, data andanalysis. Measurements are derived from business unit strategies and cover all key-processesand the outputs and results of these processes. Facts and data are needed for performanceimprovement and assessment.

Performance measures should be simple and easy to use, provide fast feedback and should

foster improvement rather than be used just for monitoring. This element standard providesguidelines for Unocal Indonesia Business Unit management to measure performance.

This GOMS Standard exceeds Corporate Standard requirements. The yellow flags are basedon not doing what the Element standard indicates we should be doing. The quality of internalreview by Element Coordinators is not comprehensive and extensive. The element does meetthe intent of the corporate standards.

Overall Business Unit Element Rating: Effectively Designed and ImplementedWith Suggestions

Criteria Jakarta

SalakWayangWindu


Written Personal Performance Standards Procedures Understood and Implemented Effectively




2001 Rating

This element received an Exceptions rating during the 2001 audit.

1. N/A n/a

2. Participation in OMS Audits ED&FI

3. Follow-up of Audit Findings Exceptions4. Internal Reviews of Standards ED&FI

2003 RatingThe Corporate 2003 audit three out of six standards as Effectively Designed and Implementedwith one suggestion.


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UGI GOMS Element 4Measurements, Evaluations, and Statistical Process Control

2004 Internal Audit

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The 2003 Corporate Audit indicates the following ratings for the standards:

1. N/A n/a

2. Participation in OMS Audits ED&I

3. Follow-up of Audit Findings ED&I w/ Suggestions

4. Internal Reviews of Standards ED&I

2004 Findings:

1. The 2003 External audit rated the Corporate OMS Standards as Fully Design andImplemented with suggestions. The suggestions have been acted upon.

2. Audits have been conducted in 2000, 2001 and 2003 and are on file.

3. Not all departments conducted annual formal measures of external and internal customersatisfaction. Loss Control department had developed a form to address customersatisfaction that can be found on the share drive. The customer satisfaction form does nothave instructions on how to use it. The customer measurement tool has not been reviewed

every two years by the department head.

4. Several departments have Service Level Agreements (SLA) in place to address customersatisfaction and are meeting the intent of this requirement (i.e. HR, IT and ProductionEngineering, LC Department, P&L).

5. Departments have Balanced Scorecard (BSC), but are not uniformly effective. Somedepartments still refer to them as Value Based Management (VBM). Not driven from astandard, procedure or guideline.

6. Share drive defined in procedures is obsolete.

7. Annual evaluations are not being done with respect to the intent of continuous improvementof the GOMS. Element coordinators just review the audit result and use the

recommendations for developing action plans. Definition review and audits not wellunderstood.

8. AIMS replaced the RATS system and still being commissioned. The follow up of bestpractice and audit deficiencies should be tracked by AIMS, but is not done

Recommendations

1. Review the need for customer satisfaction surveys. Define internal and external Customers.

2. Conduct a Refresher course for Element Coordinators and their Sponsors identifying rolesand responsibilities and emphasizing expectations.

3. Develop a guideline for reviewing the Element Standards and Procedures. (Consider usingIzzats Element 14 annual review as example).


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UGI GOMS Element 5Inspection and Maintenance

2004 Internal Audit

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ELEMENT 5 - INSPECTIONS AND MAINTENANCE

Audit date: 20 August 2004

Element Coordinator: Hari (Dido) Widianto

Interviewees Hari (Dido) Widianto, Doddy Astra, Terry Indra, Dwi Darmawanta

Auditor: Brad Wendt (lead), Paul Taylor

Follow-up Audit: 26 August 2004 with Engineers, Supervisors, ElementCoordinators, Superintendents at Salak Field Office ConferenceRoom

Overview

Periodic inspection and preventive maintenance programs must be implemented to ensure thecontinuing integrity of facilities and plant.

It is evident by the high availability of the Power Plant and Resource Production Facilities and

the good monthly maintenance reporting that a maintenance practice exists. However thepractice does not meet the Program intent of Corporate OMS.

A Program is defined as the methodical application of procedures to achieve a defined goal.Programs have the following characteristics:

The scope and objectives are well defined Procedures are defined and logically sequenced Responsibilities and accountabilities are understood and included in personal

performance standards Performance is measured against objectives Based on performance measurement, procedures exist for modifying the

program to improve effectiveness Procedures exist for follow-up and closure of deficiencies identified by the

program

Additional effort is required to get the Maintenance Supervisor, planner and engineers alignedwith the overall Maintenance progam.

Overall Business Unit Element Ratings: Exceptions

Criteria Jakarta

SalakWayangWindu

Written Policy, Standard, Program, Procedures n/a

Written Personal Performance Standards n/a

Procedures Understood and Implemented Effectively n/a

Element is Periodically Evaluate and Improved n/a

System is robust and sustainable n/a


2001 Audit Rating

This standard received an Exception rating during the 2001 audit.


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UGI GOMS Element 5Inspection and Maintenance

2004 Internal Audit

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2003 Audit RatingThe Corporate 2003 audit rated four out of six standards as Effectively Designed andImplemented with suggestions and two exceptions.

The 2003 Corporate Audit indicates the following ratings:

Mechanical Integrity Inspection Program: ExceptionsPre-Use Inspection Procedures for Critical Equipment : Okay w/ suggestions

Planned General Inspections : Okay w/ suggestions

Preventive Maintenance (PM) Program Exceptions

Flow Measurement Procedures Okay w/ suggestions

Tracking & Correcting Substandard Conditions Okay w/ suggestions

2004 Findings:

1. At Salak no substantial improvements have been made since the 2003 audit due to ashuffling of personnel resulting in a new Element Coordinator and MaintenanceSuperintendent.

2. Monthly reports indicate high availability of power plant and resource production facilities.Facilities were found to be clean and good housekeeping was observed.

3. Interviews with supervisors and leadsmen indicate that they are not fully aware of the overallmaintenance program and intent of the maintenance strategy. (Salak)

4. At Salak there are procedures and guidelines squirreled away in supervisors offices, but nocentral control of documents or linkages to the overall program could be found bysupervisors. A share drive was developed by the former Maintenance Superintendent as aholding point for the Maintenance Program. The majority of the supervisors were not awareof the share drive or the contents of the drive.

5. At WW procedures can be found on share drive and the Computer Maintenance

Management System (CMMS) known as MEX. Superintendent and Supervisors wereaware of programs and procedures.

6. There was uncertainty of what the definition of critical equipment is at both Salak and WW.

7. AIMS has replace the RATS tracking system but implementation has not been completed.

Recommendations:

1. Update the Maintenance Strategy and develop a three-year strategic plan. Utilize the plantengineers in developing the plan. Use a disciplined Project Management approach to getthis work done with clearly defined scope, deliverables and timeline. Develop yearly goals

and objectives around the three-year strategic plan. (General)2. Update the GOMS Element to include a requirement for developing the 3-year strategy and

yearly goals. Include a requirement for evaluating the strategy/maintenance program andprogress annually. Provide guidelines for conducting the evaluation. Ensure that it is donein a systematic and methodical manner.

3. Provide a clear methodology for defining critical equipment and critical spares. List and postthe critical equipment for all supervisors and engineers.


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UGI GOMS Element 6Contractor Management & Procurement Controls

2004 Internal Audit

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ELEMENT 6 - CONTRACTOR MANAGEMENT AND PROCUREMENT CONTROLS

Audit Date : 24 - 31August 2004

Element Coordinator : Angky Soekardi

Interviewee : Angky Soekardi, Tungga Dewa (Jakarta 24 August 2004)

Ongky Rahadi (Salak 27 August 2004)Bambang Purbagyo (WW 31 August 2004)

Auditors : Iman Santoso (lead), Brad Wendt, Paul Taylor

Overview

Effective selection and management of contractors, along with the effective procurement ofmaterials and equipment, are key components for achieving business objectives. A systematicapproach must be in place for evaluation, selection, and on-going assessment of criticalequipment and material vendors and contractors.

Good progress has been made by the P&L department to improve performance through theinitiation of the Service Level Agreement. Contract Administration in field is not fully understood

and there is often a disconnect between field activity and P&L.

Overall Business Unit Element Rating: Exception

Criteria Jakarta

SalakWayangWindu






Thumbs up, A-Okay, no major improvements required Flagged because there are some problems

Thumbs down, does not meet intent. Needs immediate attention.

2001 Audit Rating

This Element received an Exception rating during the audit and had 15 recommendations..Minor progress has been made on completing the action plan.

2003 Audit RatingThis Element received an Exception rating during the audit and 4 recommendations. Minorprogress has been made on completing the action plan.

GOMS Standard Findings:1. New Element Coordinator appointed in early 2004. No formal letter signed by Management

and no proper hand over between previous and new EC

2. There is no training program on contractor management and procurement control system.However, the Global Drilling Community provide a two-day course that was attended byseveral O&M supervisors and engineers, it was too generic for use in the field. There hasbeen formal training on P&L system, i.e. e-prove training, hazan training, cost element/code,tendering process.

3. P&L Department developed a Service Level Agreement (SLA) but not yet on file andaccessible by end-users

4. P&L Department is active at improving contract protocol and safety requirements.


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UGI GOMS Element 6Contractor Management & Procurement Controls

2004 Internal Audit

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5. Policies, Standards and Procedures are not well structured and easy to understand.

6. Overall understanding of policies and standards and procedures is weak.

7. There is a plan to revise the definition on Direct Appointment and Direct Selection

8. Development of a practical video presentation for Contractor pre-job meeting which include,basic HES, Security, Emergency, and other necessary information in Field operation is in

progress, delayed due to ambiguous scope definitions, scope changes and clarificationthroughout contract, not meeting expectations.

9. In the Corporate Audit 2003 recommendation, the BU is recommended to develop a fit forpurpose program to ensure that critical procured equipment and materials meet or exceedspecifications. This needs to be integrated with Element 5 Maintenance and Inspection.

10. There is confusion on which government regulation need to be followed on procurementdecree (whether it be BP Migas, GSDM or Keppres)

11. Currently there is no formal activity to review the contractor performance. Discussion isconducted as required if there is any poor contractor performance.

12. Some contract documents were not available on site causing confusion on the contract term

and risk on legal aspect.

13. There are no guidelines on Insurance Coverage for contract.

Recommendations

1. Develop and implement formal appointment and orientation for the new element coordinatorincluding the requirement on handover process when there is a change in elementcoordinator.

2. Tracking of progress on Corporate Audit Recommendation must be done during quarterlyelement coordinator meeting. Provide management support to encourage progresstowards.

3. Develop training program to improve the knowledge and competency of employees on

contractor management and procurement controls

4. Include P&L SLA as Element 6 procedure and post in GOMS folder/web site.

5. Reorganize Standard and Procedures to make it easy to understand. Consider to adoptdocument leveling based on document hierarchy (pyramid model).

6. Improve understanding of end users on policy, standard and procedures by havingcampaign and awareness of P&L system i.e. P&L system understanding for non P&Lpeople (see also recommendation on training)

7. Provide clarity to which government regulations (whether it be BP Migas, GSDM or Keppres)is to be followed and complied with.

8. Conduct contractor performance review for continuous improvement and lesson learned.(note: Element 14 Project Engineering Guidelines should have this as a requirement in thePost Project Review requirement. Check and update as necessary.)

9. Distribute the copy of contract document to Salak and WW to avoid confusion on contractterm and minimizing the risk on the legal aspect implication.


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UGI GOMS Element 7Personal Protective Equipment

2004 Internal Audit

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ELEMENT 7 PERSONAL PROTECTIVE EQUIPMENT

Audit Date : 27 August 1 September 2004

Element Coordinator : Perry Shaza

Interviewee : Perry Shaza (Salak Aug-28) / Ismail Hidayat (WW Sep-1)Auditors : Iman Santoso (lead), Bob Djanegara

Overview

This element standard provides guidelines for effective personal protective equipment (PPE)program in the Unocal Indonesia Business Unit. PPE is one of the four common approaches ofcontrolling occupational hazards, along with engineering controls, administrative controls andwork practices. Though PPE should be considered as the last resort of control, it is frequently anecessity in the defense against hazards.

Unocal is committed to the use of personal protective equipment for the safety of its workforce.Operations management must assess the need for protective equipment, ensure its availability

and enforce its use.The Element Coordinator was found to be enthusiastic and knowledgeable with regards to thiselement.

Overall Business Unit Element Ratings: Effectively Designed and Fully ImplementedWith Suggestions

Criteria Jakarta

SalakWayangWindu




Element is Periodically Evaluate and Improved System is robust and sustainable


2001 Audit Rating

This Element received an Exception rating during the audit and had 5 recommendations..

Progress has been made on completing the action plan.

2003 Audit Rating

Two Corporate standards were audited in 2003. One received an exceptions rating and the

other received a Effectively Designed and Implemented Rating with a total of four (4)recommendations. This can be interpreted as an Element rating of Exception. Progress hasbeen made on completing the action plan.

GOMS Standard Findings:

1. This Element was found to have written policy, standard, procedures, with PPS that areunderstood and implemented effectively in Salak. A co-coordinator has been assigned atWayang Windu and the standards and procedures are being adopted.

2. An annual review of the Standard had been made and submitted to LC for review andapproval Process.


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UGI GOMS Element 7Personal Protective Equipment

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3. The PPE needs assessment doesnt include drilling or Jakarta office.

4. The procedure 7.1 mentioned that all non-staffs should wear cover-all. This may not beapplicable any more.

5. No progress made on specifying PPE regulation regarding arsenic, because IH section has

not finished with the Arsenic risk assessment.

6. The PPE safety signs are posted throughout the field, but some areas are found lacking.Work is in progress to increase signage on ad hoc basis. (Salak & WW)

7. The quality of the PPE Need Assessment at WW was not as comprehensive and detailed asthe one at Salak.

8. At WW warehouse stock documents dont tally with actual PPE stock. Inventory control wasfound lacking.

9. Salak has developed an informal PPE Org Chart with assigned responsibilities.

10. The WW co-coordinator was not involved in the PPE procedure.

Recommendations:

1. Encourage WW PPE Co-coordinator to adopt best practice from Salak.

2. Include Jakarta office and Drilling activity on PPE Need Assessment

3. To review the requirement to use coverall clothes for Non Staff and revise the standard orprocedure as required.

4. Complete the Arsenic Risk Assessment program

5. Survey and Assess PPE Requirement Signage (Safety Sign) as part of PPE enforcementprogram. Use Project Management approach to deliver a report and recommendations andfollow-up implementation.


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UGI GOMS Element 8Work Rules, Permits and Procedures

2004 Internal Audit

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ELEMENT 8 - WORK RULES, PERMITS AND PROCEDURES

Audit Date : August 23, 2004 (Jakarta) Aug 30 (WW)

Element Coordinator : Heribertus Dwiyudha

Interviewee : Heribertus Dwiyudha (Jkt)Auditor : Paul Taylor (Lead), Iman Santoso

Other : Taufik Hidayat, Perry Shaza (GS) / Heribertus Dwiyudha (WW)

Overview

Control of workplace hazards is a key component of good operations. Each operation mustdevelop, implement and maintain work rules, permit systems and procedures to protect workers,control workplace hazards, comply with regulations and address industry standards.

The Work Rules, Permits and Procedures element is one of the more mature elements in theorganization as it has been continuously developed since 1995. Implementation is reasonablyadvanced but continuous effort is required by Management and Supervisors to ensure

compliance becomes a habit and is part of the business culture.

The recommendation to review this element should be given high priority since this element hasnot been reviewed since 2001.


Criteria Jakarta SalakWayangWindu



Procedures Understood and Implemented

Effectively

Element is periodically Evaluated and Improved



2001 Audit Rating

This Element, which has seven (7) standards, received an Exception rating for one (1) standardand Effectively Designed and Implemented rating for six (6) standards. There were three (3)recommendations. No formal actions closeout report was viewed but it appears that onerecommendation was completed while the other 2 are outstanding.

2003 Audit Rating

This standard which has seven (7) standards received an Exception rating for four (4) standardsand Effectively Designed and Implemented rating for three (3) elements. Nine recommendationswere made of which four (4) have been completed and three (3) are in progress.


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2004 Audit Findings

1) Business unit management will ensure that specific work rules and procedures toprotect workers are well defined, understood and enforced

Standard Rating: Exception

1. Generally implementation was in accordance with the standard except for:

2. The General Rules are not displayed on the notice boards in Jakarta office or WayangWindu. Staff at WW and Jakarta do not have a safety handbook. (Refer to clause 8.1 of GO8.0). General Rules were displayed on some notice boards in GS. However these were veryold copies and maybe not effective.

3. GO 8.0 standard and all the Element 8 procedures have not been formally reviewed since2001 (approx).

4. GOMS Question of the Week has been used in WW since April 2004.

5. The Element standard 8.0 makes reference to the Drugs and Alcohol Compliance Policy.Check to determine if this clause is appropriate for this standard.

6. There is a disagreement between element 8.1.3 and element 6.3.1 regarding personnelriding on the back of trucks. This should be clarified. Workers were observed riding on theback of trucks at GS while delivering material to the drilling rig.

7. Routine (monthly) inspections on contractor vehicles (eg labour supply, catering etc) werenot done. (GS)

8. Observed one vehicle exiting the field (B 2915 TJ) that had substandard driver seat belts.However driver was looping it over his shoulder to give the appearance that it was beingused. (GS)

9. Observed that bench grinders in both vehicle workshop and maintenance building at GSwere in sub-standard condition. (GS)

10. The material on the bulletin boards in the maintenance building and Security Pos 1 was outof date. (GS)

11. WW has a vehicle entry procedure and driving rules on the local quality directory. Theinspections as defined by the vehicle entry procedure have not been implemented in thefield. (WW)

12. There is no Safety Handbook available at WW. (WW)

13. Orientation presentation was not formally filed on the shared drive with other LC coursedescriptions and presentations. This will ensure all Contract Supervisors have access to thelatest presentation. (WW)

2) Business unit management will ensure that work permit procedures are well defined,understood and enforced.

Standard Rating: Effectively designed and fully implemented

1. Implementation of work permit procedures and specific procedures has been a high profilejob. There is evidence of recent training in these procedures at both fields.

2. Annual internal reviews of work permit system have not been completed.


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3. GLARF compliance remains an area of concern at WW.

4. Review of both GS and WW procedures showed that little (no) comments were added in thehazard screening section. (Is this just rubber stamping the form??)

5. A confined space attendee was interviewed at GS. He did not appear to clearly understand

his roles and responsibility and advised that he had attended confined space training buthad not received specific training as an attendant. Problems with Attendant knowledge anddiscipline have also been identified in WW,

3) Business unit management will ensure that an assessment is conducted to evaluatethe need for written operating and maintenance procedures, either as required byregulation or to meet business objectives.

Standard Rating: Exception

1. There is no statement in the GOMS standard about operating and maintenance procedureseven though comprehensive operating and Maintenance procedures exist at both GS and

WW.2. There is no connection between this standard and the Inspections and Maintenance

Standard #1 Mechanical Integrity.

3. No formal evaluation has been completed to determine the need for written O&Mprocedures.

4. O&M procedures are reviewed on an as-needed basis. Written standards are not formallyreviewed every 3 years.

4) Business unit management will ensure that employees involved in critical activitiesare competent and certified in the appropriate skills


1. Job Performance Standards (JPS) exist for critical activities such as: production operators,electrical, instrumentation, rotating equipment technicians. The JPS described the skills setrequired for each position based on the expertise. Each personnel need to demonstratecompetencies required for the position and will be able to understand the required skills toprogress to the next level. The JPS was also used as basis for training.

2. The TCP program provides training guidelines and progress monitoring for engineers.

3. Internal operator certification has been completed in WW and GS

4. Plans for operator external certification in progress

5. Crane Operators and Forklift Operators are certified.

6. Driving certificates exist for both WW and GS fields.

5) Business unit management will ensure that a Program is in place such that alloperating permits, including licenses, certificates or authorizations issued byregulatory authorities for consent to operate, are obtained in accordance withregulatory requirements


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Standard Rating: Effectively Designed and fully implemented

1. The permits and licenses are listed in GO-3.2 Compliance responsibilities matrix which listedthe required permits, related agencies, responsible person to obtain the permit and due datefor renewal.

2. Wayang Windu and Gunung Salak have tracking systems to check status and define who isresponsible.

3. No reference to this OMS standard in GO 8.0

6) Business unit management will implement procedures to ensure that employeesunderstand they are empowered to refuse to work when unsafe conditions arepresent


1. The refusal-to-work policy has been circulated and discussed with the workforce.

2. There is no reference to this OMS standard in GO 8.0.3. Interview of GS new employee (5 months) revealed that she was aware of and understood

this policy.

7) Business unit management will ensure that disciplinary procedures consistent withCorporate guidelines are in place and well understood by supervisors and employees


1. A new disciplinary procedure standard GO 8.6.1 has been written.

2. Disciplinary guidelines posters are on display at JKt, WW and GS.

Recommendations1. Review and update complete element standard and procedures. (General)

2. Provide safety handbook which would contain general rules, incident notification andemergency response to all WW employees as per Clause 8.1 of GO 8.0. (WW)

3. Bulletin boards need to be updated or removed. (Salak)

4. Clarify the policy for workers riding on the back of trucks. (General)

5. Review vehicle inspection procedure for regular O&M site contractors. (General)

6. Provide tool box meeting training about best safety practice for bench grinders. (General)

7. Review and provide recommendation about how to consolidate Operations & Maintenance

procedures between this element and Element 5. (General)8. Promote awareness of the hazard screening section of the Permission to Work form with the

objective of providing more focus on considering the hazards associated with the work.(General)

9. Consider developing a list of Qualified attendants and entrants for both fields. Theproposed Attendant should be defined on the Confined Space form. (General)


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UGI GOMS Element 9Workplace Health and Industrial Hygiene

2004 Internal Audit

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ELEMENT 9 - WORKPLACE HEALTH AND INDUSTRIAL HYGIENE

Audit Date : Aug-24 (JKT) / Aug-27 (Salak) / Aug-30 (Wayang Windu)

Element Coordinator : Irawadi Prihaswan

Interviewee : Irawadi Prihaswan, Zulkarnaen (Salak), Dr. Sudarmaji (WW)Auditors : Ferri Fatra (lead), Rex Soeparjadi

Overview

This element targets all Unocal employees and contractors who work in Unocal GeothermalIndonesian Business Unit operating facilities, and is intended to address any health hazardpotentials related in particular to biology, chemical, ergonomics, fitness for duty, high risk factors forcoronary heart disease, illumination, and noise.

The purposes of this element are to ensure that all potential health hazards in the workenvironment are recognized, evaluated, and controlled properly, protect employees from injuriesand illnesses due to industrial hygiene hazards, maintain and improve employees fitness and

health.The element has a standard and some procedures but is lacking understanding andimplementation. Some of the standard and procedure have been implemented but need to bereviewed. Implementation of the monitoring plan also needs improvement.


Criteria Jakarta

SalakWayangWindu





System is robust and sustainable Thumbs up, A-Okay, no major improvements required Flagged because there are some problems Thumbs down, does not meet intent. Needs immediate attention.

2001 Audit Ratings

The Element was rated Exception in 2001. Most of the recommendations from Internal Audit2001 have been followed up such as, update HHA, Develop Hazard Communication Procedureetc.

2003 Audit Ratings

Two (2) Corporate standards were rated Exception in the 2003 audit. Some of the findings havebeen closed out and others are still in progress.


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2004 GOMS Standard Findings:

1. Element Standard was last reviewed in 2001 even though the document heading waschanged to Geothermal Operations and Jakarta Office in 2002.

2. For Salak, a comprehensive Health Hazard Assessments (HHA) which should be conductedannually was irregularly done. Comprehensive assessments were done for Salak in 2001and 2004, and partial assessments done in 2002 and 2003. A 2004 monitoring plan isnearly complete (already approved by the Corporate Industrial Hygienist) to monitor theaffected employees. The monitoring program will be implemented upon receivingequipment that are currently being repaired and calibrated in the States. The program is notself sustaining yet. The last Salak HHA update was done by the assistance of the UICoIndustrial Hygienist from Balikpapan. This arrangement might not be possible in the future.The original plan was to have Salak HHA be reviewed and updated by a Corporate IH, butthe plan has not been followed through.

3. For WW, HHA and its monitoring plan has just been implemented. The first baseline survey

was conducted last May 2004 and the report is nearly complete. The magnitude ofexposure has never been assessed through either personal or area sampling. Due tounavailability of equipment in WW, personal and area sampling will be scheduled after Salakmonitoring is finished (planned in 1 Q 2005). However, the noise mapping program hasbeen conducted in WW Power Plant.

4. There are no SOPs on how to conduct IH tests and monitoring. Equipment operatingmanual exists and practices are followed based on experience. (Jakarta, Salak and WW)

5. The program lacks a communication plan to inform impacted employees on the results ofthe assessment. The result of audiometric test (part of the hearing conservation program) in2002, has not been provided to Salak affected employee. Wayang Windu has provided the

result of audiometric test in July 2004, to the affected employee.

6. The HHA software contains a list of chemicals being used in Salak and Wayang Windu field,but it lacks information on tracking traffic/flow of quantities. A chemical list is also compiledseparately in Wayang Windu.

7. There is a procedure to train potentially affected employees within 14 days of beginningwork has not been implemented. GOMS Element applies this to hearing conservation butdoes not address other hazards.

8. GOMS procedure has a report form for employee or contractor to report suspected healthproblem. But, the Health or Environmental Effect Report form has not been rolled out and is

not being used.

9. Some of sampling and monitoring activities have been conducted in Salak :

Arsenic has been identified as potential risk at Salak. Steps have been taken tocommunicate with other business units to determine proper procedures to address it.

Tests for TB is not fully/properly implemented both for employees and contractpersonnel.

Fitness for duty has been regularly conducted for Security personnel.


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Random testing for drug and alcohol has been conducted for employees as well ascontractors. However, due to constraints of equipment availability, post incident testinghas not been addressed properly.

10. Some of sampling and monitoring activities has been conducted in Wayang Windu.

Noise mapping program, noise contour (in production area) and Audiometric test

Fitness for duty test for security personnel

High risk coronary diseases

Has contracted a nutritionist to control diet of employees .

11. Chemical storage at Salak warehouse has been improved and incompatible materials arenow stored separately and labeled. Hazard communication procedure exists that cover thelabeling system and labels contain MSDS information. Improvement is still neededparticularly on labeling some of hazardous substance containers such as the ones for scaledeposits. WW warehouse has not been set-up to store and handle toxic waste.

12. The procedure to manage existing and review new MSDS is available, as well as the

requirement to review new chemicals. However, the practice, still needs to be improvedbecause list of MSDSs have not been updated and there are no Bahasa Indonesia versions.

13. The "Chemical Review Request Form" has not been distributed to the workforce and is notused in Salak or Wayang Windu.

14. Co-element Coordinator is new and has not received special orientation on element 9,Workplace Health and Industrial Hygiene.

15. Hearing conservation program standard for Noise exposure has a confusing table since it isnot clear which standard we use (eg. OSHA or Man Power Department regulation).

Recommendation:1. Review the standard and procedure and clarify standards of Noise Exposure in Noise

Conservation Program Procedure. (General)

2. Review position and need of HHC (Health and Hygiene Coordinator) and also other positionlike Hazard Communication Coordinator, IH coordinator. Need to clarify whether this is thesame or separate from the element coordinator. (General)

3. Enforce implementation of the standard. (General)

4. Recommend to change policy and train potential affected employees regarding allrisks/hazards, prior to work, instead of within 14 days of assignment.(General)

5. Simplify and roll out the Health or Environment Effect Report Form. (Jakarta, Salak &

Wayang Windu)

6. Up date the availability of MSDS and translate it into Bahasa Indonesia (General)

7. Publicize the availability and promote the use the "Chemical Review Request Form" (Salak& Wayang Windu)

8. Give GOMS awareness to the co element coordinator especially element 9, WorkplaceHealth and Industrial Hygiene. (Wayang Windu)


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UGI GOMS Element 10Emergency Preparedness, Crisis Management & Business Recovery

2004 Internal Audit

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ELEMENT 10 EMERGENCY PREPAREDNESS, CRISIS MANAGEMENTBUSINESS RECOVERY


Element Coordinator : Terry Indra

Interview with : Terry Indra, Hari Widianto (previous EC)

Auditor : Paul Taylor (Lead), Bob Djanegara

Place : Gunung Salak

Other Cecep Gunawan (31 August) WW

Overview

This program standard provides guidelines for handling emergency situations that may resultdue to natural or man-made disasters. It includes planning, programming resources, drills,initial response, loss limitation and business recovery.

This is a mature element of GOMS and implementation is well advanced for Jakarta and Salakoperations, but, periodic review of the element is lacking and the EPR Manual is merely work inprogress at Wayang Windu. And since, Corporate demands a high rating for this element,which can be easily compared between business units the reduction of the GOMS rating fromEffectively Designed to an Exception rating should be a concern for the Business Unit.

Effective design and implementation of this element requires a lot of effort and time by thecoordinators. The continued implementation needs to be given a high priority to ensure that ahigh quality program is in place. The findings suggest that more effort must be made withimplementation of this critical element. The personnel responsible for implementation must beencouraged to use project management techniques to ensure a robust program is in place priorto the 2005 Corporate Audit.





Procedures Understood and ImplementedEffectively



Thumbs up, A-Okay, no major improvements required

Flagged because there are some problems Thumbs down, does not meet intent. Needs immediate attention.

2001 Audit Rating

This standard received an Effectively Designed and Implemented rating during the audit andhad eight recommendations. No formal actions closeout was viewed but in general it appearsthat the recommendations were completed or have been superseded.


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2003 Audit Rating

This standard received an Exception rating during the audit and had nine recommendations.Minor progress has been made on completing the action plan.

2004 Audit Findings1. The hard copy Salak Emergency Response Manual is not a controlled document.

2. The latest Salak Emergency Response Manual is a well-organized document with manywritten emergency response plans. A mud slide ERP has not been prepared.

3. An Emergency Preparedness Coordinator has not been formally appointed for each field asrequired by the standard.

4. The GSDM interface is not mentioned in the Emergency Response Plan.

5. The Salak ERP has not been formally reviewed for the last 2 years.

6. In general, bulletin boards throughout Gunung Salak did not have the latest response planand emergency contact details displayed. This finding was also highlighted during a January

2004 Management Planned Inspection.

7. During 2004, the following drills were completed by Gunung SalakMay 13, Well blow out emergency response with Jakarta EMTAugust 10, Emergency drill with Geosystems and TBU

8. The Salak ERT was activated two times during 2003 and lesson learned was conductedNatural (Landslide) DisasterCrane fatality

9. A review of UGI ERP was conducted by ERST on September 9, 2002. Many of therecommendations have not been completed.

10. A project to review Emergency Preparedness programs for IBU is currently being

conducted. The EC is unsure if he should continue with his current element update, or waituntil this review is completed.

11. GOMS Element 10 in the red book is not well organized. There is no reference to where theJakarta, Salak or Wayang Windu plans can be found.

12. Wayang Windu ERP plan is still a draft and consists of 4 procedures: the ERP organizationchart, and 3 emergency response plans. The draft procedures were not available on the LCnetwork.

13. Draft WW ERP procedures were submitted for approval in December 2003. The procedureshave not been approved.

14. There are no Yellow Book ERP manuals at Wayang Windu.

15. WW has completed 2 drills during 2004 using the draft ERPs:1 following a one day ICS workshop1 fire evacuation drill

16. WW ERT training for 2004 included:3 people attended the ICS training in JakartaRoll out of all 3 emergency plansInternal ICS training for ERT members

17. WW have an Emergency Response Unit. Progress with development of this unit include:Training in use of fire extinguishers


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Training with use of portable fire fighting pumpBasic Life SupportA draft JPS has been prepared

18. The WW element coordinator has received ICS training at Balikpapan. He has not received

training in fire-fighting (included in 2004 training plan) or BRP.19. WW has not completed the 7 step preparedness and planning procedure or a review of

emergency safety systems. This 7 step program is not defined in the GOMS Element.

Recommendations:

1. Wayang Windu procedures and plans should be managed in sub-directories on the GOMSnetwork directory. (WW)

2. WW to complete preparation of the ERP manual (Yellow Book) and distribute to appropriatestaff. (WW)

3. Field Emergency response manuals to be controlled documents with personnel assigned forkeeping them up to date. (General)

4. Project management techniques to be used to complete the implementation of the elementand to complete the outstanding actions from the ERST report and the Corporate audit (All)

5. Management to ensure Element Coordinator and Emergency Preparedness Coordinatorshave sufficient time for maintenance of this element. (General)

6. Ensure a drill with 3rd party observation is completed at both fields prior to the 2005Corporate Audit (General)

7. General Manager to formally appoint the Emergency Preparedness Coordinator for eachfacility. (General)

8. Review the procedures in Element 10 and determine if the procedures should be kept witheach facility ERP (General).

9. Improve approval response time for GOMS Procedures.


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UGI GOMS Element 11Environmental Care2004 Internal Audit

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ELEMENT 11 - ENVIRONMENTAL CARE

Audit Date : August 25, 2004 / August 27, 2004 / September 01, 2004

Element Coordinator : Rudi Setiawan

Interviewee : Rudi Satiawan, Iwan Azof (Jakarta)Doddy Sofyan, Gunawan Dharsono (Salak), Maulana Hadi (WW)

Auditors : Ferri Fatra (lead), Rex Soeparjadi

Overview

Management believes that protection of the environment is a fundamental responsibility of theCompany. Therefore Management will commit the necessary resources to mitigate the adverseimpacts and to comply with regulations to facilitate Environment Protection Policy. The objectiveof this element is to focus Company Policy towards Environmental Care and to provideguidelines to ensure that all REASONABLE precautions are being taken to protect theenvironment.

Environmental Care is being accelerated by PROPER (Government Compliance Program).Implementation still needs improvement especially in waste management and the awareness ofemployee to follow the procedures. Element coordinator and environmental staff need to bemore pro-active to ensure proper environmental care.


Criteria Jakarta

SalakWayangWindu

Written Policy, Standard, Procedures n/a



Element is periodically Evaluate and Improved n/a



2001 Audit Ratings

There is one Corporate standard that has received Exception rating in the 2001 audit. Most ofthe recommendations have been done such as training of hazardous material, review Indonesiaregulation.

2003 Audit Ratings

There is one Corporate standard that received an Exception rating in the 2003 audit. Some

follow-up of the recommendations have been done such as the Review Environmental ImpactStudy. Others are still in progress like, update waste management procedure for specificwastes. The Unocal Site Assessment and Remediation Standard has not been addressed.

2004 Findings:

1. Salak and Wayang Windu have a Program to ensure that an environmental care program isimplemented. Salak has Environment Impact Assessment (AMDAL) that include allinformation on air emission, water discharge, waste generation and has assess the impactof operation to the environment. This environmental impact assessment is being reviewedafter 9 years (since 1995) in Salak and Wayang Windu has not reviewed AMDAL documentsince there are no activities or process change.


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2. BU has environmental monitoring plan as part of Environmental Management Plan thatmonitors all of influencing aspect to the environment such as noise, air emission, wastewater sampling every 3 months. The documents reporting these activities are submittedevery 3 months for WW and once a year for Salak.

3. Jim Strong from Corporate HSE visited and worked for 1 month at Jakarta/Salak to test toolsfor self auditing of an environmental care program. His findings and recommendations weresimilar to those found during the 2003 OMS Corporate Audit.

4. To manage waste, waste management procedures have been developed but not all types ofwastes have been considered, such as medical waste. It is imperative that procedures arereviewed to ensure no gaps exist.

5. There is low awareness from the employee to follow the procedure such as disposing thewaste into the bins that match the type of waste.

6. Business unit has not developed environmental objectives and targets to minimize waste,but some efforts have been introduced to reduce waste production. Salak has developed awork plan to minimize spills due to production and construction activities. Laboratory

procedures have been revised to eliminate waste of mercury and cadmium. Laundryservices have started using biodegradable detergent in Salak and WW. Salak camp hasconstructed a waste water treatment facility but still needs improvements. WW has runningwaste treatment plant and other waste minimization practices are being implemented.

7. Improvements for Salak chemical and waste storage at the warehouse have recently beenmade to comply with standards. WW warehouse has not been set-up to store and handletoxic waste.

8. Small amount of Salak Oil filters, oily rags is disposed together with domestic waste to publicwaste disposal. WW has separated these wastes and they are managed by a procedure.

9. The WW interviewee could not determine whether audits of associated land fill and regionalwaste handlers have been conducted to ensure that they implement approved systems andprograms.

10. The GOMS procedures only refers to Salak operations.

Recommendation :

1. Waste management procedure need to be reviewed, revised and supplemented. Existingdocumentation are too simple and general in nature. Consider use of PGI's bestpractices.(General)

2. Increase employee awareness in waste management by involving frontline managementand include in PPS. (General)

3. Follow up on the 2003 audit findings and recommendations. (General)

4. Audit associated land fill and regional waste handlers to ensure that their programs andsystems are run properly. (General)

5. GOMS element should be revised to include WW operations. (General)


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UGI GOMS Element 12Community Development, Relations and External Communications

2004 Internal Audit

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ELEMENT 12 - COMMUNITY DEVELOPMENT, RELATIONS & EXTERNALCOMMUNICATIONS

Audit date : August 23, 2004

Element Coordinator : Iwan Azof

Auditor : Bob Djanegara (Lead), Ferri Fatra

Interviewee : Iwan Azof; Rudiana

Place : Iwan Azofs Jakarta / Rudiana Salak / Willy Wayang Windu

Overview

Unocal Geothermal of Indonesia (UGI) has social responsibilities as a corporate citizen of thecommunities where it operates. Establishing and sustaining interactive, open communicationswith the customers (partners, governments, neighbors, community, etc.) is an essential aspectfor transforming Unocals Vision and Values into reality. Improving the lives of people whereverwe work is a fundamental aspect in establishing and implementing the program. Having a

reputation consistent with our Vision and Values is an important component of achievingbusiness objectives. This standard provides guidelines in order that our concerns aboutcommunity development, relations and external communication can be well responded anddeveloped in our operation.

The program has operated well over the last several years and received several CommunityDevelopment awards. The organization has changed recently and there are signs of downwarddrift. Little action has been taken to work the suggestions from the 2003 Audit. The standardsand procedures were fit-for-purpose for a skilled and experienced crew, but, may not beadequate for a less experienced crew. It is assumed the Jakarta Community Development is nolonger a responsibility of the UG,IBU. It will fall under the share services group.


Criteria Jakarta Salak WayangWindu

Written Policy, Standard, Procedures n/a



Element is Periodically Evaluate and Improved n/a



2001 Audit Rating

This standard received an Exception rating during the audit and had three recommendations.No formal actions closeout was viewed but in general it appears that the 1 (one)recommendation was not completely done, and the other 2 (two) were not completed or havebeen worked on.

2003 Audit Rating

This standard received an Effectively Design and Implemented (with suggestions) rating duringthe audit and had 4 (four) recommendations. Minor progress has been made on completing theaction plan.


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2004 Findings (Jakarta, Salak & WW):

1. The last revision of the standard GO-12.0 was made in 1999 and supposed to be reviewedin 2001 but was not. The procedure GO-12.1 was reviewed in 2003.

2. Community Relation & Development in Jakarta Office is handled by the Corporate

Responsibility group. This was not reflected in the Standard and Procedures

3. Procedure 12.1 is the guidelines made for the implementation in the field, whether it is inSalak or Wayang Windu. The officer in Gn Salak did not have the copy of the procedure oreven aware of its existence.

4. Communication and community relationship guidelines is not available in the written form.They run the program based on the feeling and individual skill. Up till now, the system thatthey use is still proven to be effective, thanks to the personnel skill and ability.

5. Communication flow, among the member of the Community Relation and ExternalCommunication section has run very smoothly. Communication with the community inSalak and Wayang Windu had run smoothly as well.

6. Mapping of issues & conflict and written procedures are not available (This was actually

required as per the Procedure GO-12.1, Para 4.1.). Also need to make a standard on theformat of the mapping needed.

7. The personnel in the Community Relation and External Communication section has theability to take care of the problem that suddenly arise in the field. There are a lot of work thatcame without planning because people from the community usually come to the officewithout any early notification or appointment. It is the nature of the work.

8. There are no comprehensive list of the training that has been received by the CR&CDpersonnel. Some of the training that listed in GO-12.0 has not been given to the CR & CDpersonnel, such as the risk communication, etc.

9. There are minimal personal performance standard for the community relations positions(2003 Corporate OMS Audit also had addressed this issue).

10. There are no Information Disclosure Procedure which rule the communication system forsensitive issues as well as the contents of what can be delivered or not.

11. The field Community Relation and External Communication officer in Salak still have theproblem of coordination with other section in Salak, he usually knows about a problem afterthe problem arised.

12. The field Community Relation and External Communication officer in Salak has field agentthat work for him to counter the bad information arised in the community.

13. The field Community Relation and External Communication officer got informal meetingwith the community leader almost every week. The formal meetings also conducted (morethan once every 3 months), but not properly documented.

14. The community around Salak and Wayang Windu was never been informed about theemergency procedures. Community around Salak just been informed about the emergencydrill that Unocal have recently.

15. The field Community Relation and External Communication officer in Salak and WayangWindu had not received the crisis communication training and dealing with media training.

16. The field Community Relation and External Communication officer in Salak doesnt havethe standard for his section, and he doesnt know how to get it in the intranet or sharedfolder.


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17. The field Community Relation and External Communication officer in Wayang Windu doeshave the standard for his section, and he know how to get it in the intranet or shared folder.

18. The field Community Relation and External Communication officer in Salak also takes careof the environmental issues, but not too focus. The officer in WW do not take care ofenvironment issues.

19. The field Community Relation and External Communication officers usually make 3 monthsplanning.

20. The field Community Relation and External Communication officer in Salak doesnt havethe 1 year planning made by the section head, but the officer in WW does have it.

21. The field Community Relation and External Communication officers in Salak and WW neverseen the Comdev strategic commitment for 2-5 years.

22. The field Community Relation and External Communication officer in Salak had conducteda lot of program for developing the community income, improve the community education,public health, etc.

23. The field Community Relation and External Communication officer in WW is new (2

months), and he doesnt really know what has been done before he joint WW.

Recommendations:

1. Supplement Procedure GO-12.1. with procedures for:

Mapping the issues and conflicts with community

Procedures for sharing analyses of community issues established and implemented

Procedures for channeling feedback from the community for proactive response

Procedures for response to early warning established and implemented

2. Formally transfer Jakarta Community Development Program to UICo.

3. Provide Communication and community relationship guidelines, including employeeparticipation in communities activities

4. Provide training for all the Community Relation/ Development personnel as per GO-12.0,especially Crisis Communication Training.

5. Provide guidelines for Information Disclosure


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UGI GOMS Element 13Resource Assessment Best Practice

2004 Internal Audit

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ELEMENT 13 RESOURCE ASSESSMENT BEST PRACTICE


Element Coordinator : Aquardi R.S (Dega)

Interview with : Dega, Novi Ganefianto, Ken ReidelAuditor : Paul Taylor (Lead) Brad Wendt

Place : Sentral Senayan-1, 11thFloor /

Other Novianto and Yoyo at WW

Overview

The current standard has been prepared as a directive for implementation of ResourceAssessment Best Practices. The document mandates systematic development of best practicedocumentation consistent with other company standards in a way that supports continuedimprovement of our technology, skills, and business results.

It is recommended that the intent of the element should be reviewed to be congruent with theIntegrated Resource Management Program. The program should be designed to ensureeffective management and development of the Business Units geothermal reservoirs.

The audit team considers that the current GOMS standard fails to meet the intent of thiselement and that the proposed Integrated Reservoir Management program would be well suitedto our business needs.

Overall Business Unit Element Ratings: Deficient




Procedures Understood and ImplementedEffectively




2001 Audit Rating

This standard received an Exception rating during the audit and had two recommendations. Noformal actions closeout was viewed. In general progress has been made to comply with theintent of the actions.

2003 Audit RatingThis element was not audited during the 2003 Corporate Audit because this element is not partof the OMS system.

2004 Audit Findings

1. The current GOMS element 13 is written as a directive for implementation of ResourceAssessment Best Practices.


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2. A Balanced Score Card has been prepared for the Geosciences and Reservoir Engineeringdepartment which provides the foundation for the performance of the department.

3. The departments have ensured that important documents are catalogued and filed in thelibrary. Currently there is a project to digitize all this information.

4. Many best practices and procedures exist for both departments. These are catalogued andfiled in the library. There is no formal process fo

2004 internal audit report

Documents