THE BAHRAIN PETROLEUM COMPANY B.S.C. (CLOSED)
Summary of Board-approved corporate governance document
Bapco’s Board of Directors approved the company’s corporate governance statement in Board Resolution No.4/65-2013 of 30 April 2013. The document is reviewed annually. The Board is committed to the highest standards of corporate governance in accordance with the Corporate Governance Code of the Kingdom of Bahrain 2010 and promotes high ethical standards, integrity and effective corporate governance throughout the company. The governance framework comprises three core elements:
Organization Structure - Internal Control Framework - Independent Assurance
1 ORGANIZATION STRUCTURE
1.1 Ministry of Finance: The Ministry acts as the treasury for Bapco sales revenue and provides funding to meet working capital, operating expenditures and capital investment budgets.
1.2 nogaholding: The Oil and Gas Holding Company (“nogaholding”), the business and investment arm of the National Oil & Gas Authority (“NOGA”), is Bapco’s sole shareholder. It aims to create shareholder value by the successful management of a portfolio of Government oil, gas and petrochemical assets. Consistent with this, its specific responsibilities as regards Bapco include:
- • governance and the promotion of operational excellence and best practice;
- • staff development;
- • the provision of technical services;
- • appointing external auditors and fixing their remuneration and that of the Board;
- • the review and approval of audited financial statements; and
- • co-ordinating with operating companies to develop the capacity of the refinery.
1.3 NOGA has certain specific responsibilities as regards Bapco including:
- • exploring offshore blocks under EPSAs to increase petroleum reserves;
- • optimizing consumption and ensuring fair and cost-effective distribution of natural resources;
- • local petroleum product prices (to eliminate cost differences between consumer sectors);
- • a safety and environmental protection policy within the oil sector, with special attention to the environmental implications of eliminating pollutants and toxic gases;
- • oil and gas well drilling consistent with established production plans;
- • reviewing Bapco reports and financial statements;
- • appointing Bapco Board members in consultation with higher authorities.
1.4 Board of Directors: The Board has seven members, including the Chairman, and sets the company’s policy, direction and overall objectives. It sets the company’s strategy and ensures an appropriate level of financial and human resources to deliver it.
(a) Activities reserved to the Board:
- (i) Establishing the company’s purpose, vision, mission and values and determining and reviewing its goals and policies and the overall governance framework.
- (ii) Assessing strengths, weaknesses, opportunities, threats and risks.
- (iii) Approving the company’s Annual Report and accounts and financial policy.
- (iv) Approving material capital projects, investments, acquisitions and disposals.
- (v) Setting the company’s long-term finance plan and annual budgets.
- (vi) Approving any significant change in accounting policies or practices.
- (vii) Establishing Board committees, reviewing their activities and, where appropriate, ratifying their decisions.
- (viii) Delegating authority to management, monitoring implementation of policies, strategies and business plans and communicating with senior management.
(b) Risk management: The Board will:
- (i) determine whether the company is ‘risk taking’ or ‘risk averse’;
- (ii) direct which types of risk are acceptable and which are not;
- (iii) set the standards and expectations for conduct and integrity in risk management;
- (iv) determine the appropriate risk appetite and prioritization;
- (v) approve major decisions affecting the company’s risk profile or exposure;
- (vi) ensure risks are actively managed with appropriate controls in place;
- (vii) approve an annual audit plan linked to the risk register; and
- (viii) annually review risk management and the status of the risk register.
(c) Board meetings: The quorum for each Board meeting is four directors. The Board has regular meetings with a minimum of four per annum and additionally as necessary. Directors must, wherever possible, attend all meetings and relevant committee meetings.
(d) Relationship with shareholder: The Board is accountable to the shareholder for the performance and activities of the company and has frequent dialogue with the shareholder to understand its views on a number of matters.
(e) Board Committees : There are three committees, each with its own charter and comprising three members appointed by the Board with one acting as chairman.
(i) The Audit & Finance Committee is responsible for (among others):
- • financial reporting and the preparation of financial statements;
- • the effectiveness and the integrity of Bapco’s internal controls;
- • post audit review of the financial statements and audit findings; and
- • the annual plan for internal and external audits and the relationship with external auditors.
(ii) The Human Resources Committee is responsible for (among others):
- • identifying critical HR areas that require further strategic development;
- • providing oversight and guidance to the HR function;
- • reviewing policies and procedures; ensuring appropriate HR systems; and
- • ensuring an efficient and fair recruitment process.
(iii) The Compensation & Remuneration Committee is responsible for ensuring that Bapco’s overall reward philosophy is consistent with achievement of strategic objectives and values and for making recommendations to the Board in respect of the remuneration policy for the Directors and Chief Executive.
(f) Chairman: The Chairman is appointed by NOGA. His responsibilities include:
- (i) supporting executive management in connection with EPSA, DPSA, BMP, Bapco’s agency business on behalf of the Government and high level organizational issues such as succession planning;
- (ii) overseeing and guiding Board committees and interacting with their members;
- (iii) overseeing the activities of the company through Board meetings and weekly meetings with the Chief Executive and senior management; and
- (iv) liaising between the company and the Government.
(g) Board member:
- (i) He must not miss 2 successive Board meetings without an acceptable excuse.
- (ii) He must avoid conflicts between Bapco’s and his own business interests.
- (iii) If present at a Board meeting he must sign the minutes and attendance register.
- (iv) Three members can together require the Chairman to convene a Board meeting.
- (v) If he has any serious concern about the running of the company or a proposed action, he should consider seeking independent advice and ensure the concerns are recorded in the Board minutes and that any dissent is noted in writing.
(h) Chief Executive: The Chief Executive is appointed by the Board and is responsible for leadership of the business and managing it within the authorities delegated by the Board. His particular responsibilities are set out in his job description.
- (i) Board Secretary: The Board Secretary is appointed by the Board. He:
- (i) schedules meetings of Board, Board committees and General Assembly;
- (ii) responds to Board queries Ensures that Board decisions comply with the Schedule of Authorities and are communicated to concerned divisions;
- (iii) ensures that the remuneration of the Board members is paid yearly;
- (iv) updates outstanding items to ensure Board decisions are implemented; and
- (v) ensures a quorum is maintained in meetings and keeps attendance records.
2 INTERNAL CONTROL FRAMEWORK
2.1 Objectives: The internal control framework (the company’s business principles, policies, standards, guidelines and processes), which adopts the COSO framework, has these objectives:
- (a) To ensure that management, transactions and personal conduct comply with guidelines relating to corporate business conduct, as set out by the Bapco bodies responsible for corporate governance.
- (b) To ensure that the accounting, financial and management information provided to the bodies responsible for corporate governance in the company fairly reflects the performance and the financial position of Bapco.
- (c) To ensure the efficient implementation of the company’s strategy and compliance with laws and regulations.
- (d) To prevent or control all risks arising from the activities of the company, in particular accounting, financial, operational, strategic and compliance risks.
2.2 Risk Management: Bapco recognizes the following major risks and uncertainties in its business:
- (a) Changes in the overall supply and demand of crude oil and refined products.
- (b) Changes in pricing by competitors.
- (c) Fluctuations in the price and availability of crude oil worldwide.
- (d) Worldwide refining capacity, in particular of products related to Bapco.
These are covered in more detail by the Enterprise Risk Management Standard.
3 INDEPENDENT ASSURANCE
3.1 This is provided primarily by Internal Audit, by the external auditors, by the Legal Department and by other external advisers.
3.2 Internal Audit provides assurance to the Board, the Audit & Finance Committee and management that effective and efficient internal control processes are in place to identify and manage business risks across the company. Specifically, Internal Audit:
- (a) Provides an independent assessment of the company’s systems of risk management and internal control.
- (b) Assists management by carrying out independent appraisals and making recommendations for improvement.
- (c) Supports the development of the company’s governance and business risk management policies.
3.3 The independent external auditors’ report to shareholders and their audit opinion on the accounts are set out in the annual financial statements.
3.4 The Legal Department endeavours to ensure that Bapco does not breach applicable laws and regulations.