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SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYOUR COMMITMENTAt Petron, we believe that securing a healthyenvironment that will sustain our future requires everyperson to take active and positive action. As a corporatecitizen, we acknowledge our responsibility, and haveput measures in place to ensure every employee playstheir role caring for the environment.This is embedded in our Vision and Mission Statementwhich clearly spells out our commitment to enhancethe lives of the people and the places that our businessimpacts: Acting with professionalism, integrity and fairness atall times;Adhering to the strict safety and environmentalstandards; andPromoting the best interests of all stakeholders, andcaring for our community.This commitment is achieved through steadfastdedication from our top management in institutingstrict and appropriate operational procedures andproviding necessary resources to meet, if not exceed, allgovernmental and industry standards and regulationsin promoting and protecting the environment.06Our employees are also encouraged to do their share inpreserving the environment in their personal capacity. Tothis end, we provide opportunities to engage them asvolunteer stewards of the environment through variousgreening programmes. We believe through this strongcommitment emanating from the highest levels of theorganisation down to the rank and file, we can collectivelyfulfill our pledge towards ensuring that succeedinggenerations will continue to enjoy the benefits of a healthyenvironment.Acting withprofessionalism, integrityand fairness at all timesAdhering to the strictsafety and environmentalstandardsPromoting the best interestsof all stakeholders, andcaring for our community

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYSafety, Security, Health and Environment PolicyWe at Petron Malaysia are fully committed to conduct our operations in a manner that protects the environment andensures the safety, security and health of our colleagues, customers, suppliers, contractors and the public. We believethat this is vital to ensure attain business continuity and the long-term sustainability of the Company.Consistent with our belief:To ensure that we live up to all these commitments: We commit to comply with all governmentregulations to promote occupational safety,health and the preservation of the environment; We continuously promote the safety, security andhealth of our colleagues, our host communitiesand stakeholders; We will continue to implement appropriateoperational control procedures, providenecessary resources and strong managementsupport, and involve our stakeholders in relatedendeavours; We have in place stringent goals and targets toachieve operational excellence; We pro-actively manage risks and minimiseenvironmental impact to ensure businesscontinuity; We will continue to innovate our products andservices while strictly adhering to global safety,health and environment standards; and We consistently implement strategies toconstantly improve the way we do business. We will continue to place a premium on safetyand security at all our facilities.The guiding principles as prescribed in our SSHE Policy are well ingrained throughout the length and breadth of ouroperations from the head-office to the service stations, our refinery, our terminals and all our site offices and distributioncentres.Guided by these principles, various programmes are put in place at all levels of our operations to ensure that allcommitments as stated in our policy and vision and mission are met to the fullest extent possible.OUR ENVIRONMENTAL PROGRAMMESPetron acknowledges that our business and operation have potential impact on the environment, thus we go theextra length and act more than what is required by operations regulations to mitigate and manage our footprint. TheCompany has successfully articulated on how our operations stay in line with our vision of being an industry leader thatcares for the environment by developing a system in place for measuring environmental footprint, which we extendfrom the Refinery to our service stations.07

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYOur Environmental Business Plan (EBP)Our refinery, terminals and officesestablishedSafety,Security,Health and Environment (SSHE)committees involving employeesat various levels. We areunwavering in our commitmentand in our efforts to provide fueland energy products that delivermaximum performance withoutcompromising the environment.Strategic programmes aimed atreducing wastes, managing emissionsand optimising energy utilisationallow us to make substantial impactin our environmental efforts at ourPort Dickson Refinery (PDR) andterminals. These have resultedin improved energy and waterconservation despite the aggressiveexpansion projects of the Company.Additionally, Petron undertakesregular training to effectivelycommunicateitssustainabilityreporting vision and direction amongemployees,businesspartners,community leaders, and projectbeneficiaries. We also engage andbrief our network of service stationdealers and product transportercompanies to ensure our SHE policiesand practices are fully understoodand strictly adhered to at theoperations level.To track and monitor our environmental performance at our refinery,a five (5)-year environmental business plan (EBP) is put in place thatdocuments and measures our performance against regulatory andindustry standards.By regularly measuring our environmental impact, we make sure that ourbusiness processes, facilities, products and services are contributing to theefforts in minimising environmental impact which nurture nature.EBP is a document that describes the environmental aspect and impact ofsite operations and emissions in relation to environment conservation andregulatory compliance. It identifies strategic environmental focus areas andthe initiatives to achieve them. Our EBP covers environmental strategies andaction plans for the present and up to a five-year period. This programme isimplemented at operating sites and serves as a guideline to improve/sustainPetron’s environmental performance consistent with “Protect TomorrowToday”. The EBP focuses on reducing the environmental impact related tothe expected operations over a 5-year period, including anticipated futureregulatory changes and new business challenges.The following are the main considerations and processes applied indeveloping this EBP: 08Environmental aspects, impacts, metrics and quantitative targetsof sites;Identification of steps / projects / initiatives which can possiblymeet the site and Corporation’s targets;Compliance with all applicable regulations and permitrequirements;Assessment of short / long term regulatory changes and planoperating changes and facilities upgrading, if required;Implementation of environmental best practices throughdevelopment of a specific list of prioritised opportunities orneeds, including those where technology help is necessary.

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYImproving Our Energy EfficiencyPetron’s continuousconservation efforts resulted inELECTRICITY CONSUMPTION PER CRUDE BARREL3.333.16REDUCTIONOF WATERCONSUMPTION3.07428,616cubic metres3.5-5%-3%3per barrel of crudeprocessed2.52REFINERY’S FRESHWATER FOOTPRINT24.8201520172016kWh/bblIn 2017, continuous initiativesto improve energy efficiency andenergy conservation programmeshelped Port Dickson Refinery reduceits electricity consumption, with56,447 MWhr of electricity neededto process 18,407 KBbls of crude oil(3.07 KWhr/Bbl) as against 56,702MWhr to process 17,972 KBbls(3.16 KWhr/Bbl). At the sametime,theRefineryachievedhigher operational optimisationas it achieved 2.42% more crudeprocessed over 2016. Parallel tothis, Terminal Operations registereda 0.34% reduction in electricityconsumption (3,704 MWhr in2016 to 3,692 MWhr in 2017).Total electricity use for the wholecompany, including head officestood at 60,557 MWhr for thecurrent year with the refinery in PortDickson accounting for the bulk(93.2%) of the consumption.Improving Water FootprintIn 2017, diligent conservationefforts led to the reduction of waterconsumption by over 28,616 m3from 537,712 m3 to 509,096 m3.The Refinery was also the biggestconsumer of water, requiring89.7% of the Company’s totaldemand (Terminals accounted forthe remaining 10.3%). All waterconsumed is purchased from the statewater authority. The refinery’s freshwater footprint per barrel of crudeprocessed was 24.8 litres, whichis lower than previous year by 8%(at 27 litres).litres in 2017VS27litres in 2016VOLUME OF WASTEWATER DISCHARGEDFROM REFINERYOPERATIONS723,361cubic metresVolume of waste water dischargedfrom refinery operations andmaintenanceactivitiesflowinginto the water retention pond(main lagoon) for treatment was723,361 m3 (based on flow meterreading). The waste water effluentqualities were all within the DOEStandard “B” allowable limits beforebeing discharged into public waterstreams.09

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYManaging our MaterialsMinimum Discharges, CleanerOperationsWith continuous improvements in our refinery processes, the volume of crudeprocessed at the refinery continued to increase over the years, from 17,000 KB(Thousand Barrels) in 2015 to 18,000 KB in 2016 and 18,400 KB in 2017.Waste management is anotherkey area for us. Not only doesit minimise the environmentalimpact of our operations, it helpsimprove our internal processesin the form of expenses avoidedwhile realising economic gains inadditional profits.Waste oil generated from refineryplant operation is recovered at theskim pond facility as slop oil whilecrude sludge is treated and the freeoil recovered. Both the recoveredslop oil and free oil are processedat the plant. At the terminal, slopoils generated are sold to recyclersapproved by the Department ofEnvironment.UnderMalaysianEnvironmental Quality Act &Regulations, “Scheduled Wastes”must be sent to a Prescribed Premisefor treatment or disposal.Reducing Air EmissionsWith a slight reduction in electricity consumption, total Indirect GHG emissionfrom purchased electricity at the refinery and terminals was 25.78 kilotonnesin 2017 and 26.00 kilotonnes in 2016, with the Refinery accounting for nearlythe entire (98.7%) indirect GHG emissions.The refinery continued to control flaring rate by optimising plant operationsand utilisation of refinery gas as fuel gas. GHG emission data and volumeof crude processed show that in 2017, direct GHG emission from gascombustion at the refinery furnaces and flares for every barrel of crudeprocessed was at 7.53kg/bbl, which was a slight improvement from theprevious year’s record of 0.2%.10In 2017, a total of 142.7 tonnes ofscheduled wastes (121.0 tonnes ofthe waste coming from the Refineryand 41.7 from the terminals) weredisposed. The higher volume ofscheduled wastes generated (anincrease of 22.07% from theprevious in 2017) in the Port DicksonRefinery (PDR) was due to increasedmaintenance activities and repairworks. PDR has started to look intoengaging licensed recycler/s that canactually recover hydrocarbon or userefinery oil sludge as raw material.This is to support the governmentinitiative for a “cradle-to-grave”approach in using hazardous waste

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYas raw material input to reduceusing incineration or landfill facilitiesfor disposal. Non-hazardous wastesare collected five times a week fromPort Dickson refinery and terminaland disposed at the local municipallandfill.Our Green CampaignUnder the banner of our GreenCampaign, various programmesare put in place with the aimof engaging our stakeholders employees, our business partnersand the communities in acts ofvolunteering to be part of makinglasting changes for a better planet.In regularly partnering with ourcommunities, we are able to share inbest practices while broadening ourawareness on sound environmentalinitiatives with the followingprogrammes:acts result in a great environment towork in where everything is neat andproper and giving the ambience ofefficiency while contributing towardsminimising waste and space.Our 3R programme aims toreduce waste by encouraging theoptimisation of resources. Onesuch activity, already in place atour Sepangar Bay terminal andPort Dickson Refinery, is rainwaterharvesting, where rainwater is usedfor general cleaning and gardeningactivities instead of using municipalwater. Landscaping programmes andother initiatives to promote aestheticand workplace beautification carriedout at select service stations andoperating facilities such as in ourBagan Luar and Kuantan terminals.As we remain vigilant in protectingthe environment through variousinternal programmes, we alsorecognise the importance ofcontributing to society throughourOutreachProgrammes.These external activities are done inpartnership with local municipalitiesand other external stakeholders.Our environmental outreach journeybegan in 2015 with our riverpreservation efforts along the scenicCherating River in Pahang. Togetherwith over 200 volunteers from thelocal community, students, KuantanMunicipal, and other bodies, wehelped clean the river while at thesame time planted 1,000 mangroveseed pods along the river bank. Wealso put up safety and environmentalawareness boards along the mostfrequently visited part of the river tohelp inculcate love and care for theenvironment.We continued this initiative last yearunder “Kempen Bumi Hijau”, wherewe revisited our partnership withthe Kuantan Municipal Council andplanted an additional 300 trees atTaman Tasik Pelindung, Beserah,Kuantan, Pahang. Since 2016, wehave planted a total of 800 trees atthe area.(a) 5S Housekeeping and 3RReduce-Reuse-Recycle;(b) Service Station Landscaping; and(c) Outreach Programme.The 5S Housekeeping advocates theprinciple of ‘Everything has a placeand it should be at its designatedplace’ via elps minimise waste, enhanceutilisation of space for storage andcreates ambience of neatness atour workplace. Every employee isencouraged to observe this principleas their personal contribution topreserving the environment. Takencollectively, these small individual Green Programme in Seberang Perai11

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYPDR was at the forefront of efforts to advocate for the environment. As astrategic partner of the Department of Environment, state of Negeri Sembilan,it organised environmental awareness programmes. In 2017, Negeri Sembilanwas selected to host the National Level Environment Day Celebration. PDRsponsored the “Innovation” competition category (using recyclable materials)which was participated in by university students and school children fromNegeri Sembilan. In the same event, PDR and the Retail group successfullycoordinated a two-week household electronic waste (E-Waste) collectionprogramme through six (6) Petron service stations in Seremban.We also undertook other environmental programmes in 2017, working withthe community and local councils in Port Dickson and Seberang Prai Utara toorganise beach cleaning activities, while also planting 250 more trees.PMRMB is a registered ordinarymember of PIMMAG (PetroleumIndustries of Malaysia MutualAid Group) and remains activein conducting oil spill trainingsand field response exercises foremployees and contractors. PDRand Distribution Terminal Operationmanagement regularly send theirEmergency Response Teams (ERT)to Oil Spill Response (OSR) coursesfor operators, supervisors andmanagement, organised periodicallyby PIMMAG each year to enhancethe team members’ knowledge andskills in handling potential oil spillsboth on land and in the water.In addition, plant personnel arealso trained in firefighting. Firedrill training and simulationscovering different scenarios of fireincidents were conducted quarterlythroughout 2017. Various safetyinspections and risk assessmentswere also conducted to ensure anypotential fire scenarios are identifiedand decisively addressed. 2017 National Level Environment Day in Negeri SembilanOil Spills and RemediationPetron is also proud to report that there have been no significant oilspills during the year, or any other instance of non-compliance withenvironmental laws and regulations which may result in fines orpenalties or non-monetary sanctions. The Company-operated facilitieshave consistently complied with the standards set by the Departmentof Environment (DOE), resulting in no notice of violations.12For the Retail business operations,an Underground Risk Managementprogramme is in place through arisk-basedapproachbypre-identifying aging pipelinesand underground tanks that maypotentially impact its surroundingsin the event of leak. There are20 such service stations that willundergo pipeline or undergroundtankreplacementannually.However, if a leak incident happensprior to replacement, a remediationsystem is in place to mitigateimpacts to the adjacent areas.

SECTION FOUR2017 SUSTAINABILITY REPORTPETRON MALAYSIA REFINING & MARKETING BHDENVIRONMENTAL SUSTAINABILITYProduct ResponsibilityFuel products manufactured andsold by Petron Malaysia adheresto the strict standards mandatedby the different governmentagencies in Malaysia, such asthe Department of Environment(DOE), Ministry of Domestic Trade,Co-Operatives and Consumerism(MDTCC) and Scientific andIndustrial Research Institute ofMalaysia (SIRIM).In 2016, Petron Malaysia launchedBlaze 100RON. Petron Malaysia isthe first and only oil company inMalaysia to offer the RON 100 Euro4M motor gasoline to motorists.The base fuel contains only 5ppmsulphur which can even meet theEuro 5 and Euro 6 sulphur standardsof 10ppm. This ultra-low sulphurcontent contributes significantlytowards a cleaner environment.Blaze 100RON Euro 4M has aproprietary additive package whichcontains a detergent and combustionenhancer. The detergent, as its namesuggests, cleans the dirty engine inletsystem, valves and fuel injectors. Thisdetergent continues to keep thoseparts clean which directionally resultsin cleaner burning hence reducesharmful emissions. On the otherhand, the combustion enhancerimproves combustion resulting inmore complete burning and cleaneremissions.In Sept 2016, Petron introducedTurbo Diesel Euro 5, a cleanerBiodiesel B7 fuel with sulphurcontent of not more than 10ppmwhich meets the Euro 5 standard.This is a reduction of 50 times versusEuro 2M diesel Sulphur content. Thelow sulphur will contribute towardsa cleaner environment and alsoallows diesel vehicles to be able toutilise the exhaust after-treatmentdevice designed to clean up thediesel emissions.For diesel sold at the retail stations,Petron Malaysia offers the PetronDiesel Max (B7), which meets thegovernmentlegallymandatedMalaysian Standard MS 123-1:2014,modelled after the European EURO2diesel standard. Petron Diesel Max(B7) contains 7%

TABLE OF CONTENTS SECTION 02 Message from the Chairman ONE SECTION THREE 05 About Our Report SECTION SEVEN 26 Awards and Recognition for 2017 28 2017 Awards & Recognitions - Terminal Operations SECTION NINE 30 Petron Sustainability Technical Working Group SECTION SIX Economic Sustainability 22 But How Was This Achieved? 24 Corporate Governance 25 Risk Management SECTION TWO 03 The Business of .