VALUE CHAIN and supply chain management
To successfully carry out our operations, we need a myriad of goods and services that are supplied by a significant number of strategic partners, whom we call suppliers and contractors. With their support, we develop activities that ensure responsible operation of the value chain and promote joint growth. Our management guidelines are clearly defined in our Corporate Supply Commitment (Policy), which establishes principles and standards for our activities for the acquisition of goods and services.
In 2019 we defined a new supply commitment aligned with the type of company we are today, to establish the rigid and controlled contracting rules without losing sight of the flexibility that the industry demands. The objective of the commitment is to clearly establish the procedure to obtain an efficient and effective chain that maximizes the value for the Company through the best planning, contracting, purchasing and logistics.
During 2019, we developed business relationships with 1,925 suppliers, of which 723 were local companies, making a significant impact on regional and local economies. The approximate value of our budget for payments to suppliers was US$ 371,420,092.
|N° local suppliers||N° national suppliers||N° international|
|Operations (drilling &|
production, works and
support equipment and
|Various others (IT, health,|
safety, consultancy, etc.)
We have a firm commitment to the development of the communities in which we operate. Because of that, we proactively promote relations with local suppliers, and close to 23% of our total budget is assigned to them.
|Total budget assigned to suppliers (US$)||34,709,214||24,885,331||287,725,173||242,726||8,037,801||15,819,846||371,420,092|
|Total budget assigned to|
local suppliers (US$)
|Portion of total budget assigned to local suppliers||22 %||89 %||17 %||2 %||99 %||6 %||23 %|
*Our budget allocated to local suppliers shows important variations between operations because the concept of “local supplier” has a different scope in each operation. In Argentina, local companies are those that are part of the “Buy Neuquen” Program and are registered on a list of companies that must meet certain conditions. In Brazil and Chile, they are companies from those respective countries, and there are no special considerations of proximity to the operation. In Colombia, Peru and Ecuador, local businesses are the ones that are part of the communities and neighborhoods in which we operate, and they are also included in “regional” companies, which correspond to a larger geographical area.
In Colombia, we promote the participation of local suppliers through the implementation of prequalification processes, in which we identify and characterize both the offer and the local business community to generate links and opportunities, explaining our processes and expectations.
Developing suppliers in Argentina and Chile
In Argentina and Chile our business units ensure compliance with and support of local suppliers, thus contributing to the local development of the communities in which we operate. During 2019, in the province of Neuquen we had commercial relations with 92 companies in the province and 13 companies in the towns of Plaza Huincul and Cutral Co that neighbor our operation, creating 592 direct and indirect jobs. In the Magallanes region of Chile we had commercial relations with 145 suppliers in 2019, generating 273 direct and indirect jobs.
Environmental and social practices in the supply chain
We are committed to promoting and implementing good environmental and social practices in the supply chain, and for that reason we apply our SPEED (Safety, Prosperity, Employees, Environment and Community Development) commitment in all relationships. Within that framework, we ask our suppliers and contractors for a specific HSE plan that we may require to be presented and reviewed before starting projects. In environmental terms, requirements that must be considered include the development of an evaluation of environmental risks and impacts, environmental incident management, restoration of areas, water, fauna and flora management, and emissions and waste, among others. Training is also considered a fundamental element. Therefore, some of our contractors and suppliers must define a training program that includes the project’s environmental and social management plan.
Code of conduct
All workers and contractors who carry out activities in our operations must adhere to our code of conduct. Its objective is to state the norms of behavior for all personnel who work in the field and in their areas of influence, seeking an intercultural coexistence within the framework of respect and dialogue with communities. It is the contractual obligation and responsibility of contractors to make the code known to their workers and to train and supervise them regarding their compliance.
Discussions with suppliers
To ensure process transparency, we carry out quarterly communication exercises about our results and work plans, in which we specifically detail general needs and amounts as well as requirements to participate in the contracting processes.
Evaluation and training of suppliers
Our evaluation of suppliers and contractors examines their performance in different aspects (technical, labor, health and safety, environmental, among others) and compliance with contractually established standards and procedures. During 2019, we refined our reports of non-conformities, which are also considered in the decision-making processes. We are committed to the promotion and implementation of environmental and social best practices in the supply chain.
We ask that our contractors exceed the established minimums in their environment, occupational health and safety, commercial management, human rights and labor practices, among others. For that to happen, we conduct training workshops on specific topics, in which there have been opportunities to improve, which in turn improve suppliers’ chances in future contracting processes in any economic sector
Participation in Argentina Oil & Gas
Our participation in “Argentina Oil & Gas 2019,” an exhibition organized by the Argentine Oil and Gas Institute (IAPG), allowed us to further expand our corporate brand and to contact more than 200 suppliers of goods and services interested in having commercial relations with GeoPark. It was also an excellent opportunity to strengthen relations with current suppliers.
Labor relations in the value chain – “Labor Management and Accompaniment Program” in Colombia
We want to transmit the GeoPark spirit and mission to the value chain, urging our contractors and their workers to further embrace a culture of respect, fair treatment, equality and responsibility in their professional environment. Our “Labor Management and Accompaniment Program” invites our partner companies (contractors and/or subcontractors) to implement responsible labor practices focusing on decent and dignified work that is carried out with the necessary diligence to detect, prevent and mitigate real or potential negative consequences on human rights and fundamental rights at work.
We partner with close to 100 contractors, of which in 2019 54% were local and regional and the remaining 46% were national or international.
Our objective is to consolidate actions and strategies that develop orientations and practical guides in partner companies by verifying our actions on eight (8) criteria:
Local hiring commitments through the Public Employment Service
Legal compliance in labor matters
Verification of the correct payment of the corresponding remuneration and compliance with working hours and breaks
Compliance with occupational health and safety programs
welfare conditions and employment benefits
Development and training programs
Controls in possible corruption actions in labor matters and workplace harassmen
The direct relationship between workers and employers and the channels for managing requests and complaints in labor matters.
In 2019, corporate partners in the value chain obtained a final average compliance score of 82% consistent with audited criteria, a result significantly higher than that obtained in 2018 (73%). Local and regional companies also increased their rating, from 75% in 2018 to 84% in 2019, improving the working conditions of their employees and reducing occupational risks in our operations. As a result, GeoPark sponsored the six highest-rated contractors to develop an action plan to achieve the Good Labor Practices Certification granted by the Colombian Institute of Technical Standards and Certification (ICONTEC). Two local companies were part of this process.
The 2019 program in numbers
GeoPark provided 2,700 job opportunities through the value chain (92% covered by local and regional workers and 8% by the national workforce).
We have approximately 1,580 indirect employees who work exclusively in GeoPark operations, an increase of 15% from 1,370 in 2018. In 2019, the local skilled workforce increased to 46% from 38% in 2018, showing the success of the different strategies to increase the hiring of professionals living in the area of influence.
The average pay established by GeoPark as the regional minimum wage for contractors to pay workers who work exclusively in our operations is 250% higher than the legal minimum wage established by the National Government for any industrial sector.