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FLUOR CORPORATION 2004 HSE ANNUAL REPORT


Health, Safety & Environmental 2004 Annual Report

TABLE OF CONTENTS

1. Chairman and CEO - Message

2. Senior Vice President, HSE - Introduction

3. Health, Safety & Environmental Policy and Principles

4. Health, Safety & Environmental Management System

5. Health, Safety & Environmental 2004 Review

6. Case Studies And Project Achievements

7. Health, Safety & Environmental 2005 Outlook


CHAIRMAN AND CEO - MESSAGE

For nearly 100 years, Fluor has created a work environment that values diversity in thought and experience, teamwork, ethical behavior and performance excellence, both in our offices and at project sites. Within our vision and values framework, we state that the well-being of people and communities in which we work and live is one of our highest priorities. We have a well-known and proud legacy of safety superiority in the marketplace. Our global safety record shows that we are a leader in setting the bar for execution excellence and protecting the human and environmental assets that our clients place in our care.

While our safety achievements have long received global recognition, Fluor has been equally committed to health and environmental responsibilities. We conduct business in compliance with applicable health, safety and environmental (HSE) requirements, and, in doing so, we assist in protecting the environment and our stakeholders.

Over the past few years, HSE commitments have become increasingly important to businesses, governments and communities worldwide when selecting the companies with whom they wish to work. As a forward-looking company, Fluor has worked closely with clients, suppliers and contractors to implement a comprehensive HSE program and build a culture of outstanding HSE performance. Much of the thinking, philosophy and approach regarding this formalized HSE program were already established within Fluor’s global operations.

Through Fluor’s formal HSE program, we established clear accountabilities for HSE compliance to determine that HSE policy, principles and practices are reflected in each stage of a project’s life cycle, as well as throughout all facets of our activities. We set consistent goals and standards, making it clear that responsibilities are understood and addressed; provided appropriate HSE resources; trained employees to conduct their responsibilities, and established metrics to measure, monitor and assess our HSE performance.

I am proud of the commitment by Fluor employees and management to HSE excellence and it is my pleasure to present to you an overview of our HSE activities and accomplishments in Fluor’s first HSE Annual Report.

Sincerely,

Alan L. BoeckmannChairman and Chief Executive OfficerFluor Corporation

protecting peopleproperty

the environment


Senior Vice President, HSE - Introduction

During the past year, Fluor made significant progress in the development and implementation of a Health, Safety & Environmental (HSE) program and a HSE management system. While HSE responsibilities have always been integral to the way we conduct business, a formal HSE policy and HSE principles now form the cornerstone of our HSE culture. They address such issues as accountability, training, communications, resources, engineering design, performance measurement and sustainable development. Our Annual Report serves as an opportunity to demonstrate Fluor’s HSE commitment and culture. The new HSE Management System is designed to integrate the management of HSE practices into one program that embraces a project or activity from beginning to end and is consistent throughout the company globally. The use of an integrated, consistent, company-wide approach has provided efficiencies in the execution of work, a competitive advantage to clients through reliability and reduced risk, improved tracking of HSE

performance measures that indicate the manner in which the company is managing its HSE impacts and greater opportunities to provide innovative solutions to HSE challenges.

Fluor management’s commitment to HSE is exemplified by its proactive approach to creating a safe work environment for all employees. Management is accountable for promoting continuing safety education and training, continuously reviewing the program and evaluating all incidents to identify potential areas of improvement. In 2004, Fluor achieved another record-setting year in safety performance. The goals were aggressive, but, collectively, Fluor employees met the challenge. Fluor ended the year with the lowest Total Recordable Case incidence rate in the company’s history - 0.37, which reflects a 26 percent improvement over 2003. Fluor’s 2004 Lost Workday Case incidence rate of 0.05 represents a 17 percent improvement over 2003.

Further evidence of Fluor’s commitment to HSE is its award-winning performance on two government projects. Over the past decade, Fluor has worked with the U.S. Department of Energy (DOE) to provide demolition, decommissioning and environmental restoration of heavily contaminated Cold War nuclear weapons sites at Hanford, Washington, and Fernald, Ohio. This past year, these activities achieved unprecedented milestones. Programs at both sites were awarded the DOE’s Voluntary Protection Program Star Status.

Despite the ongoing successes, one employee and two subcontractors were involved in fatal accidents during the year. In addition, regulatory violations at Fluor Hanford resulted in DOE action. Therefore, HSE will continue to seek ways to mitigate potential hazards and is partnering with Fluor’s business groups to augment the company’s safety strategies. Fluor is committed to working safely and respecting the environment and the health of those individuals in our communities.

Fluor has a long history of community involvement and a commitment to having a positive impact on all of the communities that we touch. Through the Fluor Foundation, the company’s philanthropic organization, we respond to the needs, challenges and opportunities of our complex society by providing financial assistance to various nonprofit organizations and educational institutions. Our employees volunteer their time and skills and their contributions leave lasting benefits.

Looking forward to 2005, we will continue to build on our successful HSE program. We will continue to be proactive in providing value-added services to our clients, as well as contributing to a safe, secure and sustainable quality of life for our employees and for the communities in which we work.

Sincerely,

Garry FlowersSenior Vice President, HSE, Security and Industrial RelationsFluor Corporation


Health, Safety & Environmental (HSE) Policy and Principles

HSE POLICY

Fluor’s Chairman and CEO, Alan Boeckmann, has endorsed a HSE policy dated December 2003.

HSE responsibilities are integral to the way Fluor conducts business; therefore, the successful management of HSE issues is an essential component of the company’s business strategy. Through observance and encouragement of this policy, Fluor assists in protecting the environment and the overall well-being of all of its stakeholders.

In order to achieve these objectives, Fluor identifies HSE risks and reduces them to the lowest practical levels. The company’s goal is to minimize the impact of these risks on the environment and to prevent harm to employees, clients, shareholders, communities and all others who could be affected by those activities.

Fluor management will continue to take a proactive approach toward creating safe work environments for all employees and will be accountable for promoting continued safety education and training for all employees, assigning responsibility for all aspects of the program, continuously reviewing the program to identify potential areas of improvement and conducting a thorough evaluation of all incidents.

Fluor will continue to address the environmental and health impact of its operations by reducing waste, emissions and discharges and by using energy efficiently. Fluor strives to be a good citizen in every community in which it operates.

An awareness of HSE matters will be maintained, so as to be proactive in providing a value-added service to the company’s clients. This awareness is achieved through education, communication and definition of the goals and standards appropriate to the company’s operations and those operations undertaken on behalf of clients.

The company will adhere to its HSE Principles, which are the cornerstone of Fluor’s HSE culture, and will address such issues as accountability, training, communication, resources, engineering design, performance measurement and sustainable development.

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HSE PRINCIPLES

HSE COMMITMENT

Fluor’s HSE Policy applies throughout Fluor Corporation.

All offices and projects shall establish HSE policies and standards consistent with Fluor’s HSE Policy, as well as comply with and, where possible, exceed local statutory requirements. The appropriate organization and accountability must also be established to implement Fluor’s HSE Policy.

MANAGEMENT & RESOURCES

Management shall implement Fluor’s HSE Policy and shall establish and monitor programs and accountabilities intended to provide continual improvement of performance.

HSE and engineering support resources and facilities shall be made available to assist line management personnel.

COMMUNICATION & CONSULTATION

Relevant information shall be communicated to employees, contractors, clients and the public concerning the effects of Fluor’s activities on the health and safety of people and the environment. Input provided by staff members will be acknowledged, and they will be encouraged to participate in improvement programs.

TRAINING

Training needs shall be identified and implemented to allow managers and employees to work with proper regard for their own health and safety, as well as the health and safety of others, and to protect the environment.

HAZARDOUS MATERIALS

The possible hazards associated with all products, wastes and other materials present in the workplace shall be identified and inventoried. Appropriate information shall be maintained to enable the proper handling, storage, transportation and disposal of all materials.

Appropriate limits shall be set and disseminated regarding workplace exposure to hazardous materials.

DESIGN & ENGINEERING

Management systems shall be maintained and risk-reducing measures shall be taken for projects for the design of facilities, plants, equipment and processes.

MANAGEMENT OF CHANGE

Changes shall not compromise HSE performance. All changes shall be properly authorized, engineered and recorded.

1. HSE COMMITMENT

2. MANAGEMENT & RESOURCES

3. COMMUNICATION & CONSULTATION

4. TRAINING

5. HAZARDOUS MATERIALS

6. DESIGN & ENGINEERING

7. MANAGEMENT OF CHANGE

8. PROCUREMENT & CONTRACTS

9. FIELD EXECUTION

10. EMERGENCY SITUATIONS

11. CONTRACTORS & SUPPLIERS

12. ENVIRONMENTAL IMPACTS

13. HSE PERFORMANCE REPORTING

14. AUDITING

15. SUSTAINABLE DEVELOPMENT

Health, Safety & Environmental Principles


PROCUREMENT & CONTRACTS

HSE considerations shall be taken into account, and HSE factors associated with any order/purchase or contract from conception to completion shall be managed responsibly and ethically.

FIELD EXECUTION

Work processes shall be developed and maintained to promote the health and safety of people and the protection of the environment. Hazards shall be eliminated, where possible, and consequent risk must be reduced as low as reasonably practicable.

EMERGENCY SITUATIONS

The nature and scale of all reasonably foreseeable emergencies shall be identified and contingency plans developed to address identified hazards and risks.

CONTRACTORS & SUPPLIERS

Procedures shall be established regarding the selection and monitoring of contractors and suppliers with regard to the implementation of applicable HSE principles. The intent of these procedures shall be to promote the health and safety of their employees, as well as to comply with environmental standards.

The purchase and supply of materials, equipment, and services shall be specified and monitored to enable HSE requirements to be met.

ENVIRONMENTAL IMPACTS

Each Fluor location shall prepare and maintain a location-specific HSE management plan with an environmental section, including an up-to-date assessment of the environmental impact of its activities.

HSE PERFORMANCE REPORTING

All locations shall have procedures in place for reporting HSE performance, investigating and recording all incidents/complaints and taking appropriate corrective action to avoid recurrence.

AUDITING

Formal auditing procedures shall identify deficiencies and implications, as well as prioritize corrective actions.

SUSTAINABLE DEVELOPMENT

Three systems (ecological, social and economic) shall be considered in all phases of a project. Procurement activities shall address green processes such as, when possible, doing business with vendors who use environmentally superior practices.

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The HSE Management System, the foundation of Fluor’s HSE program, provides an integrated, consistent and company-wide approach to HSE activities.

The focus of this program allows Fluor to achieve, in the areas of health and the environment, many of the benefits realized with its strong safety culture: including: the protection of lives and property; reduction of insurance costs; avoidance of liability claims; improvement in scheduling; increase in productivity and morale; as well as an enhancement of client image.

The HSE Management System is designed to apply best-practice, hazard-management techniques to systematically identify and manage HSE risk. This approach contains several inherent advantages, including: providing a greater opportunity to develop innovative HSE solutions; benefiting clients by enabling greater efficiencies, reliability and reduced risk; and providing the methodology needed to more effectively track HSE performance. In addition, an integrated HSE approach aligns Fluor’s organizational structure with the structures of a number of its major clients.

Fluor’s proven HSE Management System meets international standards, including ISO 14001 and OHSAS 18001, and provides outstanding value to each client.

Health, Safety & Environmental Management System


THE HSE PYRAMID

The pyramid, Fluor’s HSE graphic focus, is used to describe the HSE Management System’s hierarchy of documents and processes and serves as a visible reminder of the initiative and overall HSE culture existing within the company.

The highest-level document in the HSE Management System is the HSE Policy, with all other documents cascading from that policy. The Principles provide support to, and definition of, the Policy, while the Practices, Plans and Procedures are the project documentation that define and explain the minimum HSE standards.

The HSE Policy is signed by Fluor’s Chairman and CEO, Alan Boeckmann, and outlines the company’s commitment and position regarding health, safety and environmental management. The HSE Management System was developed in response to this policy and addresses the means by which the company identifies and manages HSE risk and impacts, as well as strives for continual improvement.

The HSE Principles serve as the cornerstone of Fluor’s HSE culture. These Principles provide objectives and goals that describe the workings of the Management System within the company to meet the objectives of the policy.

HSE Practices specify the HSE standards for the corporation. These practices are designed for each of the following areas: office; engineering; and execution (i.e., construction, commissioning, operations and maintenance); as well as a practice entitled General HSE Practice, which is used to address both unique items and those items common to all other practices. These practices are applied consistently on a global basis.

The HSE Procedures specify the means by which the standards will be met. To reflect a global perspective, the global catalogue of procedures encompasses a variety of regional and site-specific/project-specific procedures, checklists, forms and plans.

To address future innovations and improvements, the HSE Management System and associated documents are flexible and adaptable. These materials are reviewed and updated on an annual basis.

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CONTINUAL IMPROVEMENT

Fluor is committed to a continual improvement process composed of five elements:

Commitment and Policy

Planning

Implementation

Measurement and Improvement

Review and Improvement

MEASURING PERFORMANCE

With the integration of HSE management under the enhanced HSE Management System, it is important to measure performance. Historically, the company-wide metrics were based on lagging safety indicators, such as lost-time cases and recordable cases. Currently, Fluor is refining a process of evaluating global leading indicators that reflect HSE areas of impact to its businesses. The metrics will be used on a project-by-project, region-by-region, and company-wide basis.

Auditing is the primary tool used to measure performance and pursue continual improvement. Fluor utilizes various types of audits to comply with HSE requirements and provide consistent performance. Audits are performed throughout engineering phases to determine progress at designated milestones, as well as on a regular basis during construction.

Utilizing the integrated approach of Fluor’s HSE Management System provides a unique opportunity to enhance the company’s HSE culture.

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Health, Safety & Environmental 2004 Review

For Fluor, 2004 was a year of growth and recognition. The company delivered earnings performance at the high end of its guidance. This result was accomplished through growth in various Fluor segments, including: Energy & Chemicals, Government, Industrial & Infrastructure, and Global Services. Fluor was ranked No. 1 in both FORTUNE Magazine’s 2004 Most Admired Companies list in the Engineering and Construction category, in the U.S. and globally, and received recognition from clients for HSE performance on projects. Success in realizing the company’s 2004 HSE objectives required industry-leading training programs, individual awareness and responsibility, and a personal commitment beginning with the Chairman & CEO, Alan Boeckmann, that was shared by each employee. This review highlights the company’s achievements and the manner in which Fluor is working to attain sustainable solutions to HSE issues worldwide.


SAFETY

Safety has always been Fluor’s top priority. This commitment began in the late 1950s, and, today, Fluor’s strong world-class safety culture is sustained by unwavering management actions and an uncompromised dedication to the protection of the company’s greatest asset – its employees. Currently, Fluor is one of the safest contractors in the world, with a record-low Total Recordable Case incidence rate of 0.37, representing a 26 percent improvement from 2003. Fluor ended 2004 with a Lost Workday Case incidence rate of 0.05, a 17 percent improvement.*

Fluor’s safety record is impressive, considering the size and complexity of projects built in remote geographic locations and often with social, cultural,

economic, political and environmental challenges. Fluor’s integrated HSE engineering and execution capabilities eliminate or mitigate hazards inherent in the construction industry.

A total of 328 projects and offices plus 1,977 contractors and subcontractors worked the entire year without a Lost Workday Case. Of these, 280 projects and offices and 1,977 contractors and subcontractors ended the year without experiencing a single Recordable Case.

FLUOR & SUBCONTRACTORS WORLDWIDE

Lost Workday Cases (with days away) Per 200,000 Hours Worked

FLUOR & SUBCONTRACTORS WORLDWIDE

0.12 0.11 0.08 0.1 0.08 0.06 0.060.16 0.16

19950

1996 1997 1998 1999 2000 2001 2002 2003 2004

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Total Recordable Cases Per 200,000 Hours Worked

1.281.09

0.820.99

0.870.64

0.5 0.37

1.78

1.26

1

2

0

1

2

.05

* Total combined office, Fluor field, and contractor incident rates


In 2004, Fluor showed improvements in the following categories of safety performance measurements:

CATEGORY

2004 PERFORMANCE

2003 PERFORMANCE

Lost Workday Case Incidence Rate *

0.05 0.06

Total Recordable Case Incidence Rate *

0.37 0.50

* Total combined office, Fluor field, and contractor incident rates

Safety is a Fluor core value – an integral part of the company’s culture. In addition to mandatory orientation training, the company provides comprehensive training programs in the areas of HSE compliance and practices.

One of the most valuable drivers in the Fluor safety culture is pre-planning. While several forms of pre-planning are available, the Job Risk Analysis (JRA) and the Safety Task Assignment (STA) processes substantially impact culture, behavior and injury reduction. These interactive processes engage management, supervisors and employees in: defining the task for each activity; identifying known and potential safety hazards associated with each task; determining work practices to complete the task safely; and addressing requirements for all personal protective equipment.

Fluor operates under the assumption of “what gets measured, gets managed.” On a monthly basis, Fluor measures and reports HSE performance, incidents and compliance with HSE systems. In addition, activities and processes that produce desired results are monitored.

HEALTH

A global focus has been placed on health-management issues and a renewed interest has been demonstrated in related programs such as sustainable development and specialized health awareness. During 2004, the company has made a concerted effort to apply its experience with and knowledge of health issues associated with its project work worldwide. Specific to occupational health, Fluor develops and manages programs related to: the monitoring of health risks within work environments; the monitoring of health, prior to, and during employment; the establishment of project medical clinics; the monitoring of health conditions and work environments worldwide to ensure that both expatriate and local workforces are protected; and that camp facilities are built and maintained within stringent health guidelines.

FLUOR HSE COURSE OFFERINGS:

HSE Certified Construction / Maintenance Supervisor Certification Program

HSE Leadership Training Program

Field Assignment Safety Guidelines

Workplace Violence

The University of Florida Rinker School of Building Construction’s Certification for Professional HSE Management

Construction HSE courses

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ENVIRONMENTAL

Fluor is committed to and responsible for addressing the environmental impact of its operations by reducing waste, emissions and discharges and by using energy efficiently at offices and on projects. Employees work with local environmental organizations and take special care to respect and conserve indigenous wildlife inhabiting areas located near its projects. Fluor currently has in-place programs to recycle oil, light bulbs, batteries, paper products and office supplies to conserve resources and maintain cost-efficiency. The company also encourages carpooling to reduce emissions.

Fluor’s United Kingdom offices earned ISO 14001 certification, joining ISO-certified Fluor engineering centers and construction sites around the world.

Fluor substantially upgraded HSE requirements for contractor and subcontractor qualification. Environmental performance reporting has been added to Fluor’s contractor requirements. This new prerequisite supplements the company’s stringent health and safety standards for contractors and subcontractors.

In 2004, Fluor further enhanced its green building capabilities offered to clients. Fluor is a member of the U.S. Green Building Council (USGBC), and a number of Fluor employees have earned Leadership in Energy and Environmental Design (LEED) accreditation. LEED is one of the most widely known programs that establish criteria for designers in engineering green buildings. Fluor clients have expressed an interest in building sustainability into their projects and many require a LEED-accredited designer to implement energy conservation features and material-use efficiencies. Clients have embraced green buildings and sustainability programs for many reasons, including operational cost savings, positive impact on their reputation as responsible companies, and stewardship of the environment.

Fluor continues to provide demolition, decommissioning, environmental restoration, engineering and construction at the heavily contaminated weapons sites at Fernald, Ohio and Hanford, Washington for the U.S. Department of Energy. Through significant remediation, the company is helping to restore the sites to acceptable health and environmental standards.

Fluor continues to assist clients worldwide in meeting more stringent environmental regulations for cleaner transportation fuels and emissions. Fluor revamped clean fuel production facilities for ultra-low-sulfur gasoline and diesel programs.

Focused on solutions for simultaneous removal of multiple pollutants such as mercury, sulfur dioxide and nitrogen oxides, Fluor increased its participation and investment as a partner in the PowerspanSM Electro Catalytic Oxidation (ECO) technology.

The term “green building” means designing structures intended for human occupancy to incorporate environmental benefits such as energy efficiency and optimized use of solar energy, water conservation, enhanced operational waste management, use of recycled building materials, and design for easy recycling at end of the life of the project.


INNOVATIVE TOOLS

MANAGING SAFETY TO ZEROSM (MS20)

Fluor developed a Web-based tool, MS20 that measures safety processes and tracks leading indicators and trends to identify when HSE intervention is required. The tool assists projects in managing their HSE performance to attain Fluor and client goals.

During 2004, Fluor managed and implemented the proactive components of the MS20 program consisting of the following four key areas:

The Safety Audit Performance System involves a daily and weekly audit process, uses root-cause analysis to determine causes of incidents and allows probability and severity trending.

Safety Leading Indicator Metrics measure proactive activities that involve management personnel, supervisors and employees. These activities or indicators include self-assessments, training, management participation and evaluation of near-misses.

A Safety Perception Survey, performed on a quarterly basis, asks employees in the field to rate safety training, communication, rules and procedures, work environment and promotion programs. Their feedback is provided to management for use in continual improvement of the safety process.

Key Performance Indicators enhance the audit process by measuring individual targets, including first-aid cases and monthly reports.

The benefits of the MS20 program are:Leading indicator metricsProactive managementReal-time results Safety interventionIncreased consistency in reporting metricsEasy access via a web-based program

PROJECT SAFETY ALERT SYSTEM

A Project Safety Alert System quantifies the safety status of each project so that additional HSE focus can be placed on those projects where improvement is required and outstanding performance can be recognized. The Project Safety Alert System identifies projects with a Total Recordable Case incidence rate exceeding the Fluor goal for the report period.

1) Blue - World-Class: Managing safety at zero, incidence rate of zero. 2) Green - Warning: Managing safety at or below the Fluor Safety Goal.3) Red - Alert Status: Managing safety above the Fluor Safety Goal.

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Fluor Projects, Offices & Contractors (Total of 2,455 in 2004)

World-Class

Warning

Alert

92%(2,257)

3%(63)

5%(135)

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HSE PROJECT ACTIVITY MODEL

In 2004, Fluor developed a combined HSE standardized activity model to provide integrated HSE project execution. The HSE Project Activity Model

(PAM) is an automated template that identifies required activities to meet the scope of services on a project. The HSE PAM methodology also can be used to facilitate alignment between clients and project team members relative to their roles and responsibilities on a project.

The PAM provides a visual representation of these activities by phase, by discipline and by participant. The PAM is divided into relevant phases of a project as shown below:

Project initiationScope definition and conceptual engineeringPreliminary engineering / construction planningDetailed design / site initiationConstruction / final design / engineering support for constructionCheck-out / start-up supportProject close-out

UpFRONTsm Fluor has developed an integrated work process called UpFRONT that addresses the myriad tasks that must be accomplished and the potential risks that must be mitigated in a successful facility start-up. One of UpFRONT’s nine technical modules specifically targets essential HSE readiness activities to be completed during start-up, including performance of licensing and permitting, as well as environmental and regulatory compliance. In 2004, this innovative tool helped Fluor’s clients proactively identify and reduce HSE and other risks associated with bringing their new capital programs online.

Asset Productivity IndexSM To help existing plant and facility owners identify potential improvement opportunities, Fluor developed the Asset Productivity Index benchmarking procedure (AP Index) to quickly and objectively measure a plant’s operating performance in seven performance-critical categories. Because Fluor’s experience generally indicates high correlation between HSE performance and long-term business performance, HSE is included as one of the performance-critical categories. HSE and other metrics are measured individually and collectively, and then evaluated against industry benchmarks to provide clients comparative feedback from their peer and other world-class operations.

Knowledge OnLineSM Fluor’s global, electronic knowledge management system, Knowledge OnLine, is a Web-based tool that connects employees to Fluor experts worldwide and supports timely collaboration across all geographic and time boundaries. The system consists of communities developed around technical functions, subjects, industries or business units where Fluor experts actively participate in the proactive identification, creation, sharing and reapplication of knowledge.

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total maintenance solut ionsUpFR NT TM

Project Activity Model


In 2004, Fluor enhanced its HSE knowledge community, providing employees worldwide with 24-hour access to the HSE Management System and its global Practices and Procedures. The community allows for immediate communication of detailed HSE information and urgent HSE Alerts, as well as collaboration space to contact and share knowledge with subject matter experts for the proactive identification, creation, sharing and reapplication of knowledge.

The HSE knowledge community experienced a 20 percent increase in employee visits and a 66 percent increase in information submitted in 2004. The community continues to be the focal point for HSE knowledge sharing.

HSE AWARENESS

HSE awareness is a significant part of Fluor’s strongly imbedded HSE culture. The company uses many communication tools to disseminate the HSE message and heighten HSE awareness globally as shown below.

The HSE Communications Series addresses HSE issues regarding office settings, engineering design and field activities.

HSE Alerts provide quick notification of changes in regulations, equipment recalls or situations requiring immediate action.

The biweekly HSE newsletter and Fluor’s annual publication of Toolbox Topics deliver important HSE information to Fluor’s global project sites.

HSE maintains a constant presence on the company’s intranet Websites, delivering news items, HSE employee profiles and HSE success stories.

A special section on the company’s Internet Website, Fluor.com, communicates HSE policy and principles, capabilities, news and project profiles.

Fluor sponsors HSE competitions for employees and their families, including annual HSE slogan and childrens’ HSE poster contests.

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Health & Wellness Communication Series

Knowledge OnLine

News OnLine

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www.fluor.com


REWARDS AND RECOGNITION

EXTERNAL AWARDS

In 2004, Fluor HSE was recognized for excellence in HSE performance by external organizations.

The Royal Society for the Prevention of Accidents (RoSPA) awarded Fluor the Construction Engineering Industry Sector Award 2004 for excellence in managing health and safety at work, the second consecutive year that Fluor has won this prestigious award.

The Fluor Government Group earned seven of 21 Department of Energy (DOE) “Star” awards. The DOE’s Voluntary Protection Program honors organizations that demonstrate excellence in safety. “Star” status is the highest level of achievement. During the past four years, Fluor has collectively won one-third of the awards given nationally by the DOE.

Fluor’s Western Australian Operations and CMM Pilbara Rail received WorkSafe Western Australian’s Gold Certificates in 2004. Gold Certificates are awarded to organizations that perform at a high standard in the WorkSafe Plan Assessment by meeting specific key element percentage levels, as well as specific lost workday injury performance criteria.

Eastman Chemical Company has recognized AMECO with a “2003 Supplier Excellence Award” based on safety, reliability and increased service offerings.

Rockport Maintenance (a joint venture between Fluor and Siemens) has been recognized as a “VPP Star Site” by the state’s Occupational Safety and Health Administration’s Voluntary Protection Program (OSHA VPP) for its work at the AK Steel Project in Rockport, Indiana.

The Poland Industrial & Commercial Chamber of Commerce of Foreign Investors in conjunction with Chemical Market Magazine, have awarded the “Golden Orbital Award” to Fluor Poland in Gliwice. Fluor received the award for being the top service provider to the chemicals industry, recognized for safety, quality, professionalism and community involvement.

The Puerto Rico Manufacturers’ Association (PRMA) has awarded the “Distinguished Safety Performance Award” to Fluor Caribbean, Inc. in San Juan, Puerto Rico, for the past 14 consecutive years. The award is given to companies with an incidence rate 90 percent below the national average.

The South Carolina Chamber of Commerce “Commendation of Excellence” Award has been presented to numerous Fluor projects in South Carolina in recognition of outstanding safety performance in that state.

The South Carolina Occupational Safety Council has presented Fluor and several projects in South Carolina with a “Palmetto Safety Excellence Award” in recognition of Fluor’s safety record in that state. Fluor, at the Clariant site in Martin, South Carolina, was presented with the “Palmetto Safety Excellence Award,” recognizing the lowest incidence rates for its Standard Industrial Classification and category by the South Carolina Occupational Safety Council. The site also won the prestigious Edgar L. McGowan award for spanning the greatest amount of time since their last lost time incident (1981).

Fluor O&M in Eastover, South Carolina was recognized by the South Carolina Occupational Safety Council with a “Safety Achievement Certificate” for having either a 5-year experience since their last OSHA recordable injury or illness or accumulating 50,000 work hours since their last lost-time incident and having maintained a zero incidence rate for 2003.

The North Carolina Department of Labor has presented Fluor the “Certificate of Safety Achievement” in recognition of Fluor’s outstanding safety record in that state.


The Voridian Division of Eastman Chemical Company recognized Fluor for the completion of several key projects at the Kingsport, Tennessee, manufacturing site. Fluor was specifically recognized for excellence in construction safety performance and for the speed at which the projects were executed.

Rockport Maintenance, a joint venture between Fluor and Siemens to provide maintenance services at AK Steel, Rockport Works, has been recognized by the Indiana State OSHA VPP. Rockport Maintenance achieved VPP STAR status and is one of only 24 VPP STAR sites in Indiana.

The Russell/Fluor Construction Organization at Lima, Ohio, was recognized by the West-Central Ohio Safety Council for its 2004 safety performance. The site received the “100% Award” for working the entire year without a lost workday case and the “Group Award” for having the lowest incidence rate in its category.

The Fluor and OMV Aktiengesellschaft project team in Schwechat, Austria, received the European Construction Industry ACTIVE (Achieving Competitiveness Through Innovation and Value Enhancement) Project of the Year Award. Fluor and OMV worked with subcontractors and vendors to meet or exceed all targets and goals, with 365,000 construction workhours executed safely.

Fluor’s engineering, procurement and construction work on the ConocoPhillips Ferndale refinery has been honored by the Western Council of Construction Consumers (WCCC) with the “Outstanding Project of the Year” award. Selection for this award is based on project performance in areas of safety, value creation, operating requirements, schedule, cost, client relations, etc. The client, ConocoPhillips, also awarded this project as “Project of the Year.”

Fluor Canada and Fluor Constructors Canada have each received an award from the Canadian Gas Processors Suppliers Association for achieving zero lost time incidents.

The Del-Jen team at Laughlin Air Force Base in Texas has achieved registration of their Environmental Management System to the ISO 14001-1996 standard by Orion Registrars.

AMECO’s Borger Operations Center in Borger, Texas was recognized by OSHA VPP as a STAR site.

The U.S. Department of Energy awarded the Fast Flux Facility, the Central Plateau and the Hammer project with Star Excellence awards.

The U.S. Department of Energy awarded the Plutonium Finishing Plant, Project Support Services and the Safeguard & Security project with Superior Star awards.

Fluor Canada received The Calgary Board of Education (CBE) Lighthouse Award which recognizes a Calgary corporation, business or organization for its contributions to the CBE, its schools and its programs. Fluor Canada was rewarded for its long-standing and exemplary partnership with Central Memorial High School in Calgary.

Fluor Canada Ltd. was one of three finalists in the category of Ethics in Business Award of Distinction. The Alberta Business Awards of Distinction were created in 1991 to celebrate the successes and contributions of the business community to the makeup of Alberta. This award is presented annually to a company whose ethical business practices meet or exceed standards accepted among its peers. The Ethics in Business Award of Distinction recognizes the achievements of firms that, in the course of its day-to-day activities, exemplify clear and open communication about corporate ethics, and a commitment to uncompromising ethical behavior while exceeding customer/stakeholder expectations in the services they provide.

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INTERNAL AWARDS

In 1994, Fluor made a bold commitment to safety excellence with the introduction of the ZERO AccidentsSM recognition and reward program, establishing a higher industry standard for safety worldwide. Fluor’s program was based on the Construction Industry Institute Task Force’s recommendations for achieving zero injuries, which had identified high–impact zero incidents techniques that were used to achieve safety excellence.

Because Fluor strives for continual improvement, in 2004, the company made another bold commitment to an even higher standard of excellence. ZERO Accidents was upgraded by incorporating health and environmental recognition and renamed the ZERO IncidentsSM

program.

Because Fluor takes great pride in its accomplishments in this area and in being an industry leader. The company continues to recognize and promote outstanding HSE performance. In 2004, Fluor’s ZERO Incidents program rewarded the prestigious Tri-Star Award to the following projects that all achieved zero incidents.

PROJECT LOCATION SAFE HOURS

AMECO Operations

Corps of Army Engineers Contingencey Contract, Camp Victory / Camp Slayer

Capital Project MSDQ

Fluor Amec Joint Venture Shell Philippines Exploration-Malampaya

Amgen Bionext

Amgen Opus

UU4 Restoration Project

BP Texas City

Civil & Mechanical Maintenance,

Integrated Isocyanates Project

TXU Energy Big Brown Project

TXU Energy Martin Lake Maintenance Project

Kuwait Oil Company Rebuilding of GC-15 & Upgrade of BS-131

LG&E Energy, Kentucky Utilities SCR Projects

Minera Yanacocha SRL, Proyecto Yanacocha

AFCAP Project Taji Bed Down Task

BP Solvay BPAPI

Hazelwood Power Station

PSEG Linden

TXU Energy, Monticello SES

B130 Eli Lilly HCIP Project

Progress Energy Clean Air Project

Progress Energy FGD Project

Rockport Maintenance

BMS P9 Upgrade Project, BMS Swords

Bynel Eva Project

DSM Nutritional Products

Eli Lilly B-132 QUP Project

Exelon, Handley SCR #3

Exelon, Mountain Creek #8 SCR

Fluor 3M D-10 Project

FMS @ Georgia Power, Bowen Plant

Merck MK-431 &SAS Project

Pfizer Indiplon Enabling Project

The Kennecott Smelter Project

Worldwide

Baghdad, Iraq

Arecibo, Puerto Rico

Muntinlupa, Alabang, the Philippines

West Greenwich, Rhode Island, U.S.

Juncos, Puerto Rico

Texas City, Texas, U.S.

Texas City, Texas, U.S.

Dampier, Western Australia

Caojing, Shanghai, China

Fairfield, Texas, U.S.

Tatum, Texas, U.S.

Abdhali, Ahmadi Kuwait

Ghent, Kentucky, U.S.

Cajamarca, Peru

Iraq

Deer Park, Texas, U.S.

Morwell, Victoria, Australia

Linden, New Jersey, U.S.

Tatum, Texas, U.S.

Indianapolis, Indiana, U.S.

Asheville, North Carolina, U.S.

Roxboro, North Carolina, U.S.

Rockport, Indiana, U.S.

Dublin, Ireland

Zwijndrecht, Belgium

Freeport, Texas, U.S.

Indianapolis, Indiana, U.S.

Dallas, Texas, U.S.

Dallas, Texas, U.S.

Decatur, Alabama, U.S.

Cartersville, Georgia, U.S.

Barceloneta, Puerto Rico

Barceloneta, Puerto Rico

Magna, Utah, U.S.

3,500,000

3,000,000

1,500,000

1,500,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

750,000

750,000

750,000

500,000

500,000

500,000

500,000

500,000

250,000

250,000

250,000

250,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000


Million Plus Safe Work Hour Award achievements were earned by the following projects that had no lost workday cases.

PROJECT LOCATION SAFE HOURS

United JUPC Project

Aliso Viejo Operations

TXU Comanche Peak SES

Connect Project for London Underground Limited

Fluor Hanford Team, Richland, Washington

Lilly Humalog Project

Seward Repowering Project

Progress Energy Project

PSEG Linden 1&2 Combined Cycle Project

Amgen Opus Project

Amgen Bionext

Disposal / Groundwater Remediation Project

Ground Based Midcourse Missile Defense Project

Rockport Maintenance - AK Steel

Kuwait Oil Company Rebuilding of GC-15 & Upgrade of BS-131

Day & Zimmerman Protection Technology Project

Deactivation & Decomissioning Project

Entergy / Fluor Alliance

Hazelwood Power Station

Integrated Isocyanates Project

Pfizer B530 Project

SCDOT / CRM West, West Region Project

Spent Nuclear Fuels Project

Jubail, Saudi Arabia

Aliso Viejo, California, U.S.

Glen Rose, Texas, U.S.

London, England

Richland, Washington, U.S.

Guaynabo, Puerto Rico

New Florence, Pennsylvania, U.S.

Roxboro, North Carolina, U.S.

Linden, New Jersey, U.S.

Juncos, Puerto Rico

West Greenwich, Rhode Island, U.S.


Delta Junction, Alaska, U.S.

Rockport, Indiana, U.S.

Abdhali, North Kuwait



Metairie, Louisiana, U.S.

Morwell, Victoria Australia

Caojing, Shanghai, China

Sandwich, Kent, England

Greenville & Columbia , South Carolina, U.S.


50,000,000

15,000,000

6,000,000

4,000,000

4,000,000

4,000,000

4,000,000

3,000,000

3,000,000

2,500,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

The Silver Cross Award is bestowed upon employees who have performed life-saving actions. It is the highest recognition that the company bestows upon a member of the Fluor team. In 2004, 14 Silver Cross recipients made safety a priority, both on and off the job, by aiding others who were experiencing life-threatening situations ranging from drowning and choking to heart attacks and seizures.

21


SUSTAINABLE DEVELOPMENT

Globalization, economic growth and technological advances are creating an ever-increasing rate of change and, with it, political, environmental, social and economic challenges. Fluor strives to balance company business goals while supporting social, economic and environmental performance, the “triple-bottom line,” that leads to sustainable benefits for its clients, shareholders, employees and other major stakeholders for future generations. Each year, this objective requires the use of an innovative and proactive approach to implementing and managing projects and other business in accordance with the principles and practices found in Fluor’s HSE Management System and other corporate policies. The increased emphasis placed on corporate governance and executive responsibility around the world has led many of Fluor’s clients to seek the company’s assistance in developing sustainable solutions to challenges on their projects ranging from environmental compliance to community support.

Fluor believes that a diverse workforce and an environment of openness and inclusion are both determinants of the company’s future business success. Diversity and Inclusion combine to create a platform for innovation and growth. Diversity/Inclusion is reflected throughout Fluor’s global workforce. Its competitive advantage in delivering world-class solutions to clients is made possible by the diverse talents, skills, backgrounds and perspectives of its employees. The company’s commitment is embodied in its ethics and core value of teamwork. Diversity/Inclusion is an integral element in human resources management policies and strategies such as recruitment, career development and talent management. During 2004, in support of these ongoing activities, Fluor expanded its mentoring process and developed a series of online training modules to educate employees regarding diversity and inclusion. It created and launched a comprehensive intranet site, which provides a wide variety of information, tools and resources. These tools include the business case for diversity and inclusion, leadership messages and a vehicle for two-way communication. The company also developed a “diversity/inclusion” section on Fluor’s corporate Website.


Fluor’s Supplier Diversity Program is a proactive business initiative designed to expand the registration opportunities for suppliers. In 2004, Fluor implemented a number of activities, including:

A new outreach tool called SCORE! (Supplier and Contractor Online Registry E-version) that is a database for perspective suppliers who wish to register as a Fluor resource

A program to increase accessibility to new and diverse resources, boost employee access to supplier-diversity educational information, improve the quality of supplier-diversity reporting and increase Fluor’s global visibility as a sponsor and advocate

An enhancement of the company’s primary project purchasing system, MaterialManager®, to promote the consistent use of fields relating to supplier diversity

An increased level of participation and sponsorship at various diversity-supplier venues, such as the National Minority Supplier Development Council and the Small Business Association

Fluor continues to lead the way in the global fight against bribery and corruption. For the past three years, as the lead for the Engineering and Construction (E&C) Governors Council of the World Economic Forum (WEF), Fluor’s Chairman and CEO, Alan Boeckmann, has worked with other global E&C companies, as well as Berlin-based non-profit Transparency International and the Basel Institute on Governance, to develop and implement global anti-corruption principles. As a result, the council has helped obtain the commitment of more than 60 major global E&C firms to sign the anti-corruption principles, to embrace a zero-tolerance policy toward bribery and corruption and to implement company-wide, anti-corruption programs.

Fluor actively supports philanthropic and volunteer activities benefiting communities throughout the world and fosters an environment of caring among the company’s employees and the communities in which Fluor works. Through the Fluor Foundation, Fluor’s philanthropic organization, the company has a long history of investing in communities, nonprofit organizations, and education. The company’s charitable goals focus on four categories of giving: education; health and human services; culture and arts; as well as public and civic affairs.

In the area of health and human services, Fluor supports organizations that provide community services, emergency relief and youth services. For example, in the Philippines, the Manila office supports a local children’s orphanage, both financially and with programs and projects undertaken by the employees themselves. In addition to planned services, both the corporation and employees respond quickly to unexpected crises through disaster-relief monetary grants, employee time and effort, and in-kind donations. In 2004, when a tsunami destroyed areas of southern Asia and eastern Africa, Fluor employees and the Fluor Foundation responded with support and donations totaling more than $250,000 USD.

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For more than 30 years, Fluor has held United Way campaigns encouraging employees to contribute to this worthy philanthropy and the local health and human services agencies it supports. Annually, Fluor employees pledge $2 million USD in contributions that are matched by the company with $1 million USD.

Fluor employees around the world have a long-standing tradition of community service. Countless charitable organizations and schools benefit from the generosity and the hard work of volunteers. Through the Fluor Employee Volunteer Program, employees around the world volunteer as teams to conduct community service projects that meet community needs and promote goodwill. The Fluor Community Involvement Team supports employee community activities such as building a playground for blind children in California, installing ramps at the homes of disabled citizens in South Carolina, installing a well at an orphanage in the Philippines, and constructing homes with Habitat for Humanity in Poland and the U.S. Employees have collected books to supply school libraries in the Bahamas, held global food drives helping to fill local food banks, collected clothing to assist women entering the workplace, delivered meals to seniors, raised funds for cancer research and worked with developmentally disabled children.

Fluor’s economic performance strives to balance the growth in capital with the impacts of engineering construction on the environment and society. In addition to its work on anti-corruption, Fluor is prominently engaged in how risk in the E&C industry can be managed more effectively. Fluor has developed a comprehensive Business Risk Management Framework for identifying, assessing, mitigating and managing risk. The comprehensive program includes HSE risk and has been implemented on more than 200 projects over the past 24 months and has been cited by several clients as a key differentiator.

Fluor is actively engaged in construction craft training for local residents, securing a local skilled workforce for projects, and thereby providing career and economic growth for the local population. As one example of Fluor’s involvement in this area, Fluor has worked with one of its clients for over 12 years to provide construction training to resident workers in South Africa. These resultant training facilities evolved into a school supported by the South African government. Since its inception, the school has trained over 30,000 people and currently has an enrollment of approximately 450 individuals. In 2004, 100 people graduated with skills in welding, carpentry, masonry, iron working, drafting and many additional civil and mechanical trades. The program is now expanding to a second location.

Building on a year of growth and recognition, Fluor is committed to protecting people, property and the environment.


Case Studies and Project AchievementsEndangered eagles coexist with Sakhalin-1 Project

During the year, Fluor provided detailed engineering, procurement and construction services to Exxon Neftegas Ltd. (ENL), an ExxonMobil affiliate, on the Sakhalin-1 project. The project site on Sakhalin Island in the Far East of the Russian Federation is the location of the future Onshore Processing

Facility (OPF) for oil and gas extracted from beneath the Sea of Okhotsk. The OPF is located at Chayvo in the north of the Island and will process oil and gas prior to shipping the oil through a pipeline to mainland Russia, where crude oil will be loaded onto tankers for delivery to international markets.

Sakhalin Island is home to several endangered species, termed “Red Book species” by Russian regulators because the description of the animals is contained in a red-bound book. Drawing upon advice of recognized Russian experts, Sakhalin-1 has developed and is implementing a comprehensive protection plan for rare, threatened and endangered species that populate the project areas, including a population of the Steller’s Sea Eagles (Orlans) that inhabit the marine coasts of Sakhalin and Khabarovsk Krai. Orlan in Russian symbolizes strength, boldness and speed. In fact, ENL’s offshore concrete island drilling system platform was named “The Orlan” after the powerful eagle.

The Orlan eagle is a white-shouldered eagle of immense size, with a powerful bill and feet. Juveniles’ plumage is generally dark brown with white mottling; upon adulthood the plumage has bold color patterns, with bright white shoulders and tails. Adults reach a wingspan of 27 inches (68 millimeters) and a weight of 20 pounds (9 kilograms). Approximately 280 pairs of Orlans winter on Sakhalin Island and the surrounding areas. The endangered birds coexist with the Sakhalin-1 project. They frequent the coastline and rivers of the island, where they take live fish, other birds and mammals.

During the breeding period, Orlans will construct large bulky nests (6.5 feet or 2 meters in diameter) from thick twigs and branches in trees and cliffs near the water, approximately 50 to 65 feet (approximately 15 to 20 meters) from the ground, and produce 1 to 2 eggs. To help protect Orlans, Sakhalin-1 has been funding Russian ornithological studies since 1995. These studies were used to identify their habitat and included mapping of nests and hunting areas. The “Rare, Threatened and Endangered (RTE) Species Mitigation Plan” contains practical measures to protect Orlans and other RTE species in regard to Sakhalin-1 activities. The Mitigation Plan imposes strict limits on activities proposed for the areas occupied by Orlans.

Orlans frequent the Sakhalin coastline.

An employee at the Sakhalin Project assists a Russian ornithologist with tagging a bird near the project site.

In 2004, the project initiated two additional programs to help protect Orlans: Steller’s Sea Eagle monitoring program and the Artificial Nest and Perch program.

Members of the project team have watched the local Orlan population with interest. Families of Orlans have been observed nesting in wooded areas outside of the construction zone. The Orlan population’s well-being is important to the project, and particular care and attention to the birds inhabiting the surrounding area is observed in accordance with the project’s Rare, Threatened and Endangered Species Mitigation Plan.


BHP BILLITON

Project: Mining Area C to Yandi Railroad ProjectClient: BHP Billiton Iron OreAward: Engineers Australia - Engineering Excellence Award 2004

Located in the Pilbara region of Western Australia, the 24-mile railway links a BHP Billiton iron ore mine to the company’s export facility at Port Hedland in the northwest portion of Western Australia. The railroad construction traversed extremely rugged terrain and set several new industry records in many aspects of design and construction, including new records for the highest and longest bridge spans and largest earthworks to be built in the Pilbara region.

The Pilbara is one of Australia’s most striking and unspoiled natural wilderness areas. Covering an area of more than half-a-million square kilometers, the region is home to numerous Aboriginal sites of significance and untouched flora and fauna. Before any land disturbances took place, heritage surveys were conducted by BHP Billiton Iron Ore Specialists to identify ethnographic, archaeological and other significant sites in consultation with traditional land owners. The workforce was empowered to halt works if there was a perceived risk of disturbing environmentally or culturally significant locations that had not been captured by the earlier survey work. The project set a new benchmark for the management of indigenous heritage issues.

The uncompromising commitment of Fluor’s employees to disciplined project management and innovative thinking in key areas of the project were important to achieving success. The project was completed within budget and ahead of schedule. Employees worked 1.3 million hours with no lost-time injuries, often in difficult conditions.

The Australian Engineering Excellence Awards program has been in existence for 13 years. They acknowledge the professionalism and pursuit of excellence of engineers throughout the country. Great emphasis is placed on the impact that the project has on the economic and social life of Australia.

FLUOR CORPORATION 2004 HSE ANNUAL REPORT 27

THE ISOS/YPC MEDICAL FACILITY-IPS PROJECT

The Integrated Management Team (IMT), consisting of representatives of both client organizations and Fluor under a Project Management Contract, was responsible for the construction of the Integrated Petrochemicals Site (IPS) project, a large multi-chemical production plant in the Luhe district of Nanjing in the People’s Republic of China. The clients are a joint venture between BASF and YPC (the owners of the large, adjoining chemical plant). The work area was spread over hundreds of hectares with satellite areas up to 1.9 miles (3 kilometers) away from the main construction area. This situation, combined with an anticipated workforce of up to 20,000 individuals, made the creation of an on-site medical facility essential.

The IMT hired International SOS (ISOS) to manage the medical facilities and provide an international standard of care with their expatriate and national doctors, paramedics and clinic administrator. YPC Hospital, located in nearby DaChang city, provided national staff for the operation of the clinic. In addition to the Central Medical Facility (CMF), Remote Medical Facilities (RMFs) were established in all of the work areas to provide immediate treatment to the injured or ill before they were transported to the CMF, if that course of action was deemed necessary.

The 10 RMFs were staffed by national doctors, trained by ISOS, and consisted of containerized units outfitted with the equipment essential for the initial treatment and stabilization of an injured or ill patient. The CMF was staffed by expatriates and national medical specialists, including a First Aid trainer for the Mandarin-speaking workforce.

Employees with work-related injuries were seen by either the RMFs or the CMF and promptly reported to the IMT’s HSE department for investigation. This on-site treatment led to a decrease in downtime, fewer patients sent to local hospitals with minor injuries and faster correction of hazardous acts or conditions.

Medical cases, which formed the bulk of patients seen, varied from the common cold to cardiac conditions and even the early and life-saving diagnosis of various types of cancer. Minor surgical procedures were also performed, such as suturing and biopsies.

Paramedics were responsible for responding to all emergencies and conducting ongoing training for the national staff. They also routinely inspected off- and on-site utilities and facilities such as toilets, canteens, offices, and construction areas. Checking and monitoring potable water for the large workforce was of critical importance to this inspection routine.

The IMT adopted Fluor’s good-neighbor and community assistance policies, and the BASF-YPC-provided ambulances and supplies were utilized to respond to victims of road accidents and other incidents on the periphery of the site. The IMT-trained First Aid workers took their newly found skills back to their work site, communities and their families.


2004 PIVOTAL YEAR IN FERNALD AND HANFORD CLEANUPS

FERNALD

Hanford and Fernald, two government-run sites, were part of the infrastructure established for changing the U.S.’ “arms” from conventional to nuclear, as well as building a nuclear arsenal for national defense. With the end of the Cold War, the sites’ missions turned to cleaning and closing facilities that were once integral to the production of nuclear material.

The U.S. Department of Energy (DOE) and Fluor Fernald took a giant step toward completing the clean-up of the 1050-acre (425-hectare) former uranium production plant near Cincinnati, Ohio in 2004. More buildings were dismantled, waste shipped, contaminated earth removed and water treated than in any previous year. More importantly, the site safety record continues to be one of the best among facilities operated by the DOE and far safer than the construction industry as a whole.

The following highlights were achieved in 2004.

The razing of the Pilot Plant marks the end of the demolition of all 10 former uranium production plants.

Waste removal from Silos 1 and 2 began as workers used sluicing technology to pump 8,900 cubic yards (6,805 cubic meters) of radioactive waste from the aging concrete silos into four new 750,000-gallon steel transfer tanks. This action marks the first time that this material has been handled in 50 years.

The 125th unit train of pit waste left the Fernald site for disposal.

The Administration Building, a site landmark since the 1950s, was brought to the ground.

The eighth, and final, cell liner of the On-Site Disposal Facility was completed. More than 1.77 million cubic yards (1.35 million cubic meters) of contaminated soil and debris have been placed, with one million additional cubic yards ultimately expected.

Demolition crews demolished the Service Building, the last remaining major production-era facility.

The Fernald property will be an undeveloped park and learning center when the cleanup is complete.

HANFORD

Hanford, covering 586 square miles (1,500 square kilometers) in southeastern Washington state, produced about 60 percent of the nation’s supply of plutonium for nuclear weapons. The U.S. DOE and contractor Fluor Hanford eliminated two urgent risks in 2004 and made significant additional progress in closing and demolishing facilities at Hanford.

In one of the most important risk-reduction activities to date, Fluor Hanford mitigated an urgent risk in October, when crews completed a four-year effort to remove approximately 2,300 tons (approximately 2,100 metric tons) of “spent” nuclear fuel from two water-filled basins located near the Columbia

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Ten production plants once covered the Fernald production area. The Pilot Plant was the last former production plant to be razed at Fernald.


River. Hanford’s spent nuclear fuel comprises approximately 80 percent of the DOE’s nationwide spent-fuel inventory and is one of the largest sources of radioactivity on the Hanford site. Fluor Hanford also started operations to retrieve approximately 65 cubic yards (approximately 50 cubic meters) of radioactive sludge from these facilities—called the “K Basins.” DOE and Fluor Hanford mitigated the other urgent risk as crews completed a four-year project to stabilize and package approximately 20 tons (17.8 metric tons) of plutonium materials at the Plutonium Finishing Plant. The plant, consisting of more than 60 buildings, produced 60 percent of the nation’s supply of plutonium metal for nuclear weapons and was once considered one of the top five facilities in the DOE complex with the greatest concentration of hazardous materials.

Fluor Hanford completed the first demolition of a plutonium processing facility— the 233-S Plutonium Concentration Facility. The eight-month demolition was also the first open-air demolition of a highly contaminated processing facility in the DOE complex. The demolition was completed safely. With more than 4,000 employee entries onto the worksite, no incidents of a skin contamination or a recordable injury were recorded.

Other clean-up progress in 2004 included the start of operations to retrieve 75,000 drums of radioactive waste. At the end of 2004, a total of more than 8,700 drums had been retrieved. In 2004, Fluor Hanford completed 66 shipments of transuranic waste to the Waste Isolation Pilot Plant in New Mexico, bringing the total number of shipments completed to 127 — including more than 3,900 drums of waste — since shipments began in 2000.

Fluor Hanford employees had their safest year since the company began conducting clean-up activities at Hanford in 1996. In addition, six of the eight Voluntary Protection Program Stars awarded at Hanford were given to Fluor projects. Acceptance into the DOE program is official recognition of exemplary occupational safety and health. Star status is conferred on projects with injury and illness rates 50 to 75 percent better than the industry standard.

29


UNITED JUBAIL

The UNITED Olefins project in Saudi Arabia established a new Fluor safety record of 48.1 million safe work-hours and 1,002 consecutive safe work-days, all without a lost-time accident.

The UNITED project is a multi-billion dollar, grass-roots, petrochemical complex being constructed for Saudi Arabia Basic Industries Corporation (SABIC) in the industrial city of Al-Jubail, Saudi Arabia. Designed using a master plan to allow for future expansion, Phase 1 of this project consists of an ethylene cracker, an ethylene glycol unit and associated utilities, offsites and infrastructure.

Remarkably, this milestone was achieved under very difficult conditions. In addition to the shear size of the project, sand storms, extreme heat and high humidity all contributed to the challenge of working safely. Similarly, as the completion and startup of complexes as large as UNITED were conducted over several months (since late 2003) considerable work was executed in portions of the plant that were either under commissioning or in full operation, greatly increasing the risks to project personnel. All this was accomplished by a diverse project team that overcame the challenges of speaking 17 different languages.


Health, Safety & Environmental 2005 Outlook

Looking forward, emerging global issues will have a direct impact on Fluor’s business, its clients, its employees and the communities in which it works. Globalization brings challenges that arise from a diversity of opinions, cultures, health and environmental issues, political beliefs and constant change.

To meet these global challenges, Fluor is committed to a continual improvement process that begins with the company’s HSE Policy through measurement, improvement, review and reward, thereby resulting in value to all stakeholders.

31


In 2005, Fluor will continue to support its proven HSE practices and implement innovations that will raise the bar of excellence.

Fluor has established aggressive 2005 HSE goals for both self-performance and management of subcontractors for the company’s operations worldwide. The company continues to improve its annual safety-performance goals and has committed to a target of zero in the newly added measurement category - notices of violation from any HSE regulatory agency.

The internal safety reward and recognition program, ZERO IncidentsSM, expands to formally incorporate health and environmental performance. New award levels, the Four-and Five-Star Awards, added to the existing One-, Two- and Tri-Star Awards, further raise the bar of HSE performance.

Fluor’s regard for the world community and respect for its employees, suppliers and the clients with whom it works is reflected in the way the company conducts business. The company continues to fight bribery and corruption globally in partnership with other international leaders and the World Economic Forum. Fluor also continues to enhance its comprehensive Business Risk Management Framework for identifying, assessing, mitigating and managing risks.

Fluor strives to provide equal opportunity and access for all employees while enabling full employee engagement in the workplace. Diversity and inclusion principles and practices are systematically woven throughout the company’s processes. Fluor is increasing its investment in workforce and supplier diversity, balancing growth with social and environmental issues with ongoing improvement and outreach, internal accountability, and the further development of cost-effective tools to measure progress. Fluor is increasing its overall level of support and participation in programs such as the National Minority Supplier Development Council, the Women’s Business Enterprise Alliance and the Small Business Association.

Fluor is working to develop policies and programs consistent with green purchasing. In 2005, Fluor will continue to execute projects incorporating the principles of the U.S. Green Building Council and other international organizations.

Fluor remains committed to the HSE programs and aspirations covered in this report and in being transparent in its performance, reporting the areas needing improvement, as well as the company’s successes. Fluor’s commitment to continual improvement drives the company’s goals for the following year, as well as refines and improves its programs, processes and tools. Fluor strives to support and protect its present and future employees, clients, shareholders, working environments and communities.


FluorOne Enterprise DriveAliso Viejo, California 92656-2606949-349-2000

www.fluor.com

Copyright©2005 Fluor Corporation.All rights reserved.

Fluor and the ZERO symbol are registered service marks of Fluor Corporation. Knowledge Online, Managing Safety to ZERO, ZERO Incidents, UpFront, AP Index, the HSE Pyramid and Continuous Improvement logos are service marks of Fluor Corporation.

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