Bitech-Silur

completed

4AuguInternational Finance CorporationA Member of the World Bank GroupInternational Finance CorporationA Member of the World Bank GroupEnvironmental Review Summary (ERS)Project Name: RUSSIA: BitechRegion: EuropeSector: Mining and Extraction of Fuel MineralsProject No.: 0089021. Bitech Petroleum Corporation, a Canadian independent oil company, has requested IFC to assist in the finance of its Russian wholly owned subsidiary Bitech-Silur JSC (“Bitech”). The Project involves the full development of Bitech’s two existing fields South Kyrtayel, and Lekker (the two fields), located in the Komi Republic, Russia. South Kyrtayel is already producing 8,000-8,500 bbl/d of oil and has been in production since late 1995 while Lekker started producing in July 1998 at 500 bbl/d . The project includes drilling new wells using existing drilling pads that are connected by existing roads, working over existing wells, construction of infrastructure (including a 20 km road along the existing railway from Usinsk to Pechora) and implementing a gas injection facility at South Kyrtayel for enhanced oil recovery and elimination of gas flaring. The project also includes an extended well test and further seismic studies on an adjacent non producing heavy oil field, Subor.2. This is a category B project according to IFC’s environmental review procedure because specific impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The environmental review of this project consisted of a technical site visit June 16 to 18, 1998, the environmental and social review of separate Environmental Impact Assessment Reports (EIAR) for the South Kyrtayel and Lekker fields prepared by the Environmental Administration of the Komi Republic and additional environmental and social information provided by the project sponsor. The following potential environmental, social, health, and safety impacts of this project were analyzed:· existing infrastructure and situation at the two above mentioned fields;· gas flaring;· social impacts;· employment and community benefits;· emergency planning (including oil spills); and· housekeeping and worker safety.Information on how these impacts will be addressed is summarized in the paragraphs that follow.3. Located in a slightly hilly area the South Kyrtayel field (proven reserves of 30 mm bbls) hosts a central pad with the camp and production facilities (also the future site of the gas compression equipment) and two drilling pads (with existing wells) connected by all-weather roads. Crude from this field (8,000-8,500 bbl/d) is transported to the South Kyrtayel gathering station via an existing 28-km long 8-inch pipeline (built in 1996). Storage consists of tanks with volumes of 2 x 200m3, 2 x 400m3 and 2 x 4003 spare capacity. The tank farm is bunded. The Transneft pipeline system is adjacent to the field. At the Lekker field (proven reserves of about 14 mmbbls) situated in muskeg, Bitech inherited two Russian built drilling pads. All first phase drilling will be from the existing central drill pad (L-1). Both these pads were polluted from past drilling operations and require rehabilitation. A 2-km, 6 inch pipeline connects the existing gathering station to the adjacent Transneft pipeline system.4. At South Kyrtayel Bitech plans to add an enhanced oil recovery scheme based on re-injection of associated gas (currently flared) to increase reserves and production further (up to 10,000 bbl/d). Up to 10 million ft3 /day of associated gas will be injected into one well at 2,500 psi. The potential for gas injection at Lekker is still under study.5. The Lekker field is administered by the Usinsk Administration of the Komi Republic while the South Kyrtayel field is administered by the Pechora Administrative Region. Bitech has the exploration and development rights for the South Kyrtayel, Lekker and Subor Fields. The project has no adverse social impacts caused by potential changes to land or water use. There are no human settlements, cultural properties, cultivated areas or pastures on any of the land. The project will not obstruct the use of the land for hunting or fishing.6. As of 1st September the project employed 76 permanent staff in Pechora (the project''s operations base and camp) and 202 temporary workers. All employees, except for 10 expatriates and 2 translators, are local personnel from the Pechora or Usinsk regions. The 2 translators are from Siberia. The project responds to requests for various humanitarian causes, such as providing equipment to hospitals and schools, and is committed to helping its neighboring communities (in the Soviet era, Pechora the oldest and largest town, hosted a state supported gulag. The gulag remains but is unable to support itself because the government has ceased purchasing from the gulag''s sawmill. While gulag labor has been used in the past at the request of the camp commander for useful work for prisoners, the sponsor has decided not to do so in the future. At IFC''s request, the sponsor will give a written undertaking to that effect, and commit to referring to IFC for approval if it wishes to respond positively to any future request to utilize such labor.) These towns today have few sources of income other than the oil companies, few of whom pay taxes. Bitech is the only enterprise in the Region that pays its taxes in full and on time.7. The following oil spill provisions are in place. The 28-km pipeline to the South Kyrtayel gathering station is cathodically protected and pressure at both ends is monitored for leaks and is documented hourly 24 hours a day. The pump injection pressure is also monitored continuously. Though no automatic shut down equipment is in place, the level of monitoring present and rapid decrease in pressure would be noted and the line shut down immediately. All facilities are setback from project adjacent water bodies in accordance with Komi Republic environmental requirements (and have the requisite environmental permits) in order to protect this resource. The project''s emergency response plan has been approved by the Komi Government and a copy is held by the IFC. The plan includes an oil spill contingency plan, details of Company personnel’s responsibilities, available equipment and procedures for its operation, instructions on procedures to be followed in varying situations and local and governmental contacts.8. Housekeeping and worker safety are a top priority. At the Pechora base camp the yard area is kept exceptionally clean and a clean working environment is maintained and in the machine shops hard hats and goggles are worn. The gathering station at South Kyrtayel and its access road are well maintained. Bitech has a contract with a nearby military facility to supply fire fighting crews and equipment. At Lekker sound practices of maintenance and cleanliness are in evidence. The L-11 drill pad has been completely decontaminated by Bitech. The other drill pad (L-1) will be remediated when the drilling rig, currently on site, is removed. Project wide, old and worn Russian drill rigs have been replaced with rigs with strict safety and pollution standards.9. Based on its review of available information regarding potential environmental impacts and proposed mitigation measures, IFC concludes that Bitech’s proposed project will meet World Bank environmental, health and safety policies and guidelines and host country requirements.10. IFC will monitor ongoing compliance with World Bank environmental, health and safety policies and guidelines during the lifetime of the project by evaluating reports submitted annually to IFC by Bitech’s and by conducting periodic supervision.L:\cogd1\BITECH\ers3.docSeptember 10, 1998 5:14 PM