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This operation involves providing a loan of US$ 90 million to finance a rehabilitation programme for the Fergana oil refinery in Uzbekistan. The refinery changed the source of raw material from Russian crude oil, with a low sulphur content, to local crude extracted from the recently discovered Kokdumalak oil field, which has a high sulphur content. The major project components include the provision of a desulphurisation unit for diesel and sulphur recovery; safety improvement investments for an emergency flare system; refurbishment of water mains for fire water; a hydrogen sulphide detection system; waste management systems; and project management and technical cooperation. Financing will assist the Refinery in meeting international environmental and safety standards.
The project was screened B/1, requiring an Environmental Analysis to examine the impact of the Bank's investment, and an audit to determine the extent of environmental and health and safety risks and potential liabilities associated with the existing Refinery. The initial environmental investigations were supplemented by a specialised report on regulatory requirements and assistance to the Refinery for drafting the Environmental Action Plan. In addition, the Bank required an expert opinion and report on soil and groundwater contamination from hydrocarbon spills, an evaluation of the adequacy of current oil recovery and remediation activities, and potential environmental and financial implications from the contamination. These studies were undertaken by independent consultants following terms of reference established by the EBRD. Bank environmental staff visited the Refinery on several occasions to review the due diligence status and to meet with the environmental and health authorities.
The Refinery has significant environmental and safety problems, the majority of which will be addressed by the Bank's investment project. An Environmental Action Plan (EAP), which forms part of the loan documentation, has been agreed with the Refinery and approved by the relevant authorities. An enhanced oil recovery and remediation programme will be developed in the near term to improve the current oil recovery programme. An international remediation specialist will also be hired to improve the efficiency and effectiveness of the on-going programme and to monitor it over an extended period of time. The project also provides a long-term international environmental advisor to work with the Refinery to develop and implement the required environmental programmes. Progress on the EAP, satisfactory to the Bank, will be required before each disbursement is made on the loan.
Key mitigation measures in the project
Air emissions: The project includes desulphurisation treatment and sulphur recovery units for fuel gas, which will bring sulphur emissions from the desulphurisation units into compliance with the standards of the EU Large Combustion Directive.
Waste water: The project includes repair or replacement of leaking pump seals; repair of other equipment; and a rail car management programme. All below-ground pipework, including firewater pipework, will be installed above ground to prevent /minimise any spillage. Final effluent will be monitored and analysed.
Sludge disposal: Costs of an incinerator are included in the project; however, other alternatives for sludge treatment and disposal will be investigated prior to any decision. An environmental impact assessment, satisfactory to the Bank, will be required as part of the investigation.
Soil and groundwater contamination: An enhanced oil recovery and remediation programme has been developed and forms part of the EAP. This will form part of a larger programme to address public health risks, upgrade Refinery management and training, and implement a long-term monitoring programme and a public communication programme. An international consultant specialising in oil recovery and remediation will be involved in setting up the programme and monitoring progress.
Rail cars: The rail car loading area is one of the significant sources of soil and groundwater contamination and a rail-car management programme will be established as a matter of top priority under the supervision of the independent environmental advisor.
Occupational health and safety: The project includes funding for health and safety equipment. A detailed health and safety survey will be conducted during the first year of the loan and an action plan satisfactory to the Bank will be developed.
Fire and flare safety: The proposed project includes safety improvement investments for refurbishment of fire mains and firefighting equipment, including hydrogen sulphide detection systems. The flare system represents a serious safety concern, and will be upgraded in the project
Energy efficiency: According to the Bank's technical experts, there is some scope for energy improvements, and where possible, these have been built into the project. The EAP provides for a routine review of energy efficiency.
Product standards: When the proposed desulphurisation unit (DSU) comes on stream, the Refinery will achieve a 0.1 per cent wt sulphur, thus meeting the proposed 1999 EU standards.
Solid sulphur production: The project includes installing a sulphur granulation and packaging facility.
Public consultation: Due to the extent of the off-site contamination and the impact on the regional groundwater and potential impact on surface water, a special public information component will form part of the revised remediation programme. In addition, the Refinery will develop a community interaction programme which will provide routine information about health, safety and environment to the public. The detail in this programme will be developed during the first year of the loan, when information from the health survey is available.
Monitoring: During the first two years of the project, the Bank will receive monthly progress reports on the implementation of the project and the Environmental Action Plan. Thereafter, the Bank will receive an annual report on environmental and health and safety issues, an independent environmental audit at three-year intervals for the duration of the Bank's loan, notification of any emergencies, significant incidents and accidents, and routine visits by a member of the Bank's environmental team.
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