LUKOIL MEDIUM TERM WORKING CAPITAL FACILITY

Overview
Project Summary Document
Environmental and Social Documentation
Procurement
Complaints

Project ID 6603

Status Complete

Location

Russia

Business Sector

Natural Resources

Notice Type

Private

Project timeline

Exploratory
Passed Concept Review
Passed Structure Review
Passed Final Review
Board Approved
Signed
Implementing
Completed

Project ID 6603

Status Complete

Location

Russia

Business Sector

Natural Resources

Notice Type

Private

Environmental Category

Approval Date

07 Mar 2000

Disclosure date

31 May 2000

As per section 1.4.2 (iii) of the Directive on Access to Information: "For Projects approved by Bank management where the Board of Directors has delegated the approval authority, the PSD shall be disclosed at the start of the relevant no-objection notification period to a member country of the Bank in accordance with Article 13 (iii) of the Agreement Establishing the EBRD."

Project Description

The EBRD has signed a US$ 150 million medium-term working capital facility for JSC oil company LUKOIL. The operation will enable LUKOIL to secure a sufficient and stable level of working capital to fund its working capital requirements in respect of export-related payments, crude oil production and oil processing at its refineries in Russia.

Following the financial crisis of August 1998, Russian companies have found it increasingly difficult to obtain international financing. The EBRD has identified LUKOIL as a creditworthy Russian corporation with a positive track record of corporate governance. The Bank’s objective is to provide financing that will enable the company to maintain a sufficient and stable level of working capital. This will enhance LUKOIL’s ability to undertake long-term investment and to implement its corporate strategy.

Transition Impact

The proposed transaction will promote the following:

improved financial transparency through preparation of IAS financial statements;
further investment in the Commonwealth of Independent States as a result of a stable corporate financial structure;
implementation of critical international environmental management standards; and
establishment of a market standard for other potential medium-term financing in Russia.

The Client

LUKOIL is Russia’s largest vertically integrated oil company with operations in the exploration, development, production and refining of crude oil and the distribution of petroleum products.

The company has a proven track record of leadership in the Russian oil sector. For example, LUKOIL led the process of vertical integration of subsidiaries. In addition, the company was one of the first major Russian oil companies to conduct an independent reservoir audit according to international standards. The senior management of LUKOIL has extensive experience in the oil sector and remains focused on the development of the company’s core business activities, both in Russia and abroad.

EBRD Finance

US$ 150 million (€165 million) medium-term working capital facility.

Project Cost

Environmental Impact

An independent environmental audit was undertaken to assess LUKOIL’s environmental management system. This was carried out by an international environmental consulting firm, according to terms of reference developed by the EBRD.

The audit reported that LUKOIL is at the forefront of environmental management development in Russia. It found that LUKOIL’s environmental management compares favourably with other major Russian industrial and oil companies. Furthermore, the audit reported that the company’s existing environmental management system includes elements corresponding to or approaching current international standards for environmental management.

The audit also identified areas that will require further improvements to bring LUKOIL's environmental management practices in line with international good practice. The areas which require particular attention include: strategic environmental management, internal auditing practices, recording and documentation procedures, establishing performance guidance, preventing adverse environmental impact, risk management, and emergency response. Required improvements to meet international good practice in the identified areas will be addressed through the implementation of an Environmental Management Action Plan (EMAP). This will be implemented within two years, and will allow for compliance with ISO 14001.

In addition to environmental management issues, the corporate environmental audit reviewed key environmental risks associated with LUKOIL and its subsidiaries’ operations. The key environmental risks included associated gas flaring, oil spills, waste management practices, and interaction with the public. LUKOIL has developed a "Programme of Environmental Safety (PES) of LUKOIL Operations for 1996-2000" to address these environmental risks at the subsidiary level. This programme is at the final stages of implementation. The company is also finalising an environmental safety programme for 2000-2003, which will include action under the EMAP. The above-mentioned programmes cover virtually all of the significant environmental issues and top-priority environmental targets related to the operations of the company and its subsidiaries.

Further corporate initiatives with respect to critical environmental issues include programmes for increased utilisation of associated gas, waste minimisation and improvement of waste storage practices, oil spill prevention and pipeline replacement, soil remediation and land reclamation. Concerning greenhouse gas emissions, LUKOIL completed a corporate inventory in 1999. The review was performed as part of Russia’s obligations under the UN Framework Convention "on Climate Change" and its Protocol on reduction of greenhouse gas emissions. LUKOIL’s Environmental Protection Department is summarising the inventory results from the company’s subsidiaries. According to preliminary results, the company’s gas utilisation rate is approximately 80 per cent. A programme for reducing greenhouse gas emissions will be included in the LUKOIL Environmental Safety Programme for 2000-2003. With respect to soil remediation and land reclamation, LUKOIL reclaimed approximately 12,000 ha of land in 1998.

Finally, LUKOIL has also developed a "Corporate Relations Programme for Indigenous Populations of Northern Russia".

Technical Cooperation

None.

Transition impact

ETI Score:35

PSD last updated

01 Feb 2019

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Environmental and Social Documentation is not available for this project.

Selected procurement notices related to this project may be shown below. Further procurement opportunities related to this and other projects, if available, maybe be viewed in the EBRD Procurement Portal.

The EBRD's Environmental and Social Policy (ESP), Access to Information policy (AIP) and Project Accountability Policy (PAP) enable sound and sustainable development in its projects. The Independent Project Accountability Mechanism (IPAM) deals with complaints about environmental, social and disclosure matters related to the Bank’s investments.

No complaints about this project have been made so far.

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