Project number:


Business sector:

Natural resources

Notice type:


Environmental category:


Approval date:

12 Feb 2002



PSD disclosed:

09 Jan 2002

Project Description

Proposed financing of the joint venture development of the South Shapkino oilfield in the Nenets Okrug. The development would include a drilling programme, processing facility and a pipeline. To enable the company to develop the South Shapkino oilfield including construction of wells and a central processing facility and connection to the regional pipeline.

Transition Impact

The project will develop a corporate structure to meet and maintain the highest environmental, corporate governance and transparency standards and will transfer skills and bring foreign investment to a remote arctic region. The project also aims to demonstrate a successful joint venture between western and local sponsors.

The Client

JSC SeverTek, a special purpose joint venture company owned by KomiTek of Russia (50 per cent), (a majority-owned subsidiary of Lukoil) and by Neste Production Russia Oy (also 50 per cent) (a wholly-owned subsidiary of Fortum of Finland). Lukoil and Fortum equally will provide equity and support to SeverTek.

EBRD Finance

A senior loan comprising an A Loan of US$ 100 million (€112 million) for the EBRD's account and a B Loan of US$ 100 million to be syndicated to commercial banks.

Project Cost

US$ 355 million (€398 million).

Environmental Impact

Environmental Summary
Project Summary
The South Shapkino field is located about 70 km to the north of the Arctic Circle in the Nenets Okrug in Russia. Discovered in the 1970's, the field was initially evaluated in 1995 by Elf Aquitaine and then Neste oy. SeverTek’s development plan for South Shapkino includes the drilling of 14 oil production, 6 water injection, 2 gas injection, the construction of the Central Processing Facility (CPF) and a 98.5 km pipeline to connect, in Kharyaga, with KomiTek’s Kharyaga-Usinsk line.
Environmental studies
The project has been screened A/1, requiring an environmental assessment of the impacts associated with the development and an environmental audit of existing facilities. These were carried out by independent consultants on behalf of the sponsor. An environmental due diligence visit to the South Shapkino field was made by representatives from the EBRD during September 2001. No significant concerns have been raised during the due diligence nor on the part of the regulator, NGOs or the local community.
Environmental audit
An environmental audit of the abandoned exploration well-sites (11) was carried out in 1996 by Agra Eurasia. It led to the updating of the requirements set out in the remediation programme. This programme was agreed with authorities in 1997, but was not fully implemented due to the lack of funds. Further remediation works are planned during late 2001-2002, during the construction and early drilling phase.
Environmental Impact Assessment (EIA)
The EIA of the development, including drilling of 22 wells, the upgrading of processing facilities and the construction of a 98.5 km oil pipeline to the terminal at Kharyaga, was carried out in several phases (1998, 2000, 2001) in accordance with the regulatory requirements, and submitted to the State Environmental Review (SER) Committee for approval on 15 August 2001. A decision is expected by the end of December 2001. This project summary will be updated upon receipt of recommendations from the SER.
To date, the findings of the EIA anticipate no significant environmental impacts and that the project will remain in compliance with the relevant regulatory requirements. The EIA has identified the key environmental issues and corresponding mitigation measures, these are outlined below:
Permafrost protection: Arctic oil fields are typically located in tundra regions characterised by continuous permafrost. It is important, in the evaluation of such projects, to ensure that adequate protection measures are taken to minimise the "footprint" of the project and to preventing damage to the fragile ecosystems e.g. by minimising land-take of drilling sites, the use of ice roads for seasonal transport etc. Attention must be given to the requirements of indigenous land users e.g. reindeer farmers. In the SeverTek project, road and pipeline crossings will be provided, in consultation with local experts. Buildings will be elevated on piles to isolate the tundra from the associated heat. The pipelines will be elevated (1-1.5m) to prevent subsidence and damage to the permafrost. Pipeline crossings will be installed to allow reindeer and other migratory animals to move freely.
Air emissions: Air emissions from this operation will include emissions from combustion sources such as generators, heaters, compressors, as well as fugitive emissions from valves, flanges, fuel pumps, landfill, etc. Associated gas produced together with the oil will be used for power generation and heating on-site. The quantity of surplus gas is not sufficient to allow export economically via an additional pipeline. To avoid flaring, surplus gas will be re-injected into the reservoir. This has a secondary benefit of helping to maintain the pressure in the reservoir and provides long-term storage for gas available for production later in life of the field.
Liquid effluents: Minimisation of liquid effluents will be achieved through the application of a low-waste drilling technology allowing for the re-circulation of drilling fluids, closed- loop water supply system and reinjection of produced water after treatment at the CPF back into formation. Liquid effluents, consisting mainly of surface run-off and sewerage, will be treated separately at the designated facilities to meet the maximum permissible concentrations, prior to discharge, as specified by the regulator.
Solid waste: The large bulk wastes will be drilling cuttings, construction waste, domestic waste and miscellaneous waste from the facilities. Combustible solid waste will be incinerated. Non-combustible solid waste, will be separated and treated off-site. The de-watered sludge will be used in road construction, subject to permit, or disposed of in a sludge pit during the drilling period and later at the landfill site.
Health and Safety: The Company will operate to national and international standards of workplace health and safety, in alignment with the shareholders’ standards. Routine work place monitoring, health and safety training (including emergency response) and regular medical checks will be carried out. An Oil Spill Contingency Plan and Emergency Response Plan have been developed for the pilot phase (2003), stipulating the procedures to be followed in the event of a chemical or oil spill, equipment failure and other emergencies. The outline plans for the post-pilot phase are included in the EIA and will be finalised and agreed with the authorities during 2003.
Public Consultation
The EIA process included public consultation with project stakeholders, including a public meeting with representatives from the Nenets Autonomous region, an environmental NGO (Fund Minley) and authorities in Naryan-Mar, in April 2001. The project has been received positively. Interested parties are satisfied that the Sponsor has taken their requests/requirements into consideration, such as those of indigenous land users. The Company maintains close relations with the collective farm "Izhemsky Olenevod" and the indigenous peoples association "Yassavey". It will continue to develop and implement the Company community-interaction programme as outlined in the annual budget and EAP. This will be routinely assessed by the Bank. The EIA and an executive summary were released into the public domain on 2 October 2001, for a minimum of 60-days consultation, in accordance with the EBRD’s Environmental Procedures and the Public Information Policy. All comments will be collated and assessed prior to Board review. To-date no comments have been received.
Environmental Action Plan
The project will include an Environmental Action Plan (EAP), which is currently being finalised by the sponsor in co-operation with the Bank. In addition to the key environmental mitigation measures identified within the EIA e.g. permafrost protection measures, utilisation of the associated gas, low waste drilling technology and emergency response, according to the Russian regulatory requirements, the EAP will include measures to assist the Company with its strategy to operate in accordance with the good international industry practice standards, such as World Bank Oil & Gas Development (Onshore) guidelines. The project design is broadly aligned with World Bank provisions on issues such as the recycling of drilling mud water, minimisation of flaring, use of low- toxicity drilling mud, oil spill prevention and contingency measures, pipeline corrosion prevention and integrity monitoring programme, recovery of oil from process wastewater, segregation of storm and process wastewater; etc. Moreover, the Company’s shareholders, Fortum and Lukoil, work to internationally certified Environment, Health & Safety management systems and are providing technical expertise to SeverTek to assist the Company toward achieving high standards of EHS performance. The Bank will receive routine reports on the project’s environmental, health and safety performance, it will be notified immediately over significant incidents/ accidents and will require routine independent audits of status of implementation of the EAP.

Technical Cooperation


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