The oil field operations have issues typically associated with historic oil operations, including large numbers of oil wells with leaks, historic contamination, unlined reserve pits with liquid oil wastes, and external corrosion of pipelines. In some locations, significant improvements are needed in oil spill response equipment, fire safety equipment, and housekeeping.
The oil wells that service the Odoptu Reservoir are 5 km on-shore, but are directionally drilled to the off-shore field. The location of the wells was designed to reduce the environmental impact potential that off-shore drilling would have had. Although the rest of SMNG’s operations use water-based drilling muds, oil-based muds are necessary for wells at this depth, and the reserve pit for Odoptu is lined to protect the environment from migrating sludges. Currently, associated gas is flared.
SMNG’s oil and gas pipeline system includes infrastructure dating back to 1930s-40s when SMNG started its operations. The company has a pipeline management programme, which has an objective of replacing over 600 km of pipeline between 2000 and 2005. A total of 147 km has been replaced during the last seven years. The EAP will supplement the pipeline management programme with funding for the replacement by 2002 of a section of pipeline which is over 40 years old and includes installation of cathodic protection for critical sections of pipeline near the Nevelsky Strait, including the sub-sea pipeline to the mainland. In addition, improvements in pipeline spill response equipment and training have been included in the EAP as well as the development of a pipeline corrosion monitoring programme and setting up relevant laboratory facilities for corrosion monitoring.
SMNG operates large oil storage facilities, such as the Western Tank Farm and the recently acquired Korsakov Tank Farm. Significant improvements are needed to the storage facilities to either upgrade tanks to an acceptable level or to decommission and close tanks, to install secondary containment where needed, and to rehabilitate contaminated areas. Over US$3 million in the EAP is committed to the first phase upgrade of the Korsakov Tank Farm. A feasibility study will be undertaken of other key storage facilities during 2001 and similar upgrade or closure plans will be developed.
Some hazardous materials, such as methanol, are transported via SMNG’s railroad facilities. The narrow gauge railroad has not been modernised and the route crosses many surface water bodies and sensitive areas. Upgrades are needed to sections of the railroad track, rolling stock, parts and maintenance to improve safety of rail transport. Provisions have been included in the EAP for upgrades to the railroad, including development of an emergency response plan specific for rail transport.
Management and disposal of waste is a very significant environmental problem in the region. SMNG has established new company guidelines prohibiting burying, burning, or otherwise disposing of wastes. Sites where these practices have occurred in the past are being prioritised and a number were rehabilitated in 1999-2000. A survey of other sites and inventory of abandoned equipment will be undertaken in 2001 to prioritise reclamation and remediation needs. Priorities will take into account potential impact to ground and surface water.
SMNG is active in the emergency response planning for Sakhalin Island and the Russian Far East together with the Ministry of Emergencies. Current oil spill and emergency response planning need improvement to meet Russian and international standards. SMNG has committed itself to improvements in oil spill prevention and response, emergency prevention and response, and training. Provisions for equipment have been included in the EAP. A separate response plan will be developed for railroad operations.
The occupational health and safety performance of SMNG is comparable to other Russian oil companies. The company has not had a significant number of accidents in the past five years, but improvements are needed in areas such as personal protective equipment, hearing protection, sanitary and general services, and training. SMNG has agreed to develop an environmental and occupational health and safety management system to bring it in line with international standard practice over a number of years. The programme will also take into account the Rosneft corporate programme, which it is extending to its subsidiaries.
In the past, SMNG’s operations have had considerable exposure in the press, but has not had a strong communication programme with the public. SMNG formed a Public Relations department in late 2000. During the environmental audit, the SMNG environmental manager met with NGOs and agreed to establish routine communication. The Bank is currently working with SMNG to define commitments to a more proactive approach to communication, including communication on routine operations, in the event of emergencies, and with regard to future projects. More structure will be given to communications and to documenting programmes with various communities near company facilities. The company has agreed to release information to the public about the key projects for 2001-2002, including summaries of environmental and health and safety improvements.
New Russian Sanitary Norms and Rules (SNiP) were approved in 1996 which enlarged sanitary protection zones around industrial facilities. While these rules have not been registered yet by the Ministry of Justice, they are widely applied by authorities as if they were in force. The widening of sanitary protection zones would have an impact on a number of SMNG facilities which are less than the proposed distance from residential areas. In this event, the company will need to work with authorities to determine 1) if technological changes or relocation of emission sources are necessary, 2) if a number of households need to be resettled, or 3) if a risk assessment should be done to determine the safe distance from the facilities.
Part of the proposed loan is for debt restructuring. The balance sheet restructuring and/or EAP will include provisions for agreed outstanding environmental payments which are applicable to its operations.
SMNG has committed itself to implement an EAP which outlines specific actions, schedules, and costs. The commitments include the upgrade of the Korsakov Tank Farm (Phase 1), repair and replacement of key sections of pipeline, cathodic protection of key sections of pipeline, improved oil spill response and emergency response equipment and training, railroad safety upgrades, a programme of improvements to environmental and occupational health and safety management, improved gas utilisation, fire safety, and improved communications. The environmental management programme will take into account both the Rosneft corporate environmental policy commitments and international practice.
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