Atyrau Refinery Sustainability Loan

Location:

Kazakhstan

Project number:

51662

Business sector:

Natural resources

Notice type:

State

Environmental category:

B

Approval date:

16 Sep 2020

Status:

Signed

PSD disclosed:

03 Jun 2021

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

Provision of a USD 80M corporate loan in Kazakhstani tenge to Atyrau Oil Refinery LLP (the "company" or "ANPZ"). The loan will be used to upgrade process water treatment facilities in accordance with best available solutions and remediate evaporation ponds adjacent to the city of Atyrau. The loan will be fully guaranteed by National Company KazMunayGas JSC (the "sponsor" or "KMG"), the 99.54% shareholder of the company.

Project Objectives

The loan proceeds will be used to improve resource efficiency and reduce emissions by upgrading process water treatment facilities resulting in increased water reuse and resolve long-standing environmental issues by remediating 860 ha evaporation ponds adjacent to the city of Atyrau. The project is 100% consistent with the Bank's Green Economy Transition approach. The project implementation will result in (i) an improvement of water efficiency, (ii) the minimisation of adverse ecological impacts by remediating the evaporation ponds, and (iii) a reduction of GHG emissions and volatile organic compounds.

Transition Impact

ETI score: 64

The transition impact of the project will stem from the following transition qualities:

  • Green: Resolution of serious environmental issues for the city of Atyrau through upgrade of process water treatment and remediation of evaporation fields located 3 km from the city.
  • Inclusion: Development of at least 4 National Occupational Skills Standards (NOSS) and implementation of an accredited dual-learning programme in partnership with a local technical university.

Client Information

ATYRAU OIL REFINERY LLC

Borrower: Atyrau Refinery LLP is one of the three main refineries in Kazakhstan, owned by KazMunayGas (99.54% stake), a state-owned O&G company. It employs approx. 1,700 people and is a part of KMG's vertically integrated value chain, with KMG supplying the feedstock and off-taking the majority of ANPZ refined products.

Sponsor: KMG is Kazakhstan's national holding in O&G involved in the exploration, production, processing and transportation of hydrocarbons. KMG is fully-owned by the Kazakh state, with 90.42% held via Samruk-Kazyna and 9.58% via the National Bank of the Republic of Kazakhstan. Being the project's sponsor, as part of the proposed transaction KMG provides a full financial guarantee for the proposed loan.

EBRD Finance Summary

USD 200,000,000.00

EBRD Finance Summary: USD 80,000,000

Total Project Cost

USD 200,000,000.00

Total Project Cost: USD 80,000,000

Environmental and Social Summary

Categorised B (2014 ESP).  The project will result in significant E&S benefits, including reduced emissions and raw water demand and the remediation of contaminated evaporation ponds. Any adverse impacts, notably with respect to implementation of the wastewater treatment plant project and the remediation of the evaporation ponds, are expected to be readily addressed. The project will not result in an increase in processing capacity of the refinery. E&S due diligence was conducted remotely by a consultant in line with ESD's COVID-19 approach to ESDD. ESD also undertook a site visit in early 2020. The due diligence considered the project as well as the E&S performance of the refinery as a whole and was benchmarked against the Bank's PRs and EU Best Available Techniques (BAT) for the sector.

Wastewater generated by the refinery is currently treated by an old and ineffective mechanical and biological treatment facility before discharge of the partially treated wastewater to evaporation ponds, which extend over 860 ha. Such wastewater has high levels of contaminants, including hydrocarbons, salts and heavy metals. The City of Atyrau (specifically the part of the City on the south bank of the Ural River) similarly discharges wastewater, but with no treatment, in adjacent ponds. These ponds are large man made wetlands, which promote evaporation of wastewater and the natural breakdown of organic matter and some contaminants.  The discharge of wastewater to evaporation ponds is a common approach and is permitted in Kazakhstan.  The ponds are located relatively close to the City and complaints (odour, contamination, etc.) by residents of the City have prompted a Government decision to address wastewater treatment processes at the refinery, introduce wastewater treatment for the City and to remediate the contaminated evaporation ponds.

The introduction of modern wastewater treatment equipment will enable a substantial increase in water recovery (decreasing fresh water demand from the Ural River), substantially improve wastewater treatment, reduce GHG (CO2) emissions from the process and from the evaporation ponds and address the long lasting water, soil and air pollution issue through dewatering and remediation of the evaporation ponds. Some wastewater will be discharged off site but will be directed to the new City treatment plant for further treatment before recirculation of a proportion of this back to the refinery. The City plant will discharge treated wastewater to an unused, and larger, evaporation pond area.  The project is currently subject to a local EIA process including public consultation. The ESDD has identified some gaps in the EIAs and the Company has confirmed that the design of the biological treatment process and remediation approach of the ponds is still being refined.  The gaps will need to be addressed by the Company and the treatment technology will need to comply with EU BAT and apply good international practice for remediation and monitoring. While closure of the refinery ponds will address long-term pollution issues, it will displace biodiversity (reeds, birds, etc.) that has been established in the ponds over time. With the commissioning of unused ponds and the discharge of treated wastewater, such biodiversity is expected to rapidly re-establish itself in these new ponds and over a larger area. The Company will need to further assess potential biodiversity issues as well as continue its contamination investigations to determine the most appropriate approach to the remediation and monitoring of the remediation ponds. Further the Company will need to consider, together with the City, any potential impacts associated with the new City evaporation ponds.

E&S due diligence indicates that the Company has the capacity to implement the Project in line with the Bank's requirements. Management systems are in place for environmental and health and safety matters and a team of Company experts is in place to ensure implementation and monitoring performance and impacts (emissions, etc.). These will need to be extended to the project and project contractors and specific systems, plans and procedures put in place for the project.  HR matters were found to align with PR2 requirements although the worker grievance mechanism will need to be improved and extended to the project. The Company will also need to introduce a system to consider potential E&S risks within its supply chain. The Project is expected to take place within the boundaries of the refinery.  Temporary land may be required for works.

The refinery has in previous years undergone significant investment to increase capacity and improve efficiencies and E&S performance. The Company, in response to expected potential changes to the national Environmental Code, is in the process of determining what improvements are likely to be required at refinery. The E&S performance of the refinery has been reviewed by the consultant to identify risk areas and determine whether further investments are required to align with refinery with EU BAT. Investments required include the need for a continuous emission monitoring system, vapour recovery on tanks and improvement of secondary containment and the soil and groundwater contamination investigations at the refinery. Further the Company will need to align its emission monitoring with EU BAT and where emission do not comply, implement measures to reduce emissions. Data reviewed indicate the potential need for abatement to reduce NOx and dust emissions.  These and other investments will be information by a detailed BAT review required by the ESAP and will need to be implemented over the duration of the loan. The Company will further need to conduct an asbestos and persistent organic pollutants (specifically PCBs) at the refinery and define a removal and replacement programme.

Health and safety issues are managed through the refinery's management system. The ESDD identified some areas where the refinery's risk assessment on industrial safety needs to be improved, including the consideration of additional accident scenarios and external events (e.g. an accident at an adjacent facility affecting the refinery).  The updates will need to consider the requirements of the EU Seveso III Directive on industrial safety and the EU ATEX Directive on explosive atmospheres and inform revisions to mitigation and control measures as well as emergency preparedness and response planning. Where community risks are identified these will need to be communicated by the Company. The refinery, like others in the region, is surrounded by a sanitary protection zone (SPZ). The SPZ is a buffer zone in which residential development is not permitted. This is to prevent community health and safety risks.

The findings of the ESDD have resulted in an E&S action plan (ESAP). This ESAP has been agreed with the Company to align the project and existing operations at refinery with the Bank's requirements.  The ESDD further included the development of a Stakeholder Engagement Plan and a Non-Technical Summary, which has been disclosed with the PSD and by the Company.  This will complement existing Company stakeholder engagement and information disclosure practices and the EIA process, including a grievance mechanism. The Company will be required to report to the Bank on the implementation of the ESAP and E&S performance of the project and the refinery. ESD will also conduct monitoring visits, where necessary, once travel restrictions are lifted.

Company Contact Information

Mr. Timur Mendebayev
ref@anpz.kz
www.anpz.kz/en/

PSD last updated

03 Jun 2021

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

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Independent Project Accountability Mechanism (IPAM)

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