Black Sea - Midia Gas Development Project

Location:

Romania

Project number:

50774

Business sector:

Natural resources

Notice type:

Private

Environmental category:

A

Target board date:

19 Jun 2019

Status:

Board Approved

PSD disclosed:

15 May 2019

Translated version of this PSD: Romanian

Project Description

Senior secured reserved based loan alongside a mix of international and local banks in favour of Black Sea Oil & Gas, Petro Ventures Resources and Gas Plus Dacia, limited liability companies incorporated in Romania.

The proceeds will fund the development of the Midia Gas Development Project (MGD Project), that comprises the Ana and Doina gas fields located some 120 km offshore Romania in the XV Midia Shallow area. MGD Project consists of 5 production wells (1 subsea well at Doina field and 4 platform wells at Ana field), a subsea gas production system over the Doina well which will be connected through an 18 km pipeline with a new unmanned production platform located over Ana field. A 121 km subsea pipeline will ensure the delivery of the gas from Ana platform to the shore, where a 4.3 km underground pipeline will connect to the new gas treatment plant.

Project Objectives

The project will support the development of a privately owned offshore gas upstream development project in Romania, and provide assistance to the Romanian government in implementing the country's updated legal and regulatory framework for the offshore oil and gas sector.

Transition Impact

The transaction will support the development of the first new offshore gas development in the Romanian Black Sea basin since 1989. As it is a follow-up to a previous equity investment in project majority owner Black Sea Oil & Gas SRL, this project will pursue the original sources of transition impact, through the "Well-governed" transition impact quality via policy dialogue to support the implementation of the off-shore safety directive in Romania, and the "Competitive" quality as all of the gas will be sold at market prices either in Romania or on a regional hub.

Client Information

BLACK SEA OIL AND GAS SRL

Black Sea Oil & Gas SRL (BSOG) is a Romanian based independent oil and gas company, targeting exploration and development of conventional oil & gas resources. Current portfolio is made up of XV Midia Shallow Block and XIII Pelican Block concession (the "Concession") in the Romanian Black Sea where it is the operator and holds a 70% interest. Gas Plus is the 4th largest producer of natural gas in Italy active in the main sectors of natural gas industry (e.g. exploration, production, purchase, distribution, sale to retail customers); holds 10% interest in the Concession. Petro Ventures, a private investment group, holds 20% interest in the Concession.

Environmental and Social Summary

Categorised A (2014). The development of offshore gas fields, installation of offshore (121 km), nearshore and onshore (4.3 km) gas lines and the construction and operation of the gas treatment plant requires a comprehensive Environmental and Social Impact Assessment (ESIA) with public consultation. The main risks associated with this project are related to possible impacts to biodiversity of the nearshore and onshore pipeline which is 4.3 km in length and crosses critical habitat. The original plan was to open trench the installation of  most of the onshore pipeline segment and use horizontal directional drilling (HDD) only for the nearshore and beach crossing pipeline section. To avoid, reduce and mitigate associated impacts, the Company committed to employing HDD for the installation of additional onshore pipeline sections, subject to technical feasibility confirmation and permitting by national authorities. The project is situated in a sensitive area, in the southern end of the Danube Delta Biosphere Reserve, within the economic zone of the World Heritage site and in the vicinity of Annex 1 Habitat. While the site is located in a sensitive area, the development of the site is consistent with the status of the protected site as the 4.3 km of underground pipes that cross the protected area are located exclusively in the Economic Zone and surface impacts will be avoided/ minimised by adopting HDD installation techniques, subject to technical feasibility confirmation and permitting by national authorities, significantly diminishing the footprint. The Bank has an existing deal with the client, and they are compliant with that Environmental and Social Action Plan (ESAP) and up to date on annual reporting.

BSOG retained a group of consultants to complete the ESIA. This ESIA has been reviewed by the EBRD's Environment and Sustainability Department (ESD) as well as by an Independent Environmental and Social Consultant (IESC) and was disclosed on the EBRD web site on 18 April 2019. The Project is defined as the offshore production facilities, the offshore and the onshore pipelines from the platform to the Gas Treatment Plant (GTP) and the GTP. Transgaz, the state entity for transportation of gas in Romania will construct a pipeline (24.5 km length, 20 inch diameter) to the GTP in order to realise a national gas transmission system connection at the outlet of the GTP. This is considered to be an Associated Facility as it will be constructed, owned and operated by Transgaz. While BSOG completed a review of alternatives for this alignment, and it is understood that Transgaz will use the preferred alignment, BSOG have no influence over the actual construction of this pipeline, either in terms of route used, construction techniques or compensation/rehabilitation.

BSOG has held a series of formal and informal public meetings to date, and implement the formalised Stakeholder Engagement Plan for future community interaction including disclosure of the ESIA and management plans to the key project stakeholders such as NGOs at regional and national level. BSOG purchased the land required for the pipeline and the GTP several years ago through consent agreements. No physical resettlement is required for the project. In order to minimise the impacts on local people, the company will allow community members to continue to use the lands that are not used by the project. Additional social baseline data has been collected from nearby communities and currently there is no need for additional land take nor is any additional compensation required. If such is required in the future, this will be conducted in accordance with the PR 5 requirements. The social impact assessment studies concluded that there are no significant anticipated impacts on coastal fishing activities due to the fact that the offshore pipeline runs adjacent to or just inside the military firing range, fishing is not legally allowed in the project area. In the offshore, the production facilities are positioned outside the fishing grounds of the commercial fishing boats, according to data provided by the Maritime Affairs. The project will develop and implement a complaint mechanisms and a Livelihood Restoration Plan in case of any losses to the ongoing local economic activities in the project area.

In order to mitigate the construction impacts on people, the construction works at the beach area are scheduled outside the summer season to ensure that there are no negative impacts to the livelihoods of small businesses such fish restaurants on the beach, informal fishermen and tourists. The Company will continually review project activities and potential impacts to local population. If this review process indicates that there are potential impacts to the locals, in particular any that could impact livelihood, a Livelihood Restoration Plan (LRP) will be implemented to address any loss that might be generated by the project. The Project will prioritise locals including fishermen in local employment to help mitigate any potential livelihood losses in line with the requirements of the LRP. The project has adopted a strategy of avoiding impacts. This starts with the offshore platforms, while gas is produced from two fields, the Doina field will consist of a subsurface installation thereby avoiding the need for a second platform. Further, the use of additional HDD for the nearshore and onshore pipelines will avoid significant impacts. Additional measures will be taken to mitigate traffic and other community safety risks to children and other vulnerable people in the region during construction and operation phases of the project. Lastly, the GTP is located on agricultural land, outside of the protected and sensitive areas.

Total greenhouse gas emissions for the project are estimated at 818,000 t CO2e, which covers construction, 20-years of operation and decommissioning. The ESAP for this project includes requirement for routine review of GHG emissions and reduction opportunities, strict control of all contractors on the construction and operation of the facilities, regular audits for working and living conditions of the workers and a robust community engagement and public disclosure activity. The project will develop and implement a community development programme with an aim to bring additional benefits to the region. While many of the management plans are included in the ESIA and the overarching Environmental and Social Management and Monitoring Plan, some of the plans will be updated to make these operational for BSOG and contractors prior to construction. In such cases the commitments to actions are already contained in the ESIA and the Environmental and Social Management Plan (ESMP) and any modifications will be updated in the public domain. Further, as final engineering is currently underway, the details of the onshore HDD are still being evaluated and when a final solution is agreed (mainly dictating the location of the HDD drilling and receiving stations) the Biodiversity Action Plan and the Critical Habitat Accounting will be finalised and updates will be released in the public domain. Given the location of the onshore pipeline and the Annex 1 habitats, the project has been subjected to the appropriate assessment procedure as part of permitting.

With implementation of the ESAP and the ESMPs this project is structured to be compliant with our performance requirements. The ESD will monitor construction to verify this compliance.

Technical Cooperation

EUR 285,000 grant funds to provide technical assistance to the Romanian government to facilitate the implementation of the EU Offshore Safety Directive by (i) supporting the institutional capacity building of the newly established Offshore Competent Authority to enable its members to effectively perform their duties; and (ii) assisting the development of the legal and regulatory framework necessary for the effective implementation of the relevant EU legislation into Romanian secondary legislation.

Company Contact Information

Ms. Ana-Maria Pericleanu
ana-maria.pericleanu@blackseaog.com
+40 21 231 32 56
https://www.blackseaog.com/projects/mdg/
Black Sea Oil & Gas SRL 175 Calea Floreasca, 10th floor, district #1, 014459, Bucharest, Romania,

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