The EBRD is considering a loan of up to EUR 90 million (consisting of EUR 65 million 'A' loan and up to EUR 25 million 'B' loan) to finance implementation of the gas cycling (i.e. utilisation) project on the main Company’s field, Yarakta, further field development and to refinance a part of existing debt. The operation will enable the Company to implement the development of the Yarakta oil and gas condensate field in the northern part of the Irkutsk region in Eastern Siberia.
One of the main components of the development plan is a gas cycling project implementation of which will contribute to significantly reducing gas flaring by re-injection of the associated and natural gas into the reservoir. The proportion of utilization of associated gas will be as high as 96% for the total volume produced during the entire service life of the field. It will result in a reduction of green house gas emissions by utilizing nearly 1million cubic metres of gas per year.
The proposed transaction, which is the second stage of the Bank’s involvement with the Company, will continue to support a private independent medium size company in the Russian oil & gas upstream sector.
Through the Project, the Bank will continue to promote improvements in the business and corporate governance structure of the Company. The Bank will encourage the Company to further improve the environmental performance of the Company’s operations. This will include the adoption and compliance with an Environmental Action Plan and implementation of the proactive environmental management systems consistent with international best practice. The development of gas cycling project is an example of respectable business behaviour which has the potential to have a high demonstration effect in the region.
Irkutsk Oil Company and its affiliates are Russian companies which hold the licences for oil and gas production from several fields in Eastern Siberia in the Russian Federation. Several of these fields are in various stages of development, with production ongoing from three of the fields. A pipeline exists linking two of the fields, including Yarakta, with the regional center Ust Kut.
The project calls for up to EUR 125 million, consisting of EUR 65 million EBRD 'A' Loan divided into two tranches, and up to EUR 25 million in 'B' Loans. The first tranche will cover the gas utilization project in the Yarakta field and restructuring of existing debt. The second tranche will finance additional in field drilling in the Yarakta field which will lead to significant increases in oil production rates while ensuring that associated gases are not flared.
In addition, a further EUR 35 million has been mobilised from Sberbank in December 2008 to assist with the funding of the gas utilisation project.
Total estimated project cost for the next 7 years to develop 4 fields and exploration blocks is over EUR 400 million.
Screened A/1 (2003). The project involves the further development of an oil and gas condensate field, and therefore an Environmental and Social Impact Assessment (ESIA) was required to evaluate the potential impacts associated with this development, and an environmental audit was required to assess potential impacts associated with development of the field to date.
The current project involves the further development of an existing oil and condensate field with the main tasks relating to utilization of associated gas and has been screened A according to the 2003 Environmental Policy. However, it should be stressed that the ESIA has been completed to the requirements of the 2008 Environmental and Social Policy. In addition to this current project, the Bank has an equity investment in this company, and the company is involved in the operation and development of several additional oil and gad condensate fields in the local area. As part of the ongoing equity investment, ESD has a strong working relationship with the company, and the company has implemented a pro active environmental and social program to comply with EBRD requirements (as agreed in the ESAP for the equity investment) across all of their operations. As agreed in the equity ESAP, the company has retained an international environmental advisor to assist on the upgrading of their environmental and social department and activities. While this is work in progress, the Company has proven that they are committed to compliance with the ESAP and the EBRD Environmental Policy requirements and to implementing an exemplary EHS program.
The current project calls for the further development of the Yarakta oil and gas condensate field. As there is no option for exporting or utilizing large amounts of gas locally, current practice is to use gas as required for local operations (including provision of gas and electricity to the nearest village located) and to flare the remainder. The subject project will introduce reinjection of the associated gas into the oil reservoir and will result in an 96% utilization rate (even with an order of magnitude increase in amounts produced) as opposed to the current utilization rate of approximately 4%. This is a significant environmental benefit and will be accomplished at an accelerated pace, years before required by national legislation.
While the proposed project relies heavily on existing infrastructure (including export pipeline, roads and well pads) some new construction is required. The Environmental and Social Impact Assessment (ESIA) identified the habitat of several rare bird species in the field area. Therefore, site and species specific surveys will be conducted prior to construction in all areas of new land take to assess potential presence of such species. If such species are identified in the area, then mitigation measures (including temporal avoidance) as outlined in the ESIA will be implemented. Another issue given the remote nature of the field area is that there is no local infrastructure available for waste management, and therefore the Company must provide all such facilities. The Company has initiated preparation of an integrated waste management plan based on EU standards and principles, and is in the process of trial tests using an incinerator. Further, once developed the company will provide this infrastructure for use by the local community of Verknomarkovo.
While the Yarakta field is more than 100 kilometres away from the nearest village, some of the local land is or was intermittently used by hunters, potentially including groups of Evenks who are designated as Indigenous Peoples by the Russian legislation. The company has initiated an active program of dialogue with these people for the Yarakta field, and this will be augmented to a corporate program of communication/interaction for all activities of the company. The ESIA for the project was released locally, on the Company’s web site and on the EBRD web site on 19 December 2008. In addition to this, the Company has developed and implemented a Stakeholder Engagement Plan and a Grievance Mechanism for all operations. Members of ESD attended public meetings/consultation (including private meetings with local administrators and representatives of local villages, hunters and Indigenous People) for the proposed project and can confirm that this consultation was meaningful and that all groups support the ongoing and proposed activities of the Company. The Company plans further consultation in the near future with the closest communities and during the whole implementation of the project.
There is an Environmental and Social Impact Assessment available for this project.
Yuriy Rubin, Email: email@example.com
Alexander Badilin, Email: firstname.lastname@example.org
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