KUBGAS Project

Location:

Ukraine

Project number:

42159

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Approval date:

04 May 2011

Status:

Completed

PSD disclosed:

25 Feb 2011

Translated version of this PSD: Ukrainian

Project Description

EBRD is considering providing a loan for up to USD 40m to KUB-Gas LLC (“KUB-Gas”), a Ukrainian exploration and production company. KUB-Gas is, indirectly, 70%-owned and controlled by Kulczyk Oil Ventures Inc (“KOV”), a Canadian oil & gas group. The remaining 30% of KUB-Gas is indirectly owned by Gastek LLC, a Californian company. The project’s objective is the development of KUB-Gas’ on-shore gas and condensate fields in the Lugansk region, eastern Ukraine, in the period to 2013. The project will enable KUB-Gas to consolidate its position as one of Ukraine’s largest private sector hydrocarbon producers.

Transition Impact

Through this project, the Bank will support private sector investment in the upstream natural gas industry of Ukraine which is still dominated by State-owned players. By backing KUB-Gas, the Bank will support an existing domestic producer in maximising the exploitation of its reserves and contributing to increased energy security for Ukraine. The acquisition of a controlling stake by KOV and associated skills and knowledge transfer will also contribute to strengthen transparency (including disclosure under Publish What You Pay principles), corporate governance and business and environmental practices at KUB-Gas, contributing to set higher standards for the industry in Ukraine.

The Client

The EBRD will provide financing to KUB-Gas, which has been active in the extraction and sale of natural gas and condensate from its four on-shore Ukrainian fields since 2000. The Sponsor of the project will be KOV.

EBRD Finance

EBRD is considering an up to USD 40m loan.

Project Cost

Up to USD 108m. Capex should include upgrading of drilling and service rigs and related equipment, purchase of a snubbing unit, drilling of new production and exploration wells, work-overs and modern stimulation techniques for existing wells, and installation of well-site compressors.

Environmental Impact

Categorised B in compliance with the Bank’s Environmental and Social Policy 2008. The independent environmental and social due diligence is currently ongoing. A site visit to the Company’s fields and operational base as well as meetings with technical, operational and HSE management have identified that the Company has sufficient resources for managing environmental, health and safety issues (EHS). The Company is also planning to hire one more HSE person prior to commencing drilling at a newly acquired license area. The head of the EHS Department reports directly to the General Director. The Company generally is in good compliance with Ukrainian regulations and only minor issues were identified during the site visit. Health and safety inductions and regular training as well as field safety and first-aid training are provided to all employees. The Company operates a strict Permit-to-Work system. The Company has developed a comprehensive Health and Safety Management Plan, which embodies a general company policy; tasks and responsibilities; local legislation requirements; procedures for implementation and monitoring of the plan; accident investigation; document processing; planning and forms and logs. The Company also develops Environmental Action Plan on a yearly basis. EHS team also conducts regular field inspections on a bi-monthly basis as well as random inspections.
Each licence areas has its Emergency Response Plan approved by all competent authorities.

The Company has a Collective Agreement, currently pending renewal, that stipulates the rights and responsibilities of the management, of the employees, labour conditions and payment of wages, working hours and leave, social security, compensation and benefits, labour safety, and resolutions of disputes.

The proposed Project will not entail any additional land-take in addition to the land acquisition process completed by the Company to date. The Company has no formal social policy or person responsible for interactions with potentially affected communities. All social issues are dealt with directly by the Director General, who regularly visits field operations and meets with the village councils. A formal Stakeholder Engagement Plan will need to be developed for the Project.

These and any other issues as may emerge upon the review of the documents submitted by the Companies will be mitigated through an Environmental and Social Action Plan that will need to be agreed with and implemented by the Company.

Technical Cooperation

None.

Company Contact

Chris Flynn
General Counsel/Head of Business Development
Tel: +971 4 339 5212
Email: cflynn@kulczykoil.com

Jakub Korczak
VP Investor Relations & Managing Director CEE
Tel: +48 22 414 21 00
Email: jkorczak@kulczykoil.com

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

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Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.