Kuwait Energy Loan

Location:

Egypt

Project number:

48380

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Status:

Cancelled

PSD disclosed:

18 Oct 2016

Translated version of this PSD: Arabic

Project Description

The EBRD is considering providing a reserve-based loan of up to USD 100 million to Kuwait Energy International Limited ("KEI" or "the Company"), a subsidiary of Kuwait Energy plc, an oil and gas exploration and production company with its regional operational hub in Kuwait, to finance its operations at the Abu Sennan, Area A, Burg El Arab and East Ras Qattara fields in Egypt.

Project Objectives

The Project supports the development of KEI's Egyptian operations including measures and investments in associated petroleum gas flaring prevention and recovery.

Transition Impact

The Project is expected to have positive transition impact through:

(i) Supporting private sector development in the Egyptian oil and gas industry;

(ii) Demonstration of new replicable behaviour and activities through the adoption by KEI of gas flaring recovery and prevention technologies in its Area A field in Egypt;

(iii) Setting standards for corporate governance and business conduct in relation to health, safety and the environment through KEI's commitment to International Petroleum Industry Environmental Conservation Association (IPIECA) membership, the adoption of IPIECA's policies in Egypt as well as a commitment by KEI to employee training on environmental topics and issues; and

(iv) Framework for markets by furthering the Bank's policy dialogue efforts in Egypt in the oil and gas industry.

Client Information

KUWAIT ENERGY INTERNATIONAL LIMITED

EBRD Finance Summary

USD 100,000,000.00

Total Project Cost

USD 100,000,000.00

Environmental and Social Summary

Categorised B in accordance with the Environmental and Social Policy 2014. The Project involves an ongoing upgrade of existing field infrastructure at the developed and producing oil fields and potential impacts are localised and site-specific.

The environmental and social due diligence (ESDD) was conducted by an independent international consulting company and consisted of (i) an environmental and social assessment of the proposed investments; (ii) an environmental, health, safety and labour audit of existing operations including a site visit to all four producing Egyptian fields and (iii) a review of relevant procedures, national Environmental Impact Assessment (EIA) reports and documentation made available by the Company prior, during and post site visit.

The ESDD identified that the potential risks of the proposed activities are similar to those posed by existing operations. Impacts related to the construction phase include management of construction waste, noise and dust emissions and increased road traffic. Potential impacts can be readily mitigated through the implementation of the Company's integrated management systems and good oilfield practice. It should be noted that the majority of operational sites are located in remote areas and away from potential sensitive receptors. East Abu Sennan, East Ras Qattara and Burg El Arab sites are located in the Western Desert, at a considerable distance from villages and settlements.

The desert climate conditions of these areas strongly limit the possibilities for developing agricultural activities; indeed no economic activities have been identified close to the sites. The Western desert, in particular the northern part, is known for the presence of nomadic Bedouin tribes whose livelihood is generally based on sheep and camels herding. However, no signs of their presence were sighted during the site visit close to East Abu Sennan, East Ras Qattara and Burg El Arab fields.

Area A is located in the Eastern Desert about 15 km from Ras El Gharib, one of the leading centres of petroleum production in Egypt, where most of the residents are directly or indirectly employed in the petroleum sector. Part of Area A overlaps with an important bird area known as Gabal El Zeit.

This area is a migratory corridor for wintering birds. The Company is aware of this biodiversity feature and is cooperating with a number of international and national conservation NGOs to maximise the effectiveness of the biodiversity management measures in the area and to avoid possible impacts associated with site operations.

Some of the proposed investments will facilitate minimising environmental and safety impacts of oil production operations; for example, construction of the gas processing plant will enable reducing the flaring of associated petroleum gas in Area A. The Company will then need to develop a formal GHG quantification and energy efficiency strategy to combat pollution in a systemic manner. Installation of sewage treatment plants will allow using treated water for irrigation purposes and thus reduce the overall freshwater water consumption. An upgrade of fire-fighting systems will ensure that all fields have in place modern automated systems including foam cannons. This will enable the efficient deployment of fire-fighting equipment and promote safety of field personnel and assets in case of emergencies.

The impacts of drilling operations in terms of cuttings handling can be minimised by the use of water-based drilling muds and implementation of good oilfield practice. While the audit of existing operations identified that mitigation measures contained in previously developed environmental impact assessment studies have been implemented and generally good practice is being applied at the fields, a number of areas require improvements. For example waste management and secondary containment around hazardous materials storage, diesel tanks and oil loading points should be improved at individual concessions.

The Company should also improve fencing around wellheads. Contractor accommodation should be reviewed to ensure it is compliant with Performance Requirement 2 and in particular with the EBRD/IFC guidelines for accommodation camps. Formal security training should be provided to unarmed watchmen. The review of corporate integrated environmental, health and safety management systems identified that they contain required procedures compliant with ISO 14001, OHSAS 18001 and ISO 9001 and such procedures are effectively implemented in the fields. However there are a number of areas where procedures should be further expanded. For example the integrated management system should ensure that the socio-economic baseline of the Project area is documented in the EIAs for the avoidance of doubt in the absence of social impacts. Supply chain provisions and contractor management and monitoring should also be enhanced; and social impact assessment and mitigation procedures should be incorporated into the integrated management system (e.g. cultural heritage, chance find procedures). While the Company has established good cooperation with the residents of the Ras Gharib oil town, located 15 km away from the Area A field, the role of the Corporate Social Coordinator should be clearly defined and documented to ensure consistency. A community grievance mechanism should also be formalised.

Mitigation measures for all identified impacts have been included into the Environmental and Social Action Plan (ESAP), which has now been agreed with KEI. Full and timely implementation of the ESAP should bring the Company in compliance with the Bank's environmental and social Performance Requirements. The Company will submit annual environmental and social reports to the Bank, including detailed ESAP implementation status reports. The Bank will conduct regular monitoring visits to the Company's operating assets in Egypt.

Technical Cooperation

None.

Company Contact Information

Roger Phillips, Chief Financial Officer
(+ 965) 257 677 00 / 257 677 01 / 257 677 02
www.kuwaitenergy.co
5th Floor, Symphony Tower 2; Salem Al Mubarak Street, Salmiya, Kuwait. P.O. Box 5614, Salmiya
22067

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