The investment will be to finance the Company’s working capital needs to enable the Company to start operating 30 new drilling rigs and become a significant niche player in exploration drilling within the Russian oil field services market.
The proposed transaction will support the growth of a private, independent supplier of oil field services which offers an alternative to in-house operations to oil and gas companies and which will have a demonstration effect by introducing in Russia modern international drilling technologies and promoting sound business practices in the industry.
Through the Project, the Bank will promote improvements in the business and corporate governance structure of the Company including production of IFRS audited accounts and adoption of international corporate governance principles. In addition, the Bank will seek to further improve environmental and labour protection policies in the Company’s operations. This will include the adoption of and compliance with the Bank’s Environmental Action Plan.
North Expedition Limited is a high-technology drilling company focusing on exploration and production drilling in the Russian Federation.
USD 50 million participation in a USD 100 million private placement of convertible preferred notes.
Working capital costs of up to USD 125 million to start operating 30 new rigs.
Environmental classification and rationale
Screened C/1. The project involves financing of the Company's working capital, which will enable the Company to start operating 30 new drilling rigs. The potential environmental and social impacts are not directly related to the Company’s current operations but rather to the services the Company will be contracted to undertake. Therefore, there are no specific projects that would need to be assessed. An Environmental Audit of the main operational bases and a corporate audit to assess the internal environmental policies and capabilities of the Company have been carried out.
Key environmental issues and mitigation
During the environmental due diligence the auditors visited two drilling areas located in the area of Noviy Urengoy and a support base in the town of Gubkinsky. The audit concluded that the Company has an efficient EHS management system. No major non-compliances with regulatory requirements have been identified. The key issues identified are as follows:
The company does not have the license for hazardous waste management.
Due to the lack of the license for hazardous waste management, company cannot obtain the limits for waste disposal and therefore it pays fees for waste disposal five times as much as the normal fee.
Wastes are not stored properly, the territory is littered with domestic waste and scrap metal.
Chemicals are temporarily stored outside the specially designated areas.
- Soil contamination was observed near the diesel fuel tanks.
At the support base:
The storm water drainage system is lacking. Rain and melt snow water flows to the adjacent topography and then to the Pyakopur River.
The base's site is partly located in the water protection area of the river. No special water protection measures that are required by the legislation are taken to prevent river contamination.
Waste storage areas are not equipped as required by the regulations.
- Signs of soil contamination with hydrocarbons were observed at a number of locations.
As part of the environmental due diligence an EAP has been prepared. The implementation requirements of the EAP are as follows:
obtain operation licenses for OAO Neftegeologiya and OOO IzevskBurServis;
develop the Sanitary Protection Zone project and obtain approval from the supervisory authorities;
prepare the project for and construct the stormwater drainage system;
obtain the license for the collection, use, neutralisation, transportation, disposal of hazardous waste;
clean the site of the waste stored outside the specially equipped areas;
provide the site with containers for domestic waste disposal;
organise a specially equipped place for scrap metal disposal or sell most of metal scrap and organise a specially equipped place for the remaining scrap metal;
construct the hard pavement at the site (roads, parking areas);
perform the regular cleaning of the site;
enhance control over the use of PPE;
ensure the personnel always follow fire safety rules;
develop and approve the environmental and H&S policy and goals and objectives of the EHS activities of the Company;
conduct the Phase 2 environmental investigation for soil and groundwater contamination;
construct hard pavement/secondary containment in places of fuel storage;
dismantle and remove from the site two old fuel storage tanks 400m3 each; and
- replace asbestos containing roofing materials of some of the buildings at the site.
Disclosure of information and consultation
In accordance with EBRD policy the Company is required to carry out its actions in accordance with national requirements for public disclosure and consultation.
Monitoring and reporting
The Company will report to the EBRD annually on its environmental, safety and labour performance and on the implementation of the ESAP. The Bank will evaluate the project's compliance with the applicable environmental and social standards during the lifetime of the project by reviewing these reports and by conducting monitoring visits to the project when and if deemed appropriate. The Company will also be required to notify the Bank of any material incidents or accidents likely to have an effect on the environment or worker and public safety.
Mr Yuri Livshits, Chairman
North Expedition Limited
Tel: +7 495 967 3839
Address: 11 Stremyanniy Pereulok, Moscow 115054, Russia
Natalia Lacorzana (email@example.com)
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