TRANSNEFTEPRODUCT

Location:

Russia

Project number:

27801

Business sector:

Natural resources

Notice type:

Public

Environmental category:

B

Target board date:

15 Jul 2003

Status:

Completed

PSD disclosed:

15 Oct 2002

Project Description

Proposed modernisation loan to finance capital expenditures in connection with the rehabilitation and upgrading of Transnefteproduct’s network of product pipelines and supporting infrastructure. The project would also improve health, safety and environmental standards and result in a certain increase of pipeline capacity.
To support TNP’s modernisation programme to upgrade product pipeline system, replace critical sections of the pipeline and install modern spill prevention and emergency response equipment. This programme will substantially reduce operational and environmental risks associated with TNP's operations.
 
 

Transition Impact

The project will improve the operational profile of TNP as well as increase transparency in its operations. The loan will assist the Company with establishing proper procurement procedures. In addition, the Project should result in significant environmental, health and safety improvements of TNP's operations. This, together with the availability of IAS audited accounts (a condition of EBRD financing) and successful completion of TNP's consolidation, should improve the Company's attractiveness to the commercial sector.

The Client

OAO “Transnefteproduct” (TNP), owner and operator of the Russian pipeline system for transportation of refined oil products (gasoline, diesel, jet fuel). It is responsible for managing, servicing and developing the integrated system of pipelines, pumping stations and storage facilities. TNP is fully owned by the state.

EBRD Finance

A 5 year senior secured corporate loan of US$ 75 million (€69.44 million). The Bank may syndicate up to US$ 25 million (€23 15 million) to commercial banks.

Project Cost

Up to US$ 164.3 million (€152.13 million).

Environmental Impact

Background
The loan facility will enable TNP to modernise several sections of its product pipeline system, replace critical parts of the pipeline and install modern spill prevention and emergency control equipment (mostly at river crossings). The need for modernisation works is substantiated by the fact that 40% of the Company’s pipelines has nearly reached its design service lifetime of 33 years, and more than 50% of the tanks have been in operation for more than 20 years. Therefore, replacement and upgrade of the obsolete infrastructure will substantially reduce operational and environmental risks associated with TNP’s current operations.
 
As a result of EBRD’s environmental audit and analysis, which identified the most environmentally sensitive areas, in which the most obsolete pipeline sections are located, the following eigth components of the TNP’s pipeline system have been included into EBRD’s Procurement Plan for this project: “Almetievsk-Kstovo”,“Cherkassy-Subkhankulovo”, “Stalnoi Kon-1D”, “Stanovaya-Stalnoi Kon”, “1D-8N”, “Kuibyshev-Bryansk (738-771, 886-922)”, “Penza-Sosedka”(959,5-969,5), “Ufa-Priboi”. Therefore, the proposed project is likely to result in significant environmental benefits through improved reliability of the system, particularly in environmentally sensitive areas.The ecological “footprint” of the Company’s key pumping and filling stations, tank farms and other non-linear facilities is minimised by means of locating them in the developed industrial areas near major refineries, railway stations, port facilities, etc.
 
Compliance status
The Company is largely in compliance with the applicable Russian environmental, health and safety requirements and guidelines, such as the Oil Industry Environmental Code of Practice - ERUS 9605 (1 March 2001). TNP did not pay any major environmental penalties and was not a subject of environment-related claims at the corporate level. The key issues of non-compliance are the existing soil and groundwater contamination resultant from leakages of old corroded pipelines and the illegal tapping practices, which also increase the potential risk of oil spills and other emergencies. These are mitigated through designated clean-up and remediation programmes and prevented through application of best available technologies such as underground laying of pipelines, use of pipelines with improved insulation, installation of protective casing at river crossings, use of intrinsically safe electrically driven valves, equipping the oil traps with two-stage filters and impermeable lining.
 
Some operational activities including inspections and maintenance of bunds, tanks and pipework, and oil spill equipment deployment practices were also found to be in line with the applicable international guidelines such as PPG2 (Environment Agency, UK), the Australian Pipeline Industry Association (APIA) Code of Environmental Practice, the UK Oil Firing Technical Association for Petroleum Industry, etc. One of the key areas, in which the Company’s performance falls short of the international standards, is the environmental management system (EMS). TNP’s EMS is currently under development and yet lacks many of the features stipulated by the ISO 14000 Environmental Management Systems and EMAS guidelines.
 
Key environmental, health and safety issues requiring mitigation at the corporate level comprise, inter alia, development of TNP’s environmental management system up to the international standards. At subsidiaries levels, further improvement is required in relation to strengthening pipeline safety and integrity practices, especially such on prevention of illegal tapping. Subsidiaries will also need to enhance management of their permitting status.
 
Summary of Environmental Action Plan (EAP)
As a result of EBRD’s environmental due diligence, the EAP has been developed and agreed with the Company. Implementation of the EAP (2003’- 2007’) will result in full compliance of the TNP’s operations with the Russian environmental, health and safety regulations. It will also bring TNP’s operations closer towards compliance with applicable international guidelines in the areas of the environmental and operational safety management, including development and implementation of adequate corporate and subsidiaries’ environmental, health and safety policy and procedures, improvement of the environmental data collection system and communications between subsidiaries and HQ; atmospheric air protection, materials and waste management, soil and ground water contamination through development of comprehensive assessment, clean-up and rehabilitation programs as well as introduction of leakage detection systems in all subsidiaries; revisions to oil spill contingency plans; occupational health and safety.
 
Most of the actions in the EAP are aimed at improvement of TNP’s EMS and are not associated with significant costs. The two most capital-intensive EAP actions are completion of the installation of the Leakage Detection System in all subsidiaries (315 ths. USD) and the clean-up and rehabilitation program for soil and groundwater contamination, the cost of which will be defined upon a number of investigations included in the EAP surveys and assessments exercises.
 
Status of public consultation
No public complaints were identified in relation to the proposed operation. It should be noted that TNP’s subsidiaries regularly use mass media to raise public awareness levels about health and safety aspects of its operations. For example, Ryazan TNP annually informs the public about safety measures undertaken in agricultural areas, and Ural TNP - about the potential environmental consequences of any unauthorised activities of the general public within the protection zone along the pipeline routes. TNP will be encouraged to further improve their interaction with the public. This issue will be an integral part of the EMS.
 
Issues of particular concern
As outlined above, the issue of illegal tapping is one of the most significant concerns leading to both financial and environmental losses. The Company’s measures on prevention of fuel thefts include completion of the installation of leak detection system and strengthening of pipeline security services.
Another issue of potential concern, amplified by the reasons outlined above, is the fact that TNP’s pipelines cross several protected territories such as Samarskaya Luka National Park in the Samara oblast’ and Zaeltsovsky Bor in the Novosibirsk oblast. However, the increased risks are mitigated through reinforced monitoring of pipeline integrity in cooperation with personnel of the reserves.
 
Environmental Management System Technical Cooperation initiative
The project team is currently working on development of a grant-financed technical cooperation project to assist TNP in establishment and implementation of its environmental management system in line with the international standards outlined above. Provision of the TC assistance to the company would not only ensure adequate implementation of the EAP, but will take TNP one step further -- beyond the EAP- in harmonizing these aspects of its operations, including the oil spills response plans and procedures, communication with the public, etc. with the best international standards and strengthening its institutional capacity in this area.
 

Technical Cooperation

TC to improve environmental policies and procedures in the Company.
 

Business opportunities

For business opportunities or procurement, contact the client company.

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