24689 - Geopark

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Environmental Review Summary

Project Number

24689

Company Name

GEOPARK ARGENTINA LIMITED

Date ERS Disclosed

Dec 21, 2005

Country

Latin America and the Caribbean Region

Region

Latin America and the Caribbean

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jan 31, 2006
Signed : Feb 7, 2006
Invested : Feb 27, 2006

Sector

Oil and Gas Production (Includes Development)

Industry

other

Department

Gbl Infrastructure & Natural Resources

Project Description

GeoPark Holdings Limited (GeoPark or the company), is a small South American exploration and production company with producing assets in both Argentina and Chile. The Cerro Dona Juana, Loma Cortaderal and Del Mosquito blocks in Argentina are located in the Neuquen and Austral basins (central and southern Argentina), frespectively, and are fully owned by the company.

The Fell block in Chile is located in the Magallanes basin (also knownas the Austral basin) and is 90 percent owned by Geopark, with the remaining interest held by Empresa Nacional de Petroleo (“ENAP”), the Chilean state-owned oil and gas company. Current oil and gas production is about 371 barrel a day (“b/d”) and 165 thousand cubic feet per day (“mcf/d”), respectively, with the majority coming from Del Mosquito.

IFC has been requested to provide early-stage financing to the company to strengthen Geopark’s capital base and to help finance a portion of the company’s currently projected capital expenditure program which aims to increase oil and gas production to about 5,000 b/day and 40 million cubic feet per day (“mmcf/d”), respectively, by December 2008. This capital expenditure program is expected to entail the drilling of about 100 primary wells, the completion of approximately 50 work-overs and the installation of production and separation facilities, and product flow lines throughout the company’s properties.

The company’s fields are located in the provinces of Santa Cruz and Mendoza in Argentina and in the Magallanes region in Chile. GeoPark is managed from its main office in Buenos Aires, with field offices in Rio Gallegos (Argentina) and Punta Arenas (Chile).

Environmental and Social

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. Further information is provided in the attached documentation.

GeoPark is currently in the early stages of exploration and production and it is expected that by the middle of next year, the company will have developed an integrated Environmental, Health, Safety and Social Management System taking into consideration the Argentinean, Chilean and IFC standards. In addition, the company is also increasing their environmental and social capacity by hiring an Environmental Specialist that will coordinate all the environmental and social aspects of the project. However, the Company currently has an Environmental, Safety and Social strategy by which they guide their current activities.

The Environmental and Safety assessments for GeoPark’s activities are currently conducted by a team of environmental consultants. The company has twenty-seven direct employees and also contracts multiple consultants and service contractors. GeoPark provides training for its employees as well as contractors, but draws on the contractors experience as well. As part of their safety program, the company provides its contractors and employees transportation between the fields and their communities due to the great distances and to avoid vehicular accidents.

It is anticipated that the main components of exploration and development will occur in the Del Mosquito block in Argentina and the Fell block in Chile.

The Del Mosquito field covers a surface area of 763.2 Km2 and is located in the province of Santa Cruz. There have been 44 wells drilled to date in the block, of which 9 are currently producing. There are also two tank batteries and one base camp within the block. The current production is 371 b/d. The five year development plan for the block includes the drilling of:

- 12 exploration wells;
- 92 development wells, and
- 450 km2 of 3D seismic.

According to the environmental Argentinean legislation, every well to be developed by the company will need to present an environmental assessment “studio previo” for the approval of the appropriate authorities.

GeoPark through their environmental consultants perform monitoring of the existing assets and an Environmental Management Plan (EMP) is prepared after each of the monitoring assessments. The EMP has a specific timetable to complete the actions. The Del Mosquito field does not have environmental contamination from past or current operations. The environmental monitoring reports are presented to the “Secretaria del Medio Ambiente”. The company is also in the process of placing fences along the wells to avoid accidents with the sheep in the area. The Del Mosquito area is semi-desert and there are no protected areas in the block.

The Fell block is located in Chile in the province of Magallanes Region XII. The closest communities to the block are Punta Arenas, Punta Delgada, San Gregorio, Rio Verde and Villa Tehuelches. The surface area of the project is 1780 Km2. The block has 148 drilled wells to date out of which only 1 is currently producing. Approximately 40 wells will be re-tested by GeoPark. Previous to theGeoPark acquisition, ENAP operated in the area since 1950. An environmental audit, carried out on June 2005 of the block was prepared by GeoPark to determine the environmental conditions and any environmental legacies in the block.

The environmental audit concluded that there are no serious environmental legacies in the block, although, there are some wells and mud pits that will need to be reinstated. The clean-up of the environmental legacies pre-dating 1997 will be the responsibility of ENAP. ENAP has prepared a master plan that identifies certain environmental legacies that are across the area and has established a budget for the clean-up of the legacies. The master plan which includes timetable and methodologies for restoration will need to be presented to CONAMA (Comision Nacional del Medio Ambiente) for their approval, prior to commencing any work.

In addition, based on the environmental audit, GeoPark has prepared an EMP with specific timetable to complete the appropriate measures to improve the conditions of the block. Within these measures taken by GeoParkn including the establishment of safe access to the well location and fences, improvement of the identification of wells, establishing a plan for clean-up of abandoned wells.

The regulatory system in Chile indicates that the company will need to prepare “declaracion de estudio de impacto ambiental” to the regional environmental authority to determine if a more detailed Environmental Impact Assessment (EIA) is necessary.

Geopark’s concessions in southern Argentina and Chile are located on the sparsely populated Patagonian steppes. The majority (if not all) of the land in the Fell and Del Mosquito blocks are privately owned by large-scale sheep ranchers and by the Cooperative of Bernardo O’Higgins. It is expected that exploration and production activities will only marginally impact ranching activities and that ranching activities will continue uninterrupted. In negotiation with ranchers, Geopark will develop an operational plan, to be integrated into the environmental management system that will outline steps to be followed to mitigate and minimize impact to ranching activities. The company aims to reach mutually-agreeable compensations for use based on a willing “buyer”, willing “seller” negotiations. In Argentina Geopark commits to comply with Argentine law that clearly outlines the rights and responsibilities of the company and landowners with regard to compensation for the right-of-way (ROW) exploration and production as well as grievance mechanisms for these processes. Geopark also commits to comply with Chilean law with regard to compensation for landowners and the rights and responsibilities of both landowners and the Company. In Chile, Geopark will negotiate a general compensation package that will apply to all affected parties. There is no resettlement planned or needed as part of the project, nor does the company intend to acquire land.

Geopark complies with Argentine and Chilean labor policy and it commits to comply with the requirements of IFC’s Performance Standard on Labor and Working Conditions. Employees of contractors, subcontractors and intermediaries will also be subject to the requirements of the Performance Standard. With regard to suppliers, the client will ensure that these suppliers do not benefit from child or forced labor. As part of it their commitment to development in the region, the company has committed to hiring a significant portion of direct employees as full-time employees, not as temporary workers as permitted by law. The company is committed to hiring 100% of unskilled labor will be hired locally in both countries. Geopark has implemented and will continue to carry out programs to train unskilled community members and employees to qualify for more highly skilled positions.

Geopark will comply with Argentine and Chilean laws on disclosure and consultation as well as IFC’s Policy on Disclosure of Information. As part of its effort to build a relationship with local communities, Geopark will designate a Community Liaison Officer who will respect an open-door policy and will record and respond to comments, requests for information and grievances. Geopark will also implement a written grievance process that ensures that complainants have access to a formal system for registering complaints locally. As part of its commitment to enhance community relationships, Geopark will regularly consult with members of the surrounding communities.

Geopark expresses a strong commitment to contribute to the economic development of the local communities and to the region and intends to develop a range of social development activities. In order to understand the socio-economic context in which it will be operating, Geopark will conduct socio-economic baselines and studies, and will produce a community development plan.

While a small Geopark’s concession in Chile is located inside the Pali Aki National Park, in order to reduce risk of disturbance to cultural heritage sites and protected areas, the company will not be exploring or producing within the park boundaries. Geopark will also implement a policy for "Chance Finds" in compliance with Argentine and Chilean laws as well as World Bank Group Operational Policy 11.03 and IFC’s Performance Standard on Cultural Heritage.

Conclusion & Monitoring

IFC will evaluate the project’s compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering:

- the status of implementation of any measures contained in the Environmental and Social Action Plan[s] and
- ongoing performance of project-specific environmental, health, safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs.

Periodic site supervision visits will also be conducted.

Environmental and Social Documentation

File Name	Actions
Chance FindsFINAL.pdf
LD ed Consulta Popular II (6) FINAL1.pdf

This Environmental Review Summary (ERS) is prepared and distributed in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Any documentation that is attached to this ERS has been prepared by the project sponsor or in conjunction with the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content. The following ERS is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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