25919 - Arabian Yemen Cement Company

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Environmental & Social Review Summary

Project Number

25919

Company Name

ARABIAN YEMEN CEMENT COMPANY LIMITED

Date ESRS Disclosed

Apr 24, 2007

Country

Yemen, Republic of

Region

Middle East

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : May 31, 2007
Signed : Jun 19, 2007
Invested : Jun 2, 2008

Sector

Cement

Industry

Manufacturing

Department

Regional Industry MAS MCT

Project Description

The project involves the construction and operation of a greenfield, integrated cement plant with a cement production capacity of 1.54 million tons per annum (tpa) and a 36-megawatt captive power plant in the eastern part of the Republic of Yemen. The project will be located about 60 kilometers northeast of Mukalla, the capital of Hadramout Governorate, and will be the first cement plant in the less developed eastern Yemen. The project is under construction and the project company, Arabian Yemen Cement Company (AYCC or the company), is expected to begin cement production in 2009.

The project is sponsored by Eastern Province Cement Company (30% shareholding) of Saudi Arabia and two prominent Saudi businessmen, Sheikh Mohammed Hussain Al-Amoudi (15% shareholding) and Engineer Abdullah Ahmed Bugshan (15% shareholding). Five minority shareholders own the balance of 40%.

Overview of IFC's Scope of Review

IFC’s environmental and sector specialists has visited the project site, the sites of the quarries for limestone, clay and gypsum, and the local port where fuel and cement might be handled, as well as local villages in the area. IFC has also reviewed technical documentation for the plant (contract guarantees), the Environmental and Social Impact Assessment (EIA) as completed in May 2006, and has visited Saudi Arabian cement operations belonging to one of the shareholders.

E & S Project Categorization and Applicable Standard

This project is being reviewed as a Direct Investment according to IFC’s Social and Environmental Sustainability Policy. Based on a review of project information, the following Performance Standards (PS) are found relevant for the project:

- PS1: Social and Environmental Assessment and Management Systems with respect to the company’s management of its performance; compliance with national and local permitting requirements; and engagement with local communities.
- PS2: Labor and Working Conditions with regard to fair, safe and healthy working conditions at its facilities, including raw material quarries.
- PS3: Pollution Prevention and Abatement with regard to efforts to optimize resource inputs, energy efficiency, and waste minimization.
- PS4: Community Health, Safety and Security with regard to the impacts of the construction and operation of facilities, including the management of construction and transport equipment to ensure public safety.
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management: The land is barren and is a minor part of a significant limestone deposit. Sustainable natural resource management is needed through the development of quarry management plans.

The following Performance Standards were not found relevant at this time, based on the following:

- PS5: Land Acquisition and Involuntary Resettlement: The land used for the plant and its quarries is barren and does not have any sustained vegetation. It was public land and has not previously been used for agricultural activities or grazing of household animals.
- PS7: Indigenous Peoples: There are no signs or knowledge of any local or migrating tribes using the land allocated to the project, and no landholder are loosing ownership and livelihoods.
- PS8: Cultural Heritage: The plant and quarry sites have been surveyed and no cultural heritage items have been identified.

Based on the identification of the applicable Performance Standards, specifically the lack of land take or biodiversity issues, and the use Best Available Techniques (BAT) including low energy consumption and lowest possible greenhouse gas emission in the design of the facilities this project has been classified as a Category B project according to IFC’s environmental and social review procedure. The project has had an Environmental and Social Impact Assessment (EIA) prepared, including public disclosure and consultation and the resulting EIA, dated May 2006 is disclosed as an attachment to this Environmental and Social Review Summary (ESRS).

Environmental and Social Mitigation Measures

The company has presented plans to address these impacts to ensure that the project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and IFC’s Policy and Performance Standards for Social and Environmental Sustainability and applicable environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the project is summarized in the paragraphs that follow:

- PS1: Social and Environmental Assessment and Management Systems:

AYCC has prepared an Environmental Impact Assessment, which also covers social aspects of its proposed operation. This EIA includes the consideration of alternative sites, and an environmental mitigation and monitoring plans, as well as capacity building and institutional strengthening. During the preparation of the EIA, coordination was carried out with the relevant local agencies, to ensure proper alignment with other initiatives and with environmental and social advocacy NGOs. Based on this, and input from the company’s international technical advisers, AYCC is in the process of establishing its own Environmental Management System (EMS). IFC has agreed with AYCC that the resulting system be consistent with an ISO 14001-based system. The ISO 14001-based EMS will allow the AYCC management to continuously monitor the performance of its operations, and will enable the company to ensure continuous compliance with relevant environmental, health and safety requirements. The company will decide at a later time if the system needs to be certified to achieve the commercial benefits of such proof of operational standard.

Consistent with the agreed EMS, AYCC will introduce continuous oxygen, carbon monoxide, particulate, sulfur dioxide and nitrogen oxides control of the kiln emissions. Oxygen and carbon monoxide measurements will be linked to the process controls to optimize the energy utilization, while the particulate, sulfur dioxide and nitrogen oxides monitoring will be used to ensure compliance with the local regulations and World Bank Group guidelines on a continuous basis.

Also consistent with the agreed EMS, AYCC will prepare quarry reclamation plans for the new quarries (limestone, clay and gypsum) before operations begin. These quarry management plans will ensure that the surrounding landscape and the quarries have a natural contouring after the quarry activities have ceases. There is no vegetation and no, or, at some places, minimal overburden to be removed and later reapplied, and the main emphasis therefore has to be on appropriate contouring.

Other raw materials used in the cement manufacturing process (e.g., iron ore and pozzolana) will be initially acquired on the open market.

AYCC will initially use either imported coal or pet coke for its fuel needs in the kilns, while the power generators will operate on diesel fuels. Later it is anticipated that a planned gas transmission line will provide the option of switching to this cleaner and more energy-efficient fuel. Both the cement kiln and the power generators are therefore prepared for a fuel switch when possible.

- PS2: Labor and Working Conditions:

AYCC only has very few and mainly high level employees at the moment and IFC has therefore only been able to review the conditions of the workers employed by the main construction contractor. No inconsistencies with the core labor standards as described in the PS2 were found in this review. AYCC is aware of the requirements specified in PS2 and has agreed that these will be fully complied with as part of their upcoming human resource policies. IFC and the company have also agreed that it is essential that the company, as soon as possible, establish a human resource department with a competent leadership, which will oversee the hiring and training of the local staff for the operation.

Initially AYCC is likely to need to employ a significant number of expatriates with experience in running cement operations. These expatriates will then gradually be phased out while AYCC will provide continuously increased local employment opportunities as the plant operations are taken over by local Yemeni workforce.

AYCC will also ensure that all onsite contractors implement terms of employment that comply with national law and IFC Performance Standards; prevent unacceptable forms of labor (e.g. child labor and forced labor); and promote a safe and healthy work environment. During the appraisal, IFC staff met with the safety managers of the Chinese main contractor. A review of the working conditions for the expatriate staff indicated salary and accommodation levels above what these workers otherwise could have earned and achieved in Yemen or in their home country. The expatriate workers were also assured fair conditions should they decide to quit the job and want to return to their home country ahead of the anticipated contract conclusion. Safety at work inspections were also carried out during the night shift at high elevations and the conditions were found appropriate (guard rails, safety nets, personal safety-harness, etc. were in place) with only few minor adjustments needed, which the contractor has promised to correct immediately during the next day shift.

- PS3: Pollution Prevention and Abatement:

The cement manufacturing plant is designed with a state-of-the-art energy efficient process including pre-heaters and pre-calciner, hereby reducing the energy consumption to between 700 and 750 Kcal per kilo of clinker produced. Air emission controls will be provided by a combination of bag filter and Electro Static Precipitators (ESP) and will achieve particulate emission controls at 30 mg/Ncm, which is well within the current World Bank guidelines of 50 mg/Ncm. SOx will be kept below 400 mg/Ncm and NOx will be kept below 600 mg/Ncm, both limits set according to the World Bank guidelines. The local limits are still under negotiation with the local environmental protection authorities and will also have to be complied with should they be different from the World Bank guidelines, and AYCC has committed to not exceed the World Bank guidelines independent of the local limits.

Initially the kiln will be fired with coal or pet coke as these are the only fuels available at reasonable costs. It is however anticipated that a new gas pipeline will be established in Yemen and that this pipeline will be passing within a reasonable distance of the plant site, hereby allowing for the construction of a connection pipe and conversion to natural gas within a few years. Although the gas pipeline project is under implementation it is still too early to say when the gas will be commercially available to AYCC. It is AYCC’s intention to convert to gas as soon as possible, unless the delivery terms of the gas will make it commercially not viable. The conversion to gas will result in a cleaner combustion and a significant reduction in the CO2 emissions caused by the firing in the kiln, and from the diesel driven power generators needed at the site. IFC will also introduce AYCC to the technology of kiln gas heat recovery for power generation and will encourage the company to consider implementing such a system once the operations will allow for this (at this time it is not possible to change the conditions of the turn key contract without jeopardizing the timing). A table stating the sources of the CO2 emissions from the cement plant is attached. This table indicate the CO2 emission caused by the conversion of the limestone to cement clinker (the calcinations process), which is an inevitable part of cement production that process optimizations can not change, and the CO2 emission caused by the fuel burning with indication of the two scenarios (coal versus gas).

It is anticipated that the plant will supply ordinary Portland cement and blended cement to the market. While Portland cement is mainly cement clinker (roughly 90%) milled together with limestone (5%) and gypsum(5%), the blended cement can contain significantly less cement clinker by substituting it with e.g. steel slag or pozzolana, as these materials have similar abilities to create the needed bonding in the final concrete mix. The anticipated product composition for AYCC’s market is 30% ordinary Portland cement and 70% blended cement based on 75% clinker, 20% pozzolana, and 5% limestone/gypsum additives. The CO2 emissions per tons of final blended cement will be reduced by the same proportions as the amount of cement clinker replaced by other materials. A complete CO2 emission overview for the AYCC plant is given in the attached table.

The cement plant will only have limited water needs, which will be supplied from local deep wells. These wells will not affect any other local users and the company might be able to supply excess water from the wells to the closest villages should the wells have satisfactory quantities and quality of water (this is among the Corporate Social Responsibility (CSR) initiatives currently under consideration by the company). Wastewater from the plant and the onsite colony will be treated and reused to the extent possible; non-recyclable water will be used for irrigation of green belts to be established at the site perimeter.

The plant operation does not produce any significant amounts of solid waste, and solid waste from the colony will be handled through local approved contractors.

- PS4: Community Health, Safety and Security:

The cement manufacturing plant is equipped with the most modern emission abatement technology and no measurable change in the ambient air quality is foreseen in the area. The plant will also not discharge wastewater and will not generate significant amounts of solid waste. Noise will also be kept within World Bank Group guidelines. No negative community health and safety issues are therefore foreseen.

The plant is planning to establish a health clinic at the site. This clinic will serve the workers, but AYCC is also considering how this health service can be extended to the families of the employees and local residents without jeopardizing availability for operations. AYCC acknowledges that by extending this service, the general health of the population can be improved.

- PS5: Land Acquisition and Involuntary Resettlement:

The land used for the plant and its three quarries (limestone, clay and gypsum) was awarded to the Sponsor by the government. That land is unoccupied and has no commercial or agricultural value. The land is also not of importance for any migrating tribes or herders. Thus, no physical or economic displacement of people is associated with the project.

- PS6: Biodiversity Conservation and Sustainable Natural Resource Management:

No biodiversity issues were found during the evaluation of the plant site and the quarry sites, which were all visited and inspected. The quarries are all part of continuous dry landscapes, with no apparent risk of holding isolated species. Sustainable natural resource management practices will be incorporated into the preparation of quarry management plans as discussed in the PS1 section.

Stakeholder Engagement

The project company is still in the construction phase. The community engagement has therefore been limited to public disclosure and consultation in connection with, and documented in, the EIA preparation and the hiring of local workers supporting the Chinese main contractor for the construction phase. The AYCC’s sponsors are, however, widely known for their social welfare activities at their other operations and it is expected that similar activities will be implemented in the nearby areas as the project development proceed.

A strong example is given by the current lead Shareholder (Engineer Abdullah Ahmed Bughshan) who has contributed significantly to project in the areas of Yemen where he currently operates, including school construction supporting 3,600 students (boys and girls) in the Hadramout Valley, two school expansions in area surrounding Mukalla, support for Yemeni students either studying in Yemen or abroad, support for the Health Academies in Aden and Mukalla, preparation of new wells in Doa’an Valley and a dam in Al Ain Valley to store rain water for the dry season, a 4,600 square meter hospital in the Haramout Valley with equipment and training for the needed personnel, local infrastructure improvements including road and power supply, etc.

The plans for activities around the new cement manufacturing facility have not yet been finalized, but an access road from the local highway to villages located behind the plant site are already under construction. This road will give the otherwise somewhat isolated villages free access to the better national road system and thereby ease their access to the local markets. Some other shareholders have their own community development profile and the company will in due time develop its own corporate social responsibility profile based on inputs from the combined ownership.

Engineer Abdulrahman Abdullah Al-Hadi, Project Manager
Arabian Yemen Cement Company Limited
P.O. Box 50760
Mukalla, Hadramout, Republic of Yemen

Phone: + 967 5 326951
Fax: + 967 5 326950
Email: hcp@ayccl.com
Website: www.ayccl.com

Environmental documents will be available at the following locations:

- AYCC’s head office in Mukalla and
- the plant.

Client Documentation

File Name	Actions
CO2 emissions from AYCC.pdf
EIA English Report.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
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