26180 - Melrose II Expansion

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Environmental & Social Review Summary

Project Number

26180

Company Name

PETROCELTIC RESOURCES PLC

Date ESRS Disclosed

May 9, 2007

Country

World Region

Region

Global

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 21, 2007
Signed : Jun 28, 2007
Invested : Jun 29, 2007

Sector

Oil and Gas Production (Includes Development)

Industry

Metals and Mining

Department

Gbl Infrastructure & Natural Resources

Project Description

Melrose Resources plc (Melrose or the company) is an Edinburgh-based oil and gas exploration and production company with operations in Bulgaria, Egypt, France and the United States. The company holds a 100% interest in the Bulgarian Galata field through its wholly owned subsidiaries Melrose Resources Sarl and Petreco Bulgaria EOOD, and is also exploring in four adjacent offshore exploration concessions. In Egypt, Melrose has a 100% interests, in the Qantara, El Mansoura and South East El Mansoura concessions, all allocated in the onshore Nile Delta.

Due to the global increases in drilling and capital costs in the oil and gas sector, Melrose’s expected capital expenditure plan over the next 12-18 months has increased. The company is planning to support the additional capital expenditure program over the next few years by increasing its current debt facilities, committed in November 2006, by $85 million.

IFC has been invited to participate in the increase of both the senior debt facility from $290 million to $350 million, as well as the mezzanine financing from $10 million to $35 million, by providing up to $20 million to help finance the project. The utilization of the IFC funds will target investments in Bulgaria and Egypt.

Overview of IFC's Scope of Review

The IFC conducted an appraisal mission of the original project, including site visits to Bulgaria and Egypt, in December 2004. A follow-up supervision mission took place in July 2005. Annual Monitoring Reports (AMRs) for 2005 have been reviewed and the Project has been performing well. Supplemental information has been received for the assessment of the new investment. The following potential, environmental , health and safety and social impacts were analyzed:

- establishing an integrated environmental, health, safety and social management system at the corporate level;
- company’s capacity to manage multiple projects and implement the integrated management system;
- air emissions including green house gases;
- water supply and disposal;
- liquid and solid waste;
- public and worker safety;
- archaeology;
- social development programs;
- community relations and public consultation;
- potential related land use/rental or compensation issues; and
- emergency plans including oil spill response plans.

E & S Project Categorization and Applicable Standard

Performance Standards (PS) applicable to this investment include:

- PS1: Social and Environmental Assessment and Management Systems;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health, Safety and Security;
- PS5: Land Acquisition and Involuntary Resettlement;
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management;
- PS7: Indigenous Peoples; and
- PS8: Cultural Heritage.

Environmental and Social Mitigation Measures

The company has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with all environmental and social requirements – namely, the host country laws and regulations and the IFC Performance Standards. Information on how these potential impacts will be addressed by the company is summarized in the following paragraphs:

- Group-Wide Health, Safety, Environment and Social Management System.

- At the parent company level, Melrose has committed to develop an integrated Health, Safety, Environment and Corporate Social Responsibility Management System (HSEMS). The HSEMS will address the requirements of IFC’s new Performance Standards, and in particular issues relating to labor, community engagement and community development.

- At the country level (Egypt, and Bulgaria), the company already has an existing HSEMS which will be reviewed and updated to address any gaps in relation to IFC’s new Performance Standards.

- As part of the new corporate and revised country level HSEMS the company will prepare specific corporate and local level Public Consultation and Disclosure Plans.

- Country-specific Issues in Egypt and Bulgaria

Egypt

- As part of IFC’s 2004 investment in the Egyptian operations, an HSEMS was prepared under the World Bank Group Safeguard policies. This management system has been implemented and will be reviewed at the corporate level to incorporate any gaps under the IFC’s new Performance Standards. The HSESMS has been adopted comprehensively throughout the operations in Egypt

- In Egypt, Melrose has activities in the Qantara, El Mansoura and South East El Mansoura concessions. To date (2005/06) the operations in Egypt have drilled 38 wells, of which 12 are currently producing.

- In the Egypt operations, safety and environment audits are conducted on a regular basis to determine any non-compliances and necessary improvements. The audits are extended to contractors activities. Additionally, safety and environment training programs for staff and contractors are conducted periodically.

- The operations in Egypt comply with the Egyptian Labor regulations. The corporate management system to be developed will include the company’s policy with respect to labor and working conditions, which will include statements on general human resources policy including a worker grievance mechanism and where appropriate collective bargaining agreements.

- Since company activities in Egypt are increasing, one of the areas that the company is focusing on is the treatment of produced water, and the use of water injection or the installation of a wastewater treatment plant. The selected option will need approval from the Minister of Environment.

- As part of the HSESMS the company established a waste management plan for all identified liquid, non-hazardous and hazardous waste. The company is also implementing recycling where possible. All disposal of waste is done through authorized third party companies.

- The company has a Land Acquisition and Compensation Plan (LACP) which forms part of its HSEMS. The LACP provides a framework for on-going land acquisition activities associated with exploratory seismic surveys and drilling and for establishment of long term/permanent facilities. The LACP addresses Egyptian regulatory requirements and the requirements of IFC’s policies and guidelines. Social Impact Assessments (SIAs) are undertaken for each well site to ensure that any site specific social impacts are addressed. Key components of the LACP include a public consultation procedure and a comprehensive grievance mechanism to address any complaints or issues concerning land acquisition and compensation raised by affected households and communities

Bulgaria

- The Galata natural gas field is located offshore the Bulgarian Black Sea coast. The field lies approximately 20 km to the east of the port of Varna and is currently producing 1.3 MMSCMD. Additionally, the Company has exploration rights in four offshore blocks.

- For the Galata field the company has obtained all the appropriate environmental authorizations. As part of the Galata development, an onshore pipeline of approximately 60 km was built. During the construction of the onshore pipeline the company avoided local communities and sensitive environmental habitats. No structures or houses were acquired, and the majority of the land acquired was agricultural land or secondary forest. Compensation was done according to established Bulgarian regulations.

- The landing point of the offshore pipeline was relocated southwards by approximately 200 m to minimize potential environmental impacts in an area of ecological sensitivity.

- Produced gas is compressed onshore at a stand alone gas processing facility. The offshore portion of the gas export pipeline follows a route from the Galata platform to a beach approximately 8.6 km south of Varna. There are no flaring activities at the Galata field.

- The company presented a proposal to the Bulgarian Environmental Authorities for their exploration work in the other areas, and the authorities have provided authorization for this exploration.

- The company provides health, safety and environment training to all employees.

Stakeholder Engagement

- Egypt:

In terms of the existing HSEMS and the LACP the company engages with the communities on a regular basis and promotes employment opportunities amongst local communities affected by land acquisition associated with exploratory seismic surveys and drilling, and the establishment of long term/ permanent facilities. The company also supports a variety of community development activities in Egypt (e.g. provision of employment opportunities to local affected communities as a first priority, improvement to access roads, contributions to school and religious facilities, skills training, etc).

- Bulgaria:

The company sponsors a day care center for children with disabilities and is presently rebuilding a local church close to the pipeline route.

As part of the new corporate and revised country level HSEMS the company will prepare specific corporate and local level Community Development Plans (CDP) which will enable a more structured approach to community development initiatives to maximize contributions to longer term local sustainable development.

**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.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

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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Environmental & Social Review Summary

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E & S Project Categorization and Applicable Standard

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